BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

In The Matter of:

Proposed New Clean Air Interstate Rule

(CAIR) SO2, NOx Annual and NOx Ozone Season

Trading Programs, 35 Ill. Adm. Code 225.

Subparts A, C, D and E.

)

)

)

)

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No. R06-26

(Rulemaking -Air)

FINAL COMMENTS OF KINCAID GENERATION, L.LC.

NOW COMES Participant KINCAID GENERATION, L.L.C. (“Kincaid”), by and

through its attorneys, JENNER & BLOCK LLP, and respectfully submits its final comments to

this rulemaking. Kincaid appreciates this opportunity to comment again on these important new

rules. Kincaid has been an active participant throughout this long rulemaking process –

attending all the “outreach” meetings convened by the Illinois Environmental Protection Agency

(“IEPA”) in Springfield in January and February, participating in the Board hearings both in

Springfield and Chicago, providing comment on the proposal on two separate occasions, and

providing testimony at the Chicago hearing.

I.

Dominion Resources, Inc. (“Dominion”) owns and operates electric generating

facilities in eleven states, including the 1250 megawatt coal-fired Kincaid

Generation L.L.C. power plant, located in Kincaid, Illinois. Dominion also owns a

50% interest in the 1400-megawatt natural gas-fired Elwood Energy, L.L.C.

combustion turbine plant, located in Elwood, Illinois.

Over the past eight years, Dominion’s Kincaid station has been installing pollution controls,

switching fuels and making other changes to ensure compliance with the increasingly more

stringent air quality emissions limitations. To reduce sulfur dioxide emissions in order to

comply with Phase II of the federal Acid Rain program, Kincaid switched in 1999 to the much

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lower sulfur Powder River Basin (“PRB”) coal. In 2001, Kincaid began construction of two

selective catalytic reduction (“SCR”) systems to control nitrogen oxides (“NO

x

”) emissions as

part of the Illinois NO

x

requirements under the new IEPA Subpart W regulations. These massive

control devices began operation in 2003 and have been very effective, reducing ozone season

NO

x

emissions by more than 85% from previous levels.

Kincaid supports the adoption of state regulations that embrace the federal Clean Air Interstate

Rule (“CAIR”). Kincaid appreciates the IEPA’s efforts to address the individual electric

companies’ particular problems associated with implementation of these important new

regulations and also appreciates this opportunity to comment on the proposed regulations.

II.

Subparts D (CAIR NO

x

Annual Trading Program) and E (CAIR NO

x

Ozone Season

Trading Program) of the Illinois CAIR proposal deviate significantly from EPA’s

model rule and could jeopardize EPA approval of the Illinois CAIR SIP.

Kincaid does not support the IEPA proposal under Subparts D and E. Specifically, we do not

support the 25% set-aside of NO

x

allowances under proposed Sections 225.455 and 225.555, the

so-called “Clean Air Set-Aside” (“CASA”). First, the agency has provided no justification that

the level of the proposed set-aside is necessary from an air quality perspective. Second, these

provisions will significantly increase compliance costs for Illinois sources and competitively

disadvantage the state relative to surrounding states. Furthermore, this approach also could

jeopardize USEPA approval of the Illinois CAIR SIP, and perhaps the ability of Illinois sources

to participate in the federal trading program. It may also deny Illinois the economic advantages

of the USEPA trading program that many other surrounding states will realize through their

adoption of the USEPA rule.

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In addition, we do not support the proposed withholding of allowances from the compliance

supplement pool (“CSP”) under Section 225.480 of the CAIR NO

x

Annual Trading Program

proposal. These additional NOx allowances have been provided in the federal rule to encourage

early reductions during 2007 and 2008. Illinois included early reduction provisions in its rules

implementing the NO

x

SIP Call. These early reduction incentives not only provide companies

added compliance flexibility that eases the burden once the requirements take effect, but benefit

the environment as well by providing real emission reductions sooner. Given this past success, it

seems counterintuitive for the agency to consider eliminating such an incentive by withholding

allowances from the CSP.

III.

The IEPA should justify any “beyond CAIR” NO

x

reductions with a thorough

modeling demonstration.

Should there remain local areas in Illinois that fail to meet the air quality standards following

implementation of the CAIR regional reductions, the IEPA should thoroughly evaluate the

amount of additional air quality improvement needed and the amount of emission reductions

needed in the more localized nonattainment area in order to achieve the needed air quality

improvements in the most cost-effective manner. Requiring all Illinois sources subject to CAIR

to implement “beyond CAIR” reductions across-the-board for the purpose of resolving local

problems is not reasonable or environmentally justified. Kincaid urges IEPA to conduct a

thorough modeling demonstration to determine the level of reductions that may be necessary to

resolve any residual non-attainment problems following implementation of the CAIR reductions.

The 25% NO

x

“set-aside” is unreasonably burdensome to Illinois generators and their customers

and has not been demonstrated to be necessary to achieve attainment with the ambient air quality

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standards. As USEPA has stated, the program is designed “to balance the burden for achieving

attainment between regional-scale and local-scale control programs.”

1

Therefore, for the purposes of implementation of CAIR, Kincaid does not believe it is necessary

for IEPA to propose the “beyond CAIR” NO

x

reductions and urges the Board to reject the IEPA

proposal and, instead, approve full adoption of USEPA’s federal “model rule” on the same

schedule established by USEPA.

IV.

Recent air quality modeling by Lake Michigan Air Directors Consortium

(“LADCO”) suggests additional NO

x

reductions from the electric generating unit

(“EGU”) sector beyond the reductions expected from the federal CAIR program

will not solve the residual ozone and PM

2.5

non-attainment problem in the Chicago

area. A comprehensive attainment plan should be thoroughly researched and fully

developed that clearly and conclusively demonstrates the level of emissions

reductions needed and the source categories for which the most efficient and

effective reductions can be achieved. Only when this plan has been fully developed

will IEPA have the justification to proceed with “beyond CAIR” reductions.

Further EGU reductions of SO

2

and NO

x

are not likely to impact PM

2.5

concentrations

sufficiently to achieve attainment in any residual PM

2.5

nonattainment areas in Illinois or in other

states. Accordingly, mandated beyond-CAIR EGU reductions of SO

2

and NO

x

may not be

necessary, cost effective or even have any beneficial effect on reducing the particle concentration

of monitored PM

2.5

. The PM

2.5

particle composition may well be driven by mobile sources in

winter. Another source mix may drive the PM

2.5

composition in summer. Until additional

speciated monitoring data is available, it is premature to require “beyond CAIR” SO

2

or NO

x

reductions from EGUs because the absolute value of PM

2.5

concentrations measured in the field

may not be driven by SO

2

or NO

x

reductions.

1

70 Fed. Reg. 25166 (May 12, 2005)

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Kincaid recognizes that several areas, including the Chicago MSA, may not achieve one or both

of these standards following the implementation of Phase 2 of CAIR in 2015. Although the

Chicago MSA, while closer to attainment, still may not reach attainment for ozone or PM

2.5

, it

appears that further regional reductions in the utility sector do not make a significant difference

in the attainment status of the Chicago MSA. Indeed, based on one analysis presented at the

October 18, 2005 Indiana Department of Environmental Management Utility Rules Workgroup

meeting, further reductions in the utility sector actually cause ozone levels to increase in the

Chicago MSA. Kincaid therefore supports the approach to implement CAIR essentially as

established by USEPA, and then work with sources in local nonattainment areas to determine the

appropriate mix of reductions needed to resolve the remaining local nonattainment area issues.

Source apportionment data provided by LADCO bears this reasoning out. Data presented at the

October 18, 2005 Indiana Utility Rules Workgroup meeting clearly indicates that Illinois EGUs

make up only a small part of the ozone non-attainment problem in Chicago MSA. The data

indicate that 38% of the ozone comes from NO

x

and VOC emissions from “Boundary

Conditions” or sources outside the five-state Midwest region. More important, 26% of the ozone

problem appears to come from “Illinois On-road” or mobile sources. Illinois EGU NO

x

emissions make up only about 4% of the ozone contribution, behind “Illinois Non-road,”

“Illinois Non-EGU,” and “Indiana On-road” sources.

2

2

Mark Derf, “Photochemical Modeling Update: Round 3 – 8 Hour Ozone and PM

2.5

,” Presentation for the Utility

Rules Workgroup, Indiana Department of Environmental Management, October 18, 2005, attached as Exhibit A.

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V.

The IEPA proposal to adopt “beyond CAIR” NO

x

reductions through a proposed

set-aside program that far surpasses that of any surrounding state places Illinois

electricity consumers at a severe economic disadvantage.

The proposal to allocate 25% of Illinois’ annual NO

x

budget as “set-asides” for the CASA

allowances will severely restrict NO

x

allocations for affected units. There appears to be little

chance that these allowances will ever be returned to the EGUs since the proposal calls for any

NO

x

allowances that remain unclaimed from the four CASA allowance pools (Energy Efficiency

and Conservation/Renewable Energy; Air Pollution Control Equipment Upgrades; Clean Coal

Technology; and Early Adopters) to be used to replenish each of the four CASA pools. Once the

allowances in each of these pools are replenished to a level twice the amount originally

designated for that pool, proposed section 225.475 (and section 225.575 of the Ozone Season

rule) indicates “the Agency may elect to retire the CAIR NOx allowances that have not been

distributed…” Thus, the 25% set-aside essentially becomes a 25% reduction beyond the NO

x

limits in the federal CAIR rule. The equivalent NO

x

limit is very close to the NO

x

limit

suggested by LADCO as modeling scenario “EGU1.”

Recent studies have evaluated the economic impacts that the imposition of broad-based “beyond-

CAIR” model rule reductions on EGU sources would have on the State of Illinois. An August

26, 2005 report prepared by BBC Research & Consulting (“BBC”) of Denver, Colorado, for the

Midwest Ozone Group and the Center for Energy and Economic Development indicates that

imposition of “beyond-CAIR” control strategies, such as the ones described in the white paper

prepared by LADCO on additional control scenarios for EGUs, could have a significant negative

impact on the economies of several Midwestern states. The paper examined two scenarios

referred to as “EGU1” and “EGU2.” The BBC results indicate that imposition of these “beyond

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CAIR” requirements on EGUs will result in the mandatory requirement of installation of controls

on very small units.

3

BBC estimated the electric rate impacts of the proposed LADCO controls and the corresponding

impact of higher electric rates on the case study industries and on household spending in the five

states within the LADCO region. Rate impacts were estimated by comparing the projected

annual electric utility revenue requirements, including costs of compliance with the LADCO

controls, with projected annual electric utility revenue requirements after compliance with

CAIR. BBC examined several scenarios of LADCO controls, including with and without

replacement power to compensate for early generating unit retirements under EGU1 and EGU2.

BBC quantified overall effects on regional output and employment arising from the direct

impacts on the case study industries and from the impacts of higher electric rates on household

disposable income. Impacts were quantified using partial equilibrium analyses of each case

study industry along with the IMPLAN economic input-output model. The focus of the study

was on the direct and secondary (or “multiplier”) effects on ten case study industries and on the

portions of the economy supported by household spending. The findings of BBC are

conservative, i.e., are underestimated, because impacts of higher electric rates on other industries

and the commercial sector (which together account for about one-third of all electricity sales)

were not included. Health- and visibility-related economic benefits of emissions reductions and

the potential short-term economic effects on the construction industry from building and

installing pollution control equipment were also outside the scope of the BBC study. It should

3

“Midwest Electric Rate Impact Study,” BBC Research and Consulting, Denver, Colorado, August 26, 2005,

attached as Exhibit B.

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be noted that the BBC study has evaluated economic impacts of the LADCO EGU1 and EGU2

scenarios that includes tighter SO

2

emissions limits, which make up the majority of these costs.

Key findings of the BBC report are as follows:

1. From a regional standpoint, electric rates in the year 2013 would be about 11 percent

higher under EGU1 and 16 percent higher under EGU2 than under the CAIR Rule.

Electric rates would increase in Illinois by about 9 percent under EGU1 and about 15

percent under EGU2.

2. Demand for coal mined in Illinois, Indiana and Ohio is expected to decline by 48 percent

under EGU1 and 54 percent under EGU2.

3. Annual economic output in the five-state region is projected to be reduced by between

$6.9 billion and $10.4 billion under EGU1 and between $9.0 billion and $14.1 billion

under EGU2. The economic output of Illinois could fall by up to $2.0 billion in the year

2013.

4. Employment in the five-state region is projected to be reduced by approximately 51,000

to 69,000 jobs under EGU1 and 69,000 to 94,000 under EGU2. In Illinois, the estimated

job loss ranges from 9,300 to 12,100 under EGU1 and between 13,400 and 17,600 under

EGU2.

Kincaid has attempted to separate the estimated costs presented in the BBC report for

compliance with only the NO

x

provisions of an EGU1 scenario. While Kincaid cannot at this

time provide a breakdown of the state-specific costs associated with the EGU1 NO

x

reductions

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expected for Illinois, Kincaid can provide an estimated cost for the five-state Midwest region

(Illinois, Indiana, Ohio, Michigan and Wisconsin). Kincaid consulted the analysts that provided

the cost data that BBC used as input to their report and their projection for the NO

x

portion of the

EGU1 scenario was estimated at $865 million per year.

4

Illinois’ share of these costs will be

borne by the citizens and industries of Illinois – costs that states adopting the federal CAIR

program will not have to bear.

VI.

Kincaid supports IEPA’s proposal under Title 35, Part 225, Subpart C to adopt the

federal CAIR provisions for SO

2

.

Kincaid supports the IEPA proposal to adopt the federal CAIR SO

2

Trading Program as part of

the Illinois CAIR rule. Modeling conducted by LADCO in the fall of 2005 suggests the current

PM

2.5

models are not yet sufficiently accurate to base regulatory decisions on. LADCO indicates

the model “over predicts” the contribution of sulfates to PM

2.5

concentrations and “under

predicts” the contribution from organic carbon.

5

The organic carbon contribution continues to

be a problem with the most recent LADCO PM

2.5

model performance, described by LADCO as

“very poor.”

6

4

James Marchetti, Michael Hein and J. Edward Cichanowicz, “Evaluation of the Midwest RPO Interim Measures

and EGU1 and EGU2” – presented at the June 28, 2005 Midwest Regional Planning Organization Regional

Workshop, attached as Exhibit C.

5

Kirk Baker, LADCO Round 3 (Base J) Model Performance, September 2005, attached as Exhibit D.

6

Kirk Baker, LADCO Round 4 (Base K) Model Performance, April 2006, attached as Exhibit E.

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VII.

Kincaid supports a longer baseline period for determining NO

x

allocations than

proposed by IEPA.

Kincaid supports the five-year baseline proposed at Part 225, Subparts D and E, Sections

225.435a and 225.535a for the initial annual and ozone season allocation of NO

x

allowances for

the years 2009, 2010 and 2011. Kincaid does not support the proposed use of the “two most

recent years of control period gross electrical output” for determining NO

x

allocations for the

year 2012 and after (Sections 225.435b and 225.535b). Kincaid urges IEPA to use a five-year

baseline, with an average of the three highest years, throughout the annual and seasonal NO

x

trading rules with periodic revisions every five or six years. This way, the allocations will be

fairly distributed among affected facilities, taking into account market swings, prolonged

maintenance breaks and lengthy outages to install the extensive control equipment needed to

comply with these rules as well as the recently finalized mercury rules at Part 225, Subpart B.

VIII. Withholding NO

x

allowances from existing sources, like Kincaid, that have already

installed expensive pollution controls to reduce NO

x

emissions, amounts to a

“penalty” for those sources that have opted for this approach. Further, any

unclaimed allowances left over in the Energy Efficiency and

Conservation/Renewable Energy (“EEC/RE”) set-aside should be returned to the

EGUs.

As Kincaid emphasized at the Pollution Control Board hearing in Chicago, the Illinois Part 217,

Subpart W NO

x

rule, based on the federal NO

x

SIP Call rules, is a “cap and trade” program, i.e.,

Illinois affected sources must meet a federal NO

x

“budget” or “cap” on emissions during each

ozone season (May 1 through September 30). Sources are allocated a discrete number of NO

x

allowances for each ozone season and the affected sources must make up any shortfall in the

number of allowances they hold versus the number of tons of NO

x

the sources emitted during the

ozone season. Affected sources have three options to make up any shortfall: reduce NO

x

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emissions to levels below the number of eligible allowances they hold, use allowances they have

“banked” through purchase or over-compliance in previous ozone seasons, or purchase/trade

allowances held by other affected sources throughout the 19 eastern states under the federal NO

x

SIP Call region. The Kincaid plant chose to reduce NO

x

emissions at the stack rather than to

rely on extra allowances purchased from other sources.

The Illinois Subpart W rules at Part 217.770 also included an opportunity for affected sources to

obtain “early reduction credits” by reducing NO

x

emissions to specified levels before the rules

were fully effective in the ozone season of 2004.

Kincaid clearly could have relied on the purchase or trade of NO

x

allowances from other

facilities to comply with the Illinois Subpart W rules, including allowances from the more than

100 Dominion-owned generating units allocated NO

x

allowances under the NO

x

SIP Call

program. Instead, both units at the Kincaid facility were equipped in 2002 with the most

effective NO

x

controls available – SCR. While this was certainly a business decision, it was

brought about in part by the incentives presented by the early reduction credits available under

Part 217.770 of the Subpart W rules. The bottom line is that emissions were reduced earlier than

required and the benefits to the environment were delivered faster – a real “win-win” for

Kincaid, the IEPA and the environment.

Nevertheless, the IEPA CAIR proposal summarily withdraws this important incentive for early

reductions with no other explanation than “for public health and air quality improvements.”

7

7

Section 225.480 of the proposed rule: Part 225 – Control of Emissions from Large Combustion Sources, May 30,

2006.

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Kincaid urges the Board to restore the allowances for the CSP in order to promote early

compliance that will provide environmental benefits to accrue and allow affected facilities to

properly plan and implement compliance strategies. Withdrawing these early reduction

provisions removes the incentive for sources to reduce NOx emissions in the non-ozone season

in 2007 and 2008 (by operating SCRs year-round).

At the October Illinois Pollution Control Board hearings in Springfield, the IEPA maintained

that the 25% CASA does not restrict the allowance market:

“It is very important to note that a set-aside is not the equivalent of lowering the

overall budget because the allowances usually remain in the market. While the

recipients of the set-aside allowances are free to hold, sell, or retire the

allowances as they see fit, it is far more likely that they would offer to sell the

allowances in the market in order to realize a financial benefit. As a result, the

recipients have an additional source of funding for their projects, and existing

sources continue to have a pool of allowances they can utilize if needed to meet

their requirements, and the total amount of emissions remains at or below the

budgeted amount.”

8

This explanation gives no consideration of the impact withdrawing these allowances have on the

market-based principles of the federal CAIR rule. Withholding the additional 25% of the NO

x

allowance budget significantly impacts the economics of the rule for EGUs. Under the federal

model rule, the allowances are allocated to affected sources based on the highest three years of

heat input over of the course of a five year period. Set-asides are presented in the model rule as

an option states may adopt, but nowhere suggests such a dramatic set-aside. Indiana, for

example, has recently finalized its CAIR rule with a 4½% set-aside for new sources and a ½%

set-aside for energy efficiency/renewable energy projects. For Kincaid, the 30% set-aside

equates to an annual allowance surrender of 1625 annual trading program allowances and 601

8

Testimony of James Ross, Manager-Division of Air Pollution Control, IEPA, October 10, 2006.

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ozone season trading program allowances or, in today’s market, about $2.5 million per year.

Under the IEPA proposal, if Kincaid needed to purchase back these allowances (which under the

federal model rule would have been directly allocated to Kincaid), the net financial impact

would be $5 million per year.

The unfortunate final result will ultimately fall on the businesses, factories and institutions that

use electricity in Illinois, thereby, disproportionately impacting Illinois competitively with

surrounding states that are adopting CAIR rules that more closely resemble the federal approach.

IEPA has suggested in its testimony in Springfield that the allowances will remain available in

the market for developers as “an additional source of funding for their projects,” and that

“existing sources continue to have a pool of allowances they can utilize if needed to meet their

requirements.” The IEPA proposal then establishes the largest single set-aside of the five

regulatory proposals discussed for EEC/RE projects, with 12%. Under the NOx SIP Call,

several states (including neighboring Indiana and Ohio) found that many of the EEC/RE

allowances were left unclaimed and eventually returned to the utilities. The IEPA proposal

states that the agency “may elect to retire” the unclaimed allowances. Since the largest pool of

CASA allowances in the IEPA proposal is designated for the EEC/RE set-aside, which has

historically been under-subscribed under the NO

x

SIP Call experience, we expect many of the

CASA set-asides for EEC/RE projects to go unclaimed.

Kincaid urges the Board to reject the 30% NO

x

set-aside in favor of a set-aside consistent with

the federal model rule or some other more reasonable approach, and, regarding the EEC/RE set-

aside, to adopt provisions that would return any allowances not claimed by EEC/RE projects to

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the EGUs. This approach would free up some allowances that may go unclaimed but still offer

incentives for these projects. To effect this change, Kincaid suggests section 225.475(b)(4) of

the proposed Subpart D: CAIR NO

x

Annual Trading Program be amended as follows:

“If allowances still remain undistributed after the allocations and distributions in

the above subsections are completed, the Agency may elect to retire any CAIR

NO

x

allowances

, with the exception of allowances assigned to the Energy

Efficiency and Conservation/Renewable Energy set-aside,

that have not been

distributed to any CASA category, to continue progress toward attainment or

maintenance of the National Ambient Air Quality Standards pursuant to the CAA.

Allowances from the Energy Efficiency and Conservation/Renewable Energy

set-aside that remain undistributed shall be distributed to each CAIR NO

x

unit in accordance with section 225.440.”

Kincaid suggests similar changes in section 225.575(b)(4) of the proposed Subpart E: CAIR NO

x

Ozone Season Trading Program:

“If allowances still remain undistributed after the allocations and distributions in

the above subsections are completed, the Agency may elect to retire any CAIR

NO

x

allowances

, with the exception of allowances assigned to the Energy

Efficiency and Conservation/Renewable Energy set-aside,

that have not been

distributed to any CASA category, to continue progress toward attainment or

maintenance of the National Ambient Air Quality Standards pursuant to the CAA.

Allowances from the Energy Efficiency and Conservation/Renewable Energy

set-aside that remain undistributed shall be distributed to each CAIR NOx

Ozone Season unit in accordance with section 225.540.”

As we have stated, Kincaid installed SCRs on both units at Kincaid in 2002. SCR is widely

accepted as the most effective control for NO

x

emissions from coal-fired utility boilers. This

equipment has provided up to a 90% reduction in NO

x

emissions during the past five ozone

seasons of 2002 through 2006, enabling Kincaid to over-comply with the Illinois Subpart W

rules. Kincaid is expecting that this equipment will provide the year-round NO

x

reductions

needed to comply with the upcoming CAIR reductions. However, the current Illinois CAIR

proposal, with the 25% CASA, allocates 5% of the Illinois NO

x

budget for both the annual and

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ozone season trading program for “air pollution control equipment upgrades” including

“installation of selective catalytic reduction.”

9

Because the eligibility to apply to this “air pollution control equipment upgrade” set-aside

apparently hinges on installation of new controls on an existing source, it appears the SCRs at

Kincaid would not be eligible for these allowances. This is unfair. Operation of the Kincaid

SCRs on a year-round basis will require a dramatic expansion of the operations of this

equipment, increasing significantly the costs for ammonia, catalysts, and other variable costs for

operating the SCRs. Kincaid expects the year-round SCR operation to significantly increase

“parasitic” loads on the plant, as well, primarily from increased fan loads.

Allowances were intended to help companies offset these economic burdens, and Kincaid does

not believe that Illinois should disproportionately burden its electric generators.

Excluding existing air pollution control equipment that must be operated on a year-round basis

following adoption of the proposed rule from applying for allowances from the “air pollution

control equipment upgrade” set-aside is unfair and Kincaid urges the Board to change the

eligibility so that these existing controls are included. Kincaid suggests the proposed rule be

amended at §225.460(c)(1) as follows:

“Air pollution control equipment upgrades at existing coal-fired electric

generating units, as follows: installation of flue gas desulfurization (FGD) for

control of SO

2

emissions; installation of a baghouse for control of particulate

matter emissions; and installation of

or extended operation of existing

selective

catalytic reduction (SCR), selective non-catalytic reduction (SNCR), or other add-

on control devices for control of NO

x

emissions.”

9

Section 225.460(c)(1)of the proposed rule: Part 225 – Control of Emissions from Large Combustion Sources, May

30, 2006.

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IX.

Kincaid supports USEPA’s position that the CAIR rulemaking does not require

states to prepare an attainment SIP to comply with CAIR and the attendant

emission reductions are not designed to result in attainment of the NAAQS.

As EPA noted in its CAIR preamble:

“The EPA's CAIR and the previously promulgated NO

X

SIP Call reflect EPA's

determination that the required SO

2

and NO

X

reductions are sufficient to

eliminate upwind States' significant contribution to downwind nonattainment.

These programs are not designed to eliminate all contributions to transport, but

rather to balance the burden for achieving attainment between regional-scale and

local-scale control programs.”

10

X.

The Board has failed to evaluate the combined impact of CAMR and CAIR.

The Board has failed to evaluate the technical feasibility and economic reasonableness of

simultaneous compliance with two contemporaneously adopted regulations (CAIR and CAMR),

where both regulations impose unique impacts on a specific industrial sector: coal-fired electric

generating units. There is no evidence in the record of either regulatory proceeding that it is

technically feasible and economically reasonable for the affected facilities to comply

simultaneously with both regulations. Kincaid has provided information in both regulatory

proceedings that the economic impact of the individual and combined regulations is

unreasonable. The Board’s failure to evaluate the simultaneous impact of both rules is not

consistent with Illinois law. Commonwealth Edison Company, v. Pollution Control Board, 25

Ill.App.3d 271, 323 N.E.2d 84 (First District, 1975), (aff’d 62 Ill.2d 494, 343 N.E.2d 4 (1976));

and Illinois State Chamber Of Commerce, v. Pollution Control Board 67 Ill.App.3d 839, 384

N.E.2d 922 (First District, 1978).

10

70 Fed. Reg. 25166

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17

Kincaid supports implementation of the federal CAIR and urges the Illinois Pollution Control

Board to adopt regulations that follow the CAIR principles.

Respectfully submitted,

Kincaid Generation, L.L.C.

by:

/s/ Bill S. Forcade

One of Their Attorneys

Dated: January 5, 2007

Bill S. Forcade

Katherine M. Rahill

Jenner & Block LLP

330 N Wabash Ave.

Chicago, IL 60611-7603

(312) 222-9350

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Final Report

Midwest Electric

Rate Impact Study

BBC Research and Consulting

August 26, 2005

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Final Report

August 26, 2005

Midwest Electric Rate Impact Study

Prepared for

Center for Energy and Economic Development;

Midwest Ozone Group; and

NiSource

Prepared by

BBC Research & Consulting

3773 Cherry Creek N. Drive, Suite 850

Denver, Colorado 80209-3827

303.321.2547 fax 303.399.0448

www.bbcresearch.com

bbc@bbcresearch.com

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Table of Contents

i

ES.

Executive Summary

I.

Introduction

Background .............................................................................................................................................................I–1

Scenarios..................................................................................................................................................................I–2

Overview of Analysis ................................................................................................................................................I–3

Limitations ...............................................................................................................................................................I–4

Data Sources............................................................................................................................................................I–5

Terminology Definitions...........................................................................................................................................I–6

II.

Case Study Industries

Selection .................................................................................................................................................................II–1

2002 Employment ..................................................................................................................................................II–2

Competitiveness in U.S. ..........................................................................................................................................II–3

International Competitiveness.................................................................................................................................II–4

Coal Mining............................................................................................................................................................II–5

III.

Midwest Electricity Rates

Control Costs .........................................................................................................................................................III–1

Baseline Revenues ..................................................................................................................................................III–2

Percentage Impacts................................................................................................................................................III–3

Household Impacts ................................................................................................................................................III–4

Relative Affordability ..............................................................................................................................................III–5

IV.

Impacts on Case Study Industries

Approach ...............................................................................................................................................................IV–1

IM1 .......................................................................................................................................................................IV–4

IM2 .......................................................................................................................................................................IV–5

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ii

IV.

Impacts on Case Study Industries (continued)

EGU1/EGU2 Without Replacement Power Costs.....................................................................................................IV–6

EGU1 .....................................................................................................................................................................IV–7

EGU2 .....................................................................................................................................................................IV–8

V.

Impacts for Higher Costs for Households

Output....................................................................................................................................................................V–1

Input.......................................................................................................................................................................V–2

VI.

Regional Economic Impact

Total Output ..........................................................................................................................................................VI–1

State Output ..........................................................................................................................................................VI–2

Total Jobs...............................................................................................................................................................VI–3

State Jobs...............................................................................................................................................................VI–4

Labor Income.........................................................................................................................................................VI–5

Appendices

A. Industry Profiles

A1. Food Industry

Introduction ..................................................................................................................................A1–1

Employment Trends.......................................................................................................................A1–2

Largest Employers..........................................................................................................................A1–3

Share of U.S. Employment .............................................................................................................A1–4

Global Competition .......................................................................................................................A1–5

Employment Forecasts ...................................................................................................................A1–6

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iii

A. Industry Profiles (continued)

A2. Paper Industry

Introduction ..................................................................................................................................A2–1

Employment Trends.......................................................................................................................A2–2

Largest Employers..........................................................................................................................A2–3

Share of U.S. Employment .............................................................................................................A2–4

Global Competition .......................................................................................................................A2–5

Employment Forecasts ...................................................................................................................A2–6

A3. Chemical Industry

Introduction ..................................................................................................................................A3–1

Employment Trends.......................................................................................................................A3–2

Largest Employers..........................................................................................................................A3–3

Share of U.S. Employment .............................................................................................................A3–4

Global Competition .......................................................................................................................A3–5

Employment Forecasts ...................................................................................................................A3–6

A4. Plastics and Rubber Industry

Introduction ..................................................................................................................................A4–1

Employment Trends.......................................................................................................................A4–2

Largest Employers..........................................................................................................................A4–3

Share of U.S. Employment .............................................................................................................A4–4

Global Competition .......................................................................................................................A4–5

Employment Forecasts ...................................................................................................................A4–6

A5. Computer Industry

Introduction ..................................................................................................................................A5–1

Employment Trends.......................................................................................................................A5–2

Largest Employers..........................................................................................................................A5–3

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A. Industry Profiles (continued)

A5. Computer Industry (continued)

Share of U.S. Employment .............................................................................................................A5–4

Global Competition .......................................................................................................................A5–5

Employment Forecasts ...................................................................................................................A5–6

A6. Primary Metal Industry

Introduction ..................................................................................................................................A6–1

Employment Trends.......................................................................................................................A6–2

Largest Employers..........................................................................................................................A6–3

Share of U.S. Employment .............................................................................................................A6–4

Global Competition .......................................................................................................................A6–5

Employment Forecasts ...................................................................................................................A6–6

A7. Fabricated Metal Industry

Introduction ..................................................................................................................................A7–1

Employment Trends.......................................................................................................................A7–2

Largest Employers..........................................................................................................................A7–3

Share of U.S. Employment .............................................................................................................A7–4

Global Competition .......................................................................................................................A7–5

Employment Forecasts ...................................................................................................................A7–6

A8. Machine Industry

Introduction ..................................................................................................................................A8–1

Employment Trends.......................................................................................................................A8–2

Largest Employers..........................................................................................................................A8–3

Share of U.S. Employment .............................................................................................................A8–4

Global Competition .......................................................................................................................A8–5

Employment Forecasts ...................................................................................................................A8–6

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A. Industry Profiles (continued)

A9. Transportation Equipment

Introduction ..................................................................................................................................A9–1

Employment Trends.......................................................................................................................A9–2

Largest Employers..........................................................................................................................A9–3

Share of U.S. Employment .............................................................................................................A9–4

Global Competition .......................................................................................................................A9–5

Employment Forecasts ...................................................................................................................A9–6

A10. Coal Mining Industry

Introduction ................................................................................................................................A10–1

Largest Employers........................................................................................................................A10–2

Production and Consumption......................................................................................................A10–3

Coal Origin and Destination ........................................................................................................A10–4

Employment Projections ..............................................................................................................A10–5

A11. Electric Power Industry

Introduction ................................................................................................................................A11–1

Retail Sales of Electricity ...............................................................................................................A11–2

Net Generation of Electricity ........................................................................................................A11–6

Projected State Population...........................................................................................................A11–7

Projected Nameplate Capacity.....................................................................................................A11–8

Projected Net Generation ............................................................................................................A11–9

Sales and Generation .................................................................................................................A11–10

Employment Trends...................................................................................................................A11–11

Employment Forecasts ...............................................................................................................A11–12

B. Industry Impacts by State

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EXECUTIVE SUMMARY

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Executive Summary

EXECUTIVE SUMMARY, PAGE 1

BBC Research & Consulting (BBC) was retained by the Center for Energy

& Economic Development (CEED), the Midwest Ozone Group (MOG)

and NiSource to examine the impacts of electric utility emission controls

identified in the “LADCO EGU White Paper” on the Midwest economy.

LADCO is considering two levels of utility emission reductions (EGU1 and

EGU2) and two intermediate levels of control (IM1 and IM2). The

proposed emission reductions under these controls are approximately 50

percent to 75 percent greater than the reductions required by EPA’s 2005

Clean Air Interstate Rule (CAIR).

BBC studied the effects of additional emission controls in Illinois, Indiana,

Michigan, Ohio and Wisconsin. Nine case study industries in those states

were selected for study based on their intensive use of electricity. These

industries included manufacturers of primary metals, transportation

equipment, chemicals, food products, plastics and rubber, fabricated metals,

paper, machinery and computers/electronic equipment. Coal mining was

selected as the tenth case study industry because it is a major supplier to

Midwestern electric generation.

BBC estimated the electric rate impacts of the proposed LADCO controls

and the corresponding impact of higher electric rates on the case study

industries and on household spending in the five states within the LADCO

region. Rate impacts were estimated by comparing the projected annual

electric utility revenue requirements, including costs of compliance with the

LADCO controls, with projected annual electric utility revenue

requirements after compliance with CAIR. BBC examined several scenarios

of LADCO controls, including with and without replacement power to

compensate for early generating unit retirements under EGU1 and EGU2.

1

BBC quantified overall effects on regional output and employment arising

from the direct impacts on the case study industries and from the impacts of

higher electric rates on household disposable income. Impacts were

quantified using partial equilibrium analyses of each case study industry

along with the IMPLAN economic input-output model.

The focus of the study was on the direct and secondary (or “multiplier”)

effects on the case study industries and on the portions of the economy

supported by household spending. The findings here are conservative

because impacts of higher electric rates on other industries and the

commercial sector (which together account for about one-third of all

electricity sales) were not included. Health and visibility-related economic

benefits of emissions reductions and the potential short-term economic

effects on the construction industry from building and installing pollution

control equipment were also outside the scope of this study.

1

Annual costs of compliance, including both technology costs and replacement power to

compensate for early retirement of older generating units, were provided by James

Marchetti, Michael Hein and Edward Cichanowicz. Baseline electric utility revenues for

2012 and 2013 were projected by BBC based on current revenues, Energy Information

Administration projections and EPA’s Regulatory Impact Analysis of the CAIR Rule.

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Executive Summary

EXECUTIVE SUMMARY, PAGE 2

Key findings are as follows:

1. From a regional standpoint, electric rates in the year 2013 would be

about 11 percent higher under EGU1 and nearly 16 percent higher

under EGU2 than under the CAIR Rule. Electric rates would increase

the most in Indiana (29% increase under EGU2) and the least in

Michigan (12% increase under EGU2).

2. Demand for coal mined in Illinois, Indiana and Ohio is expected to

decline by 48 percent under EGU1 and 54 percent under EGU2.

3. Economic output in the five-state region is projected to be reduced by

$9.0 billion to $14.1 billion under EGU2 in 2013. Under EGU1, the

reduction in annual state economic output is estimated to be between

$6.9 billion and $10.4 billion.

2

4. Employment in the five-state region is projected to be reduced by

between 69,000 and 94,000 jobs under EGU2. Under EGU1,

approximately 51,000 to 69,000 jobs would be lost.

Exhibit ES-1 summarizes the projected impacts on regional employment on

a state-by-state basis.

2

Output and employment impact estimates include direct impacts on the case study

industries, impacts on the suppliers and employees of those industries, and impacts on

the economy due to reduced disposable income of residential consumers as a result of

electric rate increases.

Exhibit ES-1.

Projected job reductions under

proposed LADCO EGU control measures

Note:

Totals may not add due to rounding.

Source: BBC Research & Consulting, 2005.

Illinois

Indiana

Michigan

Ohio

Wisconsin

Total

2012

2013

Without Replacement Power

With Replacement Power

EGU1/EGU2

9,300 –12,110

17,680 –24,330

6,630 – 9,290

16,410 –21,120

2,870 – 4,330

52,910 –71,200

EGU2

13,400 – 17,610

22,280 – 31,140

10,050 – 14,090

18,300 – 23,660

5,290 – 7,950

69,330 – 94,460

EGU1

8,800 –11,410

17,510 –24,150

6,270 – 8,730

16,190 –20,780

2,560 – 3,830

51,340 –68,890

IM2

4,660 – 6,350

7,590 –11,730

5,440 – 7,660

5,960 – 8,600

2,280 – 3,420

25,930 –37,750

IM1

1,020 – 1,370

5,380 – 8,180

3,270 – 4,520

5,510 – 7,800

1,540 – 2,280

16,720 – 24,140

Illinois

Indiana

Michigan

Ohio

Wisconsin

Total

2012

2013

Without Replacement Power

With Replacement Power

EGU1/EGU2

9,300 –12,110

17,680 –24,330

6,630 – 9,290

16,410 –21,120

2,870 – 4,330

52,910 –71,200

EGU2

13,400 – 17,610

22,280 – 31,140

10,050 – 14,090

18,300 – 23,660

5,290 – 7,950

69,330 – 94,460

EGU1

8,800 –11,410

17,510 –24,150

6,270 – 8,730

16,190 –20,780

2,560 – 3,830

51,340 –68,890

IM2

4,660 – 6,350

7,590 –11,730

5,440 – 7,660

5,960 – 8,600

2,280 – 3,420

25,930 –37,750

IM1

1,020 – 1,370

5,380 – 8,180

3,270 – 4,520

5,510 – 7,800

1,540 – 2,280

16,720 – 24,140

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SECTION I.

Introduction

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Introduction — Background

SECTION I, PAGE 1

BBC Research & Consulting (BBC) was retained by the Center for Energy

& Economic Development (CEED), the Midwest Ozone Group (MOG)

and NiSource to examine the impacts of electric utility emission controls

identified in the “LADCO EGU White Paper

1

” on the Midwest economy.

The Lake Michigan Air Directors Consortium (LADCO) was established in

1990 by the states of Illinois, Indiana, Michigan and Wisconsin. Ohio

became a member of the consortium in 2004. LADCO’s purpose is to

provide technical assessments and assistance to its member states on regional

air quality issues.

In January 2005, LADCO produced an “interim white paper” describing

candidate control measures, beyond the mandatory controls already on the

books, that might be considered by the LADCO states. LADCO is

considering two levels of utility emission reductions — EGU1 and EGU2

— and two intermediate levels of control — IM1 and IM2. Allowable

emission rates for electric generating units would be considerably lower

under the LADCO strategies than under the EPA’s 2005 Clean Air

Interstate Rule (CAIR). For example, the regional budget for annual SO2

emissions would be reduced from about 1 million tons under CAIR to

about 570,000 tons under IM2 and about 240,000 tons under EGU2.2

If

enacted, the intermediate levels of control would be in force in 2012. EGU1

and EGU2 standards would begin in 2013.

1

This is the popular name for a study by Mac Tec consulting group entitled “Interim

White Paper–Midwest RPO Candidate Control Measures.” The Midwest Regional

Planning Organization is composed of and managed by LADCO, the Lake Michigan Air

Directors Consortium.

2

“Evaluation of the Midwest RPO Interim Measures and EGU1 and EGU2,”

Marchetti, Hein and Cichanowicz, June 28, 2005.

BBC was asked to examine the impacts of the LADCO scenarios on electric

rates in the LADCO states and the impacts of potential electric rate

increases on electricity intensive industry, Midwestern households and the

Midwestern economy. BBC’s analysis includes CAIR in the baseline and

only examines impacts beyond what will result from CAIR. BBC studied

impacts on Illinois, Indiana, Michigan, Ohio and Wisconsin.

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Introduction — Scenarios

SECTION I, PAGE 2

This analysis examines the EGU1 and EGU2 scenarios with and without

the costs of “replacement power.” These scenarios are expected to lead to

early retirements of certain coal fired generating units and a corresponding

reduction in regional generation capacity. The “with replacement power”

scenarios consider the net additional cost of replacing the power that these

units would have generated through additional use of existing natural gas-

fired generation units, construction of new gas generating units and

purchases of replacement power from outside the region.

Exhibit I-1 summarizes the control scenarios studied by BBC. The EGU1

and EGU2 scenarios with no purchases of replacement power yield similar

results. Therefore BBC combined these two control scenarios into one in

this analysis.

BBC’s economic impact analysis is based on an assessment of the Midwest

electric utility industry’s response to the different control scenarios prepared

by James Marchetti, Michael Hein and Edward Cichanowicz.

3

3

Ibid.

Exhibit I-1.

Summary of LADCO pollution control scenarios examined in this study

Central Scenario

IM1

2012

Not needed

IM2

2012

Not needed

EGU1/EGU2 without replacement power

2013

Excluded

EGU1 with replacement power

2013

Included

EGU2 with replacement power

2013

Included

Purchase of

Year

replacement power

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Introduction — Overview of Analysis

SECTION I, PAGE 3

Midwest utilities would respond to the proposed control measures by

investing in pollution control equipment, increasing their use of existing

natural gas-fired generating units, building new gas units, switching from

Midwest coal to low sulfur Wyoming coal (“fuel switching” in Exhibit I-2),

and early retirement of Midwest generating units, which could lead to more

power purchases from outside the region. Each of these responses will

increase the cost of electricity for Midwest customers.

BBC’s economic analysis begins with the projected annual cost impacts on

the electricity industry. BBC then calculated rate impacts on Midwest

electricity customers. These rate impacts are discussed in Section III of this

report.

Because BBC could not conduct a comprehensive assessment of the rate

impacts on all sectors of the Midwest economy, nine electricity-intensive

industries and coal mining were selected as “case studies” for this analysis.

Section II of this report introduces the case study industries.

The direct impact of increased electricity rates on case study industries is

reduced output in each industry. As a result, each case study industry will

reduce purchases from sectors providing key inputs. For example, cost

increases for the transportation equipment industry will lead to reductions

in demand for steel (“backward linkages” in Exhibit I-2). Job losses in these

industries will also have a ripple effect through the Midwest economy.

These effects are examined in Section V. BBC also modeled impacts on the

Midwest coal industry from fuel switching.

Finally, residential electricity customers will spend more of their income on

electricity and less on other items. BBC modeled these effects as well.

Results are presented in Section V.

Exhibit I-2.

Factors included and not included in the economic study

Rate

Increases

LADCO Control Scenarios

Added

EGU Costs

EGU

Operating

Changes

Emission

Control

Construction

Reduced

Emissions

Fuel

Switching

Case Study

Manufacturing

Industries

Other

Industries &

Commercial

Residential

Consumers

Backward

Linkages

Backward

Linkages

Backward

Linkages

Forward

Linkages

Forward

Linkages

Reduced

Midwest Coal

Production

Backward

Linkages

Early

Retirement

Cost of

Replacement

Power

Note:

Shaded items were included in study; unshaded items were not.

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Introduction — Limitations

SECTION I, PAGE 4

It is also important to note the economic effects that BBC did not examine.

Reduced air pollution in the Midwest may improve the health of local

residents, enhance visibility and have other benefits. Each of these outcomes

could have positive economic effects on the region. As shown in Exhibit I-2,

effects of “reduced emissions” were not a part of BBC’s study.

Because BBC analyzed long-term economic effects of the pollution control

measures, short-term effects were not included. The short-term jobs created

from installing the pollution control equipment required under the

LADCO proposals were not estimated.

To be able to clearly examine the future economic conditions with and

without the control scenarios, BBC assumed that residential customers

would not change their use of electricity in response to higher prices.

Without this assumption, power consumption in the Midwest would be

lower, likely resulting in larger rate impacts, as the capital costs of pollution

controls would be spread over a smaller volume of sales. Attempting to

estimate the many iterations of these effects was beyond the scope of this

study.

There are also several reasons why the analysis presented here could

understate the negative economic effects of the pollution control strategies.

Only nine case study industries, plus the coal industry, were examined when

assessing direct effects of the pollution control measures. Increases in case

study industry costs may lead to higher prices for their output — and

correspondingly higher costs for other industries. BBC did not examine

these effects (“forward linkages” in Exhibit I-2). Other reasons are noted in

Exhibit I-3.

Exhibit I-3.

Reasons why the analysis may understate or overstate actual impacts

Reasons why analysis may understate actual impacts

Rate impacts limited to case study industries and households; one-third of

electricity sales ignored

Did not analyze lost utility jobs due to early power plant retirements in Midwest

or lost railroad jobs due to reduced coal transportation.

Forward linkages not included (e.g., effects of higher steel costs on rest of

Midwest economy)

Reasons why analysis may overstate actual impacts

Did not analyze any health or visibility benefits

Did not analyze short-term employment created from installing pollution control

equipment

Assumed no reductions in power use by residential customers due to

higher rates

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Introduction — Data Sources

SECTION I, PAGE 5

BBC modeled the economic impacts of the LADCO pollution control

scenarios using the IMPLAN input-output model. This tool is widely used

throughout the U.S. for regional economic impact analysis.

As much as possible, BBC relied on accepted state or federal data sources for

the inputs to the IMPLAN model and other elements of the analysis. For

example, inputs regarding industry responsiveness to cost increases

(“elasticities,” which are further discussed in Section IV of this report)

primarily come from the U.S. Environmental Protection Agency Elasticity

Databank. Current and projected average electricity revenues and rates come

from the U.S. Energy Information Administration. Historic economic data

were from federal sources such as the U.S. Census Bureau and the Bureau of

Labor Statistics.

Each state in the region has developed projections of jobs by industry, which

BBC used in developing the “baseline” (CAIR without additional LADCO

controls) scenario.

Exhibit I-4.

Key data sources

Lake Michigan Air

Directors Consortium (LADCO)

• EGU White Paper, prepared by MacTec, Inc.

(www.ladco.org),

Jan. 14, 2005.

James Marchetti, Michael Hein

and Edward Cichanowicz

• Annual electric utility compliance costs

and net costs of replacement power

Energy Information

Administration (DOE)

• Current and projected electric rates,

usage and utility revenues

EPA

• Rate increases associated with CAIR

• Industry supply and demand elasticities

IMPLAN model and data files

• Electricity expenditures by industry and

for residential users

• Current output and employment

by industry

• Output and employment multipliers

State governments

• Projected baseline jobs by industry

Bureau of Labor Statistics

• Projected productivity changes by industry

Source

Information

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Introduction — Terminology Definitions

SECTION I, PAGE 6

Backward linkages — Economic relationship between an industry and its

suppliers and employees. In economic impact analysis, incorporating

backward linkages means capturing the effects of a direct change in a

particular industry’s output on the output of the industries that supply

goods and services to that industry and to its employees.

Demand elasticity — The percentage decrease in the quantity of a good or

service that customers will purchase given a one percent increase in the price

of that good or service.

Disposable income — Household income after payment of taxes.

EGU — Electric generating units. Note that one powerplant may be

comprised of several individual coal or natural gas-fired generating units.

Energy intensity — The cost of purchases of electricity by an industry

relative to the total value of the industry’s output.

Forward linkages — Economic relationships between an industry and its

customers. In economic impact analysis, incorporating forward linkages

means capturing the effects of price changes in a particular industry’s output

on the costs and/or output of the industries that purchase goods or services

from it.

IMPLAN input-output model — a PC based regional economic modeling

system originally developed by the US Forest Service and currently

maintained by Minnesota IMPLAN Group. Widely used for economic

impact studies.

Jobs — In this study, jobs are as defined in the IMPLAN data sets and

include both full and part-time employment as well as self-employed

proprietors.

Labor income — In this study, labor income is as defined in the IMPLAN

data sets and includes wage and salary income of employees and earnings of

proprietors.

NAICS — North American Industry Classification System. Official

definitions and numeric codes for industries as published by the Office of

Management and Budget in 1997. Replaced the previous Standard

Industrial Classification (SIC) system.

Output – The value of production by an industry.

Partial equilibrium analysis — A simplified form of economic analysis

that focuses on identifying changes in supply, demand and prices in on one

market (e.g. the market for steel) at a time.

Supply elasticity — The percentage increase in the quantity of a good or

service that suppliers will produce given a one percent increase in the price

of that good or service.

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SECTION II.

Case Study Industries

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Case Study Industries — Selection

SECTION II, PAGE 1

To select the case study industries for these analyses, BBC examined total

employment in the industry in the Midwest, the industry’s total electricity

purchases, and electricity purchases as a share of total output (e.g., an

industry’s electricity-intensity). BBC examined industries at the three-digit

NAICS code level of detail.

Based on these criteria, nine sectors were selected for the industry case

studies. For example, the food products industry, which includes meat

processing, dairy, bakeries and other food processing sectors, is a large

employer in the Midwest with about $0.8 billion in electricity purchases in

2002. Electricity expenditures totaled about 0.9 percent of the cost of

producing food products. (Self-generated power was not included in the

analysis of electricity purchases.)

The largest electricity purchaser in the Midwest is the primary metals

manufacturing industry (steel, aluminum and other primary metals). BBC

estimates that the Midwest’s primary metals industry purchased $1.2 billion

of electricity in 2002, more than 2 percent of the industry’s total production

expenditures.

Three other case study industries in the Midwest — paper manufacturing,

chemicals manufacturing and plastics and rubber manufacturing — had

electricity expenditures that exceeded 1 percent of these industries’ total

outlays. Transportation equipment manufacturing, which includes auto and

truck manufacturing, spent more than $1 billion on electricity purchases in

the region. BBC also examined computer and electronic product

manufacturing, fabricated metal production and machinery manufacturing.

Because of possible impacts on demand for local coal, the Midwest coal

mining industry was also analyzed.

Exhibit II-1.

Electricity purchases by Midwest case study industries, 2002

Case Study Industry

Food Products

$848

0.89%

Paper Manufacturing

$680

1.90%

Chemical Manufacturing

$1,034

1.13%

Plastics & Rubber Production

$830

1.63%

Computer & Electronic Product Manufacturing

$170

0.52%

Primary Metal Manufacturing

$1,212

2.34%

Fabricated Metal Production

$713

0.98%

Machinery Manufacturing

$451

0.56%

Transportation Equipment

$1,093

0.41%

Coal Mining

$36

1.48%

Total Case Study Industries

$7,065

Total Industrial and Commercial

$20,569

(Millions)

Purchased

Value of

Percent

of Total

Electricity

Outlay

Source: IMPLAN.

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Case Study Industries — 2002 Employment

SECTION II, PAGE 2

Exhibit II-2 illustrates total employment in 2002 in the 10 case study

industries in each Midwest state.

Case study industry employment in Ohio totaled 637,000 employees in

2002, highest among the Midwest states. Transportation equipment,

fabricated metals, plastics and rubber manufacturing and machinery

manufacturing were large employers in this state. Compared with other

states, Ohio also has a relatively large coal mining sector (3,500 employees

in 2002).

In Michigan, there were 540,000 jobs in the case study industries in 2002.

The transportation equipment sector accounted for 40 percent of these jobs.

Illinois had nearly as many jobs in the case study industries as Michigan —

514,000 in 2002. The largest case study sector in Illinois, fabricated metal

manufacturing, accounted for 114,000 of these jobs. Illinois had the largest

chemical manufacturing and computer and electronic products industries

among the Midwest states. There were 3,800 coal mining jobs in Illinois in

2002.

Case study industries accounted for 424,000 jobs in Indiana in 2002. About

128,000 of these jobs were in the transportation equipment sector.

Fabricated metals and primary metals manufacturing were also large

employers. Indiana had 2,200 coal mining jobs in 2002.

In 2002, Wisconsin had 354,000 jobs in case study sectors. Machinery,

fabricated metal, food and paper manufacturing were large employers.

Exhibit II-2.

Employment in case study industries in 2002

Transportation Equip.

Chemical Mfg.

Food Mfg.

Plastics and

Rubber Mfg.

Fabricated

Metal Mfg.

Paper Mfg.

Machinery Mfg.

Computer & Electronic

Product Mfg.

Coal Mining

Primary Metal Mfg.

Transportation Equip.

Chemical Mfg.

Food Mfg.

Plastics and

Rubber Mfg.

Fabricated

Metal Mfg.

Paper Mfg.

Machinery Mfg.

Computer & Electronic

Product Mfg.

Coal Mining

Primary Metal Mfg.

Transportation Equip.

Chemical Mfg.

Food Mfg.

Plastics and

Rubber Mfg.

Fabricated

Metal Mfg.

Paper Mfg.

Machinery Mfg.

Computer & Electronic

Product Mfg.

Coal Mining

Primary Metal Mfg.

Transportation Equip.

Plastics and

Chemical Mfg.

Rubber Mfg.

Fabricated

Metal Mfg.

Paper Mfg.

Machinery Mfg.

Computer & Electronic

Product Mfg.

Coal Mining

Primary Metal Mfg.

Transportation Equip.

Chemical Mfg.

Food Mfg.

Plastics and

Fabricated

Rubber Mfg.

Metal Mfg.

Paper Mfg.

Machinery Mfg.

Computer & Electronic

Product Mfg.

Coal Mining

Primary Metal Mfg.

354,000 jobs

514,000 jobs

424,000 jobs

637,000 jobs

540,000 jobs

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Case Study Industries — Competitiveness in U.S.

SECTION II, PAGE 3

As a whole, the case study industries are highly competitive. In many of

these industries, manufacturing plants in the Midwest compete against

manufacturers throughout the U.S. and in other countries.

As shown in Exhibit II-3, 39 percent of U.S. primary metals employment is

located in the five-state region based on 2002 County Business Patterns

data. About one-third of the U.S. transportation equipment manufacturing,

machinery manufacturing and plastics and rubber manufacturing is located

in the Midwest. Much of the output from these industries is sold in other

states or goes into other products that compete nationally and

internationally. (The Midwest accounts for only 16 percent of the U.S.

population.)

The only case study industry in which the Midwest has a comparatively

small share of U.S. employment (apart from coal mining) is computers and

electronic product manufacturing (11 percent of U.S. employment.)

Exhibit II-3.

Midwest share of U.S. employment, 2002

Transportation Equipment

Machinery Manufacturing

Fabricated Metal

Production

Primary Metal

Manufacturing

Computers and

Electronic Product

Manufacturing

Plastics and Rubber

Product Manufacturing

Chemical Manufacturing

Paper Manufacturing

Food Products

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

17%

23%

19%

31%

11%

39%

29%

31%

35%

Source: U.S. Census Bureau, EPCD County Business Patterns

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Case Study Industries — International Competitiveness

SECTION II, PAGE 4

Although reliable data are not available for imports to the U.S. and exports

from the U.S. on a regional basis, national statistics provide insight into the

international competitiveness of the case study industries.

About 40 percent of the U.S. demand for computers and electronic

products is met by imports. Almost one-third of U.S. demand for

transportation equipment is fulfilled by imports. Imports of machinery,

primary metals and chemicals are also relatively high.

Similarly, a large proportion of U.S. production of computers and electronic

products, machinery and transportation equipment is exported to other

countries. Even in industries such as chemicals, primary metals and

fabricated metals, foreign competition is a major force in the U.S.

marketplace. Only food products manufacturing is relatively insulated from

foreign competition.

Exhibit II-4.

U.S. imports and exports for case study industry output, 2001

Transportation Equipment

Machinery Manufacturing

Fabricated Metal Production

Primary Metal Manufacturing

Computers and Electronic

Product Manufacturing

Plastics and Rubber

Product Manufacturing

Chemical Manufacturing

Paper Manufacturing

Food Products

0%

20%

40%

60%

80%

100%

4%

6%

11%

9%

20%

18%

10%

9%

41%

31%

23%

13%

10%

13%

28%

29%

31%

20%

Percent of U.S. demand met by imports

Percent of U.S. production that is exported

Source: International Trade Administration, 2005.

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Case Study Industries — Coal Mining

SECTION II, PAGE 5

The coal mining industry is a special case among the industries examined in

this study. With about 9,000 workers, coal mining does not employ as

many people in the Midwest as the manufacturing industries studied. The

industry could face, however, major impacts from the LADCO control

measures.

Dun & Bradstreet data show 18 coal mining establishments in the Midwest

with over 100 employees. Seven of the large coal mining establishments are

located in Illinois, six are in Indiana and five are in Ohio. Almost all of the

coal mining in the Midwest is used for generating power, and most of the

Midwest coal that is mined stays in the Midwest.

Exhibit II-5.

Coal mining establishments with 100+ employees

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AEP Ohio

Central Ohio Coal Co.

Coal LLC

Solar Source Underground

Ohio Valley Coal Co.

Foundation American Coal Co.

Gary

Akron

Flint

Athens

Toledo

Dayton

Lansing

Detroit

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

Cincinnati

Evansville

New Albany

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand

Rapids

Weslo Inc

Valley Mining

Kindill Mining Inc

Sands Hill Coal Co

Turris Coal Company

Old Ben Coal Co.

Black Beauty

Coal Co.

Capitol Resource and Inv Co.

Source: Dun & Bradstreet Marketplace.

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SECTION III.

Midwest Electricity Rates

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Midwest Electricity Rates — Control Costs

SECTION III, PAGE 1

BBC received estimates of the direct costs to Midwest utilities from the

proposed LADCO-EGU control measures from Manchetti, Hein and

Cichanowicz. The cost impacts were for two versions of intermediate

implementation scenarios — IM1 and IM2 — and two full implementation

control scenarios — EGU1 and EGU2. The Marchetti group examined the

EGU1 and EGU2 scenarios with and without replacement power for the

early retirement of generation under these scenarios. The “without

replacement power” cost impacts were so similar under EGU1 and EGU2

that BBC combined these two scenarios.

As shown in Exhibit III-1, annual control costs vary from $2.0 to $3.2

billion in 2012 in IM1 and IM2.

For EGU1 and EGU2, annual control costs are $5.0 billion and $7.1 billion

per year, respectively, assuming that utilities in the region would purchase

power to replace the units that would need to be retired. These annual

compliance cost figures are for 2013. Without this replacement power

assumption, EGU1 and EGU2 would have costs of about $5.2 billion in

2013.

All cost estimates are in 2003 dollars.

Exhibit III-1.

Projected annual direct costs of proposed

LADCO EGU control measures (millions of 2003 dollars)

State

EGU1

EGU2

Illinois

$142

$646

$1,118

$1,048

$1,660

Indiana

$622

$873

$1,496

$1,488

$1,949

Michigan

$353

$584

$740

$696

$1,112

Ohio

$713

$773

$1,447

$1,418

$1,640

Wisconsin

$204

$303

$393

$345

$711

Region

$2,035

$3,179

$5,194

$4,995

$7,073

Without

Replacement

2013

IM1

IM2

EGU1/EGU2

2012

Power

With Replacement Power

Note:

Totals may not add due to rounding.

Source: James Marchetti, Michael Hein and J. Edward Cichanowicz, 2005.

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Midwest Electricity Rates — Baseline Revenues

SECTION III, PAGE 2

To determine impacts on electricity rates, BBC compared the annual cost of

compliance with the baseline revenues projected for each state for 2012 and

2013, summarized in Exhibit III-2. Historic figures by state came from the

Energy Information Administration. State electricity revenue projections

were determined by applying regional growth in revenues from EIA

forecasts to each state, using 2003 revenues as the base year. The growth in

revenues for Michigan, Ohio and Indiana was based on EIA forecasts for the

ECAR region. The larger relative increase for Illinois and Wisconsin is based

on the EIA forecasts for the MAIN region.

As shown in Exhibit III-2, electricity retail sales revenues for the five-state

region were projected to be about $40 billion in 2005 (in 2003 dollars). By

2013, total electricity sales revenues were expected to grow to $45 billion (in

2003 dollars). These projections include additional costs from compliance

with CAIR, estimated by EPA to be a 2.3 percent rate impact for the

country as a whole.

Exhibit III-2

Annual revenues from retail sales of electricity,

with CAIR for 2012 and 2013 (millions of 2003 dollars)

State

Illinois

$9,650

$10,771

$11,067

Indiana

6,073

6,432

6,723

Michigan

8,361

8,856

9,256

Ohio

11,157

12,262

12,816

Wisconsin

4,418

4,931

5,066

Region

$40,080

$43,252

$44,928

2005

2012

2013

Note:

CAIR rate impacts estimated by EPA to be 2.3 percent nationally.

Source: BBC Research and Consulting from U.S. Department of Energy, Energy Information Administration.

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Midwest Electricity Rates — Percentage Impacts

SECTION III, PAGE 3

BBC projected impacts of LADCO control measures on electricity rates by

dividing the total annual control costs in a state by the projected electricity

revenues for that state without LADCO measures (but with CAIR). For

example, the 1.3 percent impact on rates in Illinois in 2012 from IM1 was

calculated based on the $142 million in compliance costs (2003 dollars)

divided by the $10,771 million in electricity sales revenues for Illinois in the

baseline scenario.

Rate impacts are the smallest (1 to 10 percent increases in rates) for IM1

and the highest for the EGU2 with replacement power control scenario. In

states where utility revenue requirements are expected to be relatively low in

2012 and 2013, such as Indiana, the percentage impact on rates is highest.

For example, electricity rates in Indiana are projected to increase by 9.7

percent in 2012 under IM1 and by 29.0 percent in 2013 under EGU2 with

replacement power. EGU2 with replacement power would increase rates in

other states by 12 to 15 percent.

Rate impacts of IM1 would be the smallest on a percentage basis in Illinois,

where rates might need to increase by only 1 percent in 2012. The required

percentage increase in electricity rates would be smallest in Wisconsin for

EGU1 and EGU2 except for the EGU2 with replacement power scenario.

Rate impacts for EGU2 with replacement power would be the smallest in

Michigan.

Exhibit III-3.

Impacts of proposed LADCO EGU control measures

on 2012 and 2013 electricity rates — percent change*

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

0%

5%

10%

15%

20%

25%

30%

1.3%

9.7%

4.0%

5.8%

4.1%

6.0%

13.6%

6.6%

6.3%

6.1%

10.1%

22.3%

8.0%

11.3%

7.8%

9.5%

22.1%

7.5%

11.1%

6.8%

15.0%

29.0%

12.0%

12.8%

14.0%

IM1

IM2

EGU1 & 2

Without

Replacement

Power

EGU1

With

Replacement

Power

EGU2

With

Replacement

Power

* Rate increases over and above increases needed to comply with CAIR Rule. IM1 and IM2 scenarios

examined in 2012, EGU1 and EGU2 scenarios in 2013.

Source: BBC Research & Consulting.

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Midwest Electricity Rates — Household Impacts

SECTION III, PAGE 4

BBC assumed that the percentage impacts on electricity rates from LADCO

control measures would be the same across all customer classes. For

example, if EGU2 with purchase of replacement power would raise rates by

29 percent in Indiana in 2013 compared with baseline rates for that year,

each rate class was assumed to face 29 percent higher electricity rates. With

this rate increase, households in Indiana would pay $678 million more for

electricity in 2013 under EGU2 (with replacement power) than under the

baseline.

BBC determined the increased expenditures for households based on

expenditure data, by household income group, in IMPLAN.

Exhibit III-4.

Additional annual electricity costs for residential customers under

proposed LADCO EGU control measures* (millions of 2003 dollars)

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

WI

OH

MI

IN

IL

$0

$250

$500

$750

$1,000

$68

$225

$150

$254

$89

$307

$316

$248

$275

$132

$521

$520

$302

$494

$168

$488

$517

$284

$484

$147

$773

$678

$454

$561

$304

IM1

IM2

EGU1 & 2

Without

Replacement

Power

EGU1

With

Replacement

Power

EGU2

With

Replacement

Power

* IM1 and IM2 scenarios examined in 2012, EGU1 and EGU2 scenarios in 2013.

Source: BBC Research & Consulting.

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Midwest Electricity Rates — Relative Affordability

SECTION III, PAGE 5

One way to gauge the impact of the rate increases on the Midwest’s

economic competitiveness is to compare Midwest electricity rates to other

states in the U.S. today and what they would be in the future with the

LADCO control measures.

In 2003, electricity rates in Illinois, Michigan, Ohio and Wisconsin were

about average for the U.S. Ranking each state from 1 (lowest average rates)

to 50 (highest average rates), Wisconsin would place 24

th

lowest and

Michigan would be 31

st

lowest, with Ohio and Illinois ranking 27

th

and 29

th

lowest, respectively. Rates in Indiana are currently low relative to other

parts of the country. Only four states in 2003 had average electricity rates

lower than Indiana.

With EGU1 (with replacement of power from early retirement of Midwest

generating units), Indiana would go from an inexpensive state for electricity

rates to one ranking 24

th

lowest among the 50 states. Each of the other states

except Wisconsin would be in the group of the 20 most expensive states for

electricity costs.

Impacts on relative competitiveness of electricity rates are larger under

EGU2 (with replacement of power). For example, Illinois would now have

higher average rates than 37 of the 50 states. After being a very low-rate

state, Indiana would move into the group of “high rate” states.

These rate increases could affect the competitiveness of existing employers in

the region when competing nationally and internationally, and potentially

make the Midwest a less-attractive location for expansion and location of

new firms.

Exhibit III-5.

Effect of projected rate increases

on affordability of industrial electric rates – EGU1

State

Illinois

29

34

Indiana

5

24

Michigan

31

33

Ohio

27

32

Wisconsin

24

28

With Projected EGU1

Affordability Ranking Among 50 States

Current (2003)

Rate Increase (2013)

Note:

1 = state with lowest rates and 50 = state with highest rates.

Source: BBC Research and Consulting from U.S. Department of Energy, Energy Information Administration.

Exhibit III-6.

Effect of projected rate increases

on affordability of industrial electric rates – EGU2

State

Illinois

29

38

Indiana

5

27

Michigan

31

35

Ohio

27

33

Wisconsin

24

32

Current (2003)

Rate Increase (2013)

With Projected EGU2

Affordability Ranking Among 50 States

Note:

1 = state with lowest rates and 50 = state with highest rates.

Source: BBC Research and Consulting from U.S. Department of Energy, Energy Information Administration.

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SECTION IV.

Impacts on Case Study Industries

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Impacts on Case Study Industries — Approach

SECTION IV, PAGE 1

Modeling impacts of higher electricity rates on case study industries is

complex. This section of the report begins by describing BBC’s approach.

The direct impact of higher production costs for industries is lower output.

The magnitude of the change in output depends on whether the firms

facing higher costs have any ability to pass along these cost increases to

purchasers of their products.

In the left hand graph in Exhibit IV-1, BBC assumes that producers have

enough market power that customers will still purchase output from those

producers even at higher prices. In other words, firms facing cost increases

for their inputs can pass along some of those higher costs to their customers.

The increases in firms’ cost of production cause the supply curve to shift

upward as it now costs more to produce any given level of output. Because

of the higher prices, customers for the output decrease the quantity they

purchase.

This view of the response to a cost increase is most accurate for cases in

which all or most producers in a market face increases in the cost of an

input. Rising global oil prices and national environmental regulations are

examples of increased costs of production that can be fully or partially

passed on to purchasers of a product, whether it be gasoline or plastics.

However, the proposed LADCO control measures would only affect

industries that purchase power produced in the Midwest. Therefore, a

manufacturing plant facing higher electricity costs in Indiana would be at a

disadvantage when competing with a plant located in areas where there are

no similar cost increases.

At an extreme, the graph to the right in Exhibit IV-1 illustrates how a cost

increase specific to only some firms could affect those firms. If there are

many other firms competing in this industry that do not face the same cost

increases, the firm examined in the graph would not be able to pass higher

costs along to the purchasers of its product. If the firm tried to do this,

customers would simply go to other sources of this good. In the economists

view, the firm is a “price taker” facing a perfectly elastic demand for its

product. The supply curve for the firm shifts upward, just as in the previous

example, but the market does not absorb any of the additional cost. The

firm must reduce its output to the point where it can make and sell its

product for the same price it was getting before.

Exhibit IV-1.

How regional industries respond

to cost increases depends on market power

Source: BBC Research & Consulting.

If costs increased across the U.S….

If only one firm experienced cost increase...

…some added costs passed forward.

…all costs must be absorbed by firm.

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Impacts on Case Study Industries — Approach

SECTION IV, PAGE 2

The slopes of the supply curves in Exhibit IV-1 reflect how much a firm’s,

or an industry’s, costs increase as it increases production. This relationship is

known as the elasticity of supply. In this study, BBC attempted to analyze

long-run supply elasticities where firms can make changes in their plant and

their production processes and are not limited to just hiring more or fewer

employees or changing their orders for materials.

A supply elasticity of 1.0 means that for every 1 percent increase in price,

the firm can increase output by 1 percent. A supply elasticity of less than 1.0

means that a firm or industry would increase output by less than 1 percent

given a 1 percent increase in price. Supply elasticities greater than 1.0 mean

that firms will have larger increases in output for a given price increase.

BBC developed supply elasticities from the U.S. Environmental Protection

Agency’s Elasticity Database. The EPA has gathered elasticity estimates

related to the paper, chemicals and primary metals industries (as well as

other manufacturing industries outside of the case study group). For other

industries examined in this report, BBC relied on the average of EPA supply

elasticities across all manufacturing sectors. Exhibit IV-2 shows these

elasticities.

Exhibit IV-2.

Supply elasticities for case study industries

Case Study Industry

Source

Food Products

2.86

EPA average of all

manufacturing industries

Paper Manufacturing

0.80

EPA estimates

Chemical Manufacturing

4.01

EPA estimates

Plastics & Rubber Production

2.86

Average of all

manufacturing industries

Computer & Electronic

2.86

Average of all

Product Manufacturing

manufacturing industries

Primary Metal Manufacturing

1.44

EPA estimates

Fabricated Metal Production

2.86

Average of all

manufacturing industries

Machinery Manufacturing

2.86

Average of all

manufacturing industries

Transportation Equipment

2.86

Average of all

manufacturing industries

Elasticity

Supply

Source: Complied by BBC Research and Consulting from U.S. Environmental Protection Agency Elasticity

Databank, 2005.

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Impacts on Case Study Industries — Approach

SECTION IV, PAGE 3

The slopes of the demand curves illustrated in Exhibit IV-1 show the degree

to which purchasers of products will absorb firms’ cost increases or just cut

back on the amount of output they will purchase. This responsiveness is

known as the elasticity of demand for a product. A demand elasticity of -

1.0, for example, means that customers will decrease their purchases of a

product by 1 percent given a 1 percent increase in price. (As with the supply

elasticities, BBC sought to model long-term elasticity of demand for these

industries.)

BBC examined effects of the electricity cost increases using two sets of

assumptions about demand elasticities for case study industries to capture

the range of potential industry responses to cost increases.

The first set of assumptions follows the logic of the left hand graph in

Exhibit IV-1 — Midwest industries could pass along some of the cost

increases to purchasers of their products. BBC used elasticity estimates from

EPA reports, as shown in Exhibit IV-3. For computers and electronic

products, BBC used elasticities determined through a literature review. The

elasticities are generally for the U.S. economy as a whole, so they probably

overstate the degree to which customers are willing to accept price increases

from firms from a single region of the country. Demand for Midwest output

is likely more price elastic than demand for U.S. output as a whole, so

regional price increases would be more difficult to pass on to customers.

BBC also examined impacts on the case study industries assuming that all

firms in the Midwest were price takers. Demand was assumed to be perfectly

elastic; that is, all purchasers would shift to other sources of supply if the

Midwest firms tried to raise their prices.

The two sets of demand elasticity assumptions represent two extremes of

possible market response. Therefore, BBC presents the case study industry

impact estimates as a range.

Exhibit IV-3.

Demand elasticities for case study industries

Case Study Industry

Source

Food Products

-0.41

EPA estimates

Paper Manufacturing

-1.14

EPA estimates

Chemical Manufacturing

-1.75

EPA estimates

Plastics & Rubber Production

-1.37

Average of all

manufacturing industries

Computer & Electronic

-3.00

Consumer electronic products

Product Manufacturing

demand estimates (literature)

Primary Metal Manufacturing

-0.71

EPA estimates

Fabricated Metal Production

-0.52

EPA estimates

Machinery Manufacturing

-1.37

Average of all

manufacturing industries

Transportation Equipment

-2.65

EPA estimates

Elasticity

Demand

Source: Complied by BBC Research and Consulting from U.S. Environmental Protection Agency Elasticity

Databank, 2005.

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Impacts on Case Study Industries — IM1

SECTION IV, PAGE 4

BBC applied the data described previously in this report to determine direct

impacts of higher electricity rates on the case study industries.

Under the IM1 scenario, changes in output would range from $10 to $30

million for the Midwest paper manufacturing industry to $100 to $310

million for the Midwest chemicals industry, in 2003 dollars. There would

be no direct impacts on the coal mining industry, as the study team assumed

no shifting away from Midwest coal due to IM1 controls.

In total, IM1 would have direct impacts on the case study industries of

$440 to $1,340 million.

Because output of the case study industries would be reduced, these

industries would purchase less inputs from linked industries and cutbacks in

workforce would affect the regional economy. These secondary effects

would total $260 to $830 million within the Midwest under IM1.

Therefore, the total effect of IM1 from impacts on case study industries is

$0.7 to $2.2 billion in reduced output. This change in output would result

in 3,320 to 10,730 fewer jobs in the Midwest. Job impacts could be

particularly large in plastic and rubber manufacturing and fabricated metals

manufacturing.

Impacts of electricity cost increases from IM1 on case study industries

would be lowest in Illinois ($40 to $130 million in reduced output) and

highest in Indiana (up to $790 million in reduced output). Job losses in

Indiana and Ohio could exceed 3,000 in each state.

Exhibit IV-4.

Impact of proposed IM1 scenario

on annual case study industry output and jobs (2012)

Losses by Industry

Food Product

$20 – $150

60 – 360

Paper

$10 – $30

50 – 80

Chemicals

$100 – $310

160 – 520

Plastic/Rubber

$70 – $200

260 – 810

Primary Metals

$40 – $120

130 – 390

Fabricated Metals

$20 – $130

90 – 600

Machinery

$30 – $100

110 – 350

Computers/Electronics

$40 – $80

70 – 140

Transportation Equipment

$110 – $240

200 – 420

Coal Mining

$0 – $0

0 – 0

10 Industry Total

$440 – $1,340

1,130 – 3,680

Secondary Impacts

$260 – $830

2,190 – 7,060

Regional Total

$700 – $2,170

3,320 – 10,730

Losses by

State

Illinois

$40 – $130

130 – 480

Indiana

$260 – $790

1,260 – 4,060

Michigan

$140 – $400

640 – 1,890

Ohio

$200 – $630

1,010 – 3,300

Wisconsin

$60 – $220

270 – 1,010

Regional Total

$700 – $2,170

3,320 – 10,730

Jobs

(2003 $ millions)

Jobs

(2003 $ millions)

Output

Output

Note:

Totals may not add due to rounding.

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Impacts on Case Study Industries — IM2

SECTION IV, PAGE 5

Impacts on case study industries would be about 50 percent greater under

the IM2 scenario compared with IM1. Direct impacts on the ten case study

industries would range from about $0.7 to $2.1 billion in reduced output

(2002 dollars). Including secondary impacts (case study industries reducing

their purchases of inputs), Midwest economic output could fall by $1.1 to

$3.4 billion.

The distribution of impacts among case study industries is similar between

IM1 and IM2. The plastic and rubber manufacturing industry and the

fabricated metals industry could face the largest job losses. Total job losses

could reach nearly 17,000 employees for the region. As with IM1, there

would be no direct impacts on the coal mining industry, as the study team

assumed no shifting away from Midwest coal due to IM2 controls.

Impacts of electricity cost increases from IM2 on case study industries

would be lowest in Wisconsin ($0.1 to $0.3 billion in reduced output) and

highest in Indiana ($0.4 to 1.1 billion in reduced output). Job losses could

exceed 3,000 in Indiana, Ohio and Michigan.

Exhibit IV-5.

Impact of proposed IM2 scenario on

annual case study industry output and jobs (2012)

Losses by Industry

Food Product

$40 – $240

90 – 610

Paper

$10 – $40

30 – 120

Chemicals

$150 – $500

260 – 840

Plastic/Rubber

$100 – $310

400 – 1,240

Primary Metals

$60 – $170

180 – 560

Fabricated Metals

$30 – $200

150 – 950

Machinery

$50 – $150

190 – 570

Computers/Electronics

$60 – $130

110 – 230

Transportation Equipment

$170 – $350

300 – 620

Coal Mining

$0 – $0

0 – 0

10 Industry Total

$660 – $2,090

1,700 – 5,750

Secondary Impacts

$400 – $1,300

3,290 – 11,060

Regional Total

$1,060 – $3,390

4,990 – 16,810

Losses by State

Illinois

$160 – $590

600 – 2,290

Indiana

$360 – $1,120

1,810 – 5,950

Michigan

$240 – $670

1,090 – 3,310

Ohio

$220 – $690

1,090 – 3,730

Wisconsin

$90 – $320

400 – 1,540

Regional Total

$1,060 – $3,390

4,990 – 16,810

Output

Output

Jobs

(2003 $ millions)

Jobs

(2003 $ millions)

Note:

Totals may not add due to rounding.

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Impacts on Case Study Industries —

EGU1/EGU2 Without Replacement Power Costs

SECTION IV, PAGE 6

The EGU1 and EGU2 LADCO control scenarios would have a similar

effect on case study industries, excluding any additional costs of replacing

power from early retirement of certain generating units. Under EGU1 or

EGU2 (without power replacement), output of case study industries could

fall by $2.4 to $4.7 billion. These direct impacts would trigger secondary

impacts of $1.8 to $3.2 billion across the regional economy. In total,

Midwest economic output could fall by as much as $7.8 billion under these

scenarios from the direct and secondary effects on the ten case study

industries. This could mean a loss of up to 38,000 jobs in the Midwest.

As with IM1 and IM2, job losses in the plastic and rubber, fabricated metals

and chemicals industries could be most severe. However, EGU1/EGU2

would trigger Midwest power plants to substitute Wyoming coal for

Midwest coal, leading to sharp cutbacks in output and employment in

Midwest coal mines. Output in coal mining could be $1.3 billion lower and

about 3,900 mining jobs could be lost in the Midwest.

Compared with the impacts of IM1 and IM2 on case study industries, the

impacts of EGU1/EGU2, without power replacement, would be higher in

each Midwest state. For example, Illinois would lose at least 2,300 jobs and

perhaps as many as 5,200 jobs under EGU1/EGU2 (without replacement

power). Indiana could lose as many as 14,700 jobs.

Exhibit IV-6.

Impact of proposed EGU1/EGU2 scenario, without power replacement

costs, on annual case study industry output and jobs (2013)

Losses by Industry

Food Product

$60 – $380

140 – 960

Paper

$30 – $60

100 – 180

Chemicals

$250 – $810

410 – 1,340

Plastic/Rubber

$160 – $500

640 – 1,970

Primary Metals

$90 – $280

290 – 890

Fabricated Metals

$50 – $320

230 – 1,490

Machinery

$80 – $240

290 – 880

Computers/Electronics

$100 – $220

170 – 360

Transportation Equipment

$250 – $530

430 – 910

Coal Mining

$1,330 – $1,330

3,880 – 3,880

10 Industry Total

$2,400 – $4,670

6,590 – 12,850

Secondary Impacts

$1,760 – $3,180

13,270 – 25,300

Regional Total

$4,160 – $7,840

19,860 – 38,150

Losses by State

Illinois

$640 – $1,370

2,360 – 5,170

Indiana

$1,640 – $2,900

8,080 – 14,730

Michigan

$300 – $820

1,330 – 3,990

Ohio

$1,460 – $2,330

7,590 – 12,300

Wisconsin

$120 – $420

510 – 1,970

Regional Total

$4,160 – $7,840

19,860 – 38,150

Jobs

(2003 $ millions)

Jobs

(2003 $ millions)

Output

Output

Note:

Totals may not add due to rounding.

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Impacts on Case Study Industries — EGU1

SECTION IV, PAGE 7

The study team also examined EGU1 with net power replacement costs.

Because the impact on electricity rates resulting from EGU1 would be

somewhat lower with power replacement than without power replacement,

effects on regional output and employment are slightly less under this

scenario. Impacts on the Midwest coal mining industry are unchanged.

Case study industry impacts of EGU1, with power replacement, would be a

loss of $4.1 to $7.6 billion in regional output and up to 37,000 jobs. These

estimates include secondary effects from cutbacks in case study industry

purchases from other sectors.

The distribution of impacts among economic sectors and states under

EGU1, with power replacement, would be similar to EGU1 without power

replacement.

Exhibit IV-7.

Impact of proposed EGU1 scenario, with power replacement

costs, on annual case study industry output and jobs (2013)

Losses by Industry

Food Product

$50 – $370

130 – 910

Paper

$30 – $50

100 – 170

Chemicals

$240 – $790

390 – 1,290

Plastic/Rubber

$150 – $480

610 – 1,900

Primary Metals

$90 – $280

290 – 870

Fabricated Metals

$50 – $310

230 – 1,420

Machinery

$80 – $230

270 – 840

Computers/Electronics

$100 – $200

170 – 340

Transportation Equipment

$240 – $510

420 – 880

Coal Mining

$1,330 – $1,330

3,880 – 3,880

10 Industry Total

$2,360 – $4,530

6,490 – 12,490

Secondary Impacts

$1,730 – $3,090

13,060 – 24,610

Regional Total

$4,090 – $7,620

19,550 – 37,100

Losses by State

Illinois

$630 – $1,300

2,300 – 4,910

Indiana

$1,620 – $2,880

7,970 – 14,610

Michigan

$280 – $770

1,260 – 3,720

Ohio

$1,450 – $2,300

7,560 – 12,150

Wisconsin

$110 – $370

450 – 1,720

Regional Total

$4,090 – $7,620

19,550 – 37,100

Output

Output

Jobs

(2003 $ millions)

Jobs

(2003 $ millions)

Note:

Totals may not add due to rounding.

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Impacts on Case Study Industries — EGU2

SECTION IV, PAGE 8

EGU2, with power replacement, would have the most severe impact on case

study industries of the scenarios studied. From $5 to $10 billion of regional

output could be lost and up to 50,000 jobs eliminated under this scenario.

EGU2, with power replacement, would result in significantly higher

electricity costs than even EGU1, with power replacement. This would be

especially true for Illinois, Michigan and Wisconsin. Power rates in Indiana

would go up 29 percent under EGU2, with power replacement, compared

with 22 percent with EGU1.

Impacts would be greater for each case study industry in the Midwest.

EGU2’s impacts on Midwest states could reach 18,700 lost jobs in Indiana

and 13,700 lost jobs in Ohio. The state with the lowest job losses,

Wisconsin, could still see losses of 3,600 jobs.

Coal mining output would drop by $1.5 billion in the Midwest under

EGU2, with power replacement. About 4,400 coal mining industry jobs

would be lost in the Midwest, or more than half of current employment in

this sector.

Exhibit IV-8.

Impact of proposed EGU2 scenario, with power replacement

costs, on annual case study industry output and jobs (2013)

Losses by Industry

Food Product

$80 – $550

200 – 1,360

Paper

$50 – $80

150 – 270

Chemicals

$340 – $1,100

560 – 1,810

Plastic/Rubber

$220 – $680

860 – 2,680

Primary Metals

$120 – $370

390 – 1,170

Fabricated Metals

$70 – $440

330 – 2,060

Machinery

$110 – $340

410 – 1,230

Computers/Electronics

$140 – $300

240 – 500

Transportation Equipment

$340 – $720

590 – 1,240

Coal Mining

$1,490 – $1,490

4,360 – 4,360

10 Industry Total

$2,960 – $6,070

8,080 – 16,680

Secondary Impacts

$2,130 – $4,080

16,190 – 32,730

Regional Total

$5,090 – $10,150

24,270 – 49,400

Losses by State

Illinois

$850 – $1,930

3,130 – 7,340

Indiana

$1,980 – $3,640

9,800 – 18,660

Michigan

$450 – $1,250

2,060 – 6,100

Ohio

$1,590 – $2,580

8,340 – 13,700

Wisconsin

$220 – $760

940 – 3,600

Regional Total

$5,090 – $10,150

24,270 – 49,400

Jobs

(2003 $ millions)

Jobs

(2003 $ millions)

Output

Output

Note:

Totals may not add due to rounding.

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SECTION V.

Impacts of Higher Costs for Households

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Impacts of Higher Costs for Households — Output

SECTION V, PAGE 1

The LADCO control scenarios could result in electricity cost increases for

Midwest households of up to $2.8 billion in 2013 (2003 dollars). This shift

of consumer expenditures toward electricity purchases would leave

households less money to spend on other items.

The impact on regional output from a $2.8 billion reduction in household

spending on non-electricity items does not equal $2.8 billion. One reason is

that the increases in electricity costs would not evenly fall on all types of

households. Each income group, for example, spends a different portion of

its income on electricity, and increasing those expenditures would have a

different effect on purchases of other goods and services. (BBC modeled

impacts for nine different income classes.) Further, not all of the displaced

consumer spending would have gone for goods and services produced by

Midwest establishments. To the extent that households will reduce some of

their purchases from companies within the Midwest, reduced spending

creates a ripple effect through the regional economy.

BBC modeled these relationships using the IMPLAN model. The result of a

$2.8 billion increase in consumer spending on electricity and corresponding

reduction of spending on other goods and services would translate into $3.9

billion of reduced output in the Midwest (EGU2, with replacement power).

The smallest impact would be a $1.2 billion reduction in regional output

under IM1. Impacts from higher electricity rates for consumers vary among

states depending on the size of the state and percentage increase in rates.

Because it would face the highest rate increases, impacts from reduced

household spending would be greatest in Indiana.

Exhibit V-1.

Annual impacts on output from reduced

household spending (millions of 2003 dollars)

Without

Replacement

Power

IM1

IM2

EGU1/EGU2

EGU1

EGU2

Illinois

$90

$390

$670

$630

$990

Indiana

$350

$480

$800

$800

$1,040

Michigan

$240

$380

$490

$430

$700

Ohio

$380

$400

$720

$720

$820

Wisconsin

$110

$150

$200

$170

$360

Region

$1,160 $1,820

$2,870

$2,760

$3,910

2012

2013

With Replacement Power

Note:

Totals may not add due to rounding.

Source: BBC Research and Consulting.

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Impacts of Higher Costs for Households—Jobs

SECTION V, PAGE 2

Based on the projected changes in output shown in Exhibit V-1, BBC used

the IMPLAN model to estimate job losses resulting from higher electricity

rates for households. Exhibit V-2 presents these impact results.

Under IM1, about 13,000 jobs could be lost in the region from the

combined direct and secondary effects of the shift in household spending.

IM2 could result in 21,000 jobs lost. EGU1, with replacement power, and

EGU1/EGU2, without replacement power, would eliminate about 32,000

to 33,000 jobs in the region from the higher household electricity rates.

EGU2, with replacement power, could lead to 45,000 fewer jobs in the

region.

Employment impacts of IM1 would range from about 900 jobs in Illinois to

4,500 jobs in Ohio. Job losses would exceed 4,000 in each state except

Wisconsin under IM2. The impact of EGU1/EGU2, without replacement

power, would range from 2,400 jobs in Wisconsin to almost 10,000 jobs in

Indiana. Effects of EGU1, with replacement power, would be similar.

EGU2, with replacement power, would have the greatest impact on each

state’s employment. Economic losses could exceed 12,000 jobs in Indiana

and reach about 10,000 jobs in both Illinois and Ohio. The drop in total

employment in Wisconsin could exceed 4,000 jobs. Michigan employment

could be reduced by 8,000 jobs.

Exhibit V-2.

Impact on jobs from reduced household spending

Without

Replacement

Power

IM1

IM2

EGU1/EGU2

EGU1

EGU2

Illinois

890

4,060

6,940

6,500

10,270

Indiana

4,120

5,780

9,600

9,540

12,480

Michigan

2,630

4,350

5,330

5,010

7,990

Ohio

4,490

4,870

8,820

8,630

9,960

Wisconsin

1,270

1,880

2,360

2,110

4,350

Region

13,400

20,940

33,050

31,790

45,060

2012

2013

With Replacement Power

Note:

Totals may not add due to rounding.

Source: BBC Research & Consulting.

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SECTION VI.

Regional Economic Impact

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Regional Economic Impact — Total Output

SECTION VI, PAGE 1

BBC combined and summarized the direct effects on case study industries,

the secondary impacts from these effects and the impacts from household

electricity rate increases for each LADCO control scenario. Impacts on

Midwest output would be in the range of $1.9 to $3.3 billion under IM1

and from $2.9 to $5.2 billion under IM2 in 2012. Impacts of

EGU1/EGU2, without replacement power, and EGU1, with replacement

power, could be about $7 billion to more than $10 billion in reduced

regional output.

EGU2, with replacement power, could have up to a $6.1 billion impact on

case study industry output, a $4.1 billion secondary effect from the rate

increases for case study industries, and a nearly $3.9 billion impact on

regional output from electricity rate increases for Midwest households. In

total, the impact of this LADCO control scenario on Midwest annual

output could reach $14.1 billion (2003 dollars). Under the alternative

assumption that local firms’ could pass on a portion of their cost increases to

their customers, the impacts of EGU2, with power replacement, would be

$9 billion.

Because BBC studied only rate impacts on households and case study

industries, and did not fully model direct effects on all industries and all the

intraregional linkages, the full effects of each scenario could be higher than

reported here.

Exhibit VI-1.

Impacts of proposed LADCO EGU control measures

on annual Midwest region output (millions of 2003 dollars)

IM1

IM2

EGU1

EGU2

Case Study

Industries

$440 – $1,340

$660 – $2,090

$2,400 – $4,670

$2,360 – $4,530

$2,960 – $6,070

Secondary

Impacts

$260 – $830

$400 – $1,300

$1,760 – $3,180

$1,730 – $3,090

$2,130 – $4,080

Residential

Impacts

$1,160

$1,820

$2,870

$2,760

$3,910

Total

$1,860 – $3,330 $2,880 – $5,210

$7,030 – $10,710

$6,850 – $10,380 $9,000 – $14,060

With Replacement Power

Without

Replacement

2012

Power

2013

EGU1/EGU2

Note:

Totals may not add due to rounding.

Source: BBC Research and Consulting.

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Regional Economic Impact — State Output

SECTION VI, PAGE 2

The $9 to $14 billion impact on regional output under EGU2, with

replacement power, would be distributed across each of the five states in the

region. Economic output of Indiana could fall by up to $4.7 billion and

output of Illinois and Ohio could drop by as much as $3 billion. Michigan

output could be reduced by $2 billion and Wisconsin economic activity

could drop by $1 billion.

The relative distribution of economic impacts are similar for other LADCO

control scenarios, with certain exceptions. In Wisconsin, EGU2 would

double the economic impacts created by EGU1. IM1 would have relatively

small effects on Illinois, but IM2 impacts in that state would be similar to

impacts in Michigan and Ohio.

Exhibit VI-2.

Impacts of proposed LADCO EGU control measures

on annual Midwest state output (millions of 2003 dollars)

IM1

IM2

EGU1

EGU2

Illinois

$130 – $220

$550 – $980

$1,310 – $2,040

$1,260 – $1,930

$1,840 – $2,920

Indiana

$610 – $1,140

$840 – $1,600

$2,440 – $3,700

$2,420 – $3,680

$3,020 – $4,680

Michigan

$380 – $640

$620 – $1,050

$790 – $1,310

$710 – $1,200

$1,150 – $1,950

Ohio

$580 – $1,010

$620 – $1,090

$2,180 – $3,050

$2,170 – $3,020

$2,410 – $3,400

Wisconsin

$170 – $330

$240 – $470

$320 – $620

$280 – $540

$580 – $1,120

Total

$1,860 – $3,330 $2,880 – $5,210

$7,030 – $10,710

$6,850 – $10,380 $9,000 – $14,060

2012

Power

2013

EGU1/EGU2

With Replacement Power

Without

Replacement

Note:

Totals may not add due to rounding.

Source: BBC Research and Consulting.

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Regional Economic Impact — Total Jobs

SECTION VI, PAGE 3

The assessment of losses of regional output ranged from $1.9 billion

(minimum impact of IM1) to $14 billion (maximum effect of EGU2, with

replacement power). The corresponding job losses would be a low of 16,700

to a high of 94,500.

Employment impacts under IM2 could reach nearly 38,000 jobs lost, which

would double under EGU1/EGU2, without replacement power. EGU1,

with replacement power, could result in 51,000 to 69,000 jobs lost.

Because BBC studied only rate impacts on households and case study

industries, and did not fully model all intraregional linkages, the full effects

could be higher.

Exhibit VI-3.

Impacts of proposed LADCO EGU

control measures on Midwest region jobs

IM1

IM2

EGU1

EGU2

Case Study

Industries

1,130 – 3,680

1,700 – 5,750

6,590 – 12,850

6,490 – 12,490

8,080 – 16,680

Secondary

Impacts

2,190 – 7,060

3,290 – 11,060

13,270 – 25,300

13,060 – 24,610

16,190 – 32,730

Residential

Impacts

13,400

20,940

33,050

31,790

45,060

Total

16,720 – 24,140 25,930 – 37,750

52,910 – 71,200

51,340 – 68,890

69,330 – 94,460

2012

Power

2013

EGU1/EGU2

With Replacement Power

Without

Replacement

Note:

Totals may not add due to rounding.

Source: BBC Research and Consulting.

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Regional Economic Impact — State Jobs

SECTION VI, PAGE 4

Job losses would be largest in Indiana and Ohio under each LADCO

control scenario. A minimum of 5,000 jobs would be lost in Indiana under

IM1. Under EGU2, with replacement power, total employment in Indiana

could be reduced by as much as 31,000 jobs. Similarly, Ohio employment

losses could be as low as 5,500 under IM1 and could exceed 23,000 under

EGU2 (with replacement power).

Exhibit VI-4.

Impacts of proposed LADCO EGU

control measures on Midwest jobs by state

IM1

IM2

EGU1

EGU2

Illinois

1,020 – 1,370

4,660 – 6,350

9,300 – 12,110

8,800 – 11,410

13,400 – 17,610

Indiana

5,380 – 8,180

7,590 – 11,730

17,680 – 24,330

17,510 – 24,150

22,280 – 31,140

Michigan

3,270 – 4,520

5,440 – 7,660

6,630 – 9,290

6,270 – 8,730

10,050 – 14,090

Ohio

5,510 – 7,800

5,960 – 8,600

16,410 – 21,120

16,190 – 20,780

18,300 – 23,660

Wisconsin

1,540 – 2,280

2,280 – 3,420

2,870 – 4,330

2,560 – 3,830

5,290 – 7,950

Total

16,720 – 24,140

25,930 – 37,750

52,910 – 71,200

51,340 – 68,890

69,330 – 94,460

2012

Power

2013

EGU1/EGU2

With Replacement Power

Without

Replacement

Note:

Totals may not add due to rounding.

Source: BBC Research and Consulting.

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Regional Economic Impact — Labor Income

SECTION VI, PAGE 5

BBC translated job losses into lost labor income in each state. The income

per job figures are from IMPLAN. Income is expressed in 2003 dollars.

As shown in Exhibit VI-5, about $0.6 to $1.0 billion in labor income would

be lost under IM-1 in the Midwest. Up to $1.6 billion in labor income

would be lost under IM-2.

EGU1/EGU2, without replacement power, and EGU1, with replacement

power, would have similar impacts on Midwest labor income. Under these

scenarios, labor income would be in the range of $2 to $3 billion lower than

baseline projections.

EGU2, with replacement power, could reduce regional labor income by up

to $4 billion. Impacts would be greatest in Indiana under this and most of

the other scenarios.

Exhibit VI-5.

Impacts of proposed LADCO EGU control measures

on annual Midwest region labor income (millions of 2003 dollars)

IM1

IM2

EGU1

EGU2

Illinois

$50 – $70

$230 – $310

$480 – $630

$450 – $590

$720 – $940

Indiana

$190 – $310

$270 – $450

$700 – $980

$690 – $970

$870 – $1,250

Michigan

$140 – $200

$230 – $340

$280 – $410

$260 – $380

$420 – $620

Ohio

$200 – $300

$210 – $330

$630 – $830

$620 – $820

$680 – $910

Wisconsin

$60 – $90

$90 – $140

$110 – $180

$100 – $160

$210 – $330

Total

$640 – $960

$1,030 – $1,560

$2,200 – $3,020

$2,130 – $2,920

$2,900 – $4,040

2012

Power

2013

EGU1/EGU2

With Replacement Power

Without

Replacement

Note:

Totals may not add due to rounding.

Source: BBC Research and Consulting.

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APPENDIX A.

Industry Profiles

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A1. Food Industry

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Food Industry — Introduction

APPENDIX A1, PAGE 1

The food manufacturing industry employed about 250,000 people in the

five-state region in 2002. Approximately 4,300 establishments made food

products in these five states according to the U.S. Census Bureau.

As shown in Figure A1-1, federal agencies divide the food manufacturing

industry into nine sectors. Plants that slaughter and process animals account

for the most jobs in the Midwest food industry. Establishments that make

bakery goods and tortillas are the second largest employer in this industry in

the Midwest. Dairy products manufacturing is the third largest component

of the Midwest food industry.

Figure A1–1.

Midwest establishments and

employment in the food manufacturing sector, 2002

Other Food Mfg.

Bakeries and Tortilla Mfg.

Seafood Product

Preparation and Packaging

Animal Slaughtering and Processing

Dairy Product Mfg.

Fruit and Vegetable Preserving

and Specialty Food Mfg.

Sugar and Confectionary Product

0

200

400

600

800

1,000 1,200 1,400 1,600 1,800 2,000

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

317

153

335

332

448

624

26

1,601

491

8,548

15,662

19,062

32,166

34,966

57,243

295

51,379

29,728

Animal Food Mfg.

Grain and Oilseed Mfg.

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Food Industry — Employment Trends

APPENDIX A1, PAGE 2

Employment in the food manufacturing industry in the five-state region

ranged from 30,000 jobs in Michigan to about 76,000 jobs in Illinois in

2002.

Fierce competition has led food manufacturing plants to invest in

technologically advanced machinery to be more productive. Increased

automation throughout the industry has led to a 3 percent decrease in jobs

between 1998 and 2002. Illinois lost 7,500 jobs over the four-year period;

Michigan and Indiana experienced smaller job losses. In contrast, the food

manufacturing industry in Wisconsin added 4,500 jobs between 1998 and

2002. Increased demand for diary products, especially cheese, may have

triggered the job increase in the state.

Figure A1-2 shows County Business Patterns data on total employment in

the food manufacturing industry for 1998 and 2002 for each Midwestern

state.

Figure A1–2.

Employment in the food industry

1998

2002

58,000

62,000

1998

2002

83,000

76,000

1998

2002

33,000

31,000

1998

2002

50,000

50,000

1998

2002

33,000

30,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Food Industry — Largest Employers

APPENDIX A1, PAGE 3

Dun & Bradstreet data show 13 food manufacturing establishments in the

Midwest with at least 1,200 employees. Four of the large employers are

located in Wisconsin and four are in Illinois.

Figure A1-3 shows the locations of the largest food manufacturing

employers according to Dun & Bradstreet.

Figure A1–3.

Food establishments with 1,200+ employees

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Athens

Gary

Dawn Food Products

B-F Processing Corp

Lyle Tate Ingredients Americas

Kraft Foods

Great Lakes Cheese Wisconsin

Packerland Packing Co

American Foods Group

Chicago

Akron

Flint

Toledo

Dayton

Detroit

Madison

Lansing

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

Cincinnati

Evansville

New Albany

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand

Rapids

Tyson

Tyson Fresh

Meats Inc

Serenade Foods Inc

Indiana Packers Corp.

A E Staley Manufacturing Co

Cargill Meat Solutions Corp

Kraft Foods NA Inc

Source: Dun & Bradstreet Marketplace.

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Food Industry — Share of U.S. Employment

APPENDIX A1, PAGE 4

The Midwest accounts for about 17 percent of total U.S. employment in

the food manufacturing industry.

The region accounts for over a quarter of the national employment in grain

and oilseed milling as well as in dairy products manufacturing, as shown in

Figure A1-4. The region accounts for only 1 percent of the nation’s seafood

product preparation and packaging.

Illinois is one of the leading states in animal slaughtering and processing,

whereas Wisconsin accounts for almost one-third of cheese manufacturing

jobs in the nation.

Figure A1–4.

Midwest share of U.S. food employment, 2002

Total Food Mfg.

Other Food Mfg.

Bakeries and Tortilla Mfg.

Seafood Product

Preparation and Packaging

Animal Slaughtering

and Processing

Dairy Product Mfg.

Fruit and Vegetable Preserving

and Specialty Food Mfg.

Sugar and Confectionary Product

Grain and Oilseed Milling

Animal Food Mfg.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

18%

29%

23%

20%

27%

12%

1%

18%

20%

17%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Food Industry — Global Competition

APPENDIX A1, PAGE 5

The U.S. is largely self-sufficient in meeting domestic demands from the

food industry. In 2001, 4 percent of the total U.S. demand for food

products was met by imports, and 6 percent of the food products produced

in the U.S. were exported.

Future growth in the U.S. food manufacturing industry will primarily come

from domestic growth in demand, usually created by population growth and

rising disposable income.

Figure A1–5.

U.S. imports and exports of food output, 2001

U.S. demand met by imports

U.S. production that is exported

4%

6%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Food Industry — Employment Forecasts

APPENDIX A1, PAGE 6

Between 2002 and 2012, employment in the food industry in the five-state

region is expected to increase slightly. The food manufacturing industry is

expected to add approximately 3,000 jobs, or about 1 percent of the total

jobs in 2002.

Figure A1-6 shows the employment change in the food manufacturing

sector between 2002 and 2012.

Figure A1–6.

Projected percent change in employment

in the food industry, from 2002 to 2012

3%

3% change

5%

5% change

(2%)

-2% change

(5%)

-5% change

(1%)

-1% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A2. Paper Industry

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Paper Industry — Introduction

APPENDIX A2, PAGE 1

The paper manufacturing industry in the Midwest employed about 115,000

people in 2002. The U.S. Census Bureau estimates approximately 1,300

paper manufacturing establishments in 2002 in these five states.

The paper industry divides into two industry groups: (a) pulp mills, paper

mills and paperboard mills that use wood chips and used paper to

manufacture paper products and (b) plants that cut, shape and coat paper to

make converted paper products. Some establishments integrate both types of

paper manufacturing.

As shown in Figure A2-1, the pulp, paper and paperboard mills subsector

accounts for over 32,000 jobs in the Midwest in 2002. The converted paper

product manufacturing is larger, employing approximately 82,000 people in

the five-state region.

Figure A2–1.

Midwest establishments and employment in the paper sector, 2002

Converted Paper

Product Mfg.

Pulp, Paper and

Paperboard Mfg.

0

200

400

600

800

1,000

1,200

1,400

0

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000

136

1,191

32,538

82,277

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Paper Industry — Employment Trends

APPENDIX A2, PAGE 2

U.S. Census Bureau County Business Pattern data indicate that

employment in 2002 in the entire paper industry varied from 12,000

workers in Indiana to more than 37,000 employees in Wisconsin.

The paper industry has suffered job losses over the last decade due to

consolidations, phasing out of less efficient operations and advancements in

automation. Between 1998 and 2002, the paper industry in the U.S. lost

about 72,000 jobs, 19,000 of which were in the Midwest.

Between 1998 and 2002, more than 5,000 people in the paper industry lost

jobs in Illinois, while more than 4,000 similar jobs were eliminated in Ohio

and in Wisconsin. Figure A2-2 shows County Business Patterns data for

1998 and 2002 by state.

Figure A2–2.

Employment in the paper industry

1998

2002

42,000

37,000

1998

2002

29,000

24,000

1998

2002

14,000

12,000

1998

2002

30,000

25,000

1998

2002

19,000

16,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Paper Industry — Largest Employers

APPENDIX A2, PAGE 3

Dun & Bradstreet data identify 13 paper manufacturing establishments in

the Midwest with at least 800 employees. The majority of the large

manufacturing establishments are located in Wisconsin.

Figure A2-3 shows the locations of the largest paper manufacturing

employers in the Midwest.

Figure A2–3.

Paper establishments with 800+ employees

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Stora Enso North America

Stora Enso Kimberly Mills

Appleton Papers Inc

International Paper

International Paper

Gary

Akron

Flint

Athens

Toledo

Dayton

Lansing

Detroit

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Fort Wayne

South Bend

Cincinnati

Evansville

New Albany

Carbondale

Eau Claire

Springfield

Terre Haute

Indianapolis

Grand

Rapids

Curwood Inc

Georgia-Pacific

Mead Corporation

Mead Corporation

Domtar Industries

Pactiv Corporation

Procter & Gamble Paper

Escanaba Paper Company Inc

Source: Dun & Bradstreet Marketplace.

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Paper Industry — Share of U.S. Employment

APPENDIX A2, PAGE 4

Wisconsin has led the U.S. in papermaking for almost 50 years. The state

ranked second in total employment in paper manufacturing industry in

2002, according to the County Business Patterns data. In total, the Midwest

region accounts for nearly one-quarter of national employment in the paper

manufacturing industry.

The Midwest’s share of national paper industry employment is highest for

converted paper product manufacturing, as is shown in Figure A2-4.

Figure A2–4.

Midwest share of U.S. paper sector employment, 2002

Total Paper Mfg.

Converted Paper

Product Mfg.

Pulp, Paper and

Paperboard Mills

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

20%

25%

23%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Paper Industry — Global Competition

APPENDIX A2, PAGE 5

In recent years, the demand for paper products has registered an average

annual growth of 3 percent in world markets, while growth in domestic

demand is about 7 percent annually. The United States is by far the largest

producer and consumer of paper products.

Imports and exports of paper products for the U.S. are smaller than the

trade within other sectors examined in this report. As is shown in Exhibit

A2-5, 11 percent of the nation’s paper demand was met by imports in 2001,

whereas 9 percent of the paper products produced in the U.S. were

exported.

The health of the paper industry depends upon the overall health of the

economy; for example, demand for paper declines during a recession. The

health of the paper industry is also highly dependent upon newspaper and

journal circulation. Electronic storage and transmission of data has not yet

resulted in a decline in paper usage; in fact, just the opposite has

happened—documents are easier to produce and print.

The challenges that face the U.S. pulp and paper industry include: the

industry’s competitiveness within the global economy, dramatic increases in

input costs (particularly wood chips), shifting markets for output, the

demands to incorporate more recycled fiber, concerns about product

quality, environmental concerns, increased government regulations, industry

access to publicly-owned forest reserves, paper recycling, and the availability

of huge amounts of softwoods from Europe.

Figure A2–5.

U.S. imports and exports of paper output, 2001

U.S. demand met by imports

U.S. production that is exported

11%

9%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Paper Industry — Employment Forecasts

APPENDIX A2, PAGE 6

Marked productivity increases in the paper industry have produced a

significant decrease in employment. The U.S. Bureau of Labor Statistics

forecasts further job losses in this industry throughout the nation. State-by-

state forecasts produced by Midwestern states estimate that the region will

see a decline in employment in this industry of more than 10 percent

between 2002 and 2012. Job losses in the paper industry are expected to be

particularly large in Ohio, where nearly one-quarter of the jobs in this

industry in 2002 will not exist in 2012.

Figure A2-6 shows the expected change in employment for this sector

between 2002 and 2012.

Figure A2–6.

Projected percent change in employment

in the paper industry, from 2002 to 2012

(11%)

-11% change

(15%)

-15% change

(3%)

-3% change

(3%)

-3% change

(24%)

-24% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A3. Chemical Industry

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Chemical Industry — Introduction

APPENDIX A3, PAGE 1

Chemicals are an essential component of the Midwest manufacturing

industry, supplying industrial products such as basic chemicals, synthetic

rubber and coatings, as well as end products such as medicines. This

industry employs approximately 155,000 people in about 2,500

establishments in the region.

Chemical manufacturing is divided into seven different subsectors. As

shown in Figure A3-1, pharmaceutical and medicine manufacturing is the

largest employer, accounting for over 46,000 jobs in the region. The

segment employing the fewest workers in the chemical industry is

agricultural chemicals, which supplies farmers and home gardeners with

fertilizers, herbicides, pesticides and other related chemicals.

Figure A3–1.

Midwest establishments and

employment in the chemicals industry, 2002

Other Chemical Product

and Preparation

Soap, Cleaning Compound

and Toilet Preparation

Paint, Coating and

Adhesive Mfg.

Pharmaceutical and

Medicine Mfg.

Pesticide, Fertilizer

and Other Chemical

Resin, Synthetic Rubber

and Synthetic Fibers

Basic Chemical Mfg.

0

100

200

300

400

500

600

700

0

10,000

20,000

30,000

40,000

50,000

60,000

407

201

109

203

490

393

620

22,175

15,118

3,437

46,793

22,577

23,686

20,913

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Chemical Industry — Employment Trends

APPENDIX A3, PAGE 2

According to U.S. Census Bureau County Business Patterns 2002 data,

statewide employment in the chemical industry ranges from 13,000 jobs in

Wisconsin to 54,000 jobs in Illinois.

As in other manufacturing industries, employment in the chemical industry

has substantially lessened in recent years. Between 1998 and 2002, national

employment in this industry saw an 8 percent reduction. The Midwest

region’s chemicals industry had a10 percent drop in employment, 18,000

jobs, from 1998 to 2002.

Job losses in this industry occurred in primarily two states, Ohio and

Michigan. While employment in the chemicals industry held steady in

Illinois, Indiana, and Wisconsin between 1998 and 2002, 10,000 jobs were

lost in Ohio and 8,000 jobs were lost in Michigan. Increasing global

competition, the rising costs of raw materials and energy, and worker

productivity gains are a few factors that have contributed to the loss of jobs.

Figure A3-2 shows County Business Patterns data for employment in the

chemicals industry in 1998 and 2002 by state.

Figure A3–2.

Employment in the chemicals industry

1998

2002

13,000

13,000

1998

2002

54,000

54,000

1998

2002

24,000

24,000

1998

2002

34,000

26,000

1998

2002

48,000

38,000

Source: U.S. Census Bureau, EPCD, County Business Patterns

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Chemical Industry — Largest Employers

APPENDIX A3, PAGE 3

Chemical industry in the five-state region accounts for almost 20 percent of

the nation’s share of chemical manufacturing establishments, according to

the 2002 data from U.S. Bureau of Census. Based on Dun & Bradstreet

Marketplace data, there are 13 chemical manufacturing establishments in

the five-state region with at least 1,500 employees. Four large employers are

located in Indiana, three are in Illinois and three are in Michigan.

Figure A3-3 shows the locations of the largest chemicals manufacturing

employers in the Midwest.

Figure A3–3.

Chemicals establishments with 1,500+ employees

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Brisol-Myers Squibb

Johnson Mead & Company

L Perrigo Company Inc.

Abbott Health Products Inc.

Baxter International Inc

Gary

Akron

Flint

Athens

Toledo

Dayton

Lansing

Madison

Chicago

Columbus

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

New Albany

Evansville

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand Rapids

Dow Chemical

Pharmacia Corp

S C Johnson Wax

Bayer Diagnostic

Procter & Gamble

Abbott Laboratories

Eli Lilly and Company

Akzo Nobel Polymer Chem LLC

Source: Dun & Bradstreet Marketplace.

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Chemical Industry — Share of U.S. Employment

APPENDIX A3, PAGE 4

In 2002, the chemical industry in the Midwest comprised about one-fifth of

the nation’s employment in the industry.

As seen in Figure A3-4, paint, coatings and adhesive manufacturing in the

five-state region accounts for one-third of all the nation’s employees in this

sector. The region is home to 21 percent of the nation’s workers in the soap

and cleaning compounds sector and 20 percent of all the U.S. workers in

pharmaceutical and medicine manufacturing.

Relatively few of the nation’s workers in the pesticide, fertilizer and related

agricultural chemical sector are in the Midwest.

Figure A3–4.

Midwest share of U.S. chemicals employment, 2002

Total Chemical Mfg.

Other Chemical Product

and Preparation

Soap, Cleaning Compound

and Toilet Preparation

Paint, Coating and

Adhesive Mfg.

Pharmaceutical and

Medicine Mfg.

Pesticide, Fertilizer

and Other Chemical

Resin, Synthetic Rubber

and Synthetic Fibers

Basic Chemical Mfg.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

13%

16%

10%

20%

33%

21%

20%

19%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Chemical Industry — Global Competition

APPENDIX A3, PAGE 5

While the U.S. has historically had one of the largest chemicals industries in

the world, foreign competition is increasing as the industry has seen

dramatic growth in other parts of the globe, particularly in Asia and Latin

America. In 2001, 20 percent of U.S. demand for products in the chemical

industry was met by imports and 18 percent of U.S. output was exported

(see Figure A3-5).

Sales of domestic chemicals recovered in 2004 after a period of relatively

slow sales from 2001 to 2003, and exports of chemicals are now increasing.

Overall output of the domestic industry is expected to grow, however,

increased worker productivity will most likely impede employment gains

within the industry.

Figure A3–5.

U.S. imports and exports of chemicals output, 2001

U.S. demand met by imports

U.S. production that is exported

20%

18%

Source: U.S. Census Bureau, International Trade Administration, 2005

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Chemical Industry — Employment Forecasts

APPENDIX A3, PAGE 6

Although the output of the chemicals industry is expected to grow,

employment in the industry is projected to slightly decline over the 2002-

2012 period, continuing the long-term trend of increasing labor

productivity in this sector.

By 2012, the five-state region projects employment to decrease by about 1

percent, a loss of approximately 1,500 jobs. Employment in the chemical

industry in Ohio, Illinois and Wisconsin is estimated to decrease between

2002 and 2012, employment in Indiana and Michigan is forecasted to

increase by 11.9 percent and 5.2 percent, respectively.

Figure A3-6 shows the change in employment in the chemical industry

between 2002 and 2012 based on each state’s own projections.

Figure A3–6.

Projected percent change in employment

in the chemicals industry, from 2002 to 2012

(3%)

-3% change

(6%)

-6% change

12%

12% change

5%

5% change

(6%)

-6% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A4. Plastics and Rubber Industry

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Plastics and Rubber Industry — Introduction

APPENDIX A4, PAGE 1

The plastics and rubber manufacturing industry employed about 280,000

people in the five-state region in 2002. The U.S. Census Bureau estimates

approximately 3,900 rubber and plastics manufacturing establishments in

2002 in these five states.

Firms in the plastics and rubber products manufacturing sector make goods

by processing plastic materials and raw rubber. The federal government

combines plastics and rubber in the same sector since plastics are

increasingly used as a substitute for rubber. However, few establishments

manufacture both plastics and rubber products.

As shown in Figure A4-1, most employment in this industry in the Midwest

is in plastics manufacturing. This sub-sector accounted for 230,000 jobs in

2002, compared to 54,000 jobs in rubber manufacturing in the five-state

area. There were five times as many plastic manufacturing establishments as

there were rubber products establishments in the Midwest in 2002.

Figure A4–1.

Midwest establishments and employment

in the plastics and rubber sector, 2002

Rubber Product Mfg.

Plastics Product Mfg.

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

50,000

100,000

150,000

200,000

250,000

300,000

3,267

615

230,064

53,601

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Plastics and Rubber Industry — Employment Trends

APPENDIX A4, PAGE 2

More plastics and rubber manufacturing jobs are in Ohio than any other

Midwest state. According to the U.S. Census Bureau County Business

Pattern data, there were 86,000 jobs in this industry in Ohio in 2002.

Between 1998 and 2002, the U.S. plastics and rubber manufacturing

industry suffered a job loss of 10 percent. In the five-state region,

approximately 35,000 jobs were lost in this sector, a decline of 11 percent.

Job losses were largest in Ohio, Michigan and Illinois.

Figure A4-2 shows employment in the plastics and rubber industry for both

1998 and 2002 in the Midwest.

Figure A4–2.

Employment in the plastics and rubber industry

1998

2002

33,000

30,000

1998

2002

69,000

60,000

1998

2002

54,000

49,000

1998

2002

67,000

59,000

1998

2002

95,000

86,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Plastics and Rubber Industry — Largest Employers

APPENDIX A4, PAGE 3

Fifteen plastics and rubber manufacturing establishments in the Midwest

have 800 or more employees. Five of the large manufacturing establishments

are located in Ohio and five are based in Michigan. Four large employers are

in Illinois.

Figure A4-3 shows the locations of the largest plastics and rubber

manufacturing employers in the five-state region according to Dun &

Bradstreet.

Figure A4–3.

Plastics and rubber establishments with 800+ employees

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Grand Rapids

Meridian Automotive Systems

Great Lakes Rubber Co Inc

Cooper Tire

& Company

Fibreboard Corporation

Cincinnati Machines Inc

Engineered Plastic

Component

Gary

Akron

Flint

Athens

Toledo

Dayton

Detroit

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

Cincinnati

New Albany

Evansville

Carbondale

Eau Claire

Springfield

Terre Haute

Indianapolis

Church Seat Co

Rantoul Products

Eaton

Corporation

Delphi Corporation

Courtesy Mold & Tool

Tigerflex Corporation

Goodyear Tire

& Rubber Co

Lacks Exterior

Systems LLC

Pechiney Plastic Packaging

Source: Dun & Bradstreet Marketplace.

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Plastics and Rubber Industry — Share of U.S. Employment

APPENDIX A4, PAGE 4

Ohio leads the U.S. in employment for the plastics and rubber

manufacturing industry. Illinois and Michigan place third and fourth,

respectively for employment in this industry.

The five-state region accounts for nearly one-third of the total national

employment in the plastics and rubber manufacturing industry, as is shown

in Figure A4-4.

Figure A4–4.

Midwest share of U.S. plastics and

rubber sector employment, 2002

Total Plastics and

Rubber Products Mfg.

Rubber Product Mfg.

Plastics Product Mfg.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

31%

30%

31%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Plastics and Rubber Industry — Global Competition

APPENDIX A4, PAGE 5

The plastics and rubber industry is a mature global industry. Similar to

other manufacturing, the plastics and rubber industry is impacted by factors

such as overseas competition, foreign government subsidies for their

industries, raw material cost, environmental regulations, recycling and

energy costs.

For example, in 1998 U.S. imports of synthetic rubber (70 percent of these

products are consumed by the automotive industry) rose 8 percent as

additional capacity came on-line in Malaysia and South Korea bringing low-

cost synthetic rubber to the global market. Exports fell by 9 percent, in part

because of the 1997 currency crisis in Asia. Economic turmoil in Latin

American and Russia as well as a strong U.S. dollar also hurt exports in that

year.

Current conditions have changed; a weaker dollar and increased demand for

rubber in China and other Asian countries has provided a boost to the U.S.

plastics and rubber industry.

In 2001, 10 percent of the U.S. demand in this industry was met by imports

and 9 percent of the production was exported (see Figure A4-5).

Figure A4–5.

U.S. imports and exports of plastics and rubber output, 2001

U.S. demand met by imports

U.S. production that is exported

10%

9%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Plastics and Rubber Industry — Employment Forecasts

APPENDIX A4, PAGE 6

Growth rates in the U.S. plastics and rubber industry slowed significantly

toward the end of the 1990’s and into 2002. However, the U.S. Bureau of

Labor Statistics projects an increase in employment of 130,000 jobs

nationally in this industry between 2002 and 2012. These job increases are

because of a predicted increase in consumption of these products by the

automobile and housing sectors, as well as increases in consumption by the

growing economies of Asian countries.

State forecasts for the Midwest indicate employment in this industry will

increase by 2012 by about 10 percent. Wisconsin forecasts the greatest

percent increase in jobs in this sector by 2012 (adding 20 percent of the

2002 employment), and Illinois, Michigan and Ohio also expect job gains

in this sector.

Figure A4-6 shows the total change in employment in the plastics and

rubber industry between 2002 and 2012, based on each state’s individual

projections.

Figure A4–6.

Projected change in employment in

the plastics and rubber industry, from 2002 to 2012

21%

21% change

11%

11% change

(1%)

-1% change

19%

19% change

6%

6% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A5. Computer Industry

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Computer Industry — Introduction

APPENDIX A5, PAGE 1

The computer and electronics product manufacturing sector employed

approximately 138,000 people in the Midwest in 2002. The U.S. Census

Bureau estimated approximately 2,000 manufacturing establishments in this

industry in the Midwest.

The computer and electronic product manufacturing sector comprises six

sectors that produce computers and related products; computer chips and

other components; communications equipment; audio and visual electronic

equipment; navigation, measuring, medical and control equipment; and

manufacturing and reproducing magnetic and optical media.

Employment in these industries varies widely. As shown in Figure A5-1, the

navigation, measuring, medical and control equipment industry is the

largest sector in the Midwest with over 45,000 employees in 2002. The

semiconductor and other electronic component sector employs more than

40,000 people in plants in the five-state region. The smallest employer —

audio and video equipment manufacturing — provides about 4,000 jobs to

people in the Midwest.

Figure A5–1.

Midwest establishments and employment

in the computer and electronics manufacturing industry, 2002

Mfg and Reproducing

Magnetic and Optical Media

Navigation, Measuring,

Medical, Control Equipment

Semiconductor and

Other Electronic Component

Audio and Video Equipment

Communications Equipment

Computer and

Peripheral Equipment

0

100

200

300

400

500

600

700

800

900

0

10,000

20,000

30,000

40,000

50,000

154

207

77

745

821

95

8,712

31,570

4,185

40,516

46,725

6,508

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Computer Industry — Employment Trends

APPENDIX A5, PAGE 2

Employment in the computer and electronics products industry widely

varies within the five-state region. While Michigan employed about 18,000

people in 2002, Illinois accounted for almost 50,000 jobs in the region for

the same year. Ohio had over 30,000 jobs.

Due to overseas competition, outsourcing and increased automation,

employment in the U.S. computer and electronic products manufacturing

industry has been declining in recent years. Between 1998 and 2002,

national employment in this industry dropped by 22 percent, or 380,000

jobs. During the same period, the Midwest lost 50,000 jobs in this industry.

Illinois had the highest decline in employment in the Midwest in this

industry, as that state lost almost 29,000 jobs lost in this period. Michigan

lost 8,000 jobs and Ohio and Indiana both lost over 5,000 jobs in this

sector.

Figure A5-2 shows employment in the computer manufacturing industry

for 1998 and 2002 by state.

Figure A5–2.

Employment in the computer and electronics manufacturing industry

1998

2002

23,000

21,000

1998

2002

77,000

49,000

1998

2002

27,000

20,000

1998

2002

26,000

18,000

1998

2002

37,000

31,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Computer Industry — Largest Employers

APPENDIX A5, PAGE 3

Dun & Bradstreet data list 13 computer and electronics products

manufacturing establishments in the Midwest with at least 1,200 employees.

Five of the large manufacturing establishments are located in Indiana and

four are in Illinois. The remainder of the establishments are located in Ohio

and Wisconsin.

Figure A5-3 shows the locations of the largest computer and electronics

products manufacturing employers according to Dun & Bradstreet.

Figure A5–3. Computer and electronics

manufacturing establishments with 1,200+ employees

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

Siemens Building Technology

Andrew Corp

General Electric Company

Roche Diagnostics Corp

Mt Picture Display Corp

!

(

Automotive Electronic Controls

!

(

Ranco North American LP

Gary

Akron

Flint

Athens

Toledo

Dayton

Detroit

Lansing

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

South Bend

Cincinnati

New Albany

Evansville

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand Rapids

Motorola

Plexus Corp

Zimmer Holdings Inc

ITT Industries Inc

Lucent Technologies

Hewlett-Packard Company

Source: Dun & Bradstreet Marketplace.

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Computer Industry — Share of U.S. Employment

APPENDIX A5, PAGE 4

The Midwest represented about one-tenth of the national employment in

the computer and electronics sector in 2002.

Employment in the manufacturing of magnetic and optical media in the

Midwest was 18 percent of the national employment in this sector in 2002.

The audio and video equipment manufacturing and communications

equipments manufacturing in the five-state region each accounted for over

15 percent of the national employment in the corresponding industries in

2002. The Midwest’s computer and peripheral equipment sector is small

relative to the nation, as illustrated in Figure A5-4.

Figure A5–4.

Midwest share of U.S. computer and

electronics manufacturing employment, 2002

Total Computer and

Electronics Equipment

Mfg and Reproducing

Magnetic and Optical Media

Navigation, Measuring,

Medical, Control Equipment

Semiconductor and

Other Electronic Component

Audio and Video Equipment

Communications Equipment

Computer and

Peripheral Equipment

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

6%

15%

16%

9%

11%

18%

11%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Computer Industry — Global Competition

APPENDIX A5, PAGE 5

Computer and electronics manufacturing is truly global — so much so that

it is difficult to characterize many companies and their products as

American or foreign. Many products are designed in one country,

manufactured in another, and assembled in a third. For example, highly

sensitive and sophisticated products such as semiconductors and computers

are designed in the U.S., but it is likely that the various components are

produced in different countries, then shipped to one site for final assembly.

As illustrated in Figure CE-5, approximately 41 percent of U.S. demand in

the computer and electronics sector in 2001 was met by imports and 31

percent of U.S. production was exported.

Rapid technological advances and intense price competition characterize the

computer and electronic product manufacturing industry. Imports have

almost entirely replaced domestic production for some portions of the U.S.

consumer electronics industry.

Figure A5–5.

U.S. imports and exports of

computer and electronic industry output, 2001

U.S. demand met by imports

U.S. production that is exported

41%

31%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Computer Industry — Employment Forecasts

APPENDIX A5, PAGE 6

Although the output of the computer and electronics manufacturing

industry is projected to continue to grow, because of continued productivity

gains, employment in this sector is expected to decline. Employment is also

likely to be affected by increases in imports of electronic and computer

products and the outsourcing of certain positions in this industry.

National employment in the computer and electronic product

manufacturing industry is expected to decline by 12 percent between 2002

and 2012. Various state sources forecast similar trends in the Midwest with

regional job losses of just over 10 percent between 2002 and 2012. Job

losses are predicted to be particularly severe in Ohio and Indiana for the

computer and electronics manufacturing industry.

Figure A5-6 illustrates 2012 employment for each state in the computer and

electronics manufacturing sector.

Figure A5–6.

Projected change in employment in the computer

and electronics manufacturing industry, from 2002 to 2012

(4%)

-4% change

(11%)

-11% change

(15%)

-15% change

(1%)

-1% change

(22%)

-22% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A6. Primary Metal Industry

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Primary Metal Industry — Introduction

APPENDIX A6, PAGE 1

The primary metals industry in the Midwest directly employs nearly

200,000 people and has multiple linkages to other sectors. In 2002, the U.S.

Census Bureau counted 1,800 establishments within this industry in the

five-state region.

As shown in Figure A6-1, five sectors comprise the primary metal industry.

Sectors involving steel manufacturing account for the most jobs in the

region. Many of these jobs involve making steel from iron ore and making

castings from molten steel (classified as foundries if the establishment if the

processing starts with refined steel). A smaller number of employees work in

plants that make intermediate steel products (e.g., pipe, plate, wire) from

purchased steel.

Aluminum manufacturing is also important in the Midwest, accounting for

15,700 jobs in 2002.

Figure A6–1.

Midwest establishments and employment

in the primary metal manufacturing sector, 2002

Foundries

Nonferrous metal

production and processing

Alumina and aluminium

production and processing

Steel product mfg.

from purchased steel

Iron and steel mills

and ferroalloy mfg.

0

100

200

300

400

500

600

700

800

900

1,000

0

10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000

326

248

148

185

869

60,100

21,700

15,700

14,400

82,400

Employment

Establishments

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Primary Metal Industry — Employment Trends

APPENDIX A6, PAGE 2

The primary metal manufacturing industry is important to the local

economies of each of the study region states. Based on 2002 U.S. Bureau of

the Census County Business Patterns data, statewide employment ranges

from 22,000 jobs in Wisconsin to 61,000 jobs in Ohio.

Employment in steel mills and other segments of the primary metal

manufacturing industry has been declining throughout the country, and the

Midwest has seen dramatic reductions in these jobs. Between 1998 and

2002, Indiana and Illinois both lost 11,000 jobs in the primary metal

industry and Ohio lost 14,000 jobs. Many of these jobs have been lost due

to increasing pressures on this industry from foreign competition and the

productivity gains required to remain competitive. As output per labor hour

has substantially increased, the total labor needs in the sector have

decreased.

Figure A6-2 shows County Business Patterns data for 1998 and 2002 by

state.

Figure A6–2.

Employment in the primary metal industry

1998

2002

27,000

22,000

1998

2002

63,000

52,000

1998

2002

37,000

32,000

1998

2002

75,000

61,000

1998

2002

39,000

27,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Primary Metal Industry — Largest Employers

APPENDIX A6, PAGE 3

Based on Dun & Bradstreet data, there are 19 primary metal manufacturing

establishments in the Midwest with at least 1,000 employees. One large

employer is located in Michigan, three are in Wisconsin and three are in

Illinois. The balance are located in Indiana and Ohio.

Figure A6-3 shows the locations of the largest primary metal manufacturing

employers according to Dun & Bradstreet.

Figure A6–3.

Primary metal manufacturing

establishments with 1,000+ employees

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

Isg Burns Harbor LLC

Burnside Bulk Marine Terminal

Opac

Athens

Akron

Flint

Toledo

Dayton

Lansing

Detroit

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

Cincinnati

Evansville

New Albany

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand

Rapids

!

Alcoa

Alcoa

Kohler Co

WCI Steel Inc

Imco Recycling

Mideast Aluminum

Middletown Works

Ispat Inland Inc

Superior Aluminum

Isg Cleveland Inc.

Bekaert Corporation

Thyssen Krupp Waupaca Inc

Severstal North America Inc

J L French Automotive Castin

Keystone Consolidated Inds I

Precision Cnncting Rod Svc Inc

Source: Dun & Bradstreet Marketplace.

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Primary Metal Industry — Share of U.S. Employment

APPENDIX A6, PAGE 4

A large share of U.S. primary metal production in based in the Midwest.

The five-state region accounts for nearly one-half of national employment in

steel mills and foundries, and more than one-third of the nation’s jobs in

steel product manufacturing from purchased steel.

In total, 39 percent of U.S. employment in the primary metal industry in

2002 was in the Midwest, as illustrated in Figure A6-4.

Figure A6–4.

Midwest share of U.S. primary

metals manufacturing employment, 2002

Total primary

metal industry

Foundries

Nonferrous metal

production and processing

Alumina and aluminium

production and processing

Steel product mfg.

from purchased steel

Iron and steel mills

and ferroalloy mfg.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

47%

37%

23%

22%

45%

39%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Primary Metal Industry — Global Competition

APPENDIX A6, PAGE 5

Supply and demand forces affecting the Midwest primary metal industry are

global. In 2001, 23 percent of U.S. demand for products in this industry

was met by imports and 13 percent of U.S. output was exported.

The steel industry provides one example of this dynamic. U.S. exports and

imports of steel are affected by factors including alleged dumping of steel

products in the U.S. by foreign producers, periodic imposition of U.S.

tariffs on steel imports, China’s rapidly-growing demand for steel, changes

in relative production costs throughout the world, and current exchange

rates. Demand for steel, as well as total U.S. steel production, have

significantly increased, though the U.S. remains a net importer of steel. Steel

prices have risen in 2004 and 2005, and U.S. steel production is nearing

capacity.

Figure A6–5.

U.S. imports and exports of primary

metals manufacturing output, 2001

U.S. demand met by imports

23%

13%

U.S. production that is exported

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Primary Metal Industry — Employment Forecasts

APPENDIX A6, PAGE 6

Even though demand for primary metal products will continue to be strong

in the future, this expansion will not lead to job creation as worker

productivity is expected to increase. The U.S. Bureau of Labor Statistics

forecasts a 33 percent growth in value of national output between 2002 and

2012, but a 3 percent decline in U.S. primary metals employment over the

same period.

Forecasts obtained from each state project continued declines in

employment in the primary metal industry. By 2012, employment in the

primary metal industry in the five-state region is expected to decrease by

approximately 10 percent. Figure A6-6 shows the percent change in

employment between 2002 and 2012 expected by each state.

Figure A6–6.

Projected percent change in employment

in the primary metal industry, from 2002 to 2012

(5%)

-5% change

(8%)

-8% change

(13%)

-13% change

(2%)

-2% change

(13%)

-13% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A7. Fabricated Metal Industry

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Fabricated Metal Industry — Introduction

APPENDIX A7, PAGE 1

The fabricated metal products industry in the Midwest directly employs

over 460,000 people, is a major purchaser of primary metals, and creates

important inputs for related industries. In 2002, the U.S. Census Bureau

counted about 15,000 establishments in this industry in the five-state

region.

The fabricated metal products industry includes plants that forge and shape

metal into a broad range of business and consumer products. As shown in

Figure A7-1, machine shops and related companies represent the largest

number of establishments and employees in the Midwest’s fabricated metals

industry. Firms involved with plate work, fabricated structural work and

ornamental and architectural metal products are the second largest employer

in this sector.

Cutlery and hand tools manufacturing is the smallest sector, employing just

18,000 people in the five-state area.

Figure A7–1.

Midwest establishments and

employment in the fabricated metal industry, 2002

Other Fabricated

Metal Product Mfg.

Coating, Engraving, Heat

Treating and Allied Activities

Machine Shops, Turned

Product, Screw, Nuts

Spring and Wire

Product Mfg.

Hardware Mfg.

Boiler, Tank and

Shipping Container Mfg.

Architectural and

Structural Metals Mfg.

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

1,021

400

2,443

325

262

465

6,754

1,933

1,645

54,296

18,006

74,025

22,959

24,306

19,503

118,098

53,376

75,621

Forging and Stamping

Cutlery and Handtool Mfg.

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Fabricated Metal Industry — Employment Trends

APPENDIX A7, PAGE 2

U.S. Bureau of Census employment estimates for 2002 placed Ohio, Illinois

and Michigan as leading states for fabricated metals manufacturing.

The Midwest region lost 73,000 fabricated metals jobs between 1998 and

2002. Ohio tops the list with 20,600 jobs lost during this period. Each of

the other Midwest states had jobs losses in this sector during this period.

Figure A7-2 shows Midwest employment in the fabricated metal industry

for 1998 and 2002.

Figure A7–2.

Employment in the fabricated metal industry

1998

2002

78,000

66,000

1998

2002

133,000

114,000

1998

2002

72,000

64,000

1998

2002

105,000

91,000

1998

2002

145,000

125,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Fabricated Metal Industry — Largest Employers

APPENDIX A7, PAGE 3

Based on Dun & Bradstreet data, there are 15 fabricated metal

manufacturing establishments in the Midwest with at least 800 employees.

As is shown in Figure A7-3, five large employers are located in Ohio and

five are in Wisconsin.

Figure A7–3.

Fabricated metal establishments with 800+ employees

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

Eau Claire

Green Bay

Milwaukee

Madison

Rockford

South Bend

Grand

Rapids

Lansing

Flint

Detroit

Ann Arbor

Toledo

Cleveland

Akron

Columbus

Dayton

Cincinnati

New Albany

Evansville

Terre Haute

Indianapolis

Fort Wayne

Springfield

Athens

Gary

Chicago

Carbondale

AAM Plant 58

AAM Detroit Forge Facility

Suriname Aluminum Co.

Alcoa

Ladish Co Inc

Snap-On Tools

Venco Products

Swagelok Co.

Polaris Industries

Edgerton Forge Inc

Snap-On Industrial

Canton Steel Plant

Delta Faucet Company

Butler Manufacturing Co.

AAM Three Rivers

Driveline Fcilty

Source: Dun & Bradstreet Marketplace.

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Fabricated Metal Sector — Share of U.S. Employment

APPENDIX A7, PAGE 4

A large share of U.S. fabricated metal production is based in the Midwest.

The five-state region accounts for nearly 30 percent of domestic

employment in the fabricated metal manufacturing industry, as illustrated

in Figure A7-4.

The region accounts for about 40 percent of the nation’s workers in metal

forging and stamping as well as in metal coating, engraving and heat

treating. Architectural and structural metals manufacturing in the Midwest

accounts for about 20 percent of all the nation’s employees in this sector.

Each of the other six sectors in the Midwest in this industry account for over

one-quarter of U.S. workers.

Figure A7–4.

Midwest share of U.S. fabricated metal employment, 2002

Total Fabricated

Metal Products Mfg.

Other Fabricated

Metal Product Mfg.

Coating, Engraving, Heat

Treating and Allied Activities

Machine Shops, Turned

Product, Screw, Nuts

Spring and Wire

Product Mfg.

Hardware Mfg.

Boiler, Tank and

Shipping Container Mfg.

Architectural and

Structural Metals Mfg.

Cutlery and Handtool Mfg.

Forging and Stamping

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

40%

29%

19%

27%

37%

31%

32%

39%

27%

29%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Fabricated Metal Industry — Global Competition

APPENDIX A7, PAGE 5

Although the U.S. fabricated metal manufacturing industry faces

competition from low-cost overseas suppliers, a relatively small portion of

total U.S. output is imported or exported. In 2001, only 10 percent of U.S.

demand for products in this industry was met by imports, while 13 percent

of U.S. output was exported.

Figure A7–5.

U.S. imports and exports of fabricated metal output, 2001

U.S. demand met by imports

U.S. production that is exported

10%

8%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Fabricated Metal Industry — Employment Forecasts

APPENDIX A7, PAGE 6

Demand for products from the fabricated metals industry is likely to

increase between now and 2012, as is employment in this industry. The

U.S. Bureau of Labor Statistics forecasts a 6.3 percent increase in U.S.

employment in this industry between 2002 and 2012.

By 2012, employment in the five-state region is expected to increase by

approximately 2 percent. Job growth is expected in this sector in each state

except Indiana.

Figure A7-6 shows the change in employment between 2002 and 2012

expected by each state.

Figure A7–6.

Projected change in employment

in the fabricated metal industry, from 2002 to 2012

3%

3%change

2%2%

change

3%

3% change

(1%)-1%

change

1%1%

change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division;

Indiana Department of Workforce Development; Michigan Department of Labor and Economic

Growth, Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job

and Family Services, Bureau of Labor Market Information; and Wisconsin Department of

Workforce Development.

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A8. Machine Industry

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Machinery Industry — Introduction

APPENDIX A8, PAGE 1

The manufacture of machinery in the U.S. involves over a million workers

in 30,000 establishments. U.S. Census Bureau County Business Patterns

data estimate that over 360,000 of these employees worked in the five-state

region in 2002.

The machinery manufacturing industry encompasses a number of diverse

subsectors. In 2002, the metalworking machinery sector and the general

purpose machinery sector employed the most people in the Midwest, each

employing more than 90,000 workers in that year (see Figure A8-1). The

manufacture of agriculture, construction and mining machinery, and

engine, turbine and power transmission equipment manufacturing both

employed over 40,000 employees in 2002. The commercial and service

industry machinery manufacturing sector employs the fewest workers within

this sector, providing 20,000 jobs to the five-state region.

Figure A8–1.

Midwest establishments and

employment in the machinery manufacturing industry, 2002

Other General Purpose

Machinery Mfg.

Engine, Turbine and

Power Transmission Eqt.

Metalworking Machinery

Ventilation, Heating, AC and

Commerical Refrigeration Eqt.

Commercial and Service

Industry Machinery

Industrial Machinery

Agriculture, Construction

and Mining Machinery

0

500

1,000 1,500 2,000 2,500 3,000 3,500 4,000 4,500 5,000

0

20,000

40,000

60,000

80,000

100,000

120,000

508

1,052

414

375

4,359

300

1,786

42,179

36,079

21,736

33,284

96,250

42,650

91,727

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Machinery Industry — Employment Trends

APPENDIX A8, PAGE 2

According to U.S. Census Bureau County Business Pattern data for 2002,

employment in the machinery manufacturing industry in the five-state

region ranges from 44,000 employees in Indiana to about 87,000 employees

in Illinois.

Employment in the machinery manufacturing sector in the Midwest

declined significantly between 1998 and 2002. Each state lost employment

in the machinery manufacturing sector between 1998 and 2002. About

25,000 jobs were lost in Ohio, and a similar number were lost in Illinois

and Michigan. In total, the Midwest lost over 100,000 jobs in the

machinery industry during this period.

Figure A8-2 shows state-by-state employment in the machinery industry for

1998 and 2002.

Figure A8–2.

Employment in the machinery manufacturing industry

1998

2002

86,000

67,000

1998

2002

114,000

87,000

1998

2002

51,000

42,000

1998

2002

107,000

84,000

1998

2002

110,000

84,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Machinery Industry — Largest Employers

APPENDIX A8, PAGE 3

Dun & Bradstreet identifies 14 machinery manufacturing establishments in

the Midwest with at least 2,000 employees. Six of the large manufacturing

establishments are located in Illinois and four are based in Ohio. The rest of

the large employers are in Wisconsin and Michigan.

Figure A8-3 shows the locations of the largest machinery manufacturing

employers according to Dun & Bradstreet.

Figure A8–3.

Machinery manufacturing establishments with 2,000+ employees

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

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!

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(

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(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

Detroit Diesel Corp

!

(

Caterpillar

Gary

Akron

Flint

Athens

Toledo

Dayton

Lansing

Detroit

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

Cincinnati

New Albany

Evansville

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand Rapids

Trane

Caterpillar

Caterpillar

Cnh America LLC

Briggs & Stratton

Crown Lift Trucks

Copeland Corporation

John Deere Harvester

Lincoln Electric Company

U O P Equitec Services Inc

Behr Dayton Thermal Product

Source: Dun & Bradstreet Marketplace.

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Machinery Industry — Share of U.S. Employment

APPENDIX A8, PAGE 4

The Midwest accounts for almost one-third of national employment in the

machinery manufacturing sector.

Figure A8-4 shows the Midwest’s share of U.S. machinery manufacturing

employment. The five-state region accounts for over half of the national

employment in the metalworking machinery industry. Engine, turbine and

power transmission manufacturers in the Midwest employ 44 percent of all

U.S. workers employed in that industry.

Figure A8–4.

Midwest share of U.S. machinery manufacturing employment, 2002

Total Machinery Mfg.

Other General Purpose

Machinery Mfg.

Engine, Turbine and

Power Transmission Eqt.

Metalworking Machinery

Ventilation, Heating, AC and

Commerical Refrigeration Eqt.

Commercial and Service

Industry Machinery

Industrial Machinery

Agriculture, Construction

and Mining Machinery

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

24%

25%

20%

21%

51%

44%

32%

31%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Machinery Industry — Global Competition

APPENDIX A8, PAGE 5

Once typically local or regional in scale, competition in the machinery

manufacturing industry is now global. In 2001, 28 percent of the U.S.

demand in this industry was met by imports and 29 percent of the

production was exported.

Demand for machinery depends strongly on the health of the overall U.S.

economy. Specific industries, such as the construction industry, play a

critical role in determining the health of the machinery manufacture

industry. Because of projected growth in the construction industry, as well

as other heavy machinery-use industries, demand for machinery is expected

to increase through 2012.

Global competition from European and Asian companies is intensifying. As

a consequence, U.S. factories are being taken to Canada, China, Mexico and

other countries where cheap labor is abundant. These factors, and others,

such as oil and gas prices and commodity costs (particularly the cost of steel)

will continue to affect the global machinery market in the future.

Figure A8–5.

U.S. imports and exports of machinery manufacturing output, 2001

U.S. demand met by imports

U.S. production that is exported

28%

29%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Machinery Industry — Employment Forecasts

APPENDIX A8, PAGE 6

Although machinery manufacturing is expected to continue to expand,

productivity gains will keep this growth from translating into sizeable job

gains, especially in the Midwest. Combining Midwestern states’

employment projections for this sector, there will be modest overall job

growth between 2002 and 2012.

In fact, state sources forecast employment in the machinery industry to

remain stable in the five-state region between 2002 to 2012. While Indiana

expects significant job losses, Illinois, Michigan and Wisconsin all project

employment gains in the machinery sector.

Figure A8-6 shows the expected change in employment between 2002 and

2012.

Figure A8–6.

Projected change in employment

in the machinery manufacturing industry, from 2002 to 2012

3%

3% change

1%

1% change

-9%

-9% change

5%

5% change

1%

1% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A9. Transportation Equipment

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Transportation Equipment — Introduction

APPENDIX A9, PAGE 1

Industries in the transportation equipment manufacturing sector produce

equipment for transporting people and goods. Although transportation

equipment is a type of machinery, the federal government separately

examines the transportation equipment sector because of its significance to

the U.S. economy.

The transportation equipment manufacturing industry in the U.S.

employed approximately 1.6 million people in 2002, of which 550,000 were

in the five-state region. The U.S. Census Bureau estimates more than 3,000

establishments in this industry in the Midwest.

The transportation sector consists of industry groups from all modes of

transport, as is shown in Figure A9-1. Within the transportation industry,

the motor vehicle parts manufacturing subsector accounts for the largest

number of jobs in the region — approximately 360,000 workers in 2002.

Motor vehicle manufacturing, which is largely assembly, employed about

100,000 people in the Midwest in 2002.

Relatively little airplane, railroad and ship manufacturing takes place in the

Midwest.

Figure A9–1.

Midwest establishments and employment in

transportation equipment manufacturing sectors, 2002

Other Transportation

Equipment Mfg.

Ship and Boat Building

Railroad Rolling

Stock Mfg.

Aerospace Product

and Parts Mfg.

Motor Vehicle Parts Mfg.

Motor Vehicle Body

and Trailer Mfg.

Motor Vehicle Mfg.

0

500

1,000

1,500

2,000

2,500

0

50,000

100,000 150,000 200,000 250,000 300,000 350,000 400,000

118

410

2,012

194

54

108

143

99,995

37,986

362,500

31,892

8,995

10,398

10,274

Establishments

Employment

Establishments

Employment

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Transportation Equipment — Employment Trends

APPENDIX A9, PAGE 2

In spite of increases in demand for transportation equipment, employment

in this industry has substantially declined. Between 1998 and 2002, jobs in

the industry decreased by 300,000 nationally. The Midwest lost 125,000

jobs during the same time period, about 20 percent of the employment in

1998.

According to U.S. Census Bureau, state employment in the Midwest ranged

from 34,000 employees in Wisconsin to over 215,000 employees in

Michigan in 2002. However, more than 40,000 jobs were lost in both Ohio

and Michigan between 1998 and 2002.

Figure A9-2 shows County Business Patterns jobs data for 1998 and 2002

by state.

Figure A9–2.

Employment in the transportation equipment manufacturing industry

1998

2002

262,000

216,000

1998

2002

173,000

133,000

1998

2002

146,000

128,000

1998

2002

44,000

34,000

1998

2002

60,000

48,000

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Transportation Equipment — Largest Employers

APPENDIX A9, PAGE 3

The Midwest is home to many of the largest transportation equipment

manufacturing establishments in the nation. Data from Dun & Bradstreet

show 15 establishments with at least 3,000 employees. Almost half of these

facilities are located in Michigan and another four are located in Indiana.

Figure A9-3 shows the locations of the largest transportation equipment

manufacturing establishments according to Dun & Bradstreet.

Figure A9–3.

Transportation equipment manufacturing

establishments with 3,000+ employees

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

Visteon Automotive System

DaimlerChrysler

DaimlerChrysler Corp

Hayes Lemmerz Intl

DaimlerChrysler

Telphi Mechatronic System

Visteon Automotive

General Motors

Green Bay

!

Rolls-Royce Corporation

(

Gary

Akron

Athens

Toledo

Dayton

Madison

Chicago

Columbus

Rockford

Cleveland

Milwaukee

Fort Wayne

South Bend

Cincinnati

New Albany

Evansville

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Royale Coach

DaimlerChrysler

Bartlett Corporation

Honda of America

Source: Dun & Bradstreet Marketplace.

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Transportation Equipment — Share of U.S. Employment

APPENDIX A9, PAGE 4

According to 2002 U.S. Census Bureau County Business Patterns data,

Michigan is the largest employer of transportation equipment workers in the

nation, followed by Ohio. The Midwest accounted for more than one-third

of employees in this industry in the U.S. in 2002.

The five-state region accounts for about 55 percent of all motor vehicle

parts manufacturing workers and more than 45 percent of motor vehicle

manufacturing jobs in the United States, as is illustrated in Figure A9-4.

Eight percent of all national aerospace products and parts manufacturing

and ship building manufacturing jobs are in the Midwest. The rest of the

industries in this sector have employment ranging from 20 to 35 percent of

all national employment in the corresponding industries.

Figure A9–4.

Midwest share of U.S. transportation

equipment manufacturing employment, 2002

Total Transportation Mfg.

Other Transportation

Equipment Mfg.

Ship and Boat Building

Railroad Rolling

Stock Mfg.

Aerospace Product

and Parts Mfg.

Motor Vehicle Parts Mfg.

Motor Vehicle Body

and Trailer Mfg.

Motor Vehicle Mfg.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%

46%

33%

55%

8%

32%

8%

26%

35%

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Transportation Equipment — Global Competition

APPENDIX A9, PAGE 5

The transportation equipment industry is global. In 2001, 31 percent of the

U.S. demand in this industry was met by imports while 20 percent of U.S.

production was exported, as shown in Figure A9-5. These data include

vehicles, vehicle parts, aviation equipment, ships and boats, and railroad

equipment.

The automobile industry presents an example of global competition. U.S.

automakers’ response has been a continued focus on productivity gains and

control of labor costs. In June 2005, General Motors announced layoffs of

25,000 workers within the United States by 2008.

Figure A9–5.

U.S. imports and exports of transportation

equipment manufacturing output, 2001

U.S. demand met by imports

U.S. production that is exported

31%

20%

Source: U.S. Census Bureau, International Trade Administration, 2005.

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Transportation Equipment — Employment Forecasts

APPENDIX A9, PAGE 6

Employment in the transportation equipment sector is expected to decline

between 2002 and 2012. Projections for 2012 by Midwestern states suggest

a regional job loss of approximately 5 percent in this industry. Competition

from outside the U.S. and increased worker productivity because of

automation are the main reasons for the job losses.

The State of Michigan predicts the largest job losses in its state – a decline

of about 10 percent between 2002 and 2012. Ohio is predicted to lose a

similar proportion of jobs by 2012. Indiana and Wisconsin, however,

forecast modest increases in transportation equipment manufacturing

employment during this time frame.

Figure A9-6 illustrates the projected change in employment the Midwest

region between 2002 and 2012.

Figure A9–6.

Projected change in employment in the transportation

equipment manufacturing industry, from 2002 to 2012

3%

3% change

-1%

-1% change

4%

4% change

-8%

-8% change

-8%

-8% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A10. Coal Mining Industry

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Coal Mining Industry — Introduction

APPENDIX A10, PAGE 1

Coal remains the dominant fuel source for electric power generation across

the U.S., and in the Midwest in particular. In 2003, coal-fired plants

produced about 51 percent of the nation’s electricity and nearly 70 percent

of the electricity generated in the LADCO region.

In 2002, the U.S. Census Bureau counted approximately 130 coal mining

establishments in the Midwest region. These establishments directly

employed about 9,500 people in the coal mines in 2002. In the same year,

the Energy Information Administration estimated 8,800 coal mine workers

in the Midwest.

Increased productivity resulting from technological advances in mining

operations and consolidation have caused a significant decline in the

number of mining jobs in the nation. Competition from low cost, low-

sulfur Western coal, primarily from Wyoming’s Powder River Basin, has

also led to declines in coal mine production and employment in other parts

of the U.S. Between 1998 and 2002, the Midwest lost 10 percent of its coal

mining jobs (about 1,100 jobs). Indiana lost about 600 jobs in this sector

while Wisconsin and Ohio lost 300 and 120 coal mining jobs, respectively,

between 1998 and 2002.

Michigan lost 19 employees and its only coal mine between 1998 and 2002.

Wisconsin also no longer has any active coal mines.

Figure A10-1 represents coal mine employment in 1998 and 2002 in the

five-state region.

Figure A10–1.

Employment in the Coal Mining industry

1998

2002

2,900

2,200

1998

2002

4,100

3,800

1998

2002

00

1998

2002

3,600

3,500

1998

2002

00

Source: U.S. Census Bureau, EPCD, County Business Patterns.

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Coal Mining Industry — Largest Employers

APPENDIX A10, PAGE 2

There were approximately 1,200 coal mining establishments in the U.S. in

2002. Dun & Bradstreet marketplace data indicates 18 coal mining

establishments in the Midwest with over 100 employees. Seven of the large

coal mining establishments are located in Illinois, six are located in Indiana

and five establishments are based in Ohio.

Figure A10-2 shows locations of the largest establishments in the Midwest

based on Dun & Bradstreet information.

Figure A10–2.

Coal mining establishments with 100+ employees

!

!

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!

!

!

!

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!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

!

(

AEP Ohio

Central Ohio Coal Co.

Coal LLC

Solar Source Underground

Ohio Valley Coal Co.

Foundation American Coal Co.

!

(

Gary

Akron

Flint

Athens

Toledo

Dayton

Lansing

Detroit

Madison

Chicago

Columbus

Rockford

Ann Arbor

Cleveland

Milwaukee

Green Bay

Fort Wayne

South Bend

Cincinnati

Evansville

New Albany

Carbondale

Eau Claire

Terre Haute

Springfield

Indianapolis

Grand

Rapids

Weslo Inc

Valley Mining

Kindill Mining Inc

Sands Hill Coal Co

Turris Coal Company

Old Ben Coal Co.

Black Beauty

Coal Co.

Capitol Resource and Inv Co.

!

(

Source: Dun & Bradstreet Marketplace.

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Coal Mining Industry — Production and Consumption

APPENDIX A10, PAGE 3

U.S. coal production in 2003 amounted to 1.07 billion tons according to

the Energy Information Administration. During the same year, the Midwest

produced about 89 million tons of coal. Midwest coal consumption during

2003 was estimated at 240 million short tons. The electric power sector

including electric utilities and independent power producers accounted for

almost 90 percent of all coal consumed in the Midwest in 2003. Other coal

consuming sectors such as coking coal, residential and commercial sectors

and other industrial sectors rounded out the rest of the coal used in the

region.

Indiana is the largest producer and consumer of coal in the Midwest.

Michigan and Wisconsin had no coal production but they accounted for 33

million short tons and 26 million short tons of coal consumed, respectively,

in 2003. Figure A10-3 illustrates the production and consumption of coal in

the five-state region in 2003.

Figure A10–3.

Coal production and consumption

in the Midwest, 2003 (1,000 short tons)

Production

Consumption

26,000

0

Production

Consumption

33,000

0

Production

Consumption

32,000

61,000

Production

Consumption

35,000

65,000

Production

Consumption

22,000

55,000

Source: Energy Information Administration, Department of Energy.

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Coal Mining Industry — Coal Origin and Destination

APPENDIX A10, PAGE 4

Based on EIA data, about 81 percent of the coal originating in the Midwest

is consumed within the region. Approximately 46 percent of the coal

produced in Illinois is consumed within the state and 19 percent is

consumed by the other four states in the Midwest. The remainder of the

coal produced in Illinois goes to states outside of the study region. Almost

93 percent of the coal produced in Indiana is consumed within the five-state

region and 83 percent of the coal produced in Ohio is consumed within the

region.

Figure A10-4 shows coal consumption within and outside of the five-state

LADCO region by state of origin in 2003.

Figure A10–4.

Distribution of Coal by State of Origin

and Destination, 2003 (1,000 short tons)

Destination

Illinois

14,483

566

0

15,049

Indiana

5,273

31,631

97

37,001

Michigan

51

0

366

147

Ohio

219

315

17,652

18,186

Wisconsin

518

428

1

947

Total LADCO

20,544

32,940

18,116

71,600

Total Production

31,751

35,350

21,770

88,871

Percent to LADCO

65%

93%

83%

81%

State of Origin

Illinois

Indiana

Ohio

Region

Note:

Midwest states include: Illinois, Indiana, Ohio, Michigan and Wisconsin.

Source: Energy Information Administration, 2005.

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Coal Mining Industry — Employment Projections

APPENDIX A10, PAGE 5

Across the U.S. as a whole, the coal mining industry is expected to increase

its output in the next few years. However, coal mining employment is

estimated to continue to decline through 2012.

The U.S. Bureau of Labor Statistics indicates loss of 23,000 coal mining

jobs in the U.S. between 2002 and 2012. Various state sources predict the

Midwest to lose about 14 percent of its regional coal mining employment

during this ten-year period.

Figure A10-5 shows the change in employment between 2002 and 2012

based on each state’s individual projections.

Figure A10–5.

Percent change in employment

in the coal mining industry, from 2002 to 2012

0%

0% change

(12%)

-12% change

(26%)

-26% change

0%

0% change

(9%)

-9% change

Source: Illinois Department of Employment Security, Economic Information & Analysis Division; Indiana

Department of Workforce Development; Michigan Department of Labor and Economic Growth,

Bureau of Labor Market Information and Strategic Initiatives; Ohio Department of Job and Family

Services, Bureau of Labor Market Information; and Wisconsin Department of Workforce

Development.

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A11. Electric Power Industry

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Electric Power Industry — Introduction

APPENDIX A11, PAGE 1

There are about 750 power-generating plants now operating in the

Midwest. Of these plants, 43 have a capacity of at least 1,200 megawatts

(MW). These 43 plants have a combined capacity of nearly 80,000

MW, or about half of all the electric power generating capacity in the

Midwest.

Of the plants with a capacity of at least 1,200 MW, there are 15 in

Illinois, 12 in Ohio, nine in Michigan, five in Indiana, and two in

Wisconsin. Figure A11-1 shows the locations of the largest power-

generating plants in the Midwest.

Figure A11-1.

Electric power-generating power plants

in the Midwest with capacity of 1,200 MW or greater

Legend

Coal

Nuclear

Petroleum

Natural Gas

Water

Source: Energy Information Administration, U.S. Department of Energy.

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Electric Power Industry — Retail Sales of Electricity

APPENDIX A11, PAGE 2

In 2002, the Midwest consumed 569,000 gigawatt hours (gWh) of

electric power. Electric power consumption in 2002 was 20 percent

higher than 1992 consumption, representing an annual increase of about

2 percent per year.

Retail sales of power were highest in Ohio and Illinois in 2002. Indiana

and Wisconsin both saw increases in retail sales of electric power of more

than 30 percent from 1992 to 2002.

Figure A11-2 shows the retail sales of electric power by state for 1992

and 2002.

Figure A11-2.

Retail sales of electric power in gigawatt hours (gWh), 1992-2002

1992

2002

50,925

66,999

1992

2002

112,521

137,666

1992

2002

76,977

101,429

1992

2002

83,840

107,311

1992

2002

145,016

155,999

Note:

Data in gigawatt hours (gWh).

Source: Energy Information Administration, U.S. Department of Energy.

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Electric Power Industry — Retail Sales of Electricity

APPENDIX A11, PAGE 3

As shown by Figure A11-3, residential homes purchase about one-third

of all the electric power sold in the Midwest. The proportion of electric

power sales to the industrial sector varies by state from 26 percent

(Illinois) to over 45 percent (Indiana).

Figure A11-3.

Retail sales of electric power by sector, 2002

Residential

(31%)

Commercial

(22%)

Industrial

(47%)

Other

(1%)

Residential

(33%)

Commercial

(33%)

Industrial

(26%)

Other

(9%)

Residential

(32%)

Commercial

(35%)

Industrial

(32%)

Other

(1%)

Residential

(32%)

Commercial

(26%)

Industrial

(39%)

Other

(3%)

Residential

(32%)

Commercial

(29%)

Industrial

(38%)

Other

(1%)

67,000 gWh

107,000 gWh

138,000 gWh

101,000 gWh

156,000 gWh

Note:

Total state purchases of electric power in gigawatt hours (gWh).

Source: Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry — Retail Sales of Electricity

APPENDIX A11, PAGE 4

The average price for power in the Midwest was 6.5 cents per kilowatt-

hour in 2002. Consumers (across all sectors) in Illinois pay the most for

electric power, just under 7 cents per kWh, while Indiana customers pay

the least, just over 5 cents per kWh.

The average price for electric power in the Midwest for residential homes

was 8.0 cents per kWh in 2002, while industrial customers paid about

4.5 cents per kWh.

Figure A11-4 shows the average price paid by both residential and

industrial consumers of electric power for each state in the Midwest.

Figure A11-4.

Average price (cents per kWh) for residential

and industrial sales of electric power, 2002

Residential

Industrial

8.2

4.4

Residential

Industrial

8.4

5.0

Residential

Industrial

6.9

4.0

Residential

Industrial

8.3

5.0

Residential

Industrial

8.3

4.7

Note:

Prices in cents per kWh, 2002$.

Source: Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry — Retail Sales of Electricity

APPENDIX A11, PAGE 5

Between 1992 and 2002, revenue generated from the sale of electric

power in the Midwest increased by about 15 percent. Approximately

$37.0 billion of electric power was sold in the Midwest in 2002.

As can be seen in Figure A11-5, revenue from electric power was smallest

in Wisconsin; utilities in that state sold about $4.2 billion of electric

power to local customers in 2002. Ohio electric power utilities had the

most sales within their state in 2002 — nearly $10.5 billion.

Figure A11-5.

Revenue from retail sales of electric power by sector, 2002

Residential

(40%)

Commercial

(24%)

Industrial

(35%)

Other

Residential

(1%)

(39%)

Commercial

(35%)

Industrial

(19%)

Other

(7%)

Residential

(38%)

Commercial

(38%)

Industrial

(23%)

Other

(1%)

Residential

(40%)

Commercial

(30%)

Industrial

(27%)

Other

(2%)

Residential

(42%)

Commercial

(30%)

Industrial

(27%)

Other

(1%)

$4.2 billion

$9.6 billion

$5.4 billion

$10.4 billion

$7.4 billion

Note:

Revenue from sales in 2002$.

Source: Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry —

Net Generation of Electricity

APPENDIX A11, PAGE 6

In 2002, the Midwest region generated about 16 percent of all the

electric power produced in the United States, a total net generation of

637,000 gigawatt hours of electric power. Coal is the major source of

electric power in the Midwest; 70 percent of all the power produced in

the Midwest is done so by coal-burning power plants. Nuclear power

plants produce 23 percent of the power in the Midwest, while generating

units that utilize natural gas or other petroleum products account for 6

percent of all the electric power in the Midwest. Plants utilizing

renewable resources generate 2 percent of the electric power in the

Midwest.

Of the five states in the region, Illinois produced the most electric power

in 2002 (188,000 gigawatt hours). Illinois is also the only state in which

coal was not the primary source of electric power. Wisconsin produced

the least amount of electricity in 2002, 58,000 gigawatt hours.

Figure

A11-6 shows the total net generation of electric power by source type

for each state in the Midwest in 2002.

Figure A11-6.

Net generation of electric power by source type, 2002

Coal (94%)

Petroleum (1%)

Natural Gas (3%)

Nuclear (0%)

Other (3%)

Coal (46%)

Petroleum (0%)

Natural Gas (5%)

Nuclear (48%)

Other (1%)

Coal (57%)

Petroleum (1%)

Natural Gas (13%)

Nuclear (26%)

Other (3%)

Coal (92%)

Petroleum (0%)

Natural Gas (1%)

Nuclear (6%)

Other (1%)

Coal (68%)

Petroleum (1%)

Natural Gas (4%)

Nuclear (21%)

Other (6%)

58,000 gWh

188,000 gWh

126,000 gWh

147,000 gWh

118,000 gWh

Note:

Data in gigawatt hours (gWh).

Source: Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry —

Projected State Population

APPENDIX A11, PAGE 7

In 2002, the Midwest had a population of approximately 45.1 million

people, or nearly 16 percent of the population of the United States. By

2012, the population of the Midwest is projected to grow by 4.3 percent

to a total of 47.0 million.

Wisconsin is expected to grow the fastest over this period, its population

increasing by 7 percent to 5.8 million residents. Ohio is expected to see

the smallest population growth of the five-state region — its population

is expected to increase by less than 3 percent to reach 11.7 million in

2012.

Population growth in the Midwest is expected to be modest in the near

future, especially when compared to the U.S. population as a whole. In

2002, the Midwest represented nearly 16 percent of the U.S. population.

But by 2012, this proportion is expected to decrease to just 15 percent.

Figure A11-7.

State population (in millions), 2002-2012

2002

2012

5.4

5.8

2002

2012

12.2

12.8

2002

2012

6.1

6.5

2002

2012

9.9

10.2

2002

2012

11.4

11.7

Source: State of Illinois, Office of Policy, Development, Planning and Research; Indiana Business Research Center;

Michigan Office of State Demographer; Ohio Department of Development; and

Wisconsin Demographic Services Center, Department of Administration.

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Electric Power Industry —

Projected Nameplate Capacity

APPENDIX A11, PAGE 8

The U.S. Department of Energy projects total nameplate capacity of

electric power production in the Midwest to increase slightly from 2002

to 2012 (under baseline conditions). In 2012, coal-generating power

plants are expected to represent just over half of all the electric power

generation capacity.

Figure A11-8 shows the nameplate capacity for coal burning electric

power plants as well as the nameplate capacity for electric power plants

regardless of source type.

Figure A11-8.

Projected electric power nameplate

capacity in the Midwest, 2002-2012

2002

2012

0

20

40

60

80

100

120

140

160

180

200

83.9

5

75.4

82.3

5

77.8

All other sources

Coal

159.3

160.1

Note:

All data in nameplate capacity; megawatts (MW).

Source: BBC Research & Consulting from Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry — Projected Net Generation

APPENDIX A11, PAGE 9

Net generation of electric power — the generation of electricity net the

use of electricity by the power plants themselves — is anticipated to

increase by nearly 25 percent between 2002 and 2012 in the Midwest.

The generation of electric power from coal-burning power plants is

expected to expand by approximately 20 percent in order to meet

increased demands. Generation from natural gas plants is expected to

more than double between 2002 and 2012.

Figure A11-9 displays the projected net generation of electric power in

the Midwest from 2002 to 2012.

Figure A11-9.

Net generation of electric power in the Midwest, 2002-2012

Other

Nuclear

Natural Gas

Petroleum

Coal

0

100,000

200,000

300,000

400,000

500,000

600,000

gWh

445,621

526,780

2,776

3,725

32,585

76,554

142,871

154,911

12,768

21,677

2002

2012

Note:

Data in gigawatt hours (gWh).

Source: BBC Research & Consulting from Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry — Sales and Generation

APPENDIX A11, PAGE 10

Figure A11-10 displays the Midwest’s share of U.S. population, it’s share

of U.S. retail sales of electric power (across all sectors), and it’s share of

net generation of electric power.

In 2002 the Midwest represented 15.7 percent of the U.S. population.

The population of the Midwest is expected to grow by a smaller rate

than the rest of the country; by 2012, the Midwest population is

expected to be 15.0 percent of the total U.S. population.

Corresponding to the decrease in population relative to the United

States, retail sales of electricity in the Midwest are also expected to

decrease relative to all electric power sold in the United States.

Electric power production in the Midwest is expected to increase slightly

relative to all U.S. production. In 2002, the Midwest produced 16.5

percent of all the electric power in the United States. By 2012, this

proportion is expected to be just more than 17 percent.

Figure A11-10.

Midwest share of U.S. population, retail sales of

electric power, and net generation of electric power, 2002-2012

2012

2002

0%

10%

20%

15.7%

15.0%

Share of U.S.

population

2012

2002

0%

10%

20%

16.4%

15.9%

2012

2002

0%

10%

20%

16.5%

17.1%

Share of U.S.

retail sales of

electric power

Share of U.S. net

generation of

electric power

Source: State population projections (see Figure EPI-7) and U.S. Census Bureau.

BBC Research & Consulting from Energy Information Agency, U.S. Department of Energy.

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Electric Power Industry — Employment Trends

APPENDIX A11, PAGE 11

Between 1998 and 2002, employment in the electric power industry in

the Midwest region decreased by nearly 10 percent. The electric power

industry in Ohio saw the largest decrease in employment over this

period, a decrease in employment by 30 percent. Wisconsin, however,

saw a slight increase in employment in this industry between 1998 and

2002.

Figure A11-11 shows historical levels of employment in the electric

power industry.

Figure A11-11.