SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-1 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 

### APPENDIX C

COMPLIANCE COSTS AND COST EFFECTIVENESS ANALYSIS FO R

AMENDED REVISED PROPOSED AMENDMENTS TO RULE 4570 (CONFINED ANIMAL FACILITIES)

October 21, 2010SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-2 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 This page intentionally blank.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-3 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 I. SUMMARY

Cost effectiveness is the change in capital and ope rating costs between the current rule and the draft rule divided by the estimated emissio n reductions associated with the change. For this rule project, the change in regul atory threshold means that sources that are currently exempt from control would become subject to the rule. Additionally, for certain CAFs already subject to the rule, there are changes in the control practices that would trigger added compliance costs. Table 1 summarizes the estimated total compliance costs for each type of CAF. Details of the calculations are discussed later in this appendix.

Table 1 – Estimated Compliance Costs and Cost Effec tiveness by CAF Type

CAF Type Annual Cost ($/yr) Estimated 2023

Emission Reductions (tpy) Cost Effectiveness ($/ton VOC reduced) Dairy $61,312,210 9,158 $6,695 Beef Feedlot $0 0 not affected Other Cattle $0 0 not affected Swine $0 0 not affected Poultry $274,000 51.1 $5,362

Other, not listed above $0 0 not affected

Total $61,586,210 9,209 $6,688

II. REQUIREMENTS OF ANALYSIS

The California Health and Safety Code 40920.6(a) re quires an air district conduct both an absolute cost effectiveness analysis and an incr emental cost effectiveness analysis of available emission control options before adopti ng each Best Available Retrofit Control Technology (BARCT) rule. The purpose of co nducting a cost effectiveness analysis is to evaluate the economic reasonableness of the pollution control measure or rule. The analysis also serves as a guideline in d eveloping the control requirements of

a rule.

Absolute cost effectiveness of a control option is the added annual compliance cost in dollars per year divided by the emission reduction achieved in tons of VOC reduced per year. This report presents the District staff's an alysis of both the absolute and incremental cost effectiveness of proposed amendmen ts to Rule 4570.

Incremental cost effectiveness is intended to measu re the change in costs, in dollars per year, and emissions reductions, in tons of VOC reduced per year, between two progressively more effective control options or tec hnologies. Incremental cost effectiveness compares the differences in costs and the differences in emissions reductions of the two candidate control options. I ncremental cost effectiveness doesSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-4 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 not reveal the emission reduction potential of the control options, merely the additional cost of adding the next most effective control to a given control measure. Unlike the absolute cost effective analysis that identifies th e control option with the greatest emission reduction; incremental cost effectiveness does not present a meaningful

correlation between emissions reductions and cost e ffectiveness. Therefore, the relative values produced in the incremental cost ef fectiveness analysis and the absolute cost effectiveness values are not comparable and ca nnot be evaluated using similar

standards.

III. ANNUAL COMPLIANCE COST METHODOLOGY AND RESULTS

Absolute cost effectiveness is the total annual com pliance costs divided by the

estimated emission reductions. In order to calcula te the cost effectiveness, District staff must first estimate the compliance costs and the as sociated emission reductions. The emission reductions calculations are detailed in Ap pendix B of this staff report. This section of Appendix C outlines the estimated compli ance costs for each type of CAF affected by the proposed amendments to Rule 4570.

Rule 4570 allows operators to implement a combinati on of mandatory measures and choose additional requirements from a menu of optio ns. For the optional measures, District staff selected the mitigation measures tha t are most likely to be chosen by operators and evaluated the compliance costs associ ated with implementing the preferred mitigation measures. In choosing the mea sures, District staff assumed that operators would elect to put in place only those me asures that are least costly to

execute.

In general, implementing mitigation measures is a f unction of labor costs and depending on the measure, there may be equipment that needs t o be purchased. Therefore, implementing mitigation measures is a function of t he labor hours to perform the measures and the cost of equipment, annualized over the life of the equipment. District staff assumed that labor cost was $19.00 per hour a nd represents the wages and overhead for a typical CAF employee as determined f rom the Employment Development Department (EDD). For some of the chose n mitigation measures there is no cost associated with implementing the measure be cause it can easily be incorporated into current practice.

IV. COMPLIANCE COSTS FOR INDIVIDUAL MITIGATION MEAS URES

The following paragraphs outline the costs for indi vidual mitigation measures and estimate what fraction of dairies will be implement ing the mitigation measures.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-5 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 A. Dairy CAF Compliance Costs

Dairy CAF compliance costs affect two different dai ry populations. Because District staff is proposing that the regulatory threshold fo r dairies be reduced from 1,000 milking cows to 500 milking cows, there will be dairies tha t will be required to institute mitigation measures that are not currently required to do so. These dairies have between 500 and 999 milking cows and are defined in the rule as med ium dairies. In order to be conservative for the costs, it will be assumed that the same percentage of medium size dairies is implementing measures as the large dairi es.

The second affected group of dairies is those alrea dy subject to the rule’s control provisions. District staff is proposing that these dairies institute control measures that are performed more frequently. The following parag raphs outline the methodology used to estimate costs and present the results of the an alysis.

1. Compliance Costs for Dairy Feed Menu

Feed to NRC Guidelines

Based on information obtained from a local dairyman and a dairy industry representative, the average cost for a nutritionist required to provide proper guidelines on NRC feeding is $1,200 per month. This cost is fo r a typical/average dairy. The District projects that by 2012 the average number o f cows per dairy in the valley will be 1,277. Based on this information, the cost per cow per year for the services of a nutritionist is $12/cow/yr. Statistics from the Di strict’s permits database (PAS) were used to estimate the percentage of facilities alrea dy performing this measure. Based on these statistics, 14% of all dairies are currently implementing this measure, so the annual cost per cow is adjusted to $10.32.

However, this cost may be slightly lower than the a ctual cost of the measure because it considers only the services of the nutritionist. Ot her costs than can reasonably be expected include the purchase of additives and mine rals required to meet NRC guidelines, additional labor required to formulate feed rations per nutritionist’s instructions, and also additional labor to feed a w ider variety of rations depending on the specific diet required for different groups of cows

.

Push Feed Within 3 Feet of Feedlane Fence

Data was obtained from a local dairy and dairy indu stry representative. The dairy indicated that their monthly expense for cleaning o ut feed from the lanes is approximately $3,000. This expense covers a herd of 6,000 milk cows. Based on this information, the cost per cow per year is $6.00/cow /yr. About 50% of the facilities are expected to already be performing this mitigation m easure and, therefore, the cost is adjusted to $3.00 per cow per year.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-6 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Remove wet feed from bunks

For 150 cow herd, amount of labor required per week is 0.25 hr. The District estimates

that the total number of rain events in the San Joa quin Valley will not exceed 12. Rain in the San Joaquin Valley generally occurs over a 2 0-week period between November and March. Cost per cow per year is $0.38. Statis tics from the District’s permits database (PAS) were used to estimate the percentage of facilities already performing this measure. Based on these statistics, 13% of all large dairies are currently implementing this measure. The annual cost per cow for this measure is adjusted to $0.33.

Begin feeding or disposing of rations within 2 hour s of grinding

No additional cost to coordinate feeding times with ration prep times. Rations are generally fed immediately after grinding/mixing.

Store grain in a weatherproof storage structure/cov ering

A cattle industry representative provided statistic s showing that the capital cost of grain storage structures is generally $250/ton of grain. This figure was supported by a university research extension document discussing t he economics of using grain

storage structures.

The grain consumption of an average dairy cow is as sumed to be $1.46 tons/yr. The capital cost per-cow per year for grain storage str ucture is therefore $365. The grain

structure is estimated to have a useful life of at least 25 years. This cost is therefore annualized over the 25-yr life to obtain the equiva lent cost/yr of $40.21. It will be assumed that 50% of all large dairies are currently implementing this measure. The costs are adjusted to $20.11.

2. Compliance Costs for Silage Menu

Cover Silage Piles

Based on information obtained from a local dairyman and a dairy industry representative, the typical cost for covering silag e is $0.8/ton. Since a typical dairy cow consumes about 4.56 tons/yr (25 lb/day) of silage, the cost per cow per year = $0.8/ton x 4.56 tons/cow/yr = $3.65. Statistics from the Dis trict’s permits database (PAS) were used to estimate the percentage of facilities alrea dy performing this measure. Based on these statistics, 41% of all dairies are currently implementing this measure so the cost is adjusted to $2.15.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-7 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Increase Silage Bulk Density

Research data indicates that most silage piles have a bulk density of about 40 pounds per cubic foot or less. Thus, this mitigation meas ure requires the density to be increased by more than 10%. Increasing silage densi ty can be achieved most cost effectively by using thinner layers when building t he pile and compacting the layers as much as possible, with special attention being paid to the side slopes of the pile and the outer layers. Using this approach, the primary cost associated with increasing silage density will be additional labor and additional fue l for compacting equipment.

Based on statistics from a cooperative extension re search document, the time required for ensiling (storage) is 4 hours for 200 tons of s ilage. The quantity of fuel required is 13 gallons for 200 tons. The District assumes that th is measure requires double the amount of ensiling time and fuel to accomplish. Th e additional times required is

therefore 4 hours for 200 tons and the additional f uel expense will be 13 gallons per 200 tons. The annual costs are $2.40 per cow.

Maintain Silage Face

The prevailing method for removal of silage from a silage bunker is the use of a frontend load. Silage is excavated from the bottom area of the face, which makes the top part of the face collapse downwards. This process p roduces an uneven face since it is hard to control the way the upper portion of the fa ce collapses.

An alternative to this method would be the use of a silage face rake. This is a simple implement that can be used as an attachment to a sk id steer or similar small or medium sized tractors. The implement resembles a large rak e, with a long boom by which it is attached to the tractor. It is operated by being pu lled downwards from the top to the bottom of the silage face. As is it drawn downwards , it shaves off a uniform amount of silage from the entire height of the face, thereby leaving a clean and evenly cut face.

Available marketing information as well as universi ty cooperative extension research documents indicates that this implement can be purc hased for approximately $5,000.

The District assumes that it will have a useful lif e of 10 years, hence the initial cost is annualized over 10 years to obtain an equivalent an nual cost of $0.28.

Using this device is also expected to increase labo r costs slightly. Usually the operator uses the front-end loader for removing silage from the pile and also for loading it into the mixer, in once continuous operation. The use of a silage rake will require the operator to rake out the silage first, and then change equip ment for loading the silage into the mixer. The District assumed an additional 1 hour pe r day will be required for this added step in the feed preparation process. Using this i nformation, the cost for the mitigation measure is the annual cost of the rake plus the ann ual operation cost of $5.71 per cow

per year.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-8 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Silage Additives

Various additives may be added to silage at the tim e of ensiling to improve its nutritional

value or to foster desirable fermentation condition s. One of the most common additives used is inoculum containing lactic acid bacteria. This inoculation is intended to boost the preexisting population of lactic acid bacteria in the forage being ensiled in order to produce as much lactic as possible in the shortest period possible after ensiling.

Production of lactic acid is desirable because lact ic acid itself is a valuable energy source, and its presence lowers the pH of the silag e enough to inhibit the growth of other microbes that cause spoilage.

The document cited in this analysis indicated that the typical cost of inoculating silage is $1.00/ton, but the range may be anywhere from $0.60 to $2.00. Due to lack of sufficient data from which a more concrete cost value may be d erived, the District will use the more conservative estimate of $0.60 per ton. The c ost of inoculation is $2.76/cow/yr.

3. Compliance Costs for Dairy Milking Parlor Menu

Flush or hose milk parlor

No additional cost; parlor cleanliness is practiced for food safety purposes.

4. Compliance Costs for Dairy Freestall Menu

Pave feedlanes at least 8’ along corral side

All the dairy freestall barns in the San Joaquin Va lley are currently in compliance with this measure. To the best knowledge of the Distric t, there are no freestall barns with dirt feedlanes anywhere within the District. Therefore, no dairies will incur costs associated with this mitigation measure.

Flush or scrape freestall feedlanes after every mil king or at least 3 times/day

Based on estimates obtained from a local dairy, a s ingle flush takes about 1 hour, using a 30-horsepower electric motors. It is assumed that facilities currently flush two times per day as standard practice, hence only an additio nal one flush per day will be required for full compliance. Using an average electrical c ost of $0.0974/kWhr, the cost to flush one additional time per day is $0.18 per cow per ye ar.

Statistics from the District’s permits database wer e used to estimate the percentage of facilities already performing this measure. Based o n these statistics, 24% of all large dairies are currently implementing this measure. T he annual cost is $0.14 per cow.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-9 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Remove manure that’s not dry from individual stalls

- Medium Dairy - Remove wet manure from individual stalls every 14 days - Large Dairy - Remove wet manure from individual s talls every seven days

Based on estimates obtained from a local dairy, rem oving manure from freestalls takes about 10 hours to complete, per event. When removin g it once every 14 days, the cost per cow per year is $0.88. The cost for implementi ng this measure every week is $1.78 per cow per year or twice the cost of removing the manure every 14 days.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. Based on these statistics, 27% of all large dairies are currently implementing thi s measure. The cost is adjusted to $0.64 per cow for removing manure every 14 days and $1.28 per cow for removing manure weekly.

5. Compliance Costs for Dairy Corral Menu

Pave feedlanes at least 8’ along corral side

The length of feedlane space per cow is assumed to be approximately 2’. Thus feedlane area to be paved per cow is 16 square feet. Cost of poured concrete is generally about $2.65/sq. ft., based on information obtained from a local dairy construction company. Using a ten-year life for the concrete, the annual cost is $6.90 per cow per year.

Most corrals feedlanes within the District are expe cted to be already in compliance with this measure. However, it is possible that a certai n proportion of dairies, especially older facilities, still have dirt feedlanes that may need to be paved in order to comply with this

measure. The District estimates that such facilitie s will not exceed 5% of the dairy facilities that become subject to the rule. In thi s case, the cost is equivalent to $0.35 per cow per year. It is expected that both large and s mall dairies will be affected by this mitigation measure.

Clean manure from corrals at least 4 times per year

Data was obtained from a local dairy and dairy indu stry representative. The dairy indicated that it costs $24/load to remove manure f rom corrals. Per occurrence, they generally remove 500 loads for their entire facilit y. The manure is usually removed by a contractor and applied to land. Using the herd bre akdown by cow type (milking, dry, heifers, calves) District staff estimates that the annual per-cow cost of this mitigation measure is $5.16 per cow per year.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. Based on these statistics, 6%SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-10 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 of all large dairies are currently implementing thi s measure. The total cost for this mitigation measure is $4.85.

Scrape or flush concrete lanes in corrals every 7 d ays

Based on estimates obtained from a local dairy, a s ingle flush of concrete lanes takes about 4 hours, using a 30-horsepower electric motor . The local dairy has 4,500 milking cows. The annual cost is $0.10 per cow per year.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. The annual cost is adjusted to $0.04 per cow.

Inspect water pipes and troughs and repair leaks

Based on estimates obtained from a local dairy, thi s measure takes about 2 hours to complete, per event. The dairy has 156 troughs for watering 10,000 cows. It will be assumed that over the course of one year 10% of the trough float valves (16 valves) will need to be replaced. Each float valve costs $23 and the labor for replacement is $10; therefore the cost to perform the inspection and re pair pipes and water troughs is $0.18

per cow per year.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. Based on these statistics, 64% of all dairies are currently implementing this meas ure. The adjusted cost is $0.06 per

cow per year.

Harrow, rake or scrape corrals to maintain dry surf ace

Based on estimates obtained from a local dairy, thi s measure takes about 10 hours to complete, per event. The frequency of the measure i s once per week, however, in order to be conservative for cost purposes, the costs wil l be evaluated for 26 weeks per year. Using these assumptions the annual cost per-cow cos t is $0.51 per year.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. Based on these statistics, 41% of all dairies are currently implementing this meas ure. The adjusted cost is $0.30 per

year per cow.

Install shade structures with light-permeable roofi ng

Based on information obtained from a local dairy co nstruction company, the cost of shade structures is generally around $4 per square foot. Shade structures are usually sized so that there is at least 40 square feet of s hade per cow. The light-permeable material of choice for roofing shade structures sha de cloth.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-11 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 For this measure, it will be assumed that a facilit y will need to remove existing roofing material and replace the shade structures’ roofs wi th shade cloth. It will be estimated that, the cost of shade cloth and the labor to inst all it will be about 25% of the cost of a

brand new shade structure. Shade cloth is estimate d to have a useful life of 5 years, hence this upfront cost will be annualized over the 5-year useful life. Overall the cost on a per-cow basis is $10.55 annually.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. Based on these statistics, 39% of all large dairies are currently implementing thi s measure. The adjusted cost is $4.11.

Clean concrete lanes such that the depth of manure does not exceed 12 inches

Based on estimates obtained from a local dairy, thi s measure takes them about 10 hours to complete, per event. The amount of fuel re quired for equipment used is 12 gallons. The labor rate is $12.00/hr, and fuel cost s $2.25 per gallon. The frequency of the measure is once per week. Using this informati on the cost is $0.51 per cow per

year.

6. Compliance Costs for Dairy Solid Manure Handling Menu

Within 72 hours of removal from cow housing, cover dry manure pile with a weatherproof covering (large dairy only)

Large dairies already have this mitigation measure in the Phase I so they will incur no costs. Medium dairies are not subject to the solid manure handling menu and therefore,

incur no costs.

7. Compliance Costs for Dairy Liquid Manure Handlin g Menu

Remove solids from waste water

The capital cost separator system, including pumps and plumbing and solids storage, is $105.81 per cow. This system is expected to have a useful life of 10 years. The annual capital cost is $17.22.

Statistics from the District’s permits database (PA S) were used to estimate the percentage of facilities already performing this me asure. Based on these statistics, 38% of all dairies are currently implementing this meas ure. The cost to implement this measure is adjusted to $10.68.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-12 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 8. Compliance Costs for Dairy Land Application Menu

Land-incorporate manure within 72 hours

Incorporation of manure is a typical practice requi red to provide maximum benefits within soil. 72-hour time limit is unlikely to caus e any added costs.

Allow liquid manure to stand in fields no more than 24 hours after irrigation

Incorporation of manure is a typical practice requi red to provide maximum benefits within soil. The mitigation measure is unlikely to cause any added costs.

B. Beef Feedlot CAF and Other Cattle CAF Compliance Costs

No significant changes will need to be implemented for beef feedlots and other cattle facilities and since there is no change to the thre sholds for these categories, no new facilities are expected to become subject to Rule 4 570; therefore cost of compliance is

minimal.

C. Swine CAF Compliance Costs

There is no change to the swine threshold and there fore, staff believes there will be no new swine facilities subject to Rule 4570. The sin gle facility that is currently subject to the control requirements is expected to continue wi th the same mitigation measures. Based on the facility’s current chosen practices to comply with Rule 4570, there would be no additional costs to the facility. In summary , swine operations would have $0 per year in compliance costs associated with the propos ed changes to Rule 4570.

D. Poultry CAF Compliance Costs

As with the dairy CAFs, there are CAFs that would b e new to the rule’s control requirements. The requirements for layer operation s are similar but not identical to broiler/duck/turkey requirements. In the following paragraphs, each mitigation measure cost is prefaced with whether it is on the layer me nu, the broiler/duck/turkey menu or

both.

1. Compliance Costs for Poultry Feed Menu

Layer and Broiler/Duck/Turkey – Feed according to N RC guidelines

This measure is a good practice that is followed by most commercial growers but there are additional costs associated with recordkeeping for this measure. The additional labor for facility staff and a registered nutrition ist would cost $1,000 per facility.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-13 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 2. Compliance Costs for Poultry Housing Menu

Broiler/Duck/Turkey – Use a dry cleaning method

This measure is a good practice that is followed by most commercial growers.

Additional administrative cost are all incurred wit recordkeeping and management oversight. The cost to implement this mitigation m easure is $1,000 per facility.

Layer and Broiler/Duck/Turkey – Use drinkers that d o not drip continuously

Precluding the use of less expensive drinkers and a lternative water measures adds about $3,000 per facility.

Broiler/Duck/Turkey – Inspect drinkers at least onc e every seven (7) days and adjust the height, volume, and location

The additional time for recordkeeping and managemen t oversight for this practice adds about $2,000 per facility per year.

Layer and Broiler/Duck/Turkey - Inspect water pipes daily

District staff is assuming that 0.5% of drinkers wi ll leak and that piping leaks and breaks very rarely occur. This measure required that the ranch staff have the necessary time, expertise, and supplies on hand to perform the need ed repairs. Small leaks and drips cannot be left for specialized maintenance crews in between flocks. There are additional costs for the actual inspection, recordk eeping and management oversight. The annual cost for this measure is about $5,000 pe r ranch per year.

Turkey - If the facility houses turkeys in pens: in stall mounds or berms.

Implementation of this control measure is expected to be $0, since it would be in the best interest to prevent water from accumulating in the pens. Turkeys are the animals most likely housed in outdoor pens, and allowing th e birds to stand in water for any length of time would be detrimental to the birds’ h ealth.

3. Compliance Costs for Poultry Solid/Liquid Manure Handling Menu

Layer and Broiler/Duck/Turkey – Within 72 hours of removal from housing, either remove all litter/manure from facility or cover pil es

Ranches will normally not have difficulty meeting t his requirement. Occasional overtime costs will be required for collection crews and tru cker. The estimated average cost for this measure is $2,000 per ranch.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-14 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 4. Compliance Costs for Poultry Land Application Me nu

For land application, District staff assumes that t he operators will modify their processes to land-incorporate in a very short time, however t he changes will not be extensive enough to change the expenses already incurred by t he operator.

V. TOTAL COMPLIANCE COSTS

A. Dairy Annual Costs

1. Medium Dairy CAF Costs

For each required mitigation measure the per-cow co st was multiplied by the projected

number of cows on medium dairies in 2012. Since a cow is housed in either a freestall or a corral, the housing costs were allocated betwe en the two. It is assumed that milking cows are split evenly between freestalls an d corrals with the support stock are

10% in freestalls and 90% in corrals. Results of t he calculations are shown in Table 2.

Table 2 – Medium Dairy CAF Compliance Costs

Menus Annual Cost $/cow/yr Annual Cost $/yr

Total Feed Menu $33.76 $15,270,593

Total Silage Menu $13.02 $5,889,311 Total Milking Parlor Menu $0.00 $0 Total Manure Handling Menus $17.22 $7,789,088 Total Land Application Menu $0.00 $0

Weighted Housing Menu - Milk Cows $3.73 $1,091,010 Weighted Housing Menu - Support Stock $8.96 $1,428,643

Grand Total $76.68 $31,468,645

2. Large Dairy CAF Costs

The calculations for large dairies are performed in the same way as for medium dairies except that the milking cows are allocated 70% to f reestalls and 30% corrals. The support stock is allocated similar to the medium da iries. Table 3 outlines the analysis.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-15 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Table 3 – Large Dairy CAF Compliance Costs

Menu Annual Cost $/cow/yr Annual Cost $/yr

Feed Menu $3.00 $4,739,199

Silage Menu $13.02 $20,568,124

Milking Parlor Menu $0.00 $0 Manure Handling Menus $0.00 $0 Land Application Menu $0.00 $0

Weighted Housing Menu - Milk Cows $2.20 $2,217,693 Weighted Housing Menu - Support Stock $4.05 $2,318,550

Grand Total $22.27 $29,843,565

B. Poultry Total Annual Costs

There are 18 broiler facilities and 2 layer facilit ies that would incur costs because of the change in the regulatory threshold for these CAFs f or a total of 20 affected facilities. Poultry operations already subject to this rule are not expected to incur any additional costs for implementing the Phase II. Table 4 demon strates the annual costs for poultry

facilities.

Table 4 – Poultry Annual Costs

Process Menu Layers ($/yr) Broiler/Duck/Turkey

($/yr) Total Annual Cost ($/yr)

Feed $2,000 $18,000 $20,000 Housing $16,000 $198,000 $214,000 Solid and Liquid Manure Handling $4,000 $36,000 $40,000 Land Application $0 $0 $0

Grand Totals $22,000 $252,000 $274,000

VI. ABSOLUTE COST EFFECTIVENESS ANALYSIS

Absolute cost effectiveness is the total estimated annual compliance cost divided by the

estimated emission reductions associated with the c hanges to the rule. District staff used the compliance costs above and the emission re ductions from Appendix B of this staff report. Table 5 lists the absolute cost effe ctiveness for each type of CAF. The cost effectiveness ranges from $3,726 per ton VOC r educed to 7,434 per ton.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-16 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Table 5 – Absolute Cost Effectiveness

CAF Type Annual Cost ($/yr) Estimated 2023

Emission Reductions (tpy) Cost Effectiveness

($/ton VOC reduced)

Dairy $61,976,304 9,158 $6,768

Beef Feedlot $0 0 not affected

Other Cattle $0 0 not affected

Swine $0 0 not affected
Poultry $274,000 51.1 $5,362

Other, not listed above $0 0 not affected

Total $62,250,304 9,209 $6,760

VII. INCREMENTAL COST EFFECTIVENESS ANALYSIS

Incremental cost effectiveness compares the differe nces in costs and the differences in

emissions reductions of the two candidate control o ptions. This rule has a combination of required and optional mitigation measures availa ble to the operator, depending on the source category. For beef feedlots, other cattl e, swine and poultry operations, there are no more effective control options than the ones provided in the draft rule. Since we are not comparing two options against each other, t he “more effective” control option is already included in the rule’s provision, so no mor e stringent option than what is proposed in Rule 4570. For this reason, no incremen tal cost effectiveness analysis for these types of operations was performed.

A. Dairy Operations

The dairy menus are made up of a combination of man dated and optional measures. Generally, the most effective and practical measure s are required while measures that may need more flexibility or require higher costs m ay be optional. Cost for the optional measures that facilities are expected to choose hav e been determined in the Absolute Compliance Costs above. This analysis will determin e the costs of the additional optional measures to determine the economical feasi bility of requiring these measures.

1. Compliance Costs for Optional Feed Measures

Feed steam-flaked corn or other steam-flaked cereal grains.

A research document on the economics of feeding ste am-flaked corn indicated that the cost of steam-flaking ranges from $6.79 to $7.16 pe r ton of corn. An average of $6.98 per ton was used for this estimate. The average gra in corn consumption per dairy cow is estimated at 8 lb/day (mixed into ration that co ntains mostly silage). The annual consumption is 1.46 tons.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-17 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 The additional cost of flaked corn is therefore est imated to be $10.19 per cow per year.

For total mixed rations that contain at least 30% b y weight of silage, feed animals total

mixed rations that contain at least 45% moisture.

The District acknowledges that there is a cost for adjusting the moisture content of the TMR to the required range, but it is not possible a t this time to determine an approximate cost. The adjustment may be done using molasses, whey, water, or the addition of moisture rich vegetables such as beets, potatoes or carrots. In addition, the level of adjustment depends on the starting moistur e content of the main ingredient. Silage-based TMRs usually have high moisture conten t and may require little adjustment since silage is generally moist in natur e, whereas hay-based rations will require a greater degree of adjustment due to the d ry nature of the main ingredient.

The measure should remain optional due to stakehold er concerns of the possible

detriment to the health of cows. California dairies in the San Joaquin Valley have access to an amazing variety of food processing res iduals that also happen to be appropriate for dairy feed. The moisture of the TMR can be influenced by both the NRC guidelines and the available commodity. In addition , adding excessive moisture to a TMR that contains a high percentage of fermented fo rage may decrease cows’ intake of feed dry matter and reduce their consumption of neu tral detergent fiber. Decreased intake of dry matter and fiber may decrease milk pr oduction. Reduced fiber intake can also adversely affect the health of cows by increas ing the risk of ruminal acidosis and other ailments; therefore, making the moisture cont ent a required element would limit the operator’s flexibility in providing appropriate nutrition for the health and productivity

of the animals.

2. Compliance Costs for Optional Silage Measures

Utilize a sealed feed storage system (e.g., AG-Bag) for silage.

Anecdotal data from a bagged silage making contract or was used the estimate the cost of bagged silage. The cost per ton is estimated to be $12.04 per ton silage harvested.

Since chopping silage is a cost that will be incurr ed regardless of whether the silage is bagged or ensiled in traditional bunkers, the cost of chopping alone must be subtracted from the combined chopping and bagging cost in orde r to estimate the cost of bagging alone. The cost of chopping is estimated at $15/acr e, and an acre generally yields about 20 tons of silage. The cost per ton is therefore $0 .75 per cow per year. Based on the above information, the cost of bagging is $11.29 pe r ton of silage.

Based on a cow’s silage consumption rate of 4.56 to ns (dry matter) per year, the cost of bagged silage = $51.48 per cow per year.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-18 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 The measure should remain optional as it is not pra ctical for most dairy facilities to store all of the silage crops that they harvest in a seal ed forage system. For many dairies using a sealed forest system for all of their silag e would require miles of bags. Because of space constraints at existing dairies many opera tors must store the harvested silage crops in piles or bunkers that are exceptionally hi gh. It is clear that many facilities do not have sufficient space available for the miles o f bags required for a sealed forest system. In addition, with usage of sealed forage s ystems much larger amounts of plastic would need to be disposed. This will incre ase the already higher costs of the system compared to silage piles. Therefore, this m easure must remain optional to allow individual operators to determine if it is feasible for their operation.

3. Compliance Costs for Optional Freestall Measures

Use non-manure-based or separated solids-based bedd ing for at least 90% of the bedding material.

Sand is a typical non-manure based bedding material . Artificial bedding materials such as water mattresses are also used, but these would not be representative of most dairy operations. Small and medium dairies in particular might not consider artificial bedding systems due to high initial costs. Just like manure bedding, sand is a loose material that is continually displaced from the bedding stall by the cow’s movements, especially when rising from a lying position. The displaced sand fa lls into the flush lanes below the stalls and is removed with the manure during lane flushing /scraping/vacuuming. Some of the

sand also is contaminated with fresh manure in the stall and has to be removed for sanitary reasons. Sand therefore has to be replenis hed frequently to maintain the optimum level in the stall. Research indicates that this on-going replenishment requires an average of 40 lb of sand per day per cow, or 7.3 tons/cow/yr. Some sand can be reclaimed and if a flush system is used for cleanin g manure lanes, but reclamation may not always be cost effective. For this analysis, it is assumed no reclamation is used and that all the sand is purchased fresh. The cost of s and varies greatly depending on the region, season, distance from supplier, etc.

Based on this cost, the total expense for replenish ment sand = $63.88/cow/yr

It is important to note that this estimate is very conservative. The costs are expected to be higher because often special equipment, or attac hments to existing equipment, is required for raking sand in the stalls for replenis hing sand. The sand also gets into the manure system and facilities using flush method of cleaning will incur increased wear on the pumps and other liquid manure handling equipmen t, as well as extra labor removing sand from the settling ponds.

Have no animals in exercise pens or corrals.

Total cost: $0.00/cow/yrSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-19 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 There are no foreseeable additional costs to restri ct animals to indoor housing based on typical dairy operation practices. This requirement has remained in the freestall menu because of animal welfare concerns. Restricting acc ess to exercise pens by enclosing the barn may exacerbate animal welfare and animal h ealth concerns, as access to open exercise pens is important for good breeding and pr egnancy rates and hoof health. This measure would reduce emissions by reducing the area in which the animals have to

excrete. This measure could affect animal health an d therefore should remain as an option.

4. Compliance Costs for Optional Corral Measures

Knockdown fence line manure build-up prior to it ex ceeding a height of twelve (12) inches at any time or point.

This measure is assumed to be similar to raking cor rals which costs $0.51/cow/yr.

Use lime, thymol or a similar absorbent material in the corrals according to the

manufacturer's recommendation to minimize moisture in the corrals

The measure to apply lime would need to include the amount of space and lime needed to be applied, labor and equipment used for spreadi ng and applying the absorbent. The application of lime/absorbent will need to be done every 5 years, hence cost is annualized over a 5-year period to be = $166.23 per cow per year.

Like lime, the cost to apply thymol would include t he amount of space and thymol needed to be applied, labor and equipment used for spreading and applying the absorbent. The application of thymol will need to b e done every two weeks. The resulting cost is = $375.68 per cow per year.

5. Compliance Costs for Optional Solid Manure Measu res

Within 72 hours of removal from cow housing, cover separated solids pile with a weatherproof covering.

This measure would need to take into consideration the surface area for the pile, the price of the plastic cover and labor to cover the m anure pile.

The following assumptions were made:

• Surface area of manure pile for 150 cows = 10, 000 sq. ft

• Price for plastic cover = $0.09 per square foot

• Plastic tarp lasts 5 years

• Labor for covering 150 cow manure pile is 1 hour @ $19/hr

Therefore the total cost would be = $1.71 per cow p er yearSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-20 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 6. Compliance Costs for Optional Liquid Manure Meas ures

Use a phototropic lagoon.

The primary costs associated with a phototrophic la goon system are lagoon capacity, solids separation and mechanical aerators. This ana lysis it will be assumed that a typical dairy will have to construct one additional lagoon, install a manure separator system, and install mechanical aerators.

The annualized capital cost of a lagoon over 25 yea rs = $27.02. The annualized capital cost of a separator system, including pumps and plu mbing and solids storage, over 10 years is = $17.22. One $8,000 mechanical aerator is required for every 66 cows. The capital cost per cows = $121.21. The aerator is exp ected to have a useful life of 10 years. The annualized capital cost = $19.73. The el ectricity cost per separator is = $1.03 per cow per year.

Therefore, the total cost per cow per year = $65.00

Use an anaerobic treatment lagoon designed in accor dance with NRCS Guideline No.

359.

The primary costs associated with anaerobic treatme nt are lagoon capacity and solids separation. In this analysis it will be assumed tha t a typical dairy will have to construct one additional lagoon and install a manure separato r system.

The annualized capital cost of the lagoon over 25 y ears = $27.02. The annualized capital cost of a separator system, including pumps and plumbing and solids storage, over 10 years is = $17.22.

Therefore, the total cost per cow per year = $44.24

Remove solids from the waste system with a solid se parator system, prior to the waste entering the lagoon

.

The annualized capital cost separator system, inclu ding pumps and plumbing and solids storage, over 10 years = $17.22 per cow per year.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-21 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 Total Cost for Additional Mitigation Measures

Table 7 summarizes the costs discussed above.

Table 7 – Costs to implement All Optional Measures in All Dairy Menus

Additional Optional Mitigation Measures Cost (per cow per year)

Feed steam-flaked corn or other steam-flaked cereal grains. $10.19

Feed animals TMR that contain at least 45% moisture . $0.00

Utilize a sealed feed storage system (e.g., AG-Bag) for silage. 51.48

Use non-manure-based for at least 90% of the beddin g material. $63.88

Have no animals in exercise pens or corrals. $0.00

Knockdown fence line manure build-up prior to it ex ceeding a height of 12 inches. $0.51

Use lime in the corrals. $166.23

Use thymol in the corrals. $375.68

Within 72 hours of removal from cow housing, cover separated solids pile with a weatherproof covering. $1.71

Use a phototropic lagoon. $65.00

Use an anaerobic treatment lagoon. $44.24

Remove solids from the waste system, prior to the w aste entering the lagoon. $17.22

Total Annual Cost (per cow per year) $796

Since the measures to feed animals TMR that contain at least 45% moisture, use an ag bag and have no animals in exercise pens or corrals should remain optional due to technical feasibility, as described above, the pote ntial costs and emission reductions resulting from implementing these measures have not been included in the cost

effectiveness shown in Table 8.

Table 8 – Cost Effectiveness of Optional Dairy Meas ures

Total Annual Cost (per cow per year) $745

Total Annual Cost for Medium Dairy $301,823,357

Total Annual Cost for Large Dairy $1,037,893,704

Total Annual Cost for Dairy CAFs $1,339,717,061

Est. Emission Reductions (tons/year) 2890.8

Cost Effectiveness ($/ton/year) $463,442

As discussed in the Staff Report, a menu approach p rovides much needed flexibility for the variability of Valley operations. Allowing for some optional measures rather thanSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-22 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 specifically mandating all requirements not only al lows the flexibility for producers to

select measures that will work best for their facil ity based on their own type of housing, manure management practices, and feed storage and m anagement but also helps minimize compliance costs while achieving the same emission reductions. Based on the socioeconomic analysis, dairies will spend appr oximately 22.5% (for large) and 84.3% (for medium) of their profits, at $6,768 per ton of reduction, to comply with the proposed rule revisions. This is a significant cos t to bear to implement the rule. The emission reductions achieved by the measures includ ed in the proposed rule are already projected to exceed the reductions required from this rule in the District’s attainment plan. Therefore, mandating additional r equirements would result in increased compliance costs at a high cost per ton b asis. This impact will have a detrimental impact to the health of the industry an d go far beyond RACT and BARCT requirements.

V. REFERENCES

1. De Groot, Tony, and Kevin Abernathy. Personal co mmunication via telephone. 9 Sept. 2010.

2. Oldfield, Justin. “Typical Capital Costs for Gra in Storage Structures.” Personal communication via email. 7 Sept. 2010.

3. Jones, Todd. “Typical Cost of Poured Concrete.” Personal communication via telephone. 11 Sept. 2010.

4. Gooch, C.A.; A.W. Wedel; and J. Karszes. “Econom ic Analysis of Mechanical Sand-Manure Separation of Flushed Sand-Laden Dairy Manure.” ASAE Meeting Presentation. Paper Number: 03-4016.

5. De Groot, Tony. “Cost of Grooming Freestall Bed s.” Personal communication via e-mail. 13 Sept. 2010.

6. De Groot, Tony. “Cost of Flushing Freestall Lane s.” Personal communication via e-mail. 13 Sept. 2010.

7. U.S. Energy Information Administration. “Average Retail Price of Electricity to Ultimate Customers by End-Use Sector, by State.” Independent Statistics Analysis. 15 Sept. 2010. <www.eia.doe.gov/cneaf/electricity/epm/table5_6_b.h tml>.

8. De Groot, Tony., and Kevin Abernathy. Personal c ommunication via telephone. 9 Sept. 2010.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost And Cost Effectiveness Analysis O ctober 21, 2010

C-23 Final Draft Staff Report with Appendices For Amended Revised Proposed Amendments to Rule 4570 9. De Groot, Tony. “Cost of Flushing Corral Lanes. ” Personal communication via email. 13 Sept. 2010.

10. De Groot, Tony. “Cost of Raking/Scraping Corra ls.” Personal communication via e-mail. 13 Sept. 2010.

11. De Groot, Tony. “Cost of Inspecting and Repairi ng Water Troughs.” Personal communication via e-mail. 13 Sept. 2010.

12. Jones, Todd. “Typical Cost of Shade Structures. ” Personal communication via email. 11 Sept. 2010.

13. De Groot, Tony. “Cost of Flushing Corral Lanes. ” Personal communication via email. 13 Sept. 2010.

14. Cooper, Rob; Terry J. Klopfenstein; Todd Milton ; and Dick Clark. 2001. “Economic Evaluation of Corn Processing for Finishi ng Cattle.” 2001. Nebraska Beef Cattle Reports.

< http://digitalcommons.unl.edu/cgi/viewcontent.cgi?a rticle=1289&context=animal

scinbcr >.

15. Gooch, C.A.; A.W. Wedel; and J. Karszes. “Econo mic Analysis of Mechanical Sand-Manure Separation of Flushed Sand-Laden Dairy Manure.” An ASAE Meeting Presentation. Paper Number: 03-4016. 2003.

16. San Joaquin Valley Dairy Manure Technology Feas ibility Assessment Panel. “An Assessment of Technologies For Management and Treat ment of Dairy Manure in California’s San Joaquin Valley." 2005. Page 159.

< http://www.arb.ca.gov/ag/caf/dairypnl/dmtfaprprt.pd f >.

17. Liu, Qinghua; Richard C. Shumway; and Kelly J. Myers Collins. “The Economics of Dairy Nutrient Management.” Farm Business Management Reports

. Cooperate Extension, Washing State University. 2003 . < http://farmmgmt.wsu.edu/PDF-docs/dairy/eb1947e.pdf >.

18. R.B. Family Farms, Inc. “Bagged Silage Analysis .” 2010.

< http://www.rbfamilyfarms.com/baggedsilage.htm >.

19. Pastoor, Jeff. “Corn Silage: A New Look at an O ld Friend.” 2010.

< http://www.beeflinks.com/Corn%20Silage%20Value.htm >.