SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

 For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D -1

APPENDIX D 

SOCIOECONOMIC IMPACT ANALYSIS REPORT 

FOR PROPOSED RULES 4306, 4307, AND 4320 

October 16, 2008 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

 For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D -2

This page intentionally blank. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

 For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D -3

SOCIOECONOMIC ANALYSIS: 

DRAFT AMENDMENTS TO RULE 4306 

AND NEW RULE 4320, AND PROPOSED AMENDMENTS 

TO 4307 

30 July 2008 

Prepared for 

San Joaquin Valley Unified Air Pollution Control District 

1990 E. Gettysburg Avenue 

Fresno, CA 93726 

Prepared by 

Applied Development Economics, Inc. 

100 Pringle Avenue, Suite 560  Walnut Creek, California 94596  (925) 934-8712 

2151 River Plaza Drive, Suite 150  Sacramento, CA 95833  (916) 923-1562 

www.adeusa.com
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 4

TABLE OF CONTENTS 

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

Section 2. Description of Proposed Amendments to Rules 4306, 4307, and Proposed 

New Rule 4320..........................................................................................................6

Section 3. Methodology..............................................................................................................7

Section 4. Impacted Industries Subject to Proposed Amendments: Larger Economic 

and Demographic Trends........................................................................................8

4.1 Larger Economic and Demographic Trends..................................................8

4.2 Affected Industries...........................................................................................11

4.3 Affected Stakeholders ......................................................................................12

Section 5. Socioeconomic Impacts .........................................................................................13

5.1 Compliance Cost Estimates ............................................................................13

5.2 Business Responses to Compliance Costs....................................................14

5.3 Impacts on Affected Industries......................................................................15

5.4 Impact on Small Businesses............................................................................19

5.5 Definition of a Small Business........................................................................19
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 5

SECTION 1. EXECUTIVE SUMMARY 

The District is amending existing Rules 4306 and 4307 to satisfy goals described in the District’s 2007 

Eight-Hour Ozone Plan. Through the proposed amendments, the District seeks to obtain as much 

reduction of oxides of nitrogen (NOx) from boilers, steam generators, and process heaters as expeditiously 

practicable, technologically feasible, and economically reasonable, as determined by the District’s 

Governing Board. In addition to proposed amendments to Rules 4306 and 4307, the District is proposing

a new rule, called Rule 4320. Rule 4320 extends Rule 4306 by requiring more stringent longer-range limits. 

The socioeconomic analysis of Rules 4306 and 4307 is based on the March 17, 2008 drafts of the rules. 

As discussed in the socioeconomic analysis, an estimated 345 established in various industries will be

subject to changes to Rule 4306\4320, and 1,527 establishments will be affected by changes to Rule 4307. 

Many of the establishments affected by changes to Rule 4307 will also be affected by changes to Rule 

4306. 

With respect to Rule 4306\4320, the socioeconomic analysis examines two cost scenarios, on involving 

annual compliance cost issued by the SJVUAPCD. The other scenario involves annual compliance cost 

figures issued by affected industry stakeholders. The analysis shows that affected industries are not

significantly impacted when using the District’s compliance cost figures. When using industry cost figures, 

industries are also not significantly affected by Rule 4306/4320 for the most part, except for large oil 

producers. With respect to impacts stemming from costs associated with changes to Rule 4307, the 

analysis concludes that affected industries are not significantly impacted by the proposed amendments. 

The analysis also concludes that small businesses are not disproportionately impacted by changes to Rules 

4306 and 4307, as well as by draft new Rule 4320. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 6

SECTION 2. DESCRIPTION OF PROPOSED AMENDMENTS 

TO RULES 4306 AND 4307 AND PROPOSED NEW RULE 

4320 

The purpose of Rule 4306 is to limit NOx and CO emissions from boilers, steam generators, and process 

heaters. The rule applies to any gaseous fuel or liquid fuel fired boiler, steam generator, and process heater 

with a rated heat input greater than 5.0 million Btu/hr. The current rule does not apply to units that are 

addressed by other District rules. These units include solid fuel fired units, dryers, glass melting furnaces, 

kilns and smelters, unfired or fired waste heat recovery boilers, and any unit in which the total rated heat 

input of each burner is less than or equal to 5 million Btu per hour as specified in the operating permit, 

and in which each burner’s products of combustion does not come in contact with the products of 

combustion of any other burner. The rule also contains certain exemptions such as burning of any fuel 

other than natural gas during natural gas curtailment for no more than 168 hours. 

The District is amending existing Rule 4306 to satisfy goals described in the District’s 2007 Eight-Hour 

Ozone Plan. Through the proposed amendments, the District seeks to obtain as much reduction of oxides 

of nitrogen (NOx

) from small boilers, steam generators, and process heaters as expeditiously practicable, 

technologically feasible, and economically reasonable, as determined by the District’s Governing Board. 

District staff also seeks to amend Rule 4307, to implement an emission control measure (S-COM-2) in the 

District’s 2007 Eight-Hour Ozone Plan. If adopted, the proposed amendments could reduce additional 

NOx emissions by providing incentives for replacement and retrofit of school boilers, steam generators, 

and process heaters (units) which are currently exempt by existing Rule 4307. Also, the existing annual 

heat input threshold of 5 billion Btu per year would be lowered to 1.8 billion Btu per year. Additionally, 

the proposed amendments would, if adopted, control units with a heat input greater than 1.8 billion Btu 

per calendar year, natural draft units in an oilfield or refinery, and glycol reboilers would be required to 

comply with the emission requirements of Section 5.1 in order to gain additional NOx emission reductions. 

In addition to proposed amendments to Rules 4306 and 4307, the District is proposing a new rule, called 

Rule 4320. Rule 4320 extends Rule 4306 by requiring more stringent longer-range limits. Rule 4306 must

remain as a backstop measure to provide specific emission limits until all units comply with the future 

limits in Rule 4320. The Alternative Emission Control option is not included in Rule 4320 because the 

recordkeeping requirements and 10 percent additional environmental benefit made this option unattractive 

as a compliance route. Rule 4320 does include an emissions fee option which should prove a more 

attractive compliance route for units which would otherwise be just above the required emission limit. 

The socioeconomic analysis of Rules 4306 and 4307 is based on the March 17, 2008 drafts of the rules. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 7

SECTION 3. METHODOLOGY 

The socioeconomic analysis involves the use of information provided directly by affected sources, as well 

as secondary data used to describe the industries affected by the proposed amendments to Rules 

4306/4307 and proposed new Rule 4320. 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 2002 

Economic Census, 1997 Economic Census, Minnesota IMPLAN Group, and the State of California’s 

Employment Development Department (EDD) Labor Market Information Division. For purposes of 

estimating profits, ADE reviewed a number of sources, including Dun and Bradstreet, the CCH, Inc., the

US Internal Revenue Services, and corporate annual reports of companies subject to Rules 4306/4307 and

proposed new Rule 4320. 

With the above information, ADE was able to estimate net after tax profit ratios for sources affected by 

the proposed amendments. 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 an assumed threshold 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 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.” 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 8

SECTION 4. IMPACTED INDUSTRIES SUBJECT TO 

PROPOSED AMENDMENTS: LARGER ECONOMIC AND 

DEMOGRAPHIC TRENDS 

This section of the socioeconomic analysis describes demographic and economic trends in the San Joaquin 

Valley region. The first part of this section compares the San Joaquin Valley region against California as a 

whole, and provides a context for understanding demographic and economic changes that occurred within 

the San Joaquin Valley region between 1996 and 2006. Starting with sub-section 4.2, the second part of

this section narrows the focus of the socioeconomic analysis to industries affected by the proposed 

changes to Rule 4306\4320 and 4307. 

4.1 LARGER ECONOMIC AND DEMOGRAPHIC TRENDS 

REGIONAL DEMOGRAPHIC TRENDS

The San Joaquin Valley region experienced tremendous population growth during the 1990s. Many came 

to this area because of affordable housing. As a result, population increased significantly. The eight-county 

region’s population increased by 23 percent (or approximately 2.1 percent annually), from 3.1 million in 

1996 to 3.8 million in 2006. Population growth continued on its healthy pace, as regional population grew 

by 2.5 percent annually between 2001 and 2006. While the State of California’s population increased by 15 

percent (or approximately 1.5 percent annually) between 1996 and 2006, all the counties in the region 

experienced faster rates of growth than California, as Table 1 shows. While, by many standards, Madera

County continues to be a small county– at 145,198 residents according to the Department of Finance–it 

still experienced an annual growth rate of 2.9 percent between 1996 and 2006. Between 2001 and 2006, 

this county continued to grow annually by 2.9 percent. In the same five-year period, Kern, Merced, and

San Joaquin Counties experienced rapid growth, growing annually by 3.0 percent, 2.8 percent, and 2.9 

percent respectively, as Table 1 below shows. As demonstrated in the following section on regional 

economic trends, the demographic changes that occurred in the San Joaquin Valley region during the 

1990s and into the new century significantly influenced the economy of this eight-county region. 

TABLE 1 

POPULATION TRENDS: SAN JOAQUIN VALLEY REGION AND CALIFORNIA, 1996-2006 

 -------------------- Year -------------------- ------- Change ------- -- Annual % Change -- 

 1996 2001 2006 96-01 01-06 96-01 01-06 

California 32,222,873 34,441,561 37,195,240 2,218,688 2,753,679 1.3% 1.6% 

Region 3,101,034 3,369,315 3,820,578 268,281 451,263 1.7% 2.5% 

 Fresno 761,855 812,338 899,872 50,483 87,534 1.3% 2.1% 

 Kern 620,383 673,571 779,490 53,188 105,919 1.7% 3.0% 

 Kings 115,297 131,282 148,073 15,985 16,791 2.6% 2.4% 

 Madera 108,340 125,817 145,198 17,477 19,381 3.0% 2.9% 

 Merced 198,443 214,627 246,114 16,184 31,487 1.6% 2.8% 

 San Joaquin 528,894 580,082 668,259 51,188 88,177 1.9% 2.9% 

 Stanislaus 416,126 458,612 513,441 42,486 54,829 2.0% 2.3% 

 Tulare 351,696 372,986 420,131 21,290 47,145 1.2% 2.4% 

Source: ADE, Inc., 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 9

REGIONAL ECONOMIC TRENDS

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 the globe. Fourteen percent of all workers in the 

region are employed by industries within agriculture, as Table 2 shows. However, in 1996 slightly over 18 

percent of all workers worked in agriculture. By 2001, this ratio stood at 15 percent. In fact, over the fiveyear period between 2001 and 2006, employment in agriculture barely increased, growing by 0.2 percent 

per year. 

Between 2001 and 2006, local support industries gained in prominence within the San Joaquin Valley 

region. Service-rendering industries employed the most workers as a proportion of total employment in 

the region. As Table 2 shows, service-rendering industries comprise 70 percent of all jobs, including public 

sector positions. In other words, 931,970 jobs out of a total of 1,326,545 jobs are in service-rendering 

industries. Excluding the public sector, service-rendering jobs account for 51 percent of all jobs in 2006. In 

2001, service-rendering industries (excluding the public sector) represented 50 percent of all jobs, 

indicating that the transition toward a services economy was in place as early as the mid to late 1990s with 

the significant increase in the number of people during that time. 

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. 

Close examination of Table 2 shows that the region experienced modest growth in manufacturing, as 

employment in this sector grew annually by 0.3 percent between 2001 and 2006. In comparison, 

manufacturing jobs declined annually by 3.4 percent in the state as a whole. Another regional bright spot 

was transportation\utilities, as jobs increased by a healthy clip of 2.2 percent per year between 2001 and 

2006, compared to 1.4 percent per year in the state as a whole. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report 

Applied Development Economics, Inc. Final Draft St

For Proposed 

and Rule 4307 an

D - 10

TABLE 2 

ECONOMIC TRENDS: SAN JOAQUIN VALLEY REGION AND CALIFORNIA, 1996-2006 

 ------------------ San Joaquin Valley Region ---------------- ------------------------- State of  ------------- Year ------------- Distr. Ann % Chg ------------------- Year --------- 1996 2001 2006 2006 96-01 01-06 1996 2001 2

Total, all industries (public and private) 1,102,386 1,204,868 1,326,545 100% 1.8% 1.9% 13,134,288 14,981,759 15,5

Private Sector  Goods-Producing 367,661 366,383 394,575 -0.1% 1.5% 2,737,099 2,960,124 2,8 Agriculture 207,186 181,777 183,335 14% -2.6% 0.2% 411,823 383,347 3

 Natural resources\Mining 10,816 9,043 9,770 1% -3.5% 1.6% 27,263 23,620  Construction 41,574 63,841 88,132 7% 9.0% 6.7% 517,539 774,145 9

 Manufacturing 108,085 111,722 113,338 9% 0.7% 0.3% 1,780,474 1,779,012 1,4

 Service-Rendering 528,232 603,018 681,888 2.7% 2.5% 8,332,062 9,708,100 10,2 Retail 117,700 129,200 144,100 11% 1.9% 2.2% 1,413,438 1,571,994 1,6

 Wholesale 32,800 36,400 43,200 3% 2.1% 3.5% 577,465 652,968 7

 Transportation\Utilities 38,235 41,161 45,927 3% 1.5% 2.2% 455,239 494,509 4

 Information 13,904 15,316 15,375 1% 2.0% 0.1% 440,225 528,794 4

 Financial Activities 40,445 44,014 49,352 4% 1.7% 2.3% 746,884 833,189 9 Professional and Business Services 76,282 95,708 105,836 8% 4.6% 2.0% 1,755,920 2,211,872 2,2 Education and Health Services 92,302 111,175 127,736 10% 3.8% 2.8% 1,220,977 1,412,810 1,5 Leisure and Hospitality 79,918 86,979 99,849 8% 1.7% 2.8% 1,231,930 1,361,700 1,5 Other Services 36,646 43,065 50,513 4% 3.3% 3.2% 489,984 640,264 7

Public sector 

 Federal Government 31,266 28,577 27,794 2% -1.8% -0.6% 295,250 253,020 2 State Government 22,843 26,747 29,427 2% 3.2% 1.9% 371,300 428,239 4 Local Government 152,384 180,143 192,861 15% 3.4% 1.4% 1,398,577 1,632,276 1,6Source: ADE, Inc., based on California EDD LMID 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 11

The emergence of local support industries in the San Joaquin Valley region mirrors and leads 

statewide trends, as Table 2 shows. In the region, construction, and health-education increased 

annually by 6.7 percent and 2.8 percent, whereas, statewide, these industries grew by 3.7 percent and 

2.2 percent between 2001 and 2006. In short, while agriculture remains the leading edge of the 

economy, the San Joaquin Valley region’s economy has become more diverse, with the growth 

occurring within population-driven local support industries rather than the export-focused economic 

base industries of manufacturing and agriculture. 

4.2 AFFECTED INDUSTRIES 

The proposed amendments and new rule affect a wide range of industries. This section of the report 

examines economic trends in the region for affected industries. In doing so, this section describes 

the broader economic context under which the District is promulgating proposed amendments and 

new rule. 

Table 3 below shows that most industries potentially impacted by the proposed amendments and 

new rule have experienced some growth between 2001 and 2006. Oil production employment 

increased by 2.4 percent annually during this period (342 jobs), going from 2,730 to 3,072 workers. 

Employment in refineries increased significantly by 12.3 percent annually. Table 3 shows that 

government increased for the most part in the Valley, except for correctional facilities, which 

declined by almost three percent annually between 2001 and 2006. 

Table 3 

Economic Trends: Industries Subject to Proposed Amendments to Rules 

4306/4307 and new RUle 4320: San Joaquin Valley 

 2001 2006 01-06 01-06 

Oil producers 2,730 3,072 342 2.4% 

Oil refineries 423 756 333 12.3% 

Government 

 General Government 78,802 82,734 3,932 1.0% 

 Health 7,753 10,312 2,559 5.9% 

 Education 42,602 68,595 25,993 10.0% 

 Correctional 10,916 9,414 -1,502 -2.9% 

Food Processing and Related Industries 

 Agriculture 181,643 183,856 2,213 0.2% 

 Food processing 45,293 47,804 2,511 1.1% 

 Manufacturing (less food processing) 66,429 65,534 -895 -0.3% 

 Warehousing 8,698 11,358 2,660 5.5% 

Other 

 Mining\Natural Resources 6,313 6,698 385 1.2% 

 Pipeline\Natural gas 1,248 1,303 55 0.9% 

 Electric, Gas, Sanitary Services 4,851 5,665 814 3.2% 

 Financial Services 28,977 32,772 3,795 2.5% 

 Personal Services 2,765 3,000 235 1.6% 

 Business Services 93,121 102,358 9,237 1.9% 

 Health Services 89,921 101,141 11,220 2.4% 

Source: ADE, Inc. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 12

 4.3 AFFECTED STAKEHOLDERS 

The previous section described trends for industries whose specific businesses are potentially subject

to the proposed amendments and new rule. This section provides employment, revenue, and net 

profit estimates for businesses actually subject to the proposed rule and amendments. These privateand public-sector entities are in the databases of the SJVUAPCD. 

Tables 4 and 5 below profile entities impacted by Rule 4306/4230 and Rule 4307 respectively. 

Approximately 345 establishments will be affected by Rule 4306/4230, while 1,454 establishments 

will be affected by amendments to Rule 4307. Many of the establishments affected by amendments 

to Rule 4703 are also subject to proposed amendments to Rule 4306 and new Rule 4230. 

Table 4 

Industries Subject to Proposed Amendments to Rule 4306 and Draft New Rule 4230 

 Establishments Employment Revenues Est. Net Profits 

Oil Production 27 2,833 $9,906,843,015 $1,027,276,042 

 Large producers 5 2,731 $9,012,547,135 $939,107,412 

 Small producers 22 102 $894,295,880 $88,168,631 

Oil Refineries 5 386 $2,344,312,500 $150,504,863 

Government 40 21,057 $3,450,097,946 

Food Processing and Related Industries 130 9,135 $11,561,782,674 $511,205,727 

Other Affected Sources 116 12,997 $3,430,818,724 $142,339,802 

345 49,241 $40,600,697,875 $2,858,602,477 

Source: ADE, Inc. 

Table 5 

Industries Subject to Proposed Amendments to Rule 4307 

 Establishments Employment Revenues Est. Net Profits 

Oil Producers 27 2,833 $9,906,843,015 $1,027,276,042 

 Large producers 5 2,731 $9,012,547,135 $939,107,412 

 Small producers 22 102 $894,295,880 $88,168,631 

Oil Refineries 5 386 $2,344,312,500 $150,504,863 

Entities With Glycol Reboilers 4 2,200 $12,720,666,162 $907,062,265 

Schools 1,375 89,848 $8,189,696 

Others 116 12,997 $3,430,818,724 $142,339,802 

1,527 108,264 $28,410,830,097 $2,227,182,973 

Source: ADE, Inc. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 13

SECTION 5. SOCIOECONOMIC IMPACTS 

This section of the report compares the economic characteristics of affected industries against the 

compliance costs. The first part of this section discusses annual compliance costs. This section 

discusses general business responses to compliance costs and analyzes the socioeconomic impacts of 

proposed amendments to Rule 4306 and proposed new rule 4320, as well as impacts of proposed 

amendments to Rule 4307. 

COMPLIANCE COST ESTIMATES 

Table 6 below includes information on the estimated costs associated with Rule 4306/4320. The 

District issued a summary of costs associated with the rule in a separate report called “Appendix C: 

Preliminary Cost Effectiveness Analysis for Rules 3206 and 4320” (July 15, 2008). In that report, the 

District pegs aggregate annual cost of the Rule 4306/4320 at $67.7 million (rounded). Industry 

stakeholders reviewed the District’s annual compliance cost estimate. They place cost much higher, 

at $177.8 million (rounded), which is almost three times higher than the District's $67.7 million. For

the purposes of analysis, this report evaluates the socioeconomic impacts associated with the 

District’s $67.7 million annual compliance cost and industry’s $177.8 million annual compliance cost. 

TABLE 6 

ANNUAL COST OF RULE 4306 (AMENDMENTS) AND RULE 4320 (NEW RULE) 

Industry 

Type of 

Control #Units 

Annual Cost 

Low 

Annual Cost 

High 

Total Costs 

Low 

Total Costs 

High 

Crude Petrol. 

Large Producers ULNB 29 $44,546 $1,291,834 $1,291,834 

 SCR 351 $74,941 $346,432 $26,304,291 $121,597,632 

 Total $27,596,125 $122,889,466 

Small Producers ULNB 18 $44,546 $801,828 $801,828 

 SCR 28 $74,941 $2,098,348 $2,098,348 

 Total $2,900,176 $2,900,176 

Petrol. Refining ULNB 53 $44,546 $2,360,938 $2,360,938 

 SCR 9 $66,781 $627,118 $601,029 $5,644,062 

 Total $2,961,967 $8,005,000 

Food Production ULNB 121 $44,546 $5,390,066 $5,390,066 

 SCR 226 $66,781 $110,116 $15,092,506 $24,886,216 

 Total $20,482,572 $30,276,282 

General Gov. ULNB 78 $44,546 $3,474,588 $3,474,588 

 SCR 10 $66,781 $667,810 $667,810 

 Total $4,142,398 $4,142,398 

Other ULNB 147 $44,546 $6,548,262 $6,548,262 

 SCR 46 $66,781 $3,071,926 $3,071,926 

 Total $9,620,188 $9,620,188 

 

GRAND TOTAL 1,116 $67,703,426 $177,833,510 

Source: SJVUAPCD 

In addition to the above numbers, the socioeconomic analysis also examines impacts associated with 

a scenario in which affected entities utilize “scrubbers.” Costs associated with “scrubbers” are added

on top of annual costs depicted above. These additional costs are in the table below. In aggregate, 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 14

these costs amount to $179.4 million, the bulk of which, at $169.2 million, would be borne by large 

oil producers. District staff below believes that, more than likely, affected stakeholders will not 

utilize scrubbers, resulting in annual costs that will range between $67.7 million (District scenario)

and $177.8 million (industry scenario). For purposes of the socioeconomic analysis, we examine 

impacts of District annual costs without scrubbers, District annual costs with scrubbers, and 

Industry annual costs with scrubbers. 

TABLE 7 

ANNUAL COST OF “SCRUBBERS”: 

RULE 4306/RULE 4320 

Large oil producers $169,231,347 

Small oil producers $3,254,000 

Oil refineries $5,694,500 

Government $813,500 

Other $406,750 

 $179,400,097 

Source: SJVUAPCD 

In addition to costs associated with Rules 4306\4320, this report analyzes socioeconomic impacts of 

proposed amendments to Rule 4307. Table 8 below includes information on the estimated costs 

associated with amendments to Rule 4307. The District issued a summary of costs associated with 

the rule in a separate report called “Appendix C: Preliminary Cost Effectiveness Analysis for Rules 

4307” (July 15, 2008). In that report, the District pegs aggregate annual cost of the Rule 4307 at $5.5 

million (rounded). 

TABLE 8 

ANNUAL COST OF PROPOSED AMENDMENTS TO RULE 4307 

OILFIELD & REFINERY NATURAL DRAFT UNITS 27 $315,468 

GLYCOL REBOILERS RATED BETWEEN 2.0 MMBtu/hr to 5.0 MMBtu/hr 8 $93,472 

SCHOOL UNITS RATED BETWEEN 2.0 MMBtu/hr to 5.0 MMBtu/hr 380 $4,439,920 

LOW USE UNITS 54 $630,936 

469 $5,479,796 

Source: SJVUAPCD

BUSINESS RESPONSES TO COMPLIANCE COSTS 

Industries impacted by the draft rule 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 and, where practical, shift 

from lower-value to higher-value product and or service. These issues were raised and reviewed at 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 15

the Socioeconomic Focus Group Meeting of March 17, 2008. In general, industry stakeholders 

indicated difficulty in absorbing and or passing on costs in this particular recessionary economic 

climate. 

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 draft rule. The estimated annual compliance 

costs used in this analysis were provided to ADE by District staff and stakeholders. 

In calculating impacts of the proposed rules on profits, ADE used net profit data analyzed financial 

data issued by the US Internal Revenue Service for the ten-year period from 1994 to 2004. 

According to the US IRS, over the long-term period stretching from 1994 to 2004, oil producers 

generated on average an after-tax net profit rate of 11.14 percent. This long-term weighted-average 

after-tax net profit rate is based on a pool of approximately 16,000 to 17,000 oil producers and 

natural gas extractors (SIC 1311). The overall rate for SIC 1311 is adjusted downward to 10.11 

percent to account for the fact that it costs more to produce oil in California relative to other states. 

For oil refineries, the report used a long-term after-tax net profit rate of 6.46 percent, which also 

comes from the US IRS. For food processors, the report used a rate of 4.14 percent. 

Tables 9 and 10 show impacts of the what the District believe Rule 4306\Rule 4320 will cost 

annually. Three-hundred forty-five establishments will be affected by these new rules, and, together, 

these establishments generate in aggregate $40.6 billion in revenues and $2.9 billion in net profits. 

Affected large oil producer, small oil producers, and refineries generate $9 billion, $894 million, and 

$2.3 billion in revenues per year, while affected public sector establishments, food processors and 

related industries, and other affected establishments generate $3.5 billion, $11.6 billion, and $3.4 

billion respectively. Table 9 shows that, when expressed as a ratio of annual cost to annual profits, 

the cost of the Rule 4306\Rule 4320 falls below the 10 percent threshold of significance level. Table 

10 adds the costs of “scrubbers” on top of District’s original cost and, in this scenario, the impacts

again are less than significant, except for large oil producers. At $196.8 million in annual costs, the 

cost associated with Rule 4306\Rule 4320 in the District cost scenario that includes “scrubbers” 

amounts to almost 21 percent of annual net profits.

Table 11 shows impacts of Rule 4306\Rule 4320 using industry’s costs. This table includes the costs 

of “scrubbers” on top of Industry’s original cost. In this scenario, impacts are less than significant

except for large oil producers. At $292.1 million in annual costs, the cost associated with Rule 

4306\Rule 4320 in the Industry cost scenario that includes “scrubbers” amounts to almost 31 

percent of annual net profits. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 16

TABLE 9 

SOCIOECONOMIC IMPACTS OF PROPOSED AMENDMENTS TO RULE 4306 AND DRAFT NEW RULE 4320 

(DISTRICT COST SCENARIO WITHOUT SCRUBBERS) 

 Establishments Revenues Est. Net Profits 

District Annual 

Cost Scenario: 

Rule 4306 

Cost-toNet Profit 

Ratio 

Oil Production 27 $9,906,843,015 $1,027,276,042 $30,496,301 

 Large 5 $9,012,547,135 $939,107,412 $27,596,125 2.94% 

 Small 22 $894,295,880 $88,168,631 $2,900,176 3.29% 

Oil Refineries 5 $2,344,312,500 $150,504,863 $2,961,967 1.97% 

Government 40 $3,450,097,946 $0 $4,142,398 0.12% 

Food Processing and Related Industries 130 $11,561,782,674 $511,205,727 $20,482,572 4.01% 

Other Affected Sources 116 $3,430,818,724 $142,339,802 $9,620,188 6.76% 

345 $40,600,697,875 $2,858,602,477 $67,703,426 

Source: ADE, Inc. 

TABLE 10 

SOCIOECONOMIC IMPACTS OF PROPOSED AMENDMENTS TO RULE 4306 AND DRAFT NEW RULE 4320 

(DISTRICT COST SCENARIO WITH SCRUBBERS) 

 Establishments Revenues Est. Net Profits 

District Annual Cost 

Scenario: Rule 4306 

(including 

scrubbers) 

Cost-toNet 

Profit 

Ratio 

Oil Production 27 $9,906,843,015 $1,027,276,042 $202,981,648 

 Large 5 $9,012,547,135 $939,107,412 $196,827,472 20.96% 

 Small 22 $894,295,880 $88,168,631 $6,154,176 6.98% 

Oil Refineries 5 $2,344,312,500 $150,504,863 $8,656,467 5.75% 

Government 40 $3,450,097,946 $4,955,898 0.14% 

Food Processing and Related Industries 130 $11,561,782,674 $511,205,727 $20,482,572 4.01% 

Other Affected Sources 116 $3,430,818,724 $142,339,802 $10,026,938 7.04% 

345 $40,600,697,875 $2,858,602,477 $247,103,523 

Source: ADE, Inc. 

TABLE 11 

SOCIOECONOMIC IMPACTS OF PROPOSED AMENDMENTS TO RULE 4306 AND DRAFT NEW RULE 4320 

(INDUSTRY COST SCENARIO WITH SCRUBBERS) 

 Establishments Revenues Est. Net Profits 

Industry Annual 

Cost Scenario: Rule 

4306 (including 

scrubbers) 

Costto-Net 

Profit 

Ratio 

Oil Production 27 $9,906,843,015 $1,027,276,042 $298,274,989 

 Large 5 $9,012,547,135 $939,107,412 $292,120,813 31.11% 

 Small 22 $894,295,880 $88,168,631 $6,154,176 6.98% 

Oil Refineries 5 $2,344,312,500 $150,504,863 $13,699,500 9.10% 

Government 40 $3,450,097,946 $0 $4,955,898 0.14% 

Food Processing and Related Industries 130 $11,561,782,674 $511,205,727 $30,276,282 5.92% 

Other Affected Sources 116 $3,430,818,724 $142,339,802 $10,026,938 7.04% 

345 $40,600,697,875 $2,858,602,477 $357,233,607 

Source: ADE, Inc. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 17

Table 12 below shows impacts of proposed amendments to Rule 4307. As Table 12 shows, impacts 

are less than significant across the board. 

TABLE 12 

SOCIOECONOMIC IMPACTS OF PROPOSED AMENDMENTS TO RULE 4307 

 Establishments Revenues Est. Net Profits 

District Annual 

Cost Scenario: 

Rule 4307 

Cost-toNet Profit 

Ratio 

Oil Producers 27 $9,906,843,015 $1,027,276,042 

 Large producers 5 $9,012,547,135 $939,107,412 $267,635 0.03%

 Small producers 22 $894,295,880 $88,168,631 $9,999 0.01%

Oil Refineries 5 $2,344,312,500 $150,504,863 $37,833 0.03%

Entities With Glycol 

Reboilers 4 $12,720,666,162 $907,062,265 $93,472 0.01%

Schools 1,375 $8,189,150,696 $4,439,920 0.05%

Others 116 $3,430,818,724 $142,339,802 $630,936 0.44%

1,554 $46,498,634,112 $2,227,182,973 $5,479,795 

Source: ADE, Inc. 

Impacts above are significant only for large oil producers (see Tables 10 and 11). At $196.8 million,

the District’s annual compliance cost is approximately $102.9 million above ten-percent of net 

profits of large oil producers, or $93.9 million. Affected stakeholders may attempt to re-coup the 

cost of compliance in part or in full, i.e. that portion above the ten-percent threshold ($102.9 

million) or all of the $196.8 million in annual cost. At $102.9 million, the annual compliance cost 

above the threshold of significance amounts to 409 full-time equivalent (FTE) positions, meaning 

that the impacted project could re-coup the cost of compliance above the threshold by reducing its 

workforce by 409 FTEs. The impacted project could re-coup the full compliance cost of $196.8 

million by reducing its workforce by 602 FTEs. 

At $292.1 million (see Table 11), industry’s annual compliance cost is approximately $198.2 million 

above ten-percent of net profits of large oil producers, or $93.9 million. This project may attempt to

re-coup the cost of compliance in part or in full, i.e. that portion above the ten-percent threshold 

($198.2 million) or all of the $292.1 million in annual cost. At $198.2 million, the annual compliance

cost above the threshold of significance amounts to 788 full-time equivalent (FTE) positions. The 

impacted project might seek to re-coup the full compliance cost of $292.1 million by reducing its 

workforce by 1,161 FTEs. 

In the District annual compliance cost scenario, the direct loss of 409 to 602 workers represents 15 

to 22 percent of the workforce of the five businesses impacted by the proposed amendments to 

Rule 4306. In the industry annual compliance cost scenario, the direct loss of 788 to 1,161 represents

28 to 44 percent of affected oil producers’ workforce. Because of the way in which one business in 

one industry interacts through buyer and supplier relations with businesses in the same or other 

industries, we also need to understand the indirect and what are called induced impacts associated 

with the draft rule. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 18

Using the IMPLAN Impro Professional input-output model, the consultant estimated the multiplier 

impacts associated with the cost of compliance above the threshold of significance, looking 

particularly at two measures – employment and industry output. These measures are defined as 

follows: 

 Employment indicates the number of jobs lost given the level of compliance cost. This 

employment total includes self-employment. 

 Industry output represents the sum of all economic activity lost by affected industries and 

ancillary activities. This activity includes all commodity inputs, labor income, property income, 

and other value added components. 

The multiplier impacts for these measures come from the Type II multipliers. These multipliers 

include the direct, indirect, and induced impacts. These multiplier descriptions are summarized 

below. 

 Direct impacts represent the jobs losses and other economic impacts that are directly related to 

costs associated by affected industries as a result of implementation of the draft rule. 

 Indirect impacts represent the jobs and other economic effects that will potentially be lost 

elsewhere in the eight-county region as a result of the direct impacts on affected industries 

resulting from the draft rule. These indirect impacts result from supplier purchases. 

 Induced impacts represent the economic losses associated with reductions in household 

purchases tied to direct and indirect employment losses in the region. These induced impacts 

most typically occur in retail and other local-serving industry categories such as personal 

services, education, and health care. 

Table 13 shows the direct, indirect, and induced employment impacts associated with annual cost of 

compliance resulting from Rule 4306\4320. In addition to the direct loss of 409 to 602 workers 

(District cost scenario), there will be an indirect loss of 262 to 386 additional workers in businesses 

with whom the six directly affected businesses engage in buyer-supplier relations. The direct loss of 

409 to 602 workers and the indirect loss of another 262 to 386 workers, in turn, will induce the loss 

of another 230 to 339 workers, mainly those who are employed in retail and services. Thus, the total 

number of jobs lost as a result of the costs associated with Rule 4306\4320 amounts to 901 to 1,327 

workers, using the District’s annual compliance cost figures. With respect to impacts stemming from 

industry’s annual compliance cost scenarios, there could be a total impact ranging from 1,737 to 

2,559 jobs, as the table below shows. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 19

TABLE 13 

DIRECT, INDIRECT, AND INDUCED JOB IMPACTS RESULTING FROM SITUATIONS WHERE 

ANNUAL COST COMPLIANCE EXCEEDS THRESHOLD OF SIGNIFICANCE: PROPOSED 

AMENDMENTS TO 4306 AND NEW RULE 4320 

 District Compliance Cost Scenario (with 

scrubbers) 

 Industry Compliance Cost Scenario 

(with scrubbers) 

 Impacts Associated 

with Recovering 

Impacts Above 10 

Percent Threshold 

Impacts 

Associated with 

Recovering Full 

Impacts 

 Impacts Associated 

with Recovering 

Impacts Above 10 

Percent Threshold 

Impacts 

Associated with 

Recovering Full 

Impacts 

Direct Impacts 409 602 788 1,161 

Indirect Impacts 262 386 505 744 

Induced Impacts 230 339 444 654 

Total 901 1,327 1,737 2,559 

Source: ADE, Inc., based on Impro Professional input-output model 

IMPACT ON SMALL BUSINESSES 

In addition to analyzing the employment impacts of the Rule 4306\4320 and Rule 4307, 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. 

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 

 

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

www.pd.dgs.ca.gov/smbus/sbcert.htm) 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Appendix D: Socioeconomic Impact Analysis Report October 16, 2008 

Applied Development Economics, Inc. Final Draft Staff Report with Appendices 

For Proposed Amendments to Rule 4306 

and Rule 4307 and Proposed New Rule 4320 

D - 20

Due to limitations of the data set, it is difficult to ascertain how many of the establishments are small 

businesses per the features identified directly above. It is possible to estimate how many affected 

establishments employ more than 100 workers, as well as to estimate the average revenues generated 

by affected establishments of a given size. However, as the previous discussion showed, impacts 

stemming from these new rules are less than significant for most if not all businesses except large oil 

producers, which are not small businesses. Thus, small businesses are not disproportionately 

impacted.