CSSGA Overview & the Future of Aggregate Supply in Colorado

Todd OhlheiserExecutive Director, CSSGA

Feb. 22, 2018

Presentation Agenda

• CSSGA Overview

• Mine Safety Institute

• Construction Industry Coalition

• Aggregates in our Life

• Demand

• Products

• Aggregate Cycle

• Transportation Impact

• Summary and Questions

Colorado Stone, Sand & Gravel AssociationMission

The Colorado Stone, Sand & Gravel Association is the advocate of the Colorado aggregate industry.

We are committed to advancing policies and regulations which protect and expand the safe, environmentally responsible use of aggregates in building Colorado’s economy and infrastructure.

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Colorado Stone, Sand & Gravel Association

• Representing the majority of the construction aggregate producers in Colorado

• Strongly support alliances with like minded organizations (Strength in Numbers) regarding the Colorado Construction Industry Coalition (CIC with CCA, CAPA, CRMCA and ACPA)

• Aligned with NSSGA regarding lobbying, environmental issues, etc.

• 4 main components:

• Safety (founded Mine Safety Institute in Partnership with DRMS)

• Governmental Affairs (CIC)

• Land Use & Environment

• Education and Community Outreach4

Mine Safety Learning Management System

Program History

• MSHA implemented P-46 training regulations for metal/non-metal mines in 2001

• CSSGA & Division of Reclamation of Mining & Safety (DRMS) partnered prior to roll out of new regulations

• Expanded to include: Task Training, MSHA 101, Annual Refresher, NMT (Spanish)

• Annual Training Materials Competition Award Winners (2000, 2003, 2007, 2008, 2016, 2017)

Learning Management System

• Began discussions in 2015 to updated product to online platform

• Objective: Create an interactive online platform with the ability to train single and multiple users and generate personalized certificates upon completion.

• Project Details:

• $40,000 grant from DRMS and $30,000 from the 2016 program revenue was allocated to the development of the new product

• Project has included content review, content transfer, product review, and product administration

Cost of Product

• Price*:

• 1-10: $130 each

• 11-25: $115 each

• 26-100: $105 each

• 101 and over, call for large group pricing.

• Increase price of DVDs / phase out USBs

*CSSGA members always receive 50% discount

Demo

Construction Industry Coalition Focus Transportation Infrastructure in Colorado

The basic equipment and structures, such as roads and bridges, that are needed for a country, region, or

organization to function properly

Global Comparison

28th in Transportation InvestmentThe Global Competitiveness Report2014-20152.02 Quality of roads

16th in Quality of Roads

National Economic Council and the President’s Council of Economic Advisers.

We Are Not Keeping Pace with Our Neighbors2014 FHWA Pavement Condition:

Source: FHWA Highway Statistics

Utah – 2nd

Kansas –9th

Wyoming – 8th

New Mexico –

16th

Colorado32nd

Colorado Road Conditions Continue to Decline

35 percent of Colorado’s major urban roads are in poor condition:

41 percent in Colorado Springs area in poor condition43 percent in the Denver urban area

12 percent of Colorado’s major mountain and outstate roads have pavements in poor condition:

44 percent are mediocre or fair

Source: TRIP

Poor Condition Defined Signs of deterioration,

including rutting, cracks and potholes. In some cases, these roads can

be resurfaced, but often are too deteriorated

and must be reconstructed.

If we stay this course, we are headed for even slower traffic, longer commutes, less safe roads and

bridges

Trillion Dollar Infrastructure Plan

• Currently no concrete plan has been set forth

• Would require bi-partisan support in a deeply divided political climate

• Impact on Colorado infrastructure funding is unclear

Gas Tax No Longer Sustainable Funding Source

• Federal and state gas taxes have been fixed for more than two decades

• Revenue has steadily declined as Coloradans burn less gasoline in more fuel-efficient cars

• CDOT is taking in 30 percent less money from gas taxes now than it did in 2000 (Source: Inside Energy)

40.4 cents per gallon ➢ 22 cents to state➢ 18.4 cents to feds

Federal and State Gas Tax

Colorado ranks 33rd in the U.S. for gas tax per gallon. Despite costly maintenance due to mountain terrain and extreme weather – our tax is below average. We pay less than Wyoming and South Dakota. (CDOTa)

In Colorado Transportation Not A General Fund Reality

• Transportation just over 5 percent in FY2015-16.

• Health care represents 32 percent of the budget

• K-12 at 21.4 percent and higher education at 14 percent

• Corrections at 5.8 percent.

K1221%

Higher Ed14%

Health Care32%

Corrections6%

Roads5%

Other22%

Proposed Funding Mechanisms

• Increase gas tax

• Vehicle Miles Traveled (VMT) tax

• Toll roads

• Public Private Partnerships (P3)

• Sales Tax Increase

Aggregate Demand

• U.S. annual production is in excess of 2.25 billion tons (NSSGA)

• Consumption of aggregates:

• 10 tons per person per year (NSSGA)

• Colorado produces about 50 million tons of aggregate annually (USGS)

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Economic Impact• Colorado aggregate production employment (Phoenix Center)

• Directly Employment: 1,555

• In-Direct Employment: 3,092

• Average earning per industry job were $75,129 in 2016. Well above national average of $61,586 (Phoenix Center)

• Direct tax revenue (Tax Revenue)

• $6,385 on average per employee annually.

• Direct employment contributed $10 million in 2016.

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Aggregate Industry Contribution

$426M Direct

$873M Indirect

$1.3B

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Colorado

Economy

Source: Phoenix Center for Advanced Legal & Economic Policy Studies: The Economic Impact of the Natural

Aggregates Industry: A National, State, and County Analysis

Aggregate Products

Decorative Rock

Sand

Rip Rap

Crushed Stone

Boulders

Light Weight

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Aggregate Utilization

Concrete

• 80% Aggregate

• Floors and walls

• Concrete pipe

• Tilt Up and Precast Structures

Asphalt

• 95% Aggregate

• Roads

• Shingles

Drainage

• French Drains

• Erosion Control

• Under Drainage, golf course, sport fields

Other

• Armor Stone

• Base for foundations and roads

• Utilities

• Building stone and block

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Roads and Highways

Typical Asphalt Road

Typical Concrete Road

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Source: Wikipedia.com

Interstate requires 40,000 tons of aggregate per one

lane mile

Aggregate Production Cycle

Permitting

Quarry Operations

ProcessingSales

Reclamation

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Aggregate Production Cycle - Permitting

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• Aggregate Source Identified:– Hard rock: Igneous, Sedimentary, or Metamorphic

– Alluvial: Sand and Gravel

– Quality: hardness, size, shape, chemical properties

– Location to market and transportation system

• Permitting Process– Federal: Corps of Engineer Permits, BLM Contracts, Environmental

Assessments

– State: DRMS, SWSP, Air Permit

– County: Zoning, Special Use Permit

– Municipal: Zoning, Special Use Permit

• Evaluation of Financial Viability

Aggregate Production Cycle – Quarry Operations

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• Crushed Stone:

– Drilling and blasting.

– Utilize loaders, shovels or excavators to load.

material.

– Haul material by truck or conveyor to the plant.

• Alluvial

– No drilling and blasting

– Utilize loaders, draglines, scrapers, or dredge to

excavate material.

– Haul material by truck, conveyor, or scraper to

the plant.

– When a dredge is used the material is pumped

to the plant utilizing a slurry pump.

Aggregate Production Cycle - Processing

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• Processing Plant:

– Crushers: Jaw Crusher, Cone Crusher, HIS, VSI to reduce the size

of the material

– Screens: Inclined, flat to size the material

– Conveyors: Transport the material within the plant between

crushers, screens and final stockpiles

• Wash Plant:

– Screens: Wet screens to rinse material, dewatering screens to

remove water

– Log washers or coarse material washers to clean the material

– Sand screws and or classifiers are used to produce sand

– Recycle Water: Settling ponds, clarifiers, or thickeners

Aggregate Production Cycle - Sales

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• Aggregate Sales Process:

– Material is transported to the end

customer or market by truck, rail,

barge, or ship.

– Material is loaded by loader or load

out bins.

– Materials are scaled by truck

scales, rail scales, belt scales

and/or loader scales.

– Freight Costs often exceed the

material cost when sources are not

close to the market.

Aggregate Production Cycle - Reclamation

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• Primary Objective: “Return the land to beneficial use”

– Five Rs

• Reform

• Reuse

• Rehabilitate

• Restore

• Recover

• Colorado’s Post Aggregate Mining Benefits

– Water storage: 1.1million ac-ft. of water storage, more than the

proposed Two Forks Dam project.

– Recreation: Fishing and or boating lakes, golf course, and

parks.

– Wildlife habitat: Wetlands or other wildlife habitats.

– Agriculture: Farmland for various crops.

Calhoun Eaton Site – Eagle County

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During Mining After Reclamation

Future Front Range Aggregate Supplies

• Permitting in the “Rocky Mountains” to produce rock is highly unlikely

• As alluvial material is mined to the east, it is smaller and smaller top size. Where Golden would have boulders, Greeley has approx. 1-1/2 inch and smaller down Platte

• Without new permits, importing material via rail will likely expand, like many major markets

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2,000

3,000

4,000

5,000

6,000

7,000

8,000

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10,000

20,000

30,000

40,000

50,000

60,000

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Aggregate Production Population

Colorado’s Front Range Demand

34Source: Colorado Demographics Population Forecasts 2000-2050, Open File Report 00-258, U.S. Geological Survey, Industry Estimates

$-

$200,000

$400,000

$600,000

$800,000

$1,000,000

$1,200,000

$1,400,000

0 10 30 50 70 90

Distance from Aggregate Facility, Miles

One Lane Mile of Interstate Highway, 40,000 Tons

Material Cost at Manufacturing Plant Freight Cost

Transportation Impact

35

48%

32%

122%

Pre 1960

1960’s & 1970’s

1980’s & 1990’s

2000’s & 2020’s

2030’s & 2040’s

Hardrock 1970’s – 2040’s

Mining Area Progression

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Aggregate products can be Cyclical

• Squeegee Gravel - Bigger than sand, smaller than pea gravel

• Generally speaking, it has been a lower demand product of mining S&G material on the Platte River basin

• All material is dependent upon Mother Nature and natural reserves. As mining moves North on the basin, less of this size

• Area inventories over time have been very cyclical. Highly dependent upon projects (demand) and overall S&G production (supply).

Several things have evolved

• Mining is moving North up the Platte and a high percentage of material mined from reserves closer to I-25 (i.e. St Vrain).

• Where the Platte produced over 25% squeegee, reserves to the North produce 20% or less.

• All material was available for bedding as recently as several years ago. Now, some asphalt mix designs consume 25% or more of all squeegee production -making fractured sand.

• These dynamics, plus overall construction demands have greatly decreased inventories

Summary

• Reserves will continue to come from river basins, but further East.

• Coarse aggregates will be quarried and trucked or railed into Front Range.

• There will continue to be long term shifts in products, specs and mix designs.

• The industry is working hard to meet all demands and changes.

• Interact with aggregate producers directly regarding alternatives. CSSGA has no specifics on reserves, demand, production, costs or volumes.

ReferencesAmerican Society of Civil Engineers. 2017 Infrastructure Report Card. http://www.infrastructurereportcard.org/

CDOT(a). Transportation Funding Problem. https://www.codot.gov/programs/environmental/wildlife/wildlife-transportation-summit/mike-vanderhoof_transportation-funding.pdf

CDOT(b). The State of Transportation in Colorado. http://static1.1.sqspcdn.com/static/f/542022/20344530/1348064410823/CDOT+Infographic+2012.pdf?token=a1vVZ3p5NxpwSrFF0kFP%2FX6lUC4%3D

CDOT(c). Transportation Commision of Colorado Workshops & Regular Meeting. https://www.codot.gov/about/transportation-commission/documents/2015-archive-of-agendas-and-supporting-documents/august-2015/august-full-packet.pdf

FHWA Highway Statistics. Highway Statistics 2014. https://www.fhwa.dot.gov/policyinformation/statistics/2014/

Inside Energy. Why Gas Taxes Won’t Fix Our Infrastructure Problem. http://insideenergy.org/2015/03/04/why-gas-taxes-wont-fix-our-infrastructure-problem/

National Economic Council and the President’s Council of Economic Advisers. An Economic Analysis of Transportation Infrastructure Investment. https://obamawhitehouse.archives.gov/sites/default/files/docs/an_economic_analysis_of_transportation_infrastructureinvestment.pdf

NSSGA. How will a 12 cent Increase in the Gas Tax Impact Drivers? http://www.nssga.org/smallchange/

NSSGA. Rocks Build America. http://www.nssga.org/rocks-build-america/

Phoenix Center for Advanced Legal & Economic Policy Studies. The Economic Impact of the Natural Aggregates Industry: A National, State, and County Analysis. http://www.phoenix-center.org/scorecards/AggregatesIndustry2017ScorecardFinal.pdf

Standards & Poor’s Ratings Services. U.S. Infrastructure Investment: A Chance to Reap More Than We Sow. http://images.politico.com/global/2014/05/05/sp-usinfrastructure201405.pdf

Tax Revenue. Based on the average yearly salary of an aggregate mining employee according to Phoenix Report ($75,129) multiplied by Employee paid State Tax (3.2%), Employer paid Unemployment Tax (3.1%) and Employer paid Workers Comp (2.2%).

TRIP: A National Transportation Research Group. Colorado Transportation by the Numbers. http://www.tripnet.org/docs/CO_Transportation_by_the_Numbers_TRIP_Report_March_2017.pdf

U.S. Global Leadership Coalition. Colorado Benefits of the International Affairs Budget. http://www.usglc.org/downloads/states/Colorado.pdf

USGS. Aggregates by State and End Use. https://minerals.usgs.gov/minerals/pubs/commodity/aggregates/

World Economic Forum. 2014-2015 Global Competitiveness Report. http://www3.weforum.org/docs/WEF_GlobalCompetitivenessReport_2014-15.pdf