3. Economic Impacts - SR26 Economic Impacts of Rosemont Copper Mine

Economic impacts are measured as changes in economic activity attributable to an event or policy change. Economists distinguish between direct impacts and total impacts. The direct impacts are changes in the economy that are the direct result of the event or policy change. In this study, the event being analyzed is the Rosemont Copper Project and the direct impacts of the construction and operation of the Project will be the purchases of goods and services from suppliers, the wages and salaries paid to mine employees, and the taxes and other payments to governments. The total impacts of the Project will be the final changes in the area economy after all of the indirect effects caused by the direct impacts have worked their way through the economy. Conventionally, the total impacts are measured by the additional economic activity that occurs as a result of the event or policy change – in terms of economic measures such as output, income, employment, etc.

The estimates of the direct impacts and of the total impacts have been produced by very different methods. The direct impacts have been calculated from information in the Rosemont Copper Project Updated Feasibility Study in combination with other data from secondary sources. The total economic impacts of the Rosemont Copper Project were estimated using three different versions of the REMI PI+ regional economic forecasting model. These computer models were developed by Regional Economic Models Inc. for use by a consortium of Arizona state agencies, including Arizona State University. The estimates of the direct impacts were used as inputs to the process, and the REMI models generated detailed estimates of the total economic impacts. The methodology and data used to develop the estimates of the direct impacts and the operation of the REMI PI+ model are described in the Technical Appendix.

The economic impacts for the Cochise/Pima/Santa Cruz Counties study area were estimated using a county-level version of the Arizona-specific REMI PI+ model. The economic impacts of the Project for the State of Arizona were estimated using a state-level version of the model, and the impacts for the U.S. economy were estimated using a national version of the REMI PI+ model.

Total spending associated with the engineering/construction phase will be $881 million. However, much of the equipment and specialized services to be purchased is not produced within the three-county study area or the State of Arizona. The total expenditures for goods and services from local suppliers in Cochise/Pima/Santa Cruz Counties (including the local share of the value of equipment ordered through local suppliers but produced elsewhere) are estimated at $205 million. Annual spending levels over the four-year engineering/construction period in the three-county study area are shown in Table 4. Most of these expenditures would be focused in the construction, mining support, and business services sectors.

At the statewide level, total purchases of goods and services from Arizona suppliers would be slightly higher at $221 million. Annual expenditures in Arizona for the four-year engineering/construction period are listed in Table 5. Again, most of these expenditures would occur in the construction, mining support, and business services sectors.

Total direct spending associated with the production/post-production phase (including reclamation and mine closure activities) will be more than $5.1 billion over a 25-year period. These expenditures will produce the following direct economic impacts within the Cochise/Pima/Santa Cruz Counties study area: $1.5 billion in purchases of goods and services from local suppliers (shown as non-labor expenditures); an average of 406 jobs and $438 million in wages and salaries paid to area workers; and $132 million in revenues to local area governments. The annual figures for each of these measures are shown in Table 4.

The direct economic impacts of the production/post-production phase for the State of Arizona will produce substantially larger amounts of purchases of goods and services from Arizona

Table 4: Rosemont Copper Project - Direct Impacts by Year
Cochise/Pima/Santa Cruz Counties Study Area
(Millions 2008$)

The development of the Rosemont Copper Project site over a four-year engineering/construction period will produce substantial benefits for the Cochise/Pima/Santa Cruz Counties study area. It will generate an average annual increase of $96 million in economic activity in the area (measured in terms of demand for goods and services from local suppliers) and will provide a total of 3,600 person-years of employment for local workers. The wages and salaries and non-labor income (dividends, interest, rent, proprietors’ income and net profits) produced by the economic activity will provide an average of $38 million per year in additional income to area residents and $5 million per year in incremental revenues to local governments in the region. Over the entire engineering/construction period, these impacts are equivalent to $385 million in additional demand for goods and services from local suppliers, $245 million in gross regional product, $152 million in personal income, and $18 million in local government revenues (Table 6).

The economic impacts of the engineering/construction phase of the Rosemont Copper Project will not be confined to the study area’s mining and construction industries. The overall economic impacts (taking into account the combination of the direct and indirect effects) will be felt across all sectors of its economy. The strongest impacts will be on the construction, manufacturing, trade, business services, and health/social assistance sectors. Appendix tables A1, A2, and A3 show the incremental private-sector economic activity in each of 19 major industries in terms of output, employment, and earnings respectively.

The development of the Rosemont Copper Project site will produce even larger benefits for the State of Arizona. It will generate an average annual increase of $122 million in economic activity in the state (measured in terms of demand for goods and services from Arizona suppliers) and will provide a total of 3,900 person-years of employment for Arizona workers. The wages and salaries and non-labor income produced by the economic activity will provide an average of $45 million per year in additional income to state residents and $6 million per year in incremental state government revenues. Over the entire engineering/construction period, these impacts are equivalent to $489 million in additional demand for goods and services from Arizona suppliers, $317 million in gross regional product, $182 million in personal income, and $23 million in state government revenues (Table 7).

The economic impacts of the engineering/construction phase of the Rosemont Copper Project will not be confined to Arizona’s mining and construction industries. The overall economic impacts (accounting for both the direct and indirect effects) will be felt across all sectors of its economy. The strongest impacts would be on the construction, manufacturing, trade, and business services sectors. Appendix tables A4, A5, and A6 list the incremental private-sector economic activity in each of 19 major industries in terms of output, employment, and earnings respectively.

Table 6: Rosemont Copper Project - Engineering/Construction Phase - Total Impacts by Year Cochise/Pima/Santa Cruz Counties Study Area
(Millions 2008$)

The development of the Rosemont Copper Project site will also produce substantial benefits to the national economy. It will generate an average annual increase of $568 million in economic activity (measured in terms of demand for goods and services from U.S. suppliers) and will provide a total of 11,600 person-years of employment for U.S. workers. The wages and salaries and non-labor income produced by the economic activity will provide an average of $167 million per year in additional income to U.S. residents and $53 million per year in incremental revenues to the federal government. Over the entire engineering/construction period, these impacts are equivalent to $2.3 billion in additional demand for goods and services, $1.2 billion in gross domestic product, $668 million in personal income, and $210 million in federal government revenues (Table 8).

The overall economic impacts (taking into account the combination of the direct and indirect effects) will be distributed broadly across all sectors of the U.S. economy. The strongest impacts would be on the manufacturing, trade, and business services sectors. Appendix tables A7, A8, and A9 show the incremental private-sector economic activity in each of 19 major industries in terms of output, employment, and earnings respectively.

The economic benefits associated with the operation of the Rosemont Mine will be much larger in scale than those generated by its construction for all three levels of geography.

Production activities will generate an average annual increase of $701 million in economic activity (measured in terms of incremental regional output) within the three-county study area and will provide an average of 2,100 jobs for area residents. The wages and salaries and non-labor income produced by the economic activity will provide an average of $143 million per

year in additional income to area residents and $19 million per year in incremental revenues to local governments in the study area. (All measured over the 20-year production period.) Over the entire production/post-production period, these impacts are equivalent to $15 billion in additional output, $8 billion in gross regional product, $3 billion in personal income, and $404 million in local government revenues (Table 9).

The economic impacts of the production/post-production phase of the Rosemont Copper Project will not be confined to the mining industry. The overall economic impacts (taking into account both the direct and indirect effects) will be felt across all sectors of the study area’s economy. The strongest impacts would be on the mining, utility, manufacturing, trade, real estate/rental/leasing, and business services sectors. Appendix tables A10, A11, and A12 show the incremental private-sector economic activity in each of 19 major industries in terms of output, employment, and earnings respectively.

Production activities will generate an average annual increase of $907 million in economic activity (measured in terms of incremental output) within the State of Arizona and will provide an average of 2,900 jobs for state residents. The wages and salaries and non-labor income produced by the economic activity will provide an average of $218 million per year in additional income to state residents and $32 million per year in incremental state government revenues. (All measured over the 20-year production period.) Over the entire production/postproduction period, these impacts are equivalent to $19 billion in additional output, $11 billion in gross regional product, $5 billion in personal income, and $681 million in state government revenues (Table 10).

The economic impacts of the production/post-production phase of the Rosemont Copper Project will not be confined to the state’s mining industry. The overall economic impacts (taking into account the combination of direct and indirect effects) will be widely distributed across all sectors of the Arizona economy. The strongest impacts would be on the mining, utility, construction, manufacturing, trade, real estate/rental/leasing, and business services sectors.

Appendix tables A13, A14, and A15 present the incremental private-sector economic activity in each of 19 major industries in terms of output, employment, and earnings respectively.

Production activities will generate an average annual increase of $1.3 billion in economic activity for the nation and will provide an average of 4,500 jobs for U.S. residents. The wages and salaries and non-labor income produced by the economic activity will provide an average of $387 million per year in additional income to U.S. residents and $128 million per year in incremental revenues for the federal government. (All measured over the 20-year production period.) Over the entire production/post-production period, these impacts are equivalent to $27 billion in additional output, $15 billion in gross domestic product, $8 billion in personal income, and $3 billion in federal government revenues (Table 11).

The overall economic impacts (accounting for both the direct and indirect effects) will be widely distributed across all sectors of the U.S. economy. The strongest impacts would be on the utility, manufacturing, trade, finance/insurance, and business services sectors. Appendix tables A16, A17, and A18 show the incremental private-sector economic activity in each of 19 major industries in terms of output, employment, and earnings respectively.

The results of the analysis indicate that net migration into the Cochise/Pima/Santa Cruz Counties study area will increase by more than 300 per year in the early years of operation and then lessen, with an annual average net migration figure of about 150 over the entire 20-year production period. This increase in net migration would mean that the population of the study area would be approximately 2,000 larger after five years and more than 4,000 larger by the end of the production period compared with a situation in which the Rosemont Copper Project was not developed.

Similarly, the results of the state-level analysis indicate that net migration into Arizona will increase by more than 500 per year in the early years of operation and then lessen, with an annual average net migration figure of about 230 over the entire 20-year production period. This increase in net migration would mean that the state’s population would be approximately 3,000 larger after five years and 7,000 larger by the end of the production period compared with a situation in which the Rosemont Copper Project had not been developed.

Results from the REMI forecasts of economic activity for the years after the closure of the mine show that the Rosemont Copper Project would have lasting effects on the economy of the three-county study area over and above the impacts during its 26-year ”active” period. Permanent changes to the business community, to the labor market, to local governments, and to many other aspects of the local economy would occur as a result of the development and operations of the Rosemont mine. These changes will result in residual economic impacts in the Cochise/Pima/Santa Cruz Counties area. The forecast results indicate that the level of economic activity would be $52 million per year higher, area residents’ income $68 million per year higher, employment more than 300 higher, and local government revenues $2 million per year higher than if the Rosemont Copper Project had never existed. Annual figures for each of these measures for the ten years after closure are listed in Table 12.

The REMI state-level forecast for years after the closure of the mine show that the Rosemont Copper Project would also have similar lasting effects on the Arizona economy. Permanent

changes to the business community, to the labor market, to the state government, and to many other aspects of the Arizona economy would occur as a result of economic activity induced by the development and operation of the Rosemont mine, and these changes would result in residual economic impacts within Arizona. The state-level forecast results indicate that the level of economic activity would be $111 million per year higher, the state residents’ income $96 million per year greater, employment 500 higher, and state government revenues $4 million per year higher than if the Rosemont Copper Project had never existed. Annual figures for each of these measures for the ten years after the end of operations are provided in Table 13.

Results from the REMI national forecast do not show similar lasting effects for the overall U.S. economy.

Arizona Department of Commerce (2009) 2008 Arizona Workforce Employment Report.

Arizona Department of Commerce (2009) 2008 Arizona Workforce Employment Report.

Global Insight (2009) U. S. Economic Outlook: September 2009.

M3 Engineering & Technology Corp. (2009) Rosemont Copper Project Updated Feasibility Study.

Regional Economic Models Inc. (2007) REMI Policy Insight 9.5: Users Guide.

Regional Economic Models Inc. (2009) Introduction to PI+: The Next Generation of Policy Insight.

Regional Economic Models Inc. (2009) PI+: Changes from Policy Insight v9.5.

Tetra Tech Inc. (2008) Rosemont Copper Project: Mined Land Reclamation Plan.

Treyz, George (1993) Regional Economic Modeling: A Systematic Approach to Economic Forecasting
and Policy Analysis. Kluwer Academic Press.

U. S. Bureau of Economic Analysis (2009) State Personal Income and Employment Database.
(www.bea.gov/regional/index.htm#state)

U. S. Bureau of Economic Analysis (2007) U.S. Benchmark Input-Output Accounts.

U. S. Census Bureau (2009) State and Local Government Finances Database. (www.census.gov/govs/www/estimate.html)

U. S. Census Bureau (2009) 2009 Statistical Abstract.

U. S. Bureau of Labor Statistics (2009) Quarterly Census of Employment and Wages Database. (www.bls.gov/cew)

WestLand Resources Inc. (2007) Mine Plan of Operations: Rosemont Project.