SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis December 18, 200 8

C-1 Final Draft Staff Report with Appendices For Revised Proposed Amendments to Rule 4607 

## APPENDIX C

COST EFFECTIVENESS ANALYSIS

FOR REVISED PROPOSED

AMENDMENTS TO RULE 4607

DECEMBER 18, 2008SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis December 18, 200 8

C-2 Final Draft Staff Report with Appendices For Revised Proposed Amendments to Rule 4607 

### APPENDIX C Cost Effectiveness Analysis

I. INTRODUCTION

The California Health and Safety Code (CH&SC) 40920 .6(a) requires the San Joaquin Valley Unified Air Pollution Control District to co nduct both an "absolute" cost effectiveness analysis and an “incremental” cost ef fectiveness analysis of available emission control options prior to adopting each Bes t Available Retrofit Control Technology (BARCT) rule. The purpose of conducting a cost effectiveness analysis is to evaluate the economic reasonableness of the poll ution control measure or rule as it applies to operators in the San Joaquin Valley Air Basin. The analysis also serves as a guideline in developing the control requirements of a rule.

Incremental cost effectiveness is intended to measu re the change in costs (in $/year) and emissions reductions (in tons reduced/year) bet ween two progressively more effective control options or technologies. For thi s rule project, the limits are considered the lowest achieved in practice, therefore, no incr emental cost effectiveness analysis

was conducted.

II. SUMMARY AND CONCLUSION

Conventional Printing Technologies As stated in appendix B, this rule amending project is not expected to reduce emissions from the rotogravure, screen printing, and letterpr ess industries within the San Joaquin Valley Air Basin (SJVAB). Also, many of the change s to rule language are required by the control techniques guidelines promulgated by EP A, as such industry is already subject to those requirements hence no cost effecti veness analysis was conducted for those changes. Therefore, a cost effectiveness anal ysis was conducted only for flexographic ink and lithographic fountain solution . The cost effectiveness analysis revealed that the costs incurred by industry to com ply with proposed amendments are negligible.

Paper, Film, Foil, and Fabric Coating Research of the District permit database indicates that there are no paper, film, foil or fabric coating operations in the SJVAB that operate independent of graphic arts printing operations. Consequently, no operations will be af fected by proposed amendments and additions; therefore, no cost effectiveness analysi s was conducted for paper, film, foil, and fabric coating operations.SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis December 18, 200 8

C-3 Final Draft Staff Report with Appendices For Revised Proposed Amendments to Rule 4607 Digital Printing Technologies The proposed recordkeeping requirement for commerci al digital printing would consist of a monthly record of the amount, type, and VOC co ntent of inks, coatings, adhesives, and cleaning materials, as well as a copy of the ma terial safety data sheet (MSDS) or product data sheet for each material used. As this does not require changes in any materials used, no cost effectiveness analysis was conducted for digital printing technologies.

III. COST EFFECTIVENESS ANALYSIS

District staff used available cost information cont ained in technical reports, EPA’s Control Techniques Guidelines (CTG), distributers, and staff reports from other Air Districts to conduct a cost effectiveness analysis of the proposed requirements of Rule 4607. For this project the compliance costs are as sociated with reformulating the ink to meet the proposed limits.

The following are assumptions used during the cost effectiveness analysis:

1) Cost 3 - 6 % increase but conversations with Fl int Group, the second largest

international distributer of inks, indicate that th ere is no cost difference between different VOC contents of flexographic inks. This is a conservative estimate. 2) Percent volume of VOC is roughly equal to the p ercent by weight. 3) Density of ink is assumed to be 10 lb/gallon on average based on MSDS sheet. 4) Lithographic fountain solutions are $15.50 /gal based on a local ink distributer. 5) Flexographic inks range from $2.25 to $3.50 /po und for an average of $2.88/lb. 6) Lithographic industry net profits after tax are $11 million from analysis conducted by Applied Development Economics. 7) Flexographic industry net profits after tax are $2.5 million from analysis conducted by Applied Development Economics.

The cost effectiveness of implementing proposed ame ndments was calculated using the following process:

Lithographic Industry :

1) Emission Inventory = 142 tons VOC/year = Ink Us ed x Current Rule Limit 142 tons/ VOC /yr = Ink Used x 8% by vo lume

142 tons/yr x 2,000 lb/ton / 8% = Ink Used Ink Used= 3,550,000 lb Ink/yearSAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DI STRICT

Appendix C: Cost Effectiveness Analysis December 18, 200 8

C-4 Final Draft Staff Report with Appendices For Revised Proposed Amendments to Rule 4607 2) Increased cost of compliance ink = Ink used x P rice of ink x 3%

= 3,550,000 lb/year x ($15.50/gal / 10 lb/gal) x 3% = $165,075/year in addition ink costs at 3% price increase

3) Cost effectiveness is calculated as follows: Emission reductions from Appendix B: 10.8 tons VOC /year Cost effectiveness = $165,075 /year / 10.8 tons VOC /year

= $15,284/ton

For the assumed 6% increase, the dollar amount woul d be double that or approximately $30,569/ton.

4) Cost effectiveness analysis calculated as follo ws: For $11 million net profit after tax: $165,800 / $ 11 million = 1.5%

Flexographic Industry : 1) Emission Inventory = 132.5 tons VOC/year = Ink Used x Current Rule Limit 132.5 tons/ VOC /yr = Ink Used x 1.8 8 lb/gal / 10 lb/gal 132.5 tons/yr x 2,000 lb/ton / ( 0.188) = Ink Us ed. Ink Used= 1,409,574 lb Ink/year

2) Increased cost of compliance ink = Ink used x Price of ink x 3%

= 1,409,574 lb/year x ($2.88/) x 3% = $121,786/year in addition ink costs at 3% price increase

3) Cost effectiveness is calculated as follows: Emission reductions from Appendix B: 9.23 tons VOC /year Cost effectiveness = $121,786/year / 9.23 tons VO C/year

= $13,195//ton

For the assumed 6% increase, the dollar amount woul d be double that or approximately $26,390/ton.

4) Cost effectiveness analysis calculated as follo ws: For $2.5 million net profit after tax: $121,786 / $ 2.5 million = 4.8%

The numbers presented in this analysis vary from th ose numbers presented in the socioeconomic analysis due to the variations in ass umptions. Also, the socioeconomic analysis presented in Appendix D assumed the cost o f the materials as a percent of the total operating costs. However, both analyses perf ormed reveal percentages of less than the 10% level of significance.