Posted on April 29th, 2011 by

A significant number of new jobs will be created as a result of The Northern Pass construction. Our updated economic study breaks down the jobs by region, within New Hampshire.

The study was released today by economist Lisa Shapiro. “Our economic modeling demonstrates that this project would have deep and widespread economic benefits for the entire state,” said Shapiro.

The study shows that job opportunities will include typical construction industry work, as well as forestry and logging, professional/technical, and supply and service industry jobs.

Read the study – and the press release.

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Posted on April 29th, 2011 by

Posted In: Jobs, Updates

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  • Jim and Sandy Dannis says:

    Thank you for sharing this updated economics and jobs study.

    We believe the study is seriously flawed. The approach — looking at only the half of the story that is “good” for Northern Pass — is similar to Ms. Shapiro’s prior work on local property tax impacts. As you recall, the property tax study took into account only INCREASES to the tax base from the transmission line. It failed to take into account DECREASES in the tax base from the large hits to property values in the vicinity of the power lines.

    The economics/jobs study does the same thing. Using the black-box REMI model (rather than a more granular and nuanced bottoms-up analysis — see below), Ms. Shapiro appears to input only INCREASES to spending coming from the transmission line project. The model predictably spits out job increases. Unfortunately, Ms. Shapiro apparently fails to input the DECREASES in spending that the project will cause. The analysis thus covers only job increases from Northern Pass, not job decreases.

    For example, the scoping process has indicated the clear harms that will be caused by the transmission lines to tourist-related businesses, to real estate (both sales of existing properties, new construction, and the various associated fee-related businesses) and to the hospitality, retail and other businesses that provide support or services. None of these negative spending impacts — and the negative job impacts — are modeled.

    The negative impacts on real estate sales and on the real estate broker, title, legal and other support industries are obvious. There are also less obvious but equally important negative impacts.

    Consider the opportunity cost of foregone residential and business construction and investment. For example, on our own property, due to the uncertainty of the transmission line route we have put on hold a major home construction project. The homes that would be built in future years for our three children are also put on hold, as are farm business investments and construction (new barns, etc.). We have also put on hold our forestry and land improvement projects.

    None of this construction or investment will occur if the lines come into our area. We conservatively estimate that these construction and investment projects, by themselves, represent at least 20 job-years of work for the local economy. These impacts are simply ignored by Ms. Shapiro’s work. And we are just one property owner. It can reasonably be expected that the negative impacts will be felt up and down the proposed routes.

    Another important factor is the “wealth effect” — the impact of decreases in a person’s asset base and net worth on annual spending. The certified real estate appraisal we commissioned showed that the transmission lines may devalue building lots by 90% or more, and larger blocks of land from 60% to 80% or more. The negative impacts on improved real estate (lots with homes) will cause even greater dollar losses.

    All else held equal, a family that used to have a home worth $150,000 and now finds the home is worth only $75,000 because the transmission lines cross the property will feel a sharp negative wealth effect. The family will feel poorer and will reduce family spending.

    Based on our appraisal, we have estimated a negative value impact from the lines of more than $1 million a mile on adjacent raw land in Coos County, with higher numbers expected further south. These decreases will produce a substantial loss in wealth and a substantial decrease in spending, which will flow through the economic models to produce job losses. Again, these major impacts are simply ignored by Ms. Shapiro in her study.

    Ms. Shapiro’s study also contains serious flaws in its detailed projections. For example, the study claims 200 new jobs a year will be created from lower electricity prices in New Hampshire. The basis for this claim is a study by CRA (filed with FERC) that asserts, with no backup, that wholesale electricity price effects “should be” passed through to NH retail and business customers.

    Note that CRA’s numbers, presumably the “best case” for Northern Pass, project only insignificant wholesale price declines — on the order of 1%-1.5%. These are not important savings or impacts that would change New Hampshire’s ranking as one of the highest cost states for electricity.

    This assertion of full pass-through to customers of these alleged savings is seriously flawed. PSNH, which accounts for roughly 70% of NH electricity sales, purchases less than 30% of its electricity in the wholesale markets, and this will decline even further if the Laidlaw power purchase agreement (PPA) goes into force. The remainder of PSNH’s electricity supplies are provided by its own higher-than-market generation assets or by long-term fixed price PPAs.

    Wholesale price changes do not change the cost of these electricity sources. Obviously, on these facts a small reduction in regional wholesale prices will not affect the majority of PSNH’s electricity sourcing costs and will have no beneficial impact on the customer pricing of the vast majority of PSNH’s power.

    Also, any changes to PSNH’s customer rates must be approved by the NH Public Utilities Commission. Given PSNH’s poor financial condition, recent sharp customer losses and PSNH’s practice of seeking annual rate increases, we believe the likelihood of any electricity procurement savings being passed on to customers is small.

    For these reasons, Ms. Shapiro’s claim of 200 jobs from electricity rate decreases is built on flawed assumptions and carries no weight.

    Ms. Shapiro’s study attempts to make sector-specific projections of job impacts — for example, forestry and land clearing. As best we can tell, this is done from the model rather than a careful bottoms-up analysis.

    We tested Ms Shapiro’s claims on forestry and land clearing based on the actual job-years required for our own land clearing projects. We will post our detailed analysis in a separate comment. The conclusion is that even after making heroic assumptions to attempt to provide some basis of support for Ms. Shapiro’s claims, our analysis still showed that job creation in forestry and land clearing would be less than 25% of what Ms. Shapiro’s study indicates. In other words, the sector-by-sector jobs analysis appears to be grossly overinflated.

    On several occasions we have invited Northern Pass to elevate the level of analysis and discussion beyond just one-sided claims and assertions. We believe a project as significant for our state as Northern Pass deserves a serious, fact-based, quantitative analysis and discussion. Unfortunately, Ms. Shapiro’s updated study does not, in our view, meet this standard. It does not help the discussion to put out studies that address only one side of the equation.

    We respectfully renew our offer to have an on the record, public discussion and debate with Northern Pass on the benefits and costs of this project.

    Thank you,

    Jim and Sandy Dannis

  • Jim and Sandy Dannis says:

    This comment supplements our prior comment. Here we addresses the claimed job benefits from the Northern Pass project in the areas of forestry and land clearing.

    As best we can tell from the truncated information in Ms. Shapiro’s study, the study appears to claim that the logging and land clearing work for the transmission lines will create up to 110-140 new jobs a year at peak. Looking at the graph presented in the study and the period indicated for forestry and land clearing jobs, and to be conservative using 110 vs. 140 peak period jobs, we calculate a total of 220 job-years for this work. This is based on 55 jobs in the first year (2012); 110 jobs in the second year (2013 — peak); and 55 jobs in the third year (2014).

    We don’t see any supporting detail for a bottoms-up analysis of job demand. It would thus appear that Ms. Shapiro’s projections are based on the black box econometric model she has chosen (REMI).

    To test Ms. Shapiro’s numbers, we used our own actual logging and land clearing jobs from the last two years as estimates of required job slots. For a 32-acre clearcut and field conversion in a fully-stocked white pine forest, the logging work required 2.5 weeks by a crew of four workers. The clearing work took 2.5 weeks by a crew of two workers. For a 12.5 acre clearcut and field conversion in a well-stocked northern hardwood/spruce fir forest, the logging work required 1.5 weeks by a crew of four workers, and the clearing work required 1.5 weeks by a crew of two workers.

    Please note: these jobs involved making the land ready for use as agricultural fields, a substantially higher standard than ROWs. Our specifications were to make the new fields ready for cutting grass with haying equipment, which required full stumping, removal of all large stones, clearing of all debris, and smoothing. ROWs are left in much rougher state and thus require less labor time.

    To be conservative, we will use the 12.5 acre project (more labor-intensive) to develop an initial comparable. Using that project, we calculate that a crew of four loggers using mechanized equipment can clearcut 8.33 acres per week; and a crew of two equipment operators can stump and smooth 8.33 acres per week.

    To be even more conservative in our analysis, we will cut that production rate by 50%+ to account for potentially more difficult conditions on some parts of the NP ROW. With this assumption, our baseline is 4 acres per week to clearcut by a crew of 4 loggers; and 4 acres per week to stump and clear by a crew of two equipment operators. For those of you with experience in mechanized harvesting and land clearing, you will know these are extremely conservative numbers!

    To continue to give Ms. Shapiro’s study all possible benefit of the doubt, we assume NP will have to log and clear a full 60 miles of new ROW. The actual number may of course be substantially less.

    Following Northern Pass’s public statements, we assume a 150’ wide ROW. This equates to 18.18 acres per mile. To account for access points to the ROWs, we will conservatively add 33% to the amount of land to be cleared and estimate 24 acres of clearing per mile of ROW. For the assumed 60 miles of new ROW, this equates to 1440 acres.

    Per the baselines above, logging and clearing 1440 acres comes out to a jobs requirement of 360 weeks of work for a crew of 4 loggers and 360 weeks of work for a crew of two equipment operators. This totals 2160 person-weeks of work for logging and clearing the full 60 miles of new ROW. That equates to 41.54 job-years.

    So, on a conservative bottoms-up basis, using actual clearing projects as a baseline and making highly conservative assumptions to adjust for ROW work, we find that the NP ROW work will require fewer than 50 job-years for logging and stumping/smoothing. In contrast, Ms. Shapiro’s study, apparently based on an economic model, spits out a number more than 4 times higher – 220 job-years.

    In plain English, we once again find NP’s economics/jobs study to be simply unsupportable on the question of how many logging and land-clearing jobs will be created. Ms. Shapiro’s study overstates the job requirements by a factor of at least 4x, in our view.

    Once again, we respectfully request the opportunity for a public, on the record discussion and debate with Northern Pass on these economic and job claims.

    Thank you,

    Jim and Sandy Dannis

  • Thank you for your comment. As a reminder for our readers, a link to the appraisal report that claims a property value reduction of more than 90 percent is available here:
    http://northernpass.us/journal/2011/04/appraising-appraisals/