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. 

APPENDIX D 

Socioeconomic Impact Analysis 

For 

Revised Proposed Amendments to Rule 4311 

June 18, 2009 
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DRAFT RULE 4311 (FLARES): 

SOCIOECONOMIC IMPACT ANALYSIS 

APRIL 21, 2009 

Prepared for 

San Joaquin Valley Air Pollution Control District 

Prepared by 

Applied Development Economics 

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

Revised Proposed Amendments to Rule 4311 
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Appendix D: Socioeconomic Impact Analysis June 18, 2009 

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CONTENTS 

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

2. Introduction .....................................................................................................................................7

3. Description of Draft Rule 4311 ....................................................................................................9

Existing Conditions.........................................................................................................................9

Proposed Draft Amendments.......................................................................................................10

4. Methodology ....................................................................................................................................11

5. Impacted Industries Subject To Proposed Amendments to Draft Rule 4311.......................13

5.1 Regional Demographic and Economic Trends....................................................................13

5.2 Description of Affected Industries.........................................................................................17

6. Socio-economic Impacts................................................................................................................27

6.1 Compliance Cost Estimates.....................................................................................................27

6.2 Business Responses to Compliance Costs ............................................................................27

6.3 Impacts on Affected Industries ..............................................................................................27
1. EXECUTIVE SUMMARY 

The proposed amendments to Rule 4311 will affect establishments in a limited set of industries, 

particularly oil refinery and oil production. The analysis shows that oil-related industries experienced 

tremendous surges in revenues and profits, starting in late 2005 and continuing into 2008. With 

respect to oil-related industries, the analysis shows that annual costs stemming from the proposed 

amendments are small in relation to estimated industry net profits, falling below the threshold used 

for purposes of analyzing whether rule impacts are significant or not. The proposed amendments 

will also affect a number of industries outside of petroleum. These industries are not significantly 

impacted by proposed amendments. 

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2. INTRODUCTION 

The San Joaquin Valley Unified Air Pollution Control District (“District”) seeks to amend Rule 4311 

(Flares) to implement emission control requirements listed in the 2007 Ozone Plan as well as the 

2008 PM 2.5 Plan. In particular, the District is contemplating changes that are already contained in 

flare rules or permit conditions in other air districts in California, to ensure that Rule 4311 meets 

federal RACT and BACM requirements as well as CH&SC requirements to implement BARCT and 

all feasible control measures (AFCMs). The report is prepared pursuant to the provisions of AB2051 

(Section 40728.5 of the California Health and Safety Code), which requires an assessment of 

socioeconomic impacts of proposed air quality rules. The findings in this report can assist District 

staff in understanding the socioeconomic impacts of the proposed amendments, and can assist staff 

in preparing a refined version of the rule. Figure 1 is a map of the eight-county region that 

comprises the San Joaquin Valley Air Basin. As indicated in the map, Kern County is not completely 

in the District. 

FIGURE 1 

MAP OF SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT 

Source: ADE, Inc. 

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3. DESCRIPTION OF DRAFT RULE 4311 

In developing the draft amendments to Rule 4311, District staff evaluated the emission reduction 

potential of flare minimization plans (FMP) and other provisions that other districts’ rules have 

already implemented, and determined that it is feasible to require similar emission controls for flares 

that are operating within the District. However, other relevant findings, available technical 

information, and input from stakeholders would be considered during the rule development process 

in order to further refine the draft rule amendments. The discussion below first summarizes existing 

conditions with regard to the Rule 4311. Then, we reference proposed amendments to Rule 4311. 

EXISTING CONDITIONS 

Source categories subject to Rule 4311 currently includes flares associated with oil and gas 

production, combustion, sewage treatment, incinerators, petroleum refining, and VOC control. 

Flaring is a high temperature oxidation process used to burn combustible components, mostly 

hydrocarbons, of waste gases from industrial operations. 95 percent of the waste gases flared are 

natural gas, propane, ethylene, propylene, butadiene and butane. During combustion, gaseous 

hydrocarbons react with atmospheric oxygen to form carbon dioxide (CO2) and water. In some 

waste gases, carbon monoxide (CO) is the major combustible component. 

Flares generate air pollutants such as nitrogen oxides, sulfur dioxide, carbon monoxide, and 

particulate matter, in addition to the possible release of hydrocarbons that have not been completely 

combusted. 

GENERAL EQUIPMENT DESCRIPTION

There are two general types of flares, elevated and ground flares. Flares are categorized by the height 

of the flare tip, and by the method of enhancing combustion by mixing at the flare tip (i.e., steamassisted, air-assisted, pressure-assisted, or non-assisted). 

Elevated flares are more common and have larger capacities than ground flares. In elevated flares, a 

waste gas stream is fed through a stack, which can be over 100 meters tall and is combusted at the 

tip of the stack. An elevated flare consists of five components: a gas collection header (to collect 

gases from various process units), a proprietary seal, water seal, or purge gas supply (to prevent flash 

back), a single or multiple-burner unit in the flare stack, and gas pilots and igniter. 

Ground flares vary in complexity and can consist either of conventional flare burners discharging 

horizontally with no enclosures or of multiple burners in refractory-lined steel enclosures.

Complete combustion requires proper mixing of air and waste gas. Smoking may result from 

combustion, depending upon waste gas components and the quantity and distribution of 

combustion air. Waste gases containing methane, hydrogen, CO, and ammonia usually burn without 

smoke, while waste gases containing heavy hydrocarbons cause smoke. 
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An external momentum force, such as steam injection, is used for efficient mixing of air and waste 

gas, and turbulence, which promotes smokeless flaring of heavy hydrocarbon waste. Other external 

forces may also be used, including water spray, high velocity vortex action, or natural gas. External 

momentum force is rarely required in ground flares. Combustion efficiency depends on flame 

temperature, residence time in the combustion zone, vent gas flammability, auto ignition 

temperature, heating value in British thermal units per standard cubic feet (Btu/scf), and turbulent 

mixing. These factors promote a destruction efficiency of 98 percent or greater. Complete 

combustion would convert all VOCs to carbon dioxide and water. 

Waste gases must have a fuel value of at least 200 to 250 British thermal units per cubic foot 

(btu/ft3) for complete flare combustion. If a waste gas does not have the required fuel value, then 

fuel must be added. Flares providing supplemental fuel to waste gas are known as fired, or 

endothermic, flares. In some cases, even flaring waste gases having the necessary heat content will 

also require supplemental heat. 

Flares are normally used to dispose of low volume continuous emissions, but are designed to handle 

large quantities of waste gases associated with plant emergencies. Flare gas volumes can vary from a 

few cubic meters per hour during regular operations up to several thousand cubic meters per hour 

during major upsets. 

PROPOSED DRAFT AMENDMENTS 

Timelines for flare minimization plans and flare monitoring and reporting have been amended to 

give more time to industry and the District to implement and enforce new requirements. Please see 

draft rule language for specific requirements and corresponding dates. The following are quick 

references to sections of the rule that will be amended. For detail, please see the District staff report 

of January 8, 2009. 

Section 1.0 Purpose 

Section 3.0 Definitions 

Section 5.8 Flare Minimization Requirements 

Section 5.9 Petroleum Refinery Performance SO2 Targets 

Section 6.2 Recordkeeping 

Section 6.3 Testing and Sampling Methods for Flare Monitoring 

Section 6.4 Flare Minimization Plan (FMP) 

Section 7.0 Monitoring and Reporting Requirements 

Section 8.0 Compliance Schedule 
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4. 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 

Draft Rule 4311. 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 

Dun and Bradstreet, 2002 Economic Census and the State of California’s Employment 

Development Department (EDD) Labor Market Information Division. In addition, ADE utilized 

data from California Department of Conservation and the California Energy Commission. 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 Rule 4311. 

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 assumed thresholds of significance, ADE discusses in the 

report whether the affected sources are likely to reduce jobs as a means of recouping the cost of rule 

compliance or as a result 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 inputoutput 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 
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no significant, adverse impact on either competitiveness or jobs seems reasonable or even 

conservative.” 
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5. IMPACTED INDUSTRIES SUBJECT TO PROPOSED 

AMENDMENTS TO DRAFT RULE 4311 

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 1998 and 2008. 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 amendments to Draft Rule 4311. The second part of this section describes 

the economic characteristics of potentially impacted industries that might be subject to this rule. 

5.1 REGIONAL DEMOGRAPHIC AND ECONOMIC 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 24 percent (or approximately 2.2 percent annually), 

from 3.2 million in 1998 to 3.9 million in 2008. In the last five years, population growth rate slightly 

declined, as regional population grew by 2.2 percent annually between 2003 and 2008. While the 

State of California’s population increased by 14 percent (or approximately 1.4 percent annually) 

between 1998 and 2008, all the counties in the region experienced faster rates of growth than 

California over the period, as Table 1 shows. While, by many standards, a small county of 150,887 

residents, Madera County experienced an annual growth rate of 2.8 percent between 1998 and 2008. 

Between 2003 and 2008, this county continued to grow annually but at a slightly lesser rate of 2.7 

percent. In the same five-year period, Kern, Merced, and San Joaquin Counties experienced rapid 

growth, growing annually by 2.9 percent, 2.4 percent, and 2.2 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. 
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TABLE 1 

POPULATION TRENDS 

1998 2003 2008 98-03 03-08 98-08 

State 33,225,655 35,652,700 38,049,462 1.4% 1.3% 1.4% 

Region 3,192,439 3,540,392 3,956,003 2.1% 2.2% 2.2% 

 Fresno 781,936 846,485 931,098 1.6% 1.9% 1.8% 

 Kern 637,227 708,753 817,517 2.2% 2.9% 2.5% 

 Kings 120,957 137,411 154,434 2.6% 2.4% 2.5% 

 Madera 114,137 131,821 150,887 2.9% 2.7% 2.8% 

 Merced 203,181 227,132 255,250 2.3% 2.4% 2.3% 

 San Joaquin 546,852 616,477 685,660 2.4% 2.2% 2.3% 

 Stanislaus 428,272 483,705 525,903 2.5% 1.7% 2.1% 

 Tulare 359,877 388,608 435,254 1.5% 2.3% 1.9% 

Source: ADE, Inc., based on California Department of Finance

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. Slightly less than 14 percent 

of all workers in the region are employed by industries within agriculture, as Table 2 shows. In 1998, 

approximately 13.1 percent of all workers worked in agriculture. By 2003, this ratio stood at 14 

percent. In fact, over the five-year period between 2003 and 2008, employment in agriculture 

increased at a modest pace of one percent per year. 

Between 2003 and 2008, 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. Service-rendering industries comprise 71 percent of all jobs, including 

public sector positions. In other words, 932,713 jobs out of a total of 1,317,365 jobs are in servicerendering industries. Excluding the public sector, service-rendering jobs account for 52 percent of all 

jobs in 2008. In 2003, service-rendering industries (excluding the public sector) represented 51 

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. 
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Employment increases in service-rendering industries are consistent with regional population 

growth. In the region, local support industries of local and private education, and health, and 

financial activities increased annually by 3.9 percent, 3.0 percent, and 2.7 percent respectively 

between 2003 and 2008. 

Construction and financial services are two other local support industries that grew in accordance 

with the region’s population surge; however, with the downturn in the national economy, these 

industries’ rates of growth have lowered dramatically. Employment in construction grew by a 6.7 

percent per year in the five-year period stretching from 1998 to 2003. Between 2003 and 2008, 

construction continued to grow but by a slower rate of 0.9 percent per year. Likewise for financial 

services, which grew annually by 3.9 percent between 1998 and 2003, and has since grown by a slight 

0.9 percent per year. 

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

as employment in this sector grew annually by 0.9 percent between 2003 and 2008. This modest 

increase reversed substantial declines experienced between 1998 and 2003, when manufacturing 

employment dropped annually by 0.6 percent. What was a regional bright spot between 1998 and 

2003 (2.7 percent per year), transportation and warehousing declined annually by 1.1 percent 

between 2003 and 2008, as compared to the 2.7 percent annual growth in the previous five-year 

period.
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TABLE 2 

ECONOMIC TRENDS: SAN JOAQUIN VALLEY, 1998-2008 

Em

D

----------------1998--------------- ----------------2003---------------- ----------------2008--------------- 

NAICS Estab. Employment 

Average 

Pay Estab. Employment 

Average 

Pay Estab. Employment 

Average 

Pay Regio

ALL 80,398 1,060,454 $33,566 92,231 1,209,849 $40,577 100,414 1,317,365 $39,543 100.0% Ag, Natural Resources 11 7,580 139,953 $18,285 8,646 169,556 $23,354 7,371 178,522 $21,714 13.6Utilities 21 251 9,533 $66,831 213 8,340 $81,309 185 10,512 $82,627 0.8Mining 22 165 4,231 $72,458 179 5,071 $86,065 169 5,618 $81,296 0.4Construction 23 6,124 49,851 $38,969 6,074 69,065 $46,870 6,705 72,312 $44,716 5.5Manufacturing 31-33 2,998 113,344 $40,989 2,779 110,002 $48,735 2,662 115,153 $43,352 8.7Wholesale 42 2,749 33,365 $47,726 2,722 37,124 $53,053 3,027 45,299 $46,510 3.4Retail 44-45 9,586 121,132 $26,446 8,941 132,956 $31,349 8,882 143,910 $25,892 10.9Transport Warehousing 48-49 2,306 33,821 $38,946 2,237 38,554 $44,962 1,957 36,514 $40,166 2.8Information 51 653 14,885 $43,401 692 14,257 $53,695 625 15,328 $47,417 1.2Finance and Insurance 52 2,637 27,792 $46,709 3,046 30,690 $59,530 3,373 32,027 $50,112 2.4Real Estate 53 2,575 13,180 $26,755 2,607 15,932 $34,144 2,784 15,897 $32,633 1.2Prof Technical Services 54 4,064 25,130 $44,216 4,501 31,812 $52,467 4,839 36,411 $46,773 2.8Management of Companies 55 321 17,997 $52,338 316 13,988 $60,045 288 10,551 $55,323 0.8Admn and Waste Services 56 2,910 44,283 $22,362 2,768 48,182 $28,986 2,947 58,761 $27,165 4.5Private Educational Services 61 459 7,107 $25,456 480 9,298 $29,532 497 10,781 $27,407 0.8Health Services 62 6,082 90,304 $38,243 6,526 110,647 $47,867 6,983 126,598 $44,058 9.6Arts, Entertainment, Rec 71 617 10,386 $16,985 621 10,244 $20,192 641 11,172 $17,305 0.8Food and Accommodations 72 5,050 70,335 $12,860 4,942 78,805 $15,831 5,312 90,404 $14,020 6.9Other Services 81 20,157 41,069 $21,165 30,390 47,370 $25,731 35,629 52,505 $21,606 4.0Unclassified 99 85 199 $38,033 1,769 2,534 $26,836 0.2Local Govt. 409 51,325 $45,674 437 60,768 $56,307 477 68,469 $51,051 5.2Local Govt., Education 881 90,200 $39,664 1,487 109,087 $48,304 1,792 118,716 $78,718 9.0State, ALL 1,464 23,639 $46,051 1,166 28,463 $56,515 1,078 31,639 $51,222 2.4Federal, ALL 360 27,592 $52,749 376 29,439 $66,395 424 27,732 $58,945 2.1Source: ADE, Inc., based on California Employment Development Department, LMID 
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5.2 DESCRIPTION OF AFFECTED INDUSTRIES 

Whereas the previous section described the larger economic context within which the District is 

contemplating proposed amendments to Rule 4311, this section analyzes trends of industries directly 

affected by the proposed amendments. For the most part, this rule affects petroleum refineries and 

oil producers in the region. The discussion directly below examines trends with respect to these 

industries in the San Joaquin Valley region, including data on an annual basis for a five-year period 

starting in 2003. 

According to the California Employment Development Department (EDD), 32 oil refineries are 

currently operating in the eight-county region, an amount that according to the EDD has not 

changed when compared to 2003. Close inspection of EDD’s data indicates that only four are actual 

refineries.1

 The four refineries are Big West (66,000 barrels per day), Kern Oil Refining (26,000 

barrels per day), San Joaquin Refining (15,000 barrels per day), and Tricor. At the moment, Tricor is 

not operating its refinery, although Tricor continues to offer other petroleum-related services. 

Tricor still maintains a permit to operate its refinery. Kern Oil and San Joaquin Refining are 

considered small refineries. 

The number of workers employed by the three operating oil refineries in the region increased by 

three percent annually between 2003 and 2008, going from 549 to 637. Average wages tend to be 

very high in this industry, at an estimated $98,900 in 2008, up from the 2003 average of $76,300. 

Table 3 below also includes revenue trends estimates. Oil refineries in the region generated an 

estimated $3.1 billion in revenues in 2008, which is approximately $592,100,400 more than what was 

generated in 2003. On average, the three operating refineries generate $1,049,600,700 in revenues, 

versus the $511,300,200 average in 2003. 

TABLE 3 

EDD OIL REFINERY TRENDS: SAN JOAQUIN VALLEY REGION 

Region 2003 2004 2005 2006 2007 2008 

Change 

03-08 

Annual 

Percent 

Change 

03-08 

 Establishments 32 29 32 31 32 32 0 -0.3% 

 Actual Refineries 5 5 5 5 5 4 -1 -4% 

 Small Refineries 3 3 3 3 3 2 -1 -20% 

 Employment 549 647 587 579 626 637 88 3% 

 Payroll ($2008) $54,845,080 $81,177,515 $66,383,607 $71,047,731 $83,006,037 $82,445,713 $27,600,633 8.5% 

 Average Pay ($2008) $76,287 $95,832 $86,317 $93,777 $101,405 $98,879 $22,591 5.3% 

 Annual output 37,277,284 37,220,213 37,589,558 37,822,866 37,953,878 30,025,891 -7,251,393 -19.5% 

 Revenues (est.)($2008) $2,556,755,854 $2,243,602,281 $2,041,647,699 $2,536,154,282 $3,260,920,609 $3,148,838,270 $592,082,416 23.2% 

Source: ADE, Inc., based on US Economic Census, California EDD LMID, and California Department of Conservation 

 

1District staff and ADE reviewed a list of companies prepared by the EDD that included the 32 refineries, and 

determined that, while most of these businesses are in petroleum-related businesses, most are not refineries. There are 

only four refineries in the region right now. 
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Proposed amendments to Rule 4311 also affects oil producers. In 2008, oil prices spiked up 

tremendously, resulting in significant amount of revenues for this industry. In 2008, oil producers 

generated $14.3 billion, almost triple what they generated in 2003, or $5.7 billion. To control for 

2008, we calculated a three year average for 2005-2008 period. Over this period, oil producers 

average $11.8 billion. As Table 4 shows, there are 52 oil producers operating in the eight-county 

region, and these businesses employ slightly over 2,700 workers. 

TABLE 4 

OIL PRODUCER TRENDS: SAN JOAQUIN VALLEY REGION 

Region 2003 2004 2005 2006 2007 2008 

Change 

03-08 

Annual 

Percent 

Change 

03-08 

 Establishments 59 56 59 60 54 52 -8 -2.7% 

 Employment 2,799 2,683 2,942 3,225 2,641 2,717 -83 -0.6% 

 Payroll ($2008) $214,840,155 $201,052,717 $248,752,305 $335,505,472 $320,002,762 $317,146,194 $102,306,038 8.1% 

 Average Pay ($2008) $76,745 $74,926 $84,549 $104,029 $121,178 $116,734 $39,989 8.8% 

 Revenues 

(est.)($2008) $5,746,954,400 $6,945,950,378 $8,731,699,584 $10,218,990,325 $10,757,282,577 $14,315,431,023 $8,568,476,623 20.0% 

Source: ADE, Inc., based on California EDD LMID and California Department of Conservation 

Table 5 below also includes estimates on revenues generated by large and small oil producers, or 

$9.9 billion and $1.8 billion respectively. Large oil producers generate, on average, $1.9 billion in 

revenues, versus the $38,800,000 in revenues generated by small oil producers. Based on throughput capacity of each refinery (assuming an 80 percent operating capacity), we estimate that the three 

operating refineries generate $2.6 billion in aggregate revenues, as well as $168,900,700 in after-tax 

net-profits. 

TABLE 5 

PROFILE OF SOURCES SUBJECT TO PROPOSED AMENDMENTS 

Type Establishments Employment Revenues Net Profits 

Oil Refineries 3 637 $2,631,319,832 $168,930,734 

 Large Refinery 1 393 $1,623,057,093 $104,200,266 

 Small Refinery 2 244 $1,008,262,739 $64,730,468 

Oil Producers 52 2,717 $11,763,901,308 $1,225,798,516 

 Large oil producers 5 2,301 $9,961,618,081 $1,038,000,604 

 Small oil producers 47 416 $1,802,283,227 $187,797,912 

Source: ADE, Inc., based on US Economic Census, SJVUAPCD, California Department of Conservation, and 

California Energy Commission 

What is driving the increase in revenues in oil production and refining is the significant increase in 

oil price on a per barrel basis. In the five-year period between 2003 and 2008, the monthly price of 

crude oil in California averaged approximately $55.00 per barrel (see Figure 1). Since January 2007, 

the monthly average has been above the medium-term average, having spiked up significantly in the 

spring of 2008. The price of crude oil in California has declined significantly since early fall, and, at 

$35.05 per barrel in December 2008, has fallen below the 2003-2008 average. It is important to note 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2009 

D-19 Final Draft Staff Report with Appendices For 

Revised Proposed Amendments to Rule 4311 

that the price of oil is set on the world market, not locally or regionally. A variety of factors 

influence the price of oil in California, including energy demand from fast-growing economic such 

as the People’s Republic of China and India, amount of reserves available on the world market, 

national and global economic climate, global political unrest, and relative availability of alternative 

sources of energy, to name a few factors. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2

D-20 Final Draft Staff Repo

Revised Proposed Ame

FIGURE 1 

MONTHLY CRUDE OIL PRICE (PRICE PER BARREL) 

JANUARY 2000 THROUGH NOVEMBER 2008 ($2008) 

$19.11

$15.89

$29.81

$30.68

$32.58

$53.03

$84.6

$53.78

$0.00

$10.00$20.00$30.00$40.00$50.00$60.00$70.00$80.00$90.00

$100.00$110.00$120.00$130.00

Jan 00

Mar 00

May 00

Jul 00

Sep 00

Nov 00

Jan 01

Mar 01

May 01

Jul 01

Sep 01

Nov 01

Jan 02

Mar 02

May 02

Jul 02

Sep 02

Nov 02

Jan 03

Mar 03

May 03

Jul 03

Sep 03

Nov 03

Jan 04

Mar 04

May 04

Jul 04

Sep 04

Nov 04

Jan 05

Mar 05

May 05

Jul 05

Sep 05

Nov 05

Jan 06

Mar 06

May 06

Jul 06

Sep 06

Nov 06

Jan 07

Mar 07

May 07

Jul 07

Sep 07

Nov 07

Jan 08

Mar 08

Region (mos. output per producing well)2003-2008 Five-year Avg

Source: ADE, Inc., California Department of Conservation 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2009 

D-21 Final Draft Staff Report with Appendices For 

Revised Proposed Amendments to Rule 4311 

It is interesting to note that Central Valley oil producers responded to the surge in oil prices by 

opening up more wells (see Figure 2). Despite this effort to supply the market, oil producers 

experienced declining oil production in aggregate (see Figure 3), which is partly explained by Figure 

4, which traces a declining output per producing well. Thus, data suggest that newer wells are not 

producing as much oil as older wells, which, for their part, could be experiencing declining output as 

well. 

Figure 5 translates the per barrel price of crude oil into per gallon terms, and compares these prices 

against wholesale price of refined gasoline and price of reformulated gasoline as sold by gas station. 

What is even more interesting about this figure are differences between per gallon price of crude oil 

and the per gallon wholesale price of gasoline, and the per gallon wholesale price and per gallon 

price of reformulated gasoline sold at gas stations. Expressed in dollar per gallon terms, gross 

margins of the oil refineries tend to be higher than gross margins for gas station, reinforcing 

anecdotal information that suggests gasoline stations do not necessarily benefit when oil producers 

and oil refineries are doing well. For example, at its peak in June 2008, gas stations sold 

reformulated gas at $4.36 per gallon after having purchased the gas from refineries and distributors 

for $3.56 per gallon, for a gross margin of $0.80 per gallon. Refineries purchased crude oil at 

approximately $2.23 per gallon and then sold the refined product at $3.56 per gallon, for a gross 

margin of $1.33 per gallon. 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2

D-22 Final Draft Sta

FIGURE 2 

MONTHLY TRENDS IN NUMBER OF PRODUCING WELL 

JANUARY 2000 THROUGH NOVEMBER 2008 

30,00032,50035,000

37,500

40,00042,500

Jan 00

Mar 00

May 00

Jul 00

Sep 00

Nov 00

Jan 01

Mar 01

May 01

Jul 01

Sep 01

Nov 01

Jan 02

Mar 02

May 02

Jul 02

Sep 02

Nov 02

Jan 03

Mar 03

May 03

Jul 03

Sep 03

Nov 03

Jan 04

Mar 04

May 04

Jul 04

Sep 04

Nov 04

Jan 05

Mar 05

May 05

Jul 05

Sep 05

Nov 05

Jan 06

Mar 06

May 06

Jul 06

Sep 06

Nov 06

Jan 07

Mar 07

May 07

Jul 07

Sep 07

Nov 07

Jan 08

Monthly Producing Wells in Region

Source: ADE, Inc., California Department of Conservation

Revised Propo
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2

D-23 Final Draft Sta

FIGURE 3 

MONTHLY CRUDE OIL PRODUCTION 

JANUARY 2000 THROUGH NOVEMBER 2008 

13,000,00015,000,000

17,000,000

19,000,00021,000,00023,000,00025,000,000

Jan 00

Apr 00

Jul 00

Oct 00

Jan 01

Apr 01

Jul 01

Oct 01

Jan 02

Apr 02

Jul 02

Oct 02

Jan 03

Apr 03

Jul 03

Oct 03

Jan 04

Apr 04

Jul 04

Oct 04

Jan 05

Apr 05

Jul 05

Oct 05

Jan 06

Apr 06

Jul 06

Oct 06

Jan 07

Apr 07

Jul 07

Oct 07

Jan 08

Re

gion

California

Source: ADE, Inc., California Department of Conservation

Revised Propo
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2

D-24 Final Draft Sta

FIGURE 4 

MONTHLY OIL PRODUCTION (BBL) BY PRODUCING WELLS 

JANUARY 2000 THROUGH NOVEMBER 2008 

300400500600

Jan 00

Mar 00

May 00

Jul 00

Sep 00

Nov 00

Jan 01

Mar 01

May 01

Jul 01

Sep 01

Nov 01

Jan 02

Mar 02

May 02

Jul 02

Sep 02

Nov 02

Jan 03

Mar 03

May 03

Jul 03

Sep 03

Nov 03

Jan 04

Mar 04

May 04

Jul 04

Sep 04

Nov 04

Jan 05

Mar 05

May 05

Jul 05

Sep 05

Nov 05

Jan 06

Mar 06

May 06

Jul 06

Sep 06

Nov 06

Jan 07

Mar 07

May 07

Jul 07

Sep 07

Nov 07

Jan 08

Mar 08

Re

gion (mos. output per producin

g well)

Output per producing well (2003-2008 a

Source: ADE, Inc., California Department of Conservation 

Revised Propo
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2

D-25 Final Draft Sta

Revised Propo

$0.00$0.50$1.00$1.50$2.00$2.50$3.00$3.50

$4.00$4.50

$5.00

2000-Jan

2000-Mar

2000-May

2000-Jul

2000-Sep

2000-Nov

2001-Jan

2001-Mar

2001-May

2001-Jul

2001-Sep

2001-Nov

2002-Jan

2002-Mar

2002-May

2002-Jul

2002-Sep

2002-Nov

2003-Jan

2003-Mar

2003-May

2003-Jul

2003-Sep

2003-Nov

2004-Jan

2004-Mar

2004-May

2004-Jul

2004-Sep

2004-Nov

2005-Jan

2005-Mar

2005-May

2005-Jul

2005-Sep

2005-Nov

2006-Jan

2006-Mar

2006-May

2006-Jul

2006-Sep

2006-Nov

2007-Jan

2007-Mar

2007-May

2007-Jul

2007-Sep

2007-Nov

2008-Jan

Regular Reformulated Gas: Monthly Average: California (dollar per gallon) ($2008)California Total Gasoline Wholesale/Resale Price by Refiners (dollar per gallon) ($2008)Price Per Gallon from Oil Producers ($2008)

FIGURE 5 

COMPARISON OF CALIFORNIA MONTHLY PRICE PER GALLON: CRUDE OIL, REFINED OIL, AND REGU

REFORMULATED 

GASOLINE, JANUARY 2000 THROUGH DECEMBER 2008 

Source: ADE, Inc., California Department of Conservation
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2009 

D-26 Final Draft Staff Report with Appendices For 

Revised Proposed Amendments to Rule 4311 

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Appendix D: Socioeconomic Impact Analysis June 18, 2009 

D-27 Final Draft Staff Report with Appendices For 

Revised Proposed Amendments to Rule 4311 

6. SOCIO-ECONOMIC IMPACTS 

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

annual compliance costs. The first part of this section discusses annual compliance costs. Section 6.2 

discusses general business responses to compliance costs. Section 6.3 analyzes the socioeconomic 

impacts of the proposed amendments to Rules 4311. 

6.1 COMPLIANCE COST ESTIMATES 

Table 6 summarizes the estimated annualized costs associated with proposed amendments to Rule 

4311. The table includes cost estimates issued by the District and industry stakeholders. As the table 

shows, the District indicates that impacted sources will bear $920,000 in total capital costs, which, 

when annualized, translates into an annual cost of $239,652, which includes cost of personnel. 

Industry stakeholders in the refining industry place total cost per establishment at $8,500,000, which, 

when annualized, amounts to $1,671,245. 

TABLE 6 

COST ASSOCIATED WITH PROPOSED DRAFT RULE 4311 

Capital Cost Per Establishment Annual Cost Per Establishment 

Air District 920,000 $239,652 

Industry Stakeholders (petroleum industries only) $8,500,000 $1,671,245 

Source: San Joaquin Valley Unified Air Pollution Control District and Kern Oil\Big West 

6.2 BUSINESS RESPONSES TO COMPLIANCE COSTS 

Industries impacted by the proposed amendments 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. Impacted industries might 

also seek to pass costs to users of services or purchasers of goods, depending on the magnitude of 

costs and on what the overall market can bear. Affected sources may also seek to renew efforts to 

increase productivity and reduce costs elsewhere in their operation in order to recoup the regulatory 

costs and maintain profit levels. More than likely, industries impacted by amendments to Rule 4311 

will pass costs to consumers and commercial\industrial entities needing fuel, which is to say most 

industries. 

6.3 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 proposed amendments to Rule 4311. As Table 7 

below indicates, impacts to petroleum-related industries including refineries and oil producers are 

less than significant. Small oil producers\oil field services are also not disproportionately impacted 

by proposed amendments to Rule 4311. In addition to oil-related industries, a number of other 

industries are also potentially impacted by the proposed amendments. Table 8 below shows that, for 
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Appendix D: Socioeconomic Impact Analysis June 18, 2009 

D-28 Final Draft Staff Report with Appendices For 

Revised Proposed Amendments to Rule 4311 

the most part, impacts are less than significant. A fruit juice manufacturer – Odwalla – is potentially 

significantly impacted by the rule, as estimated annual impacts of $239,700 exceed the ten-percent 

threshold, or $180,210, by $59,440. Recouping that amount above the ten-percent threshold through 

workforce reduction would amount to 1.4 full-time equivalent positions, or under one percent of the 

estimated plant workforce. However, we conclude that Odwalla is not significantly impacted 

because, more than likely, the 1.4 FTE impact falls within normal job attrition that occurs at the 

Odwalla plant in Dinuba. Thus, we conclude by saying that proposed amendments to Rule 4311 

does not significantly impact industries, nor are small businesses disproportionately impacted by the 

proposed amendments.
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2

D-29 Final Draft Staff Repo

Revised Proposed Ame

TABLE 7 

SOCIOECONOMIC IMPACT ANALYSIS: DRAFT RULE 4311: PETROLEUM\NATURAL GAS RELATED INDUS

Large Refineries Small Refineries 

Large 

Oil\Natural Gas 

Producers 

Small Oil 

Producers\Oil 

Field Services 

Establishments 1 2 5 50 Revenues $1,623,057,093 $1,008,262,739 $9,961,618,081 $1,806,286,727 Net Profits $104,200,266 $64,730,468 $1,038,000,604 $188,215,077 Total Annual Costs: District Scenario $239,652 $479,304 $1,198,260 $11,982,600 Total Annual Costs: Industry Stakeholder Scenario $1,671,245 $3,342,490 $8,356,225 $83,562,250 Cost to Net Profit Ratio: District Scenario 0.23% 0.74% 0.12% 6.37% Cost to Net Profit Ratio: Industry Stakeholder Scenario 1.60% 5.16% 0.81% NA District Scenario Significance less than significant less than significant less than significant less than significant Industry Stakeholder Scenario Significance less than significant less than significant less than significant NA Source: ADE, Inc., based on US Economic Census, SJVUAPCD, California Department of Conservation, and California Energy Commission 

TABLE 8 

SOCIOECONOMIC IMPACT ANALYSIS: DRAFT RULE 4311: INDUSTRIES OTHER THAN PETROLEUM\NATU

Dairy Farms 

Frozen Fruits, 

Fruit Juices 

Manufacturing 

Flat Glass 

Manufacturing 

Industrial Organic 

Chemicals 

Sewera

System

Establishments 3 1 1 1 Revenues $555,813,005 $34,292,958 $134,062,280 $70,105,071 $213Net Profits $61,695,244 $1,802,096 $5,174,021 $3,166,035 $213Total Annual Costs: District Scenario $718,956 $239,652 $239,652 $239,652 $2Cost to Net Profit Ratio: District Scenario 1.17% 13.30% 4.63% 7.57% District Scenario Significance less than significant significant less than significant less than significant less than sigSource: ADE, Inc., based on US Economic Census, US Census Quarterly Financial Report for Manufacturing and Mining, SJVUAPCD, and California State 
SAN JOAQUIN VALLEY UNIFIED AIR POLLUTION CONTROL DISTRICT

Appendix D: Socioeconomic Impact Analysis June 18, 2009 

D-30 Final Draft Staff Report with Appendices For 

Revised Proposed Amendments to Rule 4311 

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