Tennessee Gas Pipeline

Property Values and the Gas Pipeline

Many Pioneer Valley homeowners, realtors and citizens have been contemplating whether the installation of the proposed Tennessee Gas Pipeline Northeast will affect property values in the Northampton area. While the following article from the Daily Hampshire Gazette is inconclusive, it does seem to suggest that there may both safety issues in having a home in close proximity to a compressor station, and, at the least, a temporary dip in property values while the pipeline is being installed. Of course, there are also the environmental concerns surrounding this project. A group of Franklin County towns have formed the Municipal Coalition Against the Pipeline to fight the project. To follow is the article in the Gazette.

Impact on property values a concern for residents along route of proposed natural gas pipeline

RECORDER FILE PHOTO The home at 382 Lower Road in Deerfield is within 500 feet of the path of the proposed natural gas pipeline.

The home at 382 Lower Road in Deerfield is within 500 feet of the path of the proposed natural gas pipeline.

By TOM RELIHAN
For the Gazette
Wednesday, October 14, 2015
(Published in print: Wednesday, October 14, 2015)

DEERFIELD — With a natural gas pipeline and accompanying compressor station proposed to be built in western Massachusetts, many residents along the expected route have found themselves worrying about how it could affect the value of their homes.

In August, Heather Reloj, who owns a home on Lower Road in Deerfield, asked the town to repay taxes that she had paid last year and reduce her taxes going forward due to how close the project is expected to pass by her house. And residents of Gulf Road in Northfield have expressed concern about how a potentially noisy — and some say dangerous — 41,000-horsepower compressor station expected to be built nearby could affect the value of their homes or insurance policies.

The Tennessee Gas Pipeline Northeast Energy Direct project would cross through Plainfield in Hampshire County and eight Franklin County towns on its way from Pennsylvania shale fields to Dracut.

Though most of the area’s real estate and appraisal experts say it’s too early to speculate on the possibilities and the Massachusetts Association of Realtors — a trade group with a membership of 20,500 real estate professionals — said it does not have any data on the issue, how it has played out in places where such infrastructure has already been installed has been studied before.

Studies say


According to a 2013 study by the Forensic Appraisal Group LTD, a Wisconsin firm that specializes in issues with the potential of litigation related to pipelines and electric wires, natural gas pipelines have a definite, measurable effect on the value of homes on the properties that they cross. The study focused on gas transmission pipelines like the proposed Northeast Energy Direct project and how a potential home buyer’s perception of associated risks could detract from home values.

The study, conducted by senior appraiser Kurt Kieslisch, surveyed real estate agents and considered another study that surveyed home buyers. Both groups were asked their opinions on how information from negative media reports about pipelines or legal disclosure of a pipeline and the associated risks on a property might impact their decision to purchase it or increase the difficulty of selling it, in the Realtors’ case.

It found that the property became more difficult to sell with each additional level of information provided about the nearby pipeline.

“Damages resulting from perceived market negative influence are sometimes known as ‘stigma’ or ‘severance’ damages,” wrote Kieslisch.

The firm also carried out a number of “impact” studies comparing the sale price of similar homes that were encumbered by a pipeline easement and those that were not, in Ohio and Wisconsin. It found that the presence of a gas transmission pipeline decreased home values by about 12 to 14 percent on average in Ohio and about 16 percent on average in Wisconsin.

The Federal Energy Regulatory Commission, which regulates interstate natural gas pipelines and is ultimately responsible for permitting them, appears to disagree, however.

In a previous environmental impact statement issued by FERC for Constitution Pipeline Co. and Iroquois Gas Transmission System’s Constitution Pipeline and Wright Interconnect project in Pennsylvania and New York, which was permitted in December 2014, the agency determined that property values were “not substantially affected” by a nearby pipeline.

A handful of studies cited by FERC in the environmental impact statement concluded that property values aren’t heavily affected by pipelines, though one of the studies showing that property values dropped following an incident along a pipeline and recovered over time.

The statement acknowledged that appraisals do not generally consider “subjective valuation” — the idea that some things are worth more or less to different people based on how much they personally desire or need it and their perception of associated risks, in the case of pipelines, which the Forensic Appraisal study said has a definite effect on purchase decisions.

“That is not to say that the presence of a pipeline, and the restrictions associated with a pipeline easement, could not influence a potential buyer’s decision to purchase a property. If a buyer is looking for a property for a specific use, which the presence of the pipeline renders infeasible, then the buyer may decide to purchase another property more suitable to their objectives,” the environmental impact statement noted.


Oregon project

One of the studies was conducted in 2008 by Dr. Eric Fruits, a economics professor at Portland State University. The study, which he was hired to perform for the Oregon LNG Project as part of the FERC’s environmental impact statement process there, reviewed the effects of the South Mist Pipeline Extension — a 24-inch diameter pipeline in northeastern Oregon — on local home prices. Similar to the proposed Kinder Morgan pipeline, the South Mist Pipeline Extension line is buried for its entire 62-mile length with the exception of above-ground valves and inspection stations and the land above it is a permanent, 40-foot-wide easement.

Through an analysis of local assessor’s data and property values both before and after the pipeline was constructed, Fruits found that both the announcement and completion of the project had little effect on property values. In Clackamas County, Oregon, if all of the houses along the pipeline route were located exactly one mile from the pipeline and were sold after operation commenced, he wrote, the total value of the sales would only decrease by 1.9 percent over what it was before the pipeline was installed.

This year, Fruits and another Portland State researcher, Julia Freybote, revisited the topic in a second study. That study investigates the relationship between a prospective home buyer’s perceived risk related to a nearby pipeline and sales prices, as well as the media’s role in influencing sales prices through coverage of unrelated fatal pipeline explosions elsewhere.

The study, which focused on the same pipeline and data set as Fruits’ earlier study, surveyed about 30,000 home sales transactions within a mile of the pipeline, he said. It concluded that home-sales prices dropped suddenly during months in which fatal pipeline explosions were covered by local or national media. Fruits said the study, which he and Freybote conducted independently as an extension of the 2008 study, showed that coverage of such incidents do have a small effect, but it goes away after a couple of months.

“If you look at the grand scheme of things, a lot of things need to line up for that to happen,” Fruits said. “You’ve got to be pretty close to the pipeline, and you’ve got to be trying to buy or sell the house when there’s an accident.”

Washington explosion

When there is a highly publicized incident along a particular line, however — such as the explosion that occurred along the Olympic gasoline pipeline in Bellingham, Washington, on June 10, 1999, and killed three people — property values can drop suddenly but, again, recover over time, according to a 2006 study by Western Washington University economics and finance professors Julia Hansen, Earl Benson and Daniel Hagen titled “Environmental Hazards and Property Values: Evidence from a Major Pipeline Event,” which was also cited in FERC’s Constitution statement.

The study analyzed sales transactions along two petroleum product pipelines, the Olympic and the nearby Trans Mountain pipeline, which carries crude oil, for a period of 5½ years before and five years after the Olympic explosion. The Trans Mountain pipeline had never experienced an incident during the period studied.

Hansen, an economist who focuses on housing, said she and her colleagues live in Bellingham and the incident spurred their interest in how pipeline accidents affect home values.

The study found that proximity to the accident-free line saw no effect while properties within 50 feet of the Olympic line saw a 4.6 percent decrease in their home values, a figure which dropped precipitously until no impact was experienced at distances farther than 1,000 feet from the pipeline.

“We found that prior to the accident, houses near a pipeline sold for no less than similar houses elsewhere, but after the accident, houses near the pipeline that ruptured sold at a discount. The closer to the pipeline a house was located, the larger the discount,” Hansen said. “These findings suggest that the accident did in fact have the effect of increasing the perceived risk of living near a pipeline. However, we also found that the discounts become smaller over time, indicating that some of the effect on home prices was temporary.”

Harder to get a mortgage or insurance?

FERC was not able to determine whether the proximity of a pipeline makes it more difficult for a homeowner or potential buyer to get a mortgage, as banks and mortgage lenders would not confirm that to be the case during FERC interviews, the statement said.

The environmental impact statement also failed to measure the impact on a homeowner’s insurance policy regarding a pipeline being installed on their property. The statement said the agency carried out an independent study that involved calling representatives from a variety of insurance companies both in the Constitution project’s immediate area and nationally, but the companies either would not provide specifics or simply never returned inquiries.

“We researched the topic of homeowners and title insurance policies and conducted our own interviews with regional experts, where possible. Some experts would not authorize us to use them as references and others were unwilling to provide their professional opinion,” the statement read. “The real potential for these impacts is unclear and would likely be highly variable.”

The companies in the local project area did, however, acknowledge that the potential exists for a resident’s policy to be affected by the project.

Local experts

While many local real estate agents and appraisers declined to comment for this story, citing the premature nature of the issue or the controversy surrounding the pipeline, or did not return phone messages, at least one insurance representative said he did not expect a gas pipeline to affect his client’s policies.

Tim Farrell, the owner of Gilmore & Farrell Insurance in Greenfield, said none of the insurance companies he represents currently take gas transmission lines into consideration on applications for homeowner’s insurance, and he does not expect a new pipeline would affect policies.

“One of the questions we ask is how the home is heated, but gas off the street and propane tanks haven’t been a problem. We don’t like to see buried oil tanks,” he said. “As far as I know, there aren’t transmission lines here, but if there are, they haven’t been an issue.”

On the web:

FERC EIS — s3.documentcloud.org/documents/1354764/ferc-eis-constitution.pdf

Fruits, 2008 — tinyurl.com/q56crne

Hansen, et al. 2006 — pstrust.org/docs/ResidentialPropertyValues.pdf

 

Comments

  1. Sue Louisignau on

    I am a real estate appraiser. There is stia and it will effect value. The VA has specific guidelines for lending near power lines, pipelines. Our area is unique....not just a typical development. People move to the Pioneer Valley or Hilltowns for much more then having a roof over their head. There is stigma and it will effect values for houses near the compressor stations and those with pipeline crossing their land. It is possible you may not be able to finance that property. You cannot compare our area with a subdivision somewhere. This will have effects on value. Susan Louisignau. SRA, RA, M.Ed 229 Maple St Northfield, MA 01360 413-498-0080