Impact of Surface Mining on Residential Property Values

Posted by Michael Hewitt on December 20th, 2011 10:54am

A recent study on the impact of surface mining on residential property values in the USA provides a very interesting comment on what can be expected in Kamloops should the KGHM Ajax mine project be approved. The study is called "The Impact of Surface Coal Mining on Residential Property Values: A Hedonic Price Analysis Austin Williams University of Tennessee- Knoxville May 2011 Dr. Christian Vossler, Faculty Advisor". 

It is an academic report that can only be attacked on methodological grounds.  It is self-evident that open pit mines are viewed as undesirable when located close to residences, and that property values will decline, perhaps significantly, in areas where property owners were not expecting a mine to be developed. It should be noted that as property values decline, so do municipal tax revenues. 

The level of scientific assessment of declines in property value so evident in this study is an example of the level of assessment that we need to insist the government agencies, municipal, provincial and federal, require KGHM Ajax to do. Although the study deals with surface coal mining, the factors considered apply equally to a surface (open pit) copper/gold mine. 

The Vossler study clearly shows that it is wrong to simply regard the proposed mine as a financial win-win for the community based purely on economic grounds. Many people can expect to suffer substantial financial losses as their residential property values decrease.

The following two excerpts provide clear insight into the report for those of you who don't have the time to read the entire report:

"Supporters of coal claim the benefits of coal come in the form of job creation, economic prosperity, and energy security. On the other hand, since the external effects of mining are not directly borne by the coal industry, the social costs associated with coal mining are generally more difficult to measure. Lower water and air quality levels are felt primarily through increased health costs, and loss of aesthetic value can be identified through indicators such as decline in recreation-based tourism and lower property values. Fully monetizing the costs and benefits associated with a coal mine is necessary for properly determining the best public policy options."

"The use of certain surface mining techniques is currently a heavily-debated environmental issue and one where consideration of non-market values is likely to lead to the creation of better public policy. This study uses the hedonic pricing method to investigate the impact that surface coal mines have on residential property values. The results of our statistical analysis show that as the number of surface mines and their average production increases, the median value of housing units in a county significantly decreases. In particular, for the three model specifications we explored, we estimate that the addition of a surface mine decreases the median property value between $7,526,981.84 and $14,779,928.35."

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