Evaluating determinants of shale gas well locations in an urban setting

Abstract

This research aims to identify factors that contribute to gas well operator pad site location decisions in Denton, Texas. Using new production technologies, a wave of shale gas extraction between 2000 and 2014 resulted in the development of 854 gas wells on 539 pad sites within 2000 US Census block groups that include parts of the City of Denton. For pad site placement, we consider multiple location decision factors. We use both Poisson and zero-inflated Poisson regressions for the analyses. Unsurprisingly, census block groups sitting atop the Barnett Shale have more pad sites than block groups away from the Barnett Shale. Beyond that, we find statistically significant negative correlations between both housing unit density and the percentage of block group land area falling within the Denton city limits indicating that both urban development, and the regulations that go along with it, affect pad site development. However, we do not find that setback regulations in less urbanized areas curtail pad site development. We also find that access to pipeline infrastructure—needed to transport gas from each pad site—has a positive effect on pad site development. This indicates that production costs associated with potential sites do matter. It is unusual for extraction operators to share pipelines connecting pad sites to transmission lines. This could have the effect of limiting competition for natural gas property rights and reduce royalties paid to mineral rights owners. In terms of demographic or socioeconomic factors that may matter, we find income is negatively correlated with pad site development while education is positively correlated with pad site development. Finally, we find evidence that pad sites cluster. Clustering could advantage access to main roadways, reduce costs to extend pipelines, or be an outcome of urban developments that constrain pads from locating in certain areas.