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^/£e _ volume 1 Number 6 Novemberl982 

IQComments 



state documents collection 

DlC 2 1982 

mon''*na state library 

inSlUe Helena, Montana 59601 

Stroup Keynote 2 

Peskin Keynote 4 

EQC Meeting 7 

Hard Rock Bearing 8 

Groundwater 8 

Water Forum 9 

Pesticides 9 

Alt. Energy Grants. . . . 9 
EIS Chart 11 



Environmental Regulations 
and Montana's Economy 

This issue of EQComments focuses on our 
recent Environmental Regulations and Montana's 
Economy: A Public Forum. Held in Helena on 
October 4 and 5, the Forum attracted over 150 
participants from industry, environmental 
groups, government, and Montana citizens. 

Dr. Thomas Crocker from the University of 
Wyoming started the conference with a basic 
lecture on environmental economics. For the rest 
of that day and all of the next, some of 
Montana's foremost experts in environmental 
regulations and econordc development entertained, 
informed, and challenged the audience. 

One of the most intriguing sessions was 
entitled "Conflict Resolution and Environmental 
Mediation" , with resource speakers Chris Moore 
from the Center for Environmental Problem 
Solving, ROMCOE; Richard Mullineaux from Shell 
Oil Conpany; and, Robert Turner from the 
National Audubon Society. They spoke of 
exanples of cooperative problem solving that 
satisfied both sides of environmental disputes. 

Following the conflict management session 
were case studies of recent and ongoing 
environmental conflicts including the Tongue 
River Railroad, the Troy ASARCO Mine, and a 
major subdivision in Billings. The 
participants soon were reminded that the 
conflict such controversies stir are ccsnrplex 
and not easily resolved. 

The Forum was a valuable experience for 
all who attended. For those who couldn't make 
it, the EQC plans to pi±)lish a proceedings of 
all the speakers' remarks. In this newsletter, 
we are also publishing transcripts of portions 
of the two keynote speeches. For the full 
text, look for the proceedings near the end of 
tlie year. We don't expect everyone to agree with 
these speeches but hope their remarks will spark 
continued discussion of the issues they have 
raised. 

PLEASE RETURN 



Keynote: Dr. Richard Stroup 



Montana State Library 



3 0864 1004 5491 



Dr. Richar<3 Stroup, the first keynote speaker, 
recently left the Department of Econonics at 
Montana State University to becone the chief 
policy analyst for the U. S. Department of 
Interior. 

'I'm sure you knew the reputation of oconoiriics as the 'dismal 
E$ut scxne of us here today are enthusiastic about what we call 
the 'political econony of hope'. We'd suggest that our market econony, 
based as it is on a private ownership of natural resources, can make some 
strong and — much more importantly — scane imaginative adjustments to the 
growing demand for conservation and preservation of natural resources. 

You might be interested in our looks back in history to see why we're 
optimistic. History has demonstrated for us the connection between the 
ownership of resources and the stewardship of tliose resources. For 
exanple, beaver populations in one area several centuries ago were 
threatened by Native American trappers. Those Indians responded to that 
problem by essentially establishing private ownership of each beaver 
colony. This action prevented what Garrett Heurdin called "The Tragedy of 
the CCTirxDns". Once each colony was owned by a particular family. That 
family had every incentive to conserve the beaver resource instead of 
trapping out the colony before scxneone else did. 

Contrast that exairple with tJie buffalo on the Great Plains. For a 
while, just prior to the time the white man came in any great numbers, the 
buffalo were actually Uireatened in some locations by the various nomadic 
Indian tribes that suddenly had access to horses and guns. 

Ownership of the buffalo could not be established. The buffalo 
didn't sit still, and neither did the tribe. Even though the Indians had 
a tradition of conserving the buffalo, the lack of ownership was very 
nearly fatal to the buffalo. 

Ife can make the system of ovmership work for resource conservation. 
A good modem exarple is Big Sky of Montana. Chrysler Realty and Chet 
Huntley recognized the rapid rise in the demand for Montana's sceiiic 
wonders. They set up a system to protect an entire niountain valley. Once 
they had established ownership to the valley. They subdivided the land 
and sold small parcels, but only after they established strong protective 
covenants on each parcel. Each buyer had to premise not to do a whole 
long list of environmentally damaging things in that valley. But each 
buyer was perfectly willing to make those premises, because the value of 
the property rose. That development increased the value of the entire 
mountain valley. 

Western ranchers are another group that ' s finding that catering to 
the increased demand for outdoor recreation has quite a high payoff. 
Ranchers in many cases Ccui make quite small changes in the way they manage 
their Icind — primarily in the fence rcws and the edges of the fields and 



pastures — which strongly increase the value of hunting on that land. 
When daily hunting fees or seasonal leases are involved, the revenue can 
be a big help to the rancher. There are even parts of Texas where 
ranchers earn more money from fee hunting than they do fron all their 
traditional agricultural activities. 

Even when profit is not involved, it is irportant to note that the 
market still works for environmentally concerned citizens. Even a single 
individioal, or a small group of publicly spirited citizens, often can take 
advantage of an environmental opportunity just by purchasing the land or 
develofxnent rights to it. The National Audubon Society and its local 
chapters have done a lot of this. They own about a quarter million acres 
in their various private refuges. Ducks Unlimited and the Nature 
Conservancy play the same game, and so do several other organizations. 
The market mechanism here allows individuals who aren't silver-tongued 
orators even if they can't persuade a nejority of the legislature or 
Congress, to exercise their vision anyway in their favorite local 
environments . 

But just a minute, nov/. Can the environmentally concerned citizens 
actually outbid giant, multi-national corporations? Well, it turns out 
that these greedy corporations don't want to pay any more than they have 
to for the resources they want. And so, typically, all an environmental 
organization has to do is raise the ante just a little bit above what the 
corporation has to pay for a similar resource somewhere else, in a less 
environmentally sensitive area. And then the resource belongs to the 
environmentalist . 

It's not that the environmentalists have more money — it's that they 
have different goals. So typically, there's not that much conflict 
between them, any more than there is between them in the market for pickup 
trucks. 

Does this mean there's no role for government in environmentalism? 
Of course not. Some resources are not owned: air and water, for exaitple. 
And thus they are typically abused, like any other unowned resource. In 
situations like that, you've got to have government protection. The 
market is indeed imperfect, although government is too, I hasten to add. 
However, it is a comfort that private property rights and the market 
system are so frequently a powerful ally of those who are most concerned 
with environmentalism. 

I think we have a tremendous amount of evidence that we can be 
optimistic about the ways in which the private sector is responding and 
will respond to our increasing sensitivity to the value of the natural 
environment. Let us not assume that market decisions are bad and that 
public decisions are good. Because market values typically represent true 
social needs, including, I believe, environmental needs." 



Keynote: Dr. Henry Peskin 



Dr. Henry Peskin, a Senior Research Fellow of 
Resources for the Future, gave the second key- 
note address: "Peculiarities of Environmental 
Regulation" . 

"I am an econcmist: I confess that at the outset. Since I am 
addressing a group of sophisticated legislators and policy experts who are 
all too familiar with the recent track record of econcmists , I knew I can 
speak without any fear that T will be taken too seriously. And that's a 
good thing, since much of what I am about to say is easily open to 
mi sinterpreta t ion . 

For example, I am going to say that environmental policy hasn't had 
much overall effect on the econony one way or the other. But this does 
not mean that we can ignore the fact that certain firms may face serious 
hardships, or tliat environmental regulation potentially has very serious 
econcmic effects. 

I also am going to say that the benefits of existing environmental 
policies probably are far smaller than \n^at their proponents believe — 
especially wheri these benefits are cotpared to policy costs. But this 
does not mean that I am against all environmental policy, especially those 
forms of environmental policy that may be more effective and premise a 
better balance between benefits and costs than those we have tried so far. 

Finally I am going to point out that the benefits, costs, and net 
benefits (that is, benefits minus costs) of current environmental policies 
appear to be distributed very unevenly among households and regions of the 
nation. VJhile some may conclude that the policies are thus 'unfair' , I 
certainly draw no such conclusions. Policies with more even benefit and 
cost burdens are not necessarily better policies. 

The 1970s, because of the passage of several landmark environmental 
laws, is sometimes called the environmental decade. Unfortunately, it 
also marked the beginning of some of the worst U. S. economic performance 
since World V7cu: II. The annual rate of real output grcwth declined by 
one-fourth (frcm about 4 to 3 percent per year) ; unerrployment grew frcm an 
average of 4.8 percent in the 60s to an average of 6.2 percent (and still 
climbing); the rate of grcwth of real investment fell by half (frcm 4.8 to 
2.5 percent); and we all know what happened to inflation. 

It is natura], that this juxtaposition of environmental gains and 
economic woes would lead many of see cause and effect. However, all the 
hard looks at the data that I Jmcw of have led to the conclusion that 
environmental regulation could account for at most a tenth of our present 
economic difficulties. This by no means is insignificant, but higher 
energy costs, changes in the cerposition of the labor force, and fiscal 
eind monetary policies (especially through their effect on interest rates 
cind investment) seem to play a far larger role. 



This finding is not especially surprising when one looks at hew the 
structure of environitiental regulations affects costs. One notable feature 
of these regulations is their enphasis on the adoption of 'best' 
technologies. 'Best' often is defined iitplicitly by regulators as that 
technology already in use by the larger, 'more progressive' firms. 
Indeed, for these firms the incremental cost of regulations often is near 
zero. As a result, the incremental pollution control costs for an 
industry as a whole over and above what was experienced prior to the 
legislation of the 70s is far less than what one could guess by looking at 
reported environmentally related expenditures. 

At Resources for the Future, we have estimated that fully- implemented 
versions of the 1970 Clean Air Act and the 1972 Clean Water Act would 
account for increased annual costs (including capital allowances) that 
total less than 2 percent of sales for most industries. The major 
exception is electric power generation, where the increased annual 
environmental costs approach 8 percent of sales. Of course, for 
individual firms the percentages could be far higher. On the other hand, 
the costs actually experienced by many firms are far lower since neitlier 
of these laws have been fully implemented. It is not surprising, 
therefore, that, despite occasional heavy spurts of environmental capital 
investment during the 1970s, these small costs have had very small 
observed economic effects. 

I hasten to point out, however, that these observations of past 
econonic effects may be very poor predictors of future econcmic effects. 
In the first place, we don't know the details of those regulations 
forthcoming under the 1977 amendments to the air and water acts, {■tore 
inportant, we have no way of assessing the negative effects of regulatory 
uncertainty on business investment decisions. If this uncertainty proves 
to be iiiportant, the Administration — which desires to lift regulatory 
burdens frcm business - should take a close look at its cwn behavior. The 
performance of EPA over the past two years hardly generates clear signals 
for businessmen contemplating expensive investment decisions. 

I turn noiv to the benefits of these environmental policies. Vie are 
all aware that this subject is very controversial. The usually asserted 
reason for this controversy is the difficulty of measuring the benefits of 
environmental improvement in physical terms, let alone in dollars. I 
would, however, like to call your attention to another source of 
controversy: the confusion between estimates of environmental dairages and 
estimates of the benefits of those policies designed to deal with these 
damages. To assume that both concepts are essentially the same requires a 
most optimistic attitude toward policy. 

The reason I feel that policy benefits have been largely 
overestimated is not because I doubt that pollution causes severe damages 
to society. Rather, I believe that policy benefits are smaller than 
others assert because many policies are not doing an effective job of 
attacking those damages. 



\Jhile we can all agree that dainages have something to do with aribient 
environmental conditions, the fact is that our policies deal with these 
conditions in a very indirect and inprecise manner. \<le focus on emissions 
and not on what these emissions do. The fuzzy focus on airbient conditions 
is due partly to poor monitoring networks: it's almost as if we don't 
want to know what real conditions are. Furthermore, when we do monitor, 
we tend to concentrate on what is easy to measure, regardless of its 
inportance in causing environmental damage (for exanple, sulphur dioxide 
rather than sulfates) . 

Tl-ie policies' neglect of ambient conditions is also due partJ.y to 
reliance on technology-based standards, uniformly applied in very 
different geographical situations. Not only does this approach lead to 
the installation of expensive control technology in areas where such 
controls make minimal contributions to ambient quality, it also neglects 
iiiportant pollution sources — principally agricultural and urban runoff 
— for which easy technical solutions are hard to find. For exarrple, my 
colleagues and I have estimated that agricultural erosion contributes 
about as much as industry to dissolved oxygen pr(±)lems in the nation's 
waters (albiet in different locations) . Urban runoff, another essentially 
uncontrolled sector, in many cities contributes half of such toxic 
materials as cadmium and lead. 

We thus see that environmental policies often are poorly targeted 
with respect to geographical locations, sources of pollution, and the 
pollutants themselves. Targeting must improve before we can be assured 
that the magnitude of policy benefits can approach that of environrrental 
damages. Finally, let me discuss the distributional inplications of these 
laws. 

rtost analysts have found that the costs of environnental regulations 
are regressive: that is, the cost burden, as a percent of inccme, is 
higher for the poor than for the rich. In addition, these cost burdens, 
on a per capita basis, are fairly evenly distributed across the county: 
that is, the average Montana resident pays about the same for clean air 
and water as the average resident of New York. Doth these distributional 
findings are natural consequences of three facts. First, industries are 
the principal objects of regulation; second, industrial costs generally 
can be absorbed in the prices of goods, regardless of v\^ere these goods 
are consumed; and third, the poor consvime more as a percent of their 
inccmes than do the rich. 

In contrast to costs, policy benefits seem to be more unevenly and, 
perhaps, haphazardly, distributed. Again this result is due to heavy 
reliance on the uniform application of tecJinical regulations, regardless 
of local conditions. For exanple, autorobile emission regulations (and, 
hence, their cost burdens) are pretty much the same everyv^ere. However, 
the benefits of these regulations are far lower in the less densely 
populated states than in, say, east coast cities. Similarly, water 
pollution control regulations yield far fewer benefits in 



non-industrialized areas with anple supplies of clean water than in 
heavily industrialized areas with limited water availability. 

The distribution of benefits by incoirie class is equally uneven. Our 
analyses indicate that, on balance, air pollution regulations benefit the 
poor itore than the rich, while the reverse appeeurs to be true for the 
benefits of water pollution control. As a result, the air pollution 
policy seems more equitable than the water pollution policy, even though 
the cost burdens of both policies are regressive. V.'itJi the air policy, 
the cost burdens are more equitably offset by benefit gains. (One reason 
tlie same is not true for the water policy is that the level of benefits 
that can be attributed to current policy is much lower.) Given the 
inequity — let alone the inefficiency — of current approaches to water 
pollution, it is ironic that it is the Air Act and not the Water Act that 
is having the more difficult time getting reauthorized by the Congress. 

The rressage I want to leave with you is that all these findings 
depend on features that are peculiar to existing approaches to regulating 
the environment. Effects on the econcxny, on benefit-cost ratios, and on 
distribution may change radically with changes in regulatory strategies . 

Unfortunately, current policy debate alrnost totally ignores this 
seemingly obvious conclusion. Either you are for environmental regulation 
or you are against it. If you are for it, then you must be for existing 
'corniand and control' strategies. In addition, you are €r<pected to assert 
that these policies yield benefits in excess of costs, have 'favorable' 
distributional consequences (that is, they help the disadvantaged) , and 
are good for the econony (that is, they reduce unenployment) . 

On the other hand, if you are against environmental policy, then you 
are expected to work for the weakening of existing regulations and delay 
in the iiiplementation of new ones. It helps also if you can cite a few 
good exaitples of adverse econordc inpacts of governmental regulation (no 
need to confine yourself to eiivironmental regulations) , with enphasis on 
their 'unreasonable' costs. 

The fact is that the public debate ignores the search by econcnists 
and policy specialists for more efficient, equitable, and less 
econordcally disruptive regulatory approaches. At best this is enonnously 
costly. r-V hoi^e is that forums like this will be the beginning of a 
grassroots movement toweird rational political discussion of how best to 
manage both our economic and natural environments." 



November Meeting for EQC 

The full BQC will meet Tuesday, Itovember 23 at 9:00 a.m. in Room 104 
of the Capitol. The agenda includes staff reports ^lnd updates on the 
following issues: the Montana Environmental Policy.- Act (MEPA) and rules 
imp leiten ting that statute; solid waste management; pesticides; noxious 
weed control; and, small-scale hydroelectric development permitting and 



inpacts. The BQC will also hear proposals on increasing tax incentives 
for wind energy developnsnt and on the J'ton tana /Canadian Relations Project. 
At the request of the EQC, the Department of Agriculture will present its 
legislative proposals for inproving the pesticide management prograia. 

EQC Subcormittees will report to the Council on hard-rock mining, the 
econonr^ and the environment forum, and the alternative energy program. 

An important element of the EQC meeting will be a discussion of 
several aspects of the subdivision review process. Following up on 
concerns raised by many individuals and groups, the EQC has requested the 
Department of Health and Environmental Sciences to explain its procedures 
now that the Subdivision Bureau has effectively been eJ.iruinated. The 
Council will discuss the relationship of f^IEPA to the subdivision review 
process, coordination with local government review, and the potential need 
for a progranmatic environmental review of certain regions highly impacted 
by subdivision developnent. 

For more information about the BQC meeting, please call the BQC 
office . 



Public Hearing on Hard Rocic Report 

Rep. Dave Brown, Chairman of the Hard-Roclc Mining Subca:imittee , has 
called for a public hearing to be held on Novanber 22 in Rocan 104 of the 
Capitol Building in Helena. The purpose of the hearing is to receive 
public comnent on the draft report on the taxation of the hard-rock 
industry that is soon to be conpleted piirsuant to HJR 66. Iimiediately 
following the hearing the Subccnnittee will hold a working session and 
ccrplete its deliberations on the hard-rock study. A final report will 
soon thereafter be issued and reviewed by the full EQC and Revenue 
Oversight Comiittee prior to its submission to the 1983 Legislature. 

Contact EQC staff for additional information or to c±)tain a copy of 
the draft report in advance of the public hearing. 



Ground water Tasic Force Formed 

An ad hoc technical group has been formed to address the issues 
raised during the Montana Ground Water Cbnference and to prepare a status 
report on the state's ground water resources. The group, chaired by Wayne 
Wetzel of the Department of Natural Resources and Conservation, includes 
representatives fran state and federal agencies and the universities. 
During meetings held in August and October, the technical group identified 
various issues and technical problems that affect the utilization and 
protection of the state's ground water resources. 

The status report will describe cxirrent information on the 
availability and quality of ground water and the various options for 

8 



iitproving the management and utilization of the resource. It will be made 
available to a special task force on ground water as recamanded by the 
Environmental Quality Council. A suitriary of the report will be presented 
during the ftontana VJater Issues Forum to be held in Helena, December 2-3, 
1982. 

Forum on "Montana water issues" 

Plans are progressing for a "Montana Water Issues Forum" in Helena, 
December 2-3, 1982. The Forum is being sponsored by the Montana Water 
Resources Research Center in cooperation with various agencies and 
interest groups. The purpose of the Forum is to present technical and 
legal information on a nimiber of water issues that may be of special 
interest for the 1983 session of the ftontana legislature. 



Pesticides update 



Pesticides and pesticide regulations continue to be important issues 
that concern many Montanans. During their August 31 meetiiig, the EQC 
heard testiriiony on pesticide problems from state agencies, public interest 
groups, and individuals. Concern was expressed about the potential 
hazards of pesticides emd other toxic chemical residues found in wild 
game. There was also a call for state agencies to provide a more open 
flow of information about pesticide hazards and pesticide use in Montana. 

Gordon McQnber, Director of the Department of Agricultui-e , reported 
that his agency is proceeding with the development of an environmental 
inpact study on the proposed new rules for endrin. Hcwever, he indicated 
progress is slow due to inadequate funds for tliis purpose. 

The EQC directed the staff to investigate how state agency response 
to pesticide problems might be improved. 

In September the Department of Agriculture held an informational 
meeting to explain their proposed legislative changes in the Montana 
Pesticide Act and their proposed budget requests for pesticide regulatory 
programs . 

In October the Pesticide Advisory Council met in Helena to review the 
proposed legislative changes, budget requests, and the department's 
progress in testing the effectiveness of alternative chemicals for cutworm 
control . 

Fall Cycle of Alternative Energy Grants 

The Department of Natural Resources will present its reconnendations 
for the fall cycle of alternative energy grants to the Renewable Energy' 



Advisory Council (REAC) on Wednesday, November 3, at 9:00 a.m. in the DI-JRC 
Conference Itoom. 

The REAC will also review the newly instituted loan program, 
including the status of applicants authorized for loan consideration, a 
sumnary of public and institutional response to the loan program, and any 
public conments. Loan applications tabled at last spring's REAC meeting 
will be reconsidered. 

The EQC Alternative Energy Subcamittee will meet jointly with REAC 
at that time to discuss policy concerns and possible legislative 
recaiimendations for the program. 



MONTANA ENVIRONMENTAL QUALITY COUNCIL 



HOUSE MEMBERS: 

Dennis iverson, Chairman 

(R-Whitlash) 
Dave Brown, vice-chairman 

(DButte) 
Dean Switzer 

(RRichev) 
Cav Hollidav 

(DRoundup) 



SENATE MEMBERS: 

Harold Dover 

(RLewistown) 
Dorothy Ecl< 

(D-Bozeman) 
lVlil<e Halligan 

(D-Missoula) 
Gary Lee 

(R-Fort Shaw) 



PUBLIC MEMBERS: 

Dennis Nathe, Redstone 
Leslie Pengeiiy Missoula 
Glen Rugg, Plevna 
Frank Stock, Poison 



GOVERNOR'S 
REPRESENTATIVE: 

John North 



10 



Eis update 



LEAD 




AGENCY 


PROJECT 


Highways 


Hungry Horse-West Glacier 




Highway Project 


DNRC 


Kootenai River Hydro- 




electric Project 


DSL 


Anaconda Platinum/ 




Paladium Mine, Stillwater 




County 


DSL 


Consolidation Coal CX 




Ranch Mine, Bighorn County 


DSL 


Wolf Mountain Mine, 




Bighorn County 


DSL 


MontcoMine, 


DSL 


western Energy Area C 



DSL 



Extension, Rosebud Mines, 
Rosebud County 

Area B Extension 
Western Energy Rosebud 
Mine Comprehensive EIS, 
Rosebud County 



DOE/BPA 


1982 Rate Proposal 


BPA 


vegetation Management in 




Six-state Region 


001/ BLM 


Missouri Breaks Wilderness 




Suitability 


DOI/BLM 


wilderness Planning for 




Dillon Resource Area 


DOI/BLM 


Fort union Coal Region 




Leasing Plan 


DOT 


Highway 61 Reconstruction 



DRAFT EIS 

9-81 

Released 7-82 
Released 6-82 

Fall 1983 
Fall 1983 
5-82 

Released 6-82 



Early 83 
Due Late 1982 



4-82 
10-82 

Comments 
due 12-6-82 
Released 5-82 

Released 5-82 

Released 7-82 

1-82 



FINAL EIS 

9-82 



Early 83 



COMMENTS 



Early 83Rosebud 
County 
Released 8-82 



Approved 



8-82 



The need for an environmental impact statement for a project is not 
always known by state agencies. In these cases, the agencies assess the 
likely impacts in a PER, or preliminary environmental review. The PER 
may recommend a full EIS be prepared for the project, or find that no 
significant impact (NSI) is expected. 

While agencies usually send PERs to all interested parties, the EOC 
is the only office that all agencies are required to send a PER; so be- 
ginning with this issue, we will publish a list of current PERs. The 
public comment periods are brief, so contact EQC or the lead agency 
inmediately if you have a question or comment about a project. 



Recent PERs 



Lead 

Agency Project 

DHES Pleasant view Subdivision, Dawson Co. 

DHES Eagle Bend Subdivision, Flathead Lake 

DHES Broadwater Co. Landfill Expansion 

DHES Glacier Village Green Subd , NE of Kalispell 

DSL Ceothermal Lease Sale, school Trust Lands 

FW&P Transfer 3 Horses to Wild Horse island 

DOH Safety improvements N of Poison 

DOH U.S. 2 Reconstruction, SE of LIbby 



Received 


Recommendation 


9-7 


NSI 


9-10 


NSI 


9-22 


NSI 


10-8 


NO Recommd. 


9-15 


NSI 


9-15 


NSI 


9-16 


NSI 


9-17 


NSI 



11 



EQComments is prepared by the Montana Legislative 
Environmental Quality Council to keep you informed 
of important natural resource issues in the state. 
Contact us at EQC , Capitol Station, Helena, MT 
59620/(406) 449-3742. 



350 copies of this public document were pubiistied at an estimated 
cost of 51(t per copy, for a total cost of $178.85, which includes $1 18.85 
for printing and $60.00 for distribution. 



EQC 

Capitol Station 
Helena, MT 59620 



DEADHEAD 



State Library