Washington Report for 4-14-14

By Steve Kopperud

House ag committee approves CFTC reauthorization, protects end users, hedgers

The House Agriculture Committee has approved a broad bipartisan bill to reauthorize the Commodity Futures Trading Commission and provide futures market end users and legitimate risk hedgers insulation from derivatives rules aimed at financial institutions. The full House is expected to approve the bill soon.

The Customer Protection & End-User Relief Act puts the CFTC back on firm legal standing as its authorization technically expired at the end of September, 2013 but was extended when the 2008 Farm Bill was extended while lawmakers battled over the new farm bill.

The committee opted to roll the reauthorization and protections from Dodd-Frank regulations into a single bill after several hearings demonstrated the new rules on derivatives have had the “consequences of negatively impacting end users, like farmers … which use derivatives to manage risks.” In previous legislation approved by the committee, end users were to be exempted from some of the most costly new regulations, but the CFTC’s interpretation of the Dodd-Frank requirements has been too narrow, said committee chair Rep. Frank Lucas (R-Okla.)

Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) said her committee is pursuing a comprehensive bill but whether its approach will be as broad as the House ag panel’s action is not known. She is confident the two bills can be reconciled.

The House bill takes language from several previously committee-approved bills to exempt from margin requirements swaps where non-financial participants are hedging risk; exclude from the swap definition any agreement, contract or trade between affiliated entities under the control of one company; repeal indemnification requirements for regulators to get swap data from swap players; allow utility companies to trade energy swaps with government-owned utilities without having to register as a swap dealer, and require the Securities & Exchange Commission and the CFTC to issue rules on the application of U.S. swaps requirements to swaps between U.S and foreign entities.

Senate agriculture panel approves CFTC nominees

The Senate Agriculture Committee has approved President Obama’s nominations to bring the Commodity Futures Trading Commission back to its full complement of commissioners. The three nominees are expected to receive full Senate confirmation quickly.

The nominees approved are Treasury Department Assistant Secretary Timothy Massad to be CFTC chair; Sharon Y. Bowen, a New York City attorney, to be a Democrat commissioner and J. Christopher Giancarlo, executive vice president of GFI Group in New York City, to take the Republican slot on the commission.

While none of the agriculture panel members dissented, Sen. David Vitter (R-La.) released a statement after the committee approval opposing the Bowen nomination over his allegation her actions as acting chair of the Securities Investor Protection Corp. failed to protect investors in the Stanford ponzi scheme. Consumer Advocacy group Public Citizen has previously opposed Massad.

FDA’s Taylor: FSMA implementation plan details coming

The specifics on how the Food & Drug Administration will move forward to implement the Food Safety Modernization Act should be public in the next several weeks, according to FDA’s Deputy Commissioner for Food & Veterinary Services Michael Taylor. Those details should cover the produce safety proposed rule, the preventative controls proposed rules for human and animal foods and processes affecting the import system.

“This is for the purposes of stimulating dialogue with the community,” Taylor said, adding that the operational document will be posted to the FDA website, not published in the Federal Register. Taylor said that later this month or early in May, he hopes to release “an operational strategy.” He said the agency is shifting how it operates internally to achieve good FSMA implementation, “in terms of how our inspectors approach inspection, how we work with the states, how we focus on technical assistance and guidance for industry to get greater voluntary compliance, and how to use administrative enforcement powers efficiently where there is a public health need to do so.”

FSMA feed rule drawing calls for exemptions

The complexity and deficiencies identified in the 400-plus-page Food & Drug Administration proposed rule on performance standards for feed and pet food under the Food Safety Modernization Act has brought about requests from ingredient segments for outright exemption from the rule.

The big push – and the effort exhibiting the most political investment – comes from beer makers and liquor distillers. The industries contend the spent grains from the malting and distilling processes that are “given away or sold at low cost” to farmers are risk-free and the companies are not feed or ingredient companies within the meaning of FSMA, and therefore the beer and liquor firms should not be covered by the FSMA feed rule and its requirements of feed ingredient suppliers and manufacturers.

Half a dozen senators have pushed FDA Commissioner Margaret Hamburg to exempt the alcohol makers from the rulemaking. She said the feed rule is under review and a modified version will publish sometime in late May or early June.

Rep. Steve Womack (R-Ark.) introduced a bill to amend FSMA “to ensure certain facilities continue to be treated as alcohol-related facilities, notwithstanding the distribution of spent grains (for use as food for animals) resulting from the production of alcoholic beverages.” The bill will be referred to the House Committee on Energy & Commerce but is not likely to see action.

The National Turkey Federation is seeking to exempt turkey growers who make their own feed for their own birds. This bid is unlikely to prevail as FDA would then have to look at all integrated poultry producers and on-farm feed mixers in the same context. Exempting more than half the nation’s feed production is highly unlikely, said one feed industry expert close to the rulemaking.

For its part, the American Feed Industry Association does not support any exemptions from FSMA feed rule coverage. To exempt only certain practices or processes dilutes the intent of the rule, is not fair to commercial companies and exposes vast segments of the industry to risk, it said.

NGFA, NRA tell grocers FDA 'vastly underestimates' cost of FSMA feed rule

The National Grain & Feed Association and the National Renderers Association says the Food & Drug Administration has vastly underestimated how much the industry will have to pay to comply with new rules on feed safety under the Food Safety Modernization Act. The remarks came during a science forum sponsored by the Grocery Manufacturers Association.

“FDA’s estimate was that the cost across the entire industry would be $128 million … (while) our estimate shows it would easily cost $500 million, maybe closer to a $1 billion,” said NGFA President Randy Gordon. He said NGFA’s analysis pegs the per-facility cost at nearly $65,000.

NRA’s Senior Vice President David Meeker said if FDA would back down a bit and allow for practices already legal, costs could be manageable. To meet the FDA proposed standards will cost each rendering company $250,000 per plant on average. If FDA goes forward with finished product testing, as expected in the May-June republish of the proposed rule, the cost jumps to $1 million per facility, Meeker said.

Next up, FSMA transportation proposed rule

Attention is now turning to comments on the proposed Food Safety Modernization Act SMA rulemaking to ensure food transportation – from farm through processing – is sanitized and does not contribute to contamination.

The proposed “Sanitary Transportation of Human and Animal Food” rule requires human food and animal feed companies registered under FSMA to develop practices to ensure carriers using auto (truck) or rail, as well as receivers providing transport do not jeopardize food safety. The proposed rule was published last month and comments are due May 31.

“Transportation” is defined as “any movement of food in commerce by motor vehicle or rail vehicle,” and the rule sets requirements for vehicles and transport equipment, transportation operations, training, recordkeeping and qualifying for waivers.

The American Feed Industry Association is looking for input on where the proposed requirements are suitable for feed and ingredient companies. The questions AFIA seeks input on include are current clean-out procedures for truck and rail are adequate and how should the term “adequately cleanable” apply to the feed and pet food industries?; what resources are needed to implement the rule, including financial investment and new staff?; is it practical for all carriers – company owned and contract – to provide identification of the previous three loads carried by a vehicle and descriptions of how the vehicles are cleaned?; do contract carriers have written procedures on cleaning and inspecting transport vehicles?, and are the provisions appropriate for ingredients, feed and pet food?

Lucas to surrender ag committee chair, potential successor campaigns

Come January, 2015 and the 114^th Congress, the House Agriculture Committee will have a new chair as current chair Rep. Frank Lucas says he won’t seek a waiver from House rules term limiting committee chairmanships after six years.

Speaking to the North American Agriculture Journalists meeting in Washington, D.C., Lucas (R-Okla.) said “I will never leave the ag committee.”

Making noise about wanting the ag chair is Rep. Michael Conaway (R-Texas), while Rep. Steve King (R-Iowa) said he is considering whether to campaign for it.

McCarthy: RFS final numbers will be 'different'

Environmental Protection Agency Administrator Gina McCarthy says the agency’s final declaration on 2015 biofuel blend rates under the Renewable Fuels Standard will be “different” than blend levels proposed by EPA several months ago. McCarthy said her agency is paying attention to statements by Secretary of Agriculture Tom Vilsack that gasoline sales have risen since the agency made its initial proposal.

The 2015 RFS levels proposed by EPA showed across-the-board reductions – in the case of corn ethanol, a dramatic decrease – in RFS blend rates. The agency cited at the time the gasoline industry’s contention that fewer miles driven and more fuel efficient cars and trucks had led to an ethanol “blend wall,” the point at which the gasoline industry can’t blend enough mandated biofuels without exceeding the 10 percent blend rate authorized for gasoline.

McCarthy says volumetric numbers often change between proposal and final requirements and that the RFS 2015 volumetric numbers will reflect “current numbers” in the gasoline industry.

In a related development, the Advanced Ethanol Council told a Senate Agriculture Committee hearing on advanced biofuels that the EPA proposal has created such uncertainty about RFS levels it has frozen private investment in the biofuels sector.

In another RFS-related development, a federal appeals court judge wants to know why it’s taking so long for EPA to make a final RFS determination, calling the agency’s delays “egregious.” He made the statement in the context of a lawsuit brought by American Petroleum Institute and the American Fuel & Petrochemical Manufacturers seeking to throw out 2013 RFS mandates because the agency didn’t issue the mandates until nine months after the legislative deadline.

Ag told to remain calm over EPA CWA authority proposal

The agriculture community should stay calm and “take a deep breath” in its reaction to the Environmental Protection Agency's proposed rule under the Clean Water Act to expand its authority, said EPA Administrator Gina McCarthy. She said allegations the proposal is a “power grab” or a “land grab” are not true.

The American Farm Bureau Federation and the National Cattlemen’s Beef Association contend the proposed authority expansion raises more questions than it answers about what is protected and what will require permits. McCarthy said she’s open to suggestions on how to clarify the language and has already set up meetings with ag interests to discuss the rulemaking.

McCarthy reiterated in a series of public appearances that the proposed rule to reinterpret EPA’s authority under the CWA “waters of the U.S.” language keeps in place all current agricultural exemptions and exceptions.

16 senators tell EPA, USDA not to tax livestock emissions

Don’t even think about taxing farmers, ranchers and feedlots over methane emissions was the hard message sent to the Environmental Protection Agency, U.S. Department of Agriculture and the Department of Energy by 16 GOP senators as the three cabinet members seek to implement the president’s climate action plan.

“If this plan leads to heavy-handed regulations or mandatory guidelines, farmers and ranchers would likely face a steep increase in production costs,” said Sen. John Thune (R-S.D.), organizer of the Senate letter.

Thune reminded the administration that EPA cannot regulate greenhouse gas emissions from farms and ranchers based on language included annually in appropriations bills. He also pointed out methane emissions associated with farming have been reduced 11 percent since 1990.

The White House plan calls for the federal government to come up with ways to reduce methane emissions from livestock sources by 25 percent by 2020. The dairy industry is working with the three departments to come up with a Biogas Roadmap for release in June that would list a number of voluntary actions dairy producers can take, including adoption of technologies such as use of anaerobic digesters to convert methane to electricity.

Senate crafts deal on highway reauthorization

A bipartisan blueprint on how to move forward on Senate reauthorization of federal highway and commuter programs was unveiled last week after weeks of behind-the-scenes negotiation between Sen. Barbara Boxer (D-Calif., chair of the Environment & Public Works Committee, and committee ranking member Sen. David Vitter (R-La.).

The panel will mark up a six-year reauthorization bill, and that bill is being drafted after an agreement on principles was reached. As expected, the bill will not include a funding mechanism with that responsibility punted to the Senate Finance Committee to adjust the Highway Trust Fund and other transportation taxes to find about $16 billion to fund a six-year reauthorization.

Sen. Patty Murray (D-Wash.), who chairs the Appropriations Committee’s subcommittee on transportation, said the expected default of the Highway Trust Fund will lead to a “construction shutdown this summer” unless the full spending committee authorizes and Congress approves more funding immediately.