The Potential Impact Radius of a Natural Gas Transmission Line and Real Estate Valuations: A Behavioral Analysis

Copyright © 2020, Charles Hilterbrand Jr. This article is published under a Creative Commons BY-NC license. Permission is granted to copy and distribute this article for non-commercial purposes, in both printed and electronic formats This study intended to address the question, “How would a purchase price be impacted if a seller provided buyers a notice that the residential property that has been listed for sale is located within a Potential Impact Radius (PIR) of a natural gas transmission line?” Does the notice of being located within the PIR affect the purchase value a buyer is willing to offer for a residential property? Does the perceived risk associated with PIR affect the amount a potential buyer would offer? According to the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), A Potential Impact Radius (PIR) is the radius of a circle within which the potential failure of a pipeline could have significant impact on people or property. (49 CFR §192.903 (Subpart O) This designation of properties located within a PIR requires pipeline operators to provide the government with a maintenance schedule to ensure public safety. The designation of a property within a PIR is not required to be disclosed to the present landowner or any future purchasers of residential property within the PIR. This study is an attempt to ascertain what would happen if this designation was required to be disclosed to a potential residential real estate purchaser. A thorough literature review of this subject showed that the present academic and practice literature states that the proximity of a residential property to a natural gas transmission line does not impact sales prices. A review of this literature did not find a reference to a Potential Impact Radius (PIR). The methodological design for this study was a contingent valuation method associated with an experimental design (for similar examples, see Lane, Seiler & Seiler, 2013; Seiler 2014; Seiler 2018). Three hypotheses were examined: H1: Notice that a single-family residential home is located near natural gas transmission pipeline impacts a potential purchaser’s perceived value. H2: Notice that a single-family residential home is located within a Potential Impact Radius of a natural gas transmission pipeline impacts a potential purchaser’s perceived value. H3: Notice that a single-family residential home is located within a Potential Impact Radius of a natural gas transmission pipeline has a greater impact on a potential purchaser’s perceived value than notice that a single-family residential home is located near natural gas transmission pipeline. How would a purchase price be impacted if a seller provided buyers a notice that the residential property that has been listed for sale is located within a Potential Impact Radius (PIR) of a natural gas transmission line?