Readers Speak: Response to “Another View of High Voltage Transmission Lines”

By James A. Chalmers, Ph.D.

High Voltage Transmission Lines and Montana Real Estate Values: Final Report (the “Chalmers Study”) was presented at a public forum at Montana Tech in Butte on April 17 of this year. This report is available online through MSU Extension at Presentation of the study was followed by comments from a panel of real estate professionals including Mr. Kevin Pearce, ARA of Twin Bridges. Mr. Pearce made comments at that time which he followed up with a letter that was published in the Dillon Tribune on May 23 and The Madisonian on May 24.

At the most general level, his point is that the effects on the real estate market and property values during the siting and construction period of a transmission line may be different from the effects once the line is constructed. I agree with this proposition. However he goes on to argue that our study of an established transmission line has no relevance to the proposed MSTI project and its effect on current real estate values. In addition, his representation of both the purpose of our work and its findings merits clarification. Finally, he offers an opinion with respect to the longer-term effects of transmission lines that deserves brief discussion.

Mr. Pearce says that our study was commissioned by NorthWestern Energy “… as an aid in the process of planning, permitting and siting of the proposed MSTI power line.” That’s not correct. The study was conceptualized from the outset as an analysis of the effects of Montana’s only existing 500kV line on the value of the various property types that it crossed or was close to. The basic question was once a line was built and buyers and sellers were fully informed with respect to its location, its visibility, etc. what were the implications for the value of affected properties. Given the interest in development of renewable energy sources in Montana, and proposals for new transmission facilities emerging as a result, NWE had a broader interest in understanding how rural land uses may be affected by HVTLs in general. The study was motivated by, and paralleled, similar work that I had carried out in New England, recognizing that no similar work had been carried out in Montana or surrounding states.

Mr. Pearce characterizes our study as concluding that “… there is very little, to no effect on real estate values due to HVTLs.” That also is incorrect. The case studies for two of the seven property types we studied showed significant price effects as well as effects on marketing time. Further, we were careful to emphasize that you couldn’t generalize from our results to the effects on a particular property. For those property types where our case studies found no effect, it was easy to imagine particular circumstances where there would be an effect. Conversely, where our case studies found an effect, it was easy to imagine particular circumstances where there would be no effect. What our study did identify were the factors and conditions where the likelihood of effect was greater or lesser, but conclusions with respect to any particular property would have to be grounded in a site specific analysis of the attributes of the property that give it value and the way in which the transmission line affects those attributes.

Finally, Mr. Pearce argues that our study of sales along a transmission line that had been in place since the early 1980’s was irrelevant to understanding property value effects from a new transmission line because “… the lands affected by the power lines have healed and the lines (added) have become a part of the accepted landscape.” He goes on to suggest an analogy to the effects of fire or flood. I understand the fire or flood argument where the negative effects dissipate over time, but when a buyer sees a transmission line on a property, especially a buyer new to that market, his reaction is unlikely to be different whether the line has been there for five, 15 or 25 years. As to whether our case studies reflect the experience of properties during a highly active market or a down market, our findings that the availability of unaffected substitute properties is a critical factor in determining the likelihood of value impacts speak directly to this very point.

These clarifications notwithstanding, I certainly acknowledge that the current situation of not knowing where the final MSTI alignment is going to be and what the lines might look like from any particular property introduces an important element of uncertainty that can significantly impact the current value and marketability of a property. This question was not intended to be addressed by our study. Mr. Pearce asks for a study that would examine sales relevant to this period of siting and potential construction. However, sales during this period for the 500kV lines we studied would be very old and of a substantially different market era. They are also likely to be very few in number, partly because the time period of siting is relatively short and because the effect of uncertainty on potentially affected properties is to cause people to be reluctant to try to sell during this period or, if they do, to be unsuccessful. Finally, finding parties to these transactions 30 plus years later would be extraordinarily difficult if not impossible, as would obtaining accurate interview recollections as to their buying and selling motivations.

Further, it’s not clear what the relevance of knowing these interim effects would be to the large number of potentially affected properties while multiple corridors are under consideration. Once the final alignment is known many of these properties will turn out to be completely unaffected. The two relevant areas of contribution of the real estate research we carried out are the siting process, i.e. recognizing areas where the likelihood of property value effects are greater or lesser, and determining appropriate compensation for those properties actually affected once the final alignment is known. Our research has important things to say in both of these areas.

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