Washington Report for 1-27-14

By Steve Kopperud

Possible vote this week on the farm bill

Farm bill negotiators have been working on final language of a farm bill in preparation for a possible vote this week. The House is expected to vote Wednesday and the Senate by Friday.

The fast-track schedule is because of the president’s State of Union address on Tuesday – the House shuts down for security preparations midday Tuesday – and the departure of House Republicans to their policy retreat Wednesday afternoon. Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) is pushing to move the framework in hand and avoid ugly votes on specific issues. She faces other conferees who want votes on relatively minor outstanding issues, including country-of-origin labeling, the King language on federal preemption of state ag production laws and a handful of smaller issues.

Contentious issues in the conference report include dairy supports and payment limits on farmer federal payments. 

Lawmakers went home a week ago thinking the deal was done on the dairy provisions, but House Agriculture Committee ranking member Rep. Collin Peterson (D-Minn.) and the National Milk Producers Federation are reportedly trying a last-ditch effort to add stronger disincentives to milk overproduction. This move does not sit well with Rep. Frank Lucas (R-Okla.), chair of the House ag panel and chair of the conference committee. Insiders say Peterson’s effort will likely not succeed. 

The current agreement dumps all supply controls, but gives the U.S. Department of Agriculture the authority to adjust margin insurance premiums – designed to pay the difference between milk and feed costs – up or down by 5 percent. If a farmer sticks to a milk production base set by individual farm formula, 100 percent of the indemnity is received; if the producer exceeds that farm base, only a percentage of the indemnity is paid on milk produced over the base amount. 

Program payment limits in the two versions of the farm bill cap the combination of subsidies and loan deficiency payments at $125,000 per individual and $250,000 per couple. Crop insurance payments are not counted toward the cap. 

Critics want to tie the cap to adjusted gross income, limiting higher incomes to lower caps and payments, a move that would generally benefit smaller southern farms over much larger Midwestern operations. Sen. Charles Grassley (R-Iowa), who is not a conferee, is lobbying hard to put a hard limit on payments and include a much stricter legal definition of an “actively engaged” farmer in order to qualify for the payments. However, conferees, unable to agree on a compromise version of “actively engaged”, may pull that section from the farm bill and give USDA authority to rewrite the definition to limit participation in farm programs by nonfarmers.

All eyes turn to biofuels, RFS this week 

The biofuels industry – from corn ethanol to biodiesel to cellulosic fuels – have been dominating headlines in Washington, D.C. Tuesday is the deadline for comments on the U.S. Environmental Protection Agency's controversial proposal to reduce or freeze the 2014 Renewable Fuel Standard at 2103 levels. 

Last week 31 senators and 30 House members sent letters to EPA Administrator Gina McCarthy in support of increasing the biofuels RFS, particularly on ethanol. Led by House and Senate members representing midwestern ethanol and biodiesel states, the letters reminded McCarthy the RFS was designed to increase the use of biofuels and deemed an Obama administration move to freeze the RFS based largely on falling gasoline sales “a significant step backward…placing at risk both the environmental benefits from development of advanced biofuels and rural America’s economic future.” Holding the RFS at proposed levels would “halt investments in cellulosic, biodiesel and other advanced biofuels,” according to the letter. 

In a conference call, Renewable Fuels Association energy company executives said the RFS is the single greatest important market stimulant in the biofuels industry and the uncertainty created by the EPA proposal is forcing producers to look overseas for both investment and sales. RFA said the RFS was designed to drive the market for biofuels, not react to it. 

The National Biodiesel Board, representing both plant and animal-based biodiesel and renewable diesel manufacturers, reminded President Obama that as a senator, he supported creation of the RFS. The biodiesel industry, which fared slightly better than corn ethanol makers in the EPA proposal, is looking at a proposed 1.28-billion-gallon RFS level. NBB said fuel makers see this as a 50 percent cut in their RFS based on industry production. The industry wants an RFS of at least 1.7 billion gallons, even though 2014 production is on track to exceed 2 billion gallons. 

NBB said if EPA doesn’t increase the RFS, it may join with other biofuel groups and companies and sue EPA on the grounds the new RFS action violates the law. This, they allege, is because EPA bases its RFS decision on the gasoline marketplace, not on “damages, severe economic hardship or inadequate supply” as the federal law stipulates. 

Meanwhile, EPA said last week it will likely revisit its proposed levels of cellulosic ethanol required to be blended with gasoline under the RFS because commercial production of cellulosic ethanol is not meeting projections. KiOR, a cellulosic company that produces the majority of commercial U.S. cellulosic ethanol, recently announced it was refiguring its overall annual production because it missed its second quarter target. The American Petroleum Institute and the American Fuel & Petrochemical Manufacturers petitioned McCarthy asking for the reconsideration based on the KiOR production. The agency said it will revisit the numbers and begin rulemaking. 

Comments on the RFS proposal can be found at www.epa.gov; follow the home page prompts. 

Commodity Futures Trading Commission to proceed with case against Corzine 

John Corzine, former head of MF Global, the eighth largest corporate bankruptcy in U.S. history, has lost his bid to have a federal court dismiss the case brought by the Commodity Futures Trading Commission based on his role in the MFG bankruptcy. 

CFTC charged Corzine and Edith O’Brien, former MFG treasurer, with failing to adequately oversee the company’s financial operations, as well as allowing customer funds – required by law to be segregated from corporate trading funds – to be illegally used to keep afloat risky foreign MFG investments. 

No criminal charges have been filed. During the bankruptcy, $1.6 billion in customer money was unaccounted for at time the action was filed. Since then most of that money has been repaid, according to the MFG bankruptcy trustee who said he hopes to return the rest soon. 

GOP retreat to kick off immigration strategy 

House Republicans plan to unveil their strategy on immigration reform during their retreat this week. 

House Speaker John Boehner promised action on immigration last year but missed the mark. Earlier this month he reiterated Republicans' priority on immigration reform and promised to unveil “principles and standards” to guide his party during the reform process. Those strategy priorities will be unveiled during the policy retreat in Cambridge, Md. 

Reports indicate Boehner (R-Ohio) and his lieutenants want the four immigration reform bills approved by the House Judiciary Committee ready for floor action by late summer. Included in this package is a guest worker bill to grant “legal status” to undocumented workers but likely not full citizenship. The other three key bills deal with the children of illegals, tracking of foreign nationals and increasing the number of visas for immigrant unskilled labor. Border security and high-skilled worker visa legislation have already cleared the House. The goal would be to take the six bills and package them into a single piece of legislation. 

Critical, say conservative Republicans wary of the “legal status” priority, is language in the ultimate immigration package to legally compel President Obama to enforce all parts of the ultimate law agreed to by Congress. They cite the White House’s recent waiver of several parts of the Affordable Care Act without consulting with Congress. 

Rep. Paul Ryan (R-Wisc.) said the granting of “legal status” to illegal workers was necessary and would be predicated upon undocumented workers learning English and U.S. government and history, paying taxes and paying a fine for entering the country illegally. 

OSHA to clarify its definition of small farms as grain dealers 

The Occupational Safety and Health Administration said it plans to clarify its actions in trying to regulate small farms as “commercial grain dealers.” The decision came after critics called in a “power grab without legal basis” and the agency said it’s required by law to inspect certain grain-related activities whether they’re on-farm or not. 

Sen. Mike Johanns (R-Neb.) first exposed what he calls OSHA’s disdain for a 35-year-old federal policy enshrined annually in appropriations law that keeps OSHA inspectors off small farming operations, defined as those with 10 or fewer employees. Johanns said the agency ignored congressional direction and tried to redefine farming operations with separate commercial identities to permit OSHA inspections. He included language in the recently enacted FY2014 omnibus appropriations bill upholding the small farm exemption but encouraging OSHA to meet with the U.S. Department of Agriculture “before moving forward with any attempt to redefine and regulate post-harvest activities.” A USDA meeting will be set up “very quickly,” OSHA officials said. 

Johanns said what OSHA defines as “commercial grain storage” subject to inspection is simply routine grain storage used post harvest, action specifically exempt by federal law. OSHA said it’s trying to make the regulations clearer for both farmers and its inspectors. 

OSHA said the agency is motivated by safety, citing a string of storage accidents in 2010 that lead to 57 incidents and 31 deaths. In 2011, the agency announced its intent to focus on grain handling, beginning what it called “a very aggressive campaign” to prevent grain handling accidents. Further, the agency said it’s never been its policy to inspect grain storage that is “intrinsic” to a farming operation and it is unaware of any inspector ever “going to the wrong places” to enforce grain storage rules. 

EPA proposed update of ag worker pesticide protection rules may publish soon 

The U.S. Environmental Protection Agency could publish a proposed rule next month on an update of its agricultural worker pesticide protection standards. The proposal has been 10 years in EPA development and in October it requested the Office of Management and Budget review its draft. 

The EPA intent was first signaled in its required semiannual regulatory agenda published in the Federal Register. 

The draft rules are designed to better protect workers from routine exposure to pesticides during work. It is also supposed to update and make more understandable requirements and enforcement responsibilities by getting the rules to better coordinate with OSHA requirements and improved safety training. 

Supporters of the reworked pesticide protections for workers, which date back to 1992, argue such a rule will translate to greater productivity and yield overall better economic returns. However, critics question whether the expected price tag on implementation will justify the new regulations.