The Public Finance Challenges of Fracking for Local Governments in the United States

Fracking has revolutionized international oil and gas markets practically overnight, but its impact on local public finance and governance have largely been overlooked. While operating under federal and state constraints, the key ongoing policy question is whether and to what extent local governments can – and should – have the power to manage the industry’s effects on their communities. This IMFG Paper explores the fiscal health risks associated with the industry, its local revenue generation implications, and what local governments can do to address the spatial and temporal mismatches between the two. As the industry expands internationally, including to Canada, lessons from the United States can inform future regulatory response in other places.