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Crime and natural resource booms: evidence from unconventional natural gas production

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Abstract

The USA has experienced a sudden expansion of oil and natural gas production due to the combination of hydraulic fracturing and horizontal drilling. The energy extraction boom has had many localized impacts, most notably in areas with substantial shale gas reserves. This paper exploits a natural experiment in the Marcellus region to examine one channel of the so-called resource curse, the effect of resource extraction on local crime. The results show that areas experiencing a natural gas extraction boom suffer an increase in overall violent crimes, while property crimes remain similar to non-boom areas. Furthermore, the violent crime increase appears to be driven primarily by increases in aggravated and sexual assaults.

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Fig. 1

Source: Energy Information Administration

Fig. 2

Source: Author’s calculation from ERS County-level Oil and Gas Production in the USA

Fig. 3

Source: Author’s calculation from Pennsylvania Department of Environmental Protection

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Notes

  1. See Fitzgerald (2013) for a non-technical description of hydraulic fracturing.

  2. Maps of unconventional shale reserves are available from the Energy Information Administration: http://www.eia.gov/pub/oil_gas/natural_gas/analysis_publications/maps/maps.htm.

  3. In the USA, the surface rights and the underground mineral rights can be owned by separate parties. This split estate system means that local residents living on a property might not benefit financially from fracking activity if they do not own the mineral rights. Brown et al. (2016) estimates that 54% of royalty income from fracking activity in the Marcellus shale stays locally, totally $2.15 billion in 2014.

  4. “An unconventional gas well is a well that is drilled into an unconventional formation, which is defined as a geologic shale formation below the base of the Elk Sandstone or its geologic equivalent where natural gas generally cannot be produced except by horizontal or vertical well bores stimulated by hydraulic fracturing.” (Pennsylvania Department of Environmental Protection SPUD Data Report).

  5. For example, the fracking opposition group “New Yorkers Against Fracking” focuses on ground water contamination issues. More information found at: http://nyagainstfracking.org.

  6. It would be useful to be able to differentiate empirically between crimes committed by residents versus non-residents. Unfortunately, due to data limitations this is not possible. The Uniform Crime Reports does not distinguish between these categories. While data from the National Incident-Based Reporting System do provide information on the place of residence for perpetrator of an offense, however, it is not available for Pennsylvania and New York.

  7. For more information, see: http://www.fbi.gov/about-us/cjis/ucr/ucr.

  8. For more information on the BEA’s Local Area Personal Income revision and methodology, see:www.bea.gov/scb/pdf/2013/12%20December/1213_lapi-text.pdf and www.bea.gov/regional/pdf/lapi2011.pdf.

  9. mcf stands for 1000s of cubic feet.

  10. The inverse hyperbolic sine transformation is expressed as \(\hbox {ln}\left( {r+\sqrt{r^{2}+1}} \right) \), where r is the variable to be transformed.

  11. The results are also robust to using the log transformation and adding 1 to each observation, i.e., log(\({Y}_{\mathrm{ct} }+ 1\)).

  12. Of the 1098 county-years in the baseline sample, total violent and total property crimes along with burglary and larceny do not have any county-years with zero crimes. However, the other categories do have some county-years with zero crimes. In particular, 337 county-years do not have any reported murders, 11 county-years without a rape, 15 county-years without a robbery, 8 county-years without any motor vehicle thefts and 1 county-year without an aggravated result.

  13. The industry mix variable considers how a county’s industry composition grows compared to the national growth rate. The “Bartik” instrument has been widely used in regional economics as the first-stage instrument for labor demand, because projected local growth rates are calculated based on national trends. In constructing this measure, I use BEA employment data at the 2-digit NAICS level, excluding sector 21 (Mining, Quarrying, and Oil and Gas Extraction).

  14. I use all Pennsylvania counties with less than 3 million residents. This eliminates Philadelphia from the group of control counties.

  15. For example, in high fracking counties 26 additional sexual assaults per year * $240,776 \(+\) 18 additional aggravated assaults per year * $107,020 victimization costs = $8,186,536 per county per year.

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  1. Old Dominion University, 2023 Constant Hall, Norfolk, VA, 23529, USA

    Timothy M. Komarek

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Komarek, T.M. Crime and natural resource booms: evidence from unconventional natural gas production. Ann Reg Sci 61, 113–137 (2018). https://doi.org/10.1007/s00168-018-0861-x

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