2002 ANNUAL REPORT
Management Letter

2002 was a challenging year for the petroleum industry and our Western States Petroleum Association. A sluggish economy, large budget deficits in several of our states, and the lingering effects of the California energy crisis in the midst of increased security concerns put tremendous pressure on state governments. As indicated in the WSPA Annual Report (www.wspa.org/ar2002), we worked very hard to ensure that each of the western states pursued balanced solutions to all energy-related issues, while striving to maximize the available supplies of high quality, clean fuels. WSPA endeavors to provide policy makers sound recommendations based on good science. When serious bad public policy threats arise, WSPA will strongly oppose them. We were able to thwart a number of legislative actions that would have seriously harmed the consumer and our industry because they failed to strike an appropriate balance.

2003 promises to be even more challenging. The projected budget deficits in California are staggering. MTBE will be phased out by the end of the year and ethanol will see a much expanded use. Natural gas is California's "fuel of choice" but over reliance on it for power generation, motor fuel etc. could cause issues around its availability, transportation system flexibility and quality specifications. The need for cleaner air, cleaner water, and significantly improved state infrastructures will further stress already insufficient resources. How the western states deal with these issues will determine the economic and business outlook for years to come. The need for continued WSPA vigilance is obvious.

WSPA is responding to these challenges!

We initiated a strategic planning process that carefully examines critical issues that are and will be emerging in the coming years. We are addressing mandated fuel compositions, water and air quality regulation, taxes, fees and environmental justice. The direction that each state government takes will impact the availability, quality, and cost of virtually all products that our industry produces.

We are moving the WSPA headquarters from Glendale to Sacramento in the first quarter of 2003, enabling WSPA to work more closely with other business associations to help shape government policy so that the best solutions are advanced. Even though the headquarters will be in Sacramento, we will make every effort to ensure that WSPA continues to represent the interests of its members in all of the western states and does not become "California-centric."

We will continue to reach out to educators and communities. The WSPA Associates Chapters, located in several key communities, have been instrumental in building important bridges between our industry, small businesses, and communities.

We are restructuring the governance of WSPA and we strongly believe the result will be a more responsive, effective and efficient organization. The role of the primary committees will be strengthened to allow more focussed strategies and budgeting while not losing sight of the overall industry's needs.

WSPA has always been a highly effective organization and 2002 proved that once again, despite many challenges. With the continued support of a fully dedicated membership, we will face 2003 and the years beyond with equal determination and even greater confidence.

Eugene J. Voiland Chairman, Board of Directors

Catherine Reheis-Boyd Acting President

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