THE ECONOMIC VALUE OF PROTECTING INVENTORIED ROADLESS AREAS: A SPATIAL HEDONIC PRICE STUDY IN NEW MEXICO

I. INTRODUCTION Undeveloped, open-space lands, such as Inventoried Roadless Areas (IRAs) and Congressionally designated Wilderness Areas (WAs) provide a number of nonmarket benefits to society, which may not be fully accounted for in land management decisions. Although the status of WAs is relatively certain, (1) the status of IRA lands is tied to Federal agency rulemaking and a protracted political and legal debate, which makes their condition highly uncertain. The 58.5 million acres of IRA lands represent about 7% of all forested lands (Berrens et al., 2006), and 30% of all National Forest lands in the United States; they are often located on the fringe or buffer of many WAs lands (USDA, 2001 a). (2) The policy debate over the fate of IRAs centers on whether to manage them consistent with Wilderness designation. Given the difficulties of measuring the benefits of protecting IRA lands, and the changes that the federal regulations governing IRAs have experienced in the last 15 yr, this debate is far from over. As of this writing, a State Petition Rule allows each state to petition the protection of these areas to the U.S. Department of Agriculture (USDA, 2005). (3) In New Mexico (NM), Governor Bill Richardson filed a petition in May 2006 to protect all 1.6 million acres of IRAs in the state (and an additional 100,000 acres in the Valle Vidal unit of the Carson National Forest). This petition and other similar protection-oriented petitions from other states with IRAs rest on the arguments that these lands provide various ecosystem and amenity services, recreation values, and cultural significance, both on-site and off-site on proximal lands, and further that these values would be lost or significantly degraded if commercial activities were allowed on these lands. Nationwide, the IRA policy debate involves questions about the relative values of protection versus development. The state of NM has submitted a petition based largely on the nonmarket environmental benefits that IRAs provide in the state. The purpose of this paper is to investigate whether one type of benefit--off-site benefits accruing to homeowners in proximity to IRAs--is observable as a hedonic premium paid for in housing prices in NM. Because there are other potential benefits (e.g., on-site recreation values, and nonuse values) derived from protecting IRAs and WAs (Morton, 1999), the estimated off-site benefits to homeowners may only represent a small portion of the Total Economic Value (TEV) of these lands (e.g., see Loomis, 1996). As a state that is becoming relatively more dependent on the role of natural landscapes and amenities, including protected forests and grasslands, within the regional economy (e.g., Berrens et al., 2006; Hand et al., 2008a, 2008b; Rasker et al., 2008), the importance of the 1.6 million acres of IRAs may plausibly lie in their role as protected open spaces. If IRAs provide nonmarket benefits, as argued nationally (Loomis and Richardson, 2000), then NM is a place where they should be observable. Because the benefits provided by IRAs do not have explicit market prices associated with them, testing the validity of this argument requires the application of nonmarket methods (Champ, Boyle, and Brown, 2003). This study applies a hedonic pricing framework to NM residential housing values by combining the 2000 Decennial Census data with available Geographic Information Systems (GIS) data. Spatial hedonic models are estimated to determine whether the density of IRAs has a positive and statistically significant effect on the median price of a home in NM. Results indicate that there is a 5.6% gain in the price of a house from being located in or adjacent to a Census tract with IRAs. In the aggregate, this gain represents 3.5% of the value of owner-occupied units in NM ($1.9 billion in capitalized value or an annualized value in perpetuity of $95 million, assuming a 5% interest rate). II. CURRENT POLICY DEBATE The final Roadless Area Conservation Rule, which was designed to protect 58. …