December 18, 2015
Research Report

Enbridge Pipeline Construction
Economic Impact Study

Prepared for the
Minnesota Agriculture & Energy Alliance

 Research Team
UMD Labovitz School of Business and Economics
Bureau of Business and Economic Research
Monica Haynes, Director
Gina Chiodi Grensing, Editor/Writer
Travis Eisenbacher, Undergraduate Research Assistant
Karen Haedtke, Executive Administrative Specialist
Bureau of Business and Economic Research
11 East Superior Street, Suite 210
Duluth, MN 55802
(218) 726-7895
www.d.umn.edu/lsbe/bber.php
Project Contact
Greg Johnson
Weber Johnson Public Affairs
235 East 6th Street, Suite 500
St. Paul MN 55101
651-295-0036
greg@weberjohnsonpa.com

DISCLAIMER –The Bureau of Business and Economic Research (BBER) at the University of Minnesota
Duluth’s (UMD) Labovitz School was contacted by the Minnesota Agriculture & Energy Alliance as an
unbiased research entity. Publication and dissemination of this report, or any of its data, is not an
endorsement by the BBER/UMD of Enbridge Pipelines, LLC or its projects.
Enbridge provided the majority of inputs for this report. Where data was not available from Enbridge,
the BBER utilized IMPLAN, industry standards, and other secondary data sources. The BBER relied upon
the completeness, accuracy, and fair presentation of all data and information obtained from Enbridge
and/or their agents. The report is conditional upon the completeness, accuracy, and fair presentation of
that data and information. The BBER does not promise or guarantee the outcome of these results but
rather is providing projections based upon inputs and outputs using IMPLAN software.
The BBER was asked to supply an economic impact analysis only. This analysis does not consider the
social or environmental impacts of the project and should not be viewed as a cost benefit analysis or
environmental impact assessment.
Media requests should be directed to Holli VanOverbeke at Weber Johnson Public Affairs, (651) 454-3002
or holli@weberjohnsonpa.com .
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth

ii

 Table of Contents
Research Team ................................................................................................................................. ii
Table of Contents ............................................................................................................................ iii
Table of Figures ............................................................................................................................... iii
Table of Tables ................................................................................................................................ iv
Executive Summary.......................................................................................................................... v
I. Project Description....................................................................................................................... 1
Deliverables ........................................................................................................................ 1
Study Area ........................................................................................................................... 2
II. Inputs and Assumptions............................................................................................................... 5
Effects of Construction – Sandpiper Line ............................................................................ 5
Effects of Construction – Line 3 .......................................................................................... 7
Non-Local Worker Spending ............................................................................................... 8
III. Findings ..................................................................................................................................... 10
Sandpiper Line .................................................................................................................. 10
Line 3 Replacement........................................................................................................... 14
IV. Conclusions ............................................................................................................................... 17
Sandpiper Line .................................................................................................................. 17
Line 3 Replacement........................................................................................................... 18
Appendix A: Model Assumptions ................................................................................................... 19
Construction Activity......................................................................................................... 19
Non-Local Worker Spending ............................................................................................. 20
Appendix B. Economic Impact Procedures and Data Sources ....................................................... 21
Input/Output Analysis....................................................................................................... 21
IMPLAN Data and Assumptions ........................................................................................ 21
Modeling Issues ................................................................................................................ 22
Definitions used in this report .......................................................................................... 22

Table of Figures
Figure 1. MN map with project study area highlighted in white ..................................................... 2
Figure 2. Employment by Industry for Study Area, 2013 ................................................................. 3
Figure 3. Top Sectors by Employment for Study Area, 2013 ........................................................... 4
Figure 4. Sandpiper - Construction Spending by Major Expenditure .............................................. 6
Figure 5. Line 3 Replacement - Construction Spending by Major Expenditure ............................... 7
Figure 6. Non-Local Worker Per Diem Spending ............................................................................. 9

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth

iii

 Table of Tables
Table 1. Sandpiper Line Expenditures (in Millions of Dollars) ......................................................... 5
Table 2. Line 3 Expenditures (in Millions of Dollars)........................................................................ 7
Table 3. IMPLAN Sectors Used in Modeling..................................................................................... 8
Table 4. Sectors and Direct Effects Used in Modeling Non-Local Worker Spending ....................... 9
Table 5. Total Sandpiper Line Impact Summary, by Year (in Millions of Dollars) .......................... 10
Table 6. Total Sandpiper Line Impact Detail (in Millions of Dollars) .............................................. 11
Table 7. Sandpiper Construction Impact Detail (in Millions of Dollars) ......................................... 12
Table 8. Sandpiper Non-Local Worker Spending Impact Detail (in Millions of Dollars) ................ 12
Table 9. Top Retail and Hospitality Sectors Impacted by Sandpiper Line Project, 2017-18 .......... 13
Table 10. Total Line 3 Replacement Impact Summary, by Year (in Millions of Dollars) ................ 14
Table 11. Total Line 3 Replacement Impact Detail (in Millions of Dollars) .................................... 14
Table 12. Line 3 Construction Impact Detail (in Millions of Dollars) ............................................. 15
Table 13. Line 3 Non-Local Worker Spending Impact Detail (in Millions of Dollars) ..................... 15
Table 14. Top Retail and Hospitality Sectors Impacted by Line 3 Replacement, 2017-18 ............ 16

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth

iv

 Executive Summary
Enbridge Pipelines (North Dakota) LLC is
proposing to build the 610-mile Sandpiper
Pipeline, which would transport North Dakota
light crude petroleum from Beaver Lodge
Station in Tioga, North Dakota, to the existing
Enbridge terminal in Superior, Wisconsin. The
proposed pipeline would follow a route through
ten North Dakota counties and eight Minnesota
counties ending in Douglas County, Wisconsin.
In addition, Enbridge is proposing replacement
of the existing Line 3 pipeline, which would run
along much of the same route of the proposed
Sandpiper line.

region during the two-year period, 1,410 of
which are expected to be filled by construction
workers from outside the 15-county study area.
Enbridge expects to spend more than $934
million within the study area over the course of
the Sandpiper construction project – leading to
a total output impact of $1.3 billion regionally in
combined direct, indirect, and induced spending
effects.
The Line 3 replacement project is estimated to
support, directly and indirectly, approximately
7,700 jobs over the two-year period, 2,340 of
which are expected to be filled by construction
workers from outside the 15-county study area.
In total, Enbridge expects to spend more than
$1.4 billion within the study area during the
Line 3 replacement project, leading to a total
output impact of $2.0 billion regionally in
combined direct, indirect, and induced spending
effects.

The Minnesota Agriculture & Energy Alliance, in
cooperation with Weber Johnson Public Affairs,
asked the Bureau of Business and Economic
Research (BBER), an entity of the University of
Minnesota Duluth’s Labovitz School of Business
and Economics, to assess the economic impact
of the construction of the proposed Enbridge
Sandpiper Pipeline and the replacement of Line
3 on the proposed affected Minnesota counties,
which total 15. The study includes a special
focus on the economic impacts to the retail and
hospitality industries in the selected region. The
BBER used county data and impact models for
value added, employment, and output
measures.
The economic modeling data and software used
was IMPLAN. The study used IMPLAN’s
economic multiplier analysis and input/output
modeling. Data used were the most recent
IMPLAN data, which is for year 2013. Results of
modeling are reflected in 2015 dollars

For both projects, the bulk of the economic
impacts will come from the company’s
construction expenditures, including site
preparation, procurement, engineering, and
environmental costs. In the case of the
Sandpiper Line project, construction spending is
expected to support more than 4,300 jobs in
the study region and lead to more than $1.2
billion in new spending during the two-year
period. The construction spending for the Line 3
replacement is expected to support more than
6,900 jobs in the study region and lead to more
than $1.8 billion in new spending during the
two-year period.

According to the results of this analysis, it is
estimated that construction of the Sandpiper
line will support approximately 4,800 jobs in the

A smaller, but still significant, portion of the
impact from the projects will come from
spending on the part of the non-local

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth

v

 construction workers brought in for the project.
Approximately half of the workforce for both
construction projects will be sourced from
outside of the study area, and much of their
income with leave the study area. However,
these workers will spend some portion of their
income on lodging, restaurants, and other
incidental expenses. The BBER research team
estimated that non-local workers brought on for
the Sandpiper Line would spend approximately
$52 million over the course of the construction
project, supporting nearly 500 jobs throughout
the study region and leading to more than $80
million in combined direct, indirect, and
induced spending. Non-local workers for the
Line 3 construction project are expected to
spend upwards of $86 million within the study
area over the course of the construction

project, supporting nearly 800 jobs and leading
to about $135 million in combined direct,
indirect, and induced spending.
Finally, this analysis examined the impacts of
the Sandpiper and Line 3 projects on the Retail
and Hospitality sectors in the study area. In
total, it is expected that the Sandpiper project
will support more than 1,000 jobs in Retail and
Hospitality during the two-year period, and the
Line 3 replacement would support more than
1,600 jobs within those same industries. In both
cases, the sectors seeing the greatest benefits
include
Non-store
Retailers,
Other
Accommodations (e.g. resorts, campgrounds,
RV parks), Hotels and Motels, and Full-Service
Restaurants.

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth

vi

 Enbridge Pipeline Construction Economic Impact Study
I. Project Description
Enbridge Pipelines (North Dakota) LLC is proposing to build the 610-mile Sandpiper Pipeline, which
would transport North Dakota light crude petroleum from Beaver Lodge Station in Tioga, North Dakota,
to the existing Enbridge terminal in Superior, Wisconsin. The proposed pipeline would follow a route
through ten North Dakota counties and eight Minnesota counties ending in Douglas County, Wisconsin.
In addition, Enbridge is proposing replacement of the existing Line 3 pipeline, which would travel along
much of the same route of the proposed Sandpiper line.
The Minnesota Agriculture & Energy Alliance, in cooperation with Weber Johnson Public Affairs, asked
the Bureau of Business and Economic Research (BBER), an entity of the University of Minnesota Duluth’s
Labovitz School of Business and Economics, to assess the economic impact of the construction of the
proposed Enbridge Sandpiper Pipeline and the replacement of Line 3 on the affected Minnesota
counties. In addition, this study includes a special focus on the economic impacts to the retail and
hospitality industries in the selected region as a result of increased economic activity during the project.
The BBER used county data and impact models for value added, employment, and output measures.
The study used IMPLAN1 economic modeling data and software, specifically, IMPLAN’s economic
multiplier analysis and input/output modeling. Data used were the most recent IMPLAN data, which is
for year 2013. Results of modeling are reflected in 2015 dollars and are presented here in a digital,
written report.

Deliverables


The BBER reported the direct, indirect, and induced economic impacts from the construction of
the Sandpiper Pipeline and the replacement of Line 3 on the study area with a special focus on
the impacts to the retail and hospitality industries.



Data were configured by route and project phases/years.



The BBER presented the findings in a digital report.

1

IMPLAN is used by more than 570 clients, including 100 state government agencies and 25 national agencies.
IMPLAN Group LLC, 16740 Birkdale Commons Pkwy, Suite 212, Huntersville, NC 28078 www.implan.com

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
1

 Study Area
The geographic scope for this economic impact analysis includes the fifteen Minnesota counties of
Kittson, Marshall, Pennington, Red Lake, Polk, Clearwater, Beltrami, Hubbard, Wadena, Cass, Crow
Wing, Itasca, Aitkin, Carlton, and Saint Louis, according to the map below. These counties represent the
proposed route of the Sandpiper Line as well as the existing route of Line 3. Enbridge expects that
approximately half of the workforce required for the Sandpiper and Line 3 projects will come from
within this region. The counties included in the study are primarily rural and encompass a significant
portion of the northern half of the state of Minnesota. Major cities within the region include Duluth,
Hibbing, Bemidji, Brainerd, Cloquet, and Grand Rapids.
Figure 1. MN map with project study area highlighted in white

SOURCE: ENBRIDGE

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
2

 Figure 2. Employment by Industry for Study Area, 2013
Transportation,
Information, Public
Utilities
3%
Construction
5%

Agriculture
3%

Mining
2%

Manufacturing
5%

Service
51%

Trade
15%

Government
16%
SOURCE: IMPLAN, 2015

Figures 2 and 3 provide background on the regional economy of the study area as context for the results
of the report. Figure 2 shows employment by industry. In 2013, more than half of the 320,000 jobs in
the study area came from the Service industry, which includes Health Care, Education, and Hospitality.
The other largest industries in the region, measured in employment, included Government, Trade, and
Manufacturing. Construction employment represented approximately 5% of the jobs in the region in
2013, with about 15,000 workers in the study area employed in that industry.

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
3

 Figure 3. Top Sectors by Employment for Study Area, 2013
Hospitals
* Employment and payroll of local govt, non-…
* Employment and payroll of local govt, education
Wholesale trade
Real estate
Full-service restaurants
Nursing and community care facilities
Limited-service restaurants
Residential mental retardation, mental health,…
* Employment and payroll of state govt, education
Retail - General merchandise stores
Individual and family services
Labor and civic organizations
Other local government enterprises
Retail - Food and beverage stores
Retail - Nonstore retailers
Iron ore mining
All other food and drinking places
Hotels and motels, including casino hotels
Monetary authorities and depository credit…
Construction of other new nonresidential structures

15.4
13.8
13.5
9.3
8.7
8.3
7.3
6.9
6.8
6.8
6.3
5.6
4.7
4.7
4.6
4.2
3.9
3.6
3.6
3.5
2.6

0

4

8

12

16

Thousands of Employees
SOURCE: IMPLAN, 2015

Figure 3 shows the top sectors within the study area as measured by overall employment. This figure
provides more detail into the sectors that employ the largest numbers. Hospitals, Full-Service
Restaurants, Nursing and Community Care Facilities, and Limited-Service Restaurants represent a
substantial portion of the jobs in the Service industry in the study area. The Local Government sector is
another significant local employer. This study will focus primarily on IMPLAN sector 58—Construction of
Other New Nonresidential Structures, shown in gold. This sector was ranked 31st in terms of overall
employment in 2013, with nearly 2,600 workers. In addition, the study includes a special focus on the
impacts of the construction project on Retail and Hospitality sectors in the region. The largest Retail and
Hospitality sectors include Full-Service Restaurants, Limited-Service Restaurants, Retail – General
Merchandise Stores, Retail –Food and Beverage Stores, and Retail – Non-store Retailers. All employ
more than 4,000 individuals within the study area.

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
4

 II. Inputs and Assumptions
The following section describes the inputs required for modeling the impacts of the construction
projects and non-local construction worker spending and the assumptions made when developing the
models. Inputs used include major construction expenditures, employment estimates, employee
compensation, and the percentage of local labor and equipment purchases. Data were provided by
Enbridge representatives. The research team worked under the assumption that the company provided
good-faith estimates for both projects. In instances where data was not provided by Enbridge, the
research team relied on IMPLAN estimates and secondary data sources as inputs.

Effects of Construction – Sandpiper Line
Construction of the Sandpiper Line is anticipated to begin in the fourth quarter of 2016, with the bulk of
the work happening in 2017 and project completion expected in late 2018. For simplicity, we assume a
two-year construction period with costs equally distributed between the years 2017 and 2018. The
distribution of employment and spending does not greatly affect the overall results of the study.
The construction of the Sandpiper Line will generate a temporary increase in economic activity during
the course of the construction project. Throughout the project, increased demand for equipment, labor,
and transportation will lead to increased economic activity in the affected counties. After the
completion of the project, this additional activity will cease and the economic impacts will no longer be
felt in the region.
Table 1. Sandpiper Line Expenditures (in Millions of Dollars)
Budget item

Total
Spending
$640.9

% Spent in
Study Area
100%

Direct Spending
in Study Area
$640.9

Year 1
(2017)
$320.5

Year 2
(2018)
$320.5

Site preparation-Project management

$242.8

100%

$242.8

$121.4

$121.4

Procurement

$286.6

10%

$28.7

$14.3

$14.3

Engineering

$39.6

90%

$35.6

$17.8

$17.8

Environment

$54.6

23%

$12.7

$6.4

$6.4

$960.7

$480.3

$480.3

Site preparation-Construction

Total Costs

$1,264.5

SOURCE: ENBRIDGE, IMPLAN

The total budget for the Minnesota portion of the Sandpiper project is expected to total nearly $1.3
billion over the two-year period2. Table 1 shows Sandpiper Line expenditures for the two-year period by
major purchase, as well as the percentage of each budget item that is expected to be sourced within the
study area. IMPLAN requires that, for construction modeling, the full value of the structure be included
in the study area and that non-local purchases be accounted for by the Regional Purchasing Coefficients
in the Industry Spending Pattern3. The logic behind this reasoning is that while these inputs may come
2

Includes all construction expenses with the exception of land acquisition costs, which are not used in economic
impact modeling.
3
IMPLAN Support Forum
https://implan.com/index.php?option=com_kunena&view=category&Itemid=1841&layout=list
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
5

 from outside the study area, they now make up part of the value of the structure. For that reason, 100%
of site preparation costs were considered to be spent within the study area4. The percentage spent
within the study area on the other budget items (procurement, engineering, and environment) were
modified based on the estimates provided by Enbridge or by using IMPLAN’s average local purchase
percentages5. As this project has not yet begun, Enbridge representatives used information from
previous projects to estimate expenditures and purchases within the study area.
More than half of the costs for the project are in Site Preparation – Construction. Procurement costs
(equipment, purchases) represent about one quarter (23%) of the total project budget. Site Preparation
– Project Management (19%), Environmental Consulting (4%), and Engineering (3%) costs make up the
remainder of the expenditures (see Figure 4).
Figure 4. Sandpiper - Construction Spending by Major Expenditure

Engineering
3%

Environment
4%

Procurement
23%

Site Preparation Construction
51%

Site Preparation Project Management
19%
SOURCE: ENBRIDGE

Enbridge estimates that the construction of the Minnesota portion of the Sandpiper line will require
2,820 workers, with approximately half of those coming from within the study area (1,410), and the
other half from outside that region. To account for this, employee compensation for the construction
project was reduced by approximately 50%6 to represent the leakage from non-local workers’ spending
outside of the study area. The economic activity generated as a result of per diem spending by non-local
workers is analyzed separately.
4

The estimate of 100% only affects the first round of direct spending. Indirect and induced spending estimates
were based on IMPLAN spending patterns.
5
The share of environmental costs sourced locally was not provided by the company, therefore, the IMPLAN
average for the study area (23%) was used instead.
6
Local employee compensation was calculated using the following equation: Local Employee Compensation = Total
Employee Compensation * [(1- expected commuting rate)/(1- typical commuting rate)]
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
6

 Effects of Construction – Line 3
The budget for the Minnesota portion of the Line 3 replacement is expected to total $1.9 billion over the
two-year period7. Table 2 shows expenditures for the Line 3 replacement project by major purchase
over the two-year period, as well as the percentage of each budget item that is expected to be sourced
within the study area.
Table 2. Line 3 Expenditures (in Millions of Dollars)
Budget item

Total
Spending
$998.7

% Spent in
Study Area
100%

Direct Spending
in Study Area
$998.7

Year 1
(2017)
$499.4

Year 2
(2018)
$499.4

Site preparation-Project management

$376.8

100%

$376.8

$188.4

$188.4

Procurement

$445.4

10%

$44.5

$22.3

$22.3

Engineering

$34.7

90%

$31.3

$15.6

$15.6

Environment

$47.1

23%

$11.0

$5.5

$5.5

$1,462.3

$731.2

$731.2

Site preparation-Construction

Total Costs

$1,902.9

SOURCE: ENBRIDGE, IMPLAN

The budget for the Line 3 replacement project looks very similar to the Sandpiper project, but with a
larger share spent on site preparation and a smaller share spent on engineering and environmental costs
(see Figure 5).
Figure 5. Line 3 Replacement - Construction Spending by Major Expenditure
Engineering
2%

Environment
2%

Procurement
23%

Site Preparation Construction
53%

Site Preparation Project Management
20%
SOURCE: ENBRIDGE

7

Includes all construction expenses with the exception of land acquisition costs
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
7

 Like the Sandpiper Line, Enbridge estimates that the replacement of the Minnesota portion of Line 3 will
require 4,681 workers, with approximately half of those coming from within the study area (2,341), and
the other half from outside the region. Again, employee compensation for the construction project was
adjusted to represent the leakage from non-local workers’ spending outside of the study area.
Table 3 shows the IMPLAN sectors used in modeling the construction impacts for the Sandpiper and Line
3 projects. For both projects, the site preparation costs (including construction and project
management) were modeled in sector 58 using a method called Analysis by Parts. Analysis by Parts is
the process of splitting or parsing an impact analysis issue into smaller and more specific parts. This
technique allows the user to specify the amount of commodity inputs, the proportion of local labor
income, and the proportion of local purchases. The remaining budget items (Procurement, Engineering,
and Environment) were modeled in sectors 395 (Wholesale Trade), 449 (Architectural, Engineering, and
Related Services), and 455 (Environmental and Other Technical Consulting Services), respectively.
Table 3. IMPLAN Sectors Used in Modeling
Sector
58

Description
Construction of other new nonresidential structures

395

Wholesale trade

449

Architectural, engineering, and related services

455

Environmental and other technical consulting services

SOURCE: IMPLAN, 2015

Non-Local Worker Spending
Approximately half of the workers employed during the construction of the Sandpiper and Line 3
pipelines are expected to come from outside the study area. During the project, these workers will
spend a per diem on expenses, such as lodging, meals, gasoline, and retail. To determine the economic
impacts of this spending, the research team first estimated the total amount spent by non-local workers,
using the numbers of workers, their average length of stay for each project, and their per diem spending
allowance.
Enbridge did not provide the research team with per diem totals, therefore, estimates were calculated
using FY2016 Per Diem Standard Rates for Minnesota, provided by the General Service Administration
(GSA)8. The rates are $89 for lodging expenses and $51 for meals and incidentals. In total, the amount
spent per non-local worker on these expenses was estimated to be $586 each week. Assuming an
average length of employment for each non-local worker of 1.3 years9, or 68 weeks, the total per diem
spent in the study area for each non-local worker was estimated to equal nearly $40,000 over the twoyear period. This equates to $55.8 million in direct retail and hospitality spending on the part of nonlocal Sandpiper construction workers and $92.6 million in direct spending by non-local Line 3
construction workers.
8
9

http://www.gsa.gov/portal/category/100120
Source: Enbridge representatives
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
8

 A non-local construction worker spending pattern was then developed using the GSA guidelines along
with information from regional tourism studies. Figure 6 shows that spending pattern. Based on GSA
guidelines, workers receive $356 per week for lodging expenses and $230 per week on meals and
incidentals. This means that 61% of the per diem spending would go to lodging, and the remainder
would be for meals and other expenses, including gasoline, laundry, and miscellaneous retail
expenditures.
Figure 6. Non-Local Worker Per Diem Spending
Other/Retail
Grocery or
3%
convenience
6%
Gasoline/Fuel
13%

Restaurants
17%

Lodging
61%

SOURCE: GSA, IMPLAN, RELEVANT LITERATURE
Table 4. Sectors and Direct Effects Used in Modeling Non-Local Worker Spending
Sector
400
402
405
475
481
482
499
500
501
502
503
511
Total
SOURCE: GSA, IMPLAN

Description
Retail - Food and beverage stores
Retail - Gasoline stores
Retail - General merchandise stores
Offices of physicians
Other ambulatory health care services
Hospitals
Hotels and motels, including casino hotels
Other accommodations
Full-service restaurants
Limited-service restaurants
All other food and drinking places
Dry-cleaning and laundry services

Direct Effects
Sandpiper
$896,816
$783,826
$190,994
$1,938,508
$129,122
$4,706,754
$16,526,686
$16,526,686
$3,046,238
$3,046,238
$3,046,238
$1,115,258
$51,953,366

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
9

Direct Effects
Line 3
$1,488,650
$1,301,094
$317,038
$3,217,786
$214,334
$7,812,878
$27,433,124
$27,433,124
$5,056,540
$5,056,540
$5,056,540
$1,851,250
$86,238,898

 This spending pattern was then supplemented with additional medical expenditures that are not typical
among tourists but might be necessary for workers, especially those on extended employment. The
estimates for the medical expenditures (the Offices of Physicians, Other Ambulatory Health Care
Services, and Hospitals sectors) were based on typical household spending patterns, using IMPLAN
ratios, and were not based on estimates from Enbridge. Table 4 contains a complete list of the sectors
used for modeling the impacts of non-local worker spending and the direct effects modeled in each
sector as a result of non-local construction worker spending.
It should be noted that the total Direct Effects for the two projects ($51.9 million for Sandpiper and
$86.2 million for Line 3) are less than the estimated total direct spending mentioned earlier ($55.8
million and $92.6 million, respectively). This is due to margining. Margins are applied when money is
spent in a retail or wholesale sector, as only a small portion of that goes to the local retailer or
wholesaler. The price of the goods sold is passed on to producers. All of the retail spending done by nonlocal construction workers is subject to margining, and therefore, the Direct Effects shown in Table 4 are
slightly smaller than what was originally calculated.

III. Findings
This section provides the direct, indirect, and induced economic impacts of construction activities for
the Sandpiper and Line 3 projects, measured in employment, output, and value added.
A special sub-section of the findings covers the results from modeling non-local construction worker
spending on local retail and hospitality industries. All results are shown in 2015 dollars.

Sandpiper Line
Table 5 summarizes the total economic effects from Sandpiper construction on the 15-county study
area. These results use the direct expenditures provided by Enbridge as well as per diem spending by
non-local construction workers as the original input for the model. The construction of the pipeline will
generate a temporary increase in economic activity during the course of the construction project.
Throughout the project, increased demand for equipment, labor, and transportation will lead to
increased economic activity in the affected counties. After the completion of the project, this additional
activity will cease, and the economic impacts will no longer be felt in that region.
Table 5. Total Sandpiper Line Impact Summary, by Year (in Millions of Dollars)
Total Effects

Employment

Labor Income

Value Added

Output

Year 1 (2017)

4,818

$163.8

$222.2

$666.4

Year 2 (2018)

4,792

$160.5

$218.0

$652.7

Project Total

4,805

$324.3

$440.2

$1,319.1

SOURCE: IMPLAN, 2015

Table 5 shows the total economic impacts of the two-year Sandpiper Line construction project by year.
While direct spending was distributed equally between the two years as shown in Table 1, there are

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 some slight differences between the two years’ results due to inflation adjustments made by IMPLAN10.
The left-most column of Table 5, labeled Employment, indicates the number of jobs that the Sandpiper
construction project is estimated to support directly and indirectly. Employment estimates are in terms
of jobs, not in terms of full-time equivalent employees. For construction projects, these jobs are typically
short-term and temporary, meaning the effects will be felt during the project and will cease upon its
completion. According to the results of this analysis, it is estimated that construction of the Sandpiper
line will support approximately 4,800 jobs in the region during the two-year period, 1,410 of which are
expected to be filled by construction workers from outside the study area11. It should be noted that
employment for the project represents the average of the two years, not the sum. Employment
numbers cannot be summed because it is assumed that most of the jobs carry over from one year to the
next and will be filled by the same individuals.
The second column, Labor Income, is an estimate of all employee compensation, including wages,
benefits, and proprietor income. It is estimated that the Sandpiper line will contribute to over $324
million in employee wages and benefits in the study area over the life of the project. Column three,
labeled Value Added, shows the economic impacts of the expenditures that the Sandpiper line will put
specifically towards wages, rents, interest, and profits related to its construction. Value Added
represents the contribution to GDP made by an individual producer, industry, or sector. The Sandpiper
line is estimated to have a total Value Added impact of more than $440 million in the study area during
the two-year period (2017-18). The last column, Output, is the value of all local production required to
sustain activities. Enbridge expects to spend more than $934 million within the study area over the
course of the Sandpiper construction project (see Direct Effect Table 6), leading to a total output impact
of $1.3 billion regionally, in combined direct, indirect, and induced spending effects.
Table 6. Total Sandpiper Line Impact Detail (in Millions of Dollars)
Impact Type
Direct Effect
Indirect Effect
Induced Effect
Total Effect

Employment

Labor Income

Value Added

Output

3,179
957
669
4,805

$215.2
$62.3
$46.8
$324.3

$241.7
$110.3
$88.2
$440.2

$934.5
$225.6
$159.0
$1,319.1

SOURCE: IMPLAN, 2015

Further details for the total economic impacts of the two-year Sandpiper Line construction project are
shown in Table 6. In this table, the Total Effects for the two-year project are broken out by impact type:
Direct, Indirect, and Induced Effect. Direct employment and expenditures provided by Enbridge were
combined with the direct effects of non-local construction workers’ spending for a total direct effect in
the study area of $934.5 million in spending and 3,179 supported jobs. The Indirect Effect shows the
measurement of increased spending between commercial, government, and service industries as a
result of the direct effects ($225.6 million in industry spending and 957 supported jobs). Induced Effect
10

For more detail, see the Deflators definition in Appendix B
In IMPLAN modeling, employment is defined “at the site” so all employees hired for the project are considered
part of direct employment, even though we know that some will be hired from outside the study area.
11

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11

 measures the amount of increased spending by residential households as a result of the direct effects
($159.0 million in household spending and 669 supported jobs). Total Effect is the sum of Direct,
Indirect, and Induced Effects.
Tables 7 and 8 show how construction and non-local worker spending contribute to the total impacts for
the Sandpiper project. Table 7 includes detailed impacts for the Sandpiper construction spending, and
Table 8 highlights the impacts of non-local worker spending. The majority of the impacts of the project
will come from the company’s construction expenditures (Table 7), totaling $882.5 million12 in direct
spending on site preparation, procurement, engineering, and environmental costs. To complete the
project, Enbridge expects to directly employ 2,820 workers, half of whom are expected to be from
within the study area. The construction will result in an estimated total payroll of $332 million, of which
$196.6 million will go to local workers. As a result of local input purchases and the spending of labor
income, the two-year construction project is expected to support more than 4,300 jobs in the study
region and will lead to more than $1.2 billion in new spending during the two-year period.
Table 7. Sandpiper Construction Impact Detail (in Millions of Dollars)
Impact Type
Direct Effect

Employment

Labor Income

Value Added

Output

2,820

$196.6

$212.9

$882.5

Indirect Effect

904

$58.4

$103.2

$211.2

Induced Effect

606

$42.4

$79.9

$144.1

4,330

$297.4

$396.0

$1,237.8

Total Effect
SOURCE: IMPLAN, 2015

Table 8. Sandpiper Non-Local Worker Spending Impact Detail (in Millions of Dollars)
Impact Type

Employment

Labor Income

Value Added

359

$18.6

$28.8

$52.0

Indirect Effect

53

$3.9

$7.2

$14.4

Induced Effect

63

$4.4

$8.3

$14.9

474

$26.9

$44.2

$81.3

Direct Effect

Total Effect

Output

SOURCE: IMPLAN, 2015

Spending by non-local workers will provide a smaller, but substantial, portion of the economic impacts
from the Sandpiper project, as shown in Table 8. Using the per diem estimates provided by the GSA, the
BBER research team estimated that non-local workers would spend approximately $52 million over the
course of the construction project. This new spending is expected to support nearly 500 jobs throughout
the region and lead to more than $80 million in combined direct, indirect, and induced spending.

12

Enbridge’s procurement spending is subject to margining and is the reason that the total direct spending shown
in Table 7 is slightly smaller than what was originally seen in Table 1. For more information on margins, see the
explanation on page 10 and the “Margins” definition in Appendix B.
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 Table 9. Top Retail and Hospitality Sectors Impacted by Sandpiper Line Project, 2017-18
Description
Retail - Nonstore retailers
Other accommodations
Hotels and motels, including casino hotels
Full-service restaurants
Retail - Miscellaneious store retailers
Retail - Clothing and clothing accessories stores
Limited-service restaurants
Retail - General merchandise stores
Retail - Gasoline stores
Retail - Health and personal care stores
All other food and drinking places
Retail - Food and beverage stores
Retail - Building material and garden equipment and supplies stores
Retail - Sporting goods, hobby, musical instrument and book stores
Retail - Motor vehicle and parts dealers
Other amusement and recreation industries
Retail - Electronics and appliance stores
Promoters of performing arts and sports and agents for public figures
Performing arts companies
Retail - Furniture and home furnishings stores
Gambling industries (except casino hotels)
Fitness and recreational sports centers
Independent artists, writers, and performers
Commercial Sports Except Racing
Museums, historical sites, zoos, and parks
Bowling centers
Racing and Track Operation
Amusement parks and arcades
Total
SOURCE: IMPLAN, 2015

Direct
0
129
93
33
0
0
28
1
6
0
20
8
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
318

Indirect
125
0
11
17
72
73
6
38
38
39
7
8
22
19
13
2
2
2
1
3
0
1
1
1
0
0
0
0
497

Induced
10
1
10
39
10
5
33
22
7
7
17
22
10
5
9
5
4
4
4
3
3
1
1
1
1
1
1
1
240

Total
134
130
113
89
82
78
66
61
52
46
44
37
32
24
22
7
6
6
6
6
3
2
2
2
1
1
1
1
1054

Throughout the life of the project, it is expected that the Retail and Hospitality sectors in the region will
experience an increase in economic activity, as a result of direct spending on the part of non-local
workers as well as indirect and induced spending from the construction project itself. Table 9 shows all
of the Retail and Hospitality sectors impacted by the project and the number of jobs supported in each
as a result of the Sandpiper project. In total, it is expected that the project will support more than 1,000
jobs in Retail and Hospitality sectors during the two-year period. The Non-store Retailers sector is
expected to see the largest employment gains as a result of the project, followed by the sectors of Other
Accommodations (e.g. resorts, campgrounds, RV parks), Hotels and Motels, and Full-Service
Restaurants.

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13

 Line 3 Replacement
These findings summarize the effects of the Line 3 replacement project on the Northern Minnesota
study area. Like any construction project, the replacement of Line 3 will generate a temporary increase
in economic activity during the course of the construction project. Throughout the project, increased
demand for equipment, labor, and transportation will lead to increased economic activity in the affected
counties. After the completion of the project, this additional activity will cease, and the economic
impacts will no longer be felt in the region.
Table 10. Total Line 3 Replacement Impact Summary, by Year (in Millions of Dollars)
Total Effects

Employment

Labor Income

Value Added

Output

Year 1 (2017)

7,727

$243.1

$334.7

$1,013.2

Year 2 (2018)

7,689

$238.3

$328.4

$992.4

Project Total

7,708

$481.3

$663.1

$2,005.6

SOURCE: IMPLAN, 2015

Table 10 shows the total economic impacts of the two-year Line 3 replacement project by year. While
direct spending was distributed equally between the two years as shown in Table 2, there are some
slight differences in results due to inflation adjustments made by IMPLAN13. The Line 3 replacement
project is estimated to support, directly and indirectly, approximately 7,700 jobs over the two-year
period, 2,340 of which are expected to be filled by construction workers from outside the study area14. It
should be noted that employment for the project represents the average of the two years, not the sum.
Employment numbers cannot be summed because it is assumed that most of the jobs carry over from
one year to the next and will be filled by the same individuals.
In addition, the project is expected to contribute to over $480 million in employee wages and benefits
(Labor Income) and more than $660 million in combined wages, rents, interest, and profits (Value
Added). In total, Enbridge expects to spend more than $1.4 billion within the study area during the Line
3 replacement project (see Direct Effect Table 11), leading to a total output impact of $2.0 billion
regionally in combined direct, indirect, and induced spending effects.
Table 11. Total Line 3 Replacement Impact Detail (in Millions of Dollars)
Impact Type

Employment

Labor Income

Value Added

Output

Direct Effect

5,277

$318.5

$365.9

$1,428.8

Indirect Effect

1,444

$93.8

$167.1

$342.3

987

$69.0

$130.0

$234.5

7,708

$481.3

$663.1

$2,005.6

Induced Effect
Total Effect
SOURCE: IMPLAN, 2015
13

For more detail, see the Deflators definition in Appendix B
In IMPLAN modeling, employment is defined “at the site” so all employees hired for the project are considered
part of direct employment, even though we know that some will be hired from outside the study area.
14

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University of Minnesota Duluth
14

 Further details of the Line 3 replacement impacts are shown in Table 11. In this table, the Total Effects
for the two-year project are broken out by impact type: Direct, Indirect, and Induced Effect. Direct
employment and expenditures provided by Enbridge were combined with the Direct Effects of non-local
construction workers’ spending for a Total Direct Effect in the study area of $1.4 billion in spending and
5,277 supported jobs. The Indirect Effect shows the measurement of increased spending between
commercial, government, and service industries as a result of the direct effects ($342.3 million in
industry spending and 1,444 supported jobs). Induced Effect measures the amount of increased
spending by residential households as a result of the direct effects ($234.5 million in household
spending and 987 supported jobs). Total Effect is the sum of Direct, Indirect, and Induced Effects.
Tables 12 and 13 show how construction and non-local worker spending contribute to the total impacts
for the Line 3 replacement project. Table 12 includes detailed impacts for the Line 3 construction
spending, and Table 13 highlights the impacts of non-local worker spending. It is estimated that
construction spending (including site preparation, procurement, engineering, and environmental costs)
will directly employ 4,681 workers, half of which are expected to be from within the study area. The
construction will result in an estimated total payroll of $492 million, of which $287.6 million will go to
local workers. As a result of local input purchases and the spending of labor income, the two-year
construction project is expected to support more than 6,900 jobs in the region and will lead to more
than $1.8 billion in new spending during the two-year period (see Table 12).
Table 12. Line 3 Construction Impact Detail (in Millions of Dollars)
Impact Type

Employment

Labor Income

Value Added

Direct Effect

4,681

$287.6

$318.1

$1,342.5

Indirect Effect

1,357

$87.4

$155.2

$318.3

Induced Effect

883

$61.7

$116.3

$209.7

6,921

$436.7

$589.7

$1,870.6

Total Effect

Output

SOURCE: IMPLAN, 2015
Table 13. Line 3 Non-Local Worker Spending Impact Detail (in Millions of Dollars)
Impact Type

Employment

Labor Income

Value Added

Output

596

$30.9

$47.8

$86.2

Indirect Effect

87

$6.4

$11.9

$23.9

Induced Effect

104

$7.3

$13.8

$24.8

Total Effect

787

$44.6

$73.4

$135.0

Direct Effect

SOURCE: IMPLAN, 2015

Spending by non-local workers will also provide an injection of new spending to the region, as shown in
Table 13. Using the per diem estimates provided by the GSA, the BBER research team estimated that
non-local workers would spend upwards of $86 million over the course of the construction project. This
new spending is expected to support nearly 800 jobs throughout the region and lead to about $135
million in combined direct, indirect, and induced spending.
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 Throughout the life of the project, it is expected that the Retail and Hospitality sectors in the region will
experience an increase in economic activity as a result of direct spending on the part of non-local
workers as well as indirect and induced spending from the construction project itself. Table 14 shows all
of the Retail and Hospitality sectors impacted by the project and the number of jobs supported in each
as a result of the Line 3 project. In total, it is expected that the project will support more than 1,600 jobs
in Retail and Hospitality sectors during the two-year period. Other Accommodations (e.g. resorts,
campgrounds, RV parks) are expected to see the largest employment gains as a result of the project,
followed by Non-store Retailers, Hotels and Motels, and Full-service Restaurants.
Table 14. Top Retail and Hospitality Sectors Impacted by Line 3 Replacement, 2017-18
Description
Other accommodations
Retail – Non-store retailers
Hotels and motels, including casino hotels
Full-service restaurants
Retail - Miscellaneous store retailers
Retail - Clothing and clothing accessories stores
Limited-service restaurants
Retail - General merchandise stores
Retail - Gasoline stores
Retail - Health and personal care stores
All other food and drinking places
Retail - Food and beverage stores
Retail - Building material and garden equipment and supplies stores
Retail - Sporting goods, hobby, musical instrument and book stores
Retail - Motor vehicle and parts dealers
Other amusement and recreation industries
Retail - Electronics and appliance stores
Retail - Furniture and home furnishings stores
Promoters of performing arts and sports and agents for public figures
Performing arts companies
Gambling industries (except casino hotels)
Fitness and recreational sports centers
Independent artists, writers, and performers
Commercial Sports Except Racing
Museums, historical sites, zoos, and parks
Bowling centers
Amusement parks and arcades
Racing and Track Operation
Total
SOURCE: IMPLAN, 2015

Direct
214
0
154
54
0
0
46
2
11
0
34
12
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
527

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16

Indirect
0
194
16
22
112
113
8
59
60
60
10
12
33
29
20
3
3
4
3
2
0
1
2
1
0
0
0
0
765

Induced
1
15
14
58
15
8
49
32
11
11
25
33
15
8
13
8
7
5
6
7
5
2
1
1
2
2
1
1
353

Total
215
208
184
134
127
121
102
93
81
71
69
57
49
37
33
10
9
9
9
9
5
3
2
2
2
2
1
1
1645

 IV. Conclusions
The proposed Sandpiper and Line 3 construction projects represent a potentially large, and temporary,
increase in economic activity in the 15-county study area of northern Minnesota. Both proposed
projects would support thousands of jobs, many of which would be felt as direct employment in the
construction, engineering, and wholesale trade industries. In addition, Retail and Hospitality sectors
would see a sizable increase in economic activity as a result of the proposed construction projects. This
study estimates that, for both projects, more than 1,000 jobs would be supported in the Retail and
Hospitality sectors were the construction to occur.

Sandpiper Line
According to the results of this analysis, it is estimated that construction of the Sandpiper line will
support approximately 4,800 jobs in the region during the two-year period, 1,410 of which are expected
to be filled by construction workers from outside the study area15. Enbridge expects to spend more than
$934 million within the study area over the course of the Sandpiper construction project – leading to a
total output impact of $1.3 billion regionally in combined direct, indirect, and induced spending effects.
The majority of the impacts of the project will come from the company’s construction expenditures,
including site preparation, procurement, engineering, and environmental costs. Enbridge expects to
directly employ 2,820 workers as part of the two-year project, half of which are expected to be from
within the study area. The construction project will result in an estimated total payroll of $332 million,
of which approximately $196 million will go to local workers. As a result of local input purchases and the
spending of local labor income, the two-year construction project is expected to support more than
4,300 jobs in the region and will lead to more than $1.2 billion in new spending during the two-year
period.
A smaller, but still significant, impact of the project will come from spending on the part of the non-local
workforce that will be brought in for the project. According to Enbridge representatives, approximately
half of the 2,820 workers required for the construction of the pipeline will be sourced from outside of
the study area. These workers will spend some portion of their income on lodging, restaurants, and
other incidental expenses. The BBER research team estimated that non-local workers would spend
approximately $52 million over the course of the construction project. This new spending is expected to
support nearly 500 jobs throughout the region and lead to more than $80 million in combined direct,
indirect, and induced spending.
Of special interest for this analysis was the impact of the Sandpiper Line construction on Retail and
Hospitality sectors in the study area. In total, it is expected that the project will support more than 1,000
jobs in Retail and Hospitality during the two-year period. The sector of Non-store Retailers is expected to
see the largest employment gains as a result of the project, followed by Other Accommodations (e.g.
resorts, campgrounds, RV parks), Hotels and Motels, and Full-Service Restaurants.

15

In IMPLAN modeling, employment is defined “at the site” so all employees hired for the project are considered
part of direct employment, even though we know that some will be hired from outside the study area.
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University of Minnesota Duluth
17

 Line 3 Replacement
The Line 3 replacement project is estimated to support, directly and indirectly, approximately 7,700 jobs
over the two-year period, 2,340 of which are expected to be filled by construction workers from outside
the study area16. In total, Enbridge is expected to spend more than $1.4 billion within the study area
during the Line 3 replacement project, leading to a total output impact of $2.0 billion regionally, in
combined direct, indirect and induced spending effects.
Like the Sandpiper Line, the bulk of the economic impacts from the project will come from the
company’s construction expenditures, including site preparation, procurement, engineering, and
environmental costs. It is estimated that project will directly employ 4,681 workers, half of which are
expected to be from within the study area. The construction will result in an estimated total payroll of
$492 million, of which $287.6 million will go to local workers. As a result of local input purchases and the
spending of labor income, the two-year construction project is expected to support more than 6,900
jobs in the region and will lead to more than $1.8 billion in new spending during the two-year period.
Spending by non-local workers will also provide an injection of new spending to the region. The BBER
research team estimated that non-local workers would spend upwards of $86 million over the course of
the construction project. This new spending is expected to support nearly 800 jobs throughout the
region and lead to about $135 million in combined direct, indirect, and induced spending.
It is expected that the Retail and Hospitality sectors in the region will experience an increase in
economic activity as a result of direct spending on the part of non-local workers as well as indirect and
induced spending from the construction project itself. In total, it is expected that the project will support
more than 1,600 jobs in Retail and Hospitality sectors during the two-year period. Other
Accommodations (e.g. resorts, campgrounds, RV parks) are expected to see the largest employment
gains as a result of the project, followed by Non-store Retailers, Hotels and Motels, and Full-service
Restaurants.

NOTE - Readers are encouraged to remember the UMD Labovitz School’s BBER was asked to supply an
economic impact analysis only. This analysis does not consider the social or environmental impacts of
the project and should not be viewed as a cost benefit analysis or environmental impact assessment.
Any subsequent policy recommendations should be based on the “big picture” of total impact.

16

In IMPLAN modeling, employment is defined “at the site” so all employees hired for the project are considered
part of direct employment, even though we know that some will be hired from outside the study area.
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18

 Appendix A: Model Assumptions
Construction Activity
1. The IMPLAN industries selected for sectoring these impact activities are:
Sector
58
395
449
455
SOURCE: IMPLAN, 2015

Description
Construction of other new nonresidential structures
Wholesale trade
Architectural, engineering, and related services
Environmental and other technical consulting services

2. Land acquisition costs, or easements, were not included in the analysis.
3. Construction years are assumed to be 2017 and 2018 for both projects (Sandpiper and Line 3).
4. It is assumed that half of the required workforce for both projects (Sandpiper and Line 3) will
live within the study area. This equates to 1,410 local workers for the Sandpiper project and
2,341 local workers for the Line 3 replacement project. Therefore, labor income was reduced by
approximately half to reflect the local employee compensation, using the following equation:
Local Employee Compensation = Total Employee Compensation * [(1- expected commuting
rate)/(1- typical commuting rate)]
5. Sandpiper construction costs are estimated to be $1.3 billion in total, distributed as follows.
Budget item
Site preparation-Construction
Site preparation – Project management
Procurement
Engineering
Environment
Total Costs
SOURCE: ENBRIDGE, IMPLAN, 2015

Total
Spending
$640.9
$242.8
$286.6
$39.6
$54.6
$1,264.5

% Spent in
Study Area
100%
100%
10%
90%
23%

Direct Spending
in Study Area
$640.9
$242.8
$28.7
$35.6
$12.7
$960.7

Year 1
(2017)
$320.5
$121.4
$14.3
$17.8
$6.4
$480.3

Year 2
(2018)
$320.5
$121.4
$14.3
$17.8
$6.4
$480.3

6. Line 3 construction costs are estimated to be $1.9 billion in total, distributed as follows:
Budget item
Site preparation-Construction
Site preparation – Project management
Procurement
Engineering
Environment
Total Costs
SOURCE: ENBRIDGE, IMPLAN, 2015

Total
Spending
$998.7
$376.8
$445.4
$34.7
$47.1
$1,902.9

% Spent in
Study Area
100%
100%
10%
90%
23%

Direct Spending
in Study Area
$998.7
$376.8
$44.5
$31.3
$11.0
$1,462.3

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19

Year 1
(2017)
$499.4
$188.4
$22.3
$15.6
$5.5
$731.2

Year 2
(2018)
$499.4
$188.4
$22.3
$15.6
$5.5
$731.2

 7. For purposes of modeling, it was assumed that the construction budgets for both projects would
be mutually exclusive and that there would be no overlap in spending between the two projects,
should they both occur.

Non-Local Worker Spending
1. Non-local construction worker spending estimates were calculated using FY2016 Per Diem
Standard Rates for Minnesota, provided by the General Service Administration (GSA)17. The
rates are $89 for lodging expenses and $51 for meals and incidentals, with 75% meals and
incidentals on the first and last travel days (e.g. Monday and Friday).
2. For each worker, we assume a 1.3 year length of employment and a five-day work week.
Therefore, per-diem spending per non-local worker is estimated to be $585.50 per worker per
week, or $39,580 per worker for the life of each project.
3. It is assumed that half of the required workforce for both projects (Sandpiper and Line 3) will
come from outside the study area. This equates to 1,410 non-local workers for the Sandpiper
project and 2,340 non-local workers for the Line 3 replacement project.
4. Non-local construction worker spending includes lodging, meals, and "incidentals" (gas, laundry,
some retail). In addition, it is assumed that some personal expenses will go to medical costs. All
other worker income will leave the region. The IMPLAN industries used for modeling these
impacts and the direct effects for both projects are shown below.
Sector

Description

400 Retail - Food and beverage stores
402 Retail - Gasoline stores
405 Retail - General merchandise stores
475 Offices of physicians
481 Other ambulatory health care services
482 Hospitals
499 Hotels and motels, including casino hotels
500 Other accommodations
501 Full-service restaurants
502 Limited-service restaurants
503 All other food and drinking places
511 Dry-cleaning and laundry services
Total
SOURCE: GSA, ENBRIDGE, IMPLAN, 2015

17

Direct Effects
Line 3
$1,488,650
$1,301,094
$317,038
$3,217,786
$214,334
$7,812,878
$27,433,124
$27,433,124
$5,056,540
$5,056,540
$5,056,540
$1,851,250
$86,238,898

http://www.gsa.gov/portal/category/100120
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University of Minnesota Duluth
20

Direct Effects
Sandpiper
$896,816
$783,826
$190,994
$1,938,508
$129,122
$4,706,754
$16,526,686
$16,526,686
$3,046,238
$3,046,238
$3,046,238
$1,115,258
$51,953,366

 Appendix B. Economic Impact Procedures and Data Sources
Input/Output Analysis
Input/Output analysis is a type of applied economic analysis that tracks the interdependence among
various producing and consuming sectors of an economy18. Specifically, it depicts inter-industry relations
and shows how each industry is dependent on all the others in the economy, both as a consumer of
outputs and as a supplier of inputs. Input/Output analysis has been used to study regional economies
within a nation and as a tool for national and regional economic planning. It predicts the effect of
changes in one industry on the others and on consumers, government, and suppliers. In addition, a
common use of input/output analysis is to estimate the economic impacts of an organization or event. It
is this technique that is implemented in this study.
This study uses the IMPLAN Group’s input/output modeling data and software (IMPLAN version 3.1).
The IMPLAN database contains county, state, zip code, and federal economic statistics, which are
specialized by region, not estimated from national averages. Using classic input/output analysis in
combination with regional-specific Social Accounting Matrices and Multiplier Models, IMPLAN provides
a highly accurate and adaptable model for its users.

IMPLAN Data and Assumptions
IMPLAN data files use the following federal government data sources.
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US Bureau of Economic Analysis Benchmark Input/Output Accounts of the US
US Bureau of Economic Analysis Output Estimates
US Bureau of Economic Analysis Regional Economic Information Systems (REIS) Program
US Bureau of Labor Statistics Covered Employment and Wages (CEW) Program
US Bureau of Labor Statistics Consumer Expenditure Survey
US Census Bureau County Business Patterns
US Census Bureau Decennial Census and Population Surveys
US Census Bureau Economic Censuses and Surveys
US Department of Agriculture Census

IMPLAN data files consist of the following components: employment, industry output, value added,
institutional demands, national structural matrices, and inter-institutional transfers.
The data used was the most recent IMPLAN data available, which is for the year 2013. All data are
reported in 2015 dollars.
Economic impacts are made up of direct, indirect, and induced impacts. The following are suggested
assumptions for accepting the impact model: IMPLAN input/output is a production-based model, and
employment numbers (from U.S. Department of Commerce secondary data) treat both full- and parttime individuals as being employed.

18

Bureau of Economic Analysis (www.bea.gov/glossary/glossary)
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
21

 Regional data for the impact models for Value Added, Employment, and Output are supplied by IMPLAN
for this impact. Employment assumptions were provided to the model to enable construction of the
impact model. From these data, Social Accounts, Production, Absorption, and Byproducts information
were generated from the national level data and was incorporated into the model. All region study
definitions and impact model assumptions were agreed on before work with the models began.

Modeling Issues
There are some IMPLAN modeling issues that should be considered when interpreting the results of this
study.
A study area that is actually part of a larger functional economic region will likely miss some important
backward linkages. For example, linkages with the labor force may be missing. Workers who live and
spend outside the study area may actually hold local jobs.
Regional indirect and induced effects are driven by assumptions in the model. With some models, one
problem is that the assumptions can mask the true multiplier. This is especially true of the assumption
of constant returns to scale. This assumption most affects induced effects and says that, for example, if I
drink coffee, and my income increases, I will drink proportionally more coffee than before. The amount
of weight placed on the induced effects (the percentage of the total induced effect you would want to
use) can be further analyzed with an in-depth impact study, involving much more specific data collection
and more detailed analysis, but that is beyond the scope of this analysis.
Finally, and most importantly, the relationship of Output to Employment has been set for the model by
data provided by Enbridge to the BBER based on the best estimates of engineers and managers involved
in each project. It can be noted that, for purposes of research and with more resources, the modeling
methodology can be driven by data collected from surveys and post-construction values. This survey
data can provide greater accuracy in regional impact assessments for the linkage between core and
peripheral labor market areas and deliver better estimates of local vs. regional purchases.

Definitions used in this report
Backward Linkages: The interconnection of an industry to other industries from which it purchases its
inputs in order to produce its output. It is measured as the proportion of intermediate consumption to
the total output of the sector (direct backward linkage) or to the total output multiplier (total backward
linkage). An industry has significant backward linkages when its production of output requires
substantial intermediate inputs from many other industries19.
Deflators: The Output Deflator converts the industry Sales value to the year of the dataset, Output
Deflators are specific to each industry, You can see the deflator values in the Setup Activities screen
when the Event Year field is displayed (Event Options> Show> Event Year). These are just inflationary
costs. The source for the Output Deflators comes from the BLS Employment projections.
Direct Effect: Initial new spending in the study area resulting from the project.

19

IMPLAN, 2015
Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
22

 Employment: Estimates (from U.S. Department of Commerce secondary data) are in terms of jobs, not
in terms of full-time equivalent employees. Therefore, these jobs may be temporary, part-time, or shortterm jobs.
Gross Output: The value of local production required to sustain activities.
Indirect Effect: The additional inter-industry spending from the direct impact.
Induced Effect: The impact of additional household expenditures resulting from the direct and indirect
impact.
Labor Income: All forms of employment income, including employee compensation (wages and
benefits) and proprietor income.
Leakages: Any payments made to imports or value added sectors that do not in turn re-spend the
dollars within the region.
Margins: The value of the wholesale and retail trade services provided in delivering commodities from
producers' establishments to purchasers. Margin is calculated as sales receipts less the cost of the goods
sold. It consists of the trade margin plus sales taxes and excise taxes that are collected by the trade
establishment. (BEA)
Multipliers: Total production requirements within the Study Area for every unit of production sold to
Final Demand. Total production will vary depending on whether Induced Effects are included and the
method of inclusion. Multipliers may be constructed for output, employment, and every component of
Value Added.
Value Added: A measure of the impacting industry’s contribution to the local community; it includes
wages, rents, interest, and profits.

Bureau of Business and Economic Research
Labovitz School of Business and Economics
University of Minnesota Duluth
23