Washington Report for 11-4-13

By Steve Kopperud

Farm Bill Conference Begins; Focus on “Big Four” Ag Leaders

The 41 members of the House and Senate sat down Oct. 30 as official Farm Bill conferees, most with five-minute statements and press releases in hand, outlined priorities to be aired at the first formal session of the full House-Senate conference committee.

It now falls to the “Big Four” in agriculture to keep the effort focused. The Big Four are Rep. Frank Lucas (R-Okla.), chairman of the House ag panel and conference chairman, and Sen. Debbie Stabenow (D-Mich.), chairwoman of the Senate Agriculture Committee, along with their respective ranking members, Sen. Thad Cochran (R-Miss.), a former ag committee chairman, and Rep. Collin Peterson (D-Minn.), also former chairman of the House ag panel.

Most of the heavy lifting now falls to the four ag committee leaders and timing is key if the effort is to be completed by the end of the year. Ultimately the focus and decisions of the conference will be directed by Lucas and Stabenow. The ag leaders say they will meet personally over the next few weeks, but acknowledged differing work schedules for the House and Senate and the fact there are only 15 legislative work days left before the end of the year make their jobs tougher. Senate conferee Sen. Pat Roberts (R-Kan.) said, “We’re going to lose our credibility if we don’t get this bill done.”

Lucas stressed the goal of a Farm Bill is to create a producer income safety net that makes bad times manageable, not good times better. Stabenow agreed. 

The leaders stressed there is no “new” money or budget tricks to help pay for programs. The conference leaders are also keenly aware they’re negotiating a bill that could save $24-40 billion during perhaps the most austere congressional budget/spending situations in recent years. 

Whether a Farm Bill conference report would be wrapped into a potential budget resolution “grand bargain” was addressed as Stabenow is in a unique position as a conferee on both the Farm Bill and the FY2014 budget resolution. She said the ag committees, not the budget committees, will write the Farm Bill, and while the savings achieved in the ag bill will contribute overall to the budget battles, “we will control our own product.” Peterson agreed with her, saying earlier in the day he’d fight “tooth and nail” to prevent the Farm Bill being wrapped into a budget agreement. “I might as well retire and go home if they’re going to put the farm bill in another bill. It’s the wrong thing to do,” Peterson said. Lucas added, “You can’t have our money unless you take our policy.”

Member statements during the conference meeting confirmed major differences between the two bills. A ray of hope in the longstanding and often bitter battle over federal food stamp cuts comes with the automatic reduction in overall benefit spending in the Supplemental Nutrition Assistance Program. The end of emergency authority used during the 2007-2008 fiscal crisis to expand SNAP now means $11 billion is immediately cut. Stabenow was quick to point out that reduction, plus her bill’s $4.1 billion in cuts, nets a savings in the nutrition title of $15 billion. Lucas did not challenge Stabenow’s description of overall savings. 

All agreed on the need for a robust crop insurance program. While Lucas’ statements were more general, Stabenow defended many specific components of her bill, including the dairy title – which includes milk production controls – and the Senate’s cross-compliance requirement between conservation program participation and crop insurance premium assistance. She said the so-called “King Amendment” in the House bill – federal pre-emption of state laws that restrict how animals are raised and marketed – goes too far and threatens other state laws as well.

Farm Bill Miscellany

250 Ag Groups Want Five-Year Bill – More than 250 national and state ag groups, including the American Farm Bureau Federation and the American Feed Industry Association, sent a letter to Farm Bill conferees and congressional leaders telling them to approve a five-year Farm Bill that continues permanent law and includes a five-year life span for all programs, including the nutrition title. The groups said retaining permanent law provides the policy pressure to motivate Congress to enact new Farm Bills.

Diverse Groups Make Farm Bill Demands Known – Nontraditional Farm Bill players are wasting no time making their demands known to conferees. The International Teamsters Union, representing employees of bakeries, dairy, brewery and food processing, reversed itself and now supports the full Dairy Security Act – replacing several current dairy price support programs – as included in the Senate Farm Bill. Previously, the union objected to the supply control portion of the new program, but told conferees that because co-ops have to meet their supply contract obligations to processors any way they can, the full Senate program is preferable to the House version which does not include dairy supply controls. The union also supports the Senate nutrition title, a five-year bill and opposes any changes to country-of-origin meat labeling.

Calling it “Judgment Day” on animal issues, the Humane Society of the United States wants conferees to kill Rep. Steve King’s House Farm Bill language to federally pre-empt state animal production laws that interfere with interstate commerce. It also wants the conferees to protect language making it illegal for an adult to attend a dog or cockfight or to take a minor child to an animal fight. Finally, it opposes any changes to country-of-origin labeling.

FDA Releases Long-Awaited FSMA Feed/Pet Food Rule

On Oct. 29, the Federal Drug Administration finally published its proposed rule – about 18 months late – to implement performance standards for the animal feed and pet food industries under provisions of the Food Safety Modernization Act. Arguably the biggest changes in decades in how the federal government regulates the commercial animal feed and pet food industries, the 405-page rule is the last of the major rules required of the agency under FSMA.  It promises a major battle between industry and the agency over implementation and how the feed rule relates to other FSMA rulemakings already out for public comment. 

The new proposed rule, a fact sheet and other related materials can be found by going to this link: https://s3.amazonaws.com/public-inspection.federalregister.gov/2013-25126.pdf. A teleconference between FDA and industry stakeholders was held Oct. 25, and a replay of that call can be heard until Nov. 23 by calling 1-800-285-0610.

The proposed rule lays out how registered facilities must create a written food safety plan, perform “hazard analysis,” and establish preventative controls for registered facilities. In essence, the rule lays out how companies will operate if they “manufacture, process, pack or hold” animal foods – livestock/poultry feed and pet foods – both domestically and overseas to minimize and prevent contaminations “likely to occur.” Monitoring, corrective actions, verification and new recordkeeping, as well as the designation of a “qualified individual” to oversee the prevention/food safety plan, are required. The rule contains newly proposed Good Manufacturing Practices for non-registered, non-medicated feed and pet food facilities, and carries special consideration for small and “very small” businesses. The rule does not cover on-farm mixers.

In a joint statement, the American Feed Industry Association, which includes broad pet food membership, and the National Grain and Feed Association said they were “pleased to see the rules,” and said their analysis of the proposal will include how it meshes with the previously published foreign supplier verification and accreditation of third party auditor proposed rules. AFIA Senior Vice President, Richard Sellers noted AFIA and NGFA have already requested an extension of the comment period for the two earlier proposals so that implementation of the three proposed rules would occur at the same time.

NGFA’s Dave Fairfield, vice president for feed services, said AFIA and NGFA would broaden its efforts to include the Pet Food Institute so comments reflect “what’s achievable and to facilitate the continued manufacture and distribution of safe animal feed and pet food.”

Comments are due 120 days after publication, and requirements will kick in 60 days after a final rule is published. However, both AFIA and NGFA acknowledge the massive rulemaking will need more than 120 days for analysis, review and comment, and an extension of the comment period will be requested. In addition, AFIA and NGFA are finalizing preparations for a jointly sponsored webinar on the new proposal, likely to be held in early December.

Budget Committee Scales Back Expectations

With word that the House and Senate will sit down for the first time since 2009 to reconcile their respective budget resolutions, speculation is rife over spending cuts and revenue “enhancements.” However, both sides of Capitol Hill are backing away from the “grand bargain” scenario, focusing on just getting a bottom line number on how much discretionary spending will be available to the federal government in the coming fiscal year. Even that may not be possible.

Rep. Paul Ryan (R-Wis.), chairman of the House Budget Committee and author of strict spending control budgets agnostic on programs to be pared back, and Sen. Patty Murray, chairwoman of the Senate budget panel who’s committee approved this year its first full budget resolution in almost five years, are challenged to take two very different bills and reconcile at least the amount of discretionary spending available for parceling out by appropriators, all the while coming up with a sequester fix or replacement.

Once the top line spending numbers are agreed to – with or without a sequestration fix – appropriators will know how much money they have to spend and action can be taken to replace the FY2013 continuing resolution that expires Jan. 15. It looks now as if a longer-term continuing resolution could be agreed to, and it could include as many as five individual appropriations bills – possibly including agriculture – when and if it moves in December. 

Both House and Senate full-government allocations are below $1 trillion, which signals the Senate has moved slightly off its previous demand that $1.15 trillion be made available for all federal spending. Both chambers and both sides of the aisle acknowledge the mandatory spending cuts required under sequestration have caused too much pain. However, members from both chambers continue to push Ryan and Murray to turn the bill into a multi-billion jobs/tax reform/regulatory package. Insiders say there isn’t time to develop that magic formula before the panel’s Dec. 13 deadline for delivering a finished product. 

CFTC OKs Customer Protection Rule

The Commodity Futures Trading Commission approved a controversial “customer protection rule” despite strong opposition from the industries it says it wants to protect. The rule is designed to avert customer losses in the wake of disasters such as the MF Global bankruptcy, the commission said.

The rule effectively requires futures commission merchants (FCMs) to ensure customer margins are covered 24/7, including a requirement that FCMs post their own cash to cover those customer margins. The CFTC requires a system that will calculate margin coverage using a residual interest formula. 

In a joint statement, 12 national organizations, including the American Feed Industry Association and the National Grain and Feed Association, said they’re “disappointed” by the CFTC action.

“Although the commission improved on its initial concept of how margins would be collected, its decision to maintain an automatic trigger that would move the residual interest calculation by FCMs to first thing in the morning the day following the trade does not address practical impediments that many smaller futures markets participants in agriculture face,” the group said.

“Ultimately, the (new CFTC) requirement will lead to smaller entities, including farmers, ranchers and hedgers, being disadvantaged disproportionately, and being driven from the futures markets as fewer risk management tools become economically feasible,” the groups said.

“The irony of (the) vote is that significant and diverse customer groups – America’s farmers, ranchers and hedgers – cannot support a mostly beneficial rule intended by the commission to protect customers because the commission failed to correct very specific provisions we believe are harmful to agriculture market participants,” the groups said. 

Other groups opposing the rule include American Farm Bureau Federation, American Cotton Shippers Association, American Soybean Association, Commodity Markets Council, National Cattlemen’s Beef Association, National Corn Growers Association, National Cotton Council, National Council of Farmer Cooperatives, National Pork Producers Council and USA Rice Federation.

Senate, House Agree to Move to Conference on Waterways Bill

The Senate moved to begin conference committee action with the House to reconcile the chambers’ two versions of federal waterways spending reauthorizations. The bills authorize the U.S. Army Corps of Engineers to designate lock/dam, river, harbor, flood control and wetland restoration projects. The bills enjoy bipartisan support. While there are differences in how waterways projects will be determined – the House says Congress should approve a slate of recommended projects; the Senate sets criteria for Corps project selection and spending – the bills are expected to be reconciled relatively easily. 

House Committee Releases Report on Transport Efficiency

The “Panel on 21^st Century Freight Transportation,” a project of the House Committee on Infrastructure and Transportation, released a report on how the U.S. can improve freight transport. The report recommended several items, including the following:

• The Department of Transportation and the U.S. Army and Coast Guard should set a comprehensive national freight policy, designate a national, multi-modal framework and identify sustainable sources of revenue across all modes;
• Strong government “investment” in all modes of  transport is needed, along with incentives to inspire additional private investment in transport facilities;
• A grant process should be set up to create “dedicated, sustainable funding” for multi-modal freight projects; and
• DOT’s freight funding and revenue ideas need to be reviewed through the House Transportation Committee, along with the Ways & Means Committee. These reviews should be done before Congress considers the federal highway reauthorization bill in 2014.

House Committee Moves Pesticide, Spill Prevention Bills

A bill to allow farmers to spray Environmental Protection Agency-approved pesticides in or near waterways without additional permitting, and a bill to clarify an exemption for farmers from EPA’s oil spill prevention rules were approved by the House Committee on Transportation and Infrastructure.

The pesticide bill – which allows spraying of Federal Insecticide, Fungicide and Rodenticide Act-approved chemicals without new National Pollutant Discharge Elimination System permits – has been approved by both House and Senate Agriculture Committees – and the full House – several times over the last couple of Congresses. The committee shares jurisdiction on the permitting issue with the House Agriculture Committee.

The oil spill bill codifies an exemption for farmers that says any producer using an above-ground storage tank of less than 10,000 gallons does not have to prepare spill prevention and countermeasure plans. 

EPA: Shutdown Delays Fertilizer Rules Until End of November

While originally expected by the end of October, the Environmental Protection Agency told the Huffington Post its new and existing chemical safety rules and enhancements won’t be out until the end of November due to the 16-day federal government shutdown. The rules will place greater restrictions on the use, storage and oversight of ammonia-based chemicals used in fertilizer manufacture in the wake of the West, Texas fertilizer plant explosion last spring. 

Federal Court Rules for Farmers in Runoff Case Against EPA

A U.S. District Court in West Virginia has ruled against Environmental Protection Agency and in favor of a West Virginia farmer who sued the agency contending “ordinary stormwater” runoff from her farm is exempt from National Pollutant Discharge Elimination System permitting. The court decision creates a much higher hurdle for EPA in its effort to force confined animal feeding operations to come under point source pollution requirements.

In 2012, EPA threatened the poultry producer with a fine of $37,500 each time stormwater came into contact with dust, feathers or manure on the ground outside of poultry houses. An identical fine – to be charged daily – was threatened if the farmer didn’t apply for a NPDES permit.

The court said the Clean Water Act “clearly exempts agricultural stormwater runoff” – citing congressional action and intent – because ag runoff is not considered to be point source pollution, hence there’s no authority to require the NPDES permit.

EPA earlier this year tried to opt out of the case by withdrawing its order against the farmer.  However, the American Farm Bureau Federation and the West Virginia Farm Bureau, interveners in the case, argued successfully important legal issues had to be resolved or the farmer would remain vulnerable to EPA actions. The court agreed.

RFS Items

ASA, National Biodiesel Board Meet Vilsack on RFS Protections – The American Soybean Association and the National Biodiesel Board met with Secretary of Agriculture Tom Vilsack and Deputy Secretary Krysta Harden to remind them of the negative impacts of not increasing the 2014 Renewable Fuel Standard for biodiesel and renewable diesel, advanced biofuels fuels refined from plant and animal feedstocks. Vilsack pledged his continued support for a strong RFS. ASA has asked the Environmental Protection Agency to set the 2014 biodiesel RFS at not less than 1.7 billion gallons – the entire expected 2013 biodiesel production – after media reports indicated the agency was considering an RFS for advanced biofuels of only 1.28 billion gallons.

House Members Ask EPA to Lower RFS – Nearly 170 House members from both sides of the aisle sent a letter to EPA Administrator Gina McCarthy urging the agency to consider what the lawmakers called “a fair and meaningful adjustment” to the Renewable Fuel Standard  for corn ethanol. The effort was led by Rep. Bob Goodlatte (R-Va.), chairman of the House Judiciary Committee and author of bills to either adjust the RFS lower or repeal the biofuels blend mandate. Goodlatte was joined by Reps. Peter Welch (D-Vt.), Jim Costa (D-Calif.) and Steve Womack (R-Ariz.). Talks focused on the possibility the agency could hold the RFS mandate at 2013 levels. Several media outlets reported two weeks ago the agency was looking to decrease by almost half the amount of biofuels current mandated for blending with gasoline. EPA officials say agency action is in the draft stage.

Senators Want End to Corn Ethanol RFS – Sen. Dianne Feinstein (D-Calif.) and Sen. Tom Coburn (R-Okla.) said they’ll soon introduce legislation to kill the Renewable Fuel Standard for corn ethanol. RFS requirements for advanced biofuels would be continued under the Feinstein/Coburn bill. The two Senators successfully led the 2011 fight in the Senate that repealed the blenders’ tax credit and import protections on ethanol. The Renewable Fuel Association, calling the proposed legislation “monumentally stupid,” said Feinstein and Coburn are “failing to understand … that we will never see these (advanced biofuel) technologies develop if the policy is gutted and the investment community is given the unambiguous signal that Congress is not serious about reducing our dependence on foreign oil.”