House prices in UK’s only fracking area may drop by 4%

John Hewitt Jones

August 11, 2016

Fracking

Fear of earthquakes caused by shale gas exploration could see a 4% reduction in house prices near fracking sites, according to a report published by the University of Bristol.

The study tracks the impact of drilling in the Preese Hall 1 site in Lancashire – currently the UK’s only licensed fracking site – on house prices in the area.

Earthquakes following the fracturing of the first well near Blackpool in 2011 did not cause physical damage to buildings but have had a significant impact on consumer confidence.

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Fears of damage following the tremors are associated with a house price drop of between 2.7% and 4.1% within a 30km radius of the affected area, according to the report.

After oil and gas exploration company Cuadrilla Resources hydraulically fractured the first well near Blackpool, two earthquakes of magnitude 2.3 and 1.5 on the Richter scale were detected by the British Geological Survey.

Following the seismic events an average household would be willing to pay between £4,866 and £7,388 per year to avoid areas where fracking induced seismic activity according to the research.

Using a theoretical model the report estimates fracking may have wiped a maximum of between £706m and £1.1bn off house price values across the area examined by the study.

In addition the report demonstrates a statistically significant reduction in house prices of between 1% and 1.5% for the period 2008-2014 in areas where shale gas development was mentioned in the licence application.

Speaking to Mortgage Introducer, Dr Stephan Heblich, reader in economics at the University of Bristol, said: “We’re fairly sure that the magnitude is not enough to damage the houses. My feeling is it’s an awareness argument. If you look at the number of people searching for fracking on Google trends, you see hardly anything in 2008 when the issue first came up. The first searches begin to come up a few years later, when it came to the forefront of the public agenda.”

Responding to the government scheme to offer homeowners in regions near fracking sites up to £10,000 compensation announced over the weekend, Dr Heblich said: “I’m kind of a little bit afraid potential externalities may not be covered by the payment. On the other hand, a figure of around £10,000 is more precise than a generally-specified payment to the community.”

Since the 1934 Petroleum Act, all subterranean petroleum is owned by the crown.

Under government legislation passed in August 2015 the Secretary of State for Communities and Local Government has the ability to intervene in fracking planning decisions and to fast-track appeals over license refusals that are taking too long.

Although commercial shale gas extraction has not yet begun, Petroleum Exploration and Development Licenses grant the right to explore for shale gas or coal bed methane.

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  • Refracktion

    You state that “the report estimates fracking could wipe a maximum of between £706m and
    £1.1bn off house price values across all areas where exploration
    licenses have been granted” but the report itself make it clear that “These numbers are restricted to the license blocks where the earthquake happened” (P28).

    Otherwise very interesting. Thank you

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  • Ken Wilkinson

    This is a discussion paper and has not yet been published. I have been in contact with the authors. It is not acceptable to present a discussion papers as established fact.
    There is a fundamental flaw in this in that
    1. There is only ONE data point that can be used as to compare prices. I have spoken to the author and he agrees this is a limitation.
    2. The single area was affected by large layoffs at 2 local employers
    2. The conclusion is completely contradicted by a study by house price professionals, JLL, that shows in fact the house prices close to the well actually INCREASED! above the surrounding areas. See
    https://d3n8a8pro7vhmx.cloudfront.net/nwenergy/pages/102/attachments/original/1429019521/JLL_report_-_NWETF_house_prices_(2).pdf?1429019521

    and my critique on this false information.

    http://www.ryedalegas.co.uk/myths/myth-6-house-prices

    In fact in areas in Pennsylvania, house prices, (and tourism) have increased due to increased wealth and economic activity brought about by shale gas. The surface impacts are very low, and as in Yorkshire, easily concealed after drilling.

    • Luther Blissett

      contradicted by a study by house price professionals, JLL

      JLL aka JONES LANG LASALLE IP, INC, an American company who “Provides commercial real estate strategy, services and support to organizations worldwide”
      JLL prepared the report for fracking lobby group North West Energy Taskforce, a group who are funded by Cuadrilla and Centrica.

    • Luther Blissett

      1. No high volume hydraulic fracturing was carried out at Elswick
      Cuadrilla was censured by the Advertising Standards Authority in 2013 for suggesting there was no difference between the Elswick operation and its own fracking plans. By using Elswick as an example, the North West Energy Task Force report by JLL repeats this misleading spin.
      2.The JLL study doesn’t cover house prices at Preston New Road and Roseacre. Evidence from Roseacre shows house price drop.
      3. The JLL study is from March 2015
      4. In July 2015, the unredacted impact study released by the government showed that house prices were likely to fall, and suggested they would fall by around 7pc.
      5. In Roseacre, there is hard evidence of fracking affecting house prices. One couple had to drop their house price by £50k, and recorded the comments from three prospective buyers, who were concerned about Cuadrilla’s planning application at Roseacre Wood.
      6. Another Roseacre property, as reported in the Daily Mail, saw their house price drop 70% because of Cuadrilla’s fracking proposal

      • Ken Wilkinson

        1. You are an engineer? I thought not. The difference is one for experts and there is no data that this is an issue. The ASA screwed up in 2013, which is why they now are taking expert advice.
        2. See http://www.zoopla.co.uk/house-prices/browse/roseacre/?q=Roseacre%20lancashire

        • Ken Wilkinson

          3+4. The unredacted study was a joke technically. See this http://www.ryedalegas.co.uk/myths/myth-6-house-prices
          5 and 6. If there is an issue in Roseacre, isnt that because people are talking about farming stopping, burning taps, cancer, toxic chemicals etc? There is NO EVIDENCE that these occuer in the US now. There were a few incidents years ago due to bad practice, but NONE NOW.

        • Luther Blissett

          Another one of your appeals to authority? I thought so. The difference is one for experts like DECC’s senior geoscientist who said: “we would emphasise that these non-shale fracs are not comparable, in the volumes of fluid employed, to Cuadrilla’s operations at Preese Hall in 2011 – the non-shale fracs are much smaller.” Misleading advertising and exaggeration, which Cuadrilla were pulled up by ASA for, along with numerous planning breaches and taking six months to notify the authorities about the well deformation following the earthquake in April 2011 are the main reasons why people have no confidence in this fracking firm.

  • Ken Wilkinson

    I see that your article has been spread far and wide in the anti frack community. Unfortunately, it is based on incorrect information. That is usual as all of the information they use on examination, turns out to be false.

    • Luther Blissett

      By “incorrect information” you obviously (from your next post) mean independent research that wasn’t provided by pro-fracking lobby group North West Energy Taskforce, who are funded by fracking firm Cuadrilla.

      • Ken Wilkinson

        and your point is? The data is based on Land Registry prices. Do you mean that international property experts provide propaganda for industry? That wouldnt work as a business model would it? Its a massive and reputable company.

  • Luther Blissett

    Earthquakes in Blackpool didn’t damage homes, but they did crack a bridge, topple a temporary traffic light and most importantly, the well casing was deformed by the earthquake, which the company didn’t inform anyone about for 6 months. The well was capped, which was supposed to prevent the transfer of any gas from the shale via the well and prevent the migration of any fracking fluids from the well to both the surrounding rock and the surface. However this didn’t stop a later an ingress of gas from the Kinder Scout formation into the well, and the well had to be capped again. We don’t know if this has been a success in preventing migration of gas or fracking fluids via the well as it can take years for problems to show themselves.

    • Ken Wilkinson

      Please report the cracked bridge as the geologists would love to know. The well casing was below the regional seal in an area already perforated. It was no risk to the environment. You need to understand how wells work.

      This is the problem with people who are not engineers commenting on matters they do not really understand. (I have 12 years as a senior engineer, and these matters are not an issue.) People have been drilling wells for a century and a half, and it is a well researched and safe technology. Even Fiends of the Earth and Greenpeace know this, but they deliberately mislead to raise money.

      • Luther Blissett

        The ingress of gas entered the well casing from the Kinder Scout formations (Millstone Grit). I’m sure you aware that there is official documentation for this ingress.

        Like you, Cuadrilla claim years of experience. However, despite four years of drilling wells in Lancashire, Cuadrilla made 10 planning breaches and experienced technical failures at each of their four sites. They were criticised at the highest level for their failure to recognise the well deformation at Preese Hall and for failing to report this deformation to government officials for six months.

        As for the bridge cracks, Blackpool police stated that at the time of the earthquake: “CCTV cameras on Lytham Road picked up superficial cracks on the road surface of the railway bridge near to the zebra crossing.” I’m sure the geologists (and geophysicists) know about this evidence. The bridge was already weak.

        That people living in the locale don’t have confidence in fracking has nothing to do with Friends of the Earth or Greenpeace. Your patronising and often insulting attitude is partly to blame.Lastly, one only has to look at the track record of those involved in this industry, including Cuadrilla, to see why people don’t have confidence in the fracking industry.

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  • Ken Wilkinson

    One key point of this flawed report is that it attributes property drop due to perceptions of earthquake risk.

    This is a pure assumption on the part of the writer. There is no rationale to this. That is not science. It needs evidence and there is none.

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