ML12338A676
| ML12338A676 | |
| Person / Time | |
|---|---|
| Site: | Indian Point  |
| Issue date: | 12/02/2012 |
| From: | Sheppard S State of NY, Office of the Attorney General |
| To: | Atomic Safety and Licensing Board Panel |
| SECY RAS | |
| References | |
| RAS 23833, 50-247-LR, 50-286-LR, ASLBP 07-858-03-LR-BD01 | |
| Download: ML12338A676 (12) | |
Text
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 1
UNITED STATES 1
NUCLEAR REGULATORY COMMISSION 2
BEFORE THE ATOMIC SAFETY AND LICENSING BOARD 3
x 4
In re:
Docket Nos. 50-247-LR; 50-286-LR 5
License Renewal Application Submitted by ASLBP No. 07-858-03-LR-BD01 6
Entergy Nuclear Indian Point 2, LLC, DPR-26, DPR-64 7
Entergy Nuclear Indian Point 3, LLC, and 8
Entergy Nuclear Operations, Inc.
December 3, 2012 9
x 10 WRITTEN SUPPLEMENTAL REBUTTAL TESTIMONY OF 11 STEPHEN C. SHEPPARD 12 REGARDING CONTENTION NYS-17B 13 On behalf of the State of New York (NYS or the State),
14 the Office of the Attorney General hereby submits the following 15 supplemental rebuttal testimony by Stephen C. Sheppard, Ph.D.
16 regarding Contention NYS-17B.
17 Q.
Please state your full name.
18 A.
Stephen Charles Sheppard.
19 Q.
Dr. Sheppard, are you familiar with documents that 20 were filed by Entergy on November 21, 2012, and that have been 21 designated ENT00591 (Gruntz Declaration), ENT000592 22 (Supplemental Testimony of Entergy Witness George S. Tolley),
23 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 2
ENT000593 (Measuring Environmental Effects on Property Values 1
Without Hedonic Regressions, Palmquist, Raymond B. (1981)), and 2
ENT000594 (RCF, Examples of Errors Remaining in Dr. Sheppards 3
Assessor Data Set)?
4 A.
Yes. I undertook a new statistical analysis in 5
October 2012, following Entergys disclosure of a new hedonic 6
regression by Dr. Tolley. My statistical analysis was 7
designated as NYS000446. I understand that Entergy claims that 8
three of the exhibits filed on November 21, 2012 respond to 9
NYS000446. I understand that ENT000591, the Gruntz Declaration, 10 purports to respond to a question posed by the Board at the 11 October 22 hearing on NYS-17B.
12 Q.
I show you what has been marked as ENT000591. Do you 13 recognize that document?
14 A.
Yes. It is a declaration from Cory Gruntz, Entergys 15 Director of State and Local Taxes for Entergy. ENT000591 16 discusses the PILOT payments paid by Entergy to the Town of 17 Cortlandt, including a breakdown of those payments and when they 18 expire.
19 Q.
Judge McDade inquired whether Entergy paid taxes in 20 addition to Payments In Lieu of Taxes, and also the tax rate on 21 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 3
the facility. Can you explain how PILOT payments may relate to 1
housing prices near Indian Point?
2 A.
Well, Dr. Tolley claims that the PILOT payments must 3
certainly result in an increase in property values, despite the 4
fact that Dr. Tolley's own analysis does not support this belief 5
and relegates it to little more than wishful thinking.
6 Q.
What evidence has Dr. Tolley produced to support the 7
claim that PILOT payments increase property values?
8 A.
Dr. Tolley's only evidence supporting his claim that 9
PILOT payments increase property value is based on a hedonic 10 model estimated from a hand-picked subset of the data collected 11 for my repeat-sales analysis. My repeat sales analysis, 12 however, suggests that the PILOT payments, if they do have a 13 positive impact on property values considered in isolation, do 14 not have a positive impact on property values when evaluated (as 15 they must be) in combination with the presence of IPEC.
16 Q.
I next show you ENT000592, which is new testimony from 17 Dr. Tolley. Is Dr. Tolleys supplemental testimony responsive 18 to NYS000446, your October 20, 2012 analyses using different 19 functional forms to estimate the relationship between proximity 20 to Indian Point and property values?
21 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 4
A.
ENT000592 responds to my October 20, 2012 work, and 1
then some.
2 Q.
Please explain.
3 A.
In addition to responding to my criticism of his work, 4
as first set forth in my June 2012 rebuttal testimony and 5
reiterated in response to his surprise October 12 new analysis, 6
Dr. Tolley has presented new analytic work yet again. On page 7
28 of his testimony, at Table 1, Dr. Tolley, adds a new variable 8
to my repeat sales analysis.
9 Q.
What is the new variable?
10 A.
Dr. Tolley has used my methodology - the repeat sales 11 analysis - but has added duration-of-ownership to the variables 12 that I employed.
13 Q.
When you say my methodology, are you contrasting it 14 to some other methodology?
15 A.
Yes, I mean to say that Dr. Tolley has added a new 16 variable to the repeat-sales analysis that I used, as opposed to 17 the hedonic analysis that he chose with the MLS data that he 18 collected. I want to be clear that Dr. Tolley and I are both 19 attempting to measure the same thing but we have chosen 20 different measurement tools.
21 Q.
What is it that you are attempting to measure?
22 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 5
A.
My repeat-sales analysis measures the impact of the 1
commencement of Indian Points commercial operation on 2
residential property values within 5 kms of the facility.
3 Q.
And does this duration-of-ownership variable that Dr.
4 Tolley has added to your analysis cause you to change your 5
opinion about the impact of Indian Point on property values?
6 A.
No.
7 Q. Why not?
8 A.
First, because my original repeat sales analysis 9
produces estimates of the impact of Indian Point on property 10 values that are largely consistent with the impacts that can be 11 obtained from other analysis, such as analysis of Dr. Tolleys 12 data using a hedonic model. Second, because inclusion of 13 duration of ownership is not required in a repeat-sales analysis 14 such as I undertake, which focuses on the changes in the annual 15 rate of return rather than the total return to a period of 16 ownership.
17 Q.
Does your analysis, without Dr. Tolleys new variable, 18 account for the length of home ownership?
19 A.
My analysis accounts for the length of ownership by 20 using the annual rate of return as the dependent variable in the 21 analysis.
22 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 6
Q.
Please elaborate.
1 A.
In seeking to isolate and measure the impact of the 2
commencement of commercial operations at Indian Point, it is 3
important to use an approach that uses variables that are as 4
independent as possible from an indicator of the treatment 5
effect that identifies properties that were bought prior to 6
Indian Points operations and sold after those operations began.
7 Inclusion of the duration-of-ownership variable suggested by Dr.
8 Tolley fails this test. A property that has a longer duration 9
of ownership is more likely to span the time when commencement 10 of commercial operations begins at Indian Point. Use of the 11 duration of ownership variable introduces a problem that 12 econometricians call collinearity into the model. The 13 practical consequence of this is to mix up and make it difficult 14 to separate the impacts of the collinear variables. This 15 appears to have happened in Dr. Tolleys estimates, with this 16 newly introduced variable capturing much of property value 17 impact of operation of Indian Point. There are occasions when 18 this is unavoidable because there are good reasons for including 19 both (or several) collinear variables. This is not such a case.
20 My analysis focuses on the impact on annual rate of return, 21 which already makes an adjustment for length of ownership by 22 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 7
calculating the percentage increase in value standardized for a 1
one-year period. There is no reason to introduce the new 2
variable that Dr. Tolley suggests.
3 Q.
Is this new variable one that Dr. Tolley has ever 4
mentioned before, in his testimony at the hearing or in any 5
previously written response to your work?
6 A.
No. It was not included in his original report 7
criticizing my work, in his rebuttal, or in his oral testimony.
8 Q.
As a result of this new variable, Dr. Tolley testified 9
that his new regression results show that [your] repeat-sales 10 study does not support [your] claim that Indian Point lowered 11 nearby property values (ENT000592 at 29). Do you agree with 12 Dr. Tolley?
13 A. I do not. Dr. Tolleys testimony perpetuates several 14 mistakes Dr. Tolley has made throughout his analysis.
15 Q.
What mistakes?
16 A.
Dr. Tolley has testified that proximity to Indian 17 Point has no impact whatsoever on property values. He draws 18 this conclusion because of the analysis that he describes as 19 quadratic by which he means using the linear distance and the 20 square of distance together in the hedonic analysis. This 21 quadratic approach is how Dr. Tolley has chosen to 22 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 8
characterize proximity to IPEC, but it is not the only way nor 1
even the most frequently used way of measuring proximity. If 2
Dr. Tolley were to use linear distance alone, or the square of 3
distance alone, or the square root of distance (as I have 4
suggested) alone, he would have to conclude, as I do (and as 5
common sense suggests), that Indian Points commercial 6
operations have a statistically significant impact on nearby 7
residential property values. Dr. Tolley tells us in his report 8
and in testimony that he considered other approaches to 9
proximity. He appears to have very carefully selected the one 10 approach that provides partially ambiguous estimates of the 11 impact of IPEC on property values, and even his quadratic 12 estimates show that property values rise proportional to the 13 square of distance, and that this increase is statistically 14 significant.
15 Q.
So each of those other methods of examining the impact 16 of proximity to the facility on residential property values 17 confirms that there is, in fact, such impact?
18 A. Yes.
19 Q.
What is the impact?
20 A.
Indian Point has a statistically significant adverse 21 impact on nearby residential property values, which is 22 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 9
consistent with decades of research on the impact of industrial 1
facilities, including electric generating plants.
2 Q. Why does Dr. Tolley conclude otherwise?
3 A.
Well, I can only speculate that he was looking for a 4
functional form that would confirm a particular preferred 5
outcome. In essence, he cobbled one together.
6 Q.
Does Dr. Tolleys new analysis perpetuate other 7
mistakes?
8 A.
Yes. In his new testimony, Dr. Tolley repeats his 9
opinion that analysis of his specially-chosen subset of my data 10 supports his contention that PILOT payments have a positive 11 impact on property values. He concedes that, using the special 12 subset of my data, Indian Point does have an adverse impact on 13 property values but concludes that this adverse impact is not 14 estimated with sufficient precision to be statistically 15 significant.
16 Q.
Whats wrong with that?
17 A.
I disagree with Dr. Tolleys adjustments to my data.
18 He obtains his preferred result by diminishing the size of my 19 sample so much that he can claim that any unpalatable result is 20 simply not statistically significant.
21 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 10 Q.
When he purported to use your data to challenge your 1
conclusions, Dr. Tolley excluded many observations. Do you 2
agree that those exclusions improved the quality of your sample?
3 A.
No. Relying on ENT000594, Dr. Tolley claims that my 4
October 2012 regressions are based on a data set that is 5
unreliable because approximately 10 percent of the total 6
observations should have been excluded. ENT000592 at 24.
7 Q.
Dr. Tolleys staff identified some transactions that 8
they claim were not at arms length. Do you agree?
9 A.
As is clear from ENT000594, neither Dr. Tolleys staff 10 nor I can know for certain, so I would err on the side of 11 excluding those eight transactions that might not have been at 12 arms length.
13 Q.
Dr. Tolleys staff also excluded five transactions on 14 the ground that the properties were located in commercial zones.
15 Do you agree that those transactions should be excluded?
16 A.
No. The zoning classification should not disqualify a 17 property from inclusion in the sample if the property is being 18 used for residential purposes.
19 Q.
Even if you were to exclude these transactions, does 20 it affect your conclusions?
21 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 11 A.
I have not continued to do new original work, since 1
the hearing, but I am confident that excluding these 8 (or even 2
- 13) transactions would not materially affect my conclusions.
3 Q.
By way of comparison, would you remind us what sample 4
Dr. Tolley used?
5 A.
Dr. Tolley used a group of 296 houses that were 6
offered for sale on July 13, 2011.
7 Q.
Is his sample better or larger than yours?
8 A. No, neither.
9 Q.
Did Dr. Tolleys sample use asking price, or sale 10 price?
11 A.
It used asking price.
12 Q.
Is asking price the same as sale price?
13 A.
No. It tells us nothing about what a property is 14 actually worth to a willing seller, or even whether the property 15 sold at all.
16 Q.
Would you please summarize your response to Dr.
17 Tolleys supplemental testimony and the newly-designated 18 exhibits?
19 A.
Yes. Dr. Tolley has, again, responded to my testimony 20 with new analytic work that, again, does not change my 21 conclusion. My conclusion is that Indian Point has a 22 NYS000467 Submitted: December 3, 2012
Written Supplemental Rebuttal Testimony of Stephen C. Sheppard Contention NYS-17B 12 statistically-significant adverse impact on residential property 1
values within 5 km. I also conclude that if relicensing were 2
denied, property values within the area would increase by 3
slightly more than $1 billion within approximately 10 years. My 4
conclusions do not change as a result of the Payments in Lieu of 5
Taxes (PILOT) that Entergy makes. My analysis shows that those 6
payments do not equal or compensate for the facilitys impact on 7
property values. My conclusions are the same even though 8
Entergys PILOT payments will diminish or be replaced by tax 9
payments when the facility ceases commercial operations. Dr.
10 Tolleys continued attacks on my work do not change my 11 conclusions. And Dr. Tolleys work itself is not inconsistent 12 with my results. Indeed, his results are remarkably close to my 13 own, which should give a finder-of-fact confidence in the 14 result.
15 16 Attested to under penalty of perjury on December 3, 2012 17 18 19 20 21 NYS000467 Submitted: December 3, 2012