Dairy Air Michael Marsh, CPA Chief Executive Officer Western United Dairymen/Western United Resource Development Inc. January 11, 2007

# of Farms & Cows Per Farm Trend towards smaller # of larger dairies Trend towards smaller # of larger dairies

# Farms & Milk Production in CA Since 1960, the # of dairy farms has decreased by 79% –9,764 to 2,043 –Numerous sellouts in 2006 Milk production has increased by 380% –7 to 37 billion lbs CMAB Study

Western United Dairymen Largest dairy producer trade association in the Western US Represent 1,100 of CA’s 1,950 dairy families 20 member Board Environmental compliance CDQAP Economic analysis Litigation support Labor relations Safety training Government relations Political advocacy Communications and media relations Renewable energy and biofuels - WURD

Clean Air Act Passed in 1970 Amended in 1977 Amended again in 1990 California Agriculture exempt

Clean Air Act 2/4/2002 Earthjustice petitions 9 th Circuit for judicial review 5/14/2002 USDOJ announces settlement of Earthjustice petition on behalf of USEPA –California agriculture’s exemption from CAA to be eliminated

What were farmers to do? Fugitive sources vs. stationary sources No tailpipe nor smokestack National Academy of Sciences - Air Emissions from AFO’s: Current Knowledge, Future Needs (2003) Most recent ag emission research – 1938

SB 700 Florez (D – Shafter) “Regulate now, worry about the science later.” 9/22/03 Effective 1/1/2004 CAFO’s 7/1/2006 –VOC emissions

Regulatory scheme ~ 3/15/2004 Draft BACT dairies to have digesters –1938 study –Unilateral acceleration of timetable –Mathematical errors and erroneous assumptions –Repeated requests to correct and adhere to legislative mandate

CottonWood Dairy Covered Lagoon Merced County Currently 300kW Soon to be 700kW

Castelanelli Dairy Covered Lagoon San Joaquin County 160 kW

Hilarides Dairy Covered Lagoon Tulare County 500 kW

ON-FARM ENVIRONMENTAL COMPLIANCE COULD COST PRODUCERS BETWEEN $650 MILLION AND $2.6 BILLION Source:McKinsey & Company, Foundations for Consumer-Driven Dairy Growth Strategy On-farm producer compliance cost $ Millions 100 Low Cost Scenario ,600 High Cost Scenario Fixed water costs Variable water costs Covered lagoon digesters (air)

WUD/AWMP v. SJVUAPCD 5/1/2004 Challenged draft BACT Challenged accelerated timeline Challenged lack of science Settlement –DPAG

Dairy Permitting Advisory Group (DPAG) Environmentalists, academics, district staff, dairy representatives Reviewed existing and emerging emissions science 5 lbs. v lbs. v. 35 lbs. APCO 19.3 lbs. (15.5 lbs. VFA’s)

Regulation and litigation 5/20/04 Rule 4550 regulating ag PM10 emissions passed by District June 2005 AIR v. Schakel December 2005 AIR v. Vanderham Latino Issues Forum v. SJVAPCD (Rule 4550) 6/15/06 Rule 4570 regulating CAFO VOC’s passed by district AIR/CRPE v. SJVAPCD (Rule 4570) AB 32

How do we connect the dots? Sustainability LandWaterAirMarkets

Western United Dairymen Thank You!