Does water flow from farming to fracking?

• Agricultural Economics Workshop
• Environmental and Resource Economics Workshop

Date and Location

Tuesday, May 23, 2017, 4:10 PM - 5:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

Growth in oil and gas production from shale formations in the U.S. in the 2000s increased the demand for water in many areas of the western U.S. On the margin, the lowest-valued use of water likely occurs in agriculture in many areas. Using data from four waves of the Census of Agriculture and the Farm and Ranch Irrigation Survey, we explore whether substantial water flowed from farmers to energy firms by estimating how farmers changed their land and water use as oil and gas development expanded. Identification comes from temporal variation in oil and gas drilling combined with spatial variation in shale depth, which is highly correlated with where growth in oil and gas production occurred. Across various samples, we find limited evidence of economically-important flows of water across sectors. The finding likely reflects the small share of water use in extraction compared to agriculture as well as water policies that make cross-sector transactions costly.