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ATTACHMENT V 

Proposed Amendments to Rule 67.0 Architectural Coatings 

Socioeconomic Impact Analysis 

The Air Resources Board (ARB) analyzed the economic impacts that would result from 

implementation of the Suggested Control Measure (SCM) volatile organic compound (VOC) 

content limits. In addition, the South Coast Air Quality Management District (SCAQMD) 

analyzed economic impacts when it amended its architectural coating Rule 1113 in 1996 and 

1999. The interim VOC limits from those adoptions and the June 2000 SCM adopted by 

ARB are consistent. SCAQMD routinely runs regional economic models to determine 

socioeconomic impacts of its rule adoptions and did so for its Rule 1113 adoptions. ARB and 

the District have evaluated the results of this modeling analysis and believe that it provides a 

worst-case scenario for potential employment impacts in San Diego when interpolated by 

population correction factors. The applicability of these results to the San Diego area is 

premised on the idea that economic relationships between San Diego and South Coast 

suppliers and users of architectural coatings do not differ significantly. 

Correspondence from ARB states that its analysis (Chapter VIII, Economic Impacts, from the 

SCM staff report) is appropriate for use by the San Diego County Air Pollution Control 

District (District) for determining costs and economic impacts from the proposed amendments 

to Rule 67.0 (Kenny, Oct. 24, 2000). In addition, this ARB letter confirms the District’s 

assessment that it is not necessary to use a regional economic model to perform the economic 

analysis for the purpose of adopting amendments to Rule 67.0 “because the cost increase 

associated with the SCM is small.” 

Thus, for the purpose of this socioeconomic impact analysis, the District has summarized the 

relevant published cost, economic, and employment impacts from ARB and SCAQMD reports 

without doing additional economic surveys or running economic computer models. 

Types of Affected Business and Industry Including Small Business

The proposed amendments to Rule 67.0 would potentially impact: (i) industries engaged in 

manufacturing paint, varnishes, enamels and allied products (SIC 2851); (ii) end users of 

architectural coatings, including do-it-yourself consumers, painting contractors (SIC 1721) 

that may be small businesses, and maintenance personnel; and (iii) suppliers, sellers, and 

solicitors of architectural coatings (SIC 5198, 5231). New construction and maintenance of 

the following may be impacted by these proposed amendments: 

• Buildings 

• Transportation infrastructure 

• Industrial structures such as aboveground tanks 

• Any stationary structure or appurtenance 

EMPLOYMENT AND ECONOMIC IMPACTS

SCAQMD and ARB used different approaches in analyzing the employment and economic 

impacts of the proposed standards. The SCAQMD used a regional economic model to 
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quantify the employment impacts for all businesses in the region, and that approach assumed 

all costs would be passed on to the end user. In contrast, the ARB analysis focused on the 

impact of the SCM on the profitability of coating manufacturers, and its analysis assumed that 

all costs would be absorbed by the industry rather than passed through to the end users. ARB 

relied heavily on survey responses from coating manufacturers. ARB evaluated employment, 

business creation, and business competitiveness for the coating manufacturers in California. 

While ARB determined there would be little impact on coating manufacturers using its 

assessment techniques, the SCAQMD analysis actually predicts employment gains for coating 

manufacturers in the chemical industry. Both analyses support a determination that the 

proposed amendments to Rule 67.0 will not have an unacceptable adverse impact on 

employment and the economy in San Diego County. 

ARB Analysis

According to ARB, the SCM is not expected to cause a noticeable change in California 

employment and payroll of the coating manufacturers because the analysis shows that the 

proposal will not significantly alter their profitability. 

ARB estimated profitability impacts by analyzing the impact of the costs to comply on return 

on owner’s equity (ROE) for selected sample coating manufacturers. The approach used to 

determine these economic impacts was as follows: 

1. Select a sample of three representative businesses of different sizes from the list of 

135 affected businesses. Selection is based on the sales revenues and the quantity of 

noncompliant coatings manufactured. 

2. Estimate the cost of compliance with the SCM proposal for each of these businesses. 

3. Adjust the estimated cost for federal and state taxes. 

4. Calculate the three-year average ROE where data are available for each of the selected 

businesses by averaging their ROEs for 1997 through 1999. ROE is calculated by 

dividing the net profit by the net worth. 

5. Subtract the adjusted cost from the net profit data, then use this result to calculate an 

adjusted three-year average ROE. 

6. Compare the adjusted ROE with the ROE before the subtraction of the adjusted cost to 

determine the potential impact on the profitability of all affected businesses. 

ROE reductions ranged from negligible to a decline of two percent. A decrease of ten percent 

in ROE or more was considered to be a significant adverse economic impact. ARB has used 

the threshold value of ten percent consistently since 1990 to determine impact severity of 

proposed regulations. This threshold is consistent with the thresholds used by the EPA and 

others. 

In reaching this conclusion, ARB assumed that coating manufacturers, both in and outside 

California, would absorb all the costs from the adoption of this proposal. Consequently, this 

analysis represents the maximum impact on the manufacturers. This assumption of 

absorption of all costs would mean decreased profits for the coating manufacturers; however, 

since coating manufacturing profitability is unlikely to be significantly reduced, ARB 

concluded that employment, business creation and expansion, and business competitiveness 

should not be significantly affected for that industry. ARB noted that its estimates of the 

reductions in ROE might be high. They also acknowledged, however, that since its analysis 
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was based on assumptions that may not be true for all businesses, it was possible that some 

businesses might be adversely affected. 

SCAQMD Analysis

A more broad-based approach to examining employment and economic impacts within the 

District is to scale the results of the SCAQMD analysis of the interim SCAQMD Rule 1113 

VOC limits, which are the same VOC limits contained in the SCM and are the basis for the 

proposed amendments to Rule 67.0. In its 1999 socioeconomic report and computer modeling 

of employment impacts, SCAQMD estimated that 374 jobs could be forgone in the year 2002, 

which is when the interim VOC standards become effective for SCAQMD. Non-farm 

employment in the South Coast district is about 6.5 million jobs. These SCAQMD results 

were projected through the use of the Regional Economic Models, Inc. (REMI) computer 

model. 

The REMI model is an economic and demographic forecasting and simulation model 

designed to examine the economic and demographic effects resulting from policy initiatives 

or external events in a local economy. The employment impacts from the REMI model runs 

for the SCAQMD interim VOC limits are summarized in Table 1. 

Table 1 – Employment Impact of SCAQMD Rule 1113 Interim VOC Limits 

INDUSTRY(SIC) 2002 INDUSTRY(SIC) 2002 

Lumber (24) -1 Local/Interurban (41) -2 

Furniture (25) -4 Air Transp. (45) -1 

Stone, Clay (32) -1 Other Transp. (44, 46-47) -1 

Primary Metals (33) 0 Communication (48) -4 

Fabricated Metal (34) -2 Public Utilities (49) -3 

Non-electric Machinery (35) -3 Banking (60) -10 

Electric Equipment (36) -2 Insurance (63, 64) -8 

Motor Vehicle (371) -1 Credit & Finance (61-62) -8 

Rest of Transp. Equip(372-379) -1 Real Estate (65) -11 

Instruments (38) -2 Eating & Drinking (58) -34 

Misc. Manufacturing (39) -1 Rest of Retail (52-57, 59) -76 

Food (20) -3 Wholesale (50-51) -17 

Tobacco Manufacturing (21) 0 Hotels (70) -2 

Textiles (22) -1 Services & Repair (72, 76) -15 

Apparel (23) -3 Private Household (88) -6 

Paper (26) 0 Auto Repair/ Service (75) -9 

Printing (27) -2 Misc. Business Serv. (73) -26 

Chemicals 30 Amuse & Recreation (79) -14 

Petroleum Products (29) -1 Motion Pictures (78) -1 

Rubber (30) 0 Medical (80) -4 

Leather (31) 0 Prof. Serv. (81, 87, 89) -21 

Mining (10,12-14) -1 Education (82) -21 

Construction (15-17) -44 Non-Profit Org. (83) -23 

Railroad (40) 0 Agri./Forest/Fish (07-09) -3 

Trucking (42) -3 Government -8 

 TOTAL -374 

The sector with the greatest job impacts from the proposed amendments is the construction 

sector (SICs 15-17). The increased costs of paints and contractor-provided painting services 

would reduce consumer spending on other goods and services. As a result, it is expected that 
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there would be jobs forgone in the industries of eating and drinking (SIC 58), rest of retail 

(SICs 52-57, 59), wholesale (SICs 50-51), miscellaneous business services (SIC 73), medical 

(SIC 80), and miscellaneous professional services (SICs 81, 87, 89). The chemical industry 

(SIC 28) is expected to add jobs in the SCAQMD because increased expenditures made on 

reformulated coatings (and other associated activities) in this sector. Because coating 

manufacturers in San Diego County already manufacture products that meet the future limits 

in the proposed rule, these added jobs are not relevant for our assessment. 

Conclusion

In the District, there are two known coating manufacturers. One is currently manufacturing 

coatings which comply with the January 1, 2003, VOC content limits. The other 

manufacturer makes only a few architectural coatings, and is expected to comply with the 

future limits in the proposed rule. Since it is unlikely that there will be any cost impacts to 

these manufacturers, there should be no impact on ROE and no impacts on employment, 

business creation and expansion, and business competitiveness for these companies. 

The employment and economic impacts from South Coast’s ten percent increase in 

architectural coatings prices (as noted, SCAQMD assumed all manufacturing cost increases 

would be passed on) may be scaled for San Diego. The number of jobs in the District is 

approximately one fourth the number for SCAQMD. Thus, if one extrapolates SCAQMD 

data from Table 1 to San Diego, the number of jobs lost would be (374 + 30)/5.4 or 76. Note 

that the 30 manufacturing jobs created in SCAQMD that acted to reduce total job loss were 

added because no similar job creation is expected in San Diego, given that the San Diego 

paint manufacturers already make complying products and will not need to reformulate. 

RANGE OF PROBABLE COSTS

The above analysis focuses principally on employment impacts to coating manufacturers. In 

this section, the more general cost impacts associated with the proposed new requirements are 

discussed. For this analysis, unlike the employment analysis, ARB and SCAQMD both 

assumed costs would be passed on to the end user. 

The cost impacts on manufacturers and consumers were examined by looking at both the 

ARB and SCAQMD analyses. ARB prepared a detailed assessment of the expected costs in 

the SCM staff report. They examined both the economic impacts on the coating 

manufacturers and the consumers of coatings. 

The proposed amendments to Rule 67.0 may impact consumers and other users of 

architectural coatings in the form of increased coating costs for coatings manufactured outside 

the District. ARB determined the maximum potential cost to consumers by assuming that 

manufacturers will pass on all increases in reformulation costs. An evaluation of cost impacts 

to coating manufacturers is needed to perform this worst-case cost analysis for consumer 

impacts. 

Cost Data Sources

ARB relied on the December 1999 ARB Economic Impacts Survey for coating costs specific 

to manufacturers. ARB used the best estimates from 23 out of 25 coating manufacturers 

including nonrecurring and recurring costs. (Two of the respondents reported coating line 
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reformulation costs three to ten times higher than other respondents and were considered 

statistical outliers by ARB.) Nonrecurring costs include research and development costs, 

product and consumer testing costs, new or modified capital equipment costs, and one-time 

marketing/label change costs. Recurring costs include raw material costs, recordkeeping 

costs, and reporting costs. The survey responses included a variety of large, medium, and 

small producers and provided a good sampling of products from all coating categories 

affected by the proposed amendments. 

In addition to the cost data supplied by manufacturers, ARB researched the raw material costs 

needed for coating reformulation. Primary sources included spot raw material prices from the 

Chemical Market Reporter and aggregate ingredient prices reported in the 1997 U.S. 

Economic Census for SIC Code 2851. For ingredients not shown in these two sources, ARB 

relied on prices reported confidentially by individual coating manufacturers or on published 

coating literature. A default value of $1.50 per pound was assigned to those infrequent cases 

where no ingredient price information was available. This value is higher than most of the 

ingredient prices used in the raw material cost analysis, including resins, which are the most 

expensive main ingredient. 

SCAQMD’s cost estimates were based on similar cost information supplied by resin suppliers 

and some coating manufacturers. For the most part, resin suppliers were the most cooperative 

in providing price information. 

Costs to Manufacturers

ARB determined the costs to manufacturers to reformulate noncompliant coatings to comply 

with the proposed VOC limits for each of the affected coating categories. This analysis 

considered manufacturers located inside California, but outside the SCAQMD. The total 

annualized non-SCAQMD cost was $23.8 million. For comparison, the total annualized cost 

to manufacturers estimated by SCAQMD to meet the same VOC limits (not including the 

relatively small categories for multicolor coatings and swimming pool repair coatings) was 

$19.7 million. The total annual costs reported from ARB and SCAQMD analyses are in 

agreement. About 45 percent of California’s population live in the South Coast District and 

45 percent of the total annual cost is spent in the South Coast District. Thus, the regional cost 

to the manufacturers is directly proportional to the population of that region. 

Conclusion

Based on these two analyses, manufacturers will spend approximately $43 million to 

reformulate coatings to comply with the SCM’s VOC limits in California. Apportioning that 

cost to San Diego using a population factor (San Diego population to the population of the 

state excluding South Coast), the annualized costs to manufacturers to comply with Rule 67.0 

would be about $3.6 million per year. As a comparison, the San Diego Gross County Product 

is about $93 billion (based on data published by the California Department of Finance in 

California Statistical Abstract, 2000). 
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COST TO CONSUMERS

ARB Analysis

ARB projected the maximum potential impact on consumers by assuming that all 

reformulation costs in the previous section are passed on in the form of higher coating prices. 

Using this assumption, the producer cost increases range from $1.20 to $1.70 per gallon with 

an average of $1.40 per gallon. The retail price increase is estimated using a 4X multiplier 

that assumes both the wholesaler and retailer double the price. Part of this cost increase 

results from the training and service provided by wholesalers and retailers to their customers. 

Thus, the estimated maximum retail price increase would be $4.80 to $6.80 per reformulated 

gallon with an average of $5.60 per gallon. This would translate to an average 12 percent 

increase in retail prices with the largest price increases occurring at industrial maintenance 

and other commercial coating applications. 

ARB also estimated the expected costs to consumers. For ordinary consumers who use flat 

and non-flat house paints, ARB projects no price increase for a typically reformulated flat 

paint and a 21 percent maximum increase for a typically reformulated non-flat paint. They 

note that consumers may purchase currently available compliant flat and non-flat coatings 

with no increase in price due to reformulation. The competition among suppliers of these 

coatings will likely constrain any price increases from reformulated coatings. Furthermore, 

ARB surveyed the availability and costs of coatings that currently comply with the proposed 

VOC limits. The survey indicated that complying coatings are available with prices similar to 

comparable noncomplying coatings (see Table 2). Thus, costs to consumers from the 

proposed amendments to Rule 67.0 should be small. 

Table 2 – Shelf Survey of Complying and Noncomplying Coatings Costs 

Coating Category 

Cost of 

Compliant 

Coatings 

Cost of 

Noncompliant 

Coatings 

Flats $13.40 - $32.99 $12.29 - $34.49 

Floor Coatings $15.00 - $58.00 N/A 

Industrial Maintenance $24.28 $24.78 – $78.39 

Lacquer $29.95 $20.95 

Multi-color Coatings $35.75 - $75.70 $75.66 – $91.00 

Nonflats $21.99 - $34.69 $24.99 – $39.49 

Primers, Sealers, and 

 Undercoaters 

$25.49 - $28.49 $25.49 - $30.99 

Quick-Dry Enamels $24.70 - $34.90 $23.60 - $34.41 

Quick-Dry Primers, Sealers, and 

 Undercoaters 

$7.37 - $25.00 N/A 

Stains $4.00 - $36.00 $7.00 - $35.00 

Swimming Pool Repair Coatings $32.99 - $59.99 $43.95 - $84.99 

Waterproofing Sealers $13.00 - $28.00 $10.00 - $30.00 

SCAQMD Analysis

Results of the SCAQMD analysis are similar to the results of the ARB analysis. Based on 

available information, SCAQMD estimated that the interim Rule 1113 VOC standards, which 

were the basis for the SCM, would result in maximum price increases for future complying 

coatings of up to ten percent. The 1999 SCAQMD Socioeconomic Report for Rule 1113 
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projects a worst-case ten percent increase across-the-board for all major categories. The 

SCAQMD price determinations for complying coatings were supported by information 

received from resin suppliers and coating manufacturers. The following sources were cited 

by SCAQMD to provide coating price estimates: 

 A case study by Devoe & Reynolds Co. published in Stirring Up Innovation (1994) 

noted a ten percent increase in costs for <250 g/l industrial maintenance, non-flat and 

wood stain coatings. 

 A Superior Coating paper at the April 28, 1998, SCAQMD Architectural Coatings 

Technology Conference (Superior Performance Coatings) noted a zero to ten percent 

increase in the cost per gallon of zero-VOC non-flat, primer sealer and undercoater, 

rust preventative, industrial maintenance, and stain coatings. 

 Another paper at the 1998 Architectural Coating Technology Conference indicated 

examples of zero-VOC flats, non-flats, primer sealer and undercoaters, rust 

preventatives, quick-dry enamels, floor coatings, industrial maintenance coatings, 

wood sealers, and wood stain coatings that have superior or matching coating 

performance while simultaneously reducing production and application costs (VOC 

Free Paints and Inks at No Extra Cost by G. Sugerman of PPA Technologies, a resin 

supplier). 

 Norman Mowrer of Ameron International also presented a paper at the 1998 

Architectural Coating Technology Conference that reported reduced costs for 

industrial maintenance coatings based on cost per performance characteristics. 

Conclusion

The projected worst-case price increases are summarized in the following table from both 

SCAQMD and ARB reports. 

Table 3 – Estimates of Projected Maximum Coating Price Increases 

Coating Category 

Typical Retail 

Price per Gallon 

ARB Cost per 

Gallon Increase 

SCAQMD Cost per 

Gallon Increase 

Industrial Maintenance $34 to $100+ $6.80 $4.00 

Rust Preventative 

 Coatings 

$30 $4.80 Info Not Available 

Floor Coatings $21 to $24 $4.80 to $6.80 $3.00 

Non-Flats $3 to $35 $3.70 $2.00 

Primers, Sealers & 

 Undercoaters (PSU) 

$9 to $31 $4.80 to $6.80 $2.00 

Quick-Dry PSU $3 to $25 $4.80 to $6.80 $2.00 

Quick-Dry Enamels $25 to $35 $4.80 to $6.80 $2.00 

Stains $4 to $36 $4.80 to $6.80 $2.50 

Waterproof Wood 

 Sealers 

$10 to $30 $4.80 to $6.80 $2.00 
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COST TO SMALL BUSINESS

The costs of the proposal to small businesses including small coating manufacturers, retailers, 

wholesalers, and painting contractors were evaluated based on studies performed by ARB and 

SCAQMD. ARB again focused on the cost incurred by coating manufacturers while the 

SCAQMD evaluated the cost impacts on painting contractors. The District believes that these 

studies are applicable to the San Diego region because the economic factors affecting 

architectural coating manufacturers, wholesalers, retailers, and painting contractors is similar 

throughout California. 

ARB Analysis

ARB analyzed the impact of the SCM on the competitiveness of small business coating 

manufacturers that compete with large coating manufacturers. According to ARB, smaller 

coating manufacturers tend to cater to niche markets that are based on competitive factors 

other than price. These companies depend on specialty coatings, brand loyalty, customer 

service, and other non-price related factors. 

According to ARB, small business retailers and wholesalers generally sell products from all 

types of manufacturers and should be unaffected by the proposed amendments to Rule 67.0. 

High-performance coatings that currently comply with the proposed VOC limits are available 

now from many different manufacturers. Thus, retailers should have an ample supply and a 

variety of products to sell. 

SCAQMD Analysis

The SCAQMD also analyzed the cost impacts to painting contractors in its analysis of 

amendments to Rule 1113. Based on data from industry sources, the estimated annual cost of 

SCAQMD’s interim VOC limits was $10.9 million 1998 dollars to consumers and $8.9 

million 1998 dollars to painting contractors (SIC 1721). According to SCAQMD, painting 

contractors and consumers could incur additional costs beyond these amounts. For the 

painting contractor, it could be the cost of training, learning, and testing the new reformulated 

coatings, frequent painting, possible construction defects, and litigation costs. These 

additional costs are based on claims made by some coating manufacturers and some paint 

contractors and not on any empirical studies. These costs assume coating manufacturers pass 

through all reformulation costs to end users. 

Conclusion

An estimate of cost impacts to painting contractors in San Diego was made by assuming that 

the cost breakdown (consumer vs. painting contractor) is similar to that found in the South 

Coast AQMD. This is a reasonable assumption because the type and quantity of work 

performed by painting contractors is expected to be similar in both regions on a per capita 

basis. SCAQMD estimates that 45 percent of the cost impact is experienced by painting 

contractors. Thus, the cost impact to San Diego area painting contractors would be 45 percent 

of $3.6 million, which is $1.6 million. 

COST-EFFECTIVENESS OF THE PROPOSAL

Both ARB and SCAQMD reported cost-effectiveness calculations for the SCM VOC limits 

and interim Rule 1113 standards, respectively. Both the SCM and interim SCAQMD Rule 

1113 are the basis for the proposed amendments to Rule 67.0. In addition, ARB performed a 
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sensitivity analysis with the increase in resin costs as the dependent parameter. This ARB 

analysis was performed using resin costs increasing at ten percent, 20 percent, and 50 percent 

per year. Both reports include cost-effectiveness values for each of the major coating 

categories that are proposed for amendment. 

The overall cost-effectiveness of the proposal is $3.19 per pound of VOC reduced according 

to ARB or $2.45 per pound of VOC reduced according to SCAQMD. The ARB costeffectiveness value assumes that resin costs for reformulation will increase by 20 percent. 

This assumption of 20 percent increase in resin costs is based on socioeconomic analyses 

performed by SCAQMD and confidential comments provided by some manufacturers to 

ARB. The South Coast AQMD cost-effectiveness overall value does not include the impact 

from flats or lacquer coatings which were amended by SCAQMD in 1996 instead of 1999 for 

the rest of the categories, which would have made the result even less than the estimated 

$2.45. These cost-effectiveness results are summarized in the following table. The table 

reports the comparison between the ARB and SCAQMD analyses and shows the results of the 

sensitivity analysis performed by ARB that uses projected resin price increases as the 

dependent variable. 

Table 4 – Reported Cost-Effectiveness in $ per Pound of VOC Reduced 

Coating Category 

ARB: 

Baseline 

ARB: 10% 

Increase 

ARB: 20% 

Increase 

ARB: 50% 

Increase 

SCAQMD 

Interim VOC 

Limit 

SCAQMD 

Final VOC 

Limit 

Flats ($1.64) ($0.97) ($0.30) $1.71 0 $2.85 

Industrial Maintenance $5.37 $5.48 $5.59 $5.91 $3.03 $8.76 

Lacquer $1.59 $1.59 $1.59 $1.59 $1.06 $0.60 

Multicolor $2.55 $2.69 $2.83 $3.26 N/A N/A 

Non-flat (low & medium 

gloss) $3.13 $3.75 $4.37 $6.23 $5.64 $10.73 

Primers, Sealers, 

Undercoaters (PSU) $7.36 $7.50 $7.65 $8.08 $1.11 $12.46 

Quick-Dry Enamel $3.77 $3.87 $3.97 $4.28 $1.01 $4.63 

Quick-Dry PSU ($0.47) ($0.36) ($0.25) $0.08 $0.48 $9.79 

Stains $2.04 $2.09 $2.14 $2.30 $0.89 $0.89 

Swimming Pool Repair $0.48 $0.65 $0.83 $1.36 N/A N/A 

Waterproofing Sealers ($0.72) ($0.61) ($0.50) ($0.16) $0.90 $0.90 

Overall CostEffectiveness $2.72 $2.96 $3.19 $3.88 $2.45 $8.18 

Conclusion

From the Costs to Manufacturers section, the total annualized cost to comply with the 

proposed Rule 67.0 limits would be about $3.6 million. The VOC emission reductions, based 

on 1996 data, are anticipated to be 1.5 tons/day (see Emission Reduction Potential of the Rule 

section). The estimated cost-effectiveness is $3.28 per pound of VOC emission reduced. 

This cost-effectiveness is comparable to the cost-effectiveness of other District-adopted VOC 

regulations. Generally, the cost-effectiveness of past VOC rule adoptions in this District has 

been in the one-dollar to three-dollar range. 
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AVAILABILITY AND COST-EFFECTIVENESS OF AN 

ALTERNATIVE TO THE PROPOSAL

ARB looked at seven alternatives that were found infeasible. Staff also looked at these seven 

alternatives and found them infeasible. Following is a brief description of these alternatives, 

and a discussion of why they were found infeasible:

1. Performance-Based Standards 

Rather than establish lower VOC content requirements for specified categories of 

coatings, this alternative would establish emission standards based on performance 

standards such as “emissions per area covered” or “coating durability.” This 

alternative has been rejected as infeasible because it would be too difficult to reach a 

consensus among involved parties as to how to create the standards to cover the 

multitude of coatings reformulations with varying performance characteristics. 

2. Seasonal Regulation 

Under this alternative, the VOC content limits proposed for various coatings in Rule 

67.0 would be in effect during the “high-ozone season” (typically the summer 

months). During the “low-ozone season” (typically the winter months), coatings 

formulators could sell and distribute, and contractors and do-it-yourself consumers 

could use coatings with higher VOC contents. This alternative was found infeasible 

because it is too difficult to implement and enforce. It would be difficult for coatings 

formulators, distributors, and retail stores to manage their inventories to ensure that 

only complying coatings are sold during the high-ozone season. Knowledge of and 

enforcement of these requirements at the end-user level would be difficult and would 

require significant additional enforcement resources. In addition, there have been 

State violations (“high ozone”) in all months of the year except February and 

December based on data from 1980 - 1995. 

3. Regional Regulation 

Under this alternative, areas within a District that do not have an ozone problem or 

contribute to a District’s ozone problem would be exempted from the VOC 

requirements of Rule 67.0. This alternative was rejected as infeasible for two main 

reasons. First, in order to determine the viability of such an approach, the District 

would have to conduct an extensive analysis involving ambient air quality modeling to 

determine which geographical areas would be subject to the lower VOC requirements 

and which would be exempted. This type of analysis would be difficult to complete 

due to the inherent variability of meteorological conditions within San Diego County. 

Different meteorological scenarios would drastically alter the determination of those 

geographical area. In addition, there have been state ozone violations throughout the 

area. 

Second, even if a reliable technical determination could be made regarding the 

geographical areas, the problem of enforcing this regulatory approach remains. 

Enforcement at the retail level, as well as the end-user level would be difficult and 

would require significant additional enforcement resources, as identified in the 

“Seasonal Regulation” alternative. 
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4. Exceedance Fees 

This alternative would allow purchases of noncompliant coatings on payment of a fee, 

similar to the system that exists in the national Architectural and Industrial 

Maintenance (AIM) coatings rule. The system used in the national AIM rule allows 

coatings manufacturers and importers to sell coatings that exceed the applicable VOC 

limit if they pay a fee of $0.0028 per gram of excess VOC. Essentially, this is a “payto-pollute” approach. The District does not support such an approach because it does 

nothing to bring the air into compliance with the state ozone standards, and may 

actually hinder efforts to attain the state and federal ozone standards. This type of 

approach could eliminate or substantially reduce the emission reductions expected 

from the proposed revisions to Rule 67.0. Additional problems include concern 

regarding whether the fee is high enough to discourage the manufacture and sale of 

high-VOC coatings, enforcement at the district-wide level, and extensive 

recordkeeping requirements. For all of these reasons, an exceedance fee approach is 

not considered a feasible alternative. 

5. Tonnage Exemption 

As with the “Exceedance Fees” alternative, this type of alternative is part of the 

national AIM coatings rule. A tonnage exemption would allow coatings 

manufacturers and importers to sell limited quantities of coatings that exceed the 

applicable VOC limit in Rule 67.0, without paying an “exceedance fee.” The 

calculation would be based on the total mass of VOC contained in all exempt coatings. 

The limit of the exemption, on a “per manufacturer” or “per importer” basis, would be 

on a sliding scale that would decrease in future years. 

Like the “Exceedance Fee” approach, a tonnage exemption would do nothing to bring 

the air into compliance with ozone standards, may actually hinder efforts to attain both 

the state and federal ozone standards, and could substantially reduce the emission 

reductions expected from the proposed revisions to Rule 67.0. Additional problems 

include enforcement, recordkeeping, and reporting requirements. For these reasons, a 

tonnage exemption is not considered a feasible alternative. 

6. Low Vapor Pressure (Low Volatility) Exemption 

Under this alternative, VOCs with low vapor pressures (i.e., “low vapor-pressure 

VOCs” or “LVP-VOCs”) would be exempted as VOCs in determining the overall 

VOC content of a coating. This type of exemption is based on an assumption that low 

vapor-pressure VOCs volatilize more slowly, and as a result emit less VOCs to the 

atmosphere and contribute very little to ozone formation in the atmosphere. The ARB 

Final Program EIR identified a number of reasons why this alternative should be 

rejected as infeasible. Due to the extensive and technical nature of the reasoning 

behind this determination, the reasons have not been fully summarized in this report. 

For an extensive explanation of the ARB’s determination of infeasibility, the reader 

should reference the ARB Final Program EIR, Pages V-142 to V-151. 

The same reasons identified in the ARB Final Program EIR are applicable to the 

proposed project. The District has concluded that this alternative is not feasible 

because exempting LVP-VOCs would not achieve regulatory consistency, LVP-VOCs 

in architectural coatings will eventually evaporate and enter the atmosphere, and 
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EPA’s Test Method 24 automatically excludes VOCs that do not evaporate into the 

atmosphere. 

7. Reactivity-Based VOC Limits 

This alternative would involve establishing coating VOC limits based on the reactivity 

characteristics (i.e., the tendency to react in the atmosphere to form ozone) of the 

compounds contained in the coating, instead of the mass-based VOC limits that are 

used in the proposed revisions to Rule 67.0. Historically in the State of California and 

in San Diego County in particular, control of VOC emissions has been through massbased reductions. ARB has committed to evaluating the feasibility of reactivity-based 

regulations for certain VOC source categories, and a number of specific studies 

relating to VOC photochemical activity are listed on Pages V-152 and V-153 of the 

ARB Final Program EIR. In addition, ARB has begun to incorporate reactivity 

characteristics of compounds into some of its existing and proposed regulations. 

However, at this time, a number of issues need to be addressed before this type of 

control strategy could be developed for architectural coatings. These issues are 

described in the ARB Final Program EIR (Pages V-155 to V-158). As discussed in 

the Program EIR, additional data are necessary before assessing the feasibility of a 

reactivity-based control strategy for architectural coatings. Because additional 

reductions are needed in the near-term, and historical data indicate mass-based 

controls effectively reduce ozone formation, it is necessary to proceed with massbased VOC limits at this time. 

The District looked at three feasible alternatives to the proposed amendments to Rule 67.0. 

These alternatives were to not amend the rule, to extend the compliance deadline by one year, 

or to further reduce the VOC limits. 

1. The first alternative to not adopt the rule is not recommended because it would result 

in fewer emission reductions than the proposed amendments to Rule 67.0 and the 

District needs the emission reductions to achieve the state ozone standards. 

2. The second alternative to extend the compliance deadlines by one year is not 

recommended because the VOC limits in the proposed rule are feasible by January 1, 

2003 (January 1, 2004, for Industrial Maintenance Coatings), and additional time to 

comply is not necessary. Both the federal and state mandates that air quality standards 

be attained as expeditiously as practicable, and the District’s air quality problems 

require that any delay in achieving emission reductions must be technically or 

economically justified. Based on the information received to date, such a delay is not 

warranted. 

3. The last alternative is to further reduce the VOC limits. The District looked at the 

cost-effectiveness of the currently adopted form of SCAQMD Rule 1113, 

Architectural Coatings, which include more stringent VOC content requirements for 

coatings with a future effective date of 2006. This alternative was analyzed by the 

SCAQMD for cost-effectiveness and availability. 

According to SCAQMD staff report, the overall cost-effectiveness of the final VOC limits, 

effective 2006, is $8.18 per pound of VOC reduced. Although the adopted final VOC limits 
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will reduce more VOC emissions than the interim limits, it is a more expensive control 

measure when compared to the $3.19 per pound of VOC reduced for the SCM. 

Although the alternative to the proposal could still be considered cost-effective at $8.18 per 

pound of VOC reduced, staff is not proposing this alternative for several reasons: 

First, ARB staff also considered this alternative in the SCM but declined to include it 

because there were insufficient time and resources to do a thorough evaluation. 

Second, the SCM provides consistency statewide that provides a uniform regulation for 

coating manufacturers in all of California except the South Coast district. 

Third, a statewide averaging provision from the SCM is being proposed and uniform 

standards are needed for this provision to be workable. 

Fourth, the alternative is in many ways technology-forcing, the South Coast AQMD will 

be doing technology assessments to determine the progress of complying coating 

technologies in meeting future VOC limits, and District staff can reassess the need to 

adopt the more stringent standards in response to these future analyses. 

EMISSION REDUCTION POTENTIAL OF THE RULE

The estimated emissions from architectural coatings in 2000 are 10.33 tons of VOC per day. 

The estimated emission reduction for the proposed rule based on a 15 percent overall control 

factor is 1.5 tons of VOC per day.