A Fatally Flawed Study
A Critique - The Impact of On-Shore Gas Exploration Activities on Local House Prices. JLL March 2015.
This report has been promoted as making the case that there will be no impact of shale gas exploration and production on house prices.
This has been drawn from a single statement in the report, relating to the Preese hall area “Taken together, there is no clear evidence based on this data to suggest that onshore gas operations have had a material impact on local house prices.”
The report purports to show that the area of the Fylde has performed better in terms of house prices than Lancashire or the North-West as a whole, even despite one gas well and one temporary test well which operated only for months before being shut down. But whether the Fylde’s house price resilience will continue into the future if fracking goes ahead, especially on a production level, and even what effect the possibility of two new exploration sites at Preston New Road and Roseacre is having now, is another matter, and one which the report has totally failed to address.
I therefore here examine whether the report has drawn fairly on statistical data, and whether the inferences drawn from the report are valid. My conclusion is to answer no to both questions.
1. The report has drawn on limited selective historical data, has not examined current effects of the threat of fracking at two shale gas exploration sites, and has not provided any rationale for future projections based on either these two sites nor, more significantly, on the potential cumulative effect of shale gas development at production levels.
This report claims that JLL were instructed to analyse the likely impact of onshore gas operations on local house prices. They have not done that. They have, as they admit, only done a desk exercise examining the Land Registry sales figures since 1994 (which are largely irrelevant in the case of Preese Hall) and have made no attempt to collect current data from surveyors or estate agents on their experience of the current market. The report can therefore in no way even be seen by its own admission to have fulfilled its brief.
The report was commissioned by the North West Energy Task Force, an organisation of businesses, many non-local to the area or even Lancashire, which has been promoted and funded by Cuadrilla and Centrica. This report can therefore not at all be regarded as an independent assessment, and it is extremely likely that it would have been published had it come to different conclusion, even on its restricted analysis.
The main body of the report, in fact is padded by a demographic profile of the areas around one shale exploration site, Preese Hall, and a single existing conventional gas well at Elswick.
2. The report is based on two wells which are in no way representative of a shale gas production site.
The report analysed sales data from around Preese Hall and Elswick.
Preese Hall was an exploratory well which was drilled and fracked in 2011 and following a moratorium on fracking due to the fracking causing seismic events operations were suspended. The well is now due for abandonment.
Preese Hall can not therefore be fairly described as an “onshore gas site”. It has not produced any gas.
Elswick is a conventional reservoir which was not fracked in the sense it is now used (and defined by the government in recent legislation) but was stimulated by use of nitrogen foam. It has been producing gas since the 1990s.
Elswick can not be used to illustrate the potential impact of a potential unconventional shale gas development. The techniques used for fracking shale will be significantly different from the Elswick stimulation. It will be remembered that the Advertising Standards Authority after careful consideration considered that Cuadrilla was unjustified in using Elswick as a comparison site with a shale gas well. Apart from different and more aggressive techniques required for shale gas extraction, including high pressure and hig volume injection, shale gas fracking will involve injection of chemicals and on refracks of returned toxic materials into the target formation.
Cuadrilla have indicated that their shale gas well pads may accommodate not one well but ten or twelve, and each such vertical borehole may have three or four horizontal wells drilled off it. In other words, for a single pad there may be forty “wells”, with corresponding effects which make Elswick totally inappropriate a comparison because of scaling up of risk factors including pollution and traffic.
3. The report has been very selective in its statistical approach and has included areas within its house price survey which are in no way representative of the rural areas which may be most affected by shale gas exploration going forward.
In the case of both Preese Hall and Elswick the desk survey started investigating sales results in the areas within a mile and a half radius of the two sites. Ie the areas most likely to show an effect if one were expected. The authors determined there was insufficient data to produce a survey result. To achieve a result they expanded the radius to three miles.
In the case of Preese hall this meant that they have taken data from urban areas including the whole of Poulton, part of Carleton, and parts of Blackpool, specifically the Grange Park and Mereside estates.
Anyone who knows the area knows it is not demographically homogeneous, none of these locations is comparable one with the other for property type, and certainly not comparable with the rural properties with which the report should have concerned itself and concentrated on.
Any statistics produced from this survey area are therefore simply not valid for the purpose of the report’s brief.
Regarding Elswick, again JLL found insufficient data on house sales and similarly expanded their survey area. I note that the area overlapped with the Preese Hall survey area, but there is no mention in the report of how this overlap was treated and whether property sales in the joint area contributed to two sets of results.
For Elswick the report authors admit that they excised a number of higher valued property sales from their results. It is not clear how they applied criteria to such deletion, which must be considered therefore to have skewed the results. As the rural area includes many higher value properties the report may have therefore excised the most appropriate properties to judge by. The Elswick new data area included north Kirkham, again skewing the results towards an urban area. The Elswick sales figures over the last five years were only between 117 and 161 per annum. The urban area may have therefore contributed significantly to these sales at the same time as JLL took out an unknown number of rural expensive property sales.
4. No analysis extended beyond the past Land registry records.
JLL therefore either did not meet its brief, or carried out further investigations which were not felt appropriate to include in their report because it would not suit the purposes of their commissioners.
There is anecdotal evidence emerging centred on not the ex-site of Preese Hall and the poor comparison site of Elswick, but on the active sites for planning applications. House sales are being affected in the areas closest to the proposed exploration shale gas sites at Preston New Road and Roseacre Wood.
There are also reports from surveyors or estate agents working in the Fylde’s rural areas that there is buyer reluctance due to the potential for fracking.
It is perhaps not surprising that homesellers or agents are reluctant to divulge the full extent of this problem.
But not to have addressed the existence of such evidence, nor to investigate further, is a fundamental objection to any conclusions that can be drawn from a report which already has been demonstrated to be poor in its methodology even in its own terms.