If Michigan were to convert some of its coal-fired generating plants to natural gas, it could result in a net increase in long-term jobs and tax revenue, according to an analysis by a Michigan State University (MSU) economist.

The initial increase would result from conversion-related construction, said MSU’s Bill Knudson. However, even after the conversions, natural gas generation would lift the state’s struggling economy because of jobs and spending on gas production and distribution.

Knudson’s primary responsibility is as a product marketing economist at the MSU Product Center. His analysis was funded by a grant from the nonprofit Energy Foundation.

Even a modest level of conversion, defined as about 10 million MW, or 10% of Michigan’s current capacity, would result in $4.1 billion in economic activity and create 19,000 construction-related jobs, the analysis found.

Over the long term, the converted plants also would result in more jobs because Michigan’s coal-fired plants now import fuel. Coal accounts for about two-thirds of all energy production in the state today while natural gas produces less than 10%. However, significant gas reserves exist in the state, Knudson noted.

Producers, including Encana Corp., are exploring portions of Michigan’s Utica and Collingwood shales, which are on the Lower Peninsula (see Daily GPI, May 10, 2010). Chevron Corp. also is a major leaseholder in Michigan’s shale plays (see Daily GPI, Feb. 10).

Environmental groups discounted the benefits that producing in-state natural gas would bring, citing hydraulic fracturing (fracking) concerns.

“The potential economic benefits of natural gas use could easily be overshadowed and dashed entirely by the negative effects the dangerous fracking process could have on Michigan’s waters,” said Michigan Clean Water Action Director Cyndi Roper. “We must ensure that we protect our Great Lakes water resources. Our waters provide a steady stream of revenue from tourism and support hundreds of thousands of jobs for Michiganders.”

Clean Water Action and the Sierra Club also criticized Knudson’s study for failing to consider the economic impact of replacing coal with renewables like wind or solar power.

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