Understanding the Amenity Impacts of Wind Development on an International Border

Understanding the Amenity Impacts of Wind Development on an International Border Martin D. Heintzelman, Richard J. Vyn, and Sarah Guth∗ January 13, 2016 DRAFT WORKING PAPER: DO NOT CITE OR QUOTE Abstract Wind energy developments are often controversial. Concerns are often raised about negative impacts on local communities, including impacts on property values. Some of these negative impacts may be oset by compensatory payments made by wind developers. Communities often also have a say in approving the development or setting parameters which might dictate terms such as the density of towers or minimum setbacks from property borders or homes. However, if the development is near a border between municipalities, states, or even countries, it is often the case that one or more jursidictions will not have an opportunity to set such rules or demand compensation, but will, nonetheless, face some costs or impacts from the development. We explore exactly this situation at the border between Canada and the United States in the Thousand Islands region where a wind farm is currently operating on the Canadian border island of Wolfe Island. Using a parcel-level hedonic analysis of property sales transactions, we nd that properties in NY with a view of and/or in close proximity to the turbines signicantly depreciated in value after construction while parcels in Canada saw no signicant change in their value. ∗Heintzelman (corresponding author) is Associate Professor and Fredric C. Menz Scholar of Environmental Economics, School of Business, Clarkson University, P.O. Box 5790, Pots- dam, NY 13699, [email protected]. Vyn is Associate Professor, University of Guelph, Ridgetown Campus. Sarah Guth is Research Assistant, Harvard University. This research was supported by the Fredric C. Menz endowment fund for Environmental Economics at Clarkson University. Background research was conducted while Guth was participating in Clarkson University's Research Experience for Undergraduates (REU) program, supported by NSF Grant No. EEC-1359256. Additional research assistance was provided by Brittany Berry at the University of Guelph and Chuan Tang at Clarkson University. Some GIS analysis was provided by Adam Bonnycastle, also of the University of Guelph. We are indebted to seminar respondents at the University of New Hampshire and the 2015 Biennial Meeting of the Association for Canadian Studies in the United States for helpful comments and suggestions. 1 1 Introduction Renewable energy sources are a steadily increasing portion of our global energy mix. Such energy sources are a global public good - by substituting for more pollution-intensive fossil-fuel sources they reduce global pollution of both crite- ria pollutants, such as NOx, SOx, Mercury, and others, as well as greenhouse 1 pollutants like CO2. The benets of these reductions are generally spread over a large area and, in the case of greenhouse gases, over the entire planet. The costs of these reductions, however, are more likely to fall on a much smaller ge- ographic area. In some cases, in fact, renewable energy facilities can be thought of simultaneously as global public goods and local public bads. As evidence of this, siting new renewable energy facilities, particularly wind farms, is often controversial, with local governments and/or activists putting up sti resistance. This can be true even in areas with populations which are generally supportive of environmental issues, as in the case of the Cape Wind development o the coast of Massachusetts2. Common local concerns about wind developments include visual and aural disamenities, potential human health impacts, and impacts on wildlife. The visual disamenities cited by wind opponents stem from the introduction of large man-made structures into the landscape. At the most basic level, such a change to the landscape can be o-putting to residents of an area, who may have bought their property under the assumption that the landscape would remain unchanged. More specically, opponents often cite the impacts of the large (depending on the facility) array of blinking red lights which sit atop the wind turbine hubs, as well as shadown icker which occurs when the turning blades are between the sun and a home, resulting in rhythmically moving shadows. The rst aect may be amplied when the view of the turbines is over water, as this clears the visual eld of other features which would otherwise obstruct or reduce such views. Noise impacts are also often cited by homeowners opposed to wind development. Of particular concern is low frequency noise which dissipates more slowly over distance (Bolin et al., 2011). Many people have complained about serious health impacts in relation to this low frequency noise. There have been some studies which nd evidence of health impacts, in particular sleep deprivation and psychological stress, but larger summary studies have found limited evidence linking the noise itself to these impacts (Council of Canadian Academies, 2015). Instead, as found by a recent Health Canada study, wind turbine noise is more likely to cause increased levels of annoyance rather than health impacts3. Regardless of scientic evidence, the perception of health impacts remains, and these perceived amenity and health impacts are likely to be reected in property values as bids for properties in close proximity to 1The exact emissions reductions from a wind facility depends very much on what other energy sources are displaced, the focus of Kane et al. [2013]. 2The Cape Wind project is a proposed oshore wind facility in Nantucket Sound. It has met strict opposition from many local landowners and, most famously, the Kennedy family. 3Health Canada. 2014. Wind turbine noise and health study: Summary of results. Avail- able at: http://www.hc-sc.gc.ca/ewh-semt/noise-bruit/turbine-eoliennes/summary-resume- eng.php, accessed December 11, 2015. 2 wind turbines will be reduced. Acting counter to these negative impacts are some benets which often ac- crue to local landowners and communities. First, individual landowners who are able to let their land out to wind energy companies stand to gain from streams of rental payments from developers. These contracts vary across both sites and landowners in magnitude and the allocation of risk (some contracts include xed payments without regard to electricity production whereas others include payments which are a function of electricity output, transferring some risk to landowners). In addition, developers often compensate communities through payments-in-lieu-of-taxes (PILOTs). These payments help to mitigate negative impacts in the local community and, again, vary in size and structure across sites. Payments to communities will also be reected in property values as these payments could result in either lower local taxes or increased local services, or a combination of both (Kahn, 2013). Payments to landowners are unlikely to broadly impact property values, but, if transferable, would certainly increase the value of parcels that include wind leases. Weber et al. [2013] note that energy royalties, including wind turbine lease payments, are resulting in substantial payments to farms across the United States It is also possible that the development of wind energy will result in increased economic activity through direct employment impacts and indirectly as payments made to individual landowners and the municipality ow through the local economy. Brown et al. [2012] nd signicant and positive economic impacts of wind facilities on personal income and employment, while Munday et al. [2011] nd less denitive results on economic impacts. Any positive economic impacts would likely also be reected in property values. Another issue in public acceptance of wind development is public involve- ment in the development/approval process. If a community feels that they have not had sucient input to the approval process, they are more likely to oppose and ght the development. In addition, if the project moves forward despite substantial opposition, this may lead to bad feelings and drive landowners out of the area, possibly lowering property values in the process. On the other hand, if the community is able to be actively involved in the process, they may have a stronger hand in negotiating better compensation for their community in addition to aecting details about the design of the project to their advantage.4 As an extreme form of this, if the development happens near a border between communities, but is wholly contained within one community, the community without the development is likely to be held out of the approval process, and will also not receive compensation from the developer. These neighboring communities, in other words, will bear some of the cost of the project with little prospect to receive any benets. All of these issues may be further complicated by the presence of second- home or vacation home owners. These owners are likely to have more elastic preferences regarding changes in the amenities surrounding their property. Since 4See Baxter, Morzaria, and Hirsch [2013] , Groth and Vogt [2014] , Ladenburg et al. [2013], Lindén et al. [2015], and Petrova [2013]for thorough discussions of the determinants of and strategies for social acceptance of wind energy. 3 they are not tied as closely to a particular region because of concerns about employment, they are more likely to sell their property, or less likely to buy a new property due to an adverse change in amenities. In addition, to the extent that additional local services, such as improved school systems, are provided through the use of PILOTs, they are less likely to be able to take advantage of these improvements. Finally, they may also not have as much of a voice in the approval process, and may feel like an outsider as a result. All of these factors make it possible that properties that are primarily used as second or vacation homes, or communities with a large share of parcels in this use, will face even larger changes in property values as a result of wind farm developments.

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