Economic Impact of Reducing Hail and Enhancing Rainfall in North Dakota

Economic Impact Report
Economic Impact Report

In 2008, the North Dakota Atmospheric Resource Board funded a study on the economic benefits of hail suppression and rain enhancement in North Dakota. The study, conducted by Dean Bangsund and Dr. F. Larry Leistritz, of the NDSU Department of Agribusiness and Applied Economics, shows the North Dakota Cloud Modification Project (NDCMP) is strongly economic, even when considered on its most conservative results.

The results presented in the report only include the eight most common crops planted in North Dakota by acreage, plus alfalfa. Thus, the numbers shown here do not reflect the entire benefit of the NDCMP as some agricultural production is excluded, as are all potential benefits that may be attributed to property damage mitigation.

Direct Impacts for the NDCMP

ND Water Magazine Summary Article
ND Water Magazine Summary Article

Rainfall enhancement benefits for the program were evaluated at two intervals (5 and 10 percent), which reflect the long-term evaluations of the NDCMP. In the 5 percent scenario, the value of increased crop production is estimated to yield $8.4 million annually, which equates to $3.58 per planted acre. In the 10 percent scenario, the value of increased production is estimated to yield $16 million annually, or $6.84 per planted acre.

The analysis of hail suppression activities shows the average crop value saved through cloud seeding (Table 6 in the report) is $3.7 million per year, which equates to $1.57 per planted acre. Including hail suppression benefits, the total direct impact in the 5 percent rainfall scenario is $12 million annually, while the total direct impact in the 10 percent scenario is $19.7 million. That translates to $5.16 and $8.41 per planted acre, respectively. These results yield a benefit-to-cost ratio, based on anticipated 2009 project costs, of 16 to 1 for the 5 percent scenario, and 26 to 1 under the 10 percent scenario.

Total Impacts for the NDCMP

Secondary economic impacts result from subsequent rounds of spending and respending of direct economic impacts within an economy. In this study, the reduction in hail losses and the increase in gross revenue linked to added growing season rainfall constituted the direct economic impacts from cloud seeding efforts. As those direct impacts are worked through the North Dakota economy, additional economic activity is created. The combination of direct and secondary economic activity is often called gross business volume or total economic activity.

For the 5 percent scenario, total direct impacts from the NDCMP were estimated to average $12 million annually. This additional net revenue would generate secondary economic activity of $25 million annually, resulting in gross business volume of over $37 million, or $15.87 per planted acre.

In the 10 percent rainfall scenario, total direct impacts from the NDCMP were estimated to average $19.7 million annually. This additional net revenue would generate secondary economic activity of $40.9 million annually, resulting in gross business volume of $60.5 million, or $25.89 per planted acre.

State Tax Revenues

Governmental revenues are another important measure of economic impacts. Collections from personal, corporate, and sales and use taxes were estimated based on the secondary economic activity generated by increased agriculture revenues. For the NDCMP, annual collections from personal, corporate, and sales and use taxes were estimated at $745,000 and $1.2 million respectively, for the 5 and 10 percent rainfall scenarios.