Proposed Ajax Mine and Aberdeen

Neighbourhood Property Values

by

Tsur Somerville, Ph.D.

&

Jake Wetzel, MSc

July 13, 2017

Table of Contents

Executive Summary ................................................................................................................ 2

Introduction ........................................................................................................................... 4

Project Background ................................................................................................................ 5

Local Amenities and Neighbourhood Property Values ............................................................ 6

Existing research on the open space amenities and environmental hazards ........................... 7

Quantitative Analysis: Aberdeen Property Price and Liquidity Effects to Date ....................... 12

Mitigation of Risks to Aberdeen Property Values of Mine Operations ................................... 14

References ............................................................................................................................ 17

Statistical Appendix ............................................................................................................... 19

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Executive Summary

The proposed Ajax mine is likely to lower the property values of homeowners in the
nearby Aberdeen neighbourhood. The degree of this loss in value depends on the extent
to which mine operations would worsen local residents quality of life and perceptions
of risk to health and property from the mine. A large body of research finds that
proximity to land uses that worsen air quality, are environmental hazards and risks,
and create noise pollution all result in a reduction in prices for residential properties in
the affected neighbourhoods when compared with similar properties that are more
distant and thus not as burdened with these conditions. The development of the
proposed mine would be expected to lead to these conditions, and thus lower the value
of residential properties in Aberdeen.

The preliminary statistical analysis presented here finds some evidence of price declines
for properties in the Aberdeen neighbourhood relative to a control neighbourhood, over
the period 2010 to 2016. However, more time and study are needed to generate
sufficiently robust findings for the effect of the mine on either prices or the volume of
residential transactions in the Aberdeen neighbourhood. This result is surprising as
existing research has found that the capitalization of the expected negative effects of
facilities that generate adverse effects on the quality of life of nearby residents and its
possible risks to resident health and property into lower house prices does not manifest
until construction of the facility begins. This finding is consistent with and certainly
reinforces the expectation based on other research that facilities such as the proposed
Ajax mine have negative effects on nearby residential property values.

The expectation of harm from the mine necessarily raises the question of how should
current property owners be protected against financial loss. While compensation for
lower prices from mine operations can address aspects of the harms from the
development of the mine towards loss of market value, it would need to be augmented
with an insurance mechanism for property value loss similar to the Property Value
Protection Program in Port Hope ON to address lower incidence higher loss events that

2
are not as well reflected through changes in market values. Such an approach would
provide a clear framework for addressing the financial harm that the mine is likely to
cause to Aberdeen neighbourhood property owners in the future in a structured, well
understood, and fully financed way. Critically, it can provide protection for
catastrophic events and long term harms that may not be fully or appropriately
capitalized into current house prices and functionally would create a mine-proponent
funded insurance market for residents that does not currently exist.

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Introduction

This report presents an analysis of the effects the proposed Ajax mine will have on
residential property values and liquidity in the Aberdeen neighbourhood. The mine
will reduce the value of residential properties in adjacent areas if it lowers the quality of
life for residents, increases concerns regarding effects of mine operations on the health
of nearby residents, or results in a higher risk of catastrophic events to health or
property resulting from mine operations. There is also a potential for an additional
diminution of quality of life if the mine operation compromises residents enjoyment of
the adjacent private ranch lands. The negative effects of the mine on properties are not
limited to loss of value, if liquidity the expected time to sell and probability of a
property selling worsens, then existing Aberdeen property owners are harmed as
well. Compensation is hard to determine in advance of operations, so appropriate
protection for possible losses would best be addressed through a fully funded and
guaranteed insurance program. One model for this approach in Canada is the Property
1
Value Protection Program currently in use in Port Hope, ON.

Below we outline these effects on property values in the Aberdeen neighbourhood that
could be expected to occur because of Ajax mine operations. This discussion is
augmented with a brief summary of some of the relevant academic literature. To this
discussion, we add a statistical analysis of the pattern of house prices and transaction
volume outcomes in the Aberdeen neighbourhood as compared with a reference
neighbourhood before and after milestones in the approvals process for the proposed
Ajax mine. The statistical analysis finds that between 2010 and 2015 following the start
of the application process and through it, prices in Aberdeen increased by $20,000 less
than comparable properties in the Juniper Ridge control neighbourhood. However,
liquidity was not affected. These results should be considered preliminary as at present
2
we lack sufficient data for more complete tests for the robustness of the results. As
well, existing research cited below suggests that the largest effects of proximity to a

1
http://www.phai.ca/en/home/pvp-property-value-protection-program/about-the-property-value-
protection-program.aspx
2
More robust results will require more analysis when and if the proposal moves forward through the
latter stages of the application process and any subsequent phases.

4
noxious land use occur once construction of the facility has begun and continue through
a facilitys operation. The final section of the report acts as a conclusion summarizing
the risks and suggesting possible mitigation strategies.

Project Background

KGHM Ajax Mining Inc. (KGHM) is proposing to construct and operate the Ajax
copper/gold mine south of the Aberdeen neighbourhood of Kamloops. According to
the proposed operators application for the mine, as currently planned it would have an
estimated life of 23 years. The project as currently characterized in the approvals
process would consist of an open pit mine, on-site ore processing facilities, a tailings
storage facility, mine rock storage facilities, water management facilities, a diversion
system to convey water from Jacko Lake around the site, low-grade and medium-grade
ore and overburden stockpiles, ancillary facilities, mine haul roads, sewage and waste
management facilities. Off-site infrastructure for the proposed project would include a
4-km access road between the project and Highway 5, a 15-km pipeline for water
supply connecting to the existing New Afton facilities, a 5.3-km natural gas pipeline,
and a 10-km power line connecting the Ajax Project Site to the BC Hydro transmission
line corridor. (SLR. 2017)

The proposed Ajax Mine would be located immediately adjacent to the southern
boundary of the City of Kamloops in the Thompson Nicola Regional District. The
project would be above, to the south, and in close proximity to the Aberdeen and
Pineview neighbourhoods, which form part of the southern boundary of the City of
Kamloops. This area of the City of Kamloops has an estimated population of 10,880 and
approximately 4,200 residential dwellings (City of Kamloops. 2017).

The Aberdeen neighbourhood would be the closest city neighbourhood to the project. It
is a relatively new residential area: most of the development in the neighbourhood has
occurred within the past 30 years. The Aberdeen neighbourhood has two elementary
schools and over the past 20 years has been one of the faster growing neighbourhoods
in the City. The area occupies a slope rising above the valley. The neighbourhood rises

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from an elevation of 700m on the north side along the Trans-Canada Highway to a
height of 1100m at the south end at the top of Coal Hill (TRUE. 2008).

Local Amenities and Neighbourhood Property Values

The basic model of housing prices describes them as a function of the houses structural
characteristics, the lot size and layout, and the value of the houses location. Location
captures all benefits and costs that are a function of geography and reflects all elements
that are fixed in geographic space. There are two types of location effects. First, the
capitalization of travel costs to workplaces and other destinations, where more distant
locations have lower land values to compensate buyers for the higher travel costs they
incur in making longer commute and other trips. Of greater interest for this analysis is
the second, that land values capitalize the complete set of what economists refer to as
local or neighbourhood amenities. These are the positive and negative attributes
residents experience from living at a specific location. These amenities include local
school quality, crime levels, and the remaining geographic-specific features that affect a
residents quality of life. Their monetary cost or benefit show up in land values as land
is the immobile factor and thus inseparable from the consumption of these amenities: to
benefit from the amenities a household must live at the location. Formally, the
equilibrium rent households would pay for access to these amenities (for a positive
amenity) or demand in compensation (for negative amenities) is the per period
aggregate effect of the neighbourhood amenities. The discounted stream of these net
rents is the capitalized value, which affects land and thus house prices. As some of
these attributes affect all properties in a neighbourhood they will be part of the
difference in mean neighbourhood property values, after adjusting for differences in the
other elements that determine house prices, between the affected neighbourhood and
others without the same amenity mix. Similarly, the loss of an amenity would reduce
the value of affected properties.

The proposed Ajax mine threatens a set of environmental benefits that Aberdeen
residents currently enjoy as well as potentially introducing disamenities and property
risks. Operation of the proposed Ajax mine is likely to worsen environmental

6
conditions in the Aberdeen neighbourhood. The combination of increased dust, noise,
and vibrations would be a local disamenity on their own, reducing the value of homes
in the Aberdeen area. The extent of the effect on house prices depends on the
assessment by potential buyers to the extent and magnitude of these effects. Then
largest of these should be the direct worsening of quality of life and the potential risks
of loss of property. There is an additional effect because the mine is likely to worsen the
benefits to residents of the currently undeveloped private ranch lands to the south of
the neighbourhood. While this land is likely to be developed in the future, in its present
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form it serves as an amenity with positive benefits for residents. Dust, noise, and
vibration would undermine the tranquility that the land currently provides to residents.

An additional potential negative effect on house values comes from the perception and
actuality of increases in risks associated with operation of the mine. These can be
categorized first into the risk that the disamenities and loss of amenities delineated
above are actually realized. Second, into potential adverse effects of mine operation on
residents health from airborne particulates. The final category includes risks to the
properties because of mine incidents such as tailing pond environmental problems, or
disruptions to the stability of the slope on which Aberdeen is constructed as a result of
mine operations. These risks would be expected at some point to be capitalized into
lower house prices in the neighbourhood and to reduce property liquidity.

Existing research on the open space amenities and environmental hazards

There are two related literatures in land economics that relate to the relationship
between the proposed Ajax mine and residential properties in the Aberdeen
neighbourhood. The first studies the effects on residential property value of nearby land
uses that are environmental threats and hazards. The second is a set of papers that
study the benefits of access to open space. The private land to the south of Aberdeen is
currently undeveloped and at some future date will be developed into a residential

3
Based on preliminary information in the 2008 Aberdeen Area Plan, an estimated 1,153 acres are
designated for future development. Of this total, one-quarter ( 333 acres) are intended to remain as open
space due to steep slopes, heavily treed areas and environmental sensitivity. In addition, much of the
remaining plan area is would remain as greenspace because of the areas environmental sensitivity

7
neighbourhood. In the interim as ranch land it does serve as an open space amenity for
Aberdeen residents, the enjoyment of which would be compromised by mine
operations.

The effects of environmental hazards and damage on house prices has been extremely
well studied and is aptly summarized in Farber (1998) and Boyle and Kiel (2001). Their
reviews cover research on the effects on house prices of air quality, water quality and a
wide range of undesirable land uses. Comparability of results is difficult because of the
large variance in types of hazards and how differently they effect nearby properties. As
an example, below we discuss a sample of different papers, which demonstrates the
consistent finding that poorer air quality lowers residential property values.

The standard methodology for price effects of an environmental disamenity or risk to

person or property is to compare the variation in proximity to the hazard with the
variation in property prices. Using this method to study pollution from a lead mine
and smelter complex in Australia, Neelawala, Wilson, and Athukorala (2012) find that
house prices increase $A 14,000 with each kilometers distance from the mine and
smelter site. What is not clear from these types of studies is what contribution one finds
from each factor, and the effects on prices of other elements that may co-locate with the
4
mines. There is also the question of whether the mine was initially located in a less
desirable location

A methodologically stronger approach is to look for unexpected changes in the level or

perception of the disamenity or risk and then test whether these changes correlate with
movements in house prices. By design, this approach will avoid problems because of
differences in initial conditions across neighbourhoods by focusing only on changes.
The approach requires a control group that does not experience the change. The
technique is known as the difference-in-differences methodology. An example of this
approach with air quality is the Simons, Seo, and Rosenfeld (2015) study of the direct
effects of air pollution and chemical release events from a refinery in Houston, Texas on

4
The latter is addressed in work by Taylor, Phaneuf, and Liu (2016).

8
residential property values. They compare prices in affected area with those in a similar
unaffected area following release events, and find that following release events, prices
in the affected areas are 6-8 percent lower than those in unaffected areas, when
compared with pre-event prices. Further on in the report we present the results of using
this methodology to study price changes in the Aberdeen neighbourhood around
milestones in the Ajax mine approval process.

A broader analysis is Cha and Greenstones (2005) modelling of the effect of the US
Clean Air Acts reduction in total suspended particulates on house values. They are able
to offset some of the statistical methodology challenges in conventional analysis that
just compare variation in pollution to variation in house prices because house choice
and amenity preferences by households are likely to be correlated, which biases the
statistical results. Their paper gets around this problem by using the degree to which
counties are in compliance with regulatory changes rather than the level of pollution as
their indicator. By using regulatory compliance factors, they avoid problems that result
if people who are less sensitive to air quality also prefer lower priced housing, for
instance if the willingness to pay to avoid poor air quality is correlated with household
income. Their paper looks at decade long changes across all the counties in the US.
Their work ultimately yields results that a ten percent reduction in particulate
concentration is associated with a 2.0-3.5 percent increase in house values.

The combination of dust, noise, and vibrations from blasting means that the reasons
why some disamenities do not affect house prices, such as the hazard is not well known
would not apply in the case of the operation of the proposed Ajax mine: the
disamenities would be readily apparent. However, in advance of the mines approval,
the likelihood of observing price effects may be low because if the risks or perceptions
of the effects are not well known, the mine operation is not certain, and if approved,
operations are years in the future. This raises the important issue from the perspective
of estimating damage of when would the effects of mine operation lower house prices?

Kiel and McClains (1995) study the timing of when environmental effects and risks
from a land use affect the prices of nearby residential properties. Their paper traces the
house price responses of properties near a new waste incinerator through the entire

9
process of rumour, proposal, construction, and finally operation. By analysing how
residential prices of houses close to the site change compared to those further away
over the entire timeline, their work sheds light on the timing of the capitalization of the
disamenity and environmental risk effects into residential property prices. They found
that proximity to the facility site was not associated with lower house prices prior to the
construction of the facility. From before there were rumors of the possible facility
through the formal application and approval process they find no price effects on
nearby properties compared with more distant ones. Only when construction on the
facility actually began did the negative proximity effect emerge, where a 10 percent
increase in distance away from the incinerator raised house prices by 1.5 percent
(houses closer to the incinerator had lower values). This effect continued during start-
up and operation, though the price effect was modestly lower once operation
commenced. The environmental assessment and approval stages of the Ajax proposal
are not complete. The importance of their findings for Aberdeen, then, is that despite
the publicity surrounding the application, the most significant effects of the proposed
mine on nearby house prices are only likely to emerge if construction and then
5
operation were to occur.

Separate from the effects of the mine directly on the neighbourhood is the effect that it
will have on residents enjoyment of the adjacent undeveloped lands. While this
currently undeveloped area is private ranch land and not public open space, and it will
at some point be developed into a residential neighbourhood, especially if the Ajax
mine proposal is rejected, it has attributes of open space for the areas residents.
Researchers have consistently found that access and proximity to open space is
positively correlated with house prices. The findings differ along a variety of aspects,
such as whether properties under study are urban or suburban, the degree of
concentration of open space, and its type. The results of this body of research shows
that access and proximity to undeveloped open space delivers amenity values that are
captured by higher house prices. The proposed mine is a threat to these benefits
because the same effects on the external environment that lower the quality of life of

5
More formally, buyers appear to discount rumours of uncertain future events, both in terms of the
likelihood of occurrence and the expected degree of risk.

10
residents would do the same for the residents enjoyment of the undeveloped private
ranch lands that border Aberdeen.

Open space differs by both type and by the pattern of its distribution. In their paper,
Archarya and Bennett (2001) study whether there is variation in the preference for open
space between disaggregated nearby small areas as compared to larger undivided
areas, essentially distance to the nearest open space as compared to the total amount of
open space. They find house prices are higher the easier it is to access and the more
open space is nearby. In their data, households prefer open space to be more
homogenous and less fragmented. Other papers such as Thorsnes (2002) and
Cho, et. al. (2011) highlight the benefit of proximity and show how sensitive this is to
distance from the amenity, with the benefits yielding primarily to properties within 2
miles of the amenity.

What benefit open space provides is subject to debate, as there is both a view benefit, a
reduction in nearby density, and a use benefit from accessing the open space. Cavailhs,
et. al. (2009) study the difference between access and view in Dijon, France for houses at
the urban fringe. They find that the benefit in the form of higher house prices comes
from view rather than proximity alone, but they do not differentiate between forest and
farmland, so they cannot fully identify use value.

These papers and others that study open space and residential development make a
very strong case for the benefit of open space. While the large undisturbed area near
Aberdeen is private land, the benefits of proximity identified in these papers would be
undermined by the increase in dust, noise, and vibrations from mine operations. And
as the literature makes clear, losses of amenity value result in lower property values,
though the size of these effects is governed by expectations of the timing of future
development of these lands.

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Quantitative Analysis: Aberdeen Property Price and Liquidity Effects to Date

We conduct a standard statistical difference-in-differences analysis to test whether

over time prices and liquidity have fallen in Aberdeen relative to a comparison
neighbourhood as a result of increased awareness and concern about the mine proposal.
The structure of this test is a comparison of the changes over time in the affected area
(Aberdeen) with the changes over the same time period and in a selected unaffected
area (Juniper Ridge). The time periods are selected to represent a period where there
might be increased information regarding the likelihood of mine development. The
Kiel and McClain research cited above suggests that we are unlikely at this point in time
to find any effects of the proposed mine on residential property prices and liquidity in
Aberdeen when compared to other areas. Even so, we feel it is of merit to see whether
the process has had any effects and to establish a methodology for future analysis. We
examine relative price and liquidity changes over two periods relative to their state in
2007-2010. First, as compared to the two years following the December 2010 initial Ajax
Mine Project Description submission and second the year and one quarter after the
December 2015 project Ajax Mine Environmental Impact Statement (EIS) Summary. The
first date tests the effect on the initial news of the mine proposal, while the second
assesses a longer-term information effect of the entire approval process to date, rather
6
than a single event of the process.

The data are from the Canadian Real Estate Association, a commercial provider of
housing data for the residential brokerage industry in Canada. The data includes
information on the terms and characteristics of single family residential properties that
transacted in Kamloops between 2007 and 2016. The property level information
includes variables that describe the land and structure such as: lot size, neighbourhood,
floor area, number of bedrooms, bathrooms etc. The transaction information includes
variables that describe the date and price of each property sale. We use transactions of
single family detached properties in Juniper Ridge neighbourhood as the control or

6
The longer-term analysis does require stronger assumptions. The difference-in-differences statistical
methodology assumes that no other factors besides the treatment under study have differential effects on
the two neighbourhoods, which is a stronger presumption the longer the time span of analysis.

12
comparison groups for the Aberdeen neighbourhood properties on the advice of
Aberdeen residents.

The results of our analysis, which are provided in detail in the statistical appendix, of
both property prices and property transaction volume do not provide a consistent
robust answer regarding changes in prices or liquidity for residential properties in the
Aberdeen neighbourhood following the chosen event dates, but they do support a long
run negative effect of the possibility of the mine being developed on Aberdeen property
values. We use a total of 1,782 transactions in the Aberdeen and Juniper Ridge
neighbourhoods around two different events in the approval process of the proposed
Ajax mine. Again, the changes in both measures that we seek to identify for Aberdeen
transactions are not an absolute effect, but ones that are relative to what occurs over the
same periods in the comparison neighbourhood. The details of the regression analysis
are included in the Statistical Appendix.

The statistical analysis shows that the initiation of the mine proposal process did not
change prices in Aberdeen relative to the control group, but the entire process to date
has done so. Over the longer period there appears to be some capitalization of
expectations of negative future effects on quality of life and heightened risks to person
and property. Comparing prices from before 2010 with those after the fourth quarter of
2015, price growth in Aberdeen was $20,000 lower than in the Juniper Ridge
comparison neighbourhood. This analysis does adjust and control for any differences in
the characteristics of homes sold, both over time and across neighbourhoods. This
result is suggestive of harm to property owners from the proposed mine, but it is worth
remembering that this is based on a limited post-event period of analysis. It would be
pre-mature to draw final conclusions from this result. In the liquidity regressions on the
aggregate volume of transactions the changes are not statistically different from zero for
either period, though the small sample size using aggregates means we have one
observation per neighbourhood per quarter means that the absence of a statistically
significant result of any kind is to be expected.

The finding of a preliminary negative effect on Aberdeen prices from the proposed
mine is a moderately more aggressive effect than other research has found. The

13
expectation based on Kiel and McClains (1995) research is that the negative effects of
environmental hazards and risks on the prices of nearby residential properties would
not start to occur until after construction of mine facilities had commenced; there would
not be any effect during the approval process. The corollary here would be that if the
proposed Ajax mine is approved, then only after construction began would there be
notable declines in prices in the Aberdeen neighbourhood as compared to the other
areas. It is possible that we obtain our result both because the long time period captures
change of substance in the expectations about the mines prospects, and/or that the EIS
7
is perceived as a very strong signal of the likelihood of construction. It does suggest the
importance of continuing to monitor price movements in the area.

Mitigation of Risks to Aberdeen Property Values of Mine Operations

As delineated above, the Ajax mine project will potentially lower property values in the
Aberdeen neighbourhood in three different ways. The first is a lower quality of life for
residents as a result of mine operations, as dust, noise, and vibrations lower the amenity
of the neighbourhood. Second, health concerns or risks to residents health from long
term exposure to mine air and ground contamination. The price effects of these depend
on buyer perception and not actual risks. Third, the concern that mine operations and
tailings storage will increase the risk of physical damage to properties in the
neighbourhood. The price effects of this too depends on expectations. Finally, the
extent to which mine operations reduce the enjoyment residents have of the
undeveloped ranch land to the south of the neighbourhood, which currently provides
open space like amenities to residents even though it is private land used for livestock
grazing.

Formally measuring the effect on prices and sales is a challenge as previous research
suggests that effects will not manifest until construction begins and the data sample
sizes will be small. Risk mitigation is not possible for most of the ways the mine is likely

7
Strictly, we find that various milestones in the approval process have of themselves not resulted in
changes in prices or sales in Aberdeen when compared with changes in these same variables over the
same period in the comparison neighbourhood.

14
to lower property values as many of these are direct effects from mine operations. With
the notable exception of the health risks, these effects are not strictly risks, rather known
effects where the uncertainty is only in how much they will reduce livability and thus
property value rather than a conventional risk that results in either a large negative
effect or none. The traditional approach to addressing these effects is financial
compensation for property owners equal to the loss in property value and insurance for
true risks. The greater source of pure uncertainty and risk for Aberdeen property
owners is how mine operations might compromise health from air, ground, or water
pollution or physical property because of a mine accident or by destabilizing the
geologic structure of the slope above and on which Aberdeen lies. For the latter, the
potential is for no effect or possibly up to a catastrophic loss of property value in the
event of a serious incident.

Protection from high variance risks of damage or loss to property is best addressed by
insurance. While we would expect the risk to be capitalised as lower property values,
compensation for the loss of property value from this increased risk in advance would
be insufficient to cover the costs if an actual incident occurred. Compensation is more
appropriate for loss of value from loss of regular ongoing losses due to reductions in
amenity values. Insurance is the appropriate policy in response for low risk, high cost
events.

A starting place for how to address the protection of property values might be the Port
Hope Area Initiatives Property Value Protection Program. The Port Hope Project is the
clean-up and treatment of low-level radioactive waste in the Port Hope and Port
Granby, ON area. The Property Value Protection Program is a joint effort between the
affected municipalities and the Government of Canada to provide protection for loss of
value realized on sale, rental, or mortgage renewal as a result of the clean-up program.
This could serve as a model for the protection of Aberdeen property owners from loss
of amenity value and risks from the Ajax project were it to go ahead. To align
incentives, it would be best to have mine operators fund the program, with their
premiums or payments into the insurance fund tied to the extent of their actions to
mitigate risks to the homeowners. The Port Hope example does not do this as the
partner is the government.

15
16
References

Acharya, G. and L.L. Bennett. 2001. Valuing Open Space and Land-Use Patterns in
Urban Watersheds. Journal of Real Estate Finance and Economics 22 (2-3), 221-237.

Boyle, M. and K. Kiel. 2001. A survey of house price hedonic studies of the impact of
environmental externalities. Journal of Real Estate Literature 9(2), 117144.

Cavailhs, J., Brossard, T., Foltte, J.C., Hilal, M., Joly, D., Tourneux, F.P., Tritz, C., and
P. Wavresky. 2009. GIS-Based Hedonic Pricing of Landscape. Environmental Resource
Economics 44, 571590.

Chay, K.Y. and M. Greenstone. 2005. Does Air Quality Matter? Evidence from the
Housing Market. Journal of Political Economy 113 (2), 376-422.

Cho S.H., Lambert, D.M., Kim, S.G., Roberts, R.K., and W.M. Park. 2011. Relationship
between value of open space and distance from housing locations within a community.
Journal of Geographic Systems 13, 393-414.

City of Kamloops. 2017. Kamloops CityMap Census and Demographic Information.

Available at: http://kamloops.ca/citymap. Accessed June 22, 2017.

Farber, S. 1998. Undesirable facilities and property values: a summary of empirical

studies. Ecological Economics 24(1), 114.

Kiel, K.A. and K. T. McClain. 1995.House prices during siting decision stages: the case
of an incinerator from rumor through operation. Journal of Environmental Economics
and Management 28(2), 241255.

Neelawala, P., Wilson, C., and W. Athgukorala. 2012. The impact of mining and
smelting activities on property values: a study of Mount Isa city, Queensland, Australia.
The Australian Journal of Agricultural and Resource Economics 57, 60-78.

Simons, R.A., Sen, Y., and P. Rosenfeld. 2015. Modeling the Effects of Refinery
Emissions on Residential Property Values. Journal of Real Estate Research 37 (3), 321-
342.

SLR. 2017. Technical Peer Review Proposed Ajax Mine Final Report. June 9, 2017. SLR
Project No. 201.12000.0000. Prepared for the City of Kamloops. Available at:
http://www.kamloops.ca/ajax/land-ajaxmine.shtml#.WUwzaullCUk. Accessed June
22, 2017.

Taylor, L.O., Phaneuf, D.J., and X. Liu. 2016. Disentangling property value impacts of
environmental contamination from locally undesirable land uses: Implications for
measuring post-cleanup stigma. Journal of Urban Economics 93, 8598.

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Thorsnes, P. 2002. The Value of a Suburban Forest Preserve: Estimates from Sales of
Vacant Residential Building Lots. Land Economics 78 (3), 426-441.

TRUE Consulting Group. 2008. Aberdeen Plan. October 2008. TRUE project no. 303-
632. Prepared for the City of Kamloops. Available at:
http://www.kamloops.ca/planning/neighbourhoodplans/aberdeen.shtml. Accessed
June 22, 2017.

18
Statistical Appendix

The statistical methodology is the event study using a difference in differences

framework. The change in the variable of interest, prices or transaction volume, in the
treatment group, which here are properties in the Aberdeen neighbourhood, after a
particular event is compared to the changes over the same period in the comparison
group, which did not receive the treatment. The latter are properties in the Juniper
Ridge neighbourhood. Here the treatment is proximity to the proposed Ajax mine site
and the events are first the release of news indicating the conclusion of different steps in
the mine approval process, and second the entire period of the approval process as
opposed to a single news evident. In the statistical analysis, we are looking to see if
changes in house prices pre-to post-event for observations that are in the Aberdeen
neighbourhood are statistically different from the changes over the same period for
properties in the untreated Juniper Ridge control neighbourhood. For this analysis,
we use two different event windows, both of which restricts the sample to transactions
that occurred in specifically defined windows. On the one hand the two years prior to
the 2010 announcement of the Ajax mine proposal, and then either the next two years,
or the 5 quarters following December 2015.

The initial data set consists of 2,140 transactions for single family homes. From this
initial set, we discarded properties that had missing or incomplete information. We also
dropped the top and bottom 2.5% of observations based on lot size and floor area.
Trimming the data of outliers reduces the likelihood of left out variable bias tied to
unusual properties. This left us with our sample of 1,782 individual transactions, 1,295
in Aberdeen and 487 in Juniper Ridge.

Appendix Table A1 provides summary statistics of this sample, in total and separately
for each neighbourhood. For house and lot characteristics, the data are fairly tight as the
values at the 75 percentile are less than double those at the 25 percentile. While the
th th

typical house in the two neighbourhoods is the same size, lots are larger in Juniper
Ridge. Following the difference in lot size, the mean price is higher in Juniper Ridge.
Because the sample includes transactions from 2007 through the end of 2016 much of
the variation in the transaction prices is because of house price inflation over this

19
period. Had we used 2016 assessment values the distribution of property values would
be much tighter than the distribution of prices. In the statistical analysis, we adjust for
the effects of price changes over time.

Appendix Table A1 Summary Statistics

The event study approach treats the release of new information into the public sphere

20
as a shock that might change the decisions and behaviour of market participants. We
then look to see whether there is a price or liquidity response that reflects a change in
the assessment of potential risks or losses of amenity value. The first event we study is
December 2010 initial Ajax Mine Project Description submission for the approvals
process. The comparison is between the change in prices in Aberdeen and those in
Juniper Ridge over a period that stretches from the three years prior to the event and
two years subsequent. The second event is the December 2015 release of the Ajax Mine
Environmental Impact Statement Summary. However, for the latter, we do not compare
prices to the two years prior to the 2015 event, but to the three years prior to the initial
2010 proposal announcement. Thus the event is the entire mine approval process
from 2010-2015.

The statistical analysis uses the standard hedonic regression format in which the
property price is regressed against a set of lot and structure characteristics. In addition
to the individual property characteristics we include neighbourhood dummies and
year-quarter dummies. The neighbourhood fixed effects capture systematic variation in
mean house prices by neighbourhood, so that the other estimated coefficients are
controlling for the mean characteristics of each neighbourhood. Similarly, the year-
quarter fixed effects capture variation in house prices over time that is the shared
element of quarter by quarter price changes over the period of the analysis for both
studied neighbourhoods.

In Appendix Table A2, we report the results of the hedonic analysis of the property
transaction prices. In the simplest treatment in regression (1), we report the baseline
hedonic regression without addressing the effect of the Ajax mine information event.
The lot and structure coefficients have the expected signs and the regression adjusted R-
squared is 0.60, indicating that the model does a reasonable job of fitting the data. With
respect to the neighbourhood dummies, the omitted or comparison category is
Juniper Ridge.

Regressions (2) and (3) test whether there is an effect of each of the mine approval
process on Aberdeen property prices relative to prices in Juniper Ridge. Regression (2)
is for whether after the Dec. 2010 initial project description relative prices differ and

21
regression (3) is for the entire period from then through to the Dec 2015 Summary
Environmental Impact Statement (EIS) publication. Regression (2) uses data three years
prior and then two years post-event, while regression (3) uses the same three years
prior to the 2010 event, but then the post-period is the 5 quarters of data we have
following Dec. 2015 EIS release. With rising prices in general, prices after both events in
both neighbourhoods are higher than they were prior, so the coefficient on after is
statistically significant and positive.

The coefficients of interest are those on the two interaction variables, which identify a
8
transaction as both post-event and in Aberdeen. For the first event, this is almost zero
and statistically not different from zero even at the weakest confidence test. For the
second later event, the estimated coefficient on the interaction is both negative (-19,998)
and statistically different from zero. Thus, relative to price changes in Juniper Ridge
after the 2015 announcement, transaction prices in Aberdeen were almost $20,000 lower,
when comparted with their pre-2010, pre-proposal levels. Given the small sample size,
limited window, and long-time period it is premature to draw final conclusions, but it is
clearly suggests even prior to mine construction of negative effects on Aberdeen
homeowners from the proposal. It is important to remember that this methodology has
as an assumption that the only influence on prices in Aberdeen that does not affect
prices in Juniper Ridge over the period of study is the new information about the mine,
which is a strong assumption for the 5-year period in regression (3).

8
The estimated coefficients on the two interaction variables identifies the effect of prices being both after
and in Aberdeen, relative to just being after. The latter would be the price level after in Juniper Ridge. In
The interpretation of the coefficient is not of price levels, but of the excluded conditions. If the coefficient
on the interaction term is not statistically different from zero it does not mean that prices are the same
before and after each of the two dates, but rather that the difference before and after in Aberdeen is not
statistically distinguishable from the difference before and after in the other neighbourhood; hence, the
name difference in differences for the methodology.

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 Appendix Table A2 - Price Regressions

We use the same methodology to investigate whether uncertainty surrounding the

development of the Ajax mine manifested in lower liquidity for the Aberdeen
properties. In these regressions, the dependent variable is the annual transaction
volume for each of the neighbourhoods. For each neighbourhood, we have one
observation per year in the three years preceding and following the same project
milestone dates that we used above in the price regressions. Because we use annual
totals the sample size for the analysis is too small for any robust finding, but they can be
instructive. The results are shown below in Appendix Table A3. Regression (1) is for the
Dec. 2010 initial project description and regression (2) is for the Dec 2015 Environmental
Impact Statement (EIS) Summary release. Here, the relative transaction volumes are
higher in Aberdeen than Juniper Ridge after each event, but the difference is not even

23
close to being statistically different from zero, which again is to be expected from such a
small sample size.

Appendix Table A3 - Liquidity Regressions

24