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This is to certify that the

thesis entitled

SOME IMPACTS ON RESOURCE USE BY
THE NOODPULP INDUSTRY IN MANISTEE COUNTY

presented by

Joseph Diamond

has been accepted towards fulfillment
of the requirements for

Doctor of Philosophy degree in Resource Development

 

 

Major professor

Datej/7/77

07639

 

 

 

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SOME IMPACTS ON RESOURCE USE
BY THE NOODPULP INDUSTRY
IN MANISTEE COUNTY

By

Joseph Evan Diamond

A DISSERTATION
Submitted to
Michigan State University

in partial fulfillment of the requirements

for the degree of

DOCTOR OF PHILOSOPHY

Department of Resource Development

1977

ABSTRACT
SOME IMPACTS ON RESOURCE USE

BY THE NOODPULP INDUSTRY
IN MANISTEE COUNTY

By

Joseph Evan Diamond

The objectives of the study are: to assess some of the locational
advantages of woodpulp firms in Michigan, and to evaluate a set of
economic alternatives for the woodpulp industry and other sectors in
Manistee County using an input-output model.

The locational portion of the study looked at the three major
determinants of woodpulp location: access to timbersheds, water avail-
ability and marketing potential. The second part of the study utilizes
a county input-output model derived from secondary sources. The data
reduction technique used treats imports and exports as a residual and
final demands are taken from other secondary data.

Research findings are that Packaging Corporation of America, the
woodpulp firm located in Manistee County, is a very solid company from
a locational perspective compared to other Michigan companies. It has
good access to timbersheds in the central region of the Lower Peninsula
and sufficient water for a hypothetical plant expansion of one-third of
its present capacity. PCA is a subsidiary of Tenneco, one of the top
twenty largest industrial companies according to Forture Magazine. It
produces corrugated medium which has a steadily growing national market

and is integrated into carton box production with other PCA-owned plants.

Joseph Evan Diamond

'The relative distance to key Midwestern markets when compared to other
‘woodpulp companies in the northern Lower Peninsula is good.

The reduction technique used in this study allowed the input-
output model for the State of Michigan to be reduced to Manistee
County. A transaction table, technical coefficients and output, income
and unemployment multipliers were developed for Manistee County using a
15 sector input-output model. The output and income multipliers were
within reasonable ranges when compared with other studies using primary
data collection techniques. Furthermore, a procedure to include
economic-ecologic linkages was outlined. More data is needed to show
the full range of economic-ecologic trade-offs by use of environmental
multipliers. The economic input-output portion of this study can be
used as a basis for a linear programming land allocation model that can
predict possible land-use shifts which have important land-use policy
implications.

Detailed recommendations are made in the final chapter. They in-
cluded the need for specific goals if input-output analysis were util-
ized for public policy, the desirability of greater economic definition
of sectors for Manistee County, use of regional input-output studies
for setting guidelines in community development studies, advantages and
disadvantages of secondary data for regional input-output studies,
and guidelines for a hybrid regional input-output model by collection

of primary data-for household, retail, import and export sectors.

ACKNOWLEDGMENTS

I am deeply indebted for the assistance and encouragement
received from a number of people. Without their help, this work
could not have been completed.

Special thanks is due to Dr. Chappelle, Chairman of the Guidance
Committee. He initiated the study, retained the faith in my ability,
provided me with many important comments and was a fine editor.

Professors Dersch, Kruger and Farness served on my committee. I
appreciate their helpful comments and reading of my dissertation.

Ray Pfeifer and Al Boelter of the Michigan Department of Natural
Resources' Forestry Division lent me their valuable time. They provided
me with helpful suggestions and information. Bob Davis and Steve Cole
of Packaging Corporation of America made available data from the Filer
Mill in Manistee County.

Programming assistance was done by Nelson Bolyard. Peter Niehoff
gave me many useful suggestions. Lillian and Bertram, my parents, kept
my determination to finish this dissertation strong through their
interest.

An finally, I want to thank Dona Maria Gustafsson for her
editorial assistance and the sharing of my feelings of frustration and

accomplishment during the crucial last stages of my work.

ii

Chapter
I.

II.

III.

TABLE OF CONTENTS

INTRODUCTION .......................

Problem Statement ..................
The Study Area ....................
The Study Region ...................
The Description of the Study Region .........
Objectives of the Study ...............
Research Methods and Hypothesis ...........
Research Procedures .................

THE HISTORY AND DEVELOPMENT OF WOODPULP MILLS IN MICHIGAN.

Past Characteristics of Michigan Pulp Mills .....
Current Mills in Operation ...........
The Employment and Economic Importance of
Michigan Pulp Mills .............
Michigan' 5 Woodpulp Locational Advantages and
Disadvantages ................
Michigan's Wood Supply for Noodpulp Mills is
Surveyed and Analyzed-~PCA's Competitive
Advantage .....................
Availability of Timber by Volume and Species
for Integrated Hoodpulp Mills in Michigan . .
Michigan Stumpage Prices and Pulpwood Volumes as
an Indicator of PCA's Relative Locational
Advantage Among Michigan Integrated Pulp
Mills .......................
Water Requirements for Integrated Pulp Mills and
Pollution Impacts .................
Marketing Advantages and Disadvantages of PCA
Compared to Other Woodpulp Mills in Michigan . . .

SOCIO-ECONOMIC DESCRIPTION OF MANISTEE COUNTY .......

Location .......................
Economic History ...................
Human Resources ............ ' .......
Population ...................

- Miscellaneous Information ............
‘Income and Employment ..............
Sectorial Analysis ......... ‘ .........
Manufacturing ..................

7
11

11
15

17
22

26
26

46
57
63
71

71
71
73
73
74
74
82
82

Trade . . . . . . . . . ....... . 82

Financial Institutions. . . , . . ........ 86
Housing. . . . ................. 86
Transportation ...... . . . . ........ 88
Communication .................. 90
Energy Availability ............... 90
Land Use by Resource ................. 92
Agriculture ................... 92
Forestry ..................... 95
Minerals ..................... 96
Eco—System Impacts ................ 96
IV. A CASE STUDY: MANISTEE COUNTY AND PACKAGING CORPORATION

OF AMERICA'S IMPACT ON RESOURCE USE ........... 98

Formation of an Input-Output Model for Manistee
County Using Secondary Data Methods ........ 98
Why Use an Input-Output Model .......... 98
The Basic Input-Output Model Utilized ...... 99

The State Input-Output Model for Michigan . . . . 100

The Reduction Process to the County Level . . . . 101

County Gross Output Calculations Outlined . . . . 106

Area Final Demands ................ 106

The Area Transaction Table ............ 107

Treatment of Exports and Imports as a Residual. . 108
Results of the County Input-Output Model: A Brief

Description of the Multiplier Analysis Used . . . . 108
The Output, Income and Employment Multipliers

for Manistee County .............. 110
Some Hypothetical Multiplier Impacts in
Manistee County ................ 122
Changes in the Level of Output .......... 122
Case 1: Plant Closing ............ 125
Case 11: Plant Expansion .......... 125
Income Effect ................ 126
Employment Effect .............. 126
Environmental Impacts .............. 126
Construction of an Economic-Ecologic Model
as an Aid for Environmental Planning ..... 128

Examples of Some Distributional Impacts from

a Hypothetical Plant Expansion in Manistee

County .................... 132
Distributional Impacts of a Change in Timber

Stumpage Sales: A Hypothetical Example . . . . 134
Analysis of Potential Land Use Changes ...... 138
Conclusions: Multiplier Analysis is a Result

of Demand Shifts in Input- Output Analysis. . . 139

V. CONCLUSIONS AND RECOMMENDATIONS .............. 141
Major Conclusions ................... 141

The Advantages of Using Secondary Data for Regional
Input- Output Analysis ............... 143

iv

APPENDIX 1.

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX

APPENDIX
APPENDIX

2.

10.

11.

12.

13.

14.
15.

Disadvantages of Regional Input—Output Analysis

Using Secondary Data. . . . . . . . . . . . . . . 147
Limitations of Input- -Output Analysis in Its

Application to Regional Impact Studies. . . . . . . 148
Alternatives to Regional Input-Output Analysis . . . . 150
The Future Use of Similar Input-Output Analysis

for Regional Studies ................ 151
CLASSIFICATION OF PAPER AND ALLIED PRODUCTS INDUSTRY . 157
STRUCTURE OF PAPER AND ALLIED PRODUCTS INDUSTRY

GROUP #26 . .................... 161
THE MAJOR ECONOMIC CHARACTERISTICS OF PAPER

MANUFACTURING ................... 162
ACTIVE WOODPULP MILLS IN THE LAKE STATES BY LOCATION,

TYPE OF PULP PRODUCED, AND CAPACITY, 1974 ..... 166
PACKAGING CORPORATION OF AMERICA LETTER TO SELLERS

OF PULPNOOD .................... 169
ALTERNATIVE SOURCES OF MICHIGAN STUMPAGE VALUES. . . . 171
TOTAL PULPWOOD PRODUCTION FOR MICHIGAN FOR THE UPPER

AND LOWER PENINSULA 1960 TO 1974, STANDARD

CORDS (ROUGH) ................... 172
IMPLICATIONS OF USING ASPEN IN PULPING OPERATIONS. . . 173
WOODPULPING WATER REQUIREMENTS AND 5-DAY BOD

DISCHARGES ..................... 175
VALUE-ADDED PER DOLLAR 0F GROSS OUTPUT AND VALUE-

ADDED PER EMPLOYEE, CHARLESTON, SOUTH CAROLINA

STUDY AREA, 1968. . . .- .............. 177
THE ECONOMIC-ECOLOGIC MODEL WITHIN A LEONTIEF GENERAL

PRODUCTION SYSTEM ................. 179
THE DIRECT ENVIRONMENTAL IMPACT OF A DOLLAR INCREASE

IN OUTPUT BY SECTORS FOR MANISTEE COUNTY, 1970. . . 181
DIRECT ENVIRONMENTAL IMPACTS FOR A DOLLAR INCREASE BY

SECTOR FOR MANISTEE COUNTY, 1970 .......... 182
MANISTEE COUNTY VALUE-ADDED MATRIX FOR 1970 ...... 183
DIRECT ENVIRONMENTAL IMPACTS PER DOLLAR OF LOCAL

INCOME FOR MANISTEE COUNTY, 1970. ......... 184

BIBLIOGRAPHY ............................ 185

V

Table

0 oo \1 Ch (fl-#0) N

H H
H O
O C

12.
13.
14.
15.
16.

17.
18.

19.

LIST OF TABLES

HISTORICAL TRENDS IN MICHIGAN AND NATIONAL PRODUCTION

(THOUSANDS OF TONS) ...................
MICHIGAN PRODUCT CAPACITIES AND NATIONAL GROWTH OUTLOOK,

1968 (TONS PER DAY) ....................
MICHIGAN WOODPULP MILLS BY PULPING PROCESS, 1961 .......
ACTIVE MICHIGAN PULPMILLS FOR 1974 ..............
1961 PLANT CAPACITY FOR PULP MILLS CURRENTLY LOCATED IN

MICHIGAN .........................
SUMMARY OF EXPANSION OF PLANT CAPACITY FOR MICHIGAN PULP

MILLS FROM 1961 TO 1974 ...................
EMPLOYMENT IN MICHIGAN PAPER AND ALLIED PRODUCTS INDUSTRY,

1954-1966 (THOUSANDS OF JOBS) ...............
EMPLOYMENT IN MICHIGAN PAPER AND ALLIED PRODUCTS INDUSTRY,

1965 AND PROJECTED TO 1995 (THOUSANDS OF MAN-YEARS). . . .
PAYROLL, VALUE-ADDED AND CAPITAL EXPENDITURES IN MICHIGAN'S

PAPER AND ALLIED PRODUCTS INDUSTRY, 1954-1973 .......
LIST OF MICHIGAN INTEGRATED PULP MILLS, PARTICLEBOARD

PLANTS AND PRINCIPAL TREE SPECIES USED FOR PRODUCTION. . .
PULPWOOD GROWING-STOCK GROWTH, ALLOWABLE CUT, AND ACTUAL

CUT IN MICHIGAN, BY SPECIES GROUP AND SURVEY DISTRICT,

1966 (THOUSANDS CORDS) ..................
APPROXIMATE ANNUAL SURPLUS OF PULPWOOD SPECIES IN

MICHIGAN, 1967-68 (THOUSANDS OF CORDS) ..........
DISTRIBUTION OF COMMERCIAL FOREST LAND OWNERSHIP IN MICHIGAN

FOR 1966 (OWNERSHIP DISTRIBUTION IN PERCENT) .......
MICHIGAN PULPWOOD PLANTS USING DIFFERENT SPECIES OF WOOD

FOR PULPING IN 1974 ....................
MICHIGAN PULPWOOD PRODUCTION BY ORIGIN AND DESTINATION,

1970-1974 (THOUSANDS OF STANDARD CORDS) ..........
MICHIGAN PULPWOOD PRODUCTION BY FOREST SURVEY UNIT AND

DESTINATION BY STATE, 1974 (HUNDRED STANDARD CORDS:

ROUGHWOOD BASIS) ................... . .
NUMBER OF PLANTS RECEIVING PULPWOOD FROM UPPER MICHIGAN

COUNTIES, 1969 ......................
1970 MICHIGAN PULPWOOD PRODUCTION FOR COUNTIES WITH AN

INTEGRATED PULP MILL OR PARTICLEBOARD PLANT BY SELECTED

SPECIES STANDARD CORDS (ROUGH) ROUNDWOOD ONLY. . . . . . .
RANKINGS FOR ASPEN AND PINE TOTAL PULPWOOD PRODUCTION

FOR MICHIGAN COUNTIES WITH AN INTEGRATED PULP MILL OR

A PARTICLEBOARD PLANT, 1970. . . . . . ...... . . . .

vi

19
20
21
21
23
27

28
31
32
39
44

44
4s

49

51

20k
21.

22.

39.
4o.
42:
43.
44.
45.
46.
47.

48.
49.
50.
51.

52.

RELATIVE CAPACITY OF PULP MILLS IN MICHIGAN IN 1974. . . . . 52
PCA' S NEIGHBORING COUNTIES, ASPEN AND TOTAL PULPWOOD

SRODUCTION IN 1970 STANDARD CORDS (ROUGH) ROUNDWOOD

NL , . . . 53

CHAMPION INTERNATIONAL‘S NEIGHBORING COUNTIES‘ ASPEN AND

TOTAL PULPWOOD PRODUCTION IN 1970 STANDARD CORDS (ROUGH)

ROUNDWOOD ONLY. . . . . . . . . . . . . . . . . . . . . 55
ABITIBI'S NEIGHBORING COUNTIES' ASPEN AND TOTAL PULPWOOD

PRODUCTION IN 1970 STANDARD CORDS (ROUGH) ROUNDWOOD ONLY. 55
WATER REQUIREMENTS FOR SELECTED PULPING PROCESSES. . . . . . 58
AREAS OF WATER FOR MICHIGAN COUNTIES WITH A PULP MILL. . . . 58

COMPARATIVE WASTE DISCHARGE. . . . . . . . ....... 61
ANTICIPATED POLLUTION ABATEMENT COSTS. . . ......... 62
ANTigggATED POLLUTION ABATEMENT COST IMPACT ON PRICES 64
DISTANCES TO MAJOR MARKETS FOR MICHIGAN PULP MILLS ..... 65
MICHIGAN PULP MILLS, PRODUCT PRODUCED AND STANDARD

INDUSTRIAL CLASSIFICATION NUMBER FOR 1970 ........ 67
MARKETING CONSIDERATIONS FOR MICHIGAN PULP MILLS FOR 1970. . 68
COMMENTS ON INTEGRATED MICHIGAN PULP MILLS FOR 1970 ..... 69
POPULATION IN MANISTEE COUNTY AND THE CITY OF MANISTEE

FROM 1940 TO 1970 .................... 73
PERSONAL INCOME IN MANISTEE COUNTY 1959, 1965, AND 1968. . . 75
TOTAL EARNINGS BY MAJOR SOURCE - 1969 ............ 76
EMPLOYMENT BY ACTIVITY IN MANISTEE COUNTY - 1970 ...... 77
PACKAGING CORPORATION OF AMERICA PRODUCTION AND EMPLOYMENT -

1953 TO 1973 ....................... 79

MANISTEE CIVILIAN LABOR FORCE, UNEMPLOYMENT AND EMPLOYMENT
IN MICHIGAN, BY BROAD INDUSTRIAL CATEGORY AND COUNTY OR

AREA: 1969 TO 1972 (AVERAGE OF 12 MONTHLY FIGURES) . . . 79
PRODUCTION OF WOODPULP, PAPER AND PAPERBOARD IN MICHIGAN

AND THE UNITED STATES: 1960-1971 ............ 80
TOTAL EMPLOYMENT IN MANISTEE, MICHIGAN FROM 1940-1970. . . . 83
SOME MANUFACTURING DATA FOR 1958,1963 AND 1967 ....... 85
SELECTED MANISTEE COUNTY TRADING STATISTICS FOR 1963

AND 1967 ......................... 87
MANISTEE MANUFACTURING--1963 AND 1967 ............ 89
STATEMENT OF TRAFFIC AT MANISTEE HARBOR, MICHIGAN ...... 91
FREIGHT TRAFFIC, 1967, MANISTEE HARBOR, MICHIGAN

(SHORT TONS) ....................... 91
AGRICULTURE ECONOMIC PROFILE, 1959 AND 1964. . ....... 93

ACRES OF LAND OWNED BY THE MICHIGAN DEPARTMENT OF NATURAL
RESOURCES AND THE U. S. FOREST SERVICE IN MICHIGAN, BY

COUNTY: JUNE 30,1971 .................. 95
1963 STATE OF MICHIGAN TRANSACTION TABLE IN $(OOO) ..... 102
TRANSACTIONS MATRIX FOR MANISTEE COUNTY IN 1970 ....... 111

MATRIX OF TECHNICAL COEFFICIENTS FOR MANISTEE COUNTY IN 1970 114
TYPE I AND TYPE II INCOME MULTIPLIERS FOR MANISTEE COUNTY,

1970, . . ...... . . . . 117
MATRIX OF INTERDEPENDENCY COEFFICIENTS FOR MANISTEE COUNTY

IN 1970 ......................... 118

vii

53
54.

55.
56.
57.

58.
59.

60.

61.

62.

63.

64.
65.
66.
67.
68.
69.
70.

OUTPUT MULTIPLIERS FOR MANISTEE COUNTY IN 1970. . . . . . . . 121

TYPE I AND TYPE 11 EMPLOYMENT MULTIPLIERS FOR MANISTEE

COUNTY IN 1970. . . . . . . . , . , . . . . . . , . . 123
RANKING OF TYPE I AND TYPE II EMPLOYMENT MULTIPLIERS FOR

MANISTEE COUNTY IN 1970. . . . . . . . . . . . . . 124
THE DIRECT ENVIRONMENTAL IMPACT OF A DOLLAR INCREASE IN

OUTPUT BY SECTORS FOR MANISTEE COUNTY, 1970. . ...... 130
DIRECT ENVIRONMENTAL IMPACTS FOR A DOLLAR INCREASE BY

SECTOR FOR MANISTEE COUNTY, 1970. . . . ........ 130
MANISTEE COUNTY VALUE- ADDED MATRIX FOR 1970 ..... . . 131
DIRECT ENVIRONMENTAL IMPACTS PER DOLLAR OF LOCAL INCOME

FOR MANISTEE COUNTY, 1970 ................ 131
DISTRIBUTIONAL IMPACTS WITHIN MANISTEE COUNTY GIVEN A

CHANGE IN SECTOR 6, PAPER AND ALLIED PRODUCTS

INDUSTRY'S ANNUAL TRANSACTIONS .............. 133
DISTRIBUTIONAL IMPACTS WITHIN MANISTEE COUNTY GIVEN A

CHANGE IN SECTOR 2--FORESTRY AND FISHERIES INDUSTRY'S

ANNUAL TRANSACTIONS .................... 135
DISTRIBUTIONAL IMPACTS OF AN INCREASE IN TIMBER SALES FOR

MANISTEE COUNTY IN SECTOR 6, PAPER AND ALLIED PRODUCTS

INDUSTRY'S ANNUAL TRANSACTIONS .............. 137
DISTRIBUTIONAL IMPACT AND TYPE I MULTIPLIER IMPACTS OF AN

EXPANSION IN THE AGRICULTURAL INDUSTRY FOR MANISTEE

COUNTY .......................... 140
ACTIVE WOODPULP MILLS IN THE LAKE STATES BY LOCATION,

TYPE OF PULP PRODUCED, AND CAPACITY, 1974 ......... 166
TOTAL PULPWOOD PRODUCTION FOR MICHIGAN FOR THE UPPER AND

LOWER PENINSULA 1960 TO 1974, STANDARD CORDS (ROUGH) . . . 172
MICHIGAN ASPEN CUT AND GROWING STOCK, ALL COVER TYPES,

BY SURVEY UNIT, YEAR AND 5-YEAR AVERAGE .......... 174
VALUE-ADDED PER DOLLAR OF GROSS OUTPUT AND VALUE-ADDED PER

EMPLOYEE, CHARLESTON, SOUTH CAROLINA STUDY AREA, 1968. . . 177
THE DIRECT ENVIRONMENTAL IMPACT OF A DOLLAR INCREASE IN

OUTPUT BY SECTORS FOR MANISTEE COUNTY, 1970 ........ 181
DIRECT ENVIRONMENTAL IMPACTS FOR A DOLLAR INCREASE BY

SECTOR FOR MANISTEE COUNTY, 1970 ............. 182
MANISTEE COUNTY VALUE-ADDED MATRIX FOR 1970 ......... 183
DIRECT ENVIRONMENTAL IMPACTS PER DOLLAR OF LOCAL INCOME

FOR MANISTEE COUNTY, 1970 ................. 184

viii

LIST OF FIGURES

Figure Page
1. LOCATION OF MICHIGAN WOODPULP AND PARTICLE BOARD PLANTS

IN 1974 ......................... 36

2. AGRICULTURAL LAND USE AREAS OF MANISTEE COUNTY FOR 1974 . . 94

ix

CHAPTER I

INTRODUCTION

Problem Statement

Just a few years ago economic studies concentrated on economic
growth often overlooking the impact of resource use on communities,
regions or the entire economy. Left untouched were considerations of
environmental impact or dapletion of resources. Currently analysis
usually takes two paths: those emphasizing growth and others stress-
ing conservation, zero growth rates and recycling of resources wherever
possible. Here we will be concerned with finding the middle ground of
economic growth with safeguards to the environment and conservation of
resource use.

Economic analysis traditionally looked at the firm in a spaceless
and timeless context. Often community development studies investigate
communities without any attempt at indepth economic analysis. In this
study the economic relationships of a woodpulp firm and a county in
Michigan will be investigated from two divergent perspectives. From
the firm's point of view inputs are seen as a means to maximize profits
given the legal environment in which it operates. But from the
county's regional perspective more or less concern may be shown for
conservation, land use, the firm's impact on the distribution of income,
employment and its effect on levels of public services. The point here

is that the firm and the county may have different sets of priorities

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and interests.

Or another way of restating a similar point is that the present
state of resource management is too narrow in scope. Recent thought
in this field has led to a re-valuation of policies and procedures.
This has resulted in a new set of guidelines for planning which is
becoming widely accepted by institutions. For example, the Forest
Service has accepted the recommendations of the President's Water
Resource Council regarding multi-objectives in federal resource manage-

1 These guidelines reflect a concern not only with economic flow

ment.
of priced goods and services but, also, the importance of the impact on
the environment and flows of non-priced goods and services in resource
management decisions. A recent study focused on the problem:
generally, many environmental goods are not bought and sold
in markets. As a result, the information (i.e., price and
quantity sets desired by or acceptable to consumers)
necessary to apply traditional economic analysis is lacking.
This vastly complicates the difficulty of quantifying the
trade-offs between economic development and conservation of

natural resources which would result in t e 'wisest' use of
resources for the economy under scrutiny.

In the past, planning models by resource analysts have focused on
commodity production--timber, recreation, water, etc. Regional impacts,
both economic and ecologic, have been ignored in past planning by

resource managers. This has resulted in a failure to utilize

 

1See Water Resources Council,"Water and Related Land Resources:
Establishment of Principles and Standards for Planningfi'Federal
Re ister, XXXVIII, No. 174 (Washington: U. S. Government Printing
Ofgice, 1973 .

2Eugene A. Laurent and James C. Hite, Economic-EcologjgAnalysis
in the Charlestown Metropolitan Region: An Input-Output Study
(Clemson, South Carolina: Water Resources Research Institute in cooper-
ation with the South Carolina Agricultural Experiment Station, Clemson
University, Report No. 19, April 1971), p. 11.

3

multi-objective planning models which in turn may lead to a decline in
environmental quality. This is due to the very close linkages between
economic and ecological systems. Furthermore, a narrow perspective on
resource planning can lead to negative impacts on regional income and
employment. These impacts can be important not only from a quantitative
perspective but also because of their distribution. Our interest in
this study is to reflect the interrelationships between regional
economic growth, timber production on state and federal lands and the
growth or contraction of a woodpulp firm.

Finally, the State of Michigan is committed to high levels of em-
ployment and the diversification of its economy. Is the woodpulp in-
dustry a potential "growth" industry for this state which can raise
levels of employment and help diversify the economy? If so, what are
the spatial implications that market forces can generate within Michi-
gan on regions. Then we will look at a case study, Manistee County,

and try to assess what the impacts on resource use will be.

The Study_Area

Some of the characteristics of the inter-firm competitiveness of
woodpulp plants in Michigan were investigated in this study. However,
existing profitability for woodpulp firms was not calculated. Rather
the study presented some of the most important advantages and disadvan-
tages from a cost perspective of a Michigan location.

A second thrust is an analysis of impacts of Packaging Corporation
of America's (PCA) woodpulp plant on Manistee County via its demand for

inputs.

Most regional resource analysis has focused on commodity produc—
tion. The model used here is a regional input—output model. This type
of model can test alternative public policies to get some idea of their
economic impacts—-regional production, regional income and employment.
Only in recent years have impact models been expanded to not just eco-
nomic sectors but ecologic sectors. This study focuses on Manistee
County and assesses some economic-ecologic impacts of a woodpulp mill
expansion or contraction. The following factors are investigated:

- industrial linkages and locational advantages and disadvantages

of the existing plant.

- ecological impact on the county and the firm's efforts at re-

siduals management.

- manpower effects on the county given a plant expansion or con-

traction.

- county development-~levels of income distribution by sector for

alternative development plans.

The Studngegjon

Manistee County provides a perfect study area for a number of rea-
sons. It is a rural area bordering Lake Michigan on one side while
other rural counties are to the north, south and east. Since it has a
small rural based economy (though not too small a population-~the pop-
ulation is within a 10,000-20,000 range) this makes the economic and
ecological interactions easier to trace. It has a unusually diversified
character for a rural county. There are a wide variety of natural re-

source industries ranging from wood products, food processing, primary

metals, machinery and chemicals. Nevertheless, the wood products in-
dustry does play an important role in the economic life of the county.
Approximately 25% of all county land is in state or federal ownership
with lumber and wood products accounting for "13% of employment in the
county in 1965."1 And finally, the county does have a growth center,
the city of Manistee, as defined by the Michigan Department of Commerce.
While the question of regionalization and the techniques utilized
is an intriguing one for economists, regional scientists, geographers,
sociologists and others; it can become one in which your perspective
decides what definition of region is appropriate. We accept the defin—
ition of a region as Manistee County as the relevant geographic area for
answering the specific set of policy questions outlined in the study's

objectives.

The Description of the Study Region

 

A description of the study region will be left to Chapter III-- A
Socio-Economic Description of Manistee County. In this Chapter the
location of the study area, economic history, human resources, economic
sectorial analysis and finally land use by type of resource are dis-

cussed.

Objectives of the Study
The general objectives of this study were:
1) To assess some of the spatial variability of interfirm competitive-

ness of woodpulp firms in Michigan. The costs and availability of

 

1Consumers Power Company. Data on Manistee,.Michigan (Jackson,
Michigan, March 1966), p. 4.

 

wood and water are looked at as well as access to markets.

2) An evaluation of a set of growth alternatives for Manistee County.
The effects of woodpulp plant expansion or contraction are evaluated
against impacts on the various economic-ecologic relationships.

The general objectives have been further defined in terms of
several more specific research objectives. These specific objectives
are:

to list the past characteristics of Michigan pulp mills.

- to show the nature of woodpulp raw materials and their markets.

- to find what some of the advantages and limitations are in
terms of some interspatial costs.

- to focus only on water availability, wood procurement costs and
access to markets (transportation costs) of existing woodpulp
plants.

- to evaluate levels of woodpulp mill interfirm competition in
Michigan.

- to show economic linkages in Manistee County and their relation
to a single woodpulp mill.

- to assess employment effects of PCA's possible future "expansion"
or "contraction".

- to investigate the extent of some ecologic impacts to Manistee
County. That is, to investigate intensity of demand for county

resources such as wood and water.

Research Methods and Hypothesis
This study will attempt to uncover the answers to these two

issues:

7

- Are there significant spatial differences in woodpulp costs for
wood, water, and access to markets (transportation costs) in
Michigan?

- To show economic and ecologic linkages in Manistee County with
the Packaging Corporation of America and what impacts might
arise with an expansion or contraction of the industry using an

input-output model.

Research Procedures

 

The first part of the study relies on existing secondary sources
for data. Comparative costs of the more important location variables
for woodpulp plant operation are reviewed (that is, water, wood and
market availability-transportation costs to the market).

The second part of the study also uses secondary data and proceeds
through the following steps:

I. A Socio-Economic Description of Manistee County
11. Setting Up a Current Industrial Listing for Manistee County

Robert Harrell'swork on Manistee County can be used as a starting
point for this study. He has compiled an industrial listing of
Manistee County1 as of December 31, 1970 by SIC code. Karen Polenske's
data2 was put into a form useful for data reduction to Manistee County.
III. Construction of a Hypothetical Technical Coefficient Table.

Technical coefficient tables show in percentage form the direct

 

1Robert A. Harrell, The Development of Foundational Materials and
a Study for a Combined Economic and Environmental Quality Study of
Manistee County, Michigan (Michigan State University, Department of
Resource Development, 1971).

 

2Karen Polenske, Multiregional Input-Output Model for the United
States, 1970.

8

purchases made by each processing sector. A technical coefficients

table was derived from Polenske's State Input-Output Tables utilizing
1

 

the supply-demand reduction technique.
IV. Disaggregate the Woodpulp Industry from Other Wood Products

Industries.

Using statewide data available from the Polenske computer tapes,
the woodpulp industry (really the Paper and Allied Products Industry),
a single plant--the Packaging Corporation of America, was broken out
from the sector which includes all wood products industries. Its tech-
nical coefficients are taken to be equal to the national average for
woodpulp mills. This will be done using the 1963 national transaction
table.2
V. Estimation of Final Demands for Manistee County.

Final demands for Manistee County were derived from Polenske's
state estimates of final demands based on percentages of county to
state levels of sales for 1947, 1958 and 1963. For 1970 and 1980 final
demands were estimated by Scheppach3 on a state level and then reduced
to Manistee County. The increase or plant termination for a
single woodpulp mill was used to trace impacts in Manistee County.

VI. Calculation of the Income and Employment Multipliers for Manistee

County.

A Michigan State University computer program (regional input-output

 

1Karen Polenske, Multiregional Input-Output Analysis, Vol. II
(Lexington, 1972).

20. S. Department of Commerce, Input-Output Structure of the U. S.
Economy, Vol. I (Washington: U. 5. Government Printing Office, 1969).

3Raymond C. Scheppach, Jr., Multiregional Input-Output Analysis,
Vol. III (Lexington, 1972).

9

modeling system) was used to calculate a county technical coefficient
matrix and direct and indirect coefficients needed to develop type I
and type II income multipliers and employment multipliers. Data reduc-
tion techniques will be described in a later chapter. These techniques
can be used to tally effects on county income levels and employment
given a change in the level of demand and therefore output for a wood-
pulp plant.

VII. Environmental Impact

In this study we are only concerned with the ecologic impacts of
the woodpulp industry in Manistee County. This analysis will follow
closely the methods used in a study of the Charleston Metropolitan
Region.1 This model is linear and assumes constant costs. It shows in
physical units, the wood and water requirements of the woodpulp indus-
try imports to produce one dollar's worth of gross output. Also shown
are ecological exports, the amount of biochemical oxygen demand (B00)
in the water associated with one dollar of output by a woodpulp plant.
Hence, impacts on the environmental input and export sectors were shown
given an expansion or contraction of the firm's output.

The economic input-output model of Manistee County was linked with
an environmental matrix when the data were collected and put into
sectors which represent a natural resource input or emission (in this
case we are only dealing with two inputs, water and wood, and one
emission BOD from a woodpulp plant). Then post-multiplying the environ-

mental matrix by the inverse of the input-output matrix you develop the

 

1Laurent and Hite, Op. Cit.

10

r matrix. The income multipliers from the input-output table divided
by the r matrix yield a resource income or environmental-income multi-
plier which are said to show the direct and indirect environmental
linkages per dollar of local pecuniary income generated by the woodpulp
industry.1
The decision makers interested in the results of this study
should be:
- woodpulp plant corporation executives in Michigan and in other
areas.
- city and county government officials dealing with impacts of
woodpulp plant resource use.
- regional and state planning agencies interested in economic
development for the State of Michigan.
- Michigan State Department of Natural Resources.
- federal agencies such as the U. S. Forest Service.
Every effort was made to assess their needs and to guide my research

into areas which will be most fruitful and productive given the problems

they face.

 

11bid, pp. 71-72.

(I)

3': P:
A \
:0

CHAPTER II

THE HISTORY AND DEVELOPMENT
OF WOODPULP MILLS IN MICHIGAN

Past Characteristics of Michigan Woodpulp Mills

In 1957 there was a change in the classification of woodpulp mills
by the U. S. Bureau of the Census. Previous to this revision all wood-
pulp mill economic activity was together. It made no difference
whether the woodpulp mill was integrated with a paper or board mill at
the same location or not. Thereafter, woodpulp mills received a nar-
rower treatment and went under SIC code 2611. Henceforth, woodpulp
mills were defined as:

-those pulp mills which are not affiliated with any paper and

board mills and ship all their products to the market.

-pulp mills affiliated or associated with a primary or board

mill but which are separately located from the pulp mill.

-a few pulp mills affiliated or associated with a primary paper

or board mill at the same physical location where a separate

departmental records of employment, materials, and fuel costs,
shipments, etc. are maintained for the pulp mill from those
covering the paper board mill at that location and the com-

pany elected to file such a separate report.1 (See appendix 1.)
So, in effect, when we are speaking of woodpulp mills in Michigan we
are really talking about integrated woodpulp mills engaged in a vari-
ety of activities ranging from paper mills to paperboard mills since

no mills in Michigan produce and sell just woodpulp. There is a

 

1UnitedStates Bureau of the Census, Census of Manufacturing, Vol.
I, Summary Statistics (Washington, D.C.: U.S. Government Printing
Office, 1961), p. 26-A.

11

12

particle board plant in Michigan, U.S. Plywood-Champion Papers, Incor-
porated, at Gaylord. Though it does not produce woodpulp the raw
materials are similar to woodpulp and so it was treated as a woodpulp
mill in this study. There are no mills in Michigan which under the new

1958 Census of Manufacturing can be wholly classified as woodpulp mills

 

or 2611. Paper and Allied Products or industry SIC 26 is the indus-
trial classification considered in this study. (See appendix 2 and 3.)

The woodpulp industry manufactures woodpulp from pulpwood. Pulp-
wood can be defined as any timber used to produce pulp. Michigan's
production is shown in table 1. Michigan's share of national paper
production has fallen from 4.9% in 1958 to 4.2% in 1974. In paperboard
the figures are slightly different but reveal the same basic conclusion
--a decline in Michigan's share of production from 6.7% to 4.0% (1958
to 1974) despite an increase in overall production levels for the
state. Along with these trends Michigan has seen a decline in the num-
ber of plants producing woodpulp from "11 in 1954 to 8 in 1974."1

Table 2 shows the distribution of Paper and Paperboard Products by
type of product and potential growth rates. Corregating Medium, which
is what PCA produces, had a projected growth rate of 6.0% which is
higher than the average growth rates for paper and paperboard products.
But it is only below one other product--particle board, which was esti-
mated to grow at 15% during this period.

In 1961 roughly one-half of the production of Michigan mills was

 

1Michigan Department of Natural Resources, Forestry Division,
Directory of Primary Woodusing Plants (Lansing, 1970 and 1974); and
Michigan State University Agricultural Experiment Station and Coopera-
tive Extension Service, Michigan Timber Production-Now and 1985
(East Lansing, 1973).

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14

TABLE 2

MICHIGAN PRODUCT CAPACITIES AND NATIONAL GROWTH OUTLOOK, 1968
(TONS PER DAY)

 

 

 

Total for Growth Outlook
Michigan Upper Great in Total U.S. Market
Lakes Region 1968-1975
%/Year

Paper
Groundwood

Coated 280 2,560 4.5

Uncoated 150 425 2.5
Book

Uncoated 800 1,100 6.5

Coated 370 570 6.5
Fine

Chemical 700 2,615 6.0

Rag 70 270 0
Glassine & Related - 715 2.0
Wrap & Converting - 575 3.0
Tissue

Sanitary 250 2,460 6.0

Industrial 280 430 0
Special Industrial 30 240 6.0
Subtotal 2,930 11,960 4.9
Paperboard
Cylinderboard 3,360 4,780 1.5
Corrugating Medium 850 2,015 6.0
Insulation Board 270 1,160 0
Hardboard 280 795 7.0
Particleboard 160 495 15.0
Subtotal 4,920 9,245 ' 3.5

 

SOURCE: The Arthur 0. Little Report, Overview of Pulp and Paper
Expansion Possibilities in the Upper Great Lakes‘Region.

15

produced by a sulfite or groundwood pulp process. Both processes use
a low-resin content species such as balsam and spruce for the largest
amount of its timber volume. The sulfate process, which is used by
approximately 15% of Michigan's mills and is well suited to high resin
softwoods such as pine. The soda and semi-chemical process are used
principally for the pulping of hardwoods. (See table 3 for 1961 Michi-
gan data on number and types of pulping processes.) By 1974 (see
appendix 4) there were no sulfite mills; sulfate accounted for 28.7%,

groundwood and other mechanical 39.1% and semi-chemical 32.1%.

TABLE 3
MICHIGAN WOODPULP MILLS BY PULPING PROCESS, 1961

 

 

Chemical Pulps

Sulfite Sulfate Soda Semi-chemical Groundwood Miscellaneous

 

2 2 4 4 2

Total Mills
14

 

SOURCE: U.S. Forest Service, Woodpulp Mills in the United States,
(Washington, D.C.: Division of Forest Economics Research,
1961).
Current Mills in Operation
As of 1974 there were eight integrated woodpulp mills in Michigan
and one particleboard plant:
- S. 0. Warren in Muskegon is a division of Scott Paper Company and is

included in SIC number 2641. It is a kraft pulp mill with five paper

machines and a production capacity of 225 tons per 24 hours. It

16

consumes 430 cords of pulpwood daily.

- Hoerner Waldorf Corporation of Ontonagon, Michigan, with an SIC
number of 2621 produces paper. Total production should have reached
220 tons per 24 hours by 1974.

- Packaging Corporation of America, a subsidiary of Tenneco Corporation
in Filer City, SIC 2631 (paperboard and corrugated medium), has a capac-
ity of almost 700 tons per day. It is a semi-chemical pulp mill.

There are three machines. The number 1 machine was built in 1923, the
number 2 machine in 1953, and the number 3 machine in 1958. The

number 3 machine was rebuilt for corrugated medium product from bleached
kraft production in 1972. These machines are updated continually and
have been modernized.

- Menasha Corporation's Paperboard Division with sic number 2631 pro-
duces corrugated medium in Otsego. It has a capacity of producing 225
tons daily.

- Celotex Corporation in L'Anse is a subsidiary of Jim Walter Corpora-
tion, a major producer of building materials. The mill produces insu-
lation board and is listed as SIC number 2661. It has a plant capacity
of 270 tons per day.

- Mead Corporation at Escanaba produces paper, hence its SIC number
2621. Its capacity in 750 tons daily.

- The Manistique Pulp and Paper Company is owned by Field Enterprises
and is classified by a SIC number 2621 which means it produces paper.
It has a capacity of 90 tons daily.

- The Abitibi Corporation in Alpena makes insulation board and is

classified by SIC number 2661. It produces 430 tons daily by the

17

groundwood process.
- Finally, U.S. Plywood-Champion Industries at Gaylord makes particle-
board and therefore has a SIC number of 2661.

The information on plant size, location and type of process is
summarized in table 4. It shows a drop in the number of plants from 14
in 1961 to 8 in 1974. Table 5 shows similar information for 1961 but
only for plants still in existence in both 1961 and 1974. Table 6
then makes a comparison between tables 4 and 5 and shows that the
percentage of pulp production capacity dropped in the northern Lower
Peninsula from 66% to 55%. In 1961, PCA was the largest woodpulp mill
in Michigan but was second in 1974. It registered a 135-ton increase
per 24 hours which ranked third by total increase in volume and sixth
by percentage increase. The relative ranking of the mills has not
changed much except for Mead jumping from 8 to 1 in relative rank..
Other mills in the northern Lower Peninsula while still smaller than
PCA show larger percentage increases in volume. In summary, PCA has
expanded production from 1961 to 1974, but not as much as the other
competing mills in the northern Lower Peninsula. It is no longer the
largest mill in Michigan. However, it is still a very large mill and
the relative rankings for the northern Lower Peninsula mills were
unchanged over this time span.

The Employment and Economic Importance
of Michigan Pulp Mills

Employment in paper and allied products for Michigan has fallen
off in the past 20 years and will likely continue to so so in the

future (see tables 7 and 8). Table 7 shows that 3,500 jobs in the

18

 

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TABLE 7

EMPLOYMENT IN MICHIGAN PAPER AND ALLIED PRODUCTS
INDUSTRY, 1954-1966 (THOUSANDS OF JOBS)

 

 

1954 1958 1963 1966

 

Employment 33.0 27.8 29.1 29.5

 

SOURCE: Michigan State University, Michigan Statisticai Abstract,
1976.

 

TABLE 8

EMPLOYMENT IN MICHIGAN PAPER AND ALLIED PRODUCTS INDUSTRY,
1965 AND PROJECTED TO 1995 (THOUSANDS OF MAN-YEARS)

 

 

Industry 1965 1975 1985 1995

 

Pqu, Paper & ATTied 4.0 3.4 2.6 1.9

 

SOURCE: Michigan State University AgricuTtural Experiment Station and

Cooperative Extension Service, Michigan Timber Production-

 

Now and 1985.

 

Note: One man-year is equal to one man empioyed for 250 eight-hour
days.

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22

Paper and Allied Products Industry were lost from 1954 to 1966. Future
employment levels are expected to drop from 4,000 man-years in 1965 to
1,900 man-years in 1995. This future trend is a result of expected
increases in labor productivity that will be combined with more effi-
cient manufacturing methods. Employment in timber harvesting will de-
crease as more machines replace men in the woods. To some extent this
trend will be offset by an increase in forest management activities
related to the Pulp, Paper and Allied Products Industries.

The Paper and Allied Products Industry in Michigan has grown in
total sales since 1954. But percentagewise, the yearly payroll and
value added as a percentage of the total state output has fallen
slightly since 1954 (see table 9).

Michigan's Woodpulp Locational
Advantages and Disadvantages

Locational decisions for woodpulp mills whether for expansion,
contraction or closing of existing mills or the formation of a new mill
present an unique set of circumstances in every case. But all mills
have common requirements for wood, water, labor, fuel and other inputs.
The three major determinants considered in this study are wood availa-
bility, water availability and access to markets. Other factors such
as state and local taxes, construction costs, electricity costs, labor
costs, chemicals and transportation rates are assumed to be constant in
the state.

Woodpulp manufacturing is a weight losing activity (raw-material
oriented) and tends to be located near timber supply areas. Paper mills

are more market oriented. In Michigan all mills are integrated hence

I
F' 0‘.
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23

TABLE 9

PAYROLL, VALUE-ADDED AND CAPITAL EXPENDITURES IN MICHIGAN'S
PAPER AND ALLIED PRODUCTS INDUSTRY, 1954-1973

 

 

 

 

 

Yearly Value Added Capital
Payroll By Manufactures Expenditures
Unadiusted (1,000) ,11,000)_
1954 Paper &
Allied Products $ 132,100 $ 236,147 $ 26,705
Michigan 5,252,352 8,707,194 870,465
Percentage of Total 2.5% 2.7%
1958 Paper &
Allied Products $ 90,031 $ 163,823 $ 4,396
Michigan 5,172,363 8,350,781 438,866
Percentage of Total 1.7% 2.0%
1973 Paper &
Allied Products $ 272’100 $ 560’900
Michigan 14,868,300 27,170,400
Percentage of Total 1.8% 2.1%

 

SOURCE: Michigan State University, Michigan Statistical Abstract,
1975 and 1976.

24

the chief market for pulp is the very same integrated woodpulp mill in
almost all cases. In a few cases the pulp is turned into paper.

The pulping process usually determines the type of tree species
utilized. One would surmise that the original decision for a new pulp-
ing process, its replacement or even termination, is a function of wood
availability.

Chemicals make up a large part of the total cost for woodpulp mills
but do not vary greatly over space.

Several other locational factors for woodpulp mills are worth dis-
cussing. Water availability for woodpulp manufactures is important for
the manufacture of woodpulp as well as the dilution of waste materials.
Other important factors in mill locational decisions are the need for
transportation linkages (rail connections are of course important when
the final product such as corrugating medium is quite heavy and bulky).
A final factor in location decisions is forest land ownership. Any
disruption in the flow of wood to a woodpulp mill could be disastrous
because of the level of capacity needed to maintain profits. As a rule,
company land holdings guarantee a future source of supply and can give
varying degrees of monopoly power. At the very least, such holdings
could counter monopolistic or collusive actions on the part of sellers
of pulpwood to the mill. State or federal forests and other large
sellers of timber selling to a mill without any or small holdings.
other things remaining equal, will not be in as favorable a bargaining
position as a mill which has a fairly sizable source of owned timber.

A study done by the Battelle Memorial Institute listed three loca-

tional disadvantages the Upper Great Lakes have compared to the Pacific

25

Northwest and the South for the wood products industry. These are:
-saw logs reach maturity twice as slowly in the Great Lakes area.

-the concentration of saw timber in the Great Lakes is less per
acre.

-the forest area is basically privately owned by small landowners
often not primarily engaged in the production of timber.1

Naturally these comments apply to Michigan as well. But the Michigan
timber resource, especially hardwoods, has increased from a low in 1935
of only 19 million acres of forest land from an original 35.5 million
acres. The original forest lands were depleted by fires, overcutting
and land going into agricultural production. Roundwood production in-
creased "51% from 1954 to 1965 and remained almost constant (declining
slightly) in 1969."2 It has been projected that over the period "1965

3 In

to 1995 total pulpwood production is expected to almost triple."
short, there is a large growing timber resource base which can be uti-
lized to meet the increased demand for wood. Secondly, wise public

timber sale policies and efforts to encourage better use and the sale
of forest products from private lands can to some extent overcome the
land ownership problem (lack of large private tracts by woodpulp mills

in the lower peninsula by woodpulp mills) though this is not as much

of a problem in the Upper Peninsula.

 

1David Sweet, John Griffen and Hal S. Maggied, Industries Suited
for the Upper Great Lakes Region (Battelle Memorial Institute Columbus,
Ohio, 1970). p. 13-15. .

2Michigan State University Agricultural Experiment Station and
Cooperative Extension Service, Marketing Timber Production-Now and 1985
(East Lansing, 1972), p. 9.

3Ibid, p. 11.

1
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26

Michigan's Wood Supply fOr Woodpulp Mills is
Surveyed and Analyzed--PCA's Competitive
Advantage

Availability of Timber by Volume
and Species for Integrated Woodpulp
Mills in Michigan

The eight integrated woodpulp mills in Michigan and the single
particleboard plant vary in their access to various timbersheds and
consequently their demands for selected tree species due to the type of
pulping process used. Sulfite and groundwood mills use long fibered,
low-resin-content species such as spruce and balsam. Various pines and
hardwoods are also utilized in the production of sulfite and groundwood
pulp but generally in small amounts when compared to spruce and balsam.
The sulfate process is especially suited to highly resinous softwoods
especially pine though it can be used with many species. Hardwoods
are used primarily with the soda and semichenical processes. PCA uses
a semichenical process. The Fourdrinier machines require a specific
mix of tree species. Table 10 lists mill locations and principal spe-
cies used. PCA uses 65% aspen and 35% dense hardwoods. It seems to
have the most rigid requirements of any Michigan woodpulp mill for
particular tree species.

Table 11 (table 12 summarizes these data) shows the pulpwood sur-
plus for 1966 by regions within the state. This table shows:
- the expectation is of larger amounts of surplus growth in the Western
Upper Peninsula than the Eastern Upper Peninsula and less in the North-
ern Lower Peninsula followed finally by the Southern Lower Peninsula.

- the 1970 report by the Arthur 0. Little Company date updated in 1966-

67 from the preliminary U.S. Forest Service 1965 Michigan Forest Survey

27

TABLE 10

LIST OF MICHIGAN INTEGRATED PULP MILLS, PARTICLEBOARD
PLANTS AND PRINCIPAL TREE SPECIES USED FOR PRODUCTION

 

 

Firm

Plant Location

Principal Species Used

 

1. Abitibi Corporation

2. Celotex Corporation
3. Hoerner-Waldorf
Corporation
4. Manistique Pulp &
Paper Company

5. Mead Corporation

6. ,Menasha Corporation

7. PCA

8. 5.0. Warren Company

9. U.S. Plywood-Champion
International

Alpena

L'Anse

Ontonagon

Manistique

Escanaba

Otsego

Filer City

Muskegon

Gaylord

Aspen, red & white oak,
hardwood chips

Aspen

Aspen, dense hardwood chips,
yellow birch, hard and soft
maple

Balsam fir, spruce, pine,
aspen

Aspen, balsam fir, spruce

5-10% aspen, white ash,
black cherry, hard and soft
maple, red oak, 35% mixed
hardwood chips

65% aspen, 35% dense hard-
wood chips, mostly maple
or oak

Aspen, jack & red pine,
mixed hardwood chips

Aspen, jack pine

 

SOURCE: Michigan Department of Natural Resources, Directory of Primary
WoodusingyPlants in Michigan, 1970 and 1974.

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30

(table 12) differs slightly from the data in table 11. Both correctly
note that the largest expansion possibilities for wood products indus-
tries exist in the Upper Peninsula where the largest surplus of wood
is. Indeed, Mead's expansion at Escanaba has utilized a large part of
the hardwood surplus in the Western Upper Peninsula and the Eastern
Upper Peninsula as well. The expansion of the Manistique Paper Company
--Field Enterprises has not materialized. It was expected to use 65,000
cords of dense hardwood. This also would have cut the wood surplus in
the eastern Upper Peninsula.

- by expanding the use of wastepaper integrated woodpulp mills are in
effect cutting their dependence on new pulpwood. Nationally, in 1965
the fibrous raw material blend needed to make paper or board was 76%
wood fiber from new wood, 22% from recycled waste paper and board, and
2% from rags, straw and other fibers.1 The Menasha Corporation used
about 30% of recycled corrugated board in 1974. PCA used about 5% K28
clippings from corrugated box production in the early 19705 and in 1977
it is using about 8% to 10%. It has plans to increase its use of waste-
paper to include post-consumer materials to about 25% in the future,
making PCA even less dependent on new wood. At the present time the
other integrated mills in Michigan are not heavy users.of wastepaper.

- in assessing the expansion possibilities for forest industries, the
Arthur D. Little Company suggested that expansion possibilities exist

for particleboard and/or hardboard and integrated.semi-chemical pulp

 

1Michigan State University Agricultural Experiment Station and
Cooperative Extension Service, Marketing Timber Production-Now and

1985, Op. Cit., p. 5.

:..

 

 

 

31

for a bleached kraft plant. Since that "Little Report" PCA has shifted
to a semichemical pulp process for machine 3 in order to make corrugated
medium, a new particleboard plant was started in Gaylord, Michigan, by
Champion International and the Mead Company in the Upper Peninsula
expanded production by 700 tons. But the Upper Peninsula and the north-

ern Lower Peninsula still have a large supply of untapped dense hard-

 

 

 

woods.
TABLE 12
APPROXIMATE ANNUAL SURPLUS OF PULPWOOD SPECIES IN
MICHIGAN, 1967-68 (THOUSANDS OF CORDS)
Location Aspen Other Hardwoods Softwoods

Eastern Upper Peninsula 80 420 210
Western Upper Peninsula 70 350 200
Northern Lower Peninsula 50 410 7180

 

SOURCE: Arthur D. Little,’Incorporated, Overview of Pulp_and Paper
Expansion Possibilities in the Upper Great Lakes Region.

*flgtg; The southern Lower Peninsula is not included since no substan-
tial levels of pulpwood product exist there and it was outside
the boundaries of this study.

The percentage of federal-state forests in the northern Lower
Peninsula plus industry holdings are much less than in the Upper Penin-
sula. Indeed the category of industrial holdings is very low and
miscellaneous private holdings are very high. But better public timber
sale policies and programs can foster a more efficient utilization of
forest in production from private lands and public lands (see table 13

for the exact distribution of forest land ownership in Michigan). Also,

I“"ll‘l1l

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32

 

 

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33

since the combined total acreage is about 16.1 million acres, with the
larger percentages in the Upper Peninsula for federal-state and indus-
trial land holdings, and the total commercial forest lands are of
greater consequence in the northern Lower Peninsula.

Both the Michigan State Forests managed by the Forestry Division
of the Department of Natural Resources and the four federal forests
managed by the U.S. Forest Service use multiple-use objectives in the
professional management of Michigan forests. It is generally recog-
nized that federal ownership pays more attention to the commodity pro-
duction of timber. State forests, as do federal forests provide for
the use of forest land for recreation, wildlife,mineral production,
aesthetics, etc. The State of Michigan, for example, has an ambitious
program for deer habitat management in cooperation with the Wildlife
Division to locate areas and supervise projects directed toward im-
proving deer habitat. Generally, wood production and the management of
state forests for wood production are compatible. In some areas forest
products are managed for deer habitat as a primary objective but over-
all they are part of a multiple-objective approach.

As a general rule, the goal for the wildlife management units

is to have a minimum of 35 percent in aspen and a total of

60 to 65 percent in intolerant types (aspen, oak, jack pine

and upland bush). Grassy openings should make up 6 to 15

percent of the area. The higher percentage of open area will

be in the deer priority townships. Note that, statewide,

35.9 percent is now in aspen, 62.2 percent in intolerant types

or openings, some of the excess should be converted to species

which will increase the timber potential for products in
greatest demand by industry to meet public needs.1

 

1Michigan Department of Natural Resources, State Forest Manage-
ment Planning (Lansing, 1974), pp. 19-20.

 

 

vptq a
It

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34

Thus, an intolerant tree species is preferred for deer production
since ground coverage of these species allows more vegetation to grow
underneath. But all intolerant tree species are used for pulpwood pro-
duction in Michigan, especially aspen. In Manistee County the Betsie
River State Forest is in deer priority townships. The federally-owned
Manistee National Forest in the southern part of the county also falls
into a deer priority township which have similar guidelines but no
funding from the state.

Management of private lands for timber production (a major problem
in the northern Lower Peninsula) has been aided by the Tree Farming
System which is a national program with more than 32,000 tree farms
across the country sponsored by the American Forestry Institute. The
tree farming program has been active in Michigan since 1949 and in
1976 there were 1,071 tree farms.1 However, there is not any direct
correlation between tree farms and pulpwood production. Tree farming
can be for sawlogs (for a pallet mill) wildlife as well as pulpwood.
Despite tree farming most small private landowners do not practice for-
est management because of indifference, lack of information on the ben-
efits to be received or physical and economic limitations. Absentee
owners often acquire forest land for recreation with no interest in
harvesting forest products. Informational programs such as the Michi-
gan Tree Farming Program need to be intensified if the economic and
other benefits of proper forest management are to be realized. The

impact of tree farming in Manistee County shows up in our economic

 

1Michigan Forest Association, The Forest Flare, Vol. III, Issue
No. 1 (Jan.-Feb., 1977), p. 1.

35

input-output model in the forestry sector and also in the lumber and
furniture sector.

A third essential point concerning timber availability for inte-
grated woodpulp mills in Michigan is the absence or occurrence of price
competition over space. For Michigan there are two basic pricing sit-
uations which still prevail and have been described by Professor Manthy1
in an earlier work and confirmed by informal discussion with the Depart-
ment of Natural Resource's Forestry Division. The two timbersheds in
Michigan for the supply of wood to Michigan pulp mills are the Upper
Peninsula which is often divided into the western Upper Peninsula and
the eastern Upper Peninsula and the Lower Peninsula (mostly the north-
ern part since this is where almost all the pulpwood in this area is
located).

Figure 1 shows the location of all the woodpulp mills in Michigan
plus the single particle board plant. It is helpful to refer to when
reading the analysis of Michigan timbersheds vis-a-vis woodpulp plants.

In the northern Lower Peninsula the timbersheds overlap. There
are three plants in this zone (one particle board plant) and two out-
side this zone which still compete heavily for timber in this area.

S. 0. Warren in Muskegon and Menasha Corporation in Otsego, Allegan

County buy large quantities of timber in the northern Lower Peninsula
due to its relative abundance and the availability of needed tree spe-
cies. The exact lines of the relative timbersheds for these five com-

panies will vary from year to year depending on such facotrs as

 

1Robert Manthy,"Marketing Pulpwood in the North Central Region:‘
Michigan State University Ph.D. dissertation (East Lansing, 1963),
pp. 148-149.

36

   
 

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SOURCE: Michigan Department of Natural Resources, Forestry Division,
Directory of Primary Woodusing Plants in Michigan, 1974.

 

 

FIGURE 1.--LOCATION OF MICHIGAN WOODPULP AND PARTICLE BOARD PLANTS IN
1974.

'7‘.) I-
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:2' er

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37

production levels, supplier relationships, availability of needed tim-
ber and the like. The timber supply situation is characterized by
areas of monopoly for these five firms especially for the species

close to their respective plants. PCA and Menasha Corporation both
produce paperboard but are the only two companies with the same princi-
pal product in the Northern Lower Peninsula. There is a greater degree
of overlap in the demand for similar tree species. For example,
Abitibi, Champion International, S. 0. Warren and PCA are heavily in-
volved in buying aspen (especially PCA). Abitibi, Menasha and S. 0.
Warren are all competing for mixed hardwood chips.

The overall supply situation exhibits elements of price discrim-
ination. Each plant is located along Lake Michigan or Lake Huron with
good highway access and some distance from each other. Very little
timber flows from the Upper Peninsula to the Lower Peninsula and vir-
tually no imported pulp has come from Canada in recent years.1 One
would expect that in their home counties (location of woodpulp mills)
prices would remain high and output somewhat restricted for stumpage
they need. This along with transportation costs would discourage
other firms from buying there. This would allow mills to use close
sources of timber as a reserve. Further away from the plant pockets of
competition exist subject to yearly changes. Prices vary over space
beyond transportation costs. There seems to be evidence of this from

the prices paid to sellers (owners of stumpage) from various distances

 

1James E. Blyth, Allen H. Boetter, Carl W. Danielson, Forest Pro-
duct Industry and Timber Use, (Michigan, 1972), p. 5. James Blyth and
andTJeroniT. Hahn, "Pulpwood Production in the North Central Region
by County 1974," p. 4.

 

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38

for the mills. In fact, "bonuses are quite a common method of dis-
criminating in price as mills seek wood supplies further and further
from the plant site."1
Analysis of stumpage prices show the order in terms of price for
Michigan is as follows for 1969*:
1. Aspen lowest price
2. Dense hardwood
3. Balsam fir . . 2
4. Spruce highest price
The price differential for aspen and mixed hardwoods in 1969 was
negligible but it was expected to be greater in 1970 due to a rise in
demand. In 1970 aspen pulpwood production lead pine by almost 3 to I
in the Lower Peninsula.3
Table 14 corroborates the relative price data listed previously.
Aspen, the most common tree species, is also the cheapest in price with
spruce being much less common in use and relatively the most expensive
of the previous five tree species.
PCA and Abitibi use over 50% aspen for production purposes.
Menasha uses some aspen, but not large amounts. Champion International
and S. D. Warren use larger amounts of aspen than Menasha Corporation

but exact figures on Champion's demand for aspen were not uncovered,

but they would be expected to be substantial. Champion International

 

1Manthy, p. 146.

2Arthur 0. Little Report, p. 27.

3Michigan Department of Natural Resources, Michigan Pulpwood
Production 1969, p. 2.

 

 

*1969 data were used since they were closest to 1970 which was
the base year.

...\

39

TABLE 14

MICHIGAN PULPWOOD PLANTS USING DIFFERENT SPECIES
OF WOOD FOR PULPING IN 1974

 

 

 

Species and Kind Number of
of Material Plants
Aspen 8
Balsam fir 3
Birch 6
Hemlock 3
Pine 4
Spruce 3
Tamarack 1
Maple 7
Oak 5
Other hardwoods 5
Woodchips 5
Slabwood and other 2
residue
TOTAL PLANTS 8

 

SOURCE: James B. Blyth and Jerold T. Hahn, Pulpwood Production in the
North Central Region by County, 1974.

Note: 1970 data should be quite similar to this table, the only differ-
ence being that there were nine pulp mills in 1970 and eight in
1974. '

40

used chips for around a quarter of its production in 1974.

The larger companies in the Lower Peninsula are very large buyers
of aspen compared to smaller companies such as 5.0. Warren or Hoerner
Waldorf. S.D. Warren and Champion International use a lot of jack and
red pine as well as mixed hardwood chips. The Menasha Corporation uses
a lot of red oak and hardwood residue. The Department of Natural Resour»
ces in 1970 showed jack and red pine were more expensive than red oak,
aspen and other wood residues. Other things being equal, the larger
firms use cheaper pulpwood though the marginal firms (in terms of size)
are larger users of wood residues which are relatively cheap.‘ This gen-
eralization seems to hold true except for Champion-International.*

The area for the timbersheds for the five plants in the Lower Pen-
insula are mostly concentrated in the northern Lower Peninsula. PCA
has bought timber for some years in over 25 counties. PCA is almost a
third bigger than the next largest woodpulp mill in the Lower Peninsula
and for its size it does not own much land. Despite the fact that it
is close to large pulpwood production counties such as Manistee and
Lake, it is receiving competitive pressures from Champion International,
S.D. Warren and Menasha Corporation. PCA's dependence on aspen and
dense hardwood chips, mostly oak and maple, forces it to be selective
in every county in which it buys.

A company letter (PCA) indicating the general buying pattern for

state and federal timber is included in appendix 5. Most of its search

 

*Note: The Department of Natural Resources has exact figures by county
and tree species that each company buying pulpwood records, but
because of disclosure problems the detailed information was not
revealed.

41

for timber is concentrated in the mid—section of the Lower Peninsula.
Naturally, being located close to the Manistee National Forest is a
locational advantage.

Abitibi, also a large buyer of aspen, due to its somewhat smaller
plant size than PCA and proximity to the largest number of high volume
pulpwood producing counties in the Lower Peninsula (Alcon, Montgomery,
Crawford, and Oscoda) only buys in a radius surrounding Alpena County.
This covers a much smaller area than PCA's timbershed. Proximity to
the Huron National Forest southwest of Alpena is a locational advan-
tage and a major source for pulpwood.

Champion International at Gaylord, though it produces particle
board, competes with the other woodpulp mills in the Lower Peninsula
for pulpwood. It buys over a large market area and is mid-way between
Abitibi and PCA so it undoubtly competes with both for timber. Nearness
to major pulp producing counties such as Clare, Crawford, Oscoda,
Roscommon and Montmorency provide a good source of timber. With one-
quarter of the plant using chips it can be less selective in tree
species selection.

S. 0. Warren at Muskegon makes very large use, almost 90% of red
oak which in 1970 was slightly more expensive than aspen when sold in
state forests. Red oak was also considerably more expensive in the
Huron-Manistee National Forest, $2.44 per cord as compared to 95¢ per
cord for aspen. S. 0. Warren is one of the smaller woodpulp plants
along with Menasha Corporation. It nevertheless has to have a fairly
large buying area for pulpwood due to the specificity of species and

distance to large pulpwood producing counties. True, it is close to

 
 
 
 

 

 

42

the Manistee National Forest, but it is doubtful that it would be able
to procure a large amount of oak from Manistee County because of PCA's
presence. Possible areas for buying of large amounts of oak include
Lake, Iosco and Crawford counties. S. D. Warren's timbershed area
would seem to be moving in a northeast direction overlapping PCA,
Menasha and Champion International at times.

Lastly, Menasha Corporation in Otsego produces corrugated medium
as does PCA. However, due to its high use of recycled corrugated board
(30% of total wood requirements) and 35% of hardwood chips only 35% of
the stumpage is in the form of dense poplars. Possibly, Mecosta would
be one county where Menasha would buy a lot of pulpwood and it does
have a chipper at Paris, Michigan. But its basic timbershed region
lies north by northeast. Since it buys mostly dense poplars and dense
hardwoods it may buy in counties PCA and S. 0. Warren use, but not
necessarily competing heavily at all. It may compete with Champion
International for dense hardwood to be chipped.

The Upper Peninsula has four woodpulp mills. As a timbershed, it
is usually broken into two major areas, east and west. There were
twenty-four woodpulp plants in Wisconsin in 1974 with about twice the
overall woodpulp capacity as Michigan and about one-quarter of the Mich-
igan pulpwood production (see appendix 4). Many of the twenty-four
Wisconsin mills are on the northeast and northcentral portion of Wiscon-
sin. However, the following tables show:

- almost one-third of the Michigan pulpwood goes to Wisconsin (see
table 15).
-in 1974 the western Upper Peninsula had 60% of the total cut in the

M
o!“

.uv-

"I

43

Upper Peninsula and 63% of the Upper Peninsula to Wisconsin (see table
16).
- in 1969, all the Upper Peninsula counties furnished pulpwood for ten
or more plants except Keweenaw. It was led by Menominee and Delta which
recorded seventeen and eighteen plants respectively buying pulpwood in
these counties. Obviously, a lot of Wisconsin woodpulp mills were
buying pulp in Upper Peninsula counties (see table 17).

In Escanaba, Mead operates the largest mill in Michigan producing
750 tons per day, and while using a lot of aspen it also uses hard
maple, hemlock, red pine and other hardwood residues. This plant con—
trols 370,000 acres of forest,1 owning 138,000 in the Upper Peninsula.2
While buying all over the Upper Peninsula, its close proximity to the
Hiawatha National Forest in Delta and Menominee, two of the largest
pulpwood producing counties, and to Dickinson and Marquette counties
which are also large pulpwood producing counties, would seem to indicate
that it would favor procurement in the eastern Upper Peninsula close to
its mill. Also, these counties have high production levels for the
Upper Peninsula of aspen, balsam fir and spruce which is used by Mead.

The Manistique Pulp and Paper Company has the smallest mill in
Michigan and uses an assortment of aspen, spruce, pine and balsam fir.
It is half the size of the next largest mill in Michigan and one-ninth
the size of the largest woodpulp mill in Michigan--Mead Company. It
borders the Hiawatha National Forest on the west in Delta County and

the east in Chippewa and Mackinac County. While it mostly buys pulpwood

 

1Mead Annual Report, 1973, p. 7.

. 21bid, p. 15.

44

TABLE 15

MICHIGAN PULPWOOD PRODUCTION BY ORIGIN AND DESTINATION,
1970-1974 (THOUSANDS OF STANDARD CORDS)

 

 

 

 

Total Destination of Pulpwood

Year Cut Wisconsin Michigan Other

1970 1406 610 785 11

1971 1267 567 688 12

1972 1401 470 917 14

1973 1585 418 1131 36

1974 1843 534 1290 19
5-Year Average 1500 520 962 18

 

SOURCE: James B. Blyth and Jerold T. Hahn, Pulpwood Production in the
North Central Region by County, 1974.

 

TABLE 16

MICHIGAN PULPWOOD PRODUCTION BY FOREST SURVEY UNIT AND
DESTINATION BY STATE, 1974 (HUNDRED STANDARD CORDS,
ROUGHWOOD BASIS)

 

 

 

 

 

Total Destination of Pulpwood
Unit Cut Wisconsin Michigan Other
Eastern Upper
Peninsula 4666 1941 2725 0
Western Upper
Peninsula 6917 3270 3534 113
Northern Upper
Peninsula 6141 131 5966 44
Southern Lower '
Peninsula 700 0 672 28
TOTAL 18,424 5342 12,897 185

 

SOURCE: James B. Blyth and Jerold T. Hahn, Pulpwood Production in the
North Central Region by County, 1974.

45

TABLE 17

NUMBER OF PLANTS RECEIVING PULPWOOD FROM UPPER
MICHIGAN COUNTIES, 1969

 

 

 

County Number of Plants
Alger 10
Baraga 13
Chippewa 13
Delta 18
Dickinson 14
Gogebic 14
Houghton 14
Iron 14
Keweenaw 3
Luce 15
Mackinac 11
Marquette 13
Menominee 17
Ontonogan 14
Schoolcraft 12

 

SOURCE: Michigan Department of Natural Resources, Directory_of Primary,
Woodusing Plants in Michigan, 1970 and 1974.

46

throughout the eastern Upper Peninsula, it probably buys heavily in the
strong pulp producing areas such as Delta, Schoolcraft and Luce.

Celotex in L'Anse and Hoerner Waldorf in Houghton are the two
Michigan woodpulp mills in the western Upper Peninsula. Celotex pro-
duces insulation board and uses aspen as its major source of timber.
With a 24 hour mill capacity of 270 tons per 24 hours (1974) it is one
of the smaller Michigan integrated woodpulp mills. Its size and prox-
imity to Baraga and Houghton counties would make additional purchases
of pulpwood elsewhere unlikely.

Finally, Hoerner-Waldorf with a 24 hour capacity of 220 tons (1974)
is one of the smaller integrated mills in Michigan. In producing paper
it mostly uses aspen, chips, hard and soft maple. Hoerner-Waldorf‘s
timbershed seems to lie in the western Upper Peninsula with emphasis on
near counties such as Ontonogon and Gogebic with additional possibility
of Houghton County. Close proximity to the Ottawa National Forest in
Gogebic and Ontonogon County is a definite locational advantage. Mill
expansion was planned to 565 tons1 which may change Hoerner-Waldorf's
timbershed area in volume and size.

Michigan Stumpage Prices and Pulpwood Volumes as an
Indicator of PCA's Relative Locational Advantage
Among Michigan Integrated Pulp Mills
Michigan stumpage prices and volumes within Michigan for pulpwood

must be interpreted within certain definite guidelines:

 

1See the U.S. Forest Service Handbook of Timber Appraisal and the
Michigan Department of Natural Resources (Division of Forestry) Mich-
igan State Forest Volumes and Stumpage Prices by Districts which are
excellent sources for making yearly comparisons by geographic area for
stumpage prices. They are in various log scales so conversion factors
must be used.

 

47

- stumpage prices for pulpwood in Michigan, depending on tree species,
can be higher or lower in the Upper Peninsula or Northern Michigan de-
pending on the year.1
- from 1960-1975 Michigan pulpwood production has been higher in the
Upper Peninsula than in the northern Lower Peninsula (see appendix 7).

- the future cut of aspen, the largest single tree species used in
Michigan, is likely to fall by 1995 in the western Upper Peninsula and
also by 1995 in the eastern Upper Peninsula and northern Lower Peninsula
(see appendix 8).

The implications of these timber trends in Michigan need close
inspection of stumpage prices over a reasonably long period of time in
order to determine the advantages or disadvantages of the Upper Penin-
sula versus the northern Lower Peninsula (where PCA is operating).
Secondly, while pulpwood production in the last 15 years has shown a
definite trend toward greater production in the Upper Peninsula, almost
half that production is exported to Wisconsin. Currently, the total
pulpwood production from Michigan mills is running close to 50% from
the Upper Peninsula, 50% from the northern Lower Peninsula, though this
may easily change. But the northern Lower Peninsula is an important
source of pulpwood and the second and third largest mills depend on the
area to support their mills. Finally, in 20 years PCA, as well as other
plants in Michigan, will need to find alternatives to aspen or costs
will rise and future plant expansions will be aborted. (See appendix 8

for a fuller description of this trend and the implications for grouse

 

1Hoerner-Waldorf Annual Report, 1973, p. 3.

48

and deer management.)

In order to fully assess locational advantages of PCA regardless
of the model used or data source (primary or secondary data sources)
certain additional factors must be considered. (Note the subsequent
discussion of secondary data sources assumes use of the same basic in-
fOrmation referred to in appendix 6 and 7). Stumpage prices and vol-
umes must be looked at over a long period of time before some assess-
ment of the future can be made. Secondly, transportation costs must
be reflected fully and are the key to assessing relative locational
advantages of integrated pulp mills. This approach poses no problem
with a questionnaire or primary data as long as the disclosure pro-
blem is not violated. But secondary data sources, while providing
accurate information, must be supplemented and/or reassembled to re-
flect a finer locational assessment of stumpage prices. For example,
Michigan State forest prices are reported on a regional basis and the
U.S. Forest Service efforts are recorded by forests. But information
must often be broken down further by state forests or federal forests.
as they overlap county or transportation zones delineated by the study.
Similar efforts to obtain pulpwood production may mean giving county
data a finer locational dimension.

With these qualifications let us take a glance at only 1970 pulp—
wood volumes and prices (as a benchmark) and make some tenative
generalizations. The Upper Peninsula county production levels are
much higher (table 18), but since they face competition from Wisconsin
mills a lot of wood is exported. The largest woodpulp mills are PCA

and Mead by an appreciable margin. Since the Upper Peninsula

 

49

TABLE 18

1970 MICHIGAN PULPWOOD PRODUCTION FOR COUNTIES WITH AN
INTEGRATED PULP MILL OR PARTICLEBOARD PLANT BY SELECTED
SPECIES STANDARD CORDS (ROUGH) ROUNDWOOD ONLY

 

 

Selected Species Total
Balsam Other Pulpwood
County/Company Aspen Fir Hemlock Pine Hardwood Production

 

Baraga 23,909 849 16,301 6,645 4,225 53,757
(Celotex)

Otsego 183 16 - 1,538 312 2,726
(Champion
International)

Allegan 11 - - 12 11 171
(Menasha
Corporation)

Muskegon 104 - - 2,950 348 3,402
(S.D. Warren)

Schoolcraft 9,731 5,224 4,751 9,263 1,661 33,951
(Manistique Pulp
& Paper)

Manistee ‘10,420 - 107 1,192 6,062 31,330
(PCA)

Alpena 8,803 55 - 687 2,206 14,633
(Abitibi)
Delta 31,355 17,954 3,856 10,472 3,812 79,274

(Mead Corpora-
tion)

Ontonagon 14,618 557 5,114 318 1,169 22,139

(Hoerner-
Waldorf)

\

SOURCE: Michigan Department of Natural Resources, Michigan Pulpwood
Production, 1970.

 

u

u

'l

w

 

50

represents another timbershed we really need not dwell on it. Of
course, firms expand, contract and new plants are built based on rela-
tive profitability, but in this study we are mainly interested in
existing plants since any change in output will most likely be made
there because of high current costs of new plant construction.

It is beyond the scope of this study to gather profitability

information and therefore we are focusing on plants and their relative E
locational advantages. In this case we are looking at the access to E
wood. g

The Upper Peninsula has more growth potential and in recent years
it has started to produce more but it faces heavy competition from Wis-
consin mills and exports considerable amounts of pulpwood. The new
Upper Peninsula production is about that or slightly more than the
Lower Peninsula production. On the other hand several generalizations
can be made about the northern Lower Peninsula. The smaller mills (see
table 20) (Menasha Corporation in Allegan County and 5.0. Warren in
MUSkegon County) are located in small pulpwood producing counties (see
tables 18 and 19), farther from the larger pulpwood counties than any
Other mills and both use moderate quantities of aspen. Menasha Cor-
Poration relies heavily on hardwood residues and red oak, while S.D.
Warren relies mostly on jack and red pine.

Therefore, both mills compete with PCA, Abitibi and Champion in
°"1y selected tree species and their smaller volumes pose competitive
threats only in selected parts of the northern Lower Peninsula timber-
shed.

Essentially, PCA and Abitibi are the dominant firms in the

51

TABLE 19

RANKINGS FOR ASPEN AND PINE TOTAL PULPWOOD PRODUCTION
FOR MICHIGAN COUNTIES WITH AN INTEGRATED PULP MILL
OR A PARTICLEBOARD PLANT, 1970

 

 

 

Total
County Aspen Pine Production
Baraga 2 3 2
Otsego 7 5 8
Allegan 9 9 9
Muskegon 8 4 7
Schoolcraft 5 2 3
Manistee 4 6 4
Alpena 6 7 6
Delta 1 1 1
Ontonagon 3 8 5

L

NQLQ; Rankings are listed from 1, the highest,to 9 which is the lowest.

SOURCE: Michigan Department of Natural Resources, Michigan Pulpwood
Production, 1970. .

 

 

 

 

 

52

TABLE 20
RELATIVE CAPACITY OF PULP MILLS IN MICHIGAN IN 1974*

 

 

 

 

Relative
County Company Ranking**
Baraga Celotex Corporation 4
Otsego Champion International***
Allegan Menasha Corporation 5
Muskegon S.D. Warren Company 6
Schoolcraft Manistique Pulp & Paper Company 8
Manistee PCA 2
Alpena Abitibi Corporation 3
Delta Escanaba Pulp & Paper- 1
Mead Company
Ontonogan Hoerner-Waldorf Corporation 7

SOURCE: Lockwood's Directory, 1974.
*Rankings are listed from 1, the highest, to 8, the lowest.
**Mill capacity in tons per 24 hours.

***Particleboard Plant.

53

northern Lower Peninsula. PCA does not own large tracts of land and
the larger timber producing counties are in the central and eastern
portion of the northern Lower Peninsula. Nevertheless, it can control
counties close by such as Manistee and probably large parts of Lake

and Mason counties though it may face some competition from S. 0. Warren
in these counties. As a general rule, we would expect PCA to undercut
or buy less close to its plant site to keep prices down and have a
reserve. Further from the mill it meets competition by discriminating
in price in areas where its timbershed overlaps with other firms. The
total production for close-by timber producing counties of high volumes
is shown in table 21. Hence, PCA has close access to 16% of the north-

ern Lower Peninsula's aspen and 22% of its total pulpwood production.

TABLE 21

PCA'S NEIGHBORING COUNTIES, ASPEN AND TOTAL PULPWOOD PRODUCTION
IN 1970 STANDARD CORDS (ROUGH) ROUNDWOOD ONLY

 

 

 

 

 

County Aspen Total Pulpwood Production
Manistee 10,420 31,330
Mason 7,047 21,455
Lake 12,638 48,445
Wexford 15,556 33,667
TOTAL 45,661 134,897

SOURCE: Michigan Department of Natural Resources, Michigan Pulpwood
Production, 1970.

 

 

 

 

54

The Champion International mill in Gaylord (Otsego County) is
located slightly north of and mid-way between PCA and Abitibi. While
a quarter of the wood is chipped, it competes with PCA and Abitibi for
aspen and jack pine roundwood in a number of counties in the central
Lower Peninsula. Though Otsego County is not a large producer of pulp-
wood it is located close to a number of high production counties (see
table 22). Champion International is located closer to a larger per-
centage of aspen and total volume of pulpwood than PCA since it is
within close range of 24% of the total aspen production and 29% of
total pulpwood production in the northern Lower Peninsula. Compared
to Abitibi, Champion has less access to aspen but the same percentage
for total pulpwood production. Nevertheless, Champion International
has two serious disadvantages: it is competing for similar types of
umod with the two largest woodpulp mills located on either side of the
northern Lower Peninsula; it is without a large pulpwood producing
county in its immediate proximity. PCA's home county has a substantial
amount of production but Abitibi home county production (Alpena) has
less than half its volume though its production is seven times that of
Otsego County (site of Champion International).

Abitibi, in Alpena County, is the second largest mill in the north-
ern Lower Peninsula and has a lower relative ranking in aspen, pine and
total pulpwood production than PCA in its home county (see table 19).
It also is a larger buyer of aspen and has the highest total pulpwood
Production from counties in close proximity to the mill (see table 23).

Abitibi seems to have the best overall access to timber with better

Proximity to aspen and equal proximity to the total volume of pulpwood

 

55

TABLE 22

CHAMPION INTERNATIONAL'S NEIGHBORING COUNTIES' ASPEN
AND TOTAL PULPWOOD PRODUCTION IN 1970 STANDARD
CORD (ROUGH) ROUNDWOOD ONLY

 

 

 

County Aspen Total Pulpwood Production
Otsego 183 2,726
Cheboygan 8,204 14,148
Presque Isle 11,996 20,750
Montmorency 17,400 30,982
Oscoda 19,809 59,215
Crawford 4,724 30,387
Kalkaska 5,660 12,578
Antrim 862 1,334
TOTAL 68,838 172,120

 

SOURCE: Michigan Department of Natural Resources, Michigan Pulpwood
Production, 1970.

 

TABLE 23

ABITIBI'S NEIGHBORING COUNTIES' ASPEN AND TOTAL PULPWOOD
PRODUCTION IN 1970 STANDARD CORDS (ROUGH) ROUNDWOOD ONLY

 

County Aspen Total Pulpwood Production
Alpena 8,803 14,633
Presque Isle 11,996 20,750
Montmorency 17,400 30,982
Oscoda 19,809 59,215
Alcona 31,106 47,247
TOTAL 89,114 172,827

 

 

SOURCE: Michigan Department of Natural Resources, Michigan Pulpwood

Production, 1970.

 

 

56

within adjacent counties compared to the total northern Lower Peninsula
pulpwood production. Some disadvantages for Abitibi include: it
controls a smaller supply of aspen and pulpwood in its home county than
PCA; and, it is a smaller firm than PCA and size may provide advantages
in buying pulpwood which are needed in the areas of competition between
wpodpulp firms. Some evidence of this is that PCA is able to enter
into a fair number of long-term wood procurement contracts according

to state forest officials.

This analysis was only for one year and could contain the follow-
ing additional considerations for a more complete analysis of Michigan's
timbersheds for integrated woodpulp mills: pulpwood production and
prices within certain specified distances from the mills; data from a
longer time span than one year; and, additional data on other tree
species. Further analysis along these lines could provide greater
depth to the question though not necessarily providing any different
conclusions regarding locational advantages and disadvantages of wood-
pulp mills in Michigan.

In conclusion, PCA has a strong relative position in its proxi-
mity to pulpwood in neighboring counties though not as strong perhaps
as Abitibi in Alpena. It does, however, reside in a strong pulpwood
Producing county which it can treat as its own reserve and can compete
vigorously in overlapping supply areas with all other woodpulp mills in

the Lower Peninsula because of its relative size.~

“1

._..-._.—
a I. .

 

57

Water Requirements for Integrated
Pulp Mills and Pollution Impacts

Water requirements for pulp are quite high and this is a severe
limiting factor in expanding industrial capacity. (See appendix 9 for
an estimate of water requirements for different type of pulp mills.)
A.more recent and detailed estimate is included in table 24. Since PCA
uses a semi-chemical process, its water requirements per ton will be
lower than other pulping processes except the groundwood process as
illustrated in table 25. Of course, having the second highest produc-
tion volume of 700 tons means that it has very high water requirements
land this is discussed in Chapter IV more at length but the total amount
(Jf water needed would be higher if the requirements per ton for the
.semi-chemical process were not so low.

Table 25 shows the total water available in each county in Mich-
'Igan where a woodpulp mill is situated. In addition, almost all are
ltacated close to one of the Great Lakes. There is not tremendous vari-
irtion in water availability among the counties except for Schoolcraft
Ct>unty which leads by quite a margin. This is where the smallest w00d-
pulp mill, the Manistique Pulp and Paper Company is located. PCA is
Itacated in a county which has slightly below average water availability
but the plant lies on Lake Manistee and is fed by the Little Manistee
Fliver, both of which are among the larger bodies of water within the
Izounty. Sufficient water is available for plant expansion of one-third
<>f its capacity according to informal discussions with Department of
Natural Resources officials in the Division of Forestry and PCA plant

Officials.

Many of the rivers capable of sustaining woodpulp operations in

- ~.TL v.5;

 

58

TABLE 24
WATER REQUIREMENTS FOR SELECTED PULPING PROCESSES

 

 

Gallons Fresh Water Per Ton of Pulp

 

 

Process Maximum Minimum
Kraft and soda (unbleached) 88,500 33,000
Kraft and soda (bleached) 144,500 39,500
Sulfite (unbleached) 79,000 8,300
Sulfite (bleached) 126,300 8,300
Groundwood (unbleached) 69,000 1,000
Groundwood (bleached) 92,400 1,000
Semi-chemical (unbleached) 12,400 6,980
.Semi-chemical (bleached) 30,000 12,960

 

‘*Figures are for integrated pulp mills with paper.
SCMRCE: U.S. Department of Commerce, Technical and Economic Feasibility

of Establishing a Hardwood Pulp and Paper Mill in an Eight-
County Area of Western Kentucky.

TABLE 25
AREAS OF WATER FOR MICHIGAN COUNTIES WITH A PULP MILL

 

H

Inland Bodies

 

 

of Water Bodies of Miles
Total Total Water Over of
Firm County Number Acreage 200 Acres Streams
Cel otex Baraga 1,147 10 , 152 9 696
Escanaba Pulp 8: Paper Delta 561 5,977 2 514
l‘ioerner-Waldorf Ontonagon 645 10,994 4 1,282
Abitibi Corporation Alpena 67 13,373 8 301
Menasha Corporation Allegan 569 8,522 11 517
5.0. Warren Muskegon 262 11,453 7 394
Iflangstique Pulp & Schoolcraft 1,095 28,801 18 734
aper
PCA Manistee 301 8,248 6 276

 

\

TSOURCE: Michigan State University, County and Regional Facts, 1972.

 

 

59

Michigan are being used and if further use of one of the Great Lakes
were made the plant would have to meet very stringent federal regula-
-tions. Michigan does have a lot of water available and a tolerance
for some unavoidable water pollution. With federal regulations being
imposed and eventually enforced uniformly, Michigan is not at any real
disadvantage for a new plant expansion or expansion of an existing
plant.

Pollution control for integrated woodpulp mills requires large
volumes of water for the purification process which can be quite costly.
The basic pollutants of woodpulp mill water are suspended solids such
as bark and fiber and solubles entering the material and production
process.

Suspended matter deposits on the bottom of receiveing streams

which discolor the water and during decomposition can place a

great demand upon the oxygen content of the water. The solu-

bles also deplete dissolved oxygen and stimulate the growth of
slime organism. Purification processes such as screening,
settling, and floatation are effective in preventing suspended
materials from entering streams, but the solubles require either
reaeration or activated-sludge treatment which are more costly.

The regional water quality supervisor for Michigan in 1969, Mr.

Tliomas L. Kamppinen, stated that "abatement of pollution in the inter-
State waters of Michigan is to be accomplished by June 1, 1972."2 He
1 ists the Menominee River as having pollution problems attributable to

the paper companies. Also the Kalamazoo River biochemical oxygen de--

Inand (BOD) loadings are another of Michigan's problem areas. Only one

\

1Battelle Memorial Institute, Industries Suited for the Upper
Emat Lakes Region, pp. 5-12.

2Alfred J. Tassel, Environmental Side Effects of Rising Industrial
Qutput, p. 33.

 

 

60

Michigan woodpulp plant is in the Kalamazoo Basin, the Menasha Corpor-
ation. Certainly PCA's pollution control efforts have been extensive
and costly and they are described at more length in Chapter IV.

Table 26 and appendix 9 can be used in calculating comparative
waste discharges for wastewater, BOD and suspended solids in woodpulp
mills. Using table 25 or part of appendix 9 as a guide (with the 1974
capacities of Michigan mills except PCA where 700 tons per 24 hours is
used) multiplying discharges times appropriate mill volume yields the
levels of discharge. Similarly, table 27 can be used to calculate
estimated pollution abatement costs given type of mill and mill volume.
PCA has had a primary treatment plant since 1957 and has completed a
Iiew $4.5 million secondary treatment plant putting it in a relatively
good position for controlling pollution. The purpose of the facility
is to remove biochemical oxygen demanding materials (such as wood sugars
and lignin upon which bacteria feed) from the wastewater generated in
‘the production of corrugating medium. The Filer mill secondary treat-
nkent plant along with a nutrient addition system and collecting and
FHmmping facilities adjacent to the mill are financed under Michigan
Iridustrial Development Revenue Bond Act. Revenue bonds to cover the
C(3St of the treatment facilities were issued by Manistee County. PCA
VVill repay the bonds from lease rental fees. The principal and inter-
est on the bonds are not a general obligation of the county and are
THDt payable from any tax revenues or other general funds of the county.
”hast existing Michigan woodpulp mills are making substantial investments

1'1 pollution control in order to comply with Federal Water Pollution

Standards .

 

COMPARATIVE WASTE DISCHARGE

61

TABLE 26

 

 

 

Suspended
BOD Solids
Unit of Waste Water (parts per (parts per
Process Input or Output (gals. per unit) million) million)
Groundwood ,F
pulp 1 ton dry pulp 12,000 645 --- :
Soda pulp 1 ton dry pulp 58,000 110 1,720
Sulfate
(kraft) 1 ton dry pulp 64,000 123 --- F
pulp
Sulfite --..
pulp 1 ton dry pulp 48,000 443
Paper mill 1 ton paper 40,000 19 452
Paperboard 1 ton paperboard 14,000 121 660

‘

 

SOURCE: E.A. Ackerman and 6.0.6. Lof, Technology in American Water
Development.

 

 

62

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63

Table 28 shows the anticipated impact of pollution control equip-

ment on prices for the U.S. All woodpulp plants in Michigan can be

assumed efficient. PCA, which produces semichemical medium, would (if

these national guidelines are used) then register a 5.5% price increase

in 1972-76. Similar calculations could be made for other woodpulp mills
in Michigan.

Marketing Advantages and Disadvantages of PCA
Compared to Other Woodpulp Mills in Michigan

It is often quite difficult to estimate distances to markets from
plants for a variety of reasons but mainly because individual plants or
firms may not disclose information about the exact markets they serve.

Al so reciprocal trade agreements exist probably because of freight rates

which vary over space. Therefore. companies may not actually sell their

goods in the markets they hope to serve.

Nevertheless, access to markets is a very important locational

advantage and some general calculations were made. Table 29 shows that

the northern Lower Peninsula and the Upper Peninsula are different

SUbregions and though the Upper Peninsula distances to the markets are

higher its results might best be interpreted separately. As a general

r‘u'le, woodpulp mills locate close to raw materials and paper mills

Closer to markets, given equal transportation rates. However, all

mills are integrated though producing a different variety of paper and
an ied products. PCA, a large producer of coarse paper, is in a rela-
ti Vely good market location in the northern Lower Peninsula ranking

On‘ly slightly behind Menasha Corporation and S. D. Warren which produce

1B‘Ine quality paper and are very market oriented.

64

 

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66

Finally, distances to two major market in the Upper Peninsula are
fairly close. The exception is the Manistique Pulp and Paper Company
which now only sells in one market, Chicago, and would of course have
lower total mileage figures.

In the summary, PCA holds a good relative position in the northern
Lower Peninsula for access to major markets. It exercises reciprocal
trade agreements with other companies in the Midwest so while it may
be serving a designated market area, it may not actually deliver to it.
Reciprocal selling usually indicates an oligopolistic market structure
where members of the industry compete through nonprice rivalry rather
than price competition.

Tables 30 and 31 list marketing considerations for integrated
woodpulp mills in Michigan. All mills are well related to their pro-
duct lines and very often part of a larger diversified company. Many
are subsidiaries of larger companies (such as PCA which is a part of
Tenneco). As for PCA, it is in an enviable position from a marketing
Standpoint since its corrugated plant in Filer City is part of a large
Corrugated box production effort.

PCA appears to hold a strong overall position in type of produc-
t1'On process, access to pulpwood, access to markets and marketing capa-
bil ity, water availability and water pollution efforts. It is by no
means a marginal company and the prospects for future viability, largely

re] ated to the market for corrugated medium which is expected to be

good, seem to be very promising.

 

5.5 .- WfiJ‘ 1

‘3.’ 'V‘

 

67

TABLE 30

MICHIGAN PULP MILLS, PRODUCT PRODUCED AND STANDARD
INDUSTRIAL CLASSIFICATION NUMBER FOR 1970

 

 

 

Firm Product SIC No.

Abitibi Corporation Insulation board and hardboard 2661
(Shampion International Particleboard 2661 FE
S.[L Warren* Coated printing paper (fine 2641 F

(Scott Paper Company) papers) 5
PCA Paperboard (corrugated medium) 2631 2..
Menasha Corporation Paperboard (corrugated medium) 2631
Hoerner-Waldorf Paper - makes a variety of 2621

carton stocks, corrugated
medium, kraft liner board and
other paper products

Manistique Pulp & Paper Paper (newsprint and other 2621
Company specialty papers)
Mead Company Paper (bleached kraft pulp 2621

printing paper)

Celotex ‘ Insulation board 2661
(Jim Walter Corporation)

 

 

SOURCE: Michigan Department of Natural Resources, Directory of Primary
Woodusing Plants, 1970 and 1974.

*Pr‘oduces bleached kraft pulp.

 

68

TABLE 31

MARKETING CONSIDERATIONS FOR MICHIGAN PULP MILLS FOR 1970

 

 

Firm

Marketing Factors

 

Abiti bi Corporation

Champion International

S . 0. Warren
(Scott Paper Company)

Packaging Corporation of
America

Menasha Corporation

Hoerner-Wal dorf

Manistique Pulp and Paper
Company

Mead Company

CGI otex
(Jim Walter Corporation)

\

Requires distribution channels to the
construction industry. Market dominated
by five companies in hardboard.

Requires distribution channels to con-
struction, cabinet and furniture indus-
tries.

Ideally should be integrated into a
firm producing book and fine papers,
publication paper, sanitary tissue or
footboard.

Firms should be integrated to corrugated
box production.

Firm should be integrated to corrugated
box production.

Supply reliability and quality image
with newspaper publishers.

Strong price-performance, competition in
selling to key magazine and catalog
publishers.

Requires distribution channels to con-
struction industry.

soURCE: Arthur 0. Little, Overview of Pulp and Paper Exapnsion Possi-
bilities in the Upper Great Lakes Region.

 

69

TABLE 32

COMMENTS ON INTEGRATED MICHIGAN PULP MILLS FOR 1970

 

 

Firm

Comments

 

Abitibi Corporation

Champion International

S . D. Warren

PENN

Menasha Corporation

Hoe rner-Wal dorf

Manistique Pulp and
Paper Company

Abitibi is one of the five major hard-
board companies and it has distribution
channels to the construction industry
through the Abitibi Corporation Building
Products Division and the Abitibi
Building Products Division.

Champion International has distribution
channels to the construction industry
through its subsidiary of U.S. Plywood
and Weldwood of Canada and to the furni-
ture industry through Drexel Heritage.

Scott Paper Company has divisions which
make sanitary tissue and book and fine
paper through its division, S.D. Warren.

PCA is integrated into Tenneco which pro-
duces chemicals and natural gas. PCA
makes corrugated containers, folding
cartons, molded pulp as well as paper.

It merged with Tenneco in 1965. It has

a plant in Grand Rapids which makes high
grade box boards.

Menasha has corrugated container divi-
sions with seven plants, one of which
is at Colorna, Michigan.

Hoerner-Waldorf is involved in a variety
of paper-making activities which makes
it difficult to assess major marketing
factors. It also has a large container
division and several consumer packaging
and bag plants.

Since 1959 the Manistique Pulp and Paper
Company has been a subsidiary of Field
Enterprises of Chicago, Illinois. Field
Enterprises publishes The Chicago Sun-
Times, The Chicago Daily News and World
Book Encyclopedia.

 

70

TABLE 32-—Continued.

 

 

Firm Comments

 

Mead Company The backbone of Mead's merchant business
is in printing papers such as bond,
writing and carbonless papers for busi-
ness forms and copy/duplicator markets,
coated and uncoated book papers for off-
set printing (catalogs, etc.).

Celotex The parent company, Jim Walter Corpora-
(Jim Walter Corporation) tion is a major home builder through its
division of Jim Walter Homes and Mid-
States Homes. It also produces building
supplies through its Dixie Building
Supplies and its array of companies in
its wood products group.

SCNJRCE: Annual Reports for Scott Paper, Tenneco, Abitibi Corporation,
Champion International, Menasha Corporation, Hoerner-Waldorf,
Field Enterprises, Mead Company, and Jim Walter Corporation,
1974.

 

CHAPTER III
SOCIO-ECONOMIC DESCRIPTION OF MANISTEE COUNTY

Location

In the northwest portion of Michigan's Lower Peninsula lies Manis- I

I"

tee County. It borders on Lake Michigan and is almost square in shape.

Directly north of Manistee County is Benzie County, east lies Wexford

1: -" .‘\V T).

County and to the south is Muskegon County. "Within the boundaries of
Manistee County are 357,120 acres or 558 square miles."1 The county
lies within the Michigan Planning and Development Region 9 which in-
Cludes the ten northwest Lower Peninsula counties of Antrim, Benzie,
Charlevois, Emnet, Grand Traverse, Kalkaska, Leelanau, Manistee, Mis-
Saukee and Wexford. The regional center is Traverse City though Man-

istee County lies much closer to the "pull" of Muskegon.

Economic Hi story

Prior to 1850 Manistee County was the frontier. But during the
Dost-Civil War period until about 1915 the logging industry exploited
the virgin forests of prime white pine. These were years of great
prosperity and today the city of Manistee has a great number of arti-
facts ranging from timber barons' homes to a sizeable number of

Churches of many varied denominations. When the high quality white pine

¥

1U.S. Bureau of the Census, Census of the Population: 1960, Number
31: Inhabitants, Michigan, Final Report PC(1)-24A (Washington: U.S.
Government Printing Office, 1962), p. 14.

71

 

72

was stripped the economic activity of the county fell. The major tim-

ber companies moved to the west coast. The pulpmill in Filer City

began in 1917 as a kraft-pulp mill using low grade woods such as aspen,
oak and other hardwoods. It has grown into one of the largest corru-

gating medium production mills. In 1977 all three machines were pro-

ducing corrugating medium. Other mineral based industries such as

chemicals and the production of salt have attempted to rejuvinate the

economic base of the county but it has been a slow process.

The growth of a year-round recreational business in the 1940's and
farmers turning to the production of specialty crops have further di-

versified the county's economy. Two developments in the area of re-

creation loom as possible future benefits for Manistee County. Since

the coho salmon were introduced into Lake Michigan in 1965 many sport

fishermen will be coming to Manistee County since many good fishing

sPots include Manistee County. In 1970 Sleeping Bear Dunes National

Lakeshore was established 25 miles north of Manistee County in Benzie

and Leelanau Counties. Many people that visit this area may visit or

Step off in Manistee County. "It has been estimated that three million

persons will be drawn annually to Sleeping Bear Dunes National Lake-

shore."1 The exact impact of the two new developments of the economy

01“ Manistee have not been fully analyzed at this time.

\

1Donald A. Blome, The Proposed Sleeping Bear Dunes National Lake-
shore: An Assessment of the Economic Impact (EastLansing: Michigan
state University, 1967), p. 42.

73

Human Resources

Population

Table 33 shows Manistee County with a growth rate of moderate pro-
portions. The City of Manistee is having the opposite trend. Indeed
from 1960-1970 Manistee County's population rose 5.5% while the City

of'Manistee's population fell 7.2%.

TABLE 33

POPULATION IN MANISTEE COUNTY AND THE CITY OF MANISTEE
FROM 1940 TO 1970

 

 

 

 

POPULATION
1940 1950 1960 1970
City of Manistee 8,694 8,642 8,324 7,723
Manistee County 18,450 18,524 19,042 20,094

‘

SCNJRCES: U.S. Bureau of the Census, U.S. Census of the Population:
1960, General Social and Economic Characteristics, Michigan.
U.S. Department of Commerce, Bureau of the Census, United
States Census of Population: 1970, Number of Inhabitants.

"For 1970 in Manistee County, 38.4% of the population was classi-

1

1"Ied as urban and 61.6% as rural." "This compares to Michigan and the

entire U.S. where the urban-rural breakdown is approximately 75% urban

ahd 25% rural. In 1970 98.8% of the population was white."2

\

1U.S. Bureau of the Census, United States Census of Population:
1‘970, Number of Inhabitants, Michigan, PC(1)-AP4 (Washington: U.S.
Government Printing Office, 1970), pp. 19-20.

2U.S. Bureau of the Census, United States Census of Population:

.%§970, General Population CharacterTstics, Michigan, PC(1)4824, pp. 178-
E30.

 

‘Im \II'

'13 iii

 

74

When looking at total population figures the statistic net migra-
tion is often left out. The term means the number of persons moving
out of the county exceeding those moving in. "In 1970 for Manistee

County there was a net migration of -289 but an excess of births over

deaths of 1,341."1

Miscellaneous Information

"As expected for a rural area, Manistee County has a lower per-
centage of males and females in the 20-44 age group and more males and
females in the over 65 group than the State of Michigan."2 This is

«due to the less than satisfactory job opportunities which cause a

negative net migration.

Income and Employment

"Manistee County has a mean family income of $9,121 compared to
$12,296 for the State of Michigan (1969). It has 11.8% of its fami-

1'ies which lie below the poverty level compared to 7.3% for the

$12ate."3

Table 34 shows the per capita income in the county increasing

Over the past few years. In 1959 the per capita income was $1,648 and

iii 1968 it was $2,956.

\

1Michigan State University, Michigan Department of Commerce,
Executive Office of the Governor, County and Regional Facts (Region
1()) (East Lansing, Michigan, 1970), p. 8.

21bid, p. 10.

3Ibid, pp. 35-36.

 

75

TABLE 34
PERSONAL INCOME IN MANISTEE COUNTY 1959, 1965, AND 1968

 

 

 

Personal Income 1959 1965 1968
Total (millions .
Per Capita

(dollars) 1,648 2,377 2,956

 

SOURCE: Mgggigan State University, Michigan Statistical Abstract,

From Table 35 Manistee County's percentage of earnings by the
‘industrial sector look very close to the State of Michigan for Govern-
ment; Manufacturing; Transportation, Communication and Public Utilities;
Wholesale and Retail Trade; and, Service. A heavy natural resource
based industry in pulp and chemical accounts for the higher than normal
(for a rural county) percentage earnings by the manufacturing sector.
Farm earnings are higher than the state on a percentage basis but below
other rural counties in the same region. 1

Looking at employment by activity (Table 36), similar conclusions
Can be made as in income by activity (see previous discussion). The
nIanufacturing sector plays a dominant role by employing 2,842 workers
f’lcom the 6,945 workers which comprise about 39.4% of the total labor
fkarce. Retail trade at 18.2% and professional and related services at
15.3% of the labor force are also important sectors.

The American Box Board Corporation (later PCA) had 303 workers in

1953. PCA has 632 workers in 1962. In 1972 after the conversion of

 

 

76

TABLE 35
TOTAL EARNINGS BY MAJOR SOURCE - 1969.

 

 

Item Michigan Manistee

 

Total Earnings ($000) 29,607,631 47,211

Distribution of Total
Earnings by Percent

Farm 1.1 4.3
Government 12.0 14.8
Manufacturing 45.4 43.4
Mining 0.1 0.0
Contract Construction 5.7 4.0
Transportation, Communication 4.9 5.4
and Public Utilities
Wholesale and Retail Trade 13.9 14.0
Finance, Insurance and Real Estate 3.2 2.4
Services 12.2 11.3
Other 0.2 0.4

x.

SOURCE: Michigan State University, County and Regional Facts, 1973.

 

 

 

77

TABLE 36
EMPLOYMENT BY ACTIVITY IN MANISTEE COUNTY - 1970

 

 

 

Item No. Total % Male %
Total Number Employed 6,945 100.0 64.8
Agriculture, Forestry & Fisheries 244 3.5 77.9
Mining 16 .2 68.8
Construction 294 4.2 95.9
Manufacturing:
Durable Goods 1,105 15.9 85.3
Non-Durable Goods 1,637 253 70.5
39.4
Utilities 348 4.0 84.5
Trade 1,265 18.2 55.3
Finance, Insurance & Real Estate 199 2.8 50.3
Business & Repair Service 77 1.1 75.3
Personal Services 333 4.7 37.5
Entertainment 8 Recreation Services 20 0.2 75.0
Professional 8. Related Services 1,067 15.3 33.8
public Administration 340 4.8 78.5

\

SOURCE: Michigan State University, County and Regional Facts, 1973.

78

the third machine from the production of solid bleached-draft paper-
board to the production of more corrugated medium, the employment was

down to 467. Table 37 shows the relationship between PCA's woodpulp

output and employment. By 1974 employment rose to 489 but potential

production was 700 tons per 24 hours. It shows increasing production

with fewer workers. See also table 38 which shows the higher levels of

unemployment in 1972 of 15.9% in Manistee probably in part due to in-
troduction of a third machine as a labor saving investment.

Table 39's major point is that though production of woodpulp,
paper and paperboard have been increasing in Michigan, the rate of

growth nationwide is four times the growth rate in Michigan from 1960

to 1971.
Two separate studies indicate that the potential employment effects

01’ pollution abatement might have a significant impact on employment in

the woodpulp industry. Firstly, in a joint publication effort by the

Council on Environmental Quality, Department of Corrmerce and the Envi-

Y‘Onmental Protection Agency it was found that "of the 752 pulp and

paDer mills over 15% of the U.S. production is marginal." Price in-

f

cr‘eases to cover pollution abatement costs will reduce already, low

Profit margins. It was estimated that in the time frame 1972-76 "60-

55 mills would be forced to close (nationwide) resulting in a loss of
1E5,000 jobs by 1976."2 While a larger number of jobs will be expected

by way of plant expansion, many jobs created may not be in communities

\

E 1Council on Environmental Quality, Department of Comerce and the
COVironmental Protection Agency, The Economic Impact of Pollution
W (Washington: U.S. Government Printing Office, 1970) p. 41.

2Ibid, p. 41.

79

TABLE 37

PACKAGING CORPORATION OF AMERICA PRODUCTION
AND EMPLOYMENT - 1953 TO 1973

 

 

Manistee Woodpulp Production Manistee Woodpulp Employment
(nfill capacity in tons per 24 hours)
(1) 1953 280 (3) 1953 (Feb.) 303
(1) 1961 (June) 565 (4) 1962 632
(2) 1972 625 (6) 1972 467
(5) 1974 700 (6) 1974 489

SOURCES: (1) United States Pulp Producers Association, Incorporated,
Woodpulp Statistics, 1960.

(2) PCA's Headlines, 1972.

(3) Comsumers Power Company, Data on Plant Location at Manis-
tee, Michigan, 1953.

(4) Consumers Power Company, Data on Manistee, Michigan, 1966.

(5) James E. Blyth and Jerold T. Hahn, Pulpwood Production in
the North Central Region by County, 1974.

(6) PCA company data transmitted by letter.

 

 

 

 

TABLE 38

MANISTEE CIVILIAN LABOR FORCE, UNEMPLOYMENT AND
EMPLOYMENT IN MICHIGAN, BY BROAD INDUSTRIAL CATEGORY
AND COUNTY OR AREA: 1969 TO 1972
(AVERAGE 0F 12 MONTHLY FIGURES)

 

 

Unemployment
Year Civilian Labor Force Number Rate
1969 7,400 g 725 9.8
1970 7,450 925 12.4
1971 7,500 875 11.7
1972 7,725 1,225 15.9

\

SOURCE: Michigan Department of Commerce, Employment by Selected
Industrial Sectors, January 1975.

80

TABLE 39

PRODUCTION OF WOODPULP, PAPER AND PAPERBOARD IN
MICHIGAN AND THE UNITED STATES: 1960-1971

Year Michigan* United States**
(in thousands of short tons)

1960 515.3 25,315.6
1961 476.8 26,522.8
1962 499.5 27,908.3
1963 548.5 30,121.2
1964 570.1 32,428.9
1965 605.6 33,993.1
1966 590.3 36,640.0
1967 575.9 36,660.0
1968 496.0 39,399.7
1969 588.9 43,416.1
1970 587.3 43,662.6
1971 572.6 43,932.7

\

SOURCE: Michigan State University, Michigan Statistical Abstract,
1974.

*Greater than 10% increase in 11 years.

**Greater than 42.4% increase in 11 years.

81

experiencing job loss. Furthermore, many plant closings are expected
in rural areas much like Manistee County where they would have a signi-
ficant community impact. The study concludes that semi-chemical pulp
plants (like PCA) have a definite potential for plant shutdowns.
Vertrees concludes in his dissertation that within region II 8
(this includes an area larger than just Manistee County) there is
the widespread dispersal of diverse employment effects among the
industries. Within this region, however, the relatively small
paper and chemical industries would have contributed substan-
tially to the number of jobs lost due to the worst-possible em-
ployment effects. 0f the 1,330 workers in status list plants
with 'E' rated discharges (the highest level of pollution) in
region II B, 775 workers or about 58 percent found employment
in either a paper mill in Filer City or a salt work in Manistee.
The employment impact of pollution abatement needed to bring PCA into
ccnnpliance with the new environmental water pollution direct controls
Nmauld: have a sizeable employment impact in Region II B and Manistee
County since it employs 600 of the 775 in a paper mill or a salt works;
require substantial investments since it was classified as a major
P071utor since it was related "E" in discharges (the highest level of
901 lution). Since we do not know the individual firms cost/price re-
Iationship and hence its profitability (which will ultimately indicate
Its ability to absorb the pollution abatement costs or pass them on to
Consumers) we are left only with an assessment of potential employment
e1"Fects of direct pollution controls which indeed Professor Vertrees
"eCognizes.

Despite the potential for serious employment impacts as a result
H._~‘¥i
1Robert L. Vertrees, The Incidence of Certain Beneficial and

AdVerse Effects of Public Water Poilution Control Measures Upon Manu-
-§§E§gring in Michigan, Michigan State University Dissertation, p. 182.

 

82

of new pollution control regulations, PCA built a new secondary treat-
ment plant for wastewater at a cost of over $4,000,000. This is in
addition to the primary treatment plant which has been in existence
since 1957. The new facility removes biochemical oxygen demanding
materials from wastewater (organic materials such as wood, sugar and
lignin upon which bacteria feed). Only a non-marginal firm could ab-
sorb this expense and still retain its normal levels of profitability
and therefore its work force.

Table 40 shows 30 years of employment data for various industries
in the county. As mentioned in other sections, manufacturing and
wholesale and retail trade and services show large employment gains
while agriculture shows a sharp drop. Paper and allied products show
a gain but as we know from table 37 employment levels dropped after
1970 but then increased again when the new machine was installed and
employment registered 487 workers in 1974. Incidentally, the Manistee

Chamber of Comerce reports that the county is the labor market area.

sectorial Analysis

 

Manufacturing

Manistee County has a very diverse economy for Michigan consisting
01’ an active wood products, primary metals, machinery, food processing,
aIJIDarel and chemical industry. From table 41 it appears that the ex-
Pansion of output and increased employment has come from existing firms

Over this time period.

Trade
Retail and wholesale trade has been steadily increasing over the

past years. For example, "retail total sales jumped from $18.9 million

83

 

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85

TABLE 41

SOME MANUFACTURING DATA FOR 1958, 1963 AND 1967

 

 

 

 

 

 

 

 

 

Year Manistee County Michigan
NH Employees Annual Average
1958 1,871 880,014
1963 2,533 961,090
1967 2,700 1,137,600
Total Number of Establishments
1958 55 13,429
1963 55 14,220
1967 46 14,370
Establishments with 1-19 Employees
1958 37 N.A.
1963 38 N.A.
1967 N.A. N.A.
§§tablishments with 20-99 Employees
1958 12 2,837
1963 11 3,229
1967 N.A. N.A.
Eéztablishments with 100 or More Employees
1958 6 1,153
1963 6 1 308
1967 N.A. N.A.
lfiilue Added by Manufacturing (million dollars in current terms)
1958 21.1 8,363.6
1963 36.3 13,090.3
1967 41.9 12,243.7

x

SOURCE:

U.S. Bureau of the Census, 1967 Census of Manufacturing,
Michigan, Preliminary Report MC 67 (P)-523 (Washington:

U.S. Department of Commerce, 1970), p. 3.

ote: N.A. - Not available.

‘

86

in 1958 to $25. 0 million in 1967 with food accounting for 30%, 25% for
automobiles and 16.4% for general merchandise."1

Figures in table 42 show in summary form those establishments in
retail and wholesale trading activities. Higher payroll and sales vol-
umes in 1967 were obtained without a large increase in firms and em-
ployees than in previous years (that is, 1963).

The data in table 43 shows selected statistics for Manistee
County's manufacturing. It shows that with slightly fewer establish-
ments from 1963 to 1967 gains were made in employment, payroll and
value added by manufacturing. Employment per establishment increased

from 45.45 to 58.70 employees from 1963 to 1967.

Financial Institutions

There are two main banks in Manistee County--Manistee Bank and

Trust Company, and Security National Bank. For 1969, "both banks re-

2

Ported total resources of $45,470,000." The Manistee Bank and Trust

Company is the larger of the two institutions.

Housing

"The 1970 Census showed Manistee County with 9,346 housing units."3

111 1950 the total was 8,642. Housing stock built prior to 1940 was
ESs921. From 1940-49, 1,189 units were constructed. Then from 1950-59,

\

1Michigan State University, Michigan Statistical Abstract, 1970,
Dp. 294- 95 and pp. 306- 307.

21bid, p. 374.

3Michigan State University, Michigan Department of Commerce and
Executive Office of the Governor, op. cit., p. 23.

 

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88

1,532 homes were built and from 1960-69 a decline was registered with
704 housing units added. Based on year round housing figures, in 1970
67.6% of all homes were owner-occupied, 15.0% rented, and vacant homes
accounted for the other 17.4%. Seasonal and migrational homes account-

ed for 16.2%

Transportation

A well-developed transportation network services Manistee County.
Hhile highways are not the four lane variety, the roads are functionaT.
U.S. 31 is the major north-south route and M-55 is the primary east-
west connector. "The Michigan State Highway Department pays for the
cost of maintaining the federal and state roads in the county, but
Manistee County Road Commission also maintains the other primary and
secondary roads."1

Air traffic is handled by the Manistee Blacken Airport with North
Central Airlines providing passenger and freight service. Figures for
commercial trucking are not available on the county level. Railroad
service is provided by the C & 0 Railroad. The line is in the "black"
and no rail closings along this connection are foreseen in the near
future. Finally, port facilities at Manistee Harbor are available up
to large freight vessels with some freight storage space available.

"A depth of 25.0 feet is maintained over the entrance bar, with 23.0

 

1Provisional League of Women Voters at Manistee County, A Cit-
izen's Guide to Manistee County, p. 54.

 

89

TABLE 43
MANISTEE MANUFACTURING-~1963 AND 1967

 

 

Item Manistee

 

Number of Establishments

1963 55

1967 46
Employment

1963 2,500

1967 2,700
Payroll($000)

1963 13,200

1967 16,500
Value Added by Manufacturing ($000)

1963 36,300

1967 41,900

Value of Shipments ($000)1

1967 72,400

 

SOURCE: Michigan Department of Commerce, Office of Economic Expansion,
Economic Profile of Manistee County, November 1971.

1Data not recorded in 1963.

90

1 Navigation dates are from March 30 to

feet in the river channel."
December 14. Table 44 shows the period 1958—1967 when freight tonnage
grew 46.3%. Most of the traffic is freight, not passenger traffic.

A large part of the incoming freight is coal and lignite which in
1967 accounted for 86% of the tonnage of incoming materials. From out-
going cargo sand, gravel and crushed rock amounted to 77% of the out-

going weight. See table 45 for a more detailed description of 1967

traffic data.

Communication

Michigan Bell (one of the four telephone companies servicing Manis-
tee County) serviced 80.2% of the households in the county in 1970.
Local radio is provided by Station WMTE. Finally, there are two news-
papers, I'The Manistee News-Advocate in Manistee (the largest paper) is

a daily paper having a circulation of 5,301."2

Energy Availability

PCA makes its own steam and electricity. Natural gas is the main
fuel, but bark from the pulpwood debarking system and electricity and
heat generated by the pulping chemical recovery system also generate
steam. According to Michigan Consolidated Gas Company, the supplier

of natural gas to PCA, there is no danger of PCA being cut off or

 

1U.S. Department of the Army, Corps of Engineers, Waterborne Com-
merce of the United States, Calendar Year 1967, Part 3: Waterways and
Harbors, Great Lakes (Washington: U.S. Government Printing Office),
p. 68.

2Michigan State University, Michigan Statistical Abstract, op.cit.,
p. 399.

91

TABLE 44

STATEMENT OF TRAFFIC AT MANISTEE HARBOR, MICHIGAN

 

 

 

Year Tons Passengers
1958 430,601 354
1959 571,569 0
1960 590,522 334
1961 508,736 0
1962 502,637 282
1963 602,896 0
1964 634,022 0
1965 582,928 392
1966 628,795 0
1967 629,976 0

 

SOURCE: U.S. Department of the Army, Corps of Engineers, Waterborne
Commerce of the United States, Calendar Year 1967, Part 3:

Waterways and Harbors, Great Lakes, 1967.

TABLE 45

FREIGHT TRAFFIC, 1967, MANISTEE HARBOR, MICHIGAN (SHORT TONS)

 

 

 

 

_ Lakewise
Commodity Receipts Shipments Local Total
Fresh fish, except
shellfish ° 0 1° 1°
Iron ore and concentrates 0 15,076 0 15,076
Coal and lignite 221,622 0 0 221,622
Limestone 14,927 0 0 14,927
sand: grave]: cr”5“ed 15,705 286,698 0 302,403
rock
Other nonmetallic
minerals 6,000 ~ 69,938 0 75,938
TOTAL 258,254 371,712 10 629,976

 

SOURCE: U.S. Department of the Army, Corps of Engineers, Waterborne
Commerce of the United States, Calendar Year 1967,TPart 3:

Waterways and Harbors, Great Lakes, 1967.

F1

I!

n ’11

U)

92

cutback, barring a Federal or State mandate. About 17% of this com-
pany's natural gas is obtained from Canada, their only foreign supplier

as of 1975.

Land Use by Resource

Agriculture

 

Agricultural development in Manistee County has paralleled those
trends evident in Michigan and the U.S. at the macro-level. Table 46
shows that the average size of farms is increasing at the same time
the total percentage of land in farms is decreasing. Both the average
value of products sold and the value of land and improvements includ-
ing buildings per farm are increasing (in current dollars).

Farming in Manistee over the last twenty or so years has been a
shift from generalized farming to more specialized crops. Over two-
thirds of the value of agricultural production (in 1964) of the
$3,719,000 value of products sold in Manistee County $3,020,000 was
for crops of which $2,482,000 was for fruits and nuts.1

In 1967 the Overall Economic Development Program (OEDP) of Manis-
tee County, Michigan classified the county agricultural land uses into
four broad sections (which are shown in Figure 2)--the fruit belt, the
specialized fruit and vegetable crop area, a combination area and of

interest to this study, a pine-oak forest area located south of the

Manistee River along the southern 6 to 10 miles of the county.

 

1U.S. Bureau of the Census, Census of Agriculture: 1964,_Statis-
tics for the State and County, Michi an, Vol. 1, Part 13 (Washington:
U.S. Government Printing Office, 1967 , p. 298.

93

TABLE 46
AGRICULTURE ECONOMIC PROFILE, 1959 and 1964

 

 

 

Manistee United
Item Year County Michigan States
Percent of all land in 1959 22.5 40.5 49.5
farms 1964 22.2 37.3 48.7
Percent of all farms 1964 17.1
tenant operated
Number of farms 1964 524 93,504 3,157,014
Ratio of commercial 1964 54.0 64.4 68.6
farms to all farms
Average size of farms 1959 140 132 303
(acres) 1964 151 145 352
Farm products sold 1959 2,579 622,960 30.5 Bil.
($000) 1964 3,719 767,188 35.3 Bil.
Ratio of farm products 144.2 123.2 115.8
sold — 1964 to 1959
Percent of commercial 1964 24.4 10.4 20.6
farms with under
$2,500 in products
sold
Percent of commercial 1964 31.1 37.9 40.2
farms with over
$10,000 in products
sold
Average value of land 1959 12.8 25.6 34.8
and buildings per 1964 19.0 34.0 51.0
farm ($000)
1964 average value of 148.6 133.2 146.4

land and buildings
per farm as a per-
cent of 1959

 

SOURCE:

"Overall Economic Development Program, Manistee County,
Michigan," 1959 and 1964.

94

 

 

 

 

 

 

 

 

 

 

Manist-

File City'

 

 

 

 

 

 

 

Fruit tree area

 

 

Specialized fruit and vegetable crop area

K \ Combination area

//I Pine-Oak forest area

 

 

 

 

 

 

 

 

 

 

 

 

Scale: 1 inch=
5 miles

SOURCE: Robert A. Harrell, The Development of Foundational Materials
and a Studnglan for a Combined Economic-Env1ronmental Qual1ty
Study of Manistee County, Michigan.

 

FIGURE 2.--AGRICULTURAL LAND USE AREAS OF MANISTEE COUNTY FOR 1970.

r31

u.
'v‘\

‘u

I
1";
‘J‘

95

Forestry
"Virgin forests covered 353,000 of the 357,120 acres of the

county or 98.8% of the land. In the virgin stands it has been calcu-

lated that there were about 117,000 acres of hardwoods, 159,000 acres

of softwoods and 77,000 acres of mixed pine and hardwood." Currently,

nearly half of the county is in second growth trees, mostly of hard—

woods used for pulpwood production. Table 47 shows that in Manistee

County 27.7% of all government owned land is in the hands of the state,

and 27.3% is in federal hands. Manistee County's 357,120 acres include

86,165 acres under government ownership or 24.1%.

TABLE 47

ACRES OF LAND OWNED BY THE MICHIGAN DEPARTMENT OF

NATURAL RESOURCES AND THE U.S. FOREST SERVICE IN
MICHIGAN, BY COUNTY: JUNE 30, 1971

State Owned Federally Owned

‘

Manistee County 23,904.10

SCXJRCE: Michigan State University, Michigan Statistical Abstract,
1974.

62,261

Pulpwood statistics for 1973 show a much larger cutting of hard-

WOods than softwoods. "In Manistee over 30,702 standard cords of all

sPecies were cut, the largest species being aspen--16,918 and oak

E33.727."2 "Prices of pulpwood vary by species and region but as of

1Land-Use Planning Report, Manistee County, 1947, p. 10.

_ 2Michigan Department of Natural Resources, Forestry Division,
M1chigan Pulpwood Production, 1973, p. 4.

 

96

January 1, 1973 aspen sold as pulpwood for about $17 per standard cord

with bark at the mill and oak around $18.50."1 This would have amounted

to $552,536 in 1973 assuming a standard $18.00 a cord price.

Minerals
Mineral production is quite important economically in Manistee

County. The year 1966 saw salt production as the most valuable mining

”For the year

In

activity followed in order by salines, sand and gravel.
1966 some $20.5 million of the products were extracted and refined.

1967 and 1960 the value of minerals produced was $22,105,000 and

$20,795,000."2

Eco-System Impacts
The ecologic impact of PCA could be localized in Manistee County

or in the other areas outside the county. The plant is located in Filer

City which is just outside of the City of Manistee. It lies on Manis-
'tee Lake which is fed by the Little Manistee River. PCA draws and
(Lischarges water into Manistee Lake which eventually empties into Lake

There are two larger lakes in the western portion of the

Michigan.
(Haunty: Bear Lake and Portage Lake. To the north of the county is the
Betsie River State Forest which has a deer priority management status.

T1) the south and east lies the Manistee National Forest. PCA buys

l3l1lpwood from both forest areas. Also both the State and Federal For-

est land include recreational activities such as camping, boating,

1Michigan Department of Natural Resources, Forestry Division, Tim-
Iaszr Price and Market Report, 1973, p. 1.

2U.S. Bureau of Mines, Mineral Yearbook: 1968, Vol. III: Area
lgSEEEths Domestic (Washington: U.S. Governmenthrinting Office, I970),

DD . 375—394.

97

fishing, etc. The Manistee State Game Area is in the southwestern
portion of the county close to Filer City. The coho and Chinook were
transplanted from west coast salmon eggs in 1964 as an attempt to im-
port sport fishing in Lake Michigan. This program has been successful
and salmon is now plentiful along the Lake Michigan shore which in-

cludes the shore line west of the city of Manistee.

CHAPTER IV
A CASE STUDY: MANISTEE COUNTY AND PACKAGING CORPORATION
OF AMERICA'S IMPACT ON RESOURCE USE

Formation of an Input-Output Model for Manistee
County Using Secondary Data Methods

Why Use an Input-Output Model

The input-output technique is a tool of economic analysis which
can be utilized to show the economic impact of changes in final demand
given a full and complete quantitative input-output table showing in-
terindustrial trading. Hence, out interest is in showing the economic
effects of a private decision for the growth or contraction of a dom-
inant industry and the implications for regional development. Further-
more, input-output can show the distributional or equity impacts of
an economic change which is often neglected in policy analysis.

The input-output model can aid in the construction of a regional
growth plan by showing regional growth trends and information concern-
ing interdependencies between regional economic sectors. For example,
information can be compiled from 1940 to 1980 for Manistee County which
can track various components of economic growth. Then predictions in
Possible changes in final demand can be made and their economic impacts

delineated which can aid in the formation of a regional economic plan.

98

99

The Basic Input-Output Model Utilized

An Input-Output model shows the economic interdependencies of a
region when the date are organized into sectors representing the im-
portant economic enterprised of the region. This study utilizes a
15-sector model which was derived from a 87-sector state model of Mich-
igan. The Paper and Allied Products Industry sector represents the in-
tegrated woodpulp mills in Michigan.

The basic function of input-output analysis is to show the inter-
dependencies of sectors as goods and services flow from primary to final
use. That is, it describes the buying and selling of goods and services
as inputs are transferred to intermediate and final products. Hence,
the "double counting" of national income accounting is included in
input-output. That is, the total sales price of all interindustry
transactions are recorded in input-output and not just the value added
as in national income analysis.

Input-Output analysis rests on the following basic assumptions:

- the level of technology is assumed stable over time. Therefore, the
normal changes which occur in a dynamic economy through a changing
pattern of demands for goods and services are not considered part of

an input-out model. Where a relatively stable economy exists, the
assumption of "constant technology" is not assumed to be unrealistic.
Also predictions in the short-run can be assumed reasonably accurate
when no significant changes occur in the economic_structure.. Therefore,
short-run predictions can be used. However, when an economy has large
economic changes the direct requirements can be adjusted from one time

frame to the next so that the model can become a "comparative static"

100

one.
- fixed rates of substitution between inputs over time imply that the
use of resources over time in an input-output model does not change.
That is, since resources are considered free, they are not substituted
for each other. Therefore, interindustry transactions between indus-
tries are taken to remain the same over time. Given the essentially
static framework within which input-output works, private and public
sector changes can be evaluated and forecast when a specified change
in an autonomous variable affects the endogenous sector or exogenous

inputs.

The State Input-Output Model for Michigan
The first essential step in arriving at an input-output table for
Manistee County was to obtain the data of Karen Polenske's 1963 U.S.

1

Multiregional Input-Output Model. This study yielded an 87-sector

model. It contrasts with Robert Harrell's 37-sector listing for

2 The final regional model consisted of 15 sectors

Manistee County.
which were aggregated from the State of Michigan's 87-sector model.
Mostly the automotive sector of the manufacturing industry was removed
since it does not function in the study region. The assumptions
underlying the use of the aggregation process were: the technical coef-
ficients developed at the state level hold at the regional level; the

industries represented in the consolidated sectors utilize a similar

 

1Karen Polenske, Multiregional Input-Output Analysis, Op. Cit.

2Harrel, Op. Cit.

101

level of technology (i.e., there are the same rates of substitution

between factors of production and therefore inter-industrial linkages).

SIC classifications were used in 87 rows and columns of Polenske's

Michigan data and can also describe the aggregated sectors:

1.
2.
3.

10.
11.
12.
13.
14.
15.

Agriculture

Forestry

Mining

Construction

Lumber and Furniture

Paper and Allied Products/Integrated Woodpulp Mills
Manufacturing

Transportation

Communication, Public Utilities
Wholesale, Retail Trade

Finance, Insurance and Real Estate
Lodging Services

Amusements

Other Services

Government: Federal, State and Local

The transaction table for the State of Michigan reduced from nat-

ional input-output tables from 1963 appears as table 48.

The Reduction Process to the County Level

A county matrix was developed from the 15-settor row and column

consolidation of the 87-sector Polenske model which produced a new set

of technical coefficients. The procedures utilized to reduce the state

matrix in an adjusted form to a county matrix followed the Stipe-Miley

102

 

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105

approach. Stipe used the "modified and unmodified supply-demand pool
techniques discussed by Schaffer and Chu with demands calculated from
data outside the model. They differ in that final demands are not
calculated within the models but taken from other available data."1
My approach uses a similar technique for the reduction of the state
model to a region but with imports and exports treated as residuals.
This allows some final demands to be met from imports and not generated
all by internal production as mentioned in the first reduction model.
It is reasonable to assume that some final demand is satisfied by im-
ports since numerous survey-based studies verify this premise. .A
study by Philip J. Bourque for the State of Washington showed that
about 15% of the total final demand was imported.2 Another study done
for the State of New Mexico shows "24% of the final demands being pur-
chased by the import sector."3
Given the choice of date reduction techniques, the following steps
were followed:
- calculation of employment ratios and population and income ratios
from county and state data.
- calculation of county final demands from secondary sources and the
use of regional to state income and employment ratios for county final

gross output.

- calculation of a county transaction table from regional gross outputs.

 

1

2Philip J. Bourque, The Washington Economy: An Input-Output
Study, p. 39.

3University of New Mexico, A Review of the Input-Output Stugy.

Stipe, Op. Cit., p. 58.

106

County Gross Outpgt Calculations Outlined

Starting with state gross outputs (this was derived by multiplying
the inverse of the processing sectors times state final demand) for the
year which the input-output table is to be constructed, "state and
county employment was obtained by each sector."1 A productivity ratio
for the state by sector is obtained by dividing state gross output for
the state by sector by the number of workers. This productivity ratio
will be assumed to hold for the county as well. Then, the productivity
ratio multiplied by the employment within the county by sector yields
gross county output by sector. This was done for each sector to ob-

tain a column sector for a region.

Area Final Demands

In order to arrive at county final demands for a chosen year,

state final demands were disaggregated into three areas:

- personal consumption expenditures.

- non-export final demand which includes the sum of gross private
capital formation plus net inventory change plus federal, state
and local expenditures.

2

- net exports.

All figures were changed to 1963 dollars by the use of a commodity

 

1Michigan Department of Commerce, Bureau of Economic Analysis,
Regional Economics Information System (Lansing, Michigan, 1975).

2Karen R. Polenske, State Estimates of the Gross National Product,
pp. 224-225, 260-261, 296-297, 332-333, 380—381, 416-417. These data

were aggregated to the 15-sector model.

107

price index and a service price index.1

Assuming consumption is a function of income, a ratio of income
for the county to the state is developed. The income for personal
consumption of the county divided by the income for personal consump—
tion by the state was multiplied by the state personal consumption
for each of the 15 sectors which yielded personal consumption ex-
penditures for Manistee County.2

Area non-export final demand by sector was derived from state non-
export final demand by another allocation technique. Here the ratio
of county gross output by sector divided by state gross output by

sector multiplied by state non-export final demand by sector yielded

non-export final demand by sector.

The Area Transaction Table

In order to derive the processing sector for Manistee County the
area gross output was multiplied by the state table of direct coeffi-
cients by sector. It was assumed that the state direct coefficients
are similar to the county. Also, all sectors in the state table are
in the county table. Here, the automotive industry was factored out
of both the state and county input-output tables. The original State
of Michigan table did include the automotive industry. Furthermore,
the 1963 direct requirements were used with other years of gross out-

put. This assumes the same direct requirements are used with other

 

1Economic Report of the President, Feb. 1974, p. 301.

2Michigan Department of Commerce. Economic Profile of Manistee
County, Nov. 1971, p. 2.

108

years of gross output, i.e., small changes in technology and a stabil-
ity of industry with an unchanging capital-labor ratio make this ap—

proach reasonable.

Treatment of Exports and Imports as a Residual

Gross output, summing across each of the rows for the processing
sectors, equals the sum of the rows for the processing sectors, person-
al consumption expenditures, non-export final demand and net exports.
Since we know all the figures except net exports, we can calculate this
as a residual.

Imports are also derived as residuals. Gross input for each row
equals (this lies at the bottom row of the transaction table) the gross
output of each row. Value added was assumed to be an average figure
based on 1963 transaction table data. This figure, average value added
for the state, was obtained by dividing value added by gross input or
total outlays for each sector. Since in each column sector we lack
only one figure, imports, it is derived as a residual just as with ex-
ports. That is, gross input equals value added, imports and the sum
of the column of the processing sector. Subtracting the known figures
of value added, and the sum of each column of the processing sector

from gross input for each column leaves imports.

Results of the County Input-Output Model: A
Brief Description of the Multiplier Analysis Used

There are three basic types of multipliers which are used in this
study. Without input-output multipliers, local and regional impacts
would not be as easily or sharply assessed. Some of the techniques

are direct descendants of Keynesian multiplier analysis.

109

An output multiplier for a column or industry can be computed by
adding up the entries of a column of the inverted Leontief matrix.
The household sector is excluded. They show, for a given industry,
the unit requirements of an input per dollar of sales. Higher output
multipliers show higher amounts of interdependence among industries.

Income multipliers, the core of an impact study, come in two vari-
ties. The type I multiplier shows the direct and indirect changes in
income given a dollar change in output from all of the industries mak-
ing the product. Type II income multipliers also take into account
the induced changes in income which were a result of additional con-
sumer spending. The type II multiplier is always larger than the type
I multiplier. Here, the household sector is endogenous or within the
processing sector.

Employment multipliers are often included in regional analysis in
order to see what the effects on employment would be from industrial
expansion. The approach taken here parallels the Moore and Petersen

method.1

Employment-production functions for the county by sector were
calculated and type I and type II employment multipliers similar to
type I and type II income multipliers were calculated. They were
arrived at by multiplying the state productivity ratio times employment
in Manistee County. Employment then is a function of income since

changes in employment reflect changes in final demand.

 

1F. T. Moore and J. W. Peterson, "Regional Analysis: An Interin-
dustry Model of Utah," Review of Economics and Statistics, pp. 363-383.

110

The Output, Income and Employment
Multipliers for Manistee County

1970 total sales for Manistee County including internally and ex-
ternally generated income appear in table 49. The table is read by
going down a column to find the expenditures of the purchasing sector
and across the rows for sales to producers. The table is easily read
and shows the importance of sector 6 which is the Paper and Allied
Products Industry or PCA. It has the third largest gross outlays.

The technical coefficients (or direct requirements) in table 32
was formed from the transaction table. One reads the table down a
column. Each column adds up to 1 showing the input expenditure used
to produce a product or service. Sector 6, paper and allied products,
purchases 42% from external sources (excluding households) and 20% from
itself.

Income multipliers, described earlier, were arrived at on a type
I and type 11 basis. They range from 2.9 to 1.5 for type I and 6.1 to
3.2 for type II multipliers. Sector 6, the woodpulp industry in Manis-
tee Countyshas a multiplier for type I of 1.7 and type II of 3.6. See
table 51 which lists all the type I and type II income multipliers and
their relative rankings.

As noted above, output multipliers can be derived from the Leontief
inverse matrix as shown in table 52 (the matrix of direct and indirect
coefficients). Output multipliers, while not as useful as income and
employment multipliers for impact studies, do show the direct and in-
direct requirements per unit of final demand. Table 53 summarizes the
data from table 52 to show only output multipliers for Manistee County

by ranking in size. Sector 6, Paper and Allied Products, has a relative

111

 

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112

 

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113

 

 

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114

 

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115

 

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116

 

 

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117

 

 

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118

 

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119

 

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120

 

 

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.OOOOOHOOO--NO NONOH

OUTPUT MULTIPLIERS FOR MANISTEE COUNTY IN 1970

121

TABLE 53

 

 

 

Sector Output Multiplier Rank
Agriculture 2.5 2
Forestry, Fisheries 1.3 10
Mining 1.4 9
Construction 6.1 1
Lumber, Furniture 1.7 6
Paper, Woodpulp 2.1 3
Manufacturing 2.0 4
Transportation 1.6 7
Communication, Public Utilities 1.7 6
Wholesale, Retail 1.4 9
Finance, Insurance, Real Estate 1.7 6
Lodging 1.7 6
Amusements , 1.8 5
Other Services 1.5 8
Government 2.1 3

 

122

rank of 3 but seems to be somewhere in the middle in terms of structur-
al interdependence between this sector and the rest of the economy.

Employment multipliers were calculated on a type I and type II
basis just as the income multipliers were. The employment multiplier
analogous to the type I income multiplier is the ratio of this direct
plus indirect employment change to the direct employment change. Simi-
larly, there is an employment multiplier parallel to the type II in-
come multiplier which measures the ratio of the direct, indirect and
induced employment change to the direct employment change.1 Table 54
shows type I and type II employment multipliers. Table 55 show their
relative rankings. Sector 6 has an EMI of 2.8 and EMII of 8.6. This
means that changes in employment result from a change in final demand.

The employment multipliers are higher than the income multipliers
for sector 6 despite PCA being a capital-intensive firm. Type I and
type II employment multipliers are 2.8 and 8.6 compared to type I and
type II income multipliers which run 1.7 and 3.0. This contradiction
is explained by the employment multipliers linkage to more labor-inten-
sive industries as a result of direct, indirect and induced linkages.

Some Hypothetical Multiplier Impacts
in Manistee County

Changes in the Level of Output

Two case studies can illustrate how some of the income and employ-

ment multipliers could be used to forecast expected impacts on Manistee

 

1Harry W. Richardson, Input-Output and Regional Economics, p. 35.

123

TABLE 54

TYPE I AND TYPE II EMPLOYMENT MULTIPLIERS FOR
MANISTEE COUNTY IN 1970

 

 

 

Type I Type II
Sector Multiplier Multiplier
Agriculture 2.5 5.1
Forestry, Fisheries 1.3 ‘ 2.2
Mining 1.6 2.5
Construction 6.7 20.3
Lumber, Furniture 1.6 3.2
Paper, Woodpulp 2.8 8.6
Manufacturing 1.8 3.7
Transportation , 1.7 3.8
Communication, Pub. Utilities 1.5 3.5
Wholesale, Retail - 2.0 5.2
Finance, Ins., Real Estate 1.3 2.3
Lodging 3.1 9.4
Amusements 2.6 6.6
Other Services 3.4 9.3
Government ' 14.1 49.3

 

124

TABLE 55

RANKINGS OF TYPE I AND TYPE II EMPLOYMENT MULTIPLIERS

FOR MANISTEE COUNTY IN 1970

 

 

 

Sector EMI Ranking EMII Ranking
Agriculture 2.5 7 5.1 8
Forestry, Fisheries 1.3 13 2.2 15
Mining 1.6 11 2.5 13
Construction 6.7 2 20.3 2
Lumber, Furniture 1.6 11 3.2 12
Paper, Woodpulp 2.8 5 8.6 5
Manufacturing 1.8 9 3.7 10
Transportation 1.7 10 3.8 9
c°m3:?1§:§;g"' Pu”: 1.5 12 3.5 11
Wholesale, Retail 2.0 8 5.2 7
F'":2::’E:2::::"Ce* w 14
Lodging 3.1 4 9.4 3
Amusements 2.6 6 6.6 6,
Other Services 3.4 3 9.3 4
Government 14.1 1 49.3 1

 

125

County. Neither case is contemplated in PCA's future planning. Sec-
tor 6, Paper and Allied Products or PCA has a total annual income of
$8,000,000 in 1970. This is 6.4% of the total county gross output
($8,000,000/125,112,000) and 8% (609/7,603) of the total employment.
Unemployment was 12.4% in Manistee County or 567 persons in the year
1970. For sector 6, type II income multiplier is 3.6 and the type II
employment multiplier is 8.6.

Case I Plant Closing

Total annual income iost by a plant closing is estimated to be
$8,000,000 x 3.6 or $28,800,000. This would be cushioned by welfare,
unemployment compensation, savings, severance pay and other income
support programs which would reduce the impact on consumption within
the county. The employment impact would be expected to be 609 jobs
lost x 8.6 (type II employment multiplier) which equals 5237 unemploy-
ment workers. This high total would be reduced to the extent that
government transfers income to unemployed workers to maintain consump-

tion and retain workers for other jobs.

Case II Plant Expansion

The present plant (PCA) produces 700 tons per 24 hours at full
capacity and is presently adding $8,000,000 of income per year or
$13,136 per worker. Assuming we expand output by 233 tons or 1/3 of
existing production to 933 tons, this would mean an estimated 200 addi-
tional workers using an average production per worker ratio. Two
hundred workers times $13,136 (average dollar per worker) yields

$2,627,200 per year of additional income from the plant.

126

Income Effect

The total income change is: $2,627,200 x 3.6 = $9,457,920. This
would mean that for sector 6, total gross income would be $10,627,200
(8,000,000 annual income plus $2,627,200 additional income), or 8% in-

stead of 6.4% of total county gross income.

Employment Effect

 

The total employment effect is: 200 workers x 8.6 = 1720 new jobs.

Total Labor Force Before Expansion = 7603
New Jobs Created = 1720
Total Labor Force = 9323

After this change, sector 6 row represents 8.6% of the total labor
force instead of 7%. Unemployment is 6.5% instead of 12.4%. This
assumes all new workers came from the "not in the labor force" cate-
gory in Manistee County or from the outside. If the unemployment with-
in the county are absorbed then the unemployment rate will fall de-4
pending on amounts involved. The skill levels may not be high enough
to allow large numbers of unemployed and "not in the labor force" to

be absorbed.

Environmental Impacts
What would be the environmental, labor force and other resource
considerations in the previous two hypothetical cases of a plant closing
and a plant expansion by a third? Firstly, input-output analysis as-
sumes that labor is available and mobile. But with an expansion addi-
tional workers would be needed. They must come from outside the local

labor market, the unemployed or from people not currently in the labor

127

force in Manistee County. The model would assume these assumptions as
facts but further investigation needs to be done by company planners
and the county officials if such a move were contemplated. A second
consideration is that at current levels of production there is no pro-
blem in obtaining sufficient natural gas but is there a sufficient
amount for expansion (of course this varies by the volume considered)
and if not is another energy source available? In short, are energy
resources available at reasonable prices. Thirdly, the existing water
supply will be enough but can it be processed by the present secondary
treatment plant or will additional facilities have to be built?
Currently, with three machines capable of producing 700 tons of
corrugated medium per day, 4 to 5 million gallons of water are
used from the Little Manistee River along with 15 million gallons
per day from Manistee Lake for cooling purposes. Seven to eight
million gallons of water per day are treated in its secondary
wastewater treatment plant.1
This puts the overall use of water at 28,571 gallons per ton of
output of which 11,428 gallons per ton of output are treated in a
secondary wastewater treatment plant. (See appendix 9 for guidelines
for pulpmills water usage.) Now if output were expanded at the rate
stated in our earlier example, 233 tons, 6,463,063 gallons of water
would be needed and 2,662,724 gallons of additional water would be
treated by a secondary treatment plant.
Timber availability for a 233-ton plant expansion would require a
mix of woods probably similar to existing ratios. (This assumes the

same process and product is being produced.) However, it has been

estimated that from the period 1965 to 1980 "the average amount of

 

1The Manistee News Advocate, Jan. 18, 1975, p. 5.

128

pulpwood required for a ton of wood pulp was 1.5 cords.“1 Consequently,
a more accurate estimate of cords of pulpwood needed for a 233 ton ex-
pansion of capacity may be around 350 additional cords per day.
Construction of An Economic-Ecologic Model As An
Aid for Environmental Planning

It is my purpose here only to sketch the barest outlines of how
an ecologic matrix can be combined with the economic input-output
model of Manistee County.2 Only sector 6, paper and allied products,
will be looked at for environmental impacts. In order to fully analyze
the economic-ecologic relationships all or a large number of sectors
must be included in this analysis and direct and indirect environmental
linkages must be shown. Direct linkages occur when an economic sector
draws resources straight from the environment. Indirect linkages occur
when one sector in supplying inputs to another draws on the environ-
ment to provide this economic linkage. Only one sector's direct link-
ages to other sectors will be sketched out here. The only environmental
goods considered at this point are 5-day BOD discharge in pounds and
total amounts of water. For pulp mill pollution of water, it is the
dissolved oxygen content of the receiving water for the mill's organic
wastes (800), the biochemical oxygen demand, which is the major or
crucial pollution factor. The analytical process will be sketched out

and discussed and compared to the Charlestown, South Carolina study by

 

1Michigan State University, Michigan Timber Production--Now and
in 1985, p. 5.

,2This discussion follows closely the work of Eugene A. Laurent
and James C. Hite.

129

Laurent and Hite where applicable.

Sludge disposal is another important environmental emission espe-
cially for a plant the size of PCA. Currently, PCA is spending about
1/2 million dollars in fuel costs to burn the sludge. To a certain
extent there are some beneficial effects of the sludge. A small part
of it is being used as a soil conditioner and nutrient on forest lands
but the land has to be specially prepared for this type of treatment
which aids tree growth in dry weather.

Table 56 shows only total water intake and S-day-BOD for sector
6, Paper and Allied Products. The Charlestown study equivalent of our
sector 6 is Lumber, Pulp and Paper Products which is not directly com-
parable. Table 57 multiplies the inverse matrix times the environmental
matrix. This shows the direct changes for water and 800 resulting in
a dollar increase in sales from sector 6. If the entire matrix was
complete we would have a better understanding of economic-ecologic in-
terdependence (see appendix 13).

In order to assess the trade-offs between income growth and en-
vironmental quality, environmental-income multipliers can be calcu-
lated. The summation of each column of a value-added matrix (the
Leontief matrix times the value added coefficient) divided by the in-
come multiplier gives us the environmental-income multiplier. This
shows the environmental impact per dollar of income generated within
Manistee County for sector 6, Paper and Allied Products. The environ-
mental-income multipliers, then, show the trade-offs between economic
growth and environmental quality. Table 59 shows the environmental

emissions per dollar of local income for Manistee County in 1970 for

130

TABLE 56

THE DIRECT ENVIRONMENTAL IMPACT OF A DOLLAR INCREASE
IN OUTPUT BY SECTORS FOR MANISTEE COUNTY, 1970*

 

 

Sector T°taEGg$§ggs§ntake 5-Day 800 (lbs.)

 

6. Paper & Allied Products 2.47 .002 to .012

 

*Other environmental linkages could include hydrocarbons (lbs.), sulfur
dioxides (lbs.) and solid wastes (cu. yards) to name just a few.

TABLE 57

DIRECT ENVIRONMENTAL IMPACTS FOR A DOLLAR
INCREASE BY SECTOR FOR MANISTEE COUNTY, 1970*

 

 

Total Water Intake
Sector (Gallons) S-Day BOD (lbs.)

 

6. Paper & Allied Products (2.47 x 2.1) = 5.1 (.002 or .012 x 2.1
= .004 or .025)

 

*Environmental Matrix x Inverse.

131

TABLE 58
MANISTEE COUNTY VALUE-ADDED MATRIX FOR 1970*

 

 

Sector

 

6. Paper & Allied Products .71

 

*Each sector x the inverse of that sector summed equals the value-
added for that sector.

TABLE 59

DIRECT ENVIRONMENTAL IMPACTS PER DOLLAR OF LOCAL
INCOME FOR MANISTEE COUNTY, 1970*

 

 

 

Sector Total Water Intake 5-Day 800
6. Paper & Allied Products .71 x 5.1 = 3.6 .71 x .004 or
.025 x .017

 

*Value-Added Matrix x Table 39 = Direct Environmental Impact per
Dollar.

132

only sector 6. Additional information for other sectors would be need-
ed before trade-offs could be assessed. See appendices 12, 13 and 15.
The information in tables 56 to 59 is incomplete but if additional
information for environmental indices for other sectors were compiled
then the economic-ecologic trade-off could be assessed.

This type of analysis is useful to view as part of the overall
Leontief model (see appendix 11). Generally, the model has two key
limitations. Firstly, the model is linear and subject to the limita-
tions associated with such a system. Secondly, costs are calculated
in terms of estimates of opportunity costs of diverting environmental
resources from primary uses to environmental goods but these values do
not have the same meaning as a direct estimate that consumers place on
environmental goods. In short, it only places a minimum price on the
economic value of common-property environmental resources.

This sort of economic-ecologic model can provide a useful input
to decisions made by planners and public officials in regional planning.
It can show the trade-offs between generation of local income and loss
of environmental goods.

Examples of Some Distributional Impacts from a
Hypothetical Plant Expansion in Manistee County

Assuming an additional $2,627,200 per year were generated by an
investment in a single new machine and other associated fixed costs for
sector 6, what would the on-going distributional impact of this
incremental income be? Using table 50, the direct coefficients for
Manistee County, times the amount of annual income generated by sector

6, the distributional results appear in table 60. Since 42% of the

133
TABLE 60
DISTRIBUTIONAL IMPACTS WITHIN MANISTEE COUNTY GIVEN A

CHANGE IN SECTOR 6, PAPER AND ALLIED PRODUCTS
INDUSTRY'S ANNUAL TRANSACTIONS

 

 

 

Sector Total Dollars
1. Agriculture 315
2. Forest & Fisheries --
3. Mining 14,186
4. Construction 7,356
5. Lumber & Lumber Products 241,702
6. Paper & Allied Products 528,067
7. Manufacturing 304,755
8. Transportation 141,868
9. Communications & Public Utilities 65,680
10. Wholesale, Retail Trade 107,977
11. Finance, Insurance & Real Estate 42,035
12. Lodging Services 5,779
13. Amusement 262
14. Other Services 49,536
15. Government, Federal, State & Local 2,627

 

*Of $2,627,200, 57.6% of this amount ($1,513,267) is distributed
internally and 42.4% is exported or for external use.

**Figures are approximations due to round-off error.

***Household internal sales are omitted.

134

gross output is exported only $1,512,145 of this is initially distri-
buted within Manistee County. Note the large flow of monies to the
paper and allied products industry, manufacturing, and lumber and lum-
ber products industries. A type II multiplier of 3.6 yields a net
effect (for inside Manistee County) of only $5,443,722.

Table 61 shows the distributional impact on sector 2, forestry and
fisheries, for the same amount--$2,627,200. However, in this case the
external sector is 84% of gross output. This leaves $422,506 to be
distributed within Manistee County. By contrast with the earlier
example, most of the monies are distributed to the government, manufac-
turing and transportation sectors. Using the sector 2 type II income
multiplier which is 3.3, the impact on income inside Manistee County
is $1,394,269.

Local planners in evaluating promotional activities or even sub-
sidies to local industries must weigh not only the income and employ-
ment multipliers but county distributional impacts and total amount of
dollars to be spent inside the county. This example shows that indus-
tries which spend a large portion of their incomes locally should be
encouraged because of the multiplier impact, assuming that our bias is
to promote spending as much income as possible inside Manistee County.

Distributional Impacts of a Change in Timber
Stumpage Sales: A Hypothetical Example

It was estimated that PCA uses 700 cords per day or 252,000 cords

per year. In 1970 Michigan produced 1,406,000 cords.1 Using 1970 data

 

1Blyth and Danielson, Op. Cit., p. 16.

135

TABLE 61

DISTRIBUTIONAL IMPACTS WITHIN MANISTEE COUNTY GIVEN
A CHANGE IN SECTOR 2--FORESTRY AND FISHERIES

INDUSTRY'S ANNUAL TRANSACTIONS

 

 

 

Sector Dollars
1. Agriculture 39,318
2. Forestry & Fisheries 17,872
3, Mining -_
4. Construction --
5. Lumber & Lumber Products 3,575
6. Paper & Allied Products --
7. Manufacturing 121,531
8. Transportation 167,998
9. Communication & Public Utilities --
10. Wholesale & Retail Trade 64,340
11. Finance, Insurance & Real Estate 4,297
12. Lodging Services --
13. Amusement --
14. Other Services 3,575

15. Government, Federal, State & Local --

 

*Of $2,627,200, 16% of this amount ($422,506) is distributed internally
and 84% is within the external sector.

**The figures differ slightly due to round-off error.

136

with the three semi-chemical machines currently in place plus a fourth
(assuming an expansion of 33% in capacity) which would use a similar
mix of 65% aspen and 35% oak or maple, an additional 83,880 cords would
be used. "Manistee County has averaged around 5.5% of the total pulp-
wood production from 1965-1975 with production ranging from 30,000 to

I

almost 40,000 cords per year." It was estimated for Michigan "there

was an excess of 760 thousand cords of pulpwood in the northern

"2 By 1970 it was projected to be 859,000 cords. We

Lower Peninsula.
assumed that 5.5% of the 83,880 cords needed for plant expansion would

be bought in Manistee County from state and federal forests (especially
since data on stumpage prices are readily available). The increased

cut at a given set of volumes and prices looks like this:

 

Aspen 2,998 cords x $2.88 = $ 8,634
Maple 1,385 cords x $3.16 = $ 4,376
Mixed Hardwoods 230 cords x $1.11 = $ 255

4,613 cords $13,265

The impact of $13,266 in stumpage sales in Manistee County would be
distributed as shown in table 62 given that 42% is estimated to be
exported.

We can conclude with the aid of this table and other pertinent
analysis that:
- three out of five dollars in timber stumpage sales flow outside the

county.

 

1Michigan Department of Natural Resources, Michigan State Forest
Volumes and Stumpage Prices by Districts 1965-1975.

2Arthur 0. Little Report, Op. Cit., p. 22.

 

137

TABLE 62

DISTRIBUTIONAL IMPACTS OF AN INCREASE IN TIMBER SALES
FOR MANISTEE COUNTY IN SECTOR 6, PAPER AND ALLIED
PRODUCTS INDUSTRY'S ANNUAL TRANSACTIONS

 

 

 

Internal Sector* Dollars
1. Agriculture 1.64
2. Forestry & Fisheries ---
3. Mining 72.3
4. Construction 37.8
5. Lumber & Lumber Products 1226.2
6. Paper & Allied Products 2679.0
7. Manufacturing 1545.0
8. Transportation 718.3
9. Communication & Public Utilities 340.0
10. Wholesale & Retail Trade 545.7
11. Finance, Insurance & Real Estate 212.0
12. Lodging Services 29.5
13. Amusement 1.6
14. Other Services 253.1
15. Government, Federal, State & Local 18.0
Total Internal** 7680.0
External 571.0

 

*Household internal sales are omitted.

**43% is external and 57% is internal of the $13,265 of timber stumpage
sales.

Numbers are not exact due to round-off errors.

138
- internal distributional impacts favor the manufacturing, lumber and
paper products and paper and allied products sectors.
- $13,265 increase in stumpage sales with a multiplier of 3.6 (type II)
yields $47,754 for Manistee County. However, the total impact inter-
nally to Manistee County is $27,697.
-a larger volume of timber stumpage sales (if available) would natur-
ally produce a greater income impact. However, it would place a great-
er burden on other input requirements such as labor, power and water.
Input-output models assume these inputs are available but this need not

be the case.

Analysis of Potential Land Use Changes

The percentage of land devoted to forestry has not shifted signi-
ficantly over the last 35 years. In 1941 "there were 216,867 acres of
wooded land in Manistee County or 61.79%."1 By 1966 Manistee County
had "221,000 acres in forest land or 62% of the total county land."2
Certainly land-use changes have occurred in Manistee County despite the
fact that the overall percentage of land devoted to forestry has not
changed. The type of tree species, the intensity of forestation and
even individual parcels of acreage may be significantly different over
this time span.

Planners can influence land-use changes by taxation, zoning or

public projects. In addition, shifts in demand for various sectors

 

1Land-Use Planning Repgrt, Manistee County, 1941, p. 77.

 

2Michigan State University Extension Service, Michigan Department
of Commerce, Office of the Governor, County and Regional Facts Region
19, 1972, p. 71.

 

139

notably recreation and second-home communities are the most notable
causes of land-use shifts in Manistee County. For example, increased
timber sales may be compared to shifting land to agriculture (see table
63 which outlines the procedure for the expansion of the agricultural
sector). If $100,000 were invested, $65,000 would be spent internally
and $35,000 externally. The net impact internally would be $106,001
and these distribution effects are also shown by sector as in table 62
with sector 1, agriculture, having the largest impact.
Conclusion: Multiplier Analysis is a Result of
Demand Shifts in Input-Output Analysis

The economic impact analysis described in this chapter has illus-
trated estimated income and employment multipliers for Manistee County
and the potential distributional impacts within the county. These
impacts were a result of a change in sales. Incremental changes, in-
creases or decreases of sales by sector, trigger economic impacts. It
thus becomes necessary to have a good handle on the local economy and
final demands by sector in order to use the input-output model. Or
putting it another way, if resources exist such as water, minerals,
timber stumpage and the like, then you must first question whether sales
exist to prompt an investment or disinvestment when using input-output
analysis. Comparisons of two or more industries (sectors) can then be
made utilizing income and employment multipliers and distributional

impacts when sales change as a result of a shift in demand.

140

 

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CHAPTER V
CONCLUSIONS AND RECOMMENDATIONS

The basic thrust of this study was to develop a county input-output
model using secondary sources. Special attention was then focused on
the impacts of a particular sector, Paper and Allied Products, in a
county which has a strong natural resource base. The impact analysis
was done after locational advantages and disadvantages, and ecologic
impacts of the Paper and Allied Products Industry (really integrated
woodpulp mills) were evaluated for the State of Michigan in order to es-

timate the possibilities for expansion or contraction of this industry.

Major Conclusions

Two major conclusions stand out in this study. Firstly, PCA, one
of the eight integrated woodpulp mills in Michigan, was used as a test
case to evaluate economic—ecologic impacts in Mansitee County. It
proved to provide potential decision-makers with a solid company from
a locational perspective. The locational advantages of PCA are that its
production process uses 65% aspen which is the cheapest wood for pulping
in Michigan. It is located in a strong pulpwood producing county.
Finally, PCA is able to compete more easily with companies in the
northern Upper Peninsula since it is the largest company by a good
margin in this timbershed. Though it buys over the entire central re-
gion of the Lower Peninsula, it has very good access to timber producing

counties. There are sufficient quantities of water available for plant

141

142

expansion and a new $4.5 million secondary water treatment plant has
been in existence several years.

Finally, PCA is a subsidiary of Tenneco, a solid company in the
top twenty in Fortune's list of industrial companies. It produces cor-
rugated medium which has a steadily growing market and is integrated
into carton box production through other PCA plants and is in a good
relative position to midwestern markets vis-a-vis other integrated wood-
pulp firms in the northern Lower Peninsula. This is a very solid com-
pany which has a strong economic and ecologic presence in Manistee
County and its potential impacts make it ideal for a county input-output
study.

Secondly, a reduction technique was developed which allowed the
input-output model for the State of Michigan to be reduced to Manistee
County. A transaction table, technical coefficients, and output, in-
come and employment mulitpliers were developed. Although the focus of
the Manistee County Study was the Paper and Allied Products sector,
represented by PCA, 14 other sectors were included and could be used
if the study objectives were different. The output, income multipliers
were within reasonable ranges. When compared to other regional impact
studies, the Paper and Allied Products output and income multipliers
have yielded results similar to studies using primary data collection
techniques. For example, one regional study yielded a type I income
multiplier of 1.7 which is the same as in Manistee County and 3.4 for

a type II income multiplier compared to 3.0.1 Users of the input-output

 

1Jay Hughes, Forestry in Itasca County's Economy (St. Paul: The
University of Minnesota, 1966), p. 23.

143

model for Manistee County should take care in using the results of
the export and import for each sector since they were derived as resi-
duals. Errors exist for other entries of the row and column summations.
Since net exports and imports are computed as row and column balancing
entries, they would then include all the errors from the other data.
It may be an inaccurate figure which does not represent true export and
import values. Primary collection is needed when considering more
accurate values for imports and exports. Similarly because of the
size and importance of the household sector primary data collection
should be considered. Finally, the input-output model for Manistee
County can easily be extended in scope by collecting more environmental
impacts for a variety of sectors to show the economic-ecologic trade-
offs. The economic input-output model for Manistee County can be used
as input for a linear programming land allocation model. It can be
used to predict possible land-use shifts which have important policy
implications.
The Advantages of Using Secondary Data for
Regional Input-Output Analysis
The input-output analysis developed for Manistee County is a
value-free tool of economic analysis which was utilized to:
- measure the income and employment impacts of changes in the volume of
economic activity of PCA. It showed the distributional impacts of
changes in final demand for Forestry and Fisheries and Paper and Allied
Products. Also it showed how to schedule output for a given change in
demand for corrugated medium.
- project probable levels of economic activity which then can be used

by private or public decision-makers.

144

- develop economic-ecologic relationships through a matrix.

For the businessman, it facilitates an appraisal of their own expan-
sion possibilities and an estimation of marketing potential by looking
at the appropriate row. He can use the total sales to each sector to:
- see how its operation differs from the average firm.

- know the specific portion of his sales to total sales for the indus-
try sold to each sector.

It can also be used as a method of appraising alternative development
plans or decisions for regional industrial development.

This economic impact study of Manistee County utilized all five
possible benefits of an input-output study. Recommendation 1: When
making use of data generated from this study public and private deci-
sion-makers must spell out their objectives if the "best" choices are
to be made. For example, trade-offs may occur between alternative
courses or action which may have a high income impact, a low environ-
mental multiplier but a low employment multiplier compared to low in-
come impact, a low environmental multiplier but a high employment multi-
plier. If maximizing employment is our major objective then there is
no problem in selecting the alternative having a high employment multi-
plier. But choosing which of the conflicting multiple objectives is
more difficult and conflicts arise requiring trade-offs. With scarce
capital, a project that has a low capital requirement but also a low
employment multiplier is difficult to assess. Another factor may be
whether to favor one sector or another by expanding an existing sector
or developing new industries. The decision to promote a sector may

really be a function of whether one objective is to promote growth or

145

stability, to save on scarce capital or whether one favors large em-
ployment or income impacts. Only after priorities have been set for
decision-makers can one use an input-output model designed to show
economic impacts and find the appropriate solutions. After setting
forth priorities, input-output models can only pose questions as to
possible trade-offs required.

In short,the input-output model is an odd form of economic model.
It does not address itself to the traditional economic questions of
Inaximizing profit, consumers welfare or social welfare. By itself an
input-output model is not a choice mechanism which can make public
policy decisions. It requires values or objectives which should be
set within the planning process but exogenous to the model. Then al-
ternatives can be evaluated and discussed and decisions made.

Recommendation 2: Greater regional economic definition for Manis-
tee County may be needed, but for our purposes we only wanted to look
at the impact of the Paper and Allied Products Industry (The Woodpulp
Industry) on the designated sectors. Since only a single integrated
woodpulp mill existed in sector 6 (SIC 26), further definition was not
necessary. If other industries such as recreation or salmon fishing
are important to the objectives of the study, then further definition
of the economy would be necessary. Therefore, with greater detail one
must always ask to what extent this additional information will assist
the decision-maker as compared to extra expected costs.

A closely related issue is the data precision requirements of in-
put-output studies and the Manistee County Input-Output Study in parti-

cular. The precision level required from an input-output study is a

146
function of the goals of the project, its benefits and a given cost
framework centering on data collection and analysis costs. Whether
primary data collected using a sample design or secondary data are re-
quired relates to the precision level stipulated by the decision-
makers. Each decision-maker or group will place his own assessment of
what the benefits are of the information compared to the costs. Simi-
larly there are different assessments of risk and uncertainty made by
individuals and groups. The value of the information depends then on
who is receiving the information and how they assess the benefits.1
This must be set given the probability of expected losses (in costs)

2 Thus, once the

due to wrong decisions from incorrect information.
loss function is specified continual trade-offs between the cost of
information processing (which has declined due to high-speed data pro—
cessing) and requirements of the decision-maker to set an adequate
level of data precision must be made. If multiple objectives confront
the decision-maker, this vastly complicates the entire process. Input-
output models for regional analysis using secondary data provide deci-
sion-makers with a very powerful tool at a very low cost. If an
acceptable loss function can be found and put in terms of costs then a
vast array of benefits accrues to the users due to the vast array of

potential uses.

Recommendation 3: Input-output models can have important uses

 

1See 0. E. Chappelle, "How Much Is Information Worth" (West
Lafayette, Indiana, 1976).

2See 0. E. Chappelle, Precision in Allowable Cut Determinations
on the National Forests: An Inquiry into the Nature of an Appropr1ate
Loss Function (East Lansing, Michigan, 1975), pp. 14-17.

 

147

since they provide planners with guidelines for economic-ecologic
interdependencies in community planning. Often in community development
studies public decision-makers merely collect more data in the hope
that this will provide better solutions. "More and better data are
needed if we are to have better planning, but an appropriate analytic
framework is needed first so that data will be collected that are rele-
vant to the planning function."1
Recommendation 4: Use of secondary data for regional input-output
analysis provides answers quickly at low cost and can be used when pre-
cision levels are not so high that only a primary data input-output
study could meet the study objectives. Furthermore, use of secondary
data collection techniques for input-output to view policy alternatives
is useful when the planner's budget may require such an approach. It
avoids errors due to faulty sample design, inaccurate preparation of
interviews and data processing errors which occur in primary data
collection of input-output data. .So if a powerful tool of economic
analysis is available now in a rapidly changing world why not use it
rather than waiting when the time lag may be quite long in the prepara-

tion of input-output analysis from primary data and the results may
not be that different.
Disadvantages of Regional Input-Output
Analysis Using Secondary Data
Critics of secondary data techniques point toward the greater in-

accuracies of relying on secondary data. This is a moot point at best.

 

1Daniel E. Chappelle, Regional Models of Economic Activity In-
volving Natural Resources (East Lansing, Michigan, 1970), p. 31.

 

148

Many studies using secondary data use national coefficients which may
not be adjusted for regional studies. The pitfalls of this approach
are the differences in sector mix, prices, imports and exports, and
level of technology between the region and nation. However, as in the
Manistee Study, data reduction methods are available to make adjust-
ments.1 Of course, if the region is a reasonable approximation of the
nation then this is not a problem. But regardless of the adjustments
made, many observers rightly feel that primary data utilizing sample
techniques provides a higher level of precision.
Limitations of Input-Output Analysis in Its
Application to Regional Impact Studies

While some claim that input-output analysis is value-free, critics
claim that it does contain value judgments. It assumes constant costs
which implies a specific institutional framework. Of course, input-out-
put analysis has been adapted to alternative economic societies but per-
haps its best use would be in a command society and/or a highly central-
ized society where resources can be presumed to be directed to specific
uses. The major implicit assumptions of input-output models are that
prices are outside of the model and assumed constant, constant returns
to scale or no substitution effects and the technical mix of inputs does
not change which means the multipliers do not change (the multipliers to
every scale of every operation remain the same despite the scale of
operation). Furthermore, input-output is essentially value-free and
does not help government planners introduce a stronger goal-oriented

content to the planning process. Also, if economics is finding

 

1Stipe, Op. Cit., pp. 16-76.

149

efficient means to achieve given ends with scarce resources, input-out-
put models do not deal with economic choice. However, when resources
have serious capital, labor and land-environmental, management and en-
ergy constraints, the use of the model becomes much more limited. The
input-output model assumes slack resources. In short, an input-output
model assumes excess resources of every type to meet exogenously pro-
jected final demands. Demand always equals supply, equilibrium always
exists and there are no shortages or surpluses. Furthermore, input-
output models do not optimize any objective function since it does not
have any specific restraints. However, there is an implicit objective
function of exactly meeting the final demands which are exogenous. How-
ever, the input-output information can be used for linear programming to
optimize a specific objective function given a set of constraints.
Finally, input-output analysis is essentially static though it can be
aided by forecasting techniques in projecting future demand and assess-
ing the structural impacts since the technical coefficients often do
not change rapidly. The replacement of a new technique or material
takes time to have its impact felt through the entire economic system.
It is too costly to perform anything like national or large regional in-
put-output studies yearly from primary data, hence there is a need to
adjust the basic input-output matrix. The woodpulp industry is not
undergoing any radical changes in the short-run (except the installment
of pollution control equipment) and therefore a regional input-output
impact study for Manistee County seems reasonable.

There are a large number of social questions left unanswered. The

locational dimension of such social costs as transportation costs for

150

workers and consumers, and immigration patterns of workers are left out
of input-output models. For example, in the regional input-output
model of Manistee County one cannot answer when there is a change in
final demand, what the impact may be on the social costs of alternative
transportation patterns or where the additional workers hired or layed
off (as the case may be) come from. Another example of the limitations
of an input-output model in explaining social impacts is the somewhat
rigid assumption of its linkage to the ecologic sectors. Often ecologic
impacts are not adequately represented by shadow pricing. There may be
intangible impacts which may be left out or underestimated environmental
resources (in social terms) when use is made of shadow or minimum
pricing. Furthermore, the assumption that ecologic resources have a

linear dimension can obscure the real costs of environmental resources.

Alternatives to Regional Input-Output Analysis

The key problem for regional input-output analysis is lack of
specific quantitative and qualitative data. This then translates into
a cost-time-accuracy dimension. One approach to simplifying data needs
is to streamline the form of input-output tables. Richardson lists
several general methods which can accomplish this objective:
- obtaining information about sales or purchases, but not both.
- using a rectangular input-output matrix with the number of columns not
equal to rows (this is called a hybrid model). This suggests looking
at fewer rows when one is not concerned with a detailed breakdown of
inputs.
- combining less important sectors together so that only major inter-

sectoral flows are traced from primary data.

151

- aggregation in the size of the table. This approach can be used in
avoiding disclosure problems but it also aids in reducing cost and data
requirements.1
Another approach could be to construct indexes of "internal purchases"
,and "internal sales" as an alternative to the standard input-output
format. Knowing the flow of internal purchases and sales can provide
quite a lot of information about a local economy in rural areas that
lack the money to do sophisticated research.2

In this study we were able to aggregate the input-output table
but still retain the detail for sector 6, Paper and Allied Products.
Also, a simplified input-output format as outlined previously or just
indexes of total sales or purchases for our objectives was not chosen
since we wanted to retain the full power of an input-output analysis at
a very low cost.

The Future Use of Similar Input-Output
Analysis for Regional Studies

Our study of Manistee County has utilized an input-output model
which can be applied to a specific industry to assess various environ-
mental impacts, inter-industry relationships or for use in river basin
studies which are often of a multi-county nature. The computational
simplicity of an input-output model along with the power of its impact

analysis utilizing type I and type II income and employment multipliers

make this approach highly useful in its applications.

 

1Richardson, Op. Cit., p. 131.

2See Daniel W. Bromley, "An Alternative to Input-Output Models:
A Methodological Hypothesis," Land Economics, Vol. 48, No. 2 (May 1972),
p. 126.

 

152

Using secondary data sources made this investigation very inexpen-
sive. Various tests of secondary data sources have been made. Some
researchers have concluded that the advantages of cost-saving and the
potential to look at a single sector and its relationships to other
sectors and the environment outweigh the advantages of primary data
collection in terms of greater precision. In summary, this analysis has
shown the potential of tracing county impacts from a single sector using
secondary data sources.1

It has been observed that "the differences in various input-output
studies are primarily in the choice of the economic sectors to be

studied and the estimation procedures to be used when secondary data are

 

1See the following articles for a partial discussion on the advan-
tages of primary versus secondary techniques:

Jerald R. Barnard and Harold K. Charlesworth, "The Kentucky
Secondary Data Approach and Its Potential," Growth and Change, Vol. I,
No. 2 (April 1970), pp. 33-38.

 

Karen R. Polenske, "A Commentary on Both Models and Their Uses,"
Growth and Change, Vol. I, No. 2 (April 1970), pp. 39-40.

Ronald S. Boster and William E. Martin, "The Value of Primary
Versus Secondary Data in Interindustry Analysis: A Study in the Econ-
omics of Economic Models," Annals of Regional Science, Vol. 6, No. 2
(December 1972), pp. 35-44.

 

David G. McMenamin and Joseph E. Haring, "An Appraisal of Non-
Survey Techniques for Estimating Regional Input-Output Models," Journal
of Regional Science, Vol. 14, No. 2 (August 1974), pp. 191-205.

William A. Schaffer, "Estimating Regional Input-Output Coeffi-
cients," Review of Regional Studies, Vol. 2, No. 3 (Spring 1972), pp.
51-71.

William A. Schaffer and Kong Chu, "Nonsurvey Techniques for Con-
structing Regional Interindustry Models," Regional Science Association,
Vol. 23 (1969), pp. 83-101.

153

unavailable."1

The availability and timing of secondary data is very
often of a crucial nature. Recommendation 5: When secondary data or
resources are not available or of poor quality in a county or multi-
county study, the mixing of primary and secondary data should be used.
Therefore, special studies for the household, retail, export and import
sectors would be desirable when necessary to increase the accuracy of
studies similar to the Manistee County input-output study. All multi-
pliers generated should be checked against other studies (regional and
national) to see if they fall within reasonable ranges.

Along with county employment, sales and population data, secondary
data was used in the development of an input-output model for Manistee
County. It was felt that

the important aspect of interindustry relations is perhaps

not the accuracy of the input-output table--with the possible

exception of data such as employment, households, retail, etc.,

but the ability to experiment with various structural and
developmental alternatives and see the effects 8f changes in

one sector on the rest of the region 5 economy.

We are interested in the direction of change and its potential impacts
rather than being overly concerned that the input-output tables be per-
fectly accurate. That is our justification for using only secondary
data for the regional input-output study of Manistee County.

It is always a problem in research to decide how much additional

data is needed. Recommendation 6: For research that is concerned with

 

1Cyrus K. Motlagh, Evaluation of Input-Output Analysis as a Tool
for the Study of Economic Structure of the Grand Traverse Bay Area,
University of Michigan Bureau of Business Research, Graduate School of
Business Administration Working Paper No. 36, p. 14.

2Ibid, p. 15.

.154

more than the direction of change and potential impacts but not the
levels of accuracy that primary data can give, an intermediate approach
as suggested earlier, is recommended for regional input-output analysis.
The household sector and import and export sectors plus the sector or
sectors to be studied may require primary data. All these sectors are
of importance because of their size (the household sector), the high
degree of possible error (import and export sectors) and because various
sectors are crucial to the regional input-output study. Hence, a hybred
approach is recommended.

Estimation procedures are either the bottom-up (the pure) approach
or the top-down (the balanced) approach. The top-down approach was
utilized here with the starting point being the model of a state
(Michigan) via the MRIO (Multiregional Input-Output Model constructed
by the Harvard Economic Research Project and available through the
National Technical Information Service).1 This approach was thought to
be accurate in disaggregating national tables. Projections of final
demands to 1980 are also available from the Harvard work. Some addi-
tional advantages are that a state table for each state was developed.
The MRIO puts each state model in a consistent framework. That is, all
the fifty states add up to a balanced national input-output table using
standardized allocation techniques. If changes are made in regional
models they will not be additive. The consistency of this approach is
very important since one region or state could have an undue comparative

advantage if the approach was not derived this way. The Polenske

 

1Karen Polenske, The Implementation of a Multiregional Input-
Output Model for the United States (1972), pp. 171-189.

155

approach then represents a top-down approach since the state input-out-
put tables are derived from national input-output tables. However,
there are several disadvantages of the MRIO approach. The estimates
for the state input-output tables are done by allocation techniques
which are necessarily arbitrary. It is not an inter-regional model but
a multi-regional model. By that we mean that the input-output table
does not have trade coefficients. Finally, it has all the disadvan-
tages of using secondary data for an input-output model such as pricing
problems over space and variations of industrial mix over space.

The bottom-up approach will perhaps in the long-run yield valuable
research results. Yet unless counties and other sub-state regional
institutions, state and Title IIand Title V Commissions find ways of
increasing their independent source of revenues, bottom-up input-output
studies will not materialize. As population and rising demand press
against scarce resources the externalities will spill over county and
state boundaries. Hence, sub-state and multi-state regionalism can be
a potent force in providing data from a grass-roots level as these in-
stitutions are upgraded. The overall effect of this will be greater
citizen involvement at the local level in decision-making on economic-
ecologic problems. The institutional level at which this approach will
receive its major thrust, if at all, cannot be predicted, but efforts
along these lines must be consistent with each other. For example,
will counties develop models which are additive so that sub-state
regions, states, multi-state regional bodies and national planners can
use them in assessing larger regional models? This study has shown the

resources are available now to use the top-down approach to county

156

input-output models but the future may see increased use of a hybrid
approach of both secondary and primary data or the possible development
of the bottom-up approach as the decentralization process becomes
stronger in American institutions. Certainly, county, multi-regional
and river basin studies can make good practical use of a hybrid

approach.

APPENDICES

APPENDIX 1

CLASSIFICATION OF PAPER AND ALLIED PRODUCTS INDUSTRY1

This report shows 1958 Census of Manufactures statistics for es-
tablishments classified in each of the following industries:
S.I.C. Code and Title (1957 Edition)
2611--Pulp Mills
2621--Paper Mills, Except Building Paper Mills
2631--Paperboard Mills
2661--Building Paper and Building Board Mills
While there is some overlap in the shipments of products primary
to each of the industries in this group, the specialization for this
group of industries collectively is very high. In 1958, shipments by
mills in this group of industries consisted of 99 percent pulp, paper
and board, and only 1 percent of other products (chiefly converted
paper and board products and basic chemicals produced as a by-product
of the pulp operations). These establishments also accounted for ap-
proximately 100 percent of the pulp, paper and board produced in all
manufacturing industries.
Although some duplication occurs where the wood pulp and other
products produced by mills classified in industry 2611 are shipped to

paper and board mills for incorporation into the products of

 

1U.S. Bureau of The Census, 1958 Census of Manufacturing, Vol. 1.

 

157

158

establishments classified in industries 2621 and 2631, this situation

does not exist for paper, board and converted products.

2611--Pulp Mills

This industry comprises establishments primarily engaged in Manu-
facturing pulp from wood or from other materials such as rags, linters,
wastepaper, and straw. Logging camps operated by pulp mills, and not
separately reported, are also included in this industry. Establish-
ments primarily engaged in cutting pulpwood are classified in Industry
2411; and pulp mills combined with paper mills or paperboard mills,
and not separately reported, are classified with the latter in Indus-
tries 2621 and 2631, respectively. For a detailed list of products of
Industry 2611, refer to table 6A, product codes 2611111 to 2611289.

The code number for this industry in the 1957 revision of the
Standard Industrial Classification Manual is unchanged, but the content
of the industry has been significantly changed from the previous classi-
fication system. In the 1958 Census of Manufactures, pulp mills oper-
ated in conjunction with a paper and board mill at the same location
were permitted to file a combined report for such integrated operations.
However, in 1954 all pulp mill activity was separately reported whether
or not such pulpmill operations were conducted at the same physical
location as an associated paper or board mill. This change in treat-
ment has the effect of restricting the reporting of a "pulp mill" for
classification in Industry 2611 in the 1958 Census to the following
situations:

(a) Those pulp mills which are not affiliated with any paper and

board mills and ship all their products to the market;

 

159

(b) Pulp mills affiliated or associated with a primary paper or
board mill but which are separately located from the pulp mill; and

(c) A few pulp mills affiliated or associated with a primary
paper or board mill at the same physical location, where separate de-
partmental records of employment, materials, and fuel costs, shipments,
etc., are maintained for the pulp mill from those covering the paper
or board mill at that location and the company elected to file such a
separate report.

The above-described change in the concept for treating Industry
2611 was made effective in 1955, and as a result comparable figures
for previous Censuses are not available for this industry. To provide
historical comparison, table 1 has been prepared to show the old SIC
Group 261, Pulp, Paper, and Board, for 1957 and earlier years.

In addition, tall oil, formerly classified in this industry, is
now considered primary to Industry 2861, Gum and Wood Chemicals, and
tall oil fatty acids, also formerly classified in this industry, are
now considered primary to Industry 2894, Fatty Acids.

Value of shipments and other receipts of the Pulp Mill industry in
1958 totaled $428 million. This included shipments of wood pulp and
other pulp mill products, except tall oil (primary products), valued
at $417 million, shipments of other products (secondary products) val-
ued at $10 million, and miscellaneous receipts (all resales) of $1 mil-
lion.

This industry's shipments of wood pulp and other pulp mill pro-
ducts (primary products) in 1958 represented 98 percent (specialization

ratio) of its total product shipments (primary and secondary).

 

160

Secondary products shipped by this industry in 1958 consisted almost
entirely of paperboard, alkalies and chlorine, and tall oil.

Industry 2611 shipments of wood pulp and other pulp mill products
(primary products) in 1958 represented 73 percent (coverage ratio) of
these products valued at $568 million shipped by all industries. Other
industries shipping wood pulp (primary products) consisted mainly of
Industry 2621, Paper Mills, Except Building, $124 million; and Indus-
try 2631, Paperboard Mills, $25 million.

161

 

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APPENDIX 3

THE MAJOR ECONOMIC CHARACTERISTICS OF PAPER MANUFACTURING1

Paper manufacture and distribution is distinguished by ten major
characteristics which are of paramount importance in understanding both

historical and current price movements.

1. High Capital Intensity

The process of paper manufacture is highly capital invensive.
Approximately 5.6 percent of current dollar shipments volume is devoted
to new investment, which is second only to the chemical industry which
spends approximately seven percent of each sales dollar on new invest-
ment. A major corollary of very high capital intensity is that oper-
ating rates in paper manufacturing must be maintained at comparatively
elevated levels to keep the sector in a viable financial position.
Typically, only at rates well above 90 percent can an acceptable return
on investment be earned on relatively new higher-cost facilities. Old
or fully depreciated facilities can operate with apparent profitability

at lower rates.

2. Production-Oriented
Because of the heavy burden of fixed charges, and large additions

of productive capacity, paper manufacturing has historically tended to

 

1a. Sanford Smith, "The Economics of Papermaking," May 1975.

162

 

163

be production oriented at the expense of short-term profitability.

3. High Energy User

The production process requires substantial energy inputs. The
production of one ton of paper requires the energy equivalent of six
barrels of oil, which is more than is required to produce one ton of

steel.

4. Heavy Chemical Consumer

The manufacture of every ton of paper consumes approximately a

 

——.——-—-.‘.

quarter of ton of chemicals. The production of pulp and paper accounts
for about 90 percent of the North American consumption of saltcake, 75

percent of the alum, and 16 percent of the chlorine.

5. Heavy Environmental Investments

Because of the industry's strong commitment to environmental
cleanliness, it devotes a large portion of capital resources to
pollution abatement equipment, a process which will continue for many

years under increasingly stringent environmental standards.

6. Relatively Low Concentration

Concentration is low, especially when compared to other capital-
intensive industries such as chemicals, petroleum refining, rubber,
iron and steel, and aluminum. Approximately 18 companies account for
50 percent of primary paper and paperboard tonnage. The top ten com-

panies account for only 35 percent of total tonnage.

7. Heavy Debt Structure

The capacity to acquire debt has effectively been exhausted in

164

recent years. The long-term debt/equity ratio for the industry seg-
ment as a whole has risen from a modest .23 in 1958 to .58 in 1975.
Over the same period, the long-term debt/equity ratio in total manu-
facturing has risen from .20 to .43 which indicates the relative

deterioration in the financial position of the paper business.

8. Highly-Depreciated Asset Base

The paper business is mature in the sense of its years in exis-
tence, and this fact is reflected in the age distribution of mill fa-
cilities. A considerable block of productive facilities has been in
operation for many years, and despite periodic modernization programs,
is largely depreciated. For example, in the case of IP, the average

age of our mills is 36 years.

9. Relatively Stable Demand Growth

Historically, consumption of paper and paperboard in the United
States has closely tracked growth in real Gross National Product. In-
deed, each billion dollar improvement in real GNP has rather consist-
ently generated an additional 80,000 tons of paper and paperboard

consumption.

10. Relative Instability in Earnings

One of the major contradictions of the paper business has been
the marked cyclical variability of earnings in spite of a stable final
demand profile. This historic pattern can be attributed to "binges"
in new capacity additions, as well as to wide swings in inventory ac-
cumulation in the distribution and utilization chain. The paper and

pulp segment of the forest products industry has been characterized

 

165

by additions to new capacity in large, discrete blocks which drive
returns on invested capital to unsatisfactory levels. Such a process
has always meant an excess of capacity in advance of society's needs,
but economic conditions in recent years indicate that such overbuilding

of capacity will no longer be financially feasible.

 

166

 

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O OO O OOH OHN NON OOONO .OO ONO ONOONOEO
”cwmcoomwz
ONN OHO.H ONN ONH ONN.N OOONHO O . . . . . . . . HOOON
O OON O O OON OOOOOHO .Ogoo Onzeoo
Anozcwucoov unpommccwz
HnoOEmnu Hnowcngomz
-OEOO LOOOO OON OOOOHON OOHOHOO HNNON eoOOOOOO Nemaeoo
Ooonc=o+w

 

ngoz ON goa Ocoh cw zuwonqnu HHOz

 

.umscwucouiiOO u4m<N

168

 

.Nucsou Omicowmwm Hngpcmu :pgoz on» cw :oOHosoogO noozaHOO

.ONOH
.eOa: .N OHonO OON OONHN .N OOENO ”OONOOO

.oHonHOn>n no: pronanu \w

 

 

OOO.N ONN.N ONN.N OOO.H OHN.OH NpanO HO magnum HHO
ONN OON.H OHN.H ONN.H OON.O OuanO ON . . . . . . . . anoN
----O ....... -----OOH---------O------:-O---..--:OOH--- 3::5 .8 OOOOOEN 25
o o o ONH ONH 3nxogN .oo OHHOz gOOno :nNOnz
O OO O O OO OONONEON .oeH .oo OHOO NzNOOEON
AnozcwucooVNOOOcoommz
HnoOENOO Hnowcngomz
-OEmO Ogospo ncn mpnOHOO OOOOHOO anoN coOHnooO NcnOEoO
nooznczogw

 

OgOo: ON goO Oco» cwixuwonmmu HHOz

 

.UoocwucounnOO m4m<k

APPENDIX 5

PACKAGING CORPORATION OF AMERICA LETTER
TO SELLERS OF PULPWOOD

This PCA organizational letter shows that its prospective buyers,
state and federal forests and competing companies, are located mainly

in the entire central region of the northern Lower Peninsula.

Organization letter of March 13,,1974 from R.A.Y. to the following:

Ranger Districts: Manistee, Baldwin, White Cloud, Mio, Tawas,
U.S.F.S. Harrisville, Cadillac

Nels Johnson, Roscommon 48653 (Reg. Game Mgr., MDNR)

Daniel F. Bonner, Traverse City 49684 (Fife Lake State Forest, Area
Forester)

Lee Sherwood, Area Forester, Ogemaw State Forest, West Branch, Mich.
48661

William H. Tarr, Area Forester, Au Sable State Forest, Grayling, Mich.
49738

Lynn B. Mohr, Area Forester, Tittabawasee River State Forest, 801 N.
Silverleaf Street, Gladwin, Mich. 48624

Robert J. Slater, Area Forester, Kalkaska State Forest, Court House,
Kalkaska, Mich. 49646

Eugene C. Phillips, Area Forester, Thunder Bay River State Forest, MDNR,
Atlanta, Mich. 49709

Jerry L. Lawrence, Area Forester, Pigeon River State Forest, Gaylord,
Michigan

Robert E. Leeson, Area Forester, Pere Marquette State Forest, Baldwin,
Michigan

169

170

Ted M. Reuschel, Area Forester, Betsie River State Forest, Box 158,
Beulah, Mich. 49617

Donald L. Torchia, Area Forester, Houghton Lake State Forest, Box 158,
H. Lake Heights, Mich.

J. Doyle Voice, Area Forester, Missaukee State Forest, H. Lake Heights,
Mich.

Leon E. Erbe, Area Forester, Oscoda State Forest, Mio, Mich. 48747
Rodney J. Rugg, Area Forester, Chippewa River State Forest, Paris, Mich.

Jack P. Lockwood, Area Forester, Jorday River State Forest, P.O. Box
120, Boyne City, Mich.

Horace H. LaBumbard, Timber Management & Wildlife Staff Officer, USFS,
Cadillac, Mich.

Robert A. Borak, Regional Forest Supervisor, MDNR, Regional Headquarters,
Roscommon, Mich.

Craig J. Taggart, Timberlands Manager, Champion International, Gaylord,
Mich.

James C. Lamy, Woods Manager, Abitibi Corporation, 416 Ford Ave., Alpena,
Mich.

John Hanson, Woodlands Manager, Menasha Corporation, Otsego, Mich.

John N. Fields, Woodlands Manager, 5.0. Warren Company, 2400 Lakeshore
Drive, Muskegon, Mich.

APPENDIX 6

ALTERNATIVE SOURCES OF MICHIGAN STUMPAGE VALUES

The U.S. Forest Service Handbook of Timber Appraisal and The
Michigan DNR's (Division of Forestry) Michigan State Forest Volumnes
And Stumpage Prices By Districts are excellent sources for making
yearly comparisons by geographic area for stumpage prices. They are

in various log scales so conversion factors must be used.

171

APPENDIX 7

TABLE 65

TOTAL PULPWOOD PRODUCTION FOR MICHIGAN FOR THE UPPER AND
LOWER PENINSULA 1960 TO 1974, STANDARD CORDS (ROUGH)

 

 

 

 

 

Upper Lower
Year Peninsula Percent Peninsula Percent State Total
1974 1,165,773 61 744,360 39 1,910,133
1973 969,757 58 750,217 42 1,719,947
1972 805,073 53 703,359 47 1,508,432
1971 699,046 51 662,557 49 1,361,603
1970 735,586 52 670,604 48 1,406,190
1969 679,178 52 622,725 48 1,301,903
1968 575,226 49 592,370 51 1,167,598
1967 803,496 60 539,461 40 1,343,957
1966 837,339 53 698,938 47 1,570,639
1965 771,365 57 593,775 43 1,365,140
1964 750,492 57 570,963 43 1,321,455
1963 779,887 60 517,128 40 1,297,015
1962 704,280 58 419,014 42 1,223,294
1961 602,880 55 489,157 45 1,092,037
1960 689,976 55 566,452 45 1,256,428
SOURCE: Michigan Department of Natural Resources, Forestry Division,
Michigan Pulpwood Production 1960-1974.
Note: Total pulpwood includes residues. Very little pulpwood produc-

tion comes from the southern half of the Lower Peninsula. This
data may be further broken down for volumes of timber from
Michigan State Forests and U.S. Federal Forests (see: Depart-
ment of Natural Resources, Forestry Division, Michigan State
Forest Volumes and Stumpage Prices by District, 1975-1960.
U.S.D.A. Forest Service, Timber Cut and Sold (Region 9), FY

1975-1960).

172

APPENDIX 8

IMPLICATIONS OF USING ASPEN IN PULPING OPERATIONS

Aspen is the dominant tree species in Michigan (see table 66). It

has a short growing cycle and can be regenerated by clear-cutting. The

implications of table 66 are:

pulp mills will have to shift their wood procurement to
other areas or plan on using less aspen. This means increased
costs due to higher transportation costs or shifts to high
cost timber. However, without change in procurement, aspen
prices would rise.

plants planning expansion or new mills should not use
capital equipment favoring aspen but should seek an alter-
native species.

deer and grouse management will suffer with declining growth
of aspen. All these conclusions will especially affect PCA
in the future as their current operation is 65% dependent

on aspen. Further expansion may require a different capital

investment for machinery which needs species other than aspen.

173

174

TABLE 66

MICHIGAN ASPEN CUT AND GROWING STOCK, ALL COVER TYPES,
BY SURVEY UNIT, YEAR, AND S-YEAR AVERAGE

 

 

 

Cut Growing Stock
Year Million Cubic Feet Billion Cubic Feet
Eastern Upper Peninsula
1970 15.2 .35
1975 17.4 .37
1980 19.5 .38
1985 21.6 .37
1990 26.9 .34
1995 29.5 .27
2000 24.6 .24
Western Upper Peninsula
1970 22.9 .63
1975 26.1 .59
1980 29.3 .53
1985 32.5 .46
1990 40.3 .35
1995 41.5 .26
2000 27.7 .14
Northern Lower Peninsula
1970 38,1 1.08
1975 43.4 1.00
1980 48.8 .88
1985 54.1 .73
1990 59.5 .55
1996 64.8 .33
2000 57.3 .20

 

SOURCE: William A. Leuschner, Projecting the Aspen Resource in the
Lake States.

Note: Projections assume recent timber practices continue into the
future. ’

APPENDIX 9

WOODPULPING WATER REQUIREMENTS AND 5—DAY BOD DISCHARGES

Pulping requires relatively large quantities of process water,

although it is essentially nonconsumptive insofar as water volumes are

concerned. Even larger quantities of water than needed for processing

 

must be flowing in the stream, however, simply to dilute the wastes
discharged from the pulpmill. Approximate water-volume requirements

for pulp and paper processing are as follows:

 

 

Groundwood Semichemical Sulfate
- - -_(Gallons per ton of pulp) - -
Pulpmill 1,000 3,000-20,000 20,000-40,000

Bleaching 1,000
Partial 20,000 20,000
Full 40,000 40,000

Papermill 7,000-10,000 10,000-25,000 10,000-20,000
Water for debarking will vary from 0 to 7,500 gallons per ton of pulp,
depending on pulping technique, process used, and equipment.

Pollution is a technically complex subject; however, with regard
to pulpmill pollution of water, the most important factor is the demand
of organic mill wastes upon the dissolved oxygen content of the re-
ceiving water. This oxygen-depletion characteristic is called Biochem-.

ical Oxygen Demand (800). Because Colorado River water is used as a

175

176

domestic supply by two adjacent towns, Colorado State Health Depart—
ment regulations state that waste loads discharged to the river must
not exceed a 5—day 20°C. 800 of 30 parts per million (p.p.m.). BOD
characteristics of various pulping processes assumed applicable in the
Colorado River study area follow:

5-day 20°C. 3001
(Pounds per ton of pulp)

 

Sulfate 50
Groundwood 3-10
Semichemical:

No chemical recovery 275

Chemical recovery 25-140

 

1Jay Hughes, Pulp and Papermaking_Opportunities in West Central
Colorado.

APPENDIX 10

TABLE 67

VALUE-ADDED PER DOLLAR OF GROSS OUTPUT AND VALUE-ADDED
PER EMPLOYEE, CHARLESTON, SOUTH CAROLINA STUDY AREA, 1968

 

 

Value-Added

Value-Added

 

Per Dollar a Per

Gross Output Employee
1. Ag., Forestry and Fisheries .4126c 2,822
2. Food and Kindred Products .2655: 2,947
3. Construction and Mining .4130 8,425
4. Textiles and Apparel Mfg. .3804 1,316
5. Lumber, Pulp & Paper Prods. .3430 8,913
6. Furniture & Fixtures Mfg. .4315 4,248
7. Printers & Publishers .4700 4,781
8. Chemical Manufacturing .4680 2,625
9. Petroleum & Coal Mfg. .2505 392
10. Rubber, Plastic & Related Prods. .4454 1,483
11. Stone, Clay & Glass Prods. .4902 1,293
12. Machinery & Metal Shops .4181 3,063
13. Miscellaneous Manufacturing .4029b 2,455
14. Transportation .6071 4,074
15. Communications .5141 1,455
16. Utilities .5606 12,154
17. Eating & Drinking Places .6175b 7,049
18. Hotels & Lodging Places .6745 2,854
19. Gasoline Service Stations .4680 21,881
20. Other Wholesale & Retail Trade .7245b 26,263
21. Finance and Insurance .5602b 7,217
22. Real Estate .7223 21,175
23. Other Business & Professional b

Services .5120 2,031

24. Local & State Government -- --
25. Defense-Related Government .0000 --
26. Other Federal Government .0000 --
27. Households -- c --
28. Unallocated .4001 4,830

 

aUnless otherwise specified, figures are adjusted from value-added
coefficients in Canion, Robert L. and Warren L. Trock, Input-Output as

177

178

a Method of Evaluation of the Economic Impact of Water Resource Devel-
opment, Water Resources Institute, Texas A&M unTVeFETty, May 1968,
pp. 38-39.

bOffice of Business Economics, Survey Of Current Business, United
States Department of Commerce, Washington, D. C., Vol. 49, No. 11,
November 1969.

CCharleston Survey.

dSector 24 & Sector 6.

SOURCE: Laurent and Hite, Economic-Ecologic Analysis in the Charlestown
Metropolitan Region: An Input-Output Study, April 1971.

APPENDIX 11

THE ECONOMIC-ECOLOGIC MODEL WITHIN A LEONTIEF
GENERAL PRODUCTION SYSTEM

It is useful to view the ecologic model as fitting into the overall
input-output model. It is difficult to put dollar values on environmen-
tal goods. Environmental goods form a separate matrix which when
quantifiedtnIpost-multiplying the environmental matrix by the inverse
of the input-output model show the economic-ecologic linkages. The

following chart emphasizes the economic-ecologic linkages.

Local Ecologic Other Total

Inter1ndustry Matr1x Use Exports Exports Output

 

 

 

 

 

 

 

 

 

 

 

 

1J J J J J
>5
LU)
164-?
E:
"II-m P.
L: l
O.H
0
'FW
UMP
CS-
PG E
on 1
US
Luv—o
U)
5.4-3
03$-
58, M
c: E l
H
m
'E‘;
-9 OJ N.
o: 1
[—0—0

 

179

180

The above chart was developed by Eugene A. Laurent and James C. Hite

of the Water Resources Research Institute, Clemson University.1

 

1Eugene A. Laurent and James C. Hite, Economic-Ecologic Analysis
in the Charlestown Metropolitan Region: An Input-Output Study, Water
Resources Research Institute, Clemson University.

 

APPENDIX 12

TABLE 68

THE DIRECT ENVIRONMENTAL IMPACT OF A DOLLAR INCREASE
IN OUTPUT BY SECTORS FOR MANISTEE COUNTY, 1970

 

 

Sector* Total Water Intake 5-Day 800 (lbs)

 

Agriculture
Forestry, Fish
Mining
Construction
Lumber & Lumber Products
Paper & Allied Products 2.47 lbs. .002 to .012
Manufacturing
Transportation
Comm., Public Utils.
. Trade
. Finance, Ins.,Real Est.
. Lodging Services

OQNChUT-bwmr—a

Hi—In—I
NHO

. Amusement Services
. Other Services
. Government

HHH
(II-bu.)

 

*Other environmental linkages could include hydrodarbons (lbs.), sulfur
dioxides (lbs.) and solid wastes (cu. yards) to name just a few.

181

 

APPENDIX 13

TABLE 69

DIRECT ENVIRONMENTAL IMPACTS FOR A DOLLAR I
BY SECTOR FOR MANISTEE COUNTY, 1970

NCREASE

 

 

 

Sector Total Water Intake 5-Day 800 (lbs)
1. Agriculture
2. Forestry, Fish
3. 'Mining
4. Construction
5. Lumber & Lumber Products
6. Paper & Allied Products (2.47 x 2.1) = 5.1 (.002 or .012 x
2.1) = .004 or .025
7. Manufacturing
8. Transportation
9. Comm., Public Utils.
10. Trade
11. Finance, Ins., Real Est.
12. Lodging Services
13. Amusement Services
14. Other Services
15. Government

 

*Environmental Matrix x Inverse.

182

APPENDIX 14

TABLE 70
MANISTEE COUNTY VALUE-ADDED MATRIX FOR 1970

 

 

 

Sector*
1. Agriculture
2. Forestry, Fish
3. Mining
4. Construction
5. Lumber & Lumber Products
6. Paper & Allied Products .71
7. Manufacturing
8. Transportation
9. Comm., Public Utils.
10. Trade
11. Finance, Ins., Real Est.

H
N

. Lodging Services

. Amusement Services
. Other Services

. Government

o—hI—no—I
(II-kw

 

*Each sector x the inverse of that sector summed equals the value-added
for that sector.

183

APPENDIX 15

TABLE 71

DIRECT ENVIRONMENTAL IMPACTS PER DOLLAR OF LOCAL
INCOME FOR MANISTEE COUNTY, 1970

 

 

Sector* Total Water Intake 5-Day 800 (lbs)

 

Agriculture

Forestry, Fish

Mining

Construction

Lumber & Lumber Products

Paper & Allied Products .71 x 5.1 = 3.6 .71 x .004 or
.025 x .017

010143me
00....

Manufacturing

. Transportation

9. Comm. Public Utils.

10. Trade

11. Finance, Ins., Real Est.
12. Lodging Services

13. Amusement Services

14. Other Services

15. Government

(”N

 

*Value-Added Matrix x table 69 = Direct Environmental Emissions Per
Dollar.

184

 

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