Prepared for:
La Plata County, Colorado
Durango, Colorado

Abstract

By applying an hedonic model to a dataset of residential property sales and coalbed methane well locations
in the Northern San Juan Basin, within La Plata County, Colorado, this analysis has shown that it is
feasible to estimate an hedonic pricing model for residential properties within a defined portion of the
Northern San Juan Basin. The model quantified many of the influences affecting selling price in the area,
accounting for more than 86 percent of the variation in selling price of properties sold from 1989 through
the first half of 2000. Independent of any changes in the nature of the housing stock, property values have
risen rapidly in the study area from 1990 to 2000, reflecting appreciation of about 6.9 percent per year on
average. The location of a well on a property at the time of sale had an impact on the property's selling
price, other attributes being equal. Considering only properties sold with wells on them, there was an
estimated net reduction in selling price of about 22 percent. This finding reflects the relatively large size
and higher price of these properties, as well as other, offsetting proximity effects, including a positive effect
attributable to the presence of wells within 550 feet but not on the property per se. The positive effect of
nearby wells, a seemingly contradictory result, may have been due to a belief that the property would not be
drilled because a well had already been drilled in close proximity— an effect that may not hold in the
future. The impacts of coalbed methane wells, as measured across all properties sold in the study area and
applied to an “average” property, is an estimated reduction in selling price of less than one percent.
However, properties with wells on them account for most of the reduction in selling price. Overall, the
findings of the study are consistent with results reported in the literature and with the experience of
knowledgeable individuals interviewed locally. The value of this study is to empirically measure the level of
overall impact to properties within the study area. On an individual basis, the exact character and features
of one specific property versus another must be appraised to determine actual value.

Full Report by BBC Research & Consulting (PDF File)