BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                     SB 350


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          Date of Hearing:  September 10, 2015


                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES


                                 Das Williams, Chair


          SB  
          350 (De León) - As Proposed to be Amended 


          SENATE VOTE:  24-14


          SUBJECT:  Clean Energy and Pollution Reduction Act of 2015


          SUMMARY:  Enacts the "Clean Energy and Pollution Reduction Act  
          of 2015," which establishes targets to increase retail sales of  
          renewable electricity to 50% by 2030 and double the energy  
          efficiency savings in electricity and natural gas end uses by  
          2030.


          EXISTING LAW:   


          1)The California Renewables Portfolio Standard (RPS) requires  
            "retail sellers" of electricity, i.e., investor-owned  
            utilities (IOUs), energy service providers (ESPs) and  
            community choice aggregators (CCAs), as well as publicly owned  
            utilities (POUs), to procure eligible renewable energy  
            resources to meet the following portfolio targets:

             a)   20% on average from January 1, 2011 to December 31,  
               2013.









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             b)   25% by December 31, 2016.

             c)   33% by December 31, 2020 and each year thereafter.

          2)Authorizes the Public Utilities Commission (PUC) to require  
            retail sellers to procure eligible renewable energy resources  
            in excess of these targets.

          3)Provides that eligible renewable generation facilities must  
            use biomass, solar thermal, photovoltaic, wind, geothermal,  
            renewable fuel cells, small hydroelectric, digester gas,  
            limited non-combustion municipal solid waste conversion,  
            landfill gas, ocean wave, ocean thermal or tidal current.

          4)Establishes "balanced portfolio" requirements for procurement  
            based on the following three categories of renewable energy  
            products:

             a)   Renewable energy interconnected to the grid within,  
               scheduled for direct delivery into, or dynamically  
               transferred to, a California balancing authority (i.e.,  
               real renewable energy supplied to the California grid,  
               located within or proximate to the state).  Of the total  
               renewable energy contracts executed after June 1, 2010, the  
               following percentages must fall into this category:

               i)     At least 50% for the 2011-2013 compliance period.

               ii)    At least 65% for the 2014-2016 compliance period.

               iii)   At least 75% thereafter.

             b)   Renewable energy where substitute non-renewable energy  
               is used to provide a reliable delivery schedule into a  
               California balancing authority (i.e., firmed and shaped  
               energy where substitute energy is used to compensate for  
               delivery problems due to intermittent generation or  
               inadequate transmission capacity from a remote renewable  
               resource).








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             c)   Renewable energy products not meeting either condition  
               above, including unbundled renewable energy credits (RECs)  
               (i.e., the original source of renewable energy must be  
               located within the western grid, but otherwise need not be  
               delivered to the California grid).  Of the total renewable  
               energy contracts executed after June 1, 2010, the following  
               percentages may fall into this category:

               i)     Not more than 25% for the 2011-2013 compliance  
                 period.

               ii)    Not more than 15% for the 2014-2016 compliance  
                 period.

               iii)   Not more than 10% thereafter.

          5)Requires the CEC to:

             a)   Certify eligible renewable energy resources according to  
               the criteria in the statute.

             b)   Design and implement an accounting system to verify  
               compliance, to ensure that electricity generated by an  
               eligible renewable energy resource is counted only once for  
               the purpose of meeting the RPS of this state or any other  
               state, to certify RECs produced by eligible renewable  
               energy resources, and to verify retail product claims in  
               this state or any other state. 

             c)   Establish a system for tracking and verifying RECs that,  
               through the use of independently audited data, verifies the  
               generation of electricity associated with each REC and  
               protects against multiple counting of the same REC. 

          6)Requires the PUC to establish a cost limit for each IOU  
            according to specified criteria, requires the PUC to report to  
            the Legislature by 2016 regarding whether IOUs can achieve 33%  
            within the adopted cost limit, authorizes the PUC to revise  








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            the cost limit once after 2016 if necessary, and authorizes  
            IOUs to stop procuring renewable energy beyond the cost limit,  
            unless additional renewable energy can be procured without  
            exceeding a de minimis increase in rates.

          7)Permits retail sellers to take credit for compliance surpluses  
            by requiring the PUC to adopt "banking" rules permitting  
            retail sellers to apply excess procurement to subsequent  
            compliance periods.  Prohibits banking of procurement  
            associated with contracts of less than 10 years, as well as  
            RECs and other undelivered products.

          8)Excuses retail sellers from enforcement for failure to meet  
            targets if the retail seller demonstrates that any of the  
            following conditions are beyond its control and will prevent  
            compliance:

             a)   Inadequate transmission capacity for delivery of  
               sufficient renewable energy.

             b)   Permitting, interconnection or other delays for  
               renewable energy projects, or an insufficient supply of  
               available renewable energy.

             c)   Unanticipated curtailment of renewable energy necessary  
               to address the needs of a balancing authority (e.g., the  
               Independent System Operator).

          9)Requires the CEC to establish regulations to develop and  
            implement a comprehensive program to achieve greater energy  
            savings in California's existing residential and  
            nonresidential building stock [AB 758 (Skinner), Chapter 470,  
            Statutes of  2009].  The AB 758 program is targeted at  
            buildings that "fall significantly below" the current Title 24  
            energy efficiency standards.  

          THIS BILL:

          1)Establishes a RPS target of 50% by December 31, 2030 and  








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            thereafter for retail sellers and POUs, including interim  
            targets of 40% by the end of the 2021-2024 compliance period,  
            45% by the end of the 2025-2027 compliance period, and 50% by  
            the end of the 2028-2030 compliance period.



          2)Authorizes unlimited banking of "bucket 1" resources,  
            regardless of contract length, beginning in 2021.  Requires at  
            least 65% of RPS procurement be from contracts of 10 years or  
            more or ownership of eligible renewable energy resources.   
            Applies these standards uniformly to all retail sellers and  
            POUs.



          3)Requires the PUC to direct each IOU to include in its proposed  
            procurement plan a strategy for procuring a diverse portfolio  
            of resources that provide a reliable electricity supply,  
            including renewable energy integration needs, using zero  
            carbon-emitting resources to the maximum extent reasonable.  
            Requires the net capacity costs of those resources to be  
            allocated on a fully nonbypassable basis.

          4)Removes specified criteria and reporting requirement from the  
            RPS cost limit, instead directing the PUC to set the cost  
            limit at a level that prevents disproportionate rate impacts.

          5)Limits the RPS eligibility of a facility engaged in the  
            combustion of municipal solid waste located in Stanislaus  
            County to energy generated before January 1, 2017.



          6)Permits a POU to exclude, from total retail sales, generation  
            that is produced through a voluntary green pricing or shared  
            renewable generation program.  Prohibits use of any renewable  
            energy credits associated with electricity credited to a  
            customer to be counted toward procurement requirements.








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          7)Allows compliance flexibility for those POUs that satisfy 50%  
            or more of their retail sales from specified, large  
            hydroelectric power, as well as POUs that have coal contracts,  
            entered into prior to June 1, 2010, in their electricity  
            resource mix.


          8)Specifies that costs shifting cannot occur between customers  
            of electrical corporations and CCAs or ESPs and requires the  
            PUC to ensure that departing load does not experience cost  
            increase as a result in an allocation of costs not incurred on  
            behalf of departing load.


          9)Includes the following provisions in furtherance of doubling  
            the energy efficiency savings in electricity and natural gas  
            end uses by 2030:

             a)   Directs CEC to adopt an update to the AB 758 program, by  
               January 1, 2017 and every three years thereafter.

             b)   Defines energy savings and end uses.
             c)   Directs the CEC to specify energy efficiency targets to  
               meet the goal, and specifies programs that may be used to  
               achieve the goal.


             d)   Specifies how the goals will be measured and counted;  
               makes clarifying changes.


             e)   Requires assessments of the effects of energy efficiency  
               on electricity demand statewide and locally, hourly, and  
               seasonally.


             f)   Directs the PUC to authorize energy efficiency programs  
               to meet the 50% energy efficiency goal.









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             g)   Specifies PUC energy efficiency procurement and  
               reporting requirements.


             h)   Directs POUs to meet the energy efficiency targets  
               specified by the CEC.


             i)   Directs the CEC to establish consumer protection  
               guidelines for energy efficiency products, and directs the  
               CEC to promote greater project penetration in disadvantaged  
               communities, and to use workforce development and job  
               training for residents in disadvantaged communities.


             j)   Directs the CEC to evaluate "negative therm interaction"  
               effects generated as a result of electricity efficiency  
               improvements.


          10)Establishes the following "transportation electrification"  
            provisions:



             a)   Requires ARB to identify and adopt appropriate policies  
               to remove regulatory disincentives facing retail sellers  
               from facilitating the achievement of GHG emission  
               reductions in other sectors through increased investments  
               in transportation electrification, including an allocation  
               of GHG emissions allowances to retail sellers to account  
               for increased emissions in the electric sector from  
               transportation electrification.

             b)   Requires the PUC, in consultation with the ARB and CEC,  
               to direct IOUs to propose multiyear programs and  
               investments to accelerate widespread transportation  
               electrification to reduce dependence on petroleum, meet air  








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               quality standards, achieve the goals set forth in the  
               Charge Ahead California Initiative, and reduce emissions of  
               greenhouse gases to 40% below 1990 levels by 2030 and to  
               80% below 1990 levels by 2050.  Requires the PUC to approve  
               programs and investments that deploy charging  
               infrastructure as distribution system costs.



             c)   Requires the PUC to review data concerning current and  
               future electric transportation adoption rates and charging  
               infrastructure utilization rates no less than every three  
               years and prior to any further authorization to collect  
               additional new program costs related to transportation  
               electrification in ratepayer rates.  If market barriers  
               unrelated to the investment prevent electric transportation  
               from adequately utilizing available charging  
               infrastructure, the PUC shall not permit additional  
               investments without adequate assurance that the investments  
               would not result in stranded costs recoverable from  
               ratepayers.



             d)   Establishes a new RPS compliance "offramp" for  
               unanticipated increases in retail sales due to  
               transportation electrification, if the waiver would not  
               result in an increase in GHG emissions.  In making a  
               finding, the PUC must consider whether transportation  
               electrification significantly exceeded forecasts in that  
               retail seller's service territory and whether the retail  
               seller has taken reasonable measures to procure sufficient  
               resources to account for the unanticipated increases.



          11)Requires the PUC and CEC to do all of the following in  
            furtherance of meeting the state's clean energy and pollution  
            reduction objectives:








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             a)   Take into account the use of distributed generation to  
               the extent that it provides economic and environmental  
               benefits in disadvantaged communities.

             b)   Take into account the opportunities to decrease costs  
               and increase benefits, including pollution reduction and  
               grid integration.



             c)   Where feasible, authorize procurement of resources to  
               provide grid reliability services that minimize reliance on  
               system power and fossil fuel resources and, where feasible,  
               cost-effective, and consistent with other state policy  
               objectives, increase the use of large- and small-scale  
               energy storage with a variety of technologies, targeted  
               energy efficiency, demand response, eligible renewable  
               energy resources, or other technologies to protect system  
               reliability.



             d)   Review technology incentive, research, development,  
               deployment, and market facilitation programs overseen by  
               the PUC and CEC and make recommendations to advance state  
               clean energy and pollution reduction objectives and provide  
               benefits to disadvantaged communities.



             e)   To the extent feasible, give first priority to the  
               manufacture and deployment of clean energy and pollution  
               reduction technologies that create employment  
               opportunities, including high wage, highly skilled  
               employment opportunities, and increased investment in the  
               state.








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             f)   Establish a publicly available tracking system to  
               provide up-to-date information on progress toward meeting  
               the clean energy and pollution reduction goals of the Clean  
               Energy and Pollution Reduction Act of 2015.



             g)   Establish an advisory group consisting of  
               representatives from disadvantaged communities to review  
               and advise on programs proposed to achieve clean energy and  
               pollution reduction and determine whether those proposed  
               programs will be effective and useful in disadvantaged  
               communities.
          
          12)Requires the PUC to permit community choice aggregators to  
            submit proposals for satisfying their portion of the renewable  
            integration need.



          13)Requires the PUC to adopt a process for IOUs, CCAs, and ESPs  
            to file an integrated resource plan (IRP) to:





             a)   Meet the greenhouse gas emissions reduction targets  
               established by the ARB for the electricity sector and each  
               load-serving entity that reflect the electricity sector's  
               percentage in achieving economy-wide greenhouse gas  
               emissions reductions of 40% from 1990 levels by 2030.












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             b)   Procure at least 50% eligible renewable energy resources  
               by December 31, 2030, consistent with the RPS.





             c)   Enable each IOU to fulfill its obligation to serve its  
               customers at just and reasonable rates.





             d)   Minimize impacts on ratepayers' bills.





             e)   Ensure system and local reliability.





             f)   Strengthen the diversity, sustainability, and resilience  
               of the bulk transmission and distribution systems, and  
               local communities.





             g)   Enhance distribution systems and demand-side energy  
               management.










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             h)   Minimize localized air pollutants and other greenhouse  
               gas (GHG) emissions.





          14)Requires POUs to adopt IRPs according to similar standards,  
            subject to review by the CEC.



          15)Requires the California Independent System Operator (ISO) to  
            prepare proposed governance modifications to facilitate the  
            transformation of the ISO into a regional organization,  
            requires the ISO to study specified issues, the PUC, CEC and  
            ARB to hold a joint workshop to review the ISO's proposed  
            modifications, and provides that the proposed governance  
            modifications do not take effect unless the Legislature enacts  
            a statute implementing them.

          16)Requires the CEC to study barriers for low-income customers  
            to access solar photovoltaic, other renewable energy, energy  
            efficiency, and weatherization investments.



          17)Requires ARB to study barriers for low-income customers to  
            access zero-emission and near zero-emission transportation  
            options.



          18)Amends the public works provision of the Labor Code to  
            specify that construction, alteration, demolition,  
            installation, or repair work on the electric transmission  








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            system located in California constitutes a public works  
            project, subjecting these projects to prevailing wage.
          
          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee:





          1)Ongoing annual costs of $5.6 million for staffing and one-time  
            costs of $3.5 million in contracts [General Fund (GF) and  
            special fund] for the CEC to implement the requirements of the  
            bill.


          2)Ongoing annual costs of $1.65 million for personnel services  
            and $2.3 million in operating expenses (special fund) for the  
            PUC to fulfill the requirements of the bill.


          3)Ongoing annual costs of up to $275,000 (various special funds)  
            for ARB to develop policies to remove regulatory disincentives  
            and facilitate GHG reductions through transportation  
            electrification.


          4)Unknown ratepayer costs to the GF and various special funds to  
            the state, as an electricity user and ratepayer to the extent  
            electricity prices are affected by increasing the RPS  
            standard.


          5)Unknown costs pressures (special fund) for the PUC and CEC to  
            review renewable integration needs and consider grid  
            integration in RPS implementation proceedings.


          COMMENTS:  








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          1)Governor's goals.  In his January 5, 2015 Inaugural Address,  
            Governor Brown announced the following "objectives for 2030  
            and beyond":
            


               Toward that end, I propose three ambitious goals to be  
               accomplished within the next 15 years:





                           Increase from one-third to 50% our electricity  
                    derived from renewable sources;
                           Reduce today's petroleum use in cars and  
                    trucks by up to 50%; and,


                           Double the efficiency of existing buildings  
                    and make heating fuels cleaner.





               We must also reduce the relentless release of methane,  
               black carbon and other potent pollutants across industries.  
                And we must manage farm and rangelands, forests and  
               wetlands so they can store carbon.  All of this is a very  
               tall order.  It means that we continue to transform our  
               electrical grid, our transportation system and even our  
               communities.



               I envision a wide range of initiatives:  more distributed  








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               power, expanded rooftop solar, micro-grids, an energy  
               imbalance market, battery storage, the full integration of  
               information technology and electrical distribution and  
               millions of electric and low-carbon vehicles.  How we  
               achieve these goals and at what pace will take great  
               thought and imagination mixed with pragmatic caution.  It  
               will require enormous innovation, research and investment.   
               And we will need active collaboration at every stage with  
               our scientists, engineers, entrepreneurs, businesses and  
               officials at all levels.

               Taking significant amounts of carbon out of our economy  
               without harming its vibrancy is exactly the sort of  
               challenge at which California excels.  This is exciting, it  
               is bold and it is absolutely necessary if we are to have  
               any chance of stopping potentially catastrophic changes to  
               our climate system.



          1)RPS.  The RPS is the centerpiece of California's effort to  
            develop a clean energy system and reduce pollution and GHG  
            emissions associated with electricity consumption.  The  
            original RPS bill, SB 1078 (Sher), Chapter 516, Statutes of  
            2002, set a goal of 20% by 2017.  SB 107 (Simitian), Chapter  
            464, Statutes of 2006, accelerated the deadline for 20% to  
            2010.  SBX1 2 (Simitian), Chapter 1, Statutes of 2011-12 First  
            Extraordinary Session, codified the current 33% by 2020 RPS  
            target and also established product content categories (or  
            "buckets"), which place the highest value (Bucket 1) on  
                   renewable energy that is directly delivered into California  
            because it has the greatest economic, environmental and  
            reliability benefits.


            Since the RPS was enacted, IOUs have advanced beyond their  
            2002 average starting point of 12% renewables.  According to  
            the PUC's RPS reports, IOUs' actual RPS procurement in 2013  
            was 23.8% for Pacific Gas and Electric (PG&E), 21.6% for  








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            Southern California Edison (SCE), and 23.6% for San Diego Gas  
            & Electric (SDG&E).  The PUC reports also show that the IOUs  
            are on track to meet the RPS requirement of 25% renewables by  
            2016 and are well-positioned to meet the 33% requirement by  
            2020.  RPS procurement currently under contract for 2020 is  
            31.3% for PG&E, 23.5% for SCE, and 38.8% for SDG&E.


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Calpine Corporation


          Insurance Commissioner Dave Jones


          Los Angeles County Board of Supervisors





          Prior version:





          American Academy of Pediatrics - California


          American Cancer Society Cancer Action Network, California









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          American Lung Association in California


          Asthma Coalition of Los Angeles County


          Audubon California


          Autodesk


          Baz Allergy, Asthma and Sinus Center


          Ben & Jerry's


          Bonnie J. Adario Lung Cancer Foundation


          BOSCH


          Breathe California


          Business for Innovative Climate & Energy Policy


          CALSTART


          California Association of Electrical Workers


          California Biodiesel Alliance









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          California Black Health Network


          California Catholic Conference


          California Conference of Directors of Environmental Health


          California Energy Efficiency Industry Council


          California League of Conservation Voters


          California Energy Storage Alliance


          California Nurses Association


          California Pan Ethnic Health Network


          California Public Health Association - North


          California State Pipe Trades Council


          California Thoracic Society


          California Voices for Progress


          Californians Against Waste









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          Center for Climate Change and Health; Public Health Institute


          Central California Asthma Collaborative


          Ceres


          ChargePoint


          Clean Tech San Diego


          Clean Power Campaign


          Clean Water Action 


          Climate Action


          Climate Parents


          Climate Ready Solutions


          Coalition for Clean Air


          Coalition of California Utility Employees


          Coastal Environmental Rights Foundation









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          Code REDD


          Consumer Attorneys of California


          Consumers Union


          Dignity Health


          Doctors for Climate Health


          Eagle Creek


          Environment California


          Environmental Defense Fund


          Gaia Development Services


          Gap


          Green Star Solution


          Health Care Without Harm


          Iberdrola Renewables









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          Large-Scale Solar Association


          Levi Strauss & Co.


          Medical Advocates for Healthy Air


          Mercury Press International


          Mountain Rider's Alliance


          National Parks Conservation Association


          Natural Resources Defense Council


          New Moon Girl Media


          Nextgen Climate


          North Face


          Pacific Forest Trust


          Physicians for Social Responsibility - Los Angeles


          Physicians for Social Responsibility - San Francisco Bay Area  
          Chapter








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          Planning and Conservation League


          Proof Lab Surf Shop


          Public Health Institute


          Quest


          Refill Shoppe


          Regional Asthma Management and Prevention (RAMP)


          Rio Theater


          San Francisco Asthma Task Force


          Santa Clara County Medical Society


          Sierra Business Council


          Sierra Club California


          Sirius Mac Solutions


          SmartWool








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          Sonoma County Asthma Coalition


          Solar Energy Industries Association


          South Coast Air Quality Management District


          State Building and Construction Trades Council of California


          Sungevity


          Thinkshift Communications


          Transform


          Trust for Public Lands


          U.S. Green Building Council


          Union of Concerned Scientists


          Voices for Progress


          West Marin Environmental Action Committee


          Western States Sheet Metal Workers








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          31 individuals




          Opposition 


          California Manufacturers & Technology Association


          CalTax




          (prior version)


          Agricultural Council of California


          American Alliance Authority & Compliance


          American Alliance Drug Testing


          Associated Builders and Contractors of California


          Associated General Contractors


          Building Owners and Managers Association










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          California Association of Nurseries and Garden Centers


          California Business Properties Association


          California Chamber of Commerce


          California Concrete Bumpers Alliance


          California Construction Trucking Association


          California Cotton Ginners Association


          California Cotton Growers Association


          California Dairies


          California Farm Bureau Federation


          California Fresh Fruit Association


          California Independent Oil Marketers Association


          California Independent Petroleum Association


          California Metals Coalition










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          California Retailers Association


          Chemical Industry Council of California


          Coalition of American-Latino Truckers


          Family Business Association


          Far West Equipment Dealers Association


          Food 4 Less/Rancho San Miguel


          Foster Farms


          Fullerton Chamber of Commerce


          Harris Farms


          Heavy Haul Conference


          Industrial Environmental Association


          International Council of Shopping Centers


          Kern County Board of Supervisors










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          NAOIP - Commercial Real Estate Development Association


          National Federation of Independent Business


          National Tank Truck Carriers


          Orange County Business Council


          San Joaquin County Hispanic Chamber of Commerce


          Simi Valley Chamber of Commerce


          Southwest California Legislative Council


          Torrance Chamber of Commerce


          United


          Valley Industry and Commerce Association (VICA)


          West Coast Lumber and Building Material Association


          Western Aerosol Information Bureau


          Western Agricultural Processors Association










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          Western Growers Association


          Western Plant Health Association


          Western States Petroleum Association


          Western Trucking Alliance




          Analysis Prepared by:Lawrence Lingbloom / NAT. RES. / (916)  
          319-2092