Wednesday, June 13, 2012

Fracking and Real Estate Values [Environment]

by Osman Parvez
If you think the hoopla over Fracking in Longmont, Erie, and Lafayette will just blow over and go away, you're dead wrong.    Here's why.

The Fracking Horse is Out of the Barn
It's been over 40 years since the Clean Air and Clean Water Acts passed.   Over the years, in fits and starts, our awareness over environmental issues grown.    With today's powerful social media and networking tools, environmental activists are getting more effective at getting their voices heard.

Fracking Protests are Global
Take a look at the history of health concerns in the United States.    Environmental issues with an impact on human health nearly always gain momentum.   And rightfully so.   If it weren't for the brave early voices making a fuss over asbestos, lead, and radon - we likely wouldn't have the awareness we have today.

If exposure is easy to eliminate - like not eating Alar tainted apples - or if a safer substitute exists,  the fury may die off, but when exposure is difficult to eliminate and impacts our young people, awareness and concern expand massively.  This is what is happening right now when it comes to fracking.  

Witness the growth of the organic food industry.    Several decades ago, consumers concerned with pesticides in their food demonstrated they were willing to pay the price to eat healthier.   Back then, organic foods were an exotic product only carried by co-ops and boutique grocery stores.  Today, it's a $30 billion dollar industry and Wal-mart is the largest retailer of organic groceries in the country.  The momentum is still building.  For example, we're just learning how non-organic farming depletes the soil and thus depletes the nutritional content of food.   Organic food offers less exposure to pesticides and it's possibly of higher nutritional value - does anyone seriously think organic is on the way out?

Perception Matters 
Concerns over hydraulic fracturing or fracking are growing and well founded, with potential health impacts to our community and the environment (see Facts on Fracking Video below).    Here's the rub - as a scientist at heart (and in training), it hurts to say but when it comes to markets, it really doesn't matter whether it's the truth or not.

A few weeks ago, we had our first home buyer eliminate entire cities from consideration because of oil and gas wells.    Erie, Longmont, and Lafayette were taken off our showing list because of the density of wells near schools and residential areas.    Do you think my buyers are the only ones concerned?

Perception matters more than facts when it comes to the real estate market.   If just the appearance of wells and fracking equipment in your neighborhood (or adjacent to schools!) creates a feeling of unease, fewer buyers will be interested in owning.   So even if you don't believe there are negative health impacts from fracking, you absolutely should care about the market impact of oil/gas drilling within 150 feet of your home (permissible under Colorado law).

Fewer buyers equals less demand, potentially driving down real estate values.  It's really not complicated.

Closing Thoughts
Just because you own the real estate on the surface doesn't mean you own the minerals beneath.  Mineral rights trade separately from surface rights in Colorado.    The open space you see next to your house could become a well site and if many well sites are already on open space.

City water treatment systems don't do a particularly good job of filtering heavy metals or chemicals.  Depending on your city and its water resources, upstream run-off may enter your municipal supply.    Don't assume that just because you don't use a well for water that this issue doesn't apply to you.    It does.

Additional Resources
Map of Oil and Gas Wells in Erie

Erie Rising

Our Health, Our Future, Our Longmont

Longmont ROAR

Facts on Fracking - What Can Go Wrong (Video)
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Note: Our goal is to provide exceptional service to our clients. The ideas and strategies in this blog post are the opinion of the writer at the time of publication. Silver Fern Homes recommends careful and complete due diligence before buying or selling real estate or other investments. Consult with your professional advisers before making financial decisions. This article is not intended as legal, tax, or investment advice. Silver Fern Homes will not be held liable for investment choices derived from this article.


image:   wollumbi
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