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Chicago South Suburban Airport Supplemental Analysis

July 23, 2023

Synopsis

A social benefits-social costs analysis (SBSCA) has been conducted for the planned South Suburban Airport (SSA) in Peotone, Illinois (Arkell, n.d.a.). Results revealed that net present value (NPV) was clearly negative, with expected project costs more than five times the benefits. This is due in part to the small number of expected regional aviation capacity-related delays, based upon analysis of Federal Aviation Administration (FAA) historic and projected data. Thus, the four existing regional airports: Chicago O’Hare International Airport (ORD), Chicago Midway International Airport (MDW), Chicago Rockford International Airport (RFD), and Gary/Chicago International Airport (GYY) together have more than enough capacity. This surplus could be much larger given FAA’s history of substantially over-forecasting air traffic growth. SSA passenger/cargo travel time and operating savings would not be enough to overcome project construction, operating and maintenance costs. The discrepancy would be further exacerbated by social costs of lost agricultural revenues and ecological degradation, both from the project and induced development. In relation, the aviation industry currently has insufficient market-based signals and options for rapid decarbonization needed to address global warming. Consequently, it is recommended that the State of Illinois take two steps to inform  SSA project decision-making. First, Illinois should conduct its own SBSCA to confirm these findings. Secondly, Illinois should implement aviation demand management (ADM), particularly pricing, to account for greenhouse gases and other related externalities.

Analysis

A fundamental issue that should be considered for all transport capital expansion projects is the problem to be solved. In practice, the purpose and need of such undertakings is that transportation demand is expected to increase substantially over time. In turn, investments in capacity improvements are presumably needed to meet this demand and avoid congestion/delays. This is precisely the reason given in the 2002 Record of Decision for the Tier 1: FAA Site Approval and Land Acquisition by the State of Illinois for the Proposed South Suburban Airport (FAA, 2002). However, analysis of the FAA data used in the SBSCA does not support this contention. A 2021 economic impact analysis (EIA) of SSA revealed that by 2030 the project will annually add $4 billion in economic benefit, $522 million in taxes, and support 10,000 jobs. Pre-operational construction is expected to create $1,053 million in economic output and 5,700 jobs. (Governor’s State University, 2022). However, such rationale and analysis is misleading. First, the Chicago Metropolitan Statistical Area has plenty of unfilled employment opportunities. Much of the reason is due to the spatial mismatch of affordable housing and employment in addition to insufficient job training (e.g., Cordova et al., 2018; Arkell, n.d.c.). Both of these can be alleviated through economic incentives that improve overall social welfare.

 

Second, EIA has historically been used extensively to evaluate airport projects. Nevertheless, EIA is fundamentally flawed and does not sufficiently support decision-making by discerning overall social welfare (e.g., Niemeier, 2020; Waters, 1976). EIA does not answer the fundamental question of whether society is better off, i.e., if and by how much benefits exceed costs. FAA has stated that the master airport planning process should not use EIA as a substitute for BCA (Butler and Kiernan, 1992). However, in practice the FAA has arguably improperly used EIA as justification for expanding airports (Niemeier, 2020). A meta-analysis of more than 100 U.S. and European airport studies by Wu et al. (2020) validated the link of aviation subsidies with economic growth and social benefits. However, the authors did not find evidence in the studies of improved wellbeing, i.e. benefits exceeded costs.

 

Sustainable aviation fuel (SAF) has the potential to mitigate aircraft emissions and contributions to global warming. According to a recent U.S. Government Accountability Office (GAO, 2023) report, in 2018, U.S. SAF production/supply was 1.8 million gallons and only a fraction was used by major U.S. airlines. This was well short of the FAA’s 2012 goal to use 1 billion gallons of SAF per year by 2018. The Renewable Fuel Standard (RFS) program (42 U.S.C. §7545(o)) administered by several federal agencies since 2005 had negligible impact on GHG emissions. Various entities have recently set new targets for reductions in aviation GHG’s. For example, the FAA’s 2021 U.S. Aviation Climate Action Plan (USACAP) is a roadmap for net-zero aviation emissions by 2050 (GAO, 2023). However, past roadmaps have failed due to lack of credible demand reduction components (Beevor and Alexander, 2022). The USACAP does have one in the form of coordination with the International Civil Aviation Organization (ICAO) Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA). However, credibility is lacking in the ability of this initiative to induce the carbon reductions needed from the aviation industry (Transport and Environment, 2022).

 

The prognosis of expanding SAF usage is questionable due to its higher production costs compared to conventional aviation fuel (EASA, EEA, EUROCONTROL, 2019). Passage of the recent Illinois Climate and Equitable Jobs Act and the Inflation Reduction Act provide incentives to produce and use SAF. However, the ability of such legislation to provide meaningful impacts is unclear. Growing air traffic, limitation of other aviation industry decarbonization supply measures, and insufficient taxation of the aviation industry are providing unsatisfactory price signals for decarbonization (Ricardo, 2021). New technology and operations improvements will be insufficient (Transport and Environment, 2018). Aviation fuel taxes of $0.88 to $2.55 (2023$) per gallon in the European Union could be expected to reduce carbon by this sector from 6 to 15 percent, with a reduction in GDP of 0.05 percent (Ricardo, 2021; Valdes et al., 2021). The most viable SAF is e-kerosene (CO2e)(Murphy, 2021). For CO2e, a carbon price of $400 per tonne would be necessary to make it cost competitive by 2030 (Zhou et al, 2022). Such taxes can be offset through reductions in other levies or rebates to consumers.

 

Failure to price transportation externalities is demonstrably harmful to the economy and overall well-being. This was exhibited in an ex post facto study of the Chicago city expressway system during its first 50 years of operation (Arkell, 2021). Findings were that this infrastructure was an overall substantive improvement for the region compared to a counterfactual, driven mainly by gains in productivity/travel time savings and reductions in traffic accidents. However, if a pricing mechanism had been implemented to account for social costs or externalities of surface transportation in lieu of the Chicago city expressway system, overall social welfare for the region would have been about three times higher. This is due primarily to opportunity costs of further travel time, vehicle operating, and accident cost savings from unrealized sizeable reductions in vehicle miles traveled. To understand the magnitude of this dead-weight loss, it is equivalent to up to $3 billion annually (2020 $), depending upon the discount rate used (Arkell, 2021).

 

Per the Census Bureau, from 1970-2020, combined square miles of the Chicago, IL-IN and Round Lake Beach-McHenry-Grayslake, IL-WI urbanized areas increased about 84 percent [(2,594-1,409)/1,409)] while its population only increased about 27 percent [(9.0M-7.1M)/(7.1M)]. Resulting losses of agricultural and natural land/open space and the ramifications are well documented (e.g., Friehat et al., 2015; Chicago Region Biodiversity Council, 1999). The proposed SSA site is about 45 and 25 miles from the respective west and far south sides of Chicago city, which is a lengthy commute. South suburbanites will be closer. However, even with massive subsidies for new public transportation, the vast majority of workers at SSA will be required to commute by driving long distances. Increasing suburbanization as exhibited by growing expressway capacities and vehicle miles traveled are known positive correlates to inner city violent crime (Arkell, n.d.b.).  

 

The market area for airport cargo hubs is typically about 3 hours driving distance or 100 to 200 miles (National Academies of Sciences, Engineering, and Medicine, 2015; Texas Transportation Institute, 2011). Gary/Chicago International Airport is less than 20 miles from the proposed SSA. SSA would virtually duplicate GYY’s cargo market area and replicate RFD’s by more than 50 percent.

 

Table 1 below depicts FAA Terminal Area Forecast (TAF) data of Chicago regional total aircraft operations for 2019 and estimates for 2035 and 2050. Also shown are estimated annual capacities based upon FY2015-2019 average daily capacities (ADC) determined from “called rates” at Core 30 U.S. airports. FAA estimates called rates from hourly throughput that an airport’s runways are able to sustain during periods of high demand (FAA, 2020). Capacities in Table 1 for ORD and MDW were annualized from the FAA ADC data. RFD and GYY capacities are based upon the annualized FAA ADC data for the Core 30 Airports average per runway at two runways for each facility. As can be seen from Table 1, FAA predicts about a 50 percent increase in total aircraft operations at Chicago’s four regional airports from 2019 through 2050. Together, these airports were operating at about 52 percent capacity in 2019 and are expected to operate at about 78 percent capacity in 2050. FAA predicts that most of these increases would go to the two largest airports, which would be near their capacities, while RFD and GYY airports would still have substantial unused capacities.

 

A 2016 GAO report found that the FAA’s annual activity forecasts—the National Aerospace Forecast (Aerospace) and airport-level Terminal Area Forecast (TAF)—constantly overestimated respective aviation activity since 2004 and 2010. Mean percentage errors for 10-year forecasts of total Aerospace passenger enplanements and total aircraft operations were 31.3 percent and 54.7 percent, respectively. Thus, the unused capacities in Table 1 could be much larger. GAO also found that FAA forecast methodologies were not transparent. FAA purportedly has since implemented GAO recommendations to analyze/report on forecast uncertainties/performance and document technical procedures (GAO, 2016).  

 

Conclusion

In summation, it is recommended that the State of Illinois reconsider further SSA planning and implementation activities as there is no transportation problem to be solved. Existing airports in the Chicago region have an abundance of unused passenger and cargo capacity through at least 2050. Major capital construction projects are a means to an end and not an end in themselves. EIA only documents the benefits of SSA and does not demonstrate increased total surplus or overall welfare for the region or the country. SSA would also facilitate further industrial drift  from Chicago city while exacerbating job/housing mismatches and associated ground travel distances, known correlates to inner-city violent crime. Finally, adequate aviation industry carbon reduction targets can only be met through comprehensive reforms that include credible demand reduction strategies through pricing.

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