Washington Report for 2-18-13

By Steve Kopperud

Direct Payments Take Major Hit in Senate Sequester Plan, but Free up Dollars

In a move that protects major U.S. Department of Agriculture programs, including meat inspection and disaster payments from the effects of mandatory sequestration come March 1, the Senate’s $110-billion package includes elimination of all direct farm program payments beginning in FY2014, netting a savings of about $27.5 billion over 10 years. The cuts are part of a package Senate Majority Leader Harry Reid (D-NV) said he wants to bring to the Senate floor the week of February 25. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI), who also sits on the Senate Finance Committee, confirmed February 14 that the Senate’s bill – weighted almost evenly between spending cuts and “revenue” actions – is designed, in part, to fix funding gaps in the recent 2008 Farm Bill extension. It preserves money to pay for meat inspection and similar programs and provides up to $3.5 billion to pay for disaster programs retroactive to 2012, along with renewable energy, rural small business, specialty crops, organic production and new and beginning farmer programs. Stabenow said she’s had general discussions with her House counterparts about the proposed cuts. The combined cost of the Senate’s package – $31 billion – represents a 53-percent reduction in USDA spending, said House Agriculture Committee Chairman Frank Lucas (R-OK), who called the Senate plan an “attack on rural America.” He said the Senate action, if successful, interferes with the respective committees’ ability to write a new Farm Bill. Stabenow countered that if the Senate cuts became law, the ag committees would no longer need to cut those spending programs during Farm Bill action. Lucas said while farmers and ranchers want to be part of the solution to the “fiscal crisis,” he said last year’s committee-passed Farm Bill struck the balance needed between program reform and budget cuts. 

McConnell: Republican Spending Cut Plan Coming; Millionaire Tax Included in Reid Plan

As the Senate pored over the Democrat’s $110-billion, 10-year sequestration avoidance plan – a plan that cuts spending by about $60 billion, while closing tax loopholes on the rich and tweaks other parts of the tax code to make up the other half of the pie – Senate Minority Leader Mitch McConnell (R-KY) is expected to unveil a Republican alternative when the Senate returns from a week-long President’s Day recess, and it will likely be a package that does not include tax increases. About half the savings in the Reid plan – $27.5 billion each – come from defense spending and direct farm payments, while revenue is mostly generated by a 30 percent tax on adjusted gross income phased in on those who make between $1-2 million a year. This is the so-called “Buffett rule,” named for billionaire Warren Buffett who has contended publicly the wealthiest Americans do not pay enough personal taxes. Another $2 billion would be generated by taxing oil derived from tar sands at the same rate as oil from other sources, with the income going to fund the oil spill liability trust fund. The plan also seeks to end corporate deductions related to overseas employment.

Obama: Congress Acts on Climate Change or Administration Will

As with most State of the Union speeches, President Obama delivered his 2013 policy priorities with nary a word on rural America or food/agriculture issues, but he did include strong remarks – and a warning to Congress – related to climate change. Obama threw down the gauntlet to Congress, saying if Congress did not act to mitigate climate change through control of greenhouse gas emissions and other actions, he would administratively move to impose new programs and regulations. “I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change and speed the transition top sustainable sources of energy,” the President said. In a related move, the Environmental Protection Agency, as part of its “Climate Change Adaptation Plan,” warned any threat to air and water quality tied to climate change would likely bring stricter regulations. The agency cited as examples pending actions on air particulate rules and the need to take into account increases in atmospheric ozone when crafting emissions rules, climate change-related factors that would almost guarantee much tougher regulations. Obama asked that Congress make tax credits for wind, geothermal and other source of alternative energy permanent and refundable, meaning the credit could be claimed by a company even if it had to income. Obama also wants to see assistance to businesses and individuals to make homes and office buildings more energy efficient, along with creation of an “energy security trust” that would take federal revenue from oil and gas production from federal land and waters and use it to develop alternative energy sources. 

President Obama Prioritizes U.S.-EU Trade Deal

Nearly all business groups, including the U.S. Chamber of Commerce and several national agriculture groups, praised the President’s affirmation during his State of the Union address of the Administration’s priority on achieving a U.S.-EU free trade agreement – already dubbed “Eurafta” by trade wonks – saying, “Trade that is free and fair across the Atlantic supports millions of good-paying American jobs.” He also said he wants to complete by the end of the year negotiations over the Trans-Pacific Partnership, a trade treaty between Pacific Rim nations and major global trading partners, including the U.S. and Canada. While the U.S. has been laying the groundwork for a U.S.-EU trade deal for a couple of years through a high-level working group of U.S. and European trade experts, it’s acknowledged U.S. and EU priorities, along with significant cultural differences, will make a sweeping agreement difficult at best. Trade with the EU has lagged in recent years, with the U.S. reporting a $125.9 billion trade deficit with Europe in 2012. Sens. Max Baucus (D-MT) and Orrin Hatch (R-UT), chair and ranking member of the Senate Finance Committee, sent a letter to Special Trade Representative Ron Kirk identifying several areas of concern between the trading blocs, including ag exports – GM foods, use of animal health products in livestock and poultry production, etc. – and intellectual property concerns.

USDA Says Biofuel Production Will Continue to Rise; Legislation on Ethanol Popping Up

U.S. biofuels production – primarily ethanol and biodiesel – will continue to increase over the next decade, but at a slower rate than in the previous 10 years, the U.S. Department of Agriculture reported. Meanwhile, ethanol production continues to be the target of legislation. Sens. Jeff Flake (R-AZ) and David Vitter (R-LA) introduced legislation dubbed the “Phantom Fuel Reform Act,” a bill that would change the federal Renewable Fuel Standard on cellulosic ethanol to reflect the fact there is almost no commercial production of the fuel. A similar bill was introduced in the House by Reps. Gregg Harper (R-MS) and Jim Matheson (R-UT). Meanwhile, Sen. Roger Wicker (R-MS) said he’ll introduce the first Senate bill to reverse the Environmental Protection Agency’s allowance of 15 percent blends of ethanol and gasoline, so-called “E15.” The bill would freeze the blend rate at 10 percent and prohibit EPA from raising it to 15 percent, action that, if successful, would nullify the agency’s action last year to permit E15 for use as a fuel blend in cars made after 2001. Similar legislation was introduced in the last Congress by Rep. Jim Sensenbrenner (R-WI). On biofuels production, USDA reported that in 2004-2005, corn used for ethanol totaled 1.323 billion bushels, or about 11 percent of 2004 corn production; by 2011-2012, corn used for ethanol totaled 5.011 billion bushels, or about 40 percent of the 2011 corn crop. For 2012-2013, USDA sees corn for ethanol use dropping to 4.5 billion bushels, but still consuming 42 percent of the drought-reduced corn crop. Biofuel production will steadily increase in the future, but likely not exceed 2011-2012 production until 2020-2021. 

Casey Out, Cowan In on Senate Agriculture Committee

Sen. Bob Casey (D-PA) surrendered his Senate Agriculture Committee seat in favor of a new spot on the tax-writing Senate Finance Committee, making room for interim Sen. William “Mo” Cowan (D-MA) to join the ag panel, the first Massachusetts Senator to sit on the panel since 1870. Cowan, who was appointed to the seat vacated by Sen. John Kerry (D-MA) when he was confirmed as Secretary of State, said he grew up on a working farm in North Carolina, and would work to get aid for Massachusetts’ fisherman in the Farm Bill. The full committee also announced subcommittee chairs, though the subcommittee system is not as active in the Senate as in the House. Cowan is one of three freshmen Senators who will chair subcommittees as he takes over the nutrition, specialty crops, food and ag research subcommittee. Sen. Heidi Heitkamp (D-ND) will chair the jobs, rural economic growth and energy innovation subcommittee, and Sen. Joe Donnelly (D-IN) will chair the commodities, markets, trade and risk management subcommittee. The other two subcommittees will be chaired by Sen. Mike Bennet (D-CO) on conservation, forestry and natural resources, and Sen. Kirsten Gillibrand (D-NY) on livestock, dairy, poultry, marketing and agricultural security. 

Climate Change Legislation Teed up by Boxer; Water Bill to see Markup Next Month

The Senate Environment & Public Works Committee, chaired by Sen. Barbara Boxer (D-CA), will markup in March its version of re-authorization of federal law that governs flood control, waterways navigation and environmental restoration projects, while at the same time Boxer announced she plans to move ahead on climate change legislation despite Republican opposition, and wants a bill ready for floor action this summer. The climate change plan will look much like a bill unveiled by Sen. Bernie Sanders (I-VT), which Boxer supports, legislation which would impose a federal tax on carbon emissions of $20 per ton on carbon and methane emissions, with the “fee” increasing by 5.6 percent each year for 10 years. Boxer said the tax plan would target 2,869 of the nation’s largest sources of greenhouse gas emissions and cover about 85 percent of total national emissions. She also pointed out at a press conference with Sanders that the Congressional Budget Office estimates the plan would generate $1.2 trillion in revenue over 10 years. While the money would be spent on projects that include alternative energy research and debt reduction, about 60 percent would be refunded to taxpayers to offset increased costs in electricity and transportation fuel costs that would result from the new tax. Committee Republicans have already slammed the proposal, and Boxer acknowledged the committee’s action on climate change will be contentious, telling one reporter, “This won’t be pretty.” GOP critics contend the new tax on carbon won’t only affect energy prices, but will also increase the cost of all manufactured goods and services in the U.S. On the waterways action, Boxer has not released a bill, but says she’ll have a plan ready to go next month, a move observers contend is ambitious. The plan is expected to include an overhaul of the U.S. Army Corps of Engineers authority, a move to satisfy committee ranking member Sen. David Vitter (R-LA) and garner some bipartisan support. The federal waterways re-authorization, expected every two years, has not been tackled by the committee in almost six years. Rep. Bill Schuster (R-PA), chairman of the Transportation & Infrastructure Committee, said he’ll also take up the water bill this year, but has given no timeline for action.

Grassley Re-Introduces Bipartisan Farm Program Payment Limit Bill

Four bipartisan Senators, led by Sen. Chuck Grassley (R-IA), introduced legislation to cap annual farm program payments at $125,000 per farmer, or $250,000 per farm couple. This is Grassley’s latest attempt to cap farm program payments, action he’s taken several times over the last several years. This time he’s joined in the effort by Sens. Tim Johnson (D-SD), Mike Enzi (R-WY) and Sherrod Brown (D-OH). Grassley’s bill would cap at $50,000 all commodity program benefits, except the marketing loan program. The benefits cap, Grassley said, would apply to any alternative to direct payments developed as part of a new five-year Farm Bill. Marketing loan program payments would be capped at $75,000. As before, the bill redefines who qualifies for farm program benefits, limiting federal checks to those who are “actively engaged in managing the farming operation.” A single off-farm manager would be permitted, a move aimed at general partnerships with multiple managers. Currently, farm program benefits are capped at $105,000 per farmer, $210,000 per couple, with no cap on marketing loan program benefits.

Johanns Announces Bills to Increase EPA Response

Sen. Mike Johanns (R-NE) announced he’ll introduce a series of bills aimed at increasing Environmental Protection Agency transparency and accountability, what he called “common sense reforms.” Johanns said his constituents in Nebraska report almost unanimous dissatisfaction with EPA, its rulemakings and its understanding of the impact of its actions. “Nebraskans think that EPA doesn’t understand domestic businesses, nor does it understand job creation … they think the agency is not transparent, arrogant and oftentimes, unresponsive,” Johanns said on the Senate floor. One bill will bring EPA guidance documents under the scope of the Congressional Review Act, which allows Congress to overrule agency regulations. Currently, only rules are covered under this clause. This has allowed EPA to use guidance documents to expand the agency’s regulatory reach without being subjected to Congressional oversight. Johanns’ legislation would close this loophole. The second bill requires EPA’s Inspector General to report to Congress twice a year on the agency’s progress in meeting regulatory reporting requirements. Under current law, EPA must publish updates to its regulatory agenda in April and October each year. EPA ignored this requirement in 2012, Johanns said, publishing just one update in 2012. The third bill reduces EPA’s budget by $20,000 every week until EPA meets its legal deadlines for regulatory agenda-setting. This proposal is modeled after a provision in last year’s bipartisan highway bill to encourage federal agencies to complete evaluation of transportation projects in a timely fashion, he said. The final component of the package promotes transparency and cooperation with state governments by requiring EPA to provide timely information and technical assistance to states working to comply with EPA mandates. Environmental statutes firmly establish states as equal partners with EPA.

FDA Sets Two More FSMA Meetings

The Food and Drug Administration will hold two more meetings on the produce safety and human food preventative control proposed rules emanating from the Food Safety Modernization Act. This brings a total of three public meetings the FDA will hold. The first is Feb. 28-March 1, at the U.S. Department of Agriculture in Washington, D.C.; the second meeting will be March 11-12, at the Westin Hotel in Chicago; and the third meeting will be held March 27-28 at the Crown Plaza Downtown Convention Center in Portland, OR. There are notification requirements for attending these meetings, as well as criteria and deadlines which must be met for presenting oral or written comments. Details can be obtained by contacting Courtney Treece at ctreece@planningprofessionals.com, or by calling 704-258-4983, or faxing questions to 469-854-6992.