ENERGY DEVELOPMENT, LOCAL GROWTH,

AND THE FEDERAL ROLE

Staff Working Paper

June 1980

CONGRESSIONAL BUDGET OFFICE

U.S. CONGRESS

WASHINGTON. D.C.
ENERGY DEVELOPMENT, LOCAL GROWTH,

AND THE FEDERAL ROLE

Staff Working Paper

The Congress of the United States

Congressional Budget Office

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402

PREFACE

The Congress has considered several proposals to provide financial

assistance to state and local governments to minimize the economic effects

associated with the development of new energy resources and facilities.

One such proposal, the Energy Impact Assistance Act of 1979 (S. 1699), was

reported by the Senate Energy and Natural Resources Committee in

December of 1979. The Subcommittee on Energy, Nuclear Proliferation and

Federal Services of the Senate Governmental Affairs Committee is currently considering the bill.

This paper was prepared in response to several questions asked by the

subcommittee during its consideration of the bill. The paper does not

represent a comprehensive analysis of the issue and has not undergone the

external review customarily done for published CBO papers. Its purpose is

to provide basic background on the need and magnitude of the energyrelated development problem, the degree to which this need is currently

being met by existing governmental resources, and other technical questions

specifically related to the proposal. In keeping with the Congressional

Budget Office's mandate to provide nonpartisan and objective analysis, this

paper offers no recommendations.

The paper was prepared by Mark Berkman of CBOTs Budget Analysis

Division under the supervision of Raymond C. Scheppach and Robert

Sunshine. Linwood Lloyd, Linda Alperin, Blaire French, and Sophie Korczyk

made significant contributions. Johanna Zacharias edited the manuscript,

and Dorleen Dove typed it for publication.

Alice M. Rivlin

Director

June 1980

iii

CONTENTS

Page

PREFACE iii

SUMMARY xi

CHAPTER I. INTRODUCTION AND PLAN OF THE PAPER .. . 1

CHAPTER H. THE NATURE OF THE PROBLEM 3

CHAPTER ffl. THE MAGNITUDE OF THE PROBLEM 5

Public Service Cost Projections 5

State and Local Tax Revenue Projections 10

Financial Capabilities of State and Local

Governments 11

CHAPTER IV. ASSISTANCE FROM STATE SOURCES AND

INDUSTRY 15

State Assistance 15

Assistance from Energy Industries 20

CHAPTER V. FEDERAL ASSISTANCE 23

Existing Federal Assistance 23

The Energy Impact Assistance Act of 1979 25

Other Possible Federal Approaches 27

Conclusions 27

APPENDIX COSTS AND REVENUES BY STATE 29

TABLES

TABLE 1. PROJECTED INCREASES IN EMPLOYMENT AND

POPULATION RESULTING FROM NEW U.S. ENERGY

DEVELOPMENT: 1985 AND 1990

TABLE 2. PROJECTED ENERGY DEVELOPMENT COSTS,

REVENUES, AND NEW DEBT ISSUES

STATES: 1980-1990 12

TABLE A-l. COAL MINER PRODUCTIVITY FOR WORKING STRIP

AND DEEP MINES, BY REGION 30

TABLE A-2. COAL PRODUCTION TAX MULTIPLIERS, BY STATE . 31

TABLE A-3. PROJECTED COST/REVENUE COMPARISON FOR

POPULATIONS ASSOCIATED WITH MINE MOUTH

AND SYNTHETIC FUEL PLANT DEVELOPMENT .. . 35

TABLE A-4. ALABAMA—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 36

TABLE A-5. COLORADO—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 37

TABLE A-6. ILLINOIS—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 38

TABLE A-7. MONTANA—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 39

TABLE A-8. NORTH DAKOTA—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 40

TABLE A-9. NEW MEXICO—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 41

TABLE A-10. TEXAS—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 42

vii

TABLES (Continued)

Page

TABLE A-ll. UTAH—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 43

TABLE A-12. WEST VIRGINIA—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 44

TABLE A-13. WYOMING—PROJECTED ANNUAL BUDGET

IMPACT FROM NEW COAL PRODUCTION 45

ix

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SUMMARY

Dramatic changes in energy markets resulting from steep rises in oil

prices, as well as changes in federal policies, are likely to spur widespread

development of U.S. energy resources over the next decade. Many state and

local governments will therefore have to accommodate the effects of rapid

energy-related development, by providing public services for new populations. Such accommodation may be difficult for several reasons. In

particular, rapid growth is likely to occur in areas that are now rural or only

sparsely settled, which will become the sites of boom towns. In addition,

state restrictions on borrowing and the risks of failure associated with new

energy technologies may make it difficult for local governments to finance

public service needs. Finally, interjurisdictional problems may result if the

costs fall to states and localities other than those that benefit directly from

energy production.

The Congress is now considering legislation—the Energy Impact

Assistance Act of 1979 (S. 1699)---to assist state and local governments

facing these problems. The bill would provide financial assistance for

planning and public infrastructure such as schools and recreation facilities.

Several questions will arise in considering such legislation:

o How great is the ability of state and local governments to finance

the public service needs that arise as a result of energy-related

development?

o How much assistance is already available through existing federal,

state, and industry sources?

o Will further federal aid be needed and if so, what form and

magnitude should it take?

THE ABILITY OF STATE AND LOCAL GOVERNMENTS TO FINANCE

PUBLIC SERVICES

Although there is considerable uncertainty about the speed at which

new energy resources will be developed, this analysis is based on the

assumption that development will proceed quite quickly. In 1979, U.S. coal

production totaled some 770 million tons. It is assumed that annual

XI
production will increase to 1.0 billion tons by 1985 and 1.3 billion tons by

1990. In addition, construction is assumed to begin on as many as 20

commercial-size synthetic fuel plants and 10 to 15 power plants at mine

sites ("mine-mouth" plants) during the next decade.

Under these assumptions, an additional 72,000 jobs directly related to

energy production will be created by 1990 in the 10 states expected to

account for most of the growth.JV The operating or noncapital costs of

providing public services for these increased populations would be approximately $330 million in 1985 and over $950 million in 1990, assuming a 9

percent inflation rate. The capital costs of roads, sewers, firehouses, and

other structures would be about $275 million in 1985 and more than $400

million in 1990. If the capital requirements are amortized over a 20-year

period, the total annual cost to state and local governments, including

operating and debt service costs, would be about $425 million in 1985 and

$1.2 billion in 1990.

Development will also produce additional tax revenues for states and

localities. With existing tax rates assumed to remain constant, energy

development is projected to generate revenues in excess of $500 million in

1985 and about $1.3 billion in 1990, from severance and production taxes as

well as state and local income, sales, and property taxes. In the aggregate,

therefore, it appears likely that the additional operating and infrastructure

costs of state and local governments would be more than offset by the

additional tax revenues over the next decade.

A number of financial problems remain, however:

o State and local governments must finance expanding public services before the tax base can raise tax revenues. They will

therefore turn to the capital markets to borrow these funds.

Given the risks in some types of energy development (for

example, some synfuels), some communities may find it difficult

to borrow;

o Although most of the costs will fall on local governments, most of

the revenues will go to state governments through production and

severance taxes. Consequently, it is critical that states make

these revenues available to the affected local regions;

I/ Alabama, Colorado, Illinois, Montana, New Mexico, North Dakota,

Texas, Utah, West Virginia, and Wyoming.

xn
Interjurisdictional problems may arise in places where most of

the energy-related revenue occurs in one state or locality while

most of the services are needed in an adjoining state or locality;

and

In the aggregate, states appear to be able to cover costs; on a

state-by-state basis, however, those states that have low energyrelated tax rates may not be able to cover the costs without

raising rates.

EXISTING FORMS OF ASSISTANCE

There are existing state, federal, and industrial programs that do or

could assist local communities. The form and level of state assistance

varies considerably among states. Some states allocate a significant share

of severance tax revenues to local communities and offer planning and other

technical help. Others do not give special assistance, though, and in certain

instances actually restrict the abilities of local governments to finance

additional services.

Industrial assistance, for the most part, has been voluntary, prompted

by the fact that operation or construction usually cannot begin without a

work force. There are numerous examples of the willingness of industry to

underwrite and thereby to incorporate in the costs of its products some of

the indirect costs of energy development. Few jurisdictions, however,

require any direct form of industrial assistance.

Despite certain limitations, existing federal programs could provide

significant assistance to states and localities. For example, grants are

available from the Environomental Protection Agency for waste water

treatment projects, from the Department of Housing and Urban Development for housing and community development projects, and from the

Farmers Home Administration for planning. Access to these and other

programs may be constrained, however, because of limited information at

the state and local level, or because of narrow eligibility requirements.

THE NEED FOR FEDERAL ASSISTANCE

Because in the aggregate, the state and local revenues generated by

accelerated energy development are likely to be even greater than the

costs, the need for continuing federal subsidies for public services—either

through outright grants, lower-than-market interest rates or loans, or loan

forgiveness provisions—is uncertain. Federal aid in obtaining financing for

xiii
roads, sewers, schools, and other infrastructure might prove useful, given

the potential lag between initial public service costs and ensuing revenues.

A federal role may also exist where the interjurisdictional problems

mentioned above occur. Finally, federal aid might be desirable to assist the

states in making full use of existing grant and loan programs.

The Energy Impact Assistance Act of 1979

Two versions of the Energy Impact Assistance Act of 1979 (S. 1699)

have recently been reported in the Senate. The Senate Governmental

Affairs Committee version would authorize $750 million for direct financial

assistance between fiscal years 1981 and 1985 ($150 million per year); the

version of the Senate Energy and Natural Resources Committee authorizes

$2.0 billion over the same period ($400 million per year). The former

version would limit grants to $15 million per year for planning, and the

latter would permit 40 percent of the funds to be distributed as grants.

Both versions also provide for loan guarantees of as much as $1.5 billion.

The funds needed to finance the expected infrastructure requirements of

states and localities are estimated to total roughly $1 billion by 1985 and

$2.6 billion by 1990. Of this total, a significant share (10 to 20 percent)

would most likely be financed through existing federal programs or by the

private sector. In addition, costs may be lower if production increases less

quickly than is assumed for this study. The authorization levels stipulated in

the bills may therefore be higher than necessary. Moreover, because

projected aggregate revenues generated by energy development will more

than offset the costs, the need for interest rate subsidies, grants, and loan

forgiveness provisions is open to question. If the assumptions of this

analysis are correct, grants could be limited to development costs in areas

with interjurisdictional problems and for purposes of economic planning.

To help states and local governments cover the lags between costs

and revenues, some form of loan program could prove effective. The

financing mechanism could be either a loan or a loan guarantee. If

budgetary control is a concern, however, the loan guarantee suffers from

the major disadvantage that it is outside of the budget and appropriation

process. The federal government now has more than $300 billion in loan

guarantees outstanding. These are not included in the budget, and the

Congress therefore has very little control over them. Federal government

loans, on the other hand, require a direct appropriation, and the budget

authority and loan outlays are reviewed in the normal budget and appropriation process. Potential changes in the way the budget process accounts

for loan guarantees may diminish the advantages of a loan program. Under

most circumstances, though, a loan program affords greater federal control.

xiv
The most important federal role appears to be one that would

encourage the efforts of state governments and industry. This would

provide the least outside interference in development decisions. Such a

policy would also avoid the indirect subsidy of energy prices. Because states

generally have the ability to cover expanding public service costs over time,

a federal loan program could prove an effective means of encouraging and

assisting states and localities in meeting their development needs.

xv

CHAPTER I. INTRODUCTION AND PLAN OF THE PAPER

For at least the remainder of this century, the United States will

meet an increasing share of its energy demand by mining more coal and

uranium, building more power plants, and constructing facilities to produce

synthetic fuels from both coal and oil shale. When the development of these

energy resources occurs in remote and sparsely populated areas, sudden

influxes of workers and their families will create instant cities, or boom

towns, which can give rise to significant economic and social demands. The

populations concentrated at new energy-related communities will need

expanded services such as police and fire protection, education, and health

services, which are provided by state and local governments. In addition, a

host of other services will be needed, such as roads and water and sewage

systems, which require significant capital investment and long lead times to

construct.

Local governments may not be able to provide these services and

facilities as quickly as they are needed. Rapid population growth may cause

overcrowded housing and overburdened waste disposal systems, and it may

exceed the capacities of medical facilities, schools, transportation systems,

and law enforcement institutions. Sometimes booms turn into busts—as, for

example, when a coal reserve is depleted or synthetic fuel technology fails.

A reversal in economic fortunes may leave a community with an excess of

facilities and services, as well as with the burden of paying for them.

This paper evaluates the need for a federal program to assist state

and local governments in providing public services to areas affected by

major energy developments over the next decade. Four basic issues are

considered:

o The local economic problems that are expected to accompany

accelerated energy development;

o The ability of state and local governments to finance the public

services needs that accompany the development;

o The assistance provided through existing governmental and industrial programs; and

63-559 0-80- 3
o The need for additional federal aid and whether that need would

be appropriately addressed by the current Senate proposal, the

Energy Impact Assistance Act of 1979 (S. 1699).

Chapter II describes the nature of the problems confronting local

governments and identifies the potential federal role in mitigating such

problems. Chapter III assesses the need for federal financial assistance,

based on estimates of the costs and revenues resulting from projected

energy development. Chapter IV identifies existing and potential state and

local programs and procedures available to mitigate adverse economic

effects. Chapter V summarizes the results of the analysis, identifies

existing federal programs, and discusses the nature of additional federal aid

that could be incorporated in the proposed legislation. The Appendix

summarizes the major assumptions used to develop the estimates used in the

text chapters and gives cost and revenue estimates by state.
CHAPTER II. THE NATURE OF THE PROBLEM

Economic development is generally not only welcomed but encouraged by state and local governments. Development related to energy

production, however, has been a subject of serious concern among such

governments. Although energy production and related economic growth are

likely to bring prosperity to many areas, local governments may have

trouble accommodating rapid growth in the short term. Such difficulty may

be particularly acute where development occurs in areas that are now rural

or sparsely settled.

Limited planning abilities and financial constraints are the two major

problems facing local governments. Local governments1 abilities to plan for

fast growth may be inadequate for several reasons. Many small towns have

insufficient planning and administrative staff. Some of the items that must

be planned for are not under local government control—for example,

transportation is typically a state function. Local control is also limited

because much of the land in the Western states is owned by the federal

government. Furthermore, information needed for planning may not be

readily available. In many cases, for example, only the energy company

involved in a project will know how much growth to expect and at what rate.

Major financing problems occur because state and local governments

must finance at least part of the expansion in public services before the

increased tax base raises local revenues. Governments will therefore be

forced to look to capital markets to borrow these funds. Given the risks

inherent in some types of energy development (for example, in some

synfuels), some communities may find borrowing difficult. These financing

difficulties are exacerbated because, while most of the costs will fall on

local governments, most of the additional revenues will go to state

governments through production and severance taxes. Furthermore, interstate jurisdictional problems may arise: there are cases where most of the

energy-based revenue occurs in one state, while the related need for

services is in an adjoining state. Finally, existing state and local tax rates

may not be sufficient to cover costs, and rate increases may be difficult to

obtain.

A great deal of anecdotal evidence exists regarding the boom town

phenomenon. Examples such as Craig, Colorado, where the population

increased sixfold over a four-year period, are often cited to document the

adverse conditions caused by rapid growth. In Craig, rapid growth resulted
in serious social and economic disruption. Demands for public structures

such as schools, a recreation facility, and a jail have put a sizable burden on

the communityTs financial resources. A shortage of social service workers

such as teachers is also a serious problem.

Although such effects may also be associated with other forms of

economic development, there are four factors that distinguish the problems

of energy-related development. First, dramatic changes in energy markets

resulting largely from steep oil price increases, as well as from federal

policies such as oil price decontrol and promotion of synthetic fuels, are

likely to lead to more widespread and rapid development of domestic energy

resources. Second, most of this development will occur in rural areas

requiring substantial new public infrastructure. Third, particularly in the

case of new energy technologies, there is a significant risk of failure.. And

fourth, because development of domestic energy resources is a national

priority, local development constraints may be considered a national

concern.

Rapid energy-related development, however, is not always an insurmountable problem for localities. There are also examples of communities

that were able, through efforts by local governments in cooperation with

industry and state governments, to accommodate quick growth without

adverse consequences like those in Craig.

The federal role in mitigating these problems must be evaluated in

terms of the magnitude of the problems and the extent to which industry,

state governments, and existing federal programs can or could provide the

assistance needed.
CHAPTER m. THE MAGNITUDE OF THE PROBLEM

This chapter provides estimates of the potential financial burdens

state and local governments may face as a result of increased domestic

energy production. Assumptions were made regarding coal production,

power plant construction at mine sites ("mine-mouth" plants), and synthetic

fuel plant construction over the 11-year period 1980 through 1990. Population increases were projected and public service costs estimated on the basis

of these assumptions. State and local tax revenues were also estimated

based on these assumptions.

PUBLIC SERVICE COST PROJECTIONS

Projections of public service costs were based on assumptions about

the growth of domestic energy production and related population increases.

The analysis only considers the effects of coal production and related

construction of power and synthetic fuel plants. Although production of

domestic oil, natural gas, and uranium is also expected to increase, no

significant population growth in currently undeveloped rural areas is

expected to result.

Domestic Energy Production

In order to give an approximation of the overall operating and capital

costs to state and local governments of accommodating energy development, it is first necessary to develop some assumptions regarding coal

demand and the construction of synthetic fuel and power plant facilities

over the next decade. The speed at which these resources will be developed

is uncertain; but for the purpose of this analysis, a relatively high growth

rate was assumed. In 1979, U.S. coal production was approximately 770

million tons. The rate is assumed to rise to 1.0 billion tons by 1985 and to

1.3 billion tons by 1990. These projections are based on an average annual

increase of 5 percent between 1979 and 1990, which is similar to rates

projected in several recent studies.!./

\] A number of these projections are contained in President^ Commission

on Coal, Coal Data Book (February 1980).
Projections of production increases were developed for 10 states in

which major growth is anticipated, based on available studies and estimates

of coal production. The states are Alabama, Colorado, Illinois, Montana,

North Dakota, New Mexico, Texas, Utah, West Virginia, and Wyoming.

These states are expected to account for most of the increase in coal

production between 1979 and 1990. (Detailed coal production figures for

these states are provided in the Appendix.) It should be emphasized that

these figures represent one possible scenario and are not a definitive stateby-state projection of coal production. The production levels assumed,

however, are intended to approximate, in the aggregate, the potential costs

and revenues that will occur because of increased domestic energy production. On the basis of several projections, the states selected appear to be

most likely to experience significant energy development. Consequently,

the major variations by state in terms of type of mining, government

operating costs, and tax structure are accounted for in the aggregate

calculations of costs and revenues made here.

In addition, it is assumed that construction will begin on roughly 20

commercial-size fuel plants and from 10 to 15 mine-mouth power plants

during the decade. The number of commercial-scale synthetic fuel plants

under construction or in operation is based on a recent assessment by

Cameron Engineers for the Senate Budget Committee 2/ and on the

expected enactment this year of legislation establishing the proposed Energy

Security Corporation. Seven plants are assumed to be under construction by

1984, 15 by 1987,, and 20 by 1990. Based on a seven-year construction

period, four plants will be in operation by 1990.

The projection of mine-mouth power plants is based on a recent

National Coal Association survey of utility construction plans.^/ These

power plants would account for some 11,250 megawatts of additional

capacity. All plants are assumed to be under construction by mid-decade.

The first plants are projected to come on line by the mid- to late-1980s,

based on a seven-year construction schedule.

No attempt was made to locate the projected synthetic fuel and

mine-mouth power plants by state. Because these facilities will be closely

associated with increased coal production, they will presumably be constructed in the same 10 states.

2/ U.S. Senate Committee on the Budget, Synthetic Fuels (September

1979).

3>/ National Coal Association, 1979 Survey of Electric Utility Capacity

Additions 1979-1988 (December 1979).
Population Projections

The estimates of additional population resulting from energy development in major growth states are summarized in Table 1. Direct employment

in these states from coal mining and energy production facilities is

estimated to increase by approximately 38,100 by 1985 and 72,000 by 1990.

Total population increases including direct workers, secondary (meaning

nonenergy) workers, and families will be about 146,000 by 1985 and 291,000

in 1990.

TABLE 1. PROJECTED INCREASES IN EMPLOYMENT AND POPULATION RESULTING FROM NEW U.S. ENERGY DEVELOPMENT: 1985 AND 1990

1985 1990

Employment Increases

Coal Miners 15,850 32,500

Energy Facility Workers 22,250 39,500

Total 38,100 72,000

Population Increases

Coal Mining 78,850 161,300

Energy Facilities 66,750 130,000

Total 145,600 291,300

These figures are based on several assumptions regarding miners1

productivity, work force requirements in energy facilities, and the numbers

of dependents associated with these work forces. Miners1 productivity

assumptions ranged from approximately 20 miners per million tons of coal

per year for Western strip mines to 280 miners per million tons for Eastern

deep mines. Construction work forces were assumed to peak at approximately 4,000 workers for a commercial-scale synthetic fuel plant and

approximately 1,000 workers for each 1,000 megawatts of power plant

capacity. Operating work forces were assumed to be 1,000 workers for

synthetic fuel plants and 200 workers for each 1,000 megawatts of power

plant capacity.

The resulting increase in the total permanent work force was

estimated to be 1.5 times the increase in direct employment, not counting

temporary construction workers. The total permanent population increase,
including family members, was estimated to be 3.3 times that of the work

force. A multiplier of three was used to estimate the number of secondary

workers and family members associated with the temporary construction

workers. These assumptions are explained in further detail in the Appendix.

Estimated Public Service Costs

The public service costs associated with the projected population

increases during times of economic expansion fall into three categories:

o Increased annual state and local operating expenses for police,

schools and other service sectors. (These costs are closely related

to population size, assuming services are maintained at a constant

level. For example, one policeman per 2,000 people, one teacher

per 30 pupils, and so forth.)

o Capital costs associated with new capital infrastructure required

by larger populations (for example, schools, libraries, sewer

systems, and so forth.)

o The interest costs associated with borrowing money needed to pay

for capital construction.

These three costs, along with those for upgrading state highways to

carry the increased industrial traffic in coal-producing areas, account for

the fiscal burden on state and local governments resulting from energy

development. This study, however, does not consider transportation costs

other than local streets and roads. Although preliminary results from a

Department of Transportation study indicate that such costs could be

significant, they are excluded here because the estimates available are

inconclusive and because existing or proposed federal highway programs

could fund a significant share of such costs.

The public costs associated with energy development are estimated

by relating each of these cost factors to the population projections

described above. For this analysis, it has been assumed that each new

resident brought to each of the 10 states by energy development would

necessitate public sector operating expenses equal to the average per capita

operating expense experienced in each state prior to new energy-related

development. This per capita expense was assumed to start in the first year

of new production or construction and to continue being incurred annually

for all new residents, with adjustments for inflation. Each new resident was

also assumed to require $7,125 (at fiscal year 1980 cost levels) in new local

capital expenditures for schools, roads, and sewage and water systems. This

estimate is derived from data provided in a 1974 study prepared for the
Environmental Protection Agency ,4/ updated to reflect cost increases since

that time. It is assumed that local governments would borrow money to

cover the capital costs, with repayments to be made over a 20-year period

at the prevailing municipal bond rate at the time of issue.

Because of the temporary nature of population influxes while facilities are under construction, it is not appropriate to assume the same level of

capital costs associated with permanent new residents. Consequently, the

costs used in this study include only operating costs for construction

workers. This assumes that local governments face temporary costs for the

temporary residents and are unlikely to make significant capital investments

for short-term requirements. Private industry, because it often faces such

transient problems, in many instances provides major services—including

housing, transportation, and recreation—to its temporary work force.

Industry-provided services partly offset the need for major publicly financed

capital investment. In this study, capital costs are included for the

population level assumed to remain once the facilities are in operation.

Further details on these assumptions are provided in the Appendix.

Several factors could significantly reduce the costs projected by this

methodology. A high local unemployment rate would mean that local

workers could fill available jobs, moderating the assumed population

increase and, in fact, reducing the social and governmental costs associated

with unemployment. Similarly, these estimates do not account for spouses

of workers who themselves hold jobs generated by the new economic

activity. By disregarding working spouses or other local persons who might

take service jobs during a boom, these estimates may somewhat overstate

the net new population influx. In addition, excess infrastructure capacity

may exist in some areas, which would reduce some of the costs of

accommodating the new population. Some portion of any anticipated

increase in coal production will come from existing mines; in places where

this is the case, the costs of expanding local public services should be less

than it would be for building new facilities in now undeveloped areas. Thus,

the assumptions for this study have been selected to arrive at cost

projections at the high end of the range of possible governmental costs, to

create a "worst case."

Under these assumptions, the annual expenditures, including operations, maintenance, and debt service for capital investments, are projected

to total approximately $1 billion between 1980 and 1985 and $5.5 billion

between 1986 and 1990. On an annual basis, these costs are expected to

reach over $400 million in 1985, increasing to over $1.2 billion per year by

4/ Environmental Protection Agency, Costs of Sprawl (1974).

63-559 0-80- 4
1990. Capital investments are estimated to total $1.1 billion by 1985 and

$2.6 billion by 1990.

STATE AND LOCAL TAX REVENUE PROJECTIONS

Although energy development will inevitably increase government

costs, it will also generate additional tax revenues. Energy production taxes

on additional coal production alone will bring annual revenues of more than

$340 million by 1985 and $755 million by 1990. Other tax revenues resulting

from increased population and related economic activity will total an

additional $175 million in 1985 and $535 million in 1990.

Tax Revenues from Energy Production

The energy production tax revenue projections are based on a tax

simulation model developed by Department of Agriculture economists at the

University of Minnesota.^/ To determine tax revenue multipliers, the model

applies 1979 state tax rates per ton of production to prototypical mining

operations. For this analysis, taxes are estimated only for coal mines, and

they include severance or other energy extraction taxes, as well as property

and corporate income taxes. For these projections, the tax multipliers are

increased by 2 percent annually to yield a conservative estimate of coal

price rises and property appreciation.

Tax revenues from synthetic fuel and mine-mouth power plants are

not included in this analysis. Although such revenues will be significant,

most of these facilities will not be operating until near the end of the 1980s

or later. Consequently, little revenue is expected by 1990. Simulations

accounting for such facilities, however, have shown that, over time, tax

revenues are likely to cover additional costs.(>/ These simulations also

showed that the lag in revenues will be less significant for those governments that rely on sales and income taxes rather than on property taxes.

5/ U.S. Department of Agriculture, State Taxation of Mineral Deposits and

Production (September 1978), and a memo from Dr. Thomas Stinson,

USDA, March 1979.

6/ U.S. Department of Agriculture, Local Impacts of Coal Gasification and

Liquefaction Plants in the Northern Great Plains, Draft (August 1979).

10
Tax Revenues from Population Growth

Revenues from taxes resulting from increased population are based

on average tax revenue per capita for the 10 states previously identified.

This covers state and local income, property, and sales taxes. Existing tax

rates are assumed to remain unchanged over the decade, with receipts

estimated to increase by 8 percent per year as a result of increases in

income, property values, and prices.

These projections may in fact understate revenues over the period for

several reasons. First, state tax structures and rates can be changed to

accommodate higher costs. Second, the use of average per capita revenue is

likely to understate the tax revenues that can be attributed to new

residents, because a relatively high proportion of the new residents is likely

to be employed, compared to the current state averages.

FINANCIAL CAPABILITIES OF STATE AND LOCAL GOVERNMENTS

In the aggregate, the costs of building and operating additional

infrastructure will probably be more than offset by tax revenues over the

coming decade (see Table 2). Cumulative revenues will exceed costs by

approximately $400 million by 1985 and $700 million by 1990, with total

revenues exceeding total costs in every year. The difference between

revenues and costs is projected to increase through 1985, peaking at $100

million. Between 1986 and 1988, this difference will decline, then begin to

increase again, to $90 million by 1990.

This pattern is primarily the result of the growth of synthetic fuel

plant construction assumed to take place in the latter part of the decade.

The significant population growth and resulting costs from these construction activities are not expected to be offset by increased revenues in the

short term, as is the case for coal mining. Once the plants are operating,

however, revenues would increase significantly. Altogether, the levels of

coal mining revenues are projected to offset public costs related to

synthetic fuel plant development.

As pointed out in Chapter II, however, a number of financial problems

remain. Capital investment will total more than $1 billion by 1985 and $2.6

billion by 1990. These requirements exceed the projected revenue surpluses,

suggesting that there will be an initial need for borrowing, although over

time, state and local governments will be able to cover costs. Second, most

of the costs will fall on local governments, while most of the revenues will

accrue to states. Consequently, adequate distribution of revenues within

states is critical to local governments. Third, interjurisdictional problems

11
TABLE 2. PROJECTED ENERGY DEVELOPMENT COSTS, REVENUES, AND NEW DEBT ISSUES OF STATES:

1980-1990, IN MILLIONS OF DOLLARS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

Operations and Maintenance

Coal Population 15 35

Power Plant Population 1 4

Synthetic Fuel Plant Population — _2

Subtotal Tl6) (41)

Debt Service

Coal Population — 8

Power Plant Population — —

Synthetic Fuel Plant Population — —

Subtotal — ~T8)

Total 16 49

COSTS

60 90 130 175 220 280

10 20 30 45 55 60

10 _25 60 105 170 245

(80) (135) (220) (325) (445) (585)

20 30 45 60 80 95

2 5 10 10 15 15

J> 10 15 20 30 35

(27) (45) (70) (90) (125) (145)

345 425 525

75 65 60

310 360 385

(730) (850) (970)

115 135 160

15 15 15

40 50 55

(170) (200) (230)

107 180 290 415 570 730 900 1,050 1,200

REVENUES

Coal Mining

Coal Population

Power Plant Population

Synthetic Fuel Plant Population

Total

35 80

10 20

2

"45 103

29 54

130

35

5

__5

175

68

190

50

10

10

260

255

70

15

25

365

340 405

100 125

25 30

50 60

515 620

475

160

30

120

785

REVENUES LESS COSTS

80 75 100 50 55

560 650 755

195 230 295

35 35 30

155 185 210

945 1,100 1,290

45 50 90

Population

Power Plant Population

Synthetic Plant Population

Total

70 85

20

30

TO 135

NEW DEBT ISSUES

105 125 155 190 165 190

20

45

170

25

50

200

25

50

230

30

55

275

60

225

65

255

240 275

70

310

75

350

330

JO

410
make equitable distribution of revenues difficult. Production and the

resulting revenues may occur in one state, while the burdens of increased

population are felt in another. Finally, although all 10 states together

appear to be able to cover costs, those with low tax rates and more laborintensive development may have difficulties. The state-by-state comparisons in the Appendix indicate that Alabama, Illinois, Texas, Utah, and West

Virginia may be in such positions because of low tax rates on energy

production and/or the labor requirements of deep mining. While these states

may face costs greater than revenues, the other five states will not.

The analysis suggests that most states can meet the costs of energyrelated development over time, although changes in tax rates or other

policies may be required. In fact, if the five states just listed facing

energy-related costs in excess of revenues were to raise their tax rates on

energy production to the average level of other five states, revenues would

equal or exceed costs for all except West Virginia, based on the assumptions

used in this analysis.?/ Further, the Western states where the boom town

phenomenon is most likely to occur (Colorado, Montana, North Dakota, New

Mexico, and Wyoming) appear able to cover the costs of coal-related

development with existing tax rates. In addition, although the location of

synthetic fuel plants was not assumed for this analysis, most of the initial

plants are likely to be sited in the Western states projected to experience

revenue surpluses from increased coal production. Consequently, the

financial lags resulting from synthetic fuel plant construction could be

managed by these states.

7/ Despite a relatively high tax rate applicable to energy production facilities, West Virginia is projected to experience energy-related costs in

excess of revenues over the decade. The projected costs may be

overstated, however, because currently unemployed miners rather than

new miners are likely to meet some of the projected labor

requirements.

13

CHAPTER IV. ASSISTANCE FROM STATE SOURCES AND INDUSTRY

State governments and energy companies now aid areas with energy

development in various ways. This chapter describes the more significant

forms of such assistance.

STATE ASSISTANCE

State assistance to local governments includes planning help, removal

of institutional constraints, and financial aid. The extent and range of state

assistance varies widely, as discussed below.

Planning and Technical Assistance. Many local governments lack

adequate planning staffs to deal with rapid growth. Even fewer have

knowledgeable negotiators or managers experienced in dealing with the

several levels of government that have to interact during periods of rapid

local growth.

States can help minimize the public costs arising from rapid growth

with a broad range of assistance. Several states have in the past created

agencies or offices to provide planning and technical assistance to local

governments. These agencies offer an assortment of services, ranging from

information distribution to temporary assignment of state personnel.

Direct Financial Aid. States provide direct assistance to local

governments in the form of tax revenue distribution grants, loans, or

through revenue sharing mechanisms. Clearly, a state's ability to extend

such assistance is constrained by its own financial condition. The previous

chapter indicates that states, especially those expected to experience

significant energy development, would receive substantial revenue through

severance and other taxes that could be distributed to affected areas. In

addition, overall state financial conditions have been good in recent years.

Over the five-year period 1972-1976, 30 states, including the 10 analyzed,

showed budgetary surpluses. None incurred deficits in 1978, the last year

for which complete information is available.!./ State fiscal conditions are

difficult to assess because of state budget balancing requirements and the

I/ Office of Management and Budget, Energy Impact Assistance Needs,

Staff Paper (March 1978), and U.S. Department of Commerce, State

Finances, 1978.

15
variability of state finances. From reviews of state operating balances as a

percent of expenditures, a measure used by the National Governors Association (NGA) to evaluate state finances, seven of the 10 states evaluated here

appeared to have balances of 5 percent or more (the level judged reasonable

by the NGA) in 1979. Five of these states also lowered or limited state

taxes during 1979.J2/ Future financial conditions are uncertain, however.

Economic conditions and federal budget reductions may constrain state

budgets over the next several years.

A stateTs willingness to give energy-related development aid is also

critical to the ability of local governments to meet development needs.

Several states require local governments to exhaust all outside sources—

particularly federal funds—before making state aid available. Some states

have also maintained that severance tax and federal lease revenues must be

allocated to the needs of all citizens of the state, not only those directly

affected by energy development. In addition, some state officials have

asserted that, since most energy development is the result of federal policy

and is not designed to meet local energy demands, the federal government

should be responsible for aiding local communities.

Examples of State Financial Assistance

In practice, the range of state efforts varies considerably. The

efforts made by energy-producing states are reviewed in a recent report

issued by the Economics, Statistics and Cooperatives Service of the U.S.

Department of Agriculture.^/ This report shows, for example, that

Montana, the Western state that imposes the highest average energyproduction tax, earmarks a fixed percent of all severance tax revenue to be

used for grants and loans to affected areas. The revenue allocated to the

Montana Coal Board for distribution to such areas reached $8 million in

1979, approximately 18 percent of the annual severance tax revenue. An

additional $21 million was placed in a trust fund to serve as insurance

against potential economic downturns. (It is interesting to note that an

applicant for aid from the Montana Coal Board must show that federal funds

have already been sought.) In addition to this financial aid, Montana allows

county commissioners to require the prepayment of property taxes by new

2/ National Governors Association, Fiscal Survey of the States 1979-1980

and Understanding the Fiscal Conditions of the States (December 1978).

3/ U.S. Department of Agriculture, State Taxation of Mineral Deposits and

Production (September 1978).

16
energy facilities as a source of capital. This authority, lacking in many

states, not only increases the capital available during the early, critical

stages of development, but also reduces both the need for borrowing and the

commensurate costs of servicing and retiring that debt in later years.

In Colorado, the energy-production tax rate is only two-thirds that of

Montana, but like Montana, the state targets a fixed percentage of

severance tax revenues for use by affected local governments. In 1977, the

Colorado state legislature broadened the scope of its severance tax and

established a formula that distributed revenues between state and local

governments. The legislation created a local government trust fund that

receives 45 percent of coal severance revenues and 20 percent of oil shale

revenues. Local governments may use most of these funds at their own

discretion to cover the capital and operating costs of public services.

In contrast to Montana and Colorado, the state of Utah imposes a

relatively small tax on energy production. All revenues from these taxes go

into the general state fund. Furthermore, Utah law limits the type of aid

the state can give to local governments—for example, the state can only aid

school districts, not general governments. On the other hand, the state

permits the creation of special districts to solve jurisdictional mismatches.

In addition, Utah allows energy developers to prepay sales and use taxes.

These revenues are placed in a special account used to finance schools and

highways. However, because all projects funded from this account must be

approved by the state legislature, local governments may experience considerable delays in receiving state assistance.

Wyoming's severance tax and revenue distribution system has several

unique features specifically designed to assist affected local communities.

The state legislature has created the Wyoming Community Development

Authority to extend loans to mitigate the local impacts of energy-related

projects. The agency is empowered to issue up to $100 million in revenue

bonds to finance the loans. Since such loans are not tied to severance tax

revenues, funds are available to local governments before any actual energy

production takes place. The availability of assistance in the initial phases of

the energy development would allow local governments to prepare in

advance for the anticipated population boom and its consequences. In

addition, the Wyoming Farm Loan Board collects revenues from a special

coal severance tax and distributes the funds to areas affected by coal

development. The legislature has earmarked at least 50 percent of the

revenues for highways and roads and the remainder for sewer and water

projects.

In West Virginia, taxes on coal production fall into the category of

business and occupation taxes. Since July 1, 1975 a portion of this revenue

17
returns to local government treasuries. Current law specifies that $3.85 on

each $100 of value shall be paid by businesses to the state. Of that money,

$3.50 goes to the stateTs general revenue fund. The remaining 35* returns to

local units of government. The coal-producing counties share three-fourths

of the money in amounts proportional to their production. The remaining

one-fourth goes to all cities and counties in the state in amounts proportional to population. In fiscal year 1979, the amount returned to local West

Virginia governments totaled $9.9 million. Of that sum, coal-producing

counties received $7.4 million. All West Virginia cities and counties,

including coal-producing counties, divided the remaining $2.5 million based

on population. The state does not specify how these funds may be spent

except in stipulating that no more than one-fourth of the amount received

by local governments may be used for salaries.

Alabama takes 20$ per ton from the amount it collects in coal

severance taxes and redistributes the money to the coal-producing areas. If

the coal is mined within the limits of a city, half of the 20<t-per-ton amount

goes to the city, and half returns to the county. For coal mined outside city

limits, the county retains the full amount. In fiscal year 1979, $4.7 million

was redistributed to Alabama cities and counties.

State Imposed Constraints. Although in many instances, state

governments provide significant assistance, they do not always use the

maximum available resources. In addition, state policies and laws may

actually create barriers to local governments1 abilities to respond to adverse

impacts of energy-related development. For example, a state may prohibit

localities from issuing bonds or deny localities taxing authority. All 10 of

the states highlighted in this analysis have some form of constitutional or

legislative limitations on local financing. States may also limit the

establishment of special districts or other government entities empowered

to help to alleviate jurisdictional problems.

State limitations on local indebtedness range from 2.9 percent of

assessed property value in Illinois to 18 percent in Montana. In general,

states have imposed ceilings based on 3 to 5 percent of the assessed value of

local property. Of the 10 states studied, only Texas has a constitutional

restriction against incurring debt at the local government level.

In many cases, local borrowing for sewer, water, road, or utility

projects is exempt from debt limitations. For example, Wyoming and

Colorado have no limit on borrowing to finance water supply projects, and

New Mexico has no ceiling on financing for sewer and water projects.

Alabama, however, continues to limit local indebtedness for water and

sewer projects but sets higher borrowing ceilings for these uses. Similarly,

18
most states examined in this study make special provisions for local

borrowing to build schools. The limit is generally established at 5 to 10

percent of assessed property value, although in Colorado the debt limitation

for school districts is 20 percent of the assessed value of taxable property.

Requirements for voter approval of local borrowing vary widely

among the states. In North Dakota, for example, local governments have

authority to incur debts up to an established ceiling without voter approval.

The consent of the electorate is required, however, if local governments

want to exceed the mandated debt ceiling. In contrast, West Virginia and

Colorado require local governments to secure voter approval before any

general obligation bonds can be issued.

A report prepared for the Senate Subcommittee on Energy, Nuclear

Proliferation and Federal Services includes an examination of the debt

limitations and provisions in the constitutions and laws of 12 states.4/ The

researchers found that all 12 states have some form of restriction on the

ability of state, county, or local governments to incur general obligation

debts. However, the two recommendations included in the report suggest

that there are ways to accommodate the financing needs of communities

affected by energy developments. One is for state legislatures to exempt

energy impact loans from statutory limitations. The other is for the federal

government to make loans to state or county governments for specific

construction projects that would then be leased to local governments. Most

state debt limitation restrictions would not apply in these cases. In

addition, of course, states have the option of amending their statutory

restrictions through established procedures to augment the financing

capacity of local governments.

Clearly, some states are attempting in various ways to assist local

governments in solving the initial financing problems that often result from

new energy-related activity. As the Department of Agriculture study

concludes, some state assistance programs may prove more successful than

others in distributing aid in a timely fashion, but information about the

relative effectiveness of these programs is limited.

4/ U.S. Senate Committee on Governmental Affairs, Subcommittee on

Energy, Nuclear Proliferation and Federal Services, "Information on

State and Local Financing Mechanisms Concerning S. 1699," prepared

by Merrill, Lynch, White, Weld Capital Markets Group (March 1980).

The report covered the following states: Alabama, Colorado, Kentucky,

Louisiana, Montana, New Mexico, North Dakota, Ohio, Texas, Utah,

West Virginia, and Wyoming.

19
Other studies have examined current state efforts to provide assistance and have made general recommendations about how those efforts can

be improved. For example, the Western Governors Regional Energy Policy

Office study of May 1977 concluded by proposing methods that states could

use to broaden and improve their assistance to affected areas.j)/ The study

encouraged the expansion of state aid and the imposition of added taxes to

equalize state tax efforts. In a similar study by the National Association of

Counties (NaCo) that focused on county level impacts in Appalachia, similar

conclusions were reached.6/

ASSISTANCE FROM ENERGY INDUSTRIES

Industrial assistance to communities affected by energy development

has been identified mostly with energy development in the West, where a

limited labor force has required companies to be reasonably innovative in

order to attract the labor needed for the construction and operation of new

facilities. The town of Colstrip, Montana, for instance, was planned,

financed, and developed with the assistance of Western Energy Company to

solve the public and private infrastructure needs resulting from Western

EnergyTs coal mine in Rosebud County. The White Mountain Village Project

near Rock Springs, Wyoming is another example of a new town that was

sponsored by an energy developer (Pacific Power and Light) to help solve the

public facilities problem generated by energy-related growth.

These and numerous other examples point to the willingness of

industry to underwrite and, consequently, to subsume in the cost of its

products some of the indirect costs of energy development. To date, such

efforts have generally occurred where companies faced significant problems

in developing a local labor force because of sparse indigenous population and

lack of basic facilities.

In one different and very significant case, Highland County, Virginia

was able to force Virginia Electric Power Company (VEPCO) to help pay for

a wide range of social services provided by the county to new residents

attracted by VEPCOTs hydroelectric power facility construction in a neigh5J Western Governors Energy Policy Office, Financial Strategies for

Alleviation of Socioeconomic Impacts in Seven Western States (May

1977).

6/ National Association of Counties Research Inc., Coping with Growth

(January 1979),,

20
boring county. Highland County, through the Federal Power Commission!

s 7/ licensing procedure, was able to require the developer to

mitigate some of the socioeconomic impacts of such a project, even though

the community affected was not in the same county as the development

site. Tnis precedent could have a significant influence on the distribution of

public sector costs. But its successful application depends heavily on

knowledgeable, aggressive leadership at the local level while early site

planning and licensing is evolving.

Much industrial assistance has been voluntary, however. In many

instances, construction or operation simply cannot begin without a work

force, and many companies find that start-up costs are recouped very early

in the form of low personnel turnover, high productivity, and smooth community relations.

The power to mandate industrial cooperation most often lies with

state governments, and states have begun to require more private assistance

at all stages of new energy development. The energy-facility siting laws of

several states require specific forms of corporate cooperation. For

example, the Wyoming Industrial Development Information and Siting Act

requires projects with construction costs of $50 million or more to provide

long-term plans for impact management. In addition, WyomingTs industries

are required to identify funding mechanisms for providing public services.^/

Montana has similar requirements.

Many states, however, focus primarily on environmental effects

rather than economic development ones and have been slow to develop laws

and procedures that would help local communities mitigate the boom town

effects of energy development. The focus of these states has therefore

been on energy-producing facilities themselves, such as power plants,

uranium enrichment facilities, and other fuel processing plants; they have

not, to date, directly addressed the problems of mining facilities and their

ancillary growth.

Now the Federal Energy Regulatory Commission of the U.S. Department of Energy.

Western Governors Regional Energy Policy Office, Western Boomtowns: Part I; Amended; A Comparative Analysis of State Actions

(October 1976).

21

CHAPTER V. FEDERAL ASSISTANCE

State and private sector assistance to local governments facing rapid

energy-related development is already significant. The potential levels of

assistance from these sources in the future appears even greater. The need

for additional federal aid may therefore be limited.

Most states appear able to provide substantial financial aid to

communities affected by energy development. This observation is supported

by evidence of the amounts of state aid given in the past and by projections

of ample future state revenues. To the extent that states and localities do

have financing problems, they result primarily from the need to cover the

costs of expanding public services before tax revenues are available to pay

for them. In addition, states may actually constrain local government

efforts to accommodate growth. Changes in state taxing methods, laws, and

regulations can often remove these constraints.

Industrial assistance has been significant too, although it is rarely

required by state or local governments. Some degree of mandatory

cooperation might be appropriate. Industries are often the best source of

information necessary for planning. Requirements would also cause industries to take over responsibility for some costs of development, resulting in

more efficient pricing of the energy produced.

In addition to state and industrial assistance, there are already

existing federal programs that can be used to meet the needs of energyrelated community growth. This chapter reviews these existing federal

programs and discusses the need for the proposed Energy Impact Assistance

Act of 1979.

EXISTING FEDERAL ASSISTANCE

The federal government, through its various programs to aid state

and local governments, can play a critical role in managing the problems of

energy-related economic development. There are several programs underway that are specifically targeted toward energy development for which

local governments are eligible. Several major programs, including the

Environmental Protection AgencyTs grant program for the construction of

wastewater treatment facilities, the Department of Transportation's state

aid programs, and Farmers Home Administration assistance to rural areas,

23
can provide significant funding for a number of the costlier services state

and local governments must pro vide. 17

One of the most significant forms of energy-related federal assistance comes from state shares of leasing revenues from federal lands. Under

the Mineral Leasing Act, as amended (30 U.S.C. 181, 191), the federal

government shares with the originating state the revenues from mineral

leases made in that state. Payments to states in fiscal year 1979 totaled

some $210 million and are projected to reach $450 to $500 million by 1985.

In 1979, $14.1 million of the total came from coal leases on federal

lands in the Western coal states; the balance came from oil and gas leases.

The amount of future payments from coal leases is extremely hard to

estimate, since it will depend to a great extent on the demand for coal over

the next few years, and on federal leasing policy. A preliminary estimate of

state resources from federal coal leases would place state mineral lease

revenues from coal at or above $65 to $85 million by 1985.

Although most mineral lease receipts are now allocated by states to a

variety of state programs, the additional revenues that would accrue from

coal development could be set aside for impact-area assistance without

jeopardizing these established funding allocations. Thus, by 1985, the

mineral leasing revenue-sharing program alone could add roughly $75 million

a year in revenues to state resources. Since federally owned coal reserves

are located primarily in five Western states, the bulk of these funds will go,

under existing law, to Wyoming, Montana, New Mexico, Utah, and Colorado.

The Mineral Leasing Act also authorized the states to borrow anticipated mineral lease receipts from the federal government for a prospective

10-year period. This provision met with initial objections from the

Executive Branch because of the subsidized interest rates the act provided.

In 1978, the bill was amended to allow higher interest rates, thus removing

the Administration1^ major objection. A total loan level of $212 million has

been authorized through fiscal year 1982 for this program, although no funds

have been appropriated, and $40 million of the authorization expired in

fiscal year 1979.

I/ Several studies have compiled lists of federal programs available to

states and localities. These studies include U.S. Department of Energy,

Report to the President, Energy Impact Assistance (March 1978); Office

of Management and Budget, Energy Impact Needs Staff Paper (March

1978); and U.S. Department of Housing and Urban Development, Rapid

Growth from Energy Projects (March 1976).

24
The only other local assistance program targeted toward energyaffected areas is the 601 program established by the Powerplant and

Industrial Fuel Use Act of 1978 (Public Law 95-620). The program is funded

through the Department of Energy and administered by the Farmers Home

Administration. This program authorizes grants to states to cover up to 100

percent of the costs of developing energy-impact plans for areas affected by

uranium and coal production activities. Funds from this program may also

be used to acquire land for public use. To date, the program has received

$70 million in appropriations ($20 million in fiscal year 1979 and $50 million

in fiscal year 1980).

Although existing economic development and planning programs seem

to hold promise as a source of local assistance, in reality significant

mitigation assistance may be limited. Many programs are funded at levels

that fail to meet existing demand and are controlled by eligibility criteria

that give little or no weight to socioeconomic factors common in boom town

situations. Several studies have indicated that many federal programs have

been most useful to communities with two assets: experienced grantsmen

and planners, or access to cooperative state planning agencies.^/ In any

event, applying for aid requires lead time, which is not abundant in boom

town situations.

THE ENERGY IMPACT ASSISTANCE ACT OF 1979

Two versions of the Energy Impact Assistance Act of 1979 (S. 1699)

have been reported in the Senate. One version, formulated by the Senate

Governmental Affairs Committee, would authorize direct financial assistance totalling $750 million between fiscal years 1981 and 1985 ($150

million per year). A version approved by the Senate Energy and Natural

Resources Committee would authorize $2.0 billion over the same period

($400 million per year). The latter version would allow for 40 percent of the

funds to be issued as grants. The former version would allow for loans only.

Both versions also provide for loan guarantees of up to $1.5 billion.

The capital investment necessary to finance the expected infrastructure needs of state and local governments over the next five years is

National Association of Counties Research Inc., Coping with Growth

(January 1979), and Western Governors1 Regional Energy Policy Office,

Western Boomtowns: Part I; A Comparative Analysis of State Actions

(October 1976).

25
estimated to be approximately $1 billion. Of this total, a significant share

(10 to 20 percent) would most likely be financed through existing federal

programs or by the private sector. In addition, costs may be lower if

production increases at a less rapid rate than is assumed for this study. For

this reason, the $750 million to $2 billion authorized in the bills for direct

aid may be more than is necessary. Further, because state and local

revenues generated by projected energy development will more than offset

the aggregate costs, the value of interest rate subsidies, grants, and loan

forgiveness provisions is debatable. All these provisions represent a direct

taxpayer subsidy for state and local government services.

Although, as was pointed out earlier, significant lags may occur

between public service costs and energy-related revenues, most states will

ultimately be able to cover the costs. If the assumptions of this analysis are

correct, grants could be limited to two uses: to cover development costs in

areas with interstate jurisdictional problems, and for economic planning.

To help tide states and localities over long financial lags, however, a

loan or loan guarantee program might prove useful. The financing

mechanism could be either a loan or a loan guarantee. If budgetary control

is a concern, however, a loan guarantee suffers from the major disadvantage

that it tends to circumvent the budget process. The federal government

currently has outstanding more than $300 billion in loan guarantees. These

are not governed by the budget and appropriation process, and the Congress

therefore has very little control over them. Federal government loans, on

the other hand, require direct appropriations, and the budget authority and

loan outlays are reviewed in the normal Congressional budget and appropriation process. In addition, loans would encourage the continuation and

expansion of aid from states and industries because the ultimate costs would

fall to them.3/

OTHER POSSIBLE FEDERAL APPROACHES

Although a federal loan program could be created through the

proposed legislation, similar goals could be achieved by modifying or making

greater use of existing programs. For example, loan authority provided by

the Mineral Leasing Act could be implemented. The authority could also be

broadened to accommodate energy-related development that is not situated

on federal land but that results largely from federal policy.

Potential changes in the way the budget process accounts for loan

guarantees may weaken the advantages of a loan program. Under most

circumstances,, however, a loan program affords greater federal

control. v

26
The Congress could take several other approaches to aid states and

local governments. For example, assistance from other programs could be

increased through improved access. A federal office to coordinate relevant

programs and to provide information to state and local governments is a

possible solution to the access problem.

Delays and funding limitations in existing programs, such as Farmers

Home Administration assistance to rural areas and Environmental Protection Agency waste water treatment grants, could be reduced through the

earmarking of funds for high-priority energy-related development.

Finally, program funding could be tied to an energy-related revenue

source—such as the recently enacted Crude Oil Windfall Profit Tax Act

(Public Law 96-223) or the proposed oil import fee. This would provide a

direct link between federal programs, designed to reduce dependence on

imported oil. If this linkage were made through a trust fund, however, the

Congress could lose flexibility in allocating budgetary resources.

CONCLUSIONS

Despite certain limitations, existing federal programs can provide

significant assistance to state and local governments. It may be desirable,

however, for the federal government to improve state and local access to

these programs. A federal coordination office might help accomplish this.

Another important federal role might be to encourage the efforts of

state governments and industry in assisting energy-related boom towns.

This would enable the federal government to serve a useful function without

actually interfering in state and local, or industries1, decisions. Such a

policy would also avoid the risk of indirect subsidy of energy prices.

Because states are generally able to draw from their own revenues to cover

expanding public costs over time, a federal loan program could prove an

effective interim means of aiding states and localities while they prepare to

meet their development needs.

27

APPENDIX: COSTS AND REVENUES BY STATE

Alabama, Colorado, Illinois, Montana, New Mexico, North Dakota,

Texas, Utah, West Virginia, and Wyoming were identified as having the

greatest likelihood of rapid coal-related development by 1990. Although

these states' actual production rates may vary markedly, the levels assumed

for this analysis reflect relatively high production increases. Consequently,

the projected rate of coal-related development is on the high side of the

probable range.

MAJOR ASSUMPTIONS FOR COAL RELATED DEVELOPMENT

Coal Production. Domestic U.S. coal production has been projected

to increase by roughly 5 percent a year between 1979 and 1990. For the 10

states included in the analysis, the average annual increase was assumed to

be 9 percent between 1979 and 1985 and 7 percent from 1985 to 1990.

Under these assumptions, the 10 states account for most of the growth in

coal production in this decade. The proportion of deep and strip mining by

state observed in 1979 was assumed to remain constant over time. (This is

likely to overstate cost impacts, because the proportion of strip mining,

which is less labor intensive, is likely to rise.)

Employment. The number of coal workers was based on productivity

rates by mining method and location. The productivity rates applied are

shown in Table A-l. They are based on a number of sources, including two

recent Department of Energy studies.l./

I/ U.S. Department of Energy, Basic Estimated Capital Investment and

Operating Costs for Underground Bituminous Coal Mines Utilizing a

Continuous Mining System (March 1978).

U.S. Department of Energy, Basic Estimated Capital Investment and

Operating Costs for Three Coal Mines (November 1977).

29
TABLE A-l. COAL MINER PRODUCTIVITY FOR WORKING STRIP AND

DEEP MINES, BY REGION: WORKERS PER MILLION TONS

PER YEAR

Region Strip Mining Deep Mining

West

Interior

East

20

30

100

135

280

280

Population Growth. Total population figures were calculated based

on multipliers developed for secondary workers and workers1 dependents. A

secondary employment multiplier of 1.5 was used. Other studies have

assumed multipliers of 1.25 to 2.0. The selection of 1.5 was thought to be

conservative. The dependent multiplier assumed was 3.3, based on average

family size. This multiplier was applied to the total work force (including

primary and secondary workers) to determine total population.

Public Service Costs. Three separate cost components were calculated: operations and maintenance, capital investment, and debt service

on capital investments. Annual state and local operations and maintenance

costs were based on actual per capita costs by state.2/ These costs were

inflated at 8 percent annually. Capital investment was based on a cost of

$7,122 per capita in 1980,^/ inflated by 8 to 9 percent per year. This figure

includes the capital costs for the following items:

Water systems

Sewage and storm drainage systems

Solid waste

Fire protection

Police

Recreation facilities

Education

Streets and roads (local)

Government administration

Land acquisition (for public use)

2/ U.S. Department of Commerce, Compendium of Government Finances,

1977 Census of Governments, Volume 4 (1978). These 1977 data were

adjusted to 1980 assuming an annual 7.5 percent inflation rate.

3/ Derived from U.S. Environmental Protection Agency, The Costs of

Sprawl (1974).

30
The debt service costs were calculated by amortizing the capital

investment costs over 20 years. It was assumed that all new infrastructure

would be financed by serial issue municipal bonds. The bond rate was based

on projections Data Resources Inc. made for the bond buyer index; these

projections range between 7 and 8 percent over the decade. For estimating

purposes, investments were assumed to be made annually, based on the

projected number of new residents.

Revenues. Revenues from coal production taxes and per capita taxes

were estimated. Production tax revenues were based on a simulation model

developed by economists at the University of Minnesota.4/ The model

calculates state-by-state tax revenues per ton for prototypical mining

operations. Severance, property, and corporate income tax revenues are

included in this calculation. The tax-per-ton multipliers for the 10 states

are listed in Table A-2. These tax rate multipliers were inflated at 2

percent per year. This relatively low rate was used to account for lags in

property tax assessments and the uncertainty of coal prices over time. The

result may understate revenues for states in which sales taxes are relied

upon or if coal prices increase rapidly.

TABLE A-2. COAL PRODUCTION TAX MULTIPLIERS, BY STATE: IN

DOLLARS PER TON, 1979

Dollars per Ton

Alabama 0.77

Colorado 1.02

Illinois 0.55

Montana 1.51

New Mexico 0.63

North Dakota 1.00

Texas 0.08

Utah 0.70

West Virginia 1.64

Wyoming 1.40

4/ U.S. Department of Agriculture, Coal Development in the Northern

Great Plains (January 1978) and a memo from Dr. Thomas Stinson,

USDA, February 1980.

31
General tax revenues were based on actual per capita state and local

tax revenues (not including those from severance and other energy taxes)J>/

These revenues were increased at 8 percent per year to account for

inflation. No changes in tax structure or rate were assumed, and revenues

from other sources such as license fees were not included.

Tables A-4 through A-13 at the end of this Appendix summarize the

projected costs and revenues by state. These state analyses indicate that

five states (Alabama, Illinois, Texas, Utah, and West Virginia) are likely to

experience costs in excess of revenues if existing tax rates are maintained

and if coal production increases to the levels assumed.

The remaining five states (Colorado, Montana, New Mexico, North

Dakota, and Wyoming) are likely to experience significant revenue surpluses

if there are no changes in tax structures and if the coal production levels

used for analytic purposes here do occur.

ENERGY FACILITY ASSUMPTIONS

No attempt was made to locate the synthetic fuel and mine-mouth

power plants by state. It does appear, however, that most of these facilities

will be constructed in the five states just mentioned found to be likely to

earn revenues in excess of costs. The assumptions regarding the number of

facilities and their employment and population impacts are described below.

Synthetic Fuel Plants

Approximately 20 commercial-scale synthetic fuel plants were

assumed to be under construction or in operation by 1990. This projection

was based on a survey prepared by Cameron Engineers and assumed

enactment of major synthetic fuels legislation. For estimating purposes, 10

plants were assumed to be under construction by 1985 and four in operation

by 1990. No more than three starts were assumed in any year.6/

5>/ U.S. Department of Commerce, State Government Finances in 1978

(November 1979). The 1977 data was adjusted to 1980 assuming a 7.5

percent average annual rate of inflation.

6/ U.S. Senate Committee on the Budget, "Overview of Synthetic Fuels

Potential to 1990," Cameron Engineers, in Synthetic Fuels (September

1979).

32
Employment, Estimates of construction employment were based on a

hypothetical optimal plant employing 4,000 workers in the peak year of

construction, which was assumed to be the fourth in a seven-year construction period. Upon completion, each plant was assumed to produce the

equivalent of 50,000 barrels of oil per day and to require 1,000 workers for

its operation.

Population. The number of secondary workers and dependents was

calculated by the same methods used for coal production. A distinction was

made, however, for temporary construction workers. To avoid the possibility of overstating the population effects of temporary construction

workers, a multiplier of three was chosen to account for both secondary

workers and their dependents. The analysis took into account that temporary workers are less likely to bring families or to create a market for

significant secondary work. A study prepared for the Economic Development Administration used a similar multiplier for this purpose.^/ Permanent employees involved in producing synthetic fuels were assumed to

result in the same proportion of secondary population as coal miners.

Public Service Costs. The methodology used for coal-related costs

was also applied to synthetic fuel plant construction. The distinction

between temporary and permanent residents, however, was continued in

these calculations. No capital investment costs were assumed for the

temporary residents. Only operations and maintenance costs were attributed to this group. It was assumed that major capital investments will not

be made for temporary residents. Capital investment costs and the

resulting debt service costs were calculated for permanent residents only.

Revenues. Because no more than four plants were assumed to be in

operation by 1990, no production revenue was estimated. Revenues from

general taxes were calculated based on an average per capita revenue for

the 10 states. This revenue is calculated based on the total number of

residents, including both temporary and permanent.

Mine-Mouth Power Plants

A total of 10 to 15 mine-mouth power plants yielding some 11,250

megawatts of generating capacity are expected to be constructed over the

7/ U.S. Department of Commerce, Draft Environmental Impact Statement

for the Inland Energy Impact Assistance Act of 1979, Economic

Development Administration (April 12, 1979).

33
coming decade. For this analysis, it was assumed that all plants will be

under construction by 1985 and that most are in operation by 1990. The

analysis rests on the assumption that these facilities would be situated in

the 10 states examined.

Employment. Construction work forces were assumed to peak at

approximately 1,000 workers for each 1,000 megawatts of generating

capacity in the fourth year of a seven-year construction period. Operating

work forces were assumed to be 200 workers for every 1,000 megawatts of

generating capacity.

Population. Population estimates were based on the same methodology used for construction of synthetic fuel plants, including the distinction

between temporary and permanent residents.

Public Service Costs. The methodology applied to synthetic fuel

plants was also used here.

Revenues. No revenues from energy-related taxes were estimated

because plant operations would not begin until the latter part of the decade.

Revenues from general taxes, however, were calculated based on the

average per capita tax revenue from the 10 states. Because significant tax

revenues from large power plants are likely, revenues are probably underestimated for the latter part of the period.

Table A-3 summarizes the costs and revenues calcualted for synthetic fuel and mine-mouth power plants. While development costs exceed

revenues, this is not likely to be the case once energy production begins.

34
TABLE A-3. PROJECTED COST/REVENUE COMPARISON FOR POPULATIONS ASSOCIATED WITH MINE

MOUTH AND SYNTHETIC FUEL PLANT DEVELOPMENT: TO 1990, IN MILLIONS OF DOLLARS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

CO

en

Operations & Maintenance

Power Plant Population

Synthetic Fuel Plant Population

Subtotal

Debt Service

Power Plant Population

Synthetic Fuel Plant Population

Subtotal

Total

Power Plant Population

Synthetic Fuel Plant Population

Total

4

2

(6)

-1 -3

10 20

10 25

(20) (45)

2 5

5 10

(7) (T5)

27

5

5

10

-17

60

10

10

20

COSTS

30 45 55 60

60 105 170 245

(90) (150) (225) (305)

10 10 15 15

15 20 30 35

(25) (30) (45) (50)

115 180 270 355

REVENUES a/

15

25

40

25

50

75

30

60

90

30

120

150

REVENUES LESS COSTS

-40 -75 -105 -180 -205

75

310

(385)

15

40

(55)

440

35

155

190

65 60

360 385

(425) (445)

15 15

50 55

(65) (70)

490

35

185

220

515

30

210

240

-250 -270 -275

Power Plant Population

Synthetic Plant Population

Total

20

30

50

20

45

65

25

50

75

NEW DEBT ISSUES

50

75

30

55

85

60

60

65

65

70

70

75

75

80

80

NOTE: Minus sign denotes a net deficit.

a/ Revenue estimates exclude revenues derived from the facility itself, traditionally an essential element in local

budgets. The revenues from a facility are totally dependent on site selection and therefore beyond the scope

of this analysis. In addition, these revenues will be limited because few power plant or synthetic fuel plants

will be operating until late in the decade.
TABLE A-4. ALABAMA—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO

1990, IN MILLIONS OF DOLLARS

00

1980

New Coal Production

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

1981

(in Millions

1.0 2.1

730

0.9

0.9

1,530

2.2

0.6

2.8

1982

of

3.2

2,330

3.6

1.3

4.9

1983

4.4

3,210

5.4

2.1

7.5

1984

5.6

4,090

7.4

3.1

10.5

1985

7.0

5,115

COSTS

10.1

4.1

14.2

1986

7.9

5,775

12.3

5.4

17.7

1987

8.6

6,285

14.5

6.1

20.6

1988

9.6

7,015

17.4

6.8

24.2

1989

10.5

7,680

20.6

7.8

28.4

1990

11.5

8,410

24.4

8.8

33.2

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

0.8

0.5

1.3

1.7

1.0

2.7

2.6

1.7

4.3

3.7

2.5

6.2

4.8

3.5

8.3

6.0

4.7

10.7

REVENUES LESS

New Debt Issues

0.4

5.2

-0.1

6.2

-0.6

6.8

-1.3

8.2

-2.2

9.0

-3.5

11.2

7.0

5.7

12.7

COSTS

-5.0

8.0

7.7

6.7

14.4

-6.2

6.7

8.7

8.1

16.8

-7.4

10.3

9.8

9.6

19.4

-9.0

10.1

10.9

11.4

22.3

-10.9

12.0

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-5. COLORADO—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO

1990, IN MILLIONS OF DOLLARS

CO

1980 1981

New Coal Production

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

(in

2.4

845

1.4

1.4

Millions

5.1

1,795

3.1

0.7

3.8

1982

of

8.2

2,815

5.4

1.6

7.0

1983

11.7

4,040

8.4

2.6

11.0

1984

15.6

5,415

12.2

3.9

16.1

1985

20.0

6,960

COSTS

17.0

5.5

22.5

1986

23.3

8,115

21.4

7.5

28.9

1987

27.0

9,420

26.9

8.9

35.8

1988

30.9

10,790

33.2

10.7

43.9

1989

35.3

12,335

41.1

12.7

53.8

1990

39.9

13,940

50.1

15.1

65.2

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

2.5

0,9

3.4

5.4

2,0

7.4

8.9

3,3

12.2

12.9

5,2

18.1

17.6

7,5

25.1

23.0

10e4

33.4

REVENUES LESS

New Debt Issues

2.0

6.0

3.6

7.4

5.2

8.7

7.1

11.5

9.0

14.0

10.9

17.3

27.3

13,1

40.4

COSTS

11.5

14.0

32.4

16e4

48.8

13.0

17.0

37.7

20e3

58.0

14.1

19.4

43.8

25,1

68.9

15.1

23.6

50.7

30 = 6

81.3

16.1

26.5

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-6. ILLINOIS—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO 1990,

IN MILLIONS OF DOLLARS

CO

00

1980 1981

New Coal Production (in

Tons per Year) 2 . 5

New Residents

Added Costs

Operating

Budget

Debt Service

Total

2,090

3.1

3.1

Millions

5.1

4,250

6.9

1.8

8.7

1982

of

7.9

6,580

11.7

3.8

15.5

1983

10.8

8,985

17.3

6.1

23.4

1984

13.8

11,485

24.0

8.7

32.7

1985

17.0

14,150

COSTS

32.1

11.6

43.7

1986

19.1

15,910

39.0

15.0

54.0

1987

21.3

17,740

47.9

17.1

65.0

1988

23.6

19,665

56.1

19.4

75.5

1989

25.9

21,590

65.6

22.1

87.7

1990

28.3

23,585

78.5

24.7

103.2

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

1.4

2.2

3.6

2.9

4.9

7.8

4.6

8.2

12.8

6.5

12.0

18.5

8.4

16.6

25.0

10.7

22.1

32.8

12.2

26.9

39.1

14.1

32.3

46.4

15.8

38.7

54.5

17.6

45.9

63.5

19.8

54.1

73.9

REVENUES LESS COSTS

New Debt Issues

0.5

14.9

-0.9

16.8

-2.7

19.9

-4.9

22.4

-7.7

25.6

-10.9

29.9

-14.9

21.3

-18.6

23.9

-21.0

27.2

-24.2

29.4

-29.3

32.9

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-7. MONTANA—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO

1990, IN MILLIONS OF DOLLARS

CO

CO

1980

New Coal Production

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

1981

(in Millions

3.5

350

0.6

—

0.6

7.4

735

1.3

0.4

1.7

1982

of

11.7

1,165

2.2

0.8

3.0

1983

16.5

1,640

3.4

1.3

4.7

1984

21.8

2,165

4.9

1.9

6.8

1985

28.0

2,785

COSTS

6.8

2.6

9.4

1986

32.4

3,220

8.5

3.3

11.8

1987

37.1

3,685

11.6

3.9

15.5

1988

42.1

4,185

12.9

4.6

17.5

1989

47.5

4,720

15.7

5.3

21.0

1990

53.3

5,295

19.1

6.2

25.3

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

5.4

0.3

5.7

11.6

0.7

12.3

18.7

1.2

19.9

26.9

1.8

28.7

36.4

2.6

39.0

47.6

3.6

51.2

REVENUES LESS

New Debt Issues

5.1

2.5

10.6

3.0

16.9

3.6

24.0

4.5

32.2

5.4

41.8

6.9

56.1

4.4

60.5

COSTS

48.7

5.3

65.7

5.5

71.2

55.7

6.1

75.8

6.7

82.5

65.0

7.0

87.4

8.2

95.6

74.6

8.2

100.2

9.9

110.1

84.8

9.5

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-8. NORTH DAKOTA—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION:

TO 1990, IN MILLIONS OF DOLLARS

1980 1981

New Coal Production

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

(in

2.5

250

0.4

0.4

Millions of

5.5

545

0.9

0.2

1.1

1982

9.0

895

1.7

0.5

2.2

1983

13.2

1,310

2.7

0.8

3.5

1984

18.1

1,800

4.0

1.3

5.3

1985

24.0

2,385

COSTS

5.7

1.9

7.6

1986

28.5

2,830

7.4

2.6

10.0

1987

33.6

3,340

9.4

3.2

12.6

1988

39.2

3,895

11.8

3.9

15.7

1989

45.6

4,530

14.9

5.3

20.2

1990

52.7

5,235

18.5

5.7

24.2

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

2.6

0.2

2.8

5.7

0.5

6.2

9.5

0.9

10.4

14.3

1.4

15.7

19.9

2.0

21.9

26.9

2.9

29.8

REVENUES LESS

New Debt Issues

2.4

1.8

5.1

2.3

8.2

3.0

12.2

3.9

16.6

5.0

22.2

6.6

32.5

3.7

36.2

COSTS

26.2

5.4

39.3

4.7

44.0

31.4

6.6

46.7

5.9

52.6

36.9

7.9

55.2

7.4

62.6

42.4

9.7

65.3

9.3

74.6

50.4

11.6

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-9. NEW MEXICO—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO

1990, IN MILLIONS OF DOLLARS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

New Coal Production (in Millions of

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

2.1

280

0.4

0.4

5.5

595

0.9

0.2

1.1

8.2

960

1.6

0.5

2.1

11.3

1,375

2.5

0.9

3.4

15.0

1,875

3.8

1.3

5.1

19.0

2,405

COSTS

5.2

2.0

7.2

22.1

2,820

6.6

2.6

9.2

25.6

3,290

8.3

3.2

11.5

29.4

3,795

10.4

3.8

14.2

33.5

4,360

12.9

5.3

18.2

38.1

4,975

15.9

6.1

22.0

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

1.3

0.2

1.5

3.6

0.4

4.0

5.5

0.7

6.2

7.7

1.2

8.9

10.5

1.7

12.2

13.7

2.3

16.0

REVENUES LESS

New Debt Issues

1.1

2.0

2.9

2.5

4.1

3.1

5.5

3.9

7.1

5.1

8.8

6.0

16.1

3.0

19.1

COSTS

9.9

5.0

19.2

3.7

22.9

11.4

6.1

22.3

4.7

27.0

12.8

7.2

26.1

5.8

31.9

13.7

8.6

30.1

7.1

37.2

15.2

10.1

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-10. TEXAS—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO 1990,

IN MILLIONS OF DOLLARS

to

1980 1981

New Coal Production (in Millions

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

 r

2.5

375

0.5

0.5

5.2

775

1.1

0.3

1.4

1982

of

8.2

1,225

1.8

0.7

2.5

1983

11.5

1,715

2.8

1.1

3.9

1984

15.1

2,250

4.0

1.7

5.7

1985

19.0

2,835

COSTS

5.5

2.3

7.8

1986

21.8

3,250

6.8

3.0

9.8

1987

24.8

3,695

8.3

3.6

11.9

1988

28.0

4,175

10.1

4.2

14.3

1989

31.3

4,670

12.2

4.9

17.1

1990

34.9

5,210

14.7

5.6

20.3

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

0.2

0.3

0.5

0.4

0.6

1.0

0.7

1.0

1.7

1.0

1.5

2.5

1.4

2.2

3.6

1.7

2.9

4.6

REVENUES LESS

New Debt Issues

0

2.7

-0.4

3.1

-0.8

3.8

-1.4

4.6

-2.1

5.5

— o • Z

6.5

2.0

3.6

5.6

COSTS

-4.2

5.0

2.2

4.5

6.7

-5.2

5.9

2.8

5.5

8.3

-6.0

6.7

3.1

6.6

9.7

-7.4

7.6

3.5

7.9

11.4

-8.9

8.8

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-ll. UTAH—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO 1990, IN

MILLIONS OF DOLLARS

CO

1980 1981

New Coal Production (in

Tons per Year)

New Residents

Added Costs

Operating

Budget

Debt Service

Total

2.1

1,410

2.0

—

2.0

Millions

4.6

3,090

4.9

0.7

5.6

1982

of

7.7

5,170

9.0

1.6

10.6

1983

11.5

7,720

14.6

2.8

17.4

1984

16.2

10,875

22.2

4.4

26.6

1985

22.0

1986

26.7

14,765 17,915

COSTS

32.7

6.6

39.3

42.9

9.4

52.3

1987

32.1

21,540

55.7

11.7

67.4

1988

38.4

25,770

71.9

14.4

86.3

1989

45.6

30,600

92.3

17.9

110.2

1990

53.9

36,170

117.8

21.9

139.7

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

1.5

1.1

2.6

3.4

2.7

6.1

5.7

4.9

10.6

8.7

7.8

16.5

12.5

11.8

24.3

17.2

17.4

34.6

REVENUES LESS

New Debt Issues

0.6

10.1

0.5

13.1

0

17.7

-0.9

23.8

-2.3

32.3

-4.7

43.6

21.4

22.8

44.2

COSTS

-8.1

38.2

26.0

29.6

55.6

-11.8

47.4

31.9

38.2

70.1

-16.2

59.7

38.3

49.0

87.3

-22.9

73.7

46.4

62.5

108.9

-30.8

91.8

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-12. WEST VIRGINIA—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION:

TO 1990, IN MILLIONS OF DOLLARS

1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990

New Coal Production (in Millions of

Tons per Year) 2.2 4.4 7.7 10.0 12.4 15.0 16.6 18.1 19.7 21.3 22.9

New Residents 2,685 5,370 8,190 11,015 13,975 17,120 20,400 24,150 28,500 33,460 39,160

Added Costs

Operating

Budget

Debt Service

Total

COSTS

3.3 7.4 12.2 17.8 24.5 32.6 41.9

2.3 4.7 7.5 10.6 14.5 17.9

3.3 9.7 16.9 25.3 35.1 47.1 59.8

REVENUES

53.6 68.3 86.7 109.6

22.2 27.5 34.1 41.9

75.8 95.8 120.8 151.5

New Revenues

Production

Taxes

New Resident

Taxes

Total

3.7

1.8

5.4

7.5

3.9

11.4

13.4

6.4

19.8

17.8

9.3

27.1

22.4

12.7

35.1

27.6

16.8

44.4

31.2

21.6

52.8

34.6

27.6

62.2

38.4

35.2

73.6

42.4

44.6

87.0

46.5

56.4

102.9

REVENUES LESS COSTS

New Debt Issues

2.1

19.1

1.7

20.9

2.9

24.0

1.8

26.3

0

30.3

-2.7

35.3

-7.0

39.7

-13.6

49.0

-22.2

61.5

-33.8

75.7

-48.6

93.9

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.
TABLE A-13. WYOMING—PROJECTED ANNUAL BUDGET IMPACT FROM NEW COAL PRODUCTION: TO

1990, IN MILLIONS OF DOLLARS

cn

1980 1981

New Coal Production (in Millions

Tons per Year) 11.5 24 . 9

New Residents

Added Costs

Operating

Budget

Debt Service

Total

1,145

2.0

2.0

2,475

4.8

1.0

5.8

1982

of

40.4

4,015

8.5

2.2

10.7

1983

58.4

5,805

13.4

3.7

17.1

1984

79.3

7,880

19.7

5.7

25.4

1985

104.0

10,340

COSTS

28.0

8.2

36.2

1986

122.7

12,160

35.6

11.3

46.9

1987

143.3

13,870

43.8

14.9

58.7

1988

166.1

15,695

53.6

17.6

71.2

1989

191.4

17,520

64.6

19.7

84.3

1990

219.3

19,340

77.0

22.4

99.4

REVENUES

New Revenues

Production

Taxes

New Resident

Taxes

Total

16.4

1.3

17.7

36.4

2.9

39.3

60.2

5.1

65.3

88.8

8.0

96.8

122.9

11.8

134.7

164.3

16.7

181.0

197.5

21.2

218.7

235.0

26.1

261.1

279.0

32.0

311.0

327.3

38.4

365.7

381.6

46.0

427.6

REVENUES LESS COSTS

New Debt Issues

15.7

8.1

33.5

10.4

54.6

13.1

79.7

16.7

109.3

21.3

144.8

27.5

171.8

32.1

202.4

22.4

239.8

25.8

281.4

27.8

328.2

30.1

NOTES: Coal production and population figures are cumulative. Minus sign denotes a deficit.