IMPLAN

The Pronghorn H2 Green Hydrogen Project represents a significant proposed investment in Converse County, Wyoming, with the promise of advancing green energy production and generating local economic growth. To estimate the project's economic impact, consultants and stakeholders frequently employ input-output models such as IMPLAN. While such models are useful for quantifying potential benefits, it is crucial to understand their inherent limitations, how consultants attempt to mitigate these limitations, and what important economic effects the models fail to capture—especially negative externalities tied to environmental or property value disruptions.

IMPLAN (IMpact analysis for PLANning) is an input-output modeling system widely used to estimate the ripple effects of economic activity—such as direct, indirect, and induced impacts—resulting from new projects or policy changes within a specified region. Applied to the Pronghorn H2 Green Hydrogen Project, IMPLAN would estimate:

• Direct Impacts: Jobs, income, and output generated directly by project construction, operation, and maintenance.
• Indirect Impacts: Economic activity spurred in local supply chains—such as demand for construction materials, specialized services, and parts suppliers.
• Induced Impacts: Increased household spending in the local economy by workers whose incomes are tied to the project and its supply chain.
• The results from IMPLAN can provide policymakers and the public with seemingly concrete estimates of potential job creation, tax revenue, and overall economic output tied to the hydrogen facility.

Despite its utility, the IMPLAN model is rooted in several key assumptions and simplifications that can lead to an overstatement of projected economic benefits:

• Static Relationships: IMPLAN is a static model, based on fixed relationships between industries as captured in historical data. It does not account for how local businesses and markets may dynamically adapt over time or under changing economic circumstances.
• No Supply Constraints: The model typically assumes that there is always enough labor, materials, and local capacity to meet increased demand, ignoring potential bottlenecks or competition for resources.
• Input-Output Table Limitations: The regional multipliers are based on past averages, which may not reflect the unique characteristics of Converse County or the hydrogen industry’s emerging nature.
• No Price Effects: IMPLAN does not account for changes in wages, prices, or rents that could occur if the project increases local demand beyond current supply.
• These characteristics mean that the economic benefits, as suggested by IMPLAN, may appear larger or more certain than what would materialize in reality, especially when the local economy is not equipped to absorb such a project without displacement effects or other market adjustments.

Aware of IMPLAN’s limitations, consultants may attempt to tailor the input data, assumptions, or reporting methods to better mimic the outcomes that a more dynamic, computable general equilibrium (CGE) model might produce. This is often done by:

• Adjusting Local Purchase Percentages: Modifying what portion of spending is assumed to stay within the local area, based on interviews or secondary research.
• Applying Leakage Adjustments: Estimating and removing spending that is likely to "leak" out of the region due to a lack of local suppliers or workforce.
• Scenario Analysis: Presenting multiple scenarios to reflect uncertainty or alternative assumptions about project size, local hiring, or supply chain capacity.
• Sensitivity Testing: Exploring how changes in key assumptions affect the final estimates, to illustrate a range of possible outcomes rather than a single point estimate.
• While these practices can provide more nuanced results, they still cannot fully replicate the feedback effects, substitution effects, or adaptive behaviors that a truly dynamic model could reveal.

Perhaps most critically, the IMPLAN model is not designed to estimate negative economic effects that may result from non-market or external factors, such as:

• Environmental Disruptions: Potential damages to ecosystems, water resources, air quality, or agricultural productivity caused by construction or operation of the hydrogen project.
• Property Value Reductions: Declines in real estate values for nearby communities due to perceived or actual environmental risks, increased industrial traffic, or aesthetic changes.
• Displacement Effects: Losses to local businesses that may be crowded out or suffer from changes in land use, noise, or other disruptions.
• Decreased Quality of Life: Impacts on recreation, public health, or community character that are not easily measured in monetary terms.
• IMPLAN’s focus is strictly on positive multiplier effects stemming from increased spending. It does not subtract from its estimates the possible costs or losses borne by residents, businesses, or governments from negative side effects. As a result, its outputs should be interpreted as gross—not net—measures of economic impact.

The IMPLAN model, when used to project the economic benefits of the Pronghorn H2 Green Hydrogen Project in Converse County, can provide a useful—but inherently limited—picture of potential economic gains. Its static nature, reliance on fixed multipliers, and exclusion of negative externalities mean that projected benefits may be overstated. While consultants can adjust assumptions to better fit local realities or acknowledge model shortcomings, even careful adaptation cannot account for all dynamic market responses or for environmental and social costs. Thus, any analysis using IMPLAN should be read as one piece of a larger puzzle, best complemented by qualitative assessments, dynamic modeling, and an honest accounting for possible negative impacts.

 While IMPLAN numbers may appear impressive on paper, they present only one side of the ledger. Citizens should recognize that these projections are not a guarantee of lasting prosperity but rather a best-case scenario built on assumptions that overlook many real-world costs. For those living near the Pronghorn project, the reality includes potential declines in property values, disruptions to water and land, strain on local infrastructure, and an altered quality of life—none of which IMPLAN accounts for. As neighbors and taxpayers, it is essential to view these glossy job and revenue estimates with caution and to demand a more balanced, transparent evaluation that weighs both the promised benefits and the very real risks.