Study finds link between gas well drilling and housing prices | PostIndependent.com
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Study finds link between gas well drilling and housing prices

RIFLE ” While the driving forces behind property values in Garfield County are complex at best, one trend stands out ” oil and gas drilling has a temporary effect on sale prices.

A recently concluded seven-month land values study, conducted by BBC Research of Denver, looked at the factors that drive land values and drew conclusions about the affects of what BBC managing director Ford Frick called “rural industrialization” including gas well drilling and gravel pit operations in the county.

Frick presented his conclusions Thursday to the Energy Advisory Board in Rifle.



But it wouldn’t be right to say that the natural gas industry, as many affected by it claim, has driven property values down in the Colorado River Valley.

BBC found there is a relatively short-lived loss of value in homes in close proximity to active gas drilling, but that effect tapers off and values recover when drilling is completed, Frick said.



Frick and his team analyzed 7,600 property transactions from 1987 to 2004 as well as drilling data. There are 5,010 well drilling permits currently held in the county and 2,675 operating gas wells.

“Garfield County is so diverse, it’s difficult to deal with,” Frick said. He divided the county into two areas, the Colorado River Valley and Roaring Fork River Valley. BBC assigned 20 variables that appear to have an influence over property prices and which were statistically tested for validity. Among those were a property’s size, distance from a town, its age, the number of bedrooms, and views of Mount Sopris. Once those variables were verified, BBC also looked at the relationship between gas drilling and property values.

“Proximity to gas wells and gravel pits does affect land values,” Frick said. But the relationship is complex.

To illustrate the effect of gas wells on nearby properties, Frick described a hypothetical property of 1,500 square feet on 40 acres of land in western Garfield County, 30 miles from Glenwood Springs, in the Colorado River Valley.

With an initial value of $303,079, its selling price would drop 16 percent to $254,736, if a well was being actively drilled nearby and completed in less than 90 days after the sale. If a nearby well was completed at the time of sale, its value would drop by 11 percent to $271,623.

“We see a recovery of value to 8 percent three years after drilling,” Frick said. “Value drops during the drilling phase with a loss of almost $50,000 and begins to recover as the well is completed.”

Frick said three factors contribute to the loss of value. There is the buyer’s perception of risk of purchasing a property close to active drilling with its attendant noise and odors.

There is also a perception among lenders that properties close to drilling are a risk. Further, there is also a real impact to one’s quality of life, “particularly during the drilling period,” Frick said.

Along with the temporary impacts of drilling come longer, positive economic impacts from the gas production.

“The gas industry contributes to housing appreciation,” he said. “Yes, you’ve lost value during drilling activity, but the fact is, your value is raised more than you lost in three years … by the driving demand for housing.”

Frick also pointed out that perceptions can change. In Weld County on the Front Range, gas drilling has gone on longer and is more widespread and property values do not reflect drilling impacts.

“There seems to be a critical mass that if enough people don’t perceive it’s risky (it isn’t),” he added.


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