1. Land Values and Solutions Study
Garfield County
Land Values and Solutions Study
BBC Research & Consulting Cherry Creek North Drive, # 850 Denver, Colorado
June 1, 2006
Report Presentation

2. Introduction Two Economic Studies Are Underway
The Economic Impact Model
The Land Values and Solutions Study

3. Land Values Study: Project Objectives
Demonstrate what factors drive residential land values in Garfield County.
Document how rural industrialization (gas, gravel, power lines, etc.) affects the value of residential property.
Offer mitigation strategies for situations where value losses occur.

4. Land Values Study: Three Phases
Phase I. Data Collection and Analysis
Phase II. Statistical Analysis and Conclusions
Phase III. Solutions and Mitigation Evaluation

5. Phase I: Process Assembled a data base of 7,600 sales transactions
Unincorporated, residential sales;
Cleaned and added data: gravel roads, geographic features, water & sewer, etc.
Ultimately used 20+ variables per property
Assembled gas drilling and industrial data
Location of power lines, gravel pits, highway, railroads
Location & dates of gas wells
Integrated GIS with Community-Viz mapping software
Analyzed data in light of interviews and anecdotal observations.

6. Phase II: Statistical Analysis
Meet with committees; revised conceptual approach
Completed Statistical analysis
Tested 20+ property variables
Land characteristics (e.g. size, presence of water)
Location (e.g.; RFRV vs. CRV, distance to town)
Structural characteristics (e.g.; size, age, number of bedrooms)
Determined factors that explain value
Provided a basis for understanding impact on property value and strategies for mitigation

7. What is Hedonic Regression Analysis
Hedonic regression analysis is a method of explaining demand or prices for a particular good (e.g. a housing unit) by attaching estimates of value to its component characteristics (e.g. size of structure, age, quality of construction)
Why Use? Produces results with statistical authority

8. Variables Tested for the Property Value Models — Included in Model
Land Characteristics:
Size (acreage)
Presence of water features
Presence of “good” vegetation (CRV only)
Structural Characteristics:
Size of home
New home (less than 10 years old)
Presence of garage (CRV only)
Presence of outbuildings
Heated space in outbuildings
Central wastewater system (RFV only)
Locational characteristics/ industrial proximity
Distance from Glen. Sprgs. (CRV only)
Distance from Pitkin County (RFV only)
North of Colorado River (CRV only)
View of Mt. Sopris (RFV only)
Distance to nearest paved road
Distance to nearest gravel pit (CRV only)
Gas well completed within 90 days after sale (CRV only)
Gas well completed less than 2 years prior to sale (CRV only)
Gas well completed more than 2 years prior to sale (CRV only)
Value appreciation over time:
Increase in value per acre by year
Increase in value per square foot by year

9. Variables Tested for the Property Value Models — Tested and Rejected
Land Characteristics:
South facing percentage
All flat terrain
Structural Characteristics:
Number of bedrooms
Number of bathrooms
Construction type (e.g., modular, condominium, etc.)
Additional house age groupings (e.g., 10 to 20 years old)
Water system other than a private well
Locational characteristics/ industrial proximity
Distance to nearest town
Adjoins Federal land
Distance to I-70
Distance to railroad
Proximity of high voltage lines
Proximity of land fill

10. Challenges
Wide variation in property characteristics and locational influences
Value effects across three key dimensions — property characteristics, size and time of sale
Sample sizes diminish with multiple variables
Difficult to measure some key factors
All data sets have some inaccuracies

11. Results
We can explain influences on property values with a reasonable level of accuracy:
76% of value variation in Roaring Fork Valley (2,726 observations) (95% confidence level)
81% of value variation in Colorado River Valley (4,727 observations) (95% confidence level)
Provides a reliable basis for overlaying impacts of gas drilling and other industrial effects.

12. Industrial Impacts
We tested effects of highways, railroads, gravel pits, power landfills lines and gas drilling
Also tested positive site attributes: vegetation, views, proximity to USFS lands, rivers
Proximity to highways, power lines, landfills and railroads were not proven to have an impact on values
Proximity to gravel pits and gas drilling has an apparent (but not statistically significant) impact on property values

13. Gas Drilling Data Issues
Gas well permits 5,010
Operational wells 2,674
Parcels with operational wells 354
Valid single parcel sales of parcels with operational wells 140
Final sample “Well impacts” (less than 160 acres) 32

14. Revised Colorado River Valley Property Value Model
Baseline Property: (Average Property With Gas Well)
Total Value = $303,079
$271,623
Well completed at time of sale
(11%)
$280,070
Well completed long before sale
Well older than two years
(8%)
$254,736
Well activity at time of Sale
Well completed less than 90 days after sale
(16%)

15. Generalized Gas Drilling Impact on Property Value in Colorado River Valley
Loss/Gain
Exploration
Phase
+$100,000
Drilling
Phase
Completion Phase
+$53,000
+$50,000
Typical Residential
Change in Value
+$25,000
$303,0791
Drill Site Properties
Change in Value
($32,000)
($50,000)
($49,000)
($100,000) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Months
1 Typical property with a well — 40 acres, small home, 24 miles from Glenwood.

16. Generalized Gas Drilling Impact on Property Value in Colorado River Valley
Loss/Gain
Exploration
Phase
+$100,000
Drilling
Phase
Completion Phase
+$53,000
+$50,000
Typical Residential
Change in Value
+$25,000
$303,0791
Drill Site Properties
Change in Value
($32,000)
($50,000)
($49,000)
Perception of Risk
Institutional Uncertainty
Quality of Life Impacts
($100,000) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Months
1 Typical property with a well — 40 acres, small home, 24 miles from Glenwood.

17. Generalized Gas Drilling Impact on Property Value in Colorado River Valley
Loss/Gain
Exploration
Phase
+$100,000
Drilling
Phase
Completion Phase
+$53,000
+$50,000
Typical Residential
Change in Value
+$25,000
$303,0791
Drill Site Properties
Change in Value
($50,000)
Impact of Gas
Employment Demand
($100,000) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36
Months
1 Typical property with a well — 40 acres, small home, 24 miles from Glenwood.

18. Impacts of Gas Drilling: Conclusions
Properties that experience drilling see a reduction in market value, but seemingly temporary
On average, net residential loss of value of about 16% during drilling and about 8% three years after drilling ceases
Anecdotal data suggest:
There is no average well site
Some drilling instances have more severe impacts
Problem compounds with contiguous site operations or multiple drilling
Micro site issues are hard to capture
Recent wells tend to be closer to residential uses

19. Impacts of Gas Drilling: Conclusions (cont.)
Gas activity also has countervailing positive impacts:
Gas employment drives housing demand
Property lease payments
Site improvements
Tax revenues
Mineral owners have legitimate property rights, which can’t be ignored
Drilling is not locally regulated so operational restrictions are limited

20. Mitigation Possibilities
Institutional
Quality of Life
Perception of Risk
Education material/seminar
Ombudsman
Recommend cooperative lenders/brokers
Fund property purchase or buy down
Define and enforce best practices
IGA with COGCC
Education
Remedial funds
Insurance
Certification of completeness
Environmental monitoring reporting

21. Land Values and Solutions Study Institutional Changes
Ombudsman/Advocate
Document county land value changes over time
Represent Owners
Clearing House of Information for Appraisers, Realtors and Buyers
Environment Response Agent
Intergovernmental Agreement with COGCC
Lending or Property Purchase

22. Quality of Life Mitigation Measures
Phase I Exploration
Landowner notification
Negotiated surface damage provisions
Ground water testing
Phase II Drilling and Field Organization
Reasoned environmental protections
Reasoned well-siting practices
Noise and nuisance abatement

23. Quality of Life Mitigation Measures
Phase III Production and Stimulation
Responsible stimulation techniques
Proper waste disposal
Air and water quality monitoring
Phase IV Abandonment and Reclamation
Certification of proper abandonment
Reclamation with native topsoil and vegetation

24. Land Values and Solutions Study
Garfield County
Land Values and Solutions Study