Construction Aggregates and Silica Sand in the Economy of Illinois

Subhash B. Bhagwat

Special Report 5 2016

ILLINOIS STATE GEOLOGICAL SURVEY Prairie Research Institute University of Illinois at Urbana-Champaign Front cover: This quarry (lower center) on Chicago's south side has been overrun by the development of buildings and highways whose existence would not have been possible without crushed stone extracted from this or similar quarries in the area. (Photograph by Joel M. Dexter.)

© 2016 University of Illinois Board of Trustees. All rights reserved. For permissions information, contact the Illinois State Geological Survey. Construction Aggregates and Silica Sand in the Economy of Illinois

Subhash B. Bhagwat

Special Report 5 2016

ILLINOIS STATE GEOLOGICAL SURVEY Prairie Research Institute University of Illinois at Urbana-Champaign 615 E. Peabody Drive Champaign, Illinois 61820-6918 http://www.isgs.illinois.edu Suggested citation: Bhagwat, S.B., 2016, Construction aggregates and silica sand in the economy of Illinois: Illinois State Geo- logical Survey, Special Report 5, 20 p. Contents

Abstract 1 Introduction 1 Study Objectives 5 Methodology 5 The Aggregate Industry of Illinois 7 Downstream or Supply-Driven Effects of the Illinois Aggregate Industry 12 Upstream or Demand-Driven Effects of the Illinois Aggregate Industry 12 Aggregate Mining and the Illinois Environment 17 Summary 18 Acknowledgments 19 References 19 Tables 1 Employment and payroll in Illinois for the aggregate industry and connected industries (2012) 13 2 RIMS II multipliers (2002/2010): Final demand multipliers for Illinois sand, gravel, clay, and ceramic and refractory minerals mining and quarrying (Type II) 15 3 RIMS II multipliers (2002/2010): Final demand multipliers for Illinois stone mining and quarrying (Type II) 16

Figures 1 Crushed stone quarries in Illinois 2 2 Sand and gravel pits in Illinois 3 3 Changes in county populations in Illinois 4 4 How economic multipliers work 5 5 Upstream and downstream multiplier effects 6 6 Simulated costs of aggregate transportation in 2014 6 7 Industries doing business with the aggregate industry upstream and downstream 7 8 Production of stone and sand and gravel in Illinois 8 9 Production of industrial sand in Illinois 8 10 Production of clays and manufacture of portland cement in Illinois 9 11 Prices of construction aggregates in Illinois 9 12 Price of industrial sand in Illinois 10 13 Uses of industrial sand in the United States 10 14 Total value of aggregate production in Illinois 11 15 The construction industry in the Illinois economy 11 16 Share of private housing in the value of the Illinois construction industry 11 17 Upstream economic multipliers of the aggregate industry in Illinois 17

ABSTRACT other facilities essential for modern-day by trucks because geology dictates the societies. Aggregates include primarily location of their occurrence and because It is common to find studies that crushed stone (mostly limestone and other cheaper modes of transportation, describe trends in production, the dolomite in Illinois) and construction such as barges or trains, are often not market value of materials produced, and sand and gravel. Other naturally occur- accessible nearby. As a result of these employment in the aggregate industry ring materials, such as silica sands (also pressures, aggregate mining has been as evidence of the industry’s economic called industrial sands), gypsum, and moving away from urban centers to the significance. Another aspect often clays, are used to manufacture cement outlying regions whenever suitable geo- described is to highlight how the indus- and lime used in construction. Products logic reserves are available. try’s products are used downstream using cement, gypsum, and silica sand, by other businesses in the state, and such as drywall, pipes, ceramics, and Illinois had about 150 producing stone how the downstream businesses would glass, are also used in construction. quarries in 2012. However, in the Chi- suffer without them. Neither approach These are very basic materials, many of cago metropolitan region, for example, provides a complete picture of the real which have been used by humankind two major limestone quarries account economic significance of the aggregate for thousands of years, although the for about 20% of the state’s production, industry because it cannot establish form in which they are used may have whereas a large number of smaller quar- an inescapable dependency on local changed as technologies have developed ries are located in the northwestern aggregates. To remedy the inadequacy to improve the products and construc- counties of the state, away from Metro of traditional studies, the present study tion techniques. Despite these changes, Chicago yet close enough to be able to includes not only the conventional they remain essential to the construc- supply the growing suburban develop- approach, but also the aggregate indus- tion industry because alternative mate- ments (Lasemi et al. 2010; Figure 1). The try’s measurable economic contribu- rials have not been found that would number of stone quarries in Illinois has tions by way of jobs and income in the be affordable enough to allow us to do declined over several decades (Mikulic industry itself, upstream businesses that without them. In fact, with a growing 1989). Since 2000, some 50 more quar- provide goods and services to the aggre- population and a prospering economy, ries have been idled. To keep up with gate industry, and further upstream, the demand for these minerals and the rising demand, the average produc- how the aggregate industry induces jobs materials has steadily grown. tion from the remaining facilities has and income in businesses and social increased over time. Supporting the services essential for the functioning of Illinois produces all the minerals listed geographic migration of stone quarries the communities in which employees above. This study focuses on crushed was the geology of northern Illinois, live. If the aggregate industry in the state stone and construction sand and gravel which has endowed the region with reduces production, the consequences as the dominant materials both by abundant, near-surface stone resources. for upstream businesses are inescap- volume and by their dollar value. Silica In some cases, extraction of deeper able. Unlike the effects on downstream sands have traditionally been used stone deposits from underground mines businesses, the upstream effects are in glassmaking and foundry applica- became feasible, which helped prevent measurable and causally connected to tions. In recent years, a new market has migration. Figure 2 depicts the locations the aggregate industry. With the chain opened up for specialty silica sands of the approximately 115 producing of jobs dependent on the aggregate in the production of oil and natural sand and gravel pits in Illinois. Unlike industry come the jobs and income they gas. Known as “fracking sand” or “frac the stone quarry locations, the sand and generate at each subsequent level. These sand,” these sands of high-purity silica, gravel pits are concentrated in or near direct, indirect, and induced effects, rounded shape, and high strength are the populated counties of northeastern called Type II multipliers, are measured used to fracture oil- and gas-bearing Illinois. Although their number has by the U.S. Bureau of Economic Analy- geologic formations under high hydrau- declined over the decades, the glacial sis. The inclusion of measurable direct, lic pressure and to facilitate the flow of deposits of the area provide for sand and indirect, and induced economic effects, these fuels to the producing wells. gravel resources there and along major in addition to the conventional study rivers, such as the Illinois River, making approach, provides for the first time Modern civilization would be unthink- it unavoidable for sand and gravel to a complete measure of the aggregate able without the aggregates. However, be extracted closer to the populated industry’s economic significance for the there is growing resistance to the northeast. The proximity of sand and state of Illinois. mining of aggregates, in part because of gravel resources to human populations a concern for the environment, but also continues to give rise to resistance to because of the desire not to live in close their mining in some of the most rapidly INTRODUCTION proximity to mining sites. Economic urbanizing areas of the northeast. At the Construction aggregates, aggregates for considerations require that aggregates same time, the demand for and produc- short, are minerals used in the building be used close to their places of mining tion of aggregates are affected by the of roads, highways, airports and run- because transportation costs can easily state of the economy and the financial ways, offices, schools, shopping malls, double the price of aggregates in the markets. Some of the major influencing hospitals, homes, storm and sewage sys- 20- to 50-mile (32- to 81-kilometer) factors are interest rates and the value of tems, railroads, waterways, and many range from the mines (Bhagwat 2000, construction projects (Bhagwat 1989). 2015). Most aggregates are transported

Illinois State Geological Survey Special Report 5 1 !24 2 1E 2 !16 29 3 4 5 7 9 2 3 4 5 6 7 8 9 10 11 12 ! ! ! 18 17 68 !23 BOONE !6 67 ! ! 3 WINNEBAGO ! 79 MCHENRY LAKE 28 ! !4 73 ! 80 !! 91 15 STEPHENSON !51 90! !61 ! 20 23 !68 27 83 28 ! JO DAVIESS ! ! 35 !15 ! 1 ¥94 !45 !87 31! ! ¥90 26 ! 3 !78 11 2 !23 32 ! 93 !33 ! 25 !16 ! N KANE ! 71 72 A !93 COOK 92! DI 42

! I 74 !1 47! 41 24 ! ER M Ð CARROLL 53! !18 !8 34 OGLE 2! 23 !68 DU PAGE 90 !71 DE KALB ¥ !86 40 22 !73 !1 46 39 ! ! AL ! 2 59 P 39 ! !64 ! 47 I Ð

!76 C ! 21 39 78 ¥88 ¥ 35 5 !4 PRIN 38 ! 29 Ð!! ¥294 20 KENDALL Ð 37 14 ! WHITESIDE LEE ! !2 31 19 LA SALLE ! 23! D 36 4 18 HENRY BUREAU ¥80 ! IR TH 2 Ð 12 1 6 !! Ð! !31 35 ! 1 18 ! 16 17 !31 !8 ROCK 6 ISLAND 16 ¥80 34 ! 2 MERCER ! WILL 15 33 6 5 4 3 2 1W 1E !4 7! 6 2 3 4 5 6 7 8 9 10 PUTNAM ! GRUNDY !4 14 32 KANKAKEE

RIDIAN 10 11 12 13 14E E 8 9 13 2 1W 31 1E 2 3 4 5 6 7 12 M MARSHALL 13 11W KNOX STARK ! 14W 2 11E LIVINGSTON WARREN 12 30 !33 IROQUOIS PEORIA 29 !28 N

AL 1 11 74 ! IP ¥ !3 WOODFORD 28

PRINC 10 4 HENDERSO 15 9!! ¥39 ! !22 1! 27 !3 9 MCLEAN ¥57 2 FULTON 26 ! 8 MCDONOUGH HANCOCK 25 ¥55 FORD 7

TAZEWELL 24 6 !1 VERMILION !3 23 3 5 ! H ¥155 4 CHAMPAIGN ! RT 22 U MASON 4 21 FO LOGAN 74 SCHUYLER DE WITT ¥ 3

ADAMS 20 2 1N MENARD PIATT 9 8 BROWN 19 7 6 5 4 3 1W 1 2 CASS ! BASE LIN E !2 MACON 172 18 ¥! 1S Ð 6 17 2 EDGAR MORGAN SANGAMON 72 DOUGLAS 11 43! ¥ PIKE ! 13 12 11 10 9 8 8 9 10 14W 13 12 11W10 42 7 6 5 4 3 2 1W 16 1E 2 3 4 5 6 7 ! 3 MOULTRIE 1 SCOTT 2! CHRISTIAN 15 72 4 ¥ !4 14 SHELBY COLES 27! 5 2 6 !1 ! !37 13 GREENE MACOUPIN CLARK 12 7 4 ! !5 11 CUMBERLAND 8 ! C 1 ALHO 70 3 !1 ¥ !2 10 ! 9 9 6 UN 2 55 ! ¥ FAYETTE ! 10 EFFINGHAM JASPER CRAWFORD 3 JERSEY 11 MONTGOMERY

I 8

MERI 7 12 MADISON BOND ¥70 !1 Ð 6 CLAY 5 RICHLAND LAWRENCE MARION 4

! Limestone/dolomite quarry (surface) CLINTON L

I 3

C Ð ST. CLAIR IN ¥57

Limestone/dolomite quarry (underground) PR 2 WA YNE !! 5 9! 3 3 1N 9 8 7 6 5 SH # 4 2 1W 1E 2 3 4 5 6 7 8 9 10E 14W 12W Sandstone quarry (surface) LINE BASE BA S JEFFERSON D WA 1S AR WASHINGTON W 2 ED !4 D 55 MONROE IR ¥64

¥ TH Interstate highway 3 HAMILTON WH ITE RANDOLPH PERRY Township and range boundaries 4 Ð FRANKLIN County boundary 5

6 JA CKSON SALINE GALLATIN ! 2 7 WILLIAMSON 8

0 10 20 30 40 50 60 70 80 90 100 mi 10 UNION JOHNSON N POPE HARDIN 11 !4 0 20 40 60 80 100 120 140 160 km 3! #12 !2 ¥57 12 !9

!3 13 ! 2 A LE 14 X PULASKI MASSAC AN D ¥24 E R 15 Figure 1 Crushed stone quarries in Illinois. From 16S Miao et al. (2015).

2 58 27 20 2 2 1W 1E 2 3 4 5 6 7 8 !! !! 29N 9 10 11E 1E 87! 2 3 4 5 6 7 8 ! 9 10 11 12 !92 JO DAVIESS STEPHENSON ! 43 1 LAKE 46 90 BOONE ! 28 !11 !12 MCHENRY 9! ! 45 17 !21 27 WINNEBAGO !10 94 44 ¥ ! 87 46 41! 12 26 90 ! 2 !7 !11 ¥ ! 3 !! ! 7 2 ! 43 !2 28 CARROLL 88 22 ! ! ! ! ! 10

25 N 16 46 IA ! COOK

72! D 42

RI 24 DE KALB KANE !95 1 ME ! 41 ¥39 OGLE 2 23 ! ¥90 40 WHITESIDE DU PAGE 22 LEE ! 27 ! 51 AL ! ¥88 39 29 24 68 !89

! 21 ! NCIP 37! ! I ! 82 PR 38 ! 29 5 20 84 ! ¥294 37 31! 19 LA SALLE ! BUREAU 36 !45 18 HENRY 16

HIRD ¥80 ! 12 T KENDALL 52 !77 ! 24 ! 83! ! ISLAND 61 !82 K 17 GRUNDY C ! WILL RO ! 8 16 ¥80 ! ! 1! 9 29 49 6 MERCER ! !47 15 ! 7 33 6 5 4 3 2 7 KANKAKEE 1W 1E 2 3 4 5 6 7 8 9 10 ! PUTNAM N 32

A 14 20 RIDI ! 14E !44 8 9 12 13 13 1W 31 1E 2 3 4 5 6 7 12 ME KNOX 13 11W STARK MARSHALL ON !9 LIVINGST WARREN 12 30 !25 IROQUOIS PEORIA 21 ! 9 ! 29 11 ¥74 19 WOODFORD N 28 4 23 67 ! SO 10 2 !17 ! ¥55 ! ! 29 ¥39 AL ! 27 !54

HENDER CI 9 ! 27 ¥57 34 26 MCLEAN PRIN FULTON ! 8 MCDONOUGH HANCOCK 15 28 25 FORD 7 ! !! 2 ! 36 37 24 !43 6 TAZEWELL 13 70 VERMILION 84 !! 2! 23 5 !1 H ¥155 22 T CHAMPAIGN

U MASON !6 4 80!

FO 4 LOGA N 21 74 SCHUYLER ! DE WITT ¥ 3 ! 38 ! 42 ADAMS 20 14 2 ! ! 73 1 1N MENARD 9 BROWN 19 PIATT 8 7 6 5 4 BASE 3 2 1W CASS LINE MACON 18 ¥172 1S 72 10! 17 ¥ 2 3 UGLAS EDGAR 14 MORGAN SANGAMON DO 11 ! PIKE 13 12 11 10 9 8 7 6 5 ! 7 8 9 10 14W 13 12 11W10 !23 2 1W 16 1E 2 3 4 5 6 3 ! MOULTRIE SCOTT 1 CHRISTIAN 15 ¥72 4 14 SHELBY COLES 5

13 6 GREENE MACOUPIN CLARK 12 7 6! 11 8 ! 7 ¥70 C MONTGOMERY 22 ALHO 96 !! 10 !63 7 9 9 34 U ! CUMBERLAND N 55 ¥ FAYETTE 10 JASPER CRAWFORD JERSEY EFFINGHAM

IA 8 11 3! ID 7

MER 12 BOND MADISON ! ¥70 ! 6 13 80 CLAY 5 LAWRENCE RICHLAND 6 MARION ! ! 6 !6 4 !8

CLINTON L !17 IPA 3

ST. CLAIR !1 NC 57 24! RI ¥

P 2 WA YNE ¥255 3 1N 10W 9 8 7 6 5 4 2 1W 1E 2 3 4 5 6 7 8 9 10E 14W 13 12W ! BASE LINE Sand and gravel pit S JEFFERSON SH 1S BA

WARD WASHINGTON WA 2 ED

RD ¥55 Interstate highway MONROE I ¥64 TH HAMILTON WH ITE 3 75 RANDOLPH PERRY ! Township and range boundaries 4 FRANKLIN County boundary 5 7! !5 6 JA CKSON 7 SALINE GALLATIN WILLIAMSON 8 !2

0 10 20 30 40 50 60 70 80 90 100 mi 10 N UNION JOHNSON POPE HARDIN 0 20 40 60 80 100 120140 160 km 11

12 ¥57 13 MASSAC A 14 LE PULASKI

X AN ¥24 D E 15 R Figure 2 Sand and gravel pits in Illinois. From 16S Miao et al. (2015).

3 Local demographic changes likewise JO DAVIESS STEPHENSON WINNEBAGO BOONE MC HENRY LAKE influence not only the demand, but also the production in specific regions of the 34 8 state. Figure 3 shows in blue the top 10 CARROLL OGLE COOK counties that gained population in the DE KALB KANE 1990–2010 period and in red the top 10 95DU PAGE that lost the most population. The trend WHITESIDE LEE is clearly toward a population shift to the northeast surrounding the city of KENDALL WILL LA SALLE Chicago. The total population of Illi- HENRY BUREAU 1 nois grew by about 12% over the same GRUNDY 2 period (U.S. Census data for 1990 and ROCK ISLAND MERCER 2010; http://www.census.gov, http:// 6 KANKAKEE PUTNAM www.census.gov/population/www/ KNOX STARK MARSHALL LIVINGSTON censusdata/cencounts/files/il190090. WARREN IROQUOIS txt, http://factfinder.census.gov/faces/ PEORIA WOODFORD tableservices/jsf/pages/productview. xhtml?src=CF). The growing population HENDERSON9 MC LEAN FULTON concentration in the northeast could HANCOCK MC DONOUGH FORD cause greater pressure to be exerted TAZEWELL 10 VERMILION against the extraction of limestone and 5 MASON CHAMPAIGN sand and gravel there. The issue is not LOGAN SCHUYLER 7 DEWITT simply the availability of resources, ADAMS but also the protection of the environ- MENARD PIATT ment and the provision of a comfortable CASS MACON lifestyle for the residents. A balance BROWN MORGAN SANGAMON DOUGLAS EDGAR needs to be found between continued PIKE urban expansion, longer commutes, air SCOTT MOULTRIE CHRISTIAN and water quality, and family life. As COLES GREENE MACOUPIN the demographics of the state change, CLARK so must policies to accommodate the CALHOU CUMBERLAND 10 MONTGOMERY changes and reconcile them with social SHELBY and environmental needs. As the pres- FAYETTE N JERSEY EFFINGHAM JASPER sure mounts to move surface production away from communities, underground MADISON BOND extraction of aggregates can sometimes CLAY CRAWFORD RICHLAND LAWRENCE be cost effective as well as acceptable MARION to citizens. Even though underground CLINTON ST. CLAIR extraction usually costs more than sur- WAYNE S WABASH

8 D face extraction, the savings in transpor- JEFFERSON

WASHINGTON WAR tation costs can make it economically D MONROE E feasible (Bhagwat et al. 2002). 7 HAMILTON WHITE RANDOLPH PERRY In addition to citizen concerns about FRANKLIN 6 living in immediate proximity to mining JACKSON operations, concerns have been raised SALINE GALLATIN WILLIAMSON by individuals and groups regarding 2 the acreage affected by pits and quar- 02040 60 mi ries. Stone quarries and sand and gravel UNION JOHNSON POPE HARDIN N pits usually affect small areas and lend 0 50 100 km 4

themselves more readily to postmining A L reclamation and use than areas affected EX 1 PULASKI MASSAC AND by coal surface mines. Many of the ER 3 former sites of stone and sand and gravel mining now hold water and serve as recreational lakes or preferred locations for Figure 3 Changes in county populations in Illinois. Gains are shown in blue and housing and other construction. Percep- losses in red. Data from the U.S. Census for 1990 and 2010 (http://www.census. tions and preferences do differ, however, gov). on the timing of such a transformation,

4 Special Report 5 Illinois State Geological Survey Creates new New Businesses use jobs in businesses pit/quarry pit or quarry serving quarry or products to and increases expansion produce other purchasing of an old goods or services power one

Increases demand Innovations make for auxiliary area a growth services such as center stores, hospitals, schools, etc.

Generates more May attract skilled May attract new local tax revenues labor force to area industries

Figure 4 How economic multipliers work. resulting in disputes and court litiga- fore critical to provide insight into the for the average reader, how the aggre- tion. As a result, coordination of mining economic role the industry plays in the gate industry touches most sectors of and land-use planning has acquired state. The objectives of the study include the economy and quantifies its impact urgency, especially in the northern an overview of the economic value of where possible. regions of the state of Illinois. Along with aggregates, the industries that provide new uses for naturally mined miner- goods and services to the aggregate The primary benefit of the growth of a als, new concerns have emerged that industry, the industries that use the business or industry is that it creates deserve attention, as in the case of the aggregates, and the weight these carry jobs. The payroll of the industry is a frac sands (sands used in the hydraulic in the overall economy of the state of direct economic benefit. Beyond these fracturing of rock formations to enhance Illinois. At each stage in the mining, direct benefits, goods and services are the production of oil and gas) because processing, and utilization of the aggre- purchased from providers in the region, of an observed correlation between gates, more value is added to the econ- which helps create more jobs and more increased oil and gas production and omy, more jobs are created, and more wealth. These secondary or indirect earthquakes. revenue is generated to the governments benefits, along with the primary ben- at all levels to fulfill their obligations to efits, contribute value to the economy On the positive side, the aggregate the citizens in education, health, safety, through consumption of food, cloth- industry plays an important role in and economic prosperity. ing, appliances, cars, and houses. In the local as well as the state economy. addition, services are required, such as The most obvious benefits are the jobs schools, hospitals, police, firefighters, directly created in the extraction of METHODOLOGY and many others, to maintain the infra- minerals. Additional economic benefits This study of the role of mineral aggre- structure. All these activities create jobs accrue as a consequence of the loca- gates in the economy of Illinois is based and further contribute to the economy. tion of the industry. Societal decision on several decades of data. Even though The activity may result in attracting a making must weigh the sum total of some of the data are incomplete, the skilled labor force and new businesses benefits against the costs to the society. great value of what is available is rec- to the area and promoting innovations. This study is intended to highlight the ognized and utilized in this study. For It may also attract businesses that use as economic role of the aggregate industry example, some commercial operators input products delivered by the aggre- in Illinois through all its direct and indi- and most seasonal private operators do gate industry. These benefits are tertiary rect significance to the state. not report production or employment or induced. Together, the direct, indi- figures. Small private sand and gravel rect, and induced contributions to the economy are called multipliers (Figure STUDY OBJECTIVES operations as side businesses by land- owners, for example, generally require 4). The non-fuel minerals industry in gen- no permits and remain unreported. eral and the aggregates in particular are The national input–output (I-O) data Despite some of the problems with the provide detailed accounts of the direct, of fundamental economic significance available data, valuable trends are dis- to Illinois. At the same time, there are indirect, and induced effects on the cernable and insightful observations gross economic product, employment, equally important environmental and are possible regarding the role of the social concerns regarding their conser- and value added (http://bea.gov/indu industry in the economy of Illinois. This try/io_annual.htm). These data sets are vation, extraction, and use. It is there- study highlights, in a manner plausible

Illinois State Geological Survey Special Report 5 5 Induced Spending by employees of the aggregate industry and suppliers of goods and services

Types of Goods and services multiplier Indirect purchased for Upstream effects operating business Demand driven

Direct Wages and benefits paid to employees, taxes paid; profits distributed

Illinois aggregate industry

Aggregates supplied to industries that need them to conduct their Downstream businesses, and the indirect and Supply driven induced economic activities from them

Figure 5 Upstream and downstream multiplier effects.

12 Figure 6 Simulated costs of aggregate transportation in 2014 (from Bhagwat 2015). For Crushed stone price 10 any distance (x-axis), add the transportation cost shown on the y-axis to the original aggregate cost (cost at the extraction site) to 8 Sand and gravel price get the total cost per ton for the commodity. on) For example, at 22 miles (35 kilometers), the ic t

tation cost 6 transportation cost is $7/ton. The total cost of sand and gravel aggregate will therefore be

($/metr 4 the cost of aggregate at the pit (currently aver- anspor

Tr aging about $7/ton) plus a $7/ton transporta- 2 tion cost. Thus, sand and gravel aggregate will cost $14/ton at 22 miles (35 kilometers) from the source. Crushed stone costs more, about 0 $10/ton. Thus, for crushed stone aggregate, 0 3 8 13 18 23 28 33 38 43 48 the total cost will be $20/ton about 46 miles Distance (miles) (74 kilometers) from the source. used to assess the multiplier effects of it can be argued that in the absence study using simulation as well as pro- the Illinois aggregate industry. Such of the Illinois aggregates, the down- jection of previously reported costs multipliers are also called “demand- stream industries could procure the using the Consumer and Producer driven multipliers” or “upstream multi- required aggregates from somewhere Price Indexes (CPI and PPI; Bhagwat pliers.” On the downstream side of the else. In reality, however, such alterna- 2015). As Figure 6 indicates, the cost aggregate industry are those industries tive sources have additional costs and of truck transportation can double the and businesses that use the aggregates may not always be feasible to obtain. consumer bill at 20 to 50 miles (32 to to produce other goods, objects, and ser- The main additional cost is the trans- 81 kilometers) distance from the point vices (Figure 5). portation cost. Aggregates are relatively of extraction. For example, sand and low priced but have to be trucked to the gravel are currently valued at about $7 The existence of the downstream busi- point of use. The cost of transportation per metric ton at the pit. Transporting it ness activity is not exclusively tied to by truck was estimated in a separate 22 miles (35 kilometers) to the point of the Illinois aggregate industry because

6 Special Report 5 Illinois State Geological Survey Upstream (demand driven) Downstream (supply driven)

1. Agriculture, forestry, fishing, and hunting 1. Construction base material, concrete, 2. Mining asphalt, tarmac, paving blocks, bricks, pipes, 3. Utilities roofing, shingles, fiberglass insulation 4. Construction 2. Water filtration 5. Manufacturing 3. Winter road traction, railroad ballast 6. Wholesale trade 4. Glassmaking, ceramics, metallurgical flux, 7. Retail trade chemicals, paints 8. Transportation and warehousing 5. Foundry applications Multiplier 9. Information 6. Abrasives, polishing materials effects of 10. Finance and insurance 7. “Fracking” in oil and gas production aggregate 11. Real estate and rental and leasing 8. Flood control mining and 12. Professional, scientific, and technical services 9. Fiber-optic communication and quarrying 13. Management of companies and enterprises electronic chips 14. Administrative and waste management services 10. Sulfur removal in power plants, acid 15. Educational services water treatment and fire retardants in 16. Health care and social assistance mines 17. Arts, entertainment, and recreation 11. Agricultural soil treatment, additives 18. Accommodation to poultry feed 19. Food services and drinking places 20. Other services 21. Households

Figure 7 Industries doing business with the aggregate industry upstream and downstream.

its consumption costs an additional $7. be easily expressed in numbers in ways THE AGGREGATE The consumer thus pays $14 for one ton. that upstream effects can be. In short, * Likewise, crushed stone is priced about take away the supply of Illinois aggre- INDUSTRY OF ILLINOIS $10 per metric ton at the quarry, and gates and we may change the entire Illinois construction aggregate produc- transportation by truck would add $10 composition of the economy, not only tion—stone, and sand and gravel—has more at a distance of about 46 miles (74 in Illinois but also in surrounding states shown some interesting ups and downs kilometers), thereby doubling the cost and possibly in the entire nation. This over the past decades, primarily related to the consumer. Considering that up to study, therefore, walks you through the to how the overall economy was doing 10% of construction project costs are the economy as aggregates move from pits at the time (Figure 8). A distinct decline costs of aggregates delivered to project and quarries to other uses in order to in production can be seen during the sites (Bhagwat 1991), it is critical to keep illustrate qualitatively how the supply- economic recessions around 1980, in transportation costs as low as possible. driven multiplier or the downstream the early 1990s, and after 2008. The multiplier works. economic crisis since 2008 has affected Possible alternatives to truck transport aggregate production the most, with exist where river barges or train con- Figure 7 depicts the types of indus- stone production down from nearly 80 nections are available. However, unlike tries and businesses connected to the million metric tons to about 45 million trucking, barges and trains usually aggregate industry upstream and down- metric tons. In the years prior to 2008, involve multiple modes of transporta- stream, that is, industries and busi- stone production generally trended tion in which trucks remain an essen- nesses that sell goods and services to the upward despite the longer recovery tial mode. Multimodal transportation aggregate industry and those that buy period after the 1980s recession. This has involving transloading also increases the aggregates themselves. The lists may not been the case with sand and gravel costs and imposes a limit on how far not be exhaustive because the ripple production, which in 1971 reached its aggregates can be transported eco- effects continue throughout the econ- highest production in recent decades. nomically. As a result of the geographic omy but remain unquantified. As indi- The most recent decline in sand and limitations on how far away from the cated in Figure 7, even the documented gravel production appears to have set in source of extraction the aggregates can effects on either side of the aggregate almost 4 years before the 2008 recession economically compete in the market- industry cover a wide swath of the econ- even though the construction industry place, it is evident that many down- omy, as is evident from the I-O accounts began the slowdown in 2008. It is pos- stream buyers of Illinois aggregates by the U.S. Bureau of Economic Analysis sible that the decline from 2004 to 2008 can be considered dependent on them (BEA) referenced later. may be more consistent with the past even though this dependency cannot

*Production and value data from http://www.usgs.gov/energy_minerals/ (data courtesy of the U.S. Geological Survey).

7 90 Stone 80 Sand and gravel 70

ons 60

ic t 50 40 30 Million metr 20 10 0 12 973 982 985 991 994 1970 1 1976 1979 1 1 1988 1 1 1997 2000 2003 2006 2009 20 Year

Figure 8 Production of stone and sand and gravel in Illinois. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/minerals/pubs/ myb.html), courtesy of the U.S. Geological Survey.

9 8 7 ons 6 ic t 5 4 3

Million metr 2 1 0 10 12 14 972 978 980 982 984 986 990 992 994 19701 197419761 1 1 1 1 19881 1 1 199619982000200220042006200820 20 20 Year

Figure 9 Production of industrial sand in Illinois. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/minerals/pubs/myb.html), courtesy of the U.S. Geological Survey. fluctuations in production and may have Historically, clays played an important steady price increases for stone as well little to do with the crisis that followed role in the aggregate industry. However, as sand and gravel since 1970. that period. production began to decline after 1974 and reporting ceased after 2005. Port- An even more dramatic price increase Industrial sand traditionally has been land cement, which is manufactured is displayed for silica sands (Figure 12) used in the manufacture of glass and from naturally mined products and as a result of market growth in the oil in foundries. In the past 6 years, spe- is used in the construction industry, and gas sector. Industrial sand prices cialty industrial sand has found a strong displayed a downturn similar to stone rose from about $20 to more than $60 market in the oil and gas industry to production (Figure 10). per metric ton in the 6 years since 2008. fracture oil- and gas-containing geologic The nationwide consumption pattern for formations by pumping sand, water, and The decline in production since 2008 silica sands (Figure 13) shows the rapid special chemicals under pressure to dra- was in response to declining demand, increase in demand for fracking, now matically increase production (Figure 9). and this trend helped to maintain profit- accounting for about two-thirds of the able price levels. Figure 11 illustrates the total demand and rising.

8 Special Report 5 Illinois State Geological Survey 3.5 Clays Portland cement 3.0

2.5 ons

ic t 2.0

1. 5

Million metr 1. 0

0.5

0.0

12 979 982 985 991 994 1970 1973 1976 1 1 1 1988 1 1 1997 2000 2003 2006 2009 20 Year

Figure 10 Production of clays and manufacture of portland cement in Illinois. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/ minerals/pubs/myb.html), courtesy of the U.S. Geological Survey.

12 Stone Sand and gravel 10

8 n

ic to 6 $/metr 4

12 979 982 985 991 994 1970 1973 1976 1 1 1 1988 1 1 1997 2000 2003 2006 2009 20 Year

Figure 11 Prices of construction aggregates in Illinois. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/minerals/pubs/myb. html), courtesy of the U.S. Geological Survey.

9 80.0 70.0 60.0 n 50.0 ic to 40.0 30.0 $/metr 20.0 10.0 0.0 10 12 14 972 978 980 982 984 986 990 992 994 19701 197419761 1 1 1 1 19881 1 1 199619982000200220042006200820 20 20 Year

Figure 12 Price of industrial sand in Illinois. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/minerals/pubs/myb.html), courtesy of the U.S. Geological Survey.

120

es 100 ar 80 of sh 60 age t 40 en rc

Pe 20

0 5 7 1 5 6 0 1 199 1996 199 1998 1999 2000 200 2002 2003 2004 200 200 2007 2008 2009 201 201 2012 2013 2014 Year

Glassmaking Foundry Abrasives Frac king Building products Other

Figure 13 Uses of industrial sand in the United States. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/minerals/pubs/myb.html), courtesy of the U.S. Geological Survey.

As a result of the 2008 economic crisis, $30 billion to the state’s gross domes- uted about 38% to the total value of the the total value of industrial minerals tic product (GDP) in 2008 and that its Illinois construction sector in 2005. A produced in Illinois, which had reached share of GDP approached 5% in 2004 recovery has been evident since 2009 $1.2 billion in 2006–2007, declined before residential construction began (Figure 16). The higher than average substantially after the 2008 economic to decline. Since 2010, in part because unemployment rate in Illinois has been crisis. The concurrent onset of a boom of stimulus by the U.S. government, a major contributor to the decline and in demand for fracking sand raised the the value contributed by the construc- slow recovery of the private construc- total value once again to $1.1 billion in tion industry and its share in the state’s tion market as demand for housing 2013, with industrial sand alone leading economy stabilized and has begun an has slowed. With the reduction in with $0.5 billion (Figure 14). upward trend. unemployment and continued low mortgage interest rates, the prospects The future of the aggregate industry is Federal spending on construction for a demand recovery for construction equally dependent on how the construc- mostly benefits infrastructure proj- aggregates in the next 5 years appear tion industry fares. Figure 15 illustrates ects. Equally important is the private to be optimistic. With the support of a that construction contributed more than construction sector, which contrib-

10 Special Report 5 Illinois State Geological Survey 1,400 1,200 1,000 n 800

$ m illio 600 400 200 0 8 0 6 1970 1972 1974 1976 197 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 200 2002 2004 200 2008 2010 2012 Year Portland cement Clays Silica sand Stone Sand and gravel

Figure 14 Total value of aggregate production in Illinois. From U.S. Geological Survey Minerals Year Book (http://minerals.usgs.gov/minerals/pubs/myb.html), courtesy of the U.S. Geological Survey.

35 Illinois construction GDP 6 30 Share of construction GDP 5 25 4 20 3 15 $ billionn 2 10 centage of Illinois GDP 1 r

5 Pe

0 0 10 12 14 982 984 986 990 992 994 1 1 1 1988 1 1 1 1996 1998 2000 2002 2004 2006 2008 20 20 20 Year

Figure 15 The construction industry in the Illinois economy. From U.S. Bureau of Economic Analysis (http://www.bea.gov/itable/index.cfm).

40 35 30 alue 25 20 15 centage of v

r 10

Pe 5 0

12 982 985 991 994 1970 1973 1976 1979 1 1 1988 1 1 1997 2000 2003 2006 2009 20 Year

Figure 16 Share of private housing in the value of the Illinois construction industry. From U.S. Census Bureau (https://www.census.gov/construction/c30/ historical_data.html).

11 strong demand for industrial sand in The total number of people employed the access to Lake Michigan and the the oil and gas market and a recovery in in 2012 in the selected downstream major rivers in Illinois, and its proximity the construction market, it is conceiv- sectors outside the aggregate industry to Indiana offer consumers the oppor- able we may see the total value of Illi- and its supporting businesses listed in tunity to explore aggregate purchases nois aggregates reach $1.5 billion in the Table 1 was 227,130, or 46 times higher from outside Illinois. No data are avail- next 5 years. However, state and federal than in the industry itself. The payroll able to ascertain whether such traffic funding of the infrastructure programs in the listed sectors that consume the takes place and how much occurs. On remains a source of uncertainty. aggregates amounted to $14.2 billion, the other hand, any possible reduc- or 80 times the size of the payroll of the tion in the cost of transportation could aggregate industry and its supporting work both ways and open up potential Downstream or Supply-Driven businesses. Columns 6 and 7 of Table 1 markets for Illinois aggregates outside Effects of the Illinois Aggregate show, respectively, the ratios of employ- Illinois as well. Past production data Industry ment and payroll of the aggregate indus- indicate a steadily rising trend in Illinois As depicted in Figure 7, the products try to the other sectors. Columns 8 and 9 production, tracking the rising demand of the aggregate industry are used in show the employment and payroll ratios in the state and possibly outside Illinois. a diverse range of industries, many of of sectors downstream from employ- The Illinois aggregate industry thus which are parts of or closely associated ment and payroll in the aggregate plays a significant role in the viability of with the construction industry. These industry and its supporting businesses. downstream industries. are products such as glass windows, The construction industry is predomi- nant in that it employs 36.8 persons for bricks, pavement blocks, pipes, fiber- Upstream or Demand-Driven optic cables, fiberglass insulation, and each person employed by the aggregate roofing shingles. Outside the wider con- industry and its supporting businesses, Effects of the Illinois Aggregate struction field, aggregates are also used and the payroll of the construction Industry in agriculture for soil conditioning and industry is 40.8 times larger. Unlike the downstream effects, a poultry feed. Limestone is used in coal causal relationship exists between the Substantial revenues are generated for mining as a fire retardant and as a treat- aggregate industry in Illinois and its the state and local governments as a ment for acid water, and in coal-burning economic effects on the state’s GDP as result of the payrolls of the downstream power plants it is used to remove sulfur well as the number of jobs dependent sectors. It is instructive to consider the from flue gases. Limestone is also used on the aggregate industry. To capture state income tax generated even if after in papermaking. In oil and gas extrac- the causal relationships quantitatively deductions only half of the $14.2 billion tion, specialty sands are used in the and use them for analytical and policy payroll were taxable in Illinois. In recent fracturing of reservoir rock. Foundries decisions, the BEA within the U.S. years, the state income tax rate has been use sand to make molds, and water and Department of Commerce maintains a flat 5% of taxable income. Beginning sewage treatment plants use sand and comprehensive I-O data on the U.S. January 2015, it was reduced to 3.75%. gravel. Table 1 provides an overview of economy. The concept behind the I-O Each of these sectors in turn exerts both selected major economic sectors that approach, first expounded by Was- upstream and downstream economic use aggregates or products made from sily Leontief in the 1930s and 1940s, is multipliers of its own, making further them; also listed are the number of the idea that each product or service contributions to the state’s economy. people employed in these sectors and requires the “consumption” of other their payrolls. As explained earlier, downstream eco- products and services up and down the nomic connections cannot be strictly economic chain. A change in any one In 2012, the nonmetallic mining and interpreted as causative. Consequently, of the inputs—cost, quantity, quality, quarrying sector in Illinois, which pri- the U.S. BEA does not calculate or and so forth—has an effect throughout marily consists of aggregates and the publish downstream or supply-driven the economy. The establishment of such supporting businesses, employed 4,903 economic multipliers. Yet the cost of I-O tables requires a detailed classifica- persons, 2,236 of whom were in support transporting aggregates is high in relation of products and services, as well activities related to mining (Table 1). For tion to the Free On Board (F.O.B.) price as the identification of branches of the every person employed in the extraction of aggregates, thus restricting the geo- economy in which they are produced business, another 0.8 person found a job graphic radius within which buyers of and consumed. Furthermore, indi- in a business that served the extraction aggregates actually tend to make their vidual establishments associated with business. The payroll in the mining and purchases. Consumers located near the the production and consumption of the quarrying sector alone amounted to borders with adjoining states or those goods and services need to be identified. $165 million. These are direct economic with access to cheaper modes of trans- Details of how this is done are available contributions. The annual payroll for portation, such as a direct connection in Concepts and Methods of U.S. Input- support services amounted to $120 mil- to barge transportation or a dedicated Output Accounts, published by the BEA lion, which counts as indirect contribu- rail connection, may be able to resort to in 2006 and updated in 2009 (Horowitz tions to the economy. The direct benefits alternative sources of aggregates from and Planting 2006/2009). are discussed in detail quantitatively in other states. In Chicago, for example, the section on upstream multipliers.

12 Special Report 5 Illinois State Geological Survey 1. 14 3.15 2.29 0.22 0.65 0.38 0.16 0.98 40.83 Payroll activities: others activities: 1.47 1.47 3.44 2.39 0.21 0.49 0.40 0.14 0.98 36.81 Employment Ratio mining + supportingRatio 1. 0 1. 11 1.69 0.7 5.4 4.0 2.0 0.364 0.65 0.28 ratio 70.5 Payroll Payroll 1. 0 1.81 0.8 6.3 4.4 2.7 0.38 0.9 0.74 0.26 67.7 Employ- ment ratio 1 accessed June 27, 2016). 27, accessed June , 60,426 46,506 107,449 ($1,000) 120,132 165,088 183,890 278,819 898,235 653,395 326,488 Annual payroll payroll Annual 11,646,515 686 7,190 ment 4,817 2,667 2,236 1,006 2,406 1,969 11,727 16,861 Employ- 180,468 11 54 112 117 112 No. of No. 184 184 194 160 251 596 28,087 establishments 10 73 45 98 111 211 109 193 159 453 firms No. of No. 27,895 http://www2.census.gov/econ/susb/data/2011/us_state_6digitnaics_2011.txt Employment and payroll in Illinois for the aggregate industry industries (2012) and connected the aggregate in Illinois for and payroll Employment

Sector mining and minerals Nonmetallic quarrying Support mining activities for Construction manufacturing Paper product mineral Nonmetallic manufacturing Foundries extraction Oil and gas coal Bituminous coal underground mining and other systems sewage, Water, and roofing, Asphalt paving, manufacturing material saturated and adhesive coating, Paint, manufacturing Data source: U.S. Census Bureau ( Bureau Census U.S. source: Data 1 Table 1 Table

13 Using the I-O tables, the BEA calculates The multipliers used here are Type II; industry. The direct effect of wages paid the effects of growth or decline in one that is, they show the direct, indirect, in the sand and gravel sector is captured industry on gross output, value added, and induced effects of the aggregate by the bottom number in column 6 of earnings, and employment in indus- industry. Table 2 presents the multipliers Table 2. This number is $2.4144. Accord- tries that supply goods and services to between the sand and gravel industry ing to footnote 6, this means that each the industry under consideration. This in the state and the rest of the economy. dollar paid out to employees of the sand effect is called the upstream or demand- The multipliers for the stone industry are and gravel industry adds $2.41 to all driven multiplier effect. The multipliers presented in Table 3. the households in the state, including are available at both the national and the households of the employees them- regional levels. In the present study, Listed down the first column in Tables selves. In other words, the households we are interested in the multipliers 2 and 3 are industry sectors that supply outside the sand and gravel industry of the aggregate industry in Illinois. goods and services to the respective get $1.41. The examples here show that The Regional Input-Output Modeling aggregate sector. In column 2 are the not only do the production and price of System (RIMS) estimates two types of multipliers affecting the values of out- aggregates matter, but also the level of multipliers RIMS-I (Type I) and RIMS- puts in the sectors listed in column 1. wages paid in the aggregate industry II (Type II). The BEA manual (Bess and Column 3 shows the multipliers for when it comes to the effect on earnings Ambargis 2011) describes the difference earnings in those sectors, and column 4 of all households in Illinois. as follows: lists the multipliers for the employment effects. Column 5 lists the multipliers Identical calculations for the stone Type I multipliers account for the for value added to the economy by these industry in Illinois based on Table 3 data direct and indirect impacts based on sectors. The last number in each column show a total earnings multiplier of 0.596 how goods and services are supplied represents the sum of all multipliers in (column 3, bottom number), which at within a region. Type II multipliers the column. The direct multiplier effects the current price of crushed stone of $10 not only account for these direct on earnings and employment are listed per metric ton translates into household and indirect impacts, but they also at the bottom of columns 6 and 7. incomes of 0.596 × $10 = $5.96 for each account for induced impacts based ton of stone sold. This includes wages on the purchases made by employ- To properly interpret the numbers in paid to stone industry employees. Like- ees. (p. 7) Tables 2 and 3, it is necessary to pay wise, the direct earnings effect (column close attention to the footnotes that 6) is $2.4686. This means that for $1 in The direct, indirect, and induced follow the tables (see pages 15 and 16). wages earned by an employee in the impacts are explained earlier in the First, a basic observation about the stone industry, an additional $1.47 of study (see Figure 5). Type II multipliers: They include the income is generated for other house- direct economic effects, which begin holds in Illinois. The BEA cautions about the use of these with the aggregate industry employ- multipliers: ing people to produce the aggregates. The other relevant use of multipliers RIMS II multipliers are created to Thus, an employment multiplier of 2.0 pertains to employment. In column 4 estimate the total impacts result- implies that when the aggregate indus- of Table 2, the total employment multi- ing from incremental changes in try employs one person, it generates one plier for the sand and gravel industry is final demand. Because the model is additional job, resulting in the multi- 12.2305. This represents the total change based on existing industry relation- plier of 2.0. in the number of jobs in all industries ships, they are not very well suited to within the state for each additional With this in mind, we illustrate the million dollars of sand and gravel sold estimate the total contribution of an multiplier effect for earnings, defined in industry to a local economy. (p. 15) (footnote 4). In 2013, about $123 million footnote 3 as “the total dollar change in worth of sand and gravel was sold from The addition or elimination of the indus- earnings of households employed by all Illinois pits. With the multiplier, this try changes the entire structure of the industries within the state for each addi- translates to 12.2305 × 123 = 1,504 jobs, economy. They are, however, useful indi- tional dollar of output delivered to the including those in the pits. The direct cators of the importance of changes in final demand,” in this case, by the sand employment multiplier (Table 2, bottom the industry for employment and earn- and gravel industry. of column 7) is 2.8594. This represents ings in the region. Following the BEA The total earnings multiplier at the the change in the number of jobs in advice, this study presents all four of the bottom of column 3 in Table 2 is 0.6207. all industries within the state for each multipliers of the aggregate industry to When 1 metric ton of sand and gravel is additional job in the sand and gravel provide insight into the magnitude of produced and sold in Illinois at its cur- industry (footnote 7). Every job in the its potential for the Illinois economy but rent value of $7, it contributes 0.6207 × $7 sand and gravel industry creates 1.86 focuses on earnings and employment = $4.35 to household earnings in Illinois, additional jobs. effects. including the households of individuals employed by the sand and gravel

14 Special Report 5 Illinois State Geological Survey

paid

delivered to to delivered t delivered to t delivered 2.8594 delivered to final demand final to delivered (no. of jobs) (no. delivered to final demand by the demand by final to delivered Direct-effect employment Direct-effect

for each additional dollar of output additional each for dollar of earnings additional each for Output Modeling System (RIMS II), Regional Product Product (RIMS II), Regional Output Modeling System - 2.4144 (dollars) for each additional dollar of output additional each for for each additional million dollars of outpu million dollars additional each for within the state within the state Direct-effect earning Direct-effect for each additional dollar of output additional each for 5 within the state for each additional job in the selected industry. job in the selected additional each for all industries

output data and 2010 regional data. data. regional and 2010 output data within the state within the state - within the state within the state 1.2328 0.0015 0.5363 0.0454 0.0039 0.0571 0.0384 0.0390 0.0378 0.0294 0.0899 0.1111 0.0693 0.0535 0.0276 0.0056 0.0434 0.0055 0.0042 0.0146 0.0185 0.0008 Value added Value within the state 4 in all industries in all industries in all industries in all industries 0.0157 4.5812 0.1422 0.0583 0.6503 0.2498 0.8005 0.5027 0.1845 0.8257 0.5485 0.6411 0.3195 0.7659 0.1234 0.7359 0.1563 0.0578 0.4806 0.2863 0.1043 12.2305 that occurs that occurs Employment of households employed by of households employed that occurs that occurs

that occurs 3

0.0006 0.2732 0.0151 0.0029 0.0327 0.0178 0.0203 0.0236 0.0118 0.0472 0.0143 0.0462 0.0345 0.0176 0.0040 0.0330 0.0032 0.0019 0.0089 0.0111 0.0008 0.6207 Earnings 2 1.0661 Final demand multipliers for Illinois sand, gravel, clay, and ceramic and refractory minerals mining and quarrying (Type II) mining and quarrying minerals and refractory (Type and ceramic clay, Illinois sand, gravel, for demand multipliers Final 0.0040 0.0766 0.0079 0.1772 0.0568 0.0596 0.0776 0.0542 0.1516 0.1554 0.1037 0.0862 0.0425 0.0098 0.0708 0.0089 0.0064 0.0280 0.0363 2.2796 Output

dollar change in output dollar change of jobs change in number added in value dollar change of jobs in all industries change in number dollar change in earnings dollar change all industries by of households employed in earnings dollar change

RIMS II multipliers (2002/2010): RIMS II multipliers

The Type I multipliers account for the direct and indirect impacts based on the supply of goods and services in the region. The Type II multipliers account for these same direct and these same direct account for II multipliers Type The of goods and services impacts based on the supply in the region. and indirect the direct account for I multipliers Type The the total Each entry in column 2 represents the total Each entry in column 3 represents the total Each entry in column 4 represents the total Each entry in column 5 represents the total Each entry in column 6 represents the total Each entry in column 7 represents Sector and fishing, forestry, Agriculture, hunting Mining Utilities Construction Manufacturing trade Wholesale trade Retail and warehousing Transportation Information and insurance Finance and leasing and rental estate Real and scientific, Professional, servicestechnical Management of companies and enterprises and waste Administrative management services Educational services and social assistance Health care Arts, entertainment, and recreation Accommodation services Food and drinking places Other services Households Total 1 Input Regional Source: employees. made by with the purchases associated which are induced impacts, and for impacts, indirect Division, Bureau of Economic Analysis, U.S. Department of Commerce. 2002 U.S. benchmark input 2002 U.S. Department of Commerce. U.S. Analysis, of Economic Division, Bureau 2 industry. selected 3 industry. the selected demand by final 4 dollars. year demand should be in regional final to the output delivered data, based on regional are multipliers Because the employment industry. the selected demand by final 5 industry. the selected by 6 industry. the selected by households employed to directly 7 Table 2 Table

7 paid

delivered to to delivered

delivered to final final to delivered 2.7347 delivered to final demand final to delivered (no. of jobs) (no. delivered to final demand by the demand by final to delivered Direct-effect employment Direct-effect

for each additional dollar of output additional each for dollar of earnings additional each for Output Modeling System (RIMS II), Regional Product Product (RIMS II), Regional Output Modeling System - 1 (dollars) 2.4686 for each additional dollar of output additional each for for each additional million dollars of output million dollars additional each for within the state within the state for each additional dollar of output additional each for Direct-effect earnings Direct-effect 5 within the state for each additional job in the selected industry. industry. job in the selected additional each for all industries

output data and 2010 regional data. data. regional and 2010 output data within the state within the state - within the state within the state 1.2556 0.0014 0.5913 0.0388 0.0037 0.0482 0.0349 0.0376 0.0558 0.0279 0.0839 0.1054 0.0600 0.0510 0.0265 0.0054 0.0417 0.0052 0.0040 0.0139 0.0182 0.0008 Value added Value within the state in all industries in all industries 4 in all industries in all industries 0.0148 4.8561 0.1211 0.0544 0.5347 0.2275 0.7709 0.7829 0.1747 0.7664 0.5245 0.5573 0.3043 0.7512 0.1183 0.7075 0.1482 0.0554 0.4595 0.2785 0.1001 that occurs that occurs 12.3083 Employment of households employed by of households employed that occurs that occurs

that occurs 3

0.0005 0.2605 0.0129 0.0027 0.0272 0.0162 0.0195 0.0366 0.0111 0.0439 0.0142 0.0400 0.0328 0.0171 0.0038 0.0318 0.0031 0.0019 0.0085 0.0109 0.0008 0.5960 Earnings 2 Final demand multipliers for Illinois stone mining and quarrying (Type II) mining and quarrying Illinois stone (Type for demand multipliers Final 1.0796

0.0037 0.0647 0.0073 0.1485 0.0517 0.0574 0.1126 0.0515 0.1418 0.1491 0.0895 0.0821 0.0404 0.0094 0.0680 0.0085 0.0062 0.0268 0.0357 2.2345 Output dollar change in output dollar change of jobs change in number added in value dollar change of jobs in all industries change in number dollar change in earnings dollar change all industries by of households employed in earnings dollar change

RIMS II multipliers (2002/2010): RIMS II multipliers

The Type I multipliers account for the direct and indirect impacts based on the supply of goods and services in the region. The Type II multipliers account for these same direct and these same direct account for II multipliers Type The of goods and services impacts based on the supply in the region. and indirect the direct account for I multipliers Type The the total Each entry in column 2 represents the total Each entry in column 3 represents the total Each entry in column 4 represents the total Each entry in column 5 represents the total Each entry in column 6 represents the total Each entry in column 7 represents Sector and fishing, forestry, Agriculture, hunting Mining Utilities Construction Manufacturing trade Wholesale trade Retail and warehousing Transportation Information and insurance Finance and leasing and rental estate Real and scientific, Professional, servicestechnical Management of companies and enterprises and waste Administrative management services Educational services and social assistance Health care Arts, entertainment, and recreation Accommodation services Food and drinking places Other services Households Total 1 Input Regional Source: employees. made by with the purchases associated which are induced impacts, and for impacts, indirect Table 3 Table benchmark input 2002 U.S. Department of Commerce. U.S. Analysis, of Economic Division, Bureau 2 industry. selected 3 industry. the selected demand by final 4 dollars. year demand should be in regional final to the output delivered data, based on regional are multipliers Because the employment industry. the selected demand by 5 industry. the selected by 6 industry. the selected by households employed to directly 7

16 Employment

$1 million worth of 1 additional job in the aggregates sold aggregate industry generates 12.2 to generates an additional 12.3 jobs in Illinois, 1. 74 to 1.86 jobs in the including those in rest of Illinois. the aggregate industry.

Earnings Source: Fotolia. $1 worth of aggregates $1 in wages paid to workers sold generates $0.60 to in the aggregate industry Figure 17 Upstream economic mul- $0.62 in wages for all generates an additional tipliers of the aggregate industry in workers in Illinois, $1.41 to $1.47 in wages Illinois. including those in the to workers in the rest of aggregate industry. Illinois.

In the Illinois stone industry, the above are 1.74 (stone) and 1.86 (sand tually approach the mining sites as cities employment multiplier is 12.3083 (Table and gravel). The data collection and grow and suburbs are developed. When 3, bottom of column 4). This means cross-verification system of the BEA is this happens, the location of mines near that $1 million worth of stone sold cre- highly elaborate and has been in place human habitation becomes undesirable ates 12.3083 jobs in the state (footnote for decades. It would therefore be safe to because of the truck traffic; the per- 4). In 2013, about $447 million worth conclude that the multiplier-based job ceived or real problems of dust, noise, of crushed stone was sold, resulting in estimates can be trusted. and vibrations; and the unsightliness of 12.3083 × 447 = 5,502 jobs in the state, mining operations. Particularly in the including those employed in stone As seen earlier, the earnings created densely populated northeastern coun- extraction. The direct employment mul- in the rest of the Illinois economy for ties of Illinois, this phenomenon has tiplier for the Illinois stone industry in every $1 of wages paid in the aggregate resulted in the closing down of quarries column 7 of Table 3 is 2.7347. This signi- industry amount to $1.41 (sand and and pits over decades and the concen- fies that for each job in the stone indus- gravel) and $1.47 (stone). Once again, a tration of more production from fewer try, an additional 1.74 jobs are created in comparison with Table 1 data shows that remaining operations (Mikulic 1989). Illinois (footnote 7). the payroll of the nonmetallic mining These remaining operations mine from and quarrying industry in Illinois is $165 deeper deposits and are often bounded The number of jobs created in and million. The resultant payrolls in the rest by housing right at their edges. Eventu- outside sand and gravel pits (1,504 in of the Illinois economy would be about ally, the deep and closely encircled pits total) and stone quarries (5,502 in total) $240 million annually. The earnings and and quarries will cease to operate, either adds up to 7,006 jobs. The data in Table employment multiplier effects measured because their reserves are exhausted or 1 show an employment figure of 2,667 upstream from the Illinois aggregate because public opinion does not permit in nonmetallic minerals mining and industry are summarized in Figure 17. continued operation. The interplay of quarrying in Illinois in 2012. Employ- economic necessity of mineral materials ment numbers for 2013 are not available; for continued and competitive growth however, the 2013 employment number Aggregate Mining and the Illinois Environment on one hand, and environmental or could have been lower because of the aesthetic concerns on the other will lower production. In addition, the data The mining of aggregates mostly takes ultimately decide the future of mining in Table 1 are subject to some inaccura- place in open pits and quarries. For rea- in many areas of the state. If most quar- cies as a result of reporting problems. sons of transportation economics, but ries and pits near human habitation are It can be concluded that approximately also for environmental reasons, mining closed, where will the aggregates in the 4,339 jobs are directly the result of 2,667 locations are within relatively short future come from and at what cost? jobs in the aggregate industry; that is, for distances from the locations of aggre- every person employed in the aggregate gate consumption. Ironically, the very The increased use of recycled construc- industry, 1.63 additional jobs are sup- objects built with the mined materi- tion materials, especially from road ported in Illinois. Comparable numbers als—homes, commercial and industrial surfaces, is a partial substitute for derived from the RIMS II multipliers buildings, roads, and highways—even- natural mined materials. Recycling is

Illinois State Geological Survey Special Report 5 17 environmentally desirable and often lion square feet of space underground in sphere of confidence among the individ- economically viable. However, high- limestone formations near Kansas City, ual and corporate citizens of Illinois. quality recycled quantities are limited Kansas, where major manufacturers and and are unlikely to completely replace warehouse businesses operate (ht t p:// mined materials. www.huntmidwest.com/subtropolis/). SUMMARY Large underground spaces in stone Every industry has an economic effect One attempt to answer this dilemma in deposits offer geologically stable envi- on several other industries because of recent decades comes from the idea of ronments. Their deep locations mean the goods and services it purchases from mining crushed stone by underground nearly constant year-round tempera- them or sells to them. This is called the methods similar to those used in coal tures of 50 to 55 °F, which minimize the “multiplier effect.” The former group of mining. Several underground stone need for seasonal heating and cooling. industries are “upstream,” whereas the mines operate in Illinois, and the future If such locations are in the middle of latter are “downstream” from the indus- may see many more of them as demand industrial or commercial areas, they try concerned. In this case, the industry grows while at the same time mining become ideal warehouse locations as concerned is the aggregate industry sites become scarce because of urban well as manufacturing sites. The long- in Illinois. These economic effects are development. It is estimated that cur- term revenue streams that could be called multipliers because jobs are rently about one-sixth ($100 million in generated from the underground use of created or supported and incomes are value) of Illinois’ aggregates come from space contribute to payment of some of generated. The effects are categorized as underground mines. Stone is mined the higher mining costs. direct, indirect, and induced. deep in the ground in operations invis- ible from the surface. Underground In the end, a need exists for a compre- Only the upstream effects can be reliably mining increases the cost of mining, in hensive study of the ways to optimally considered as caused by the aggregate part because extraction rates decrease, use the available resources of construc- industry because without the Illinois but also because underground mining tion aggregates and arrive at a balanced aggregate industry as a customer, these restricts the size of equipment used solution because their economic signifi- specific business transactions would not and requires added health and safety cance for Illinois is crucial and vital. An take place. The direct effects are those measures. An ISGS model economic important prerequisite to achieve this within the aggregate industry itself, that study has indicated, however, that the goal is to have complete knowledge of is, the people it employs and the wages cost increase is expected to be marginal where the resources are, their quality, they earn. The indirect effects consist of and probably acceptable in the current and how large they are. The only way employment and wages in businesses market environment (Bhagwat et al. to obtain this knowledge is to study the that supply goods and services to the 2000). The limiting factors in under- state’s geology and create maps for the aggregate industry, and the induced ground stone extraction are geology and decision makers at all levels of society. effects are those further upstream, such market price. Land-use decisions made in the absence as in sectors that serve the suppliers and of such knowledge entail the risk that provide other services, such as schools, Some mitigating economic factors make potential resources could be made per- hospitals, housing, police, and fire pro- both open pits or quarries and under- manently inaccessible. An ISGS study tection. The BEA collects such data in ground extraction attractive when one has documented the economic payout detail, compiles them, and calculates considers the postmining uses of land. of geologic mapping to the society the multiplier factors on regional and For example, the large lakes created at (Bhagwat and Ipe 2000). An additional national levels for industries, and then the open pits and quarries offer excellent requirement in Illinois is the develop- makes them available to researchers and recreational and water sport sites. The ment of uniform guidelines for the policy makers. land surrounding these lakes also offers extraction of minerals that balance the desirable housing locations, thereby social, environmental, and economic Although the BEA recognizes that mul- contributing to the enhancement of land needs in the long term. At present, tiplier effects exist downstream from values in the area. Likewise, in the Chi- land-use decisions are in the purview industries as well, no multiplier factors cago area, open pits resulting from stone of local authorities. As a result, deci- are calculated because the causal con- mining are used as overflow catchments sions are often influenced by short-term nection between the buyer and seller for the storage of storm and sewer water considerations and subjective factors cannot be established. For example, before treatment and disposal. Water while ignoring the society’s long-term in the Illinois aggregate industries, it bodies also tend to attract birds. Some interests. is indisputable that the construction species stay in the area year round, industry in Illinois would not exist with- whereas others are migratory. If properly Finally, it must be recognized that active out the supply of aggregates, but the managed, the same water bodies can participation of the aggregate industry aggregates need not necessarily come serve as habitats for fish. is essential if policies of the future are from an Illinois source. In reality, it is to be in the overall interest of Illinois. evident that a majority of businesses in Another concept of postmining land use Industry participation in funding as the state’s construction industry pur- is to develop underground spaces for well as execution of research to foster chase Illinois aggregates because it is commercial and industrial uses. The real sustainable resource extraction can con- the most economical source for them. estate company Hunt Midwest has 6 mil- tribute to the development of an atmo- Therefore, an economic multiplier does

18 Special Report 5 Illinois State Geological Survey exist downstream as well, even though it power plants use lime and limestone ACKNOWLEDGMENTS is not numerically determined. to remove sulfur from smokestacks. This study was made possible by the gen- Foundries use sand to make molds, and erous funding provided by the Illinois To fully explain the economic multi- agricultural uses include lime for con- State Geological Survey (ISGS) within plier effect of Illinois’ aggregate indus- trolling soil acidity and supplementing the Prairie Research Institute at the Uni- tries—crushed stone, sand and gravel, poultry feed. and silica sands—this study uses the versity of Illinois at Urbana-Champaign. multipliers from the BEA to quantify and The nonmetallic mining industry in The author is greatly indebted to Dr. interpret the upstream employment and Illinois, primarily the aggregate indus- Zakaria Lasemi (ISGS), Dr. Brian Herger income effects. This study also provides try, employs more than 4,900 persons, (Northern Illinois University, DeKalb), elaborate data on the aggregate indus- nearly half of whom work in busi- and Dr. Jason C. Willett (National Min- tries, as well as on industries that use nesses directly supporting the mining erals Information Center, U.S. Geologi- the aggregates. It also tracks the trends operations. Together, their payroll in cal Survey, Reston, Virginia) for their over several decades. The employment 2012 exceeded $280 million. Other valuable input and suggestions. Thanks in downstream industries that use Illi- downstream businesses listed above also go to Susan Krusemark (ISGS) for nois aggregates and the wages they paid employed more than 227,000 persons her editorial sharpness and efficiency make a major economic contribution to in 2012. For every person employed and Mike Knapp for drafting and the Illinois that, although not quantified by in the aggregate industry, about 46 final layout. I owe special thanks to Dr. the BEA statistics, is very real. others are employed in the downstream Madan M. Singh of the U.S. Geologi- industries that use aggregates in one cal Survey for his guidance during the The economic crisis in 2008 affected form or another. Their annual payroll review process of the study. the aggregate industry seriously as con- exceeded $14.2 billion, or 80 times that struction activity declined precipitously. of the aggregate industry. Most of the Crushed stone production declined from downstream employment and payroll REFERENCES 78 million metric tons in 2007 to 45 mil- is in the construction industry itself. Bess, R., and Z.O. Ambargis, 2011, lion metric tons in 2013. Sand and gravel The tax revenues generated as a result Input-output models for impact production likewise declined from 32 to of the $14.2 billion payroll alone make analysis: Suggestions for practitioners 18 million metric tons. Portland cement a significant contribution to the state’s using RIMS II multipliers: Washing- production fell by two thirds. However, budget. Continued significant economic ton, DC, U.S. Department of Com- both the production and price of indus- benefits accrue to Illinois communities merce, Bureau of Economic Analysis. trial sand increased significantly as a as a result of the spending by recipients Bhagwat, S.B., 1989, Modeling the con- result of the rising demand for frac sand. of the payrolls as the ripple effect of struction aggregates demand and Consequently, despite the declining payrolls and spending by auxiliary busi- supply: A Chicago Area case study: value of traditional aggregates, the total nesses continues. value of all non-fuel minerals in 2013 Paper presented at the 23rd Forum on was about $1.1 billion, as compared with The upstream economic multiplier the Geology of Industrial Minerals, $1.2 billion in 2007. As the construction effects of the Illinois aggregate industry Aurora, Illinois, May 1987. (Proceed- industry recovers from the crisis, sup- can be quantitatively and causatively ings published as Illinois Minerals ported by low interest rates, the produc- attributed to the Illinois aggregate Note 102, Illinois State Geological tion of crushed stone, sand and gravel, industry as summarized below: Survey.) and portland cement is expected to Bhagwat, S.B., 1991, Economics of indus- recover. If the demand for frac sand con- Employment effects: trial rocks and minerals in construc- tinues to remain strong, employment • 12.2 to 12.3 jobs are created in Illi- tion—Two case studies in road con- in the non-fuel minerals industry may nois, including those in the aggre- struction: U.S. Bureau of Mines and increase, thereby increasing the positive gate industry, for each $1 million U.S. Geological Survey, Midcontinent multiplier effect on the Illinois economy. worth of aggregates sold. Industrial Minerals Workshop, St. Downstream from the Illinois aggregate • 1.74 to 1.86 additional jobs are cre- Louis, Missouri, September 16–17. and other non-fuel minerals industry ated in Illinois for every single job Bhagwat, S.B., 2000, Industrial minerals are an array of businesses, many of in the aggregate industry. in Illinois: A key to growth: Illinois which are related to the construction Earning effects: State Geological Survey. industry. Beyond construction itself, • $0.60 to $0.62 in wages is paid to they include the manufacture of cement, Illinois workers, including those Bhagwat, S.B., 2015, Cost of transporta- glass, bricks, pavement blocks, pipes, in the aggregate industry, for every tion of construction aggregates in insulation, and roofing shingles. Aggre- $1 worth of aggregates sold. Illinois, in Z. Lasemi, ed., Proceed- gates, specifically some specialty sands, ings of the 47th Forum on the Geology are used in the oil and gas industry for • $1.41 to $1.47 in wages is paid to of Industrial Minerals: Illinois State rock fracturing. Coal mines use lime- workers outside the aggregate Geological Survey, Circular 587 (in stone as a fire retardant, and coal-fired industry for every $1 paid in wages press). to aggregate industry workers.

Illinois State Geological Survey Special Report 5 19 Bhagwat, S.B., and V.C. Ipe, 2000, Value Horowitz, K.J., and M.A. Planting, Miao, X., Z. Lasemi, D.G. Mikulic, and of geologic quadrangle maps of 2006/2009, Concepts and methods of M. Falter, 2015, Directory of Illinois Kentucky: Illinois State Geological U.S. input-output accounts: Wash- mineral producers, and maps of Survey, Special Report 3. ington, DC, U.S. Department of Com- extraction sites: Illinois State Geo- merce, Bureau of Economic Analysis. logical Survey, Circular 584, 81 p. (in Bhagwat, S.B., Z. Lasemi, and M.T. press). Dunn, 2002, Economic feasibility Lasemi, Z., D.G. Mikulic, R.E. Hughes, of underground mining of stone in T.J. Kemmis, S.B. Bhagwat, and K.S. Mikulic, D.G., 1989, Chicago’s stone southwestern Illinois: Paper pre- Keith, 2010, Illinois industrial miner- industry: A historical perspective, in sented at the 38th Forum on the Geol- als, in D.R. Kolata, Geology of Illinois: R.E. Hughes and J.C. Bradbury, eds., ogy of Industrial Minerals, St. Louis, Illinois State Geological Survey, p. Proceedings of the 23rd Forum on Missouri, April 28–May 3. 309–322. the Geology of Industrial Minerals: Illinois Geological Survey, Illinois Minerals Note 102, p. 83–89.

20 Special Report 5 Illinois State Geological Survey