Unconventional Shale Gas Development, Risk Perceptions, and Averting Behavior: Evidence from Bottled Water Purchases

Technological innovation has made extraction of natural gas from deep shale formations economically viable. While unconventional shale gas development is seen as an economic benefit, concerns have been raised about the environmental and health risks associated with the extraction process. We combine GIS data on unconventional shale gas development in Pennsylvania and Ohio with household data on bottled water purchases to assess the impact that perceived risks to drinking water from unconventional shale development have had on household well-being using a treatment effects design. In our preferred triple difference models with time-varying treatment effects, we find per household averting expenditure in 2010 ranges from $10.74 in our full sample specification to $15.64 when omitting urban counties more likely to contain public water supplies. Converting the sample-average averting expenditure of $10.74 to an annual expenditure for the entire affected population implies an averting expenditure in Pennsylvania shale counties exceeding $19 million for the year 2010.