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Final Staff Report with Appendices 

For Revised Proposed Amendments to Rule 4682

APPENDIX D 

Socioeconomic Analysis for Revised Proposed Amendments to Rule 

4682 (Polystyrene Foam, Polyethylene, and Polypropylene 

Manufacturing) 

September 20, 2007 
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D- 2

FINAL DRAFT SOCIOECONOMIC ANALYSIS 

PROPOSED AMENDMENTS TO RULE 4682: 

POLYSTYRENE 

20 September 2007 

Prepared for 

San Joaquin Valley Unified Air Pollution Control District 

1990 E. Gettysburg Avenue 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Analysis September 20, 2007

Final Staff Report with Appendices 

For Revised Proposed Amendments to Rule 4682

D- 3

Fresno, CA 93726 

Prepared by 

Applied Development Economics 

100 Pringle Avenue, Suite 560 • Walnut Creek, California • (925) 934-8712 

1029 J Street, Suite 310 • Sacramento, California • (916) 441-0323 

www.adeusa.com 
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CONTENTS 

1. Executive Summary........................................................................ 5

2. Introduction .................................................................................... 6

3. Description of Proposed Amendments to Rule 4682............... 8

4. Methodology ................................................................................. 10

5. Socioeconomic Impacts............................................................... 12

 5.1 Economic Trends: San Joaquin Valley 1996-2006 .......... 12

 5.2 compliance cost estimates................................................... 14

 5.3 business responses to compliance costs............................ 14

5.4 Impacts on Affected Industries.......................................... 15

5.5 Impacts on Small Businesses............................................... 17

 Definition Of A Small Business......................................... 18

 
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1. EXECUTIVE SUMMARY 

The San Joaquin Valley Unified Air Pollution Control District 

(“District”) seeks to adopt proposed amendments to Rule 

4683 to meet certain United States Environmental Protection 

Agency (US EPA) mandates and timelines with regards to 

improved air quality in the region. This section of the report 

summarizes the findings of the socioeconomic analysis of the 

proposed amendments to Rule 4682. This report is based on 

the version of Draft Rule 4682 that was published on July 19, 

2007. 

Up to 12 facilities are potentially subject to the proposed 

amendments to Rule 4682. These facilities employ over 1,300 

workers and generate annually over $325 million in revenues, 

off of which is earned $18 million in net profits. 

At $5.1 million, the estimated annual compliance cost 

amounts to 28.1 percent of net profits, which is significantly 

above the ten-percent threshold of significance employed to 

evaluate socioeconomic impacts of proposed amendments to 

existing rules or new rules. If annual compliance costs are 

translated into direct employment losses, facilities impacted 

by the proposed amendments could reduce their workforce 

by 17.1 to 26.6 jobs, or 1.3 percent to 2.0 percent of the total 

workforce of 1,300 workers. The analysis concludes by 

indicating that small businesses are disproportionately 

impacted by the proposed amendments. 
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2. INTRODUCTION 

This report describes the socioeconomic impacts of proposed 

amendments to Rule 4682 (Polystyrene). Following this 

introduction, the report summarizes the proposed 

amendments and describes the methodology for the 

socioeconomic analysis. In Section 5, the report describes the 

economic characteristics of sources affected by the proposed 

amendments to Rule 4682. This section also analyzes the 

socioeconomic impacts of compliance costs on the affected 

sources and the regional economy. This report is based on 

the version of Draft Rule 4682 that was published on July 19, 

2007. 

The report is prepared pursuant to the provisions of AB2051 

(Section 40728.5 of the California Health and Safety Code), 

which requires an assessment of socioeconomic impacts of 

proposed air quality rules. The findings in this report can 

assist District staff in understanding the socioeconomic 

impacts of the proposed amendments to Rule 4682, and can 

assist staff in preparing a refined version of the rule. Figure 1 

is a map of the eight-county region that comprises the San 

Joaquin Valley Air Basin. As indicated in the map, Kern 

County is not completely in the District. 
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FIGURE 1 

San Joaquin Valley Unified Air Pollution Control District (SJVUAPCD) Air Basin 
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3. DESCRIPTION OF PROPOSED AMENDMENTS TO 

RULE 4682 (POLYSTYRENE) 

The San Joaquin Valley Unified Air Pollution Control District 

(“District”) adopted Rule 4682 on May 21, 1992, and 

subsequently amended the rule on December 17, 1992, and 

June 16, 1994. Through Rule 4682, the District seeks to limit 

VOC and chlorofluorocarbon (CFC) emissions from 

manufacturing and processing of polystyrene foam, 

polyethylene, and polypropylene and from the storage of 

VOC blowing agents. The rule applies to any polystyrene 

foam, polyethylene, and polypropylene manufacturing and 

processing operations, but only for selected operations and 

equipment within the process. Those selected operations are 

currently defined as controllable VOC emission sources. 

Through the proposed amendments, the District seeks to 

expand the rule to include VOC emission reduction or 

control from all manufacturing processes including product 

curing areas and general product storage areas, similar to 

those employed by several of the existing sources. 

Following are the major changes proposed for Rule 4682. In 

establishing proposed VOC emission limits, District staff 

considered the limits that have been achieved in practice, as 

well as limits achievable by feasible control technologies. 

District staff evaluated BACT determinations established by 

the District, other California air districts, other states, 

including those that are recommended by control technology 

manufacturers and stakeholders. These changes are based on 

similar rules from other California air districts and BACT 

determinations with the District. 

 Affected operators would have to comply with one of 

four rule requirements: 

1. Demonstrate that they emit no more than 2.4 lb of VOC 

for each 100 pounds of total material processed, or 

2. Use a non-VOC blowing agent, or 

3. Control all manufacturing emissions with an approved 

system and store the finished product in a controlled 

warehouse for 24 or 48 hours, or 
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4. Demonstrate that they release no more emissions than 

would have occurred if complying with option 3. 

 Definitions and rule language was added or modified to 

clarify and strengthen rule compliance. 

The District also updated and or added record-keeping, 

testing and compliance dates for the new requirements.
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4. METHODOLOGY 

The socioeconomic analysis involves the use of information 

provided directly by affected sources and the District, as well 

as secondary data used to describe the industries affected by 

the proposed provisions of Draft Rule 4682. The approach is 

briefly described below. 

Applied Development Economics (ADE) began the analysis 

by preparing a statistical description of the industry groups of 

which the affected sources are a part, analyzing data on the 

number of jobs, sales levels, the typical profit ratios and other 

economic indicators for each industry. 

This report relies heavily on the most current data available 

from a variety of sources, such as the State of California’s 

Employment Development Department (EDD) Labor 

Market Information Division, Minnesota IMPLAN Group, 

and 2002 Economic Census. For purposes of estimating 

revenues generated by oil producers in the region, we turned 

to the State of California Department of Conservation, whose 

monthly report called “Monthly Oil and Gas Production and 

Injection Report” includes data on amount of barrels of oil 

and per unit sales price. For purposes of estimating profits, 

ADE relied on a mixture of sources, such as Dun and 

Bradstreet, United States Internal Revenues Service, and 

CCH, Incorporated. In addition, we reviewed a select 

number of corporate annual reports of California-based oil 

producers. 

With the above information, ADE was able to estimate aftertax net profit ratios for sources affected by the draft rule. 

Since the initial net profit ratio was based on national sources, 

we adjusted this profit rate to account for higher costs 

involved in producing petroleum in California relative to 

producing on-shore oil in other states. ADE calculated ratios 

of profit per dollar of revenue for affected industries. The 

result of the socioeconomic analysis shows what proportion 

of profits the compliance costs represent. Based on assumed 

thresholds of significance, ADE discusses in the report 

whether the affected sources are likely to reduce jobs as a 

means of recouping the cost of rule compliance or as a result 
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of reducing business operations. To the extent that such job 

losses appear likely, the indirect multiplier effects of the jobs 

losses are estimated using a regional IMPLAN input-output 

model. 

When analyzing the socioeconomic impacts of proposed new 

rules and amendments, ADE works closely within the 

parameters of accepted methodologies discussed in a 1995 

California Air Resources Board report called “Development 

of a Methodology to Assess the Economic Impact Required 

by SB513/AB969” (by Peter Berck, PhD, UC Berkeley 

Department of Agricultural and Resources Economics, 

Contract No. 93-314, August, 1995). The author of this 

report reviewed a methodology to assess the impact that 

California Environmental Protection Agency proposed 

regulations would have on the ability of California businesses 

to compete. The California Air Resources Board (ARB) has 

incorporated the methodologies described in this report in its 

own assessment of socioeconomic impacts of rules generated 

by ARB. One methodology relates to determining a level 

above or below which a rule and its associated costs is 

deemed to have significant impacts. When analyzing the 

degree to which its rules are significant or insignificant, ARB 

employs a threshold of significance that ADE follows. Berck 

reviewed the threshold in his analysis and wrote, “The Air 

Resources Board’s (ARB) use of a 10 percent change in 

[Return on Equity] ROE (i.e. a change in ROE from 10 

percent to a ROE of 9 percent) as a threshold for a finding of 

no significant, adverse impact on either competitiveness or 

jobs seems reasonable or even conservative.” 
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5. SOCIOECONOMIC IMPACTS 

This section of the report compares the economic 

characteristics of affected industries against the compliance 

costs. The first part sheds light on the economic context 

under which proposed amendments to Rule 4682 are 

promulgated. The second part of this section discusses 

annual compliance costs. Section 5.3 discusses general 

business responses to compliance costs. Section 5.4 analyzes 

the socioeconomic impacts of amendments to Rule 4682. 

5.1 ECONOMIC TRENDS: SAN JOAQUIN 

VALLEY REGION 1996-2006 

Economic development practitioners and planners have 

traditionally divided economies into two broad industrial 

categories—the economic base and local support industries. 

Economic base industries are the drivers of local and regional 

economies in that these industries draw income into a local 

economy by selling products outside of the local economy, 

much like the export industries of a national economy. 

Accrued earnings then circulate throughout the local area in 

the form of wages and salaries; investments; purchases of 

fixed assets, goods, and services; and generation of more jobs 

and wealth. 

The economic base is typically comprised of industries within 

the manufacturing, minerals-resource extraction, and 

agricultural sectors. There are also the “local support 

industries” such as retail or service sectors, the progress of 

which is a function of the economic base and demographic 

changes, and more so the latter than the former. As 

population increases in a given area, demand for services–

such as realtors, teachers, and healthcare–increases, as does 

demand for basic retail items like groceries, gas for 

commuting, or clothing at the local apparel shops. 

Agriculture is the economic base of the San Joaquin Valley 

region by virtue of the amount of goods this sector produces 

and exports throughout the nation and globe. Fourteen 

percent of all workers in the region are employed by 
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industries within agriculture, as Table 1 shows. However, in 

2000 almost 18 percent of all workers worked in agriculture, 

and in 2001 15 percent of all workers worked in this sector. 

In fact, over the five-year period between 2001 and 2006, 

employment in agriculture increased by a slight 0.3 percent 

per year, or by 1.3 percent over five years. 

Between 2001 and 2006, local support industries gained in 

prominence within the San Joaquin Valley region. Servicerendering industries employed the most workers as a 

proportion of total employment in the region. As Table 1 

shows, excluding wholesale, retail, and transportation, 

service-rendering industries comprise the largest employment 

sector in the region, at 738,369 or 56 percent of all jobs. With 

retail, transportation and wholesale, services accounting for 

almost 73 percent of all jobs. In 2001, service-rendering 

industries represented 55 percent of all jobs, and when 

including retail, wholesale, and transportation in the mix, 72 

percent. Increases in employment in service-rendering 

industries are consistent with regional population growth. In 

the region, local support industries of construction, education 

and health, and financial activities increased annually by 6.7 

percent, 2.8 percent, and 2.3 percent respectively between 

2001 and 2006. 

TABLE 1 

Employment Profile Of The San Joaquin Valley Region 2001 – 2006 

 MAJOR SECTORS 

San Joaquin 

Valley 

Region 

Employment 

2001 

San Joaquin 

Valley Region 

Employment 

2006 

San Joaquin 

Valley 

Region 

Employment 

Distribution, 

2006 

Annual 

Percent 

Change 

Region 

2001 to 2006 

California 

Employment 

Distribution, 

2006 

Annual 

Percent 

Change 

California

2001 to 2006 

 Agriculture 181,460 183,876 13.9% 0.3% 2.4% -0.2%

 Mining 9,360 9,833 0.7% 1.0% 0.2% 0.3% 

 Construction 63,841 88,184 6.6% 6.7% 6.0% 3.8% 

 Manufacturing 111,722 113,689 8.6% 0.3% 9.6% -3.4% 

 Utilities 4,661 5,453 0.4% 3.2% 0.4% 0.7% 

 Wholesale 36,514 43,184 3.3% 3.4% 4.5% 1.4% 

 Retail 129,663 144,300 10.9% 2.2% 10.8% 1.3% 

 Transportation 35,924 40,243 3.0% 2.3% 2.7% -0.9% 

 Information 15,316 15,376 1.2% 0.1% 3.0% -2.3% 

 Financial Activities 44,014 49,302 3.7% 2.3% 6.0% 2.3% 

 Professional and Business Services 95,708 105,876 8.0% 2.0% 14.3% 0.1% 

 Education (private) and Health 111,175 127,732 9.6% 2.8% 10.2% 2.2% 

 Leisure and Hospitality 86,979 99,989 7.5% 2.8% 9.8% 2.2% 

 Other Services 43,065 50,541 3.8% 3.3% 4.5% 3.6% 

 Unclassified 83 31 0.0% -17.9% 0.2% -13.6% 

 Public sector 235,467 249,279 18.8% 1.1% 15.3% 0.5% 
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Total Employment 1,204,952 1,326,888 100.0% 1.9% 100.0% 0.7%

Source: Applied Development Economics, based on data from California Employment Development Department LMID 

5.2 COMPLIANCE COST ESTIMATES 

The District issued a summary of costs associated with the 

rule in a separate report called “Appendix C: Cost 

Effectiveness for Proposed Amendments to Rule 4682 

(Polystyrene Foam, Polyethylene, and Polypropylene 

Manufacturing)” (August, 2007). In that report, the District 

placed annual rule amendments costs at $5,124,415. 

In analyzing costs, the District used data from information 

submitted by stakeholders. For this analysis, the District 

evaluated three different compliance options: 

 Modify or add more control to a manufacturing process; 

 Vent the air from an existing warehouse to a new 

regenerative/recuperative thermal oxidizer (RTO); 

 Build a new warehouse that vents to a new 

regenerative/recuperative thermal oxidizer. 

District staff then estimated how the affected facilities would 

comply with the proposed rule provisions. The District 

calculated that for a facility to vent the air from an existing 

warehouse to a new regenerative/recuperative thermal 

oxidizer would cost $574,050 per year. Building a new 

warehouse that vents to a new regenerative/recuperative 

thermal oxidizer would cost an additional $220,000, or 

$795,263 per year. In total, these costs amount to an 

aggregate annual expense of $5,124,415. 

5.3 BUSINESS RESPONSES TO COMPLIANCE 

COSTS 

Industries impacted by the proposed amendments to Rule 

4682 may respond in a variety of ways when faced with new 

regulatory costs. These responses may range from simply 

absorbing the costs and accepting a lower rate of return, to 

shutting down the affected business operation altogether. 

Some have voiced concerns about moving facilities to other 

regions. While affected sources may also seek to renew 

efforts to increase productivity and reduce costs elsewhere in 

their operation in order to recoup the regulatory costs and 

maintain profit levels, many stated that they are as lean as 
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possible, meaning that there is little room to squeeze even 

more productivity out of the respective operations. Some 

also voice difficulty in passing costs on to businesses and 

consumers, particularly those impacted entities that interact 

closely with agricultural industries such as grape growers. 

5.4 IMPACTS ON AFFECTED INDUSTRIES 

This section of the report analyzes estimated after tax net 

profits of affected industries against anticipated costs 

associated with implementation of the proposed 

amendments. The estimated annual compliance costs used in 

this analysis were provided to ADE by District staff and 

stakeholders. 

In calculating impacts on profits, ADE used net profit data 

analyzed from corporate annual reports for several publicly 

traded companies whose Central Valley facilities are subject 

to the rule amendments. In addition, ADE reviewed net 

profit ratios based on data issued by the US Internal Revenue 

Service (IRS) for the larger industry group under which 

impacted facilities are categorized. 

Table 2 below identifies the businesses operating in the San 

Joaquin Valley region that will be subject to rule amendments 

to Rule 4682. Four are part of larger, publicly traded 

corporations. 

TABLE 2 

Businesses Whose Facilities Are 

Subject to Proposed Amendments to 

Rule 4682 

Dart Container (Lodi, CA) 

Epic Plastics (Lodi, CA) 

Pactiv Corporation (Fresno, CA) 

TKV Containers (Fresno, CA) 

Polycell Packaging (Biola, CA) 

Pregis Innovating Packaging (Visalia, CA) 

Agri-Cel Inc. (Delano, CA) 

Pactiv Corporation (Bakersfield, CA) 

Tempo Plastic Company (Visalia, CA) 

Styrotek Inc. (Delano, CA) 

Foam Fabricators Inc. (Modesto, CA) 

Sealed Air Corp. (Madera, CA) 

Source: San Joaquin Valley Unified Air Pollution Control District 
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Table 3 below includes estimates on revenues and profits 

generated by facilities impacted by Rule 4682. For the four 

facilities that are part of larger, public traded corporations, 

revenue estimates are based on corporate annual reports. In 

addition, we use corporate annual reports to estimate typical 

industry after-tax net profits, which on a weighted averaged 

basis amounts to 5.61 percent. For the remaining facilities, 

we use 2002 Economic Census to derive a revenue per 

worker average for SIC 3086, which is multiplied against 

number of workers at various sites. Overall, the 12 facilities 

that are subject to Rule 4682 as amended employ over 1,300 

workers and generate over $325 million in revenues, off of 

which is earned an estimated $18.3 million in after-tax net 

profits. 

TABLE 3 

Economic Profile of Facilities Subject to Rule 4682 

Facilities Employment Revenue Net Profit Rate Net Profit 

12 1,335 $325,274,561 5.61% $18,253,306 

Source: Applied Development Economics, based on San Joaquin Air Pollution 

Control District, US Economic Census, US Securities and Exchange Commission 

Table 4 examines the socioeconomic impacts of proposed 

amendments to Rule 4682. At $5,124,415, the estimated 

annual compliance cost amounts to 28.1 percent of net 

profits of impacted facilities, which is significantly above the 

ten-percent threshold of significance employed to evaluate 

socioeconomic impacts of proposed amendments to existing 

rules and or new rules. If translated into direct employment 

impacts, costs in excess of the ten-percent threshold (i.e. 

$3,299,084) or total annual compliance costs (i.e. $5,124,415) 

amount to loss of 17.1 to 26.6 jobs, or 1.3 to 2.0 percent of 

the workforce employed by facilities subject to Rule 4682. 
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TABLE 4 

Socioeconomic Impacts Analysis of Proposed Amendments to Rule 4682 

Number of Impacted Businesses 12 

Revenues $325,274,561 

Net Profits $18,253,306 

Annual Compliance Cost $5,124,415 

Annual Compliance Cost Percent of Net Profits 28.1% 

Annual Compliance Cost Above 10% Significance Threshold $3,299,084 

Direct Employment Impacts 17.1 to 26.6 

Indirect Employment Impacts 8.6 to 13.4 

Induced Employment Impacts 8.2 to 12.7 

Total Employment Impacts 33.9 to 52.7 

Source: Applied Development Economics 

Impacted facilities will also reduce purchases from local 

businesses, which, indirectly would force these suppliers to 

reduce their respective workforce by 8.6 to 13.4 workers. 

The loss of consumer spending associated with the direct loss 

of 17.1 to 26.6 jobs and indirect loss of 8.6 to 13.4 jobs would 

induce the loss of another 8.2 to 12.7 jobs in retail and 

personal services, as households directly and indirectly 

affected by cost-cutting measures reduce their own 

discretionary spending. Altogether, total job losses stemming 

from the proposed amendments to Rule 4682 range from 

33.9 to 52.7 jobs, or less than one percent of all jobs in the 

region or all manufacturing jobs in the region. 

5.5 IMPACT ON SMALL BUSINESSES

In addition to analyzing the employment impacts of the 

proposed amendments to Rule 4682, state legislation requires 

that the socioeconomic analysis assess whether small 

businesses are disproportionately affected by air quality rules. 

This section begins by briefly summarizing how the state 

government defines small businesses for the purposes of 

qualifying certain businesses for various programs. This 

section concludes with a discussion as to whether the affected 

industries include small businesses and assesses whether 

those small businesses are disproportionately impacted by the 

new rules. 
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DEFINITION OF A SMALL BUSINESS

For purposes of qualifying small businesses for bid 

preferences on state contracts and other benefits, the State of 

California defines small businesses in the following manner1. 

To be eligible for small business certification, a business: 

 Must be independently owned and operated; 

 Cannot be dominant in its field of operation; 

 Must have its principal office located in California 

 Must have its owners (or officers in the case of a 

corporation) domiciled in California; and 

 Together with its affiliates, be either: 

• A business with 100 or fewer employees, and 

an average gross receipts of $10 million or less 

over the previous tax years, or 

• A manufacturer with 100 or fewer employees 

Of the 12 facilities that are potentially subject to proposed 

amendments to Rule 4682, six employ less than 100 workers, 

and, of these, three generate less than $10 million in annual 

sales. In other words, three facilities fit the small business 

criteria. Based on a review of data from the District, these 

facilities will incur costs amounting to $1.6 million, or 31 

percent of the anticipated $5.2 million in annual costs. Thus, 

the analysis concludes that small businesses are 

disproportionately impacted by the proposed amendments, as 

these businesses represent 25 percent of all facilities that are 

subject to Rule 4682 and employ three percent of all 

workers.2

 

1 State of California. Department of General Services. “California Small Business Certification” (http: 

www.pd.dgs.ca.gov/smbus/sbcert.htm) 

2 three percent = 49 workers in 3 small businesses divided by 1,330 workers in all businesses