Download Article

RWP 22-05, May 2022

To study how income expectations affect borrowing, we use leased natural gas rights in Texas in the mid-2000s, which created potential for future leaseholder income without loosening credit constraints. In matching 11,000 leaseholders with non-leaseholders selected from a screened pool of 5.2 million, we find that the average leaseholder borrowed $13,000 more over the 2003–08 leasing boom. A consumption-smoothing model indicates that leaseholders’ income expectations aligned with forecasts of persistently high natural gas prices. Yet, the unforeseeable success of fracking was associated with reduced prices and increased bankruptcies during 2009–19 for non-prime leaseholders as well as fracking firms.

JEL classifications: D12, G51, Q33

Article Citation

  • Berkowitz, Daniel, Andrew J. Boslett, Jason P. Brown, and Jeremy G. Weber. 2022. “Rational but Not Prescient: Borrowing during the Fracking Boom.” Federal Reserve Bank of Kansas City, Research Working Paper no. 22-05, May. Available at External Link


Jason P. Brown

Vice President and Economist

Jason Brown is a Vice President and Economist in the Economic Research Department of the Federal Reserve Bank of Kansas City. In this role, he coordinates the regional and commod…