Washington Report for 6-9-14

By Steve Kopperud

‘Climate change action plan’ wars Begin as EPA rolls out GHG control proposal

Last week the U.S. Environmental Protection Agency unveiled its draft proposed rule for first-ever government rules to control greenhouse gas (GHG) emissions from existing power plants. Critics say the impact of the rule goes well beyond utility plants or even the electricity industry, while coal state lawmakers pledged legislation to block the EPA effort.

The EPA proposal seeks to cut GHG emissions – primarily carbon from existing coal-fired power plants – by 30 percent by 2030, using 2005 levels as the benchmark. In addition to carbons and other GHG, the rule seeks to reduce particle pollution and emissions of nitrogen oxides and sulfur dioxide as a “co-benefit.” Citing power plants as the source of roughly one-third of total U.S. GHG emissions, the EPA proposal relies on the states and formula individual state reduction goals to hit the 30 percent reduction mark. 

The estimated $7.3-$8.8-billion proposal carries a 120-day comment period, a detail requested by several members of the Senate. EPA said it will hold public meetings in Washington, D.C., Denver, Atlanta and Pittsburgh during the week of July 28.  The 645-page proposal, along with fact sheets and other information, can be found at http://www.epa.gov/.

Critics contend the GHG control approach will affect not only electricity generation and consumer utility bills – along with the reliability of the national power grid – but also serves as a template for similar reduction proposals for other industries. Supporters called the rulemaking a “good first step,” saying the United States must lead on GHG emissions reductions. 

The state-federal “partnerships,” reduction targets set by EPA ranging from a 71.6 percent reduction in Washington State to 10.6 percent in North Dakota, are based on state energy efficiency factors, age of power plants, etc., and give states the flexibility to identify unique ways to meet agency-set reduction targets using new electricity and pollution control processes. The states have until June 2016 to submit their reduction plans to EPA, unless granted a one-year extension.

The options available to the states, EPA said, include “the right mix” of new fuels, energy efficiencies and participation in private cap-and-trade carbon markets to meet “their goals and their own needs.” Multistate plans are allowed under the EPA proposal.

Ag Reaction:   Reaction from agriculture was swift and generally negative. “Effects will especially hit home in rural America,” said American Farm Bureau Federation President Bob Stallman. The EPA proposal will hurt the general economy, rural communities and farm and ranch families, with rural electric cooperatives particularly hard hit since they rely heavily on old coal-powered power plants.  Electricity prices won’t be the only increased cost, Stallman added, but spiking costs for any energy-related input, such as fertilizer, will result. 

For itself, the National Rural Electric Cooperative Association questions whether the rulemaking is legal, given it’s predicated on EPA authority under the Clean Air Act, but also upon presidential executive order.  “It’s very disappointing and disturbing that the EPA proposed a regulation that goes farther than the CAA allows by taking an ‘outside-the-fence’ approach to setting emission standards…that states must accomplish,” said NRECA President Jo Ann Emerson, a former Missouri GOP House member.  She added there remain a lot of details to be understood, particularly how each state will approach GHG reduction in their overall state plans.

The National Farmers Union, which usually takes a supportive view of administration climate change initiatives, was cautiously positive about the rulemaking.  NFU President Roger Johnson said he wanted to see the administration work with agriculture to set voluntary incentives for carbon reductions, but is concerned about rural job loss.  “It’s clear weather volatility will only continue to increase in the coming years unless our policymakers proactively address his challenge,” Johnson said, but added he’s concerned about the impact on rural electric cooperatives. Relying on older plants to provide cheap power, these cooperatives serve rural communities and are a major source of employment, accounting for about 12 percent of electricity sales. “Any regulatory action must consider the impact on rural electrics and the communities they serve,” Johnson said.

Also unhappy with the proposal is the International Brotherhood of Electrical Workers, which said, “The regulations focus solely on the environmental aspect of public policy at the expense of balancing our nation’s economic and energy needs.” Echoing NFU’s concern, the union said EPA has “a track record of underestimating the impact of its rules, making faulty predictions that have cost tens of thousands of good jobs.”

Legislation:  House and Senate members representing coal states – and several with tight reelection races – are nervous about what critics call  a “war on coal,” contending there isn’t enough alternative fuel available to replace coal at many of the older power plants.

The first shot at the president’s climate action plan came as House appropriators included language in the Commerce-Science-Justice FY2015 spending bill that would ban any federal spending to negotiate or enter in to any trade agreement that sets limits on carbon pollution.

This comes at a time when the U.S. Special Trade Representative is actively engaged in negotiating the Trans-Pacific Partnership with Pacific Rim nations, as well as a bilateral trade pact with the European Union. The amendment is aimed at a push by environmental groups attempting to resurrect a federal cap-and-trade scheme, an effort rejected by Congress in 2009.

On June 3, 28 senators sent the president a letter stating their primary concern with the EPA proposal is that it will “result in a significant electricity rate increase and additional energy costs for everyone.” They added not only will electricity prices increase but reliability of the energy grid will suffer.  At the same time, they challenged the president on why the proposal carries no cost estimates and relies upon cap-and-trade, which the Senate rejected in 2009.

Sen. Mary Landrieu (D-La.), new chair of the Senate Energy & Natural Resources, opposes trying to curb GHG through EPA regulation. “Congress should set the terms, goals and time frame,” she said in a statement.  She also reminded reporters she was a key vote in killing off the 2009 proposal to create a federal cap-and-trade system on carbon sequestration.

Senate Environment & Public Works Committee Chair Barbara Boxer (D-Calif.) said her committee plans hearings on the EPA rulemaking “as soon as possible.” The House Energy & Commerce Committee subcommittee on energy and power will hold a hearing on the rule next week. Meanwhile full committee ranking member Rep. Henry Waxman (D-Calif.) wants panel chair Rep. Fred Upton (R-Mich.) to hold a hearing on how climate change affects commercial credit ratings given a warning from Standards & Poors Rating Services in May.

Reps. Nick Rahall II (D-W.Va.) and David McKinley (R-W.Va.) introduced a bill to block the EPA rule for existing power plants, as well as agency action on new source performance standards. Any rule even similar to that proposed last week would be blocked for five years unless Congress acts. 

Senate Minority Leader Mitch McConnell (R-Ky.), who’s made climate change and the president’s initiatives a major issue in his reelection campaign, introduced a bill he calls the “Coal Country Protection Act.”  McConnell would require the Labor Department, the Congressional Budget Office, the Energy Information Agency, the Federal Energy Regulatory Commission and the North American Electric Reliability Corp. to assess the proposal and determine that the new rules on carbon recapture will not cause job losses or a reduction in the gross domestic product, hurt the electric grid’s reliability or boost electricity costs.  All of this would be required before EPA could even think about going ahead with rulemaking.

Sen. Joe Manchin (D-W.Va.) is working with Rep. Ed Whitfield (R-Ky.) on identical legislation they’ve introduced to stop any EPA rulemaking on GHG emissions standards for old or modified power plants until Congress passes legislation setting an effective date for the reduction plan. 

Sens. John Thune (R-S.D.) and Roy Blunt (R-Mo.) intend to bring forward amendments they previously offered to the unsuccessful Senate energy efficiency bill authored by Sens. Jean Shaheen (D-Vt.) and Rob Portman (R-Ohio). One amendment would block any effort to put a fee on direct or indirect carbon sources, and the other would require Congress to approve any EPA regulation with a price tag of $1 billion or more. 

Sen. Jim Inhofe (R-Okla.), a senior Republican on the Environment & Public Works Committee, said he’ll challenge the EPA rulemaking using the Congressional Review Act, and Senate GOP leadership has made similar statements. The CRA allows Congress to review and approve resolutions that stop agency rulemakings. The only time it’s been successfully used was in the late 1990s, when Congress stopped OSHA from promulgating a one-size-fits-all workplace ergonomic standards for industry.

Senate confirms all three CFTC nominees; sets June 19 roundtable on position limits

The Commodity Futures Trading Commission finally has its full complement of commissioners and a new chair as the Senate confirmed all three of President Obama’s nominees to the commission.

Confirmed as new CFTC chairman is Timothy Massad, a former Treasury Department official, J. Chris Giancarlo, the former head of a futures market firm in New York City, and Sharon Bowen, a New York City securities attorney.

“I’m pleased the CFTC will be operating at full strength once again,” said House Agriculture Committee Chair Frank Lucas (R-Okla.).  “I’m hopeful Chairman Massad will lead by consensus, which will be better for American’s economy in the long run.  I’m hopeful he’ll reverse recent commission actions that seem to ignore the concerns of our farmers and ranchers, as well as pursue commonsense reforms that will bring certainty to marketplace for America’s manufacturers, energy firms and utilities.” 

Lucas pointed out his committee has already passed a “wide-ranging, bipartisan reauthorization bill,” and if Massad needs guidance for how the CFTC should operate, he said, “Chairman Massad can start there if he needs a blueprint for action.”

The only controversial nominee was Bowen, who once headed the Securities Investor Protection Corp., a private group with a special reserve fund authorized by Congress to repay investors of failed brokerages.  The SIPC did not, however, pay victims of the R. Allen Stanford $7-billion Ponzi scheme, which upset several senators. Bowen’s nomination was cleared on a 50-46 vote; her confirmation was secured on a 48-46 vote; four Democrats joined 42 Republicans in voting against her.

The first official public meeting for the full CFTC will be June 19 at a day-long roundtable on position limits.  The roundtable will focus on hedges of a physical commodity by a commercial enterprise, including gross hedging, cross-commodity hedging, anticipatory hedging and the process for getting a non-enumerated exemption. There will also be talk about setting the spot month limits in physical deliveries and cash-settled contracts, and a conditional spot-month limit exemption. Details on how to participate can be found at http://www.cftc.gov/. 

RFS lobbying continues, ASA tells Obama  to improve RFS

In a letter sent by the American Soybean Association to President Obama, the group asked the chief executive to “intervene and improve” the EPA final decision on the Renewable Fuels Standard for biomass-based diesel (biodiesel, renewable diesel).

The ASA letter comes on the heels of similar efforts by the National Biodiesel Board and the National Renderers Association. Biodiesels can be refined from oilseeds, including soybean oil, as well as animal-based feedstocks produced through rendering.

“The EPA proposal to limit the biomass-based diesel volumes to 1.28 billion gallons for 2014 and 2015 would unnecessarily stunt the growth of the U.S. biodiesel industry and would forego the significant emissions reductions and economic benefits derived from this growing sector,” ASA wrote. The group added it is “troubling and perplexing” the administration would propose an RFS below 2013 domestic use and production levels, when it has strongly supported biodiesel over time.

ASA’s fear is that a relatively unchanged RFS for biodiesel will seriously cut into soybean oil demand, a feedstock which accounted for about half of all biodiesel produced last year.  ASA said with world soybean crops hitting records and with a drop in the amount of soy oil used in the domestic food industry, “the need for a growing biodiesel market is vital to the bottom line for U.S. soybean farmers.”

USDA steps up PEDv rules, funding

The U.S. Department of Agriculture says it’s dealing with porcine epidemic diarrhea virus aggressively, and Secretary of Agriculture Tom Vilsack told the World Pork Expo the virus, which has killed over 7 million pigs this year, is now subject to mandatory disease reporting. Vilsack’s announcement came as USDA separately announced it will spend $26.2 million to fight PEDv and porcine deltacoronavirus (PDCoV).

Vilsack said the disease affects not only swine producers' income but also hits input suppliers, including feed companies, affecting access to the product, limiting U.S. export opportunities and is cutting supplies to consumers. He also stressed the department will aggressively educate consumers there is no food safety or human health risk from the virus.

Mandatory reporting of the disease to USDA begins immediately, Vilsack said, but USDA has not offered details on how the reporting will be handled. The National Pork Producers Council, while welcoming USDA’s actions, said the devil is in the details of the reporting regime, particularly how USDA intends to protect confidential producer information given the Environmental Protection Agency's release of confidential data to environmental activist groups last year.

Rep. Steve King (R-Iowa) said he’s skeptical about the mandatory reporting plan and whether the government can protect farmers from Freedom of Information Act requests for farmer data.  “Do we have FOIA protection for our producers or are we going to see animal rights people come in here and capitalize on this particular disease?,” King said.

NPPC, along with the National Pork Board and the American Association of Swine Practitioners met with Vilsack prior to his speech, asking for commitments from the secretary on a list of priorities, including an “in-depth investigation” into how PEDv entered the United States; collaboration with the industry on research; coordination among USDA, FDA and the Department of Homeland Security and the pork industry to “enhance biosecurity of feed and feed ingredients;” providing funding for diagnostic testing and viral genetic sequencing, and providing funding to improve biosecurity for agriculture, including on farms, in packing and processing plants and at the border.

As to USDA’s spending, $3.9 million will go to vaccine research; $2.4 million will be part of a cooperative agreement with states to support management and control programs; $500,000 will go to herd vets to help develop and monitoring of herd management plans and sample collection; $11.1 million will go to a cost-share program for producers to help with biosecurity practices; $2.4 million will be spent on diagnostic testing, and $1.5 million will go to the National Animal Health Laboratory Network for genomic sequencing at newly positive herds.

Senate transportation spending bill rolls back HOS rule

An amendment to the Senate’s FY2015 transportation/housing spending bill proposes suspending for one year an hours-of-service rule requiring drivers to take 34 hours off between work weeks and include at least two nights as part of the “rest” period. The amendment was offered by Sen. Susan Collins (R-Maine) who said the current rule forces force night-time drivers to shift their schedule to daytime hours, putting more trucks on the road and increasing safety risks.

The Collins amendment would suspend the requirement for a year pending Department of Transportation study of the HOS rule’s impact. She said forcing night shift drivers to work daylight hours “throws your body clock off” and increases the likelihood of accidents.

Analysts say ag cooperatives and grain shippers will benefit from the suspension. These groups say the new HOS, which doesn’t affect farmers due to a renewed exemption, cuts into their efficiency and increases costs on ag products.  They say recent inefficiencies have been exacerbated by extremely tight rail capacity and “less than reliable” inland waterways systems.

Highway bill still waiting for trust fund fix

Legislation to enact a multi-year reauthorization of federal highway and commuter programs is looking less likely this summer as a forecast late-July bankruptcy of the federal Highway Trust Fund looms.  Insiders are now saying even with a funding “fix,” it’s likely the highway bill will get a one-year reauthorization given the complexity of the legislation and the few remaining congressional work days this year. The deadline for action is prior to Aug. 1, the date Congress recesses for five weeks.

Sen. Ron Wyden (D-Ore.), chair of the Senate Finance Committee, said he’s working with his committee to develop a plan by the end of this month to fund the HTF. He says he’s aiming at both a short-term cash deficit given contributions from the federal gasoline tax to the HTF have fallen off this year, as well as a long-term formula for funding federal highway infrastructure programs, along with rail and urban commuter spending obligations. He wants a bipartisan solution and told his committee members to come back next week with ideas on how to achieve a solution to the funding mess. 

If Wyden is successful, it will give the states confidence the federal government will not pull funding for projects currently underway. The Department of Transportation has already warned the states it may have to delay payments on cost-shared programs, including highway and bridge work, if the HTF balance falls too low. This would idle thousands of workers across the country, DOT said.

Over in the House, lawmakers surprised observers by suggesting the HTF could be funded through May 2015 by ending most Saturday mail deliveries. In a House leadership memo, the GOP sees $10.7 billion can be saved over 10 years by cutting most Saturday mail delivery. This amount, as well as a surplus in the Leaking Underground Storage Tank trust fund could be transferred to the HTF.

USDA announces continuous CRP sign-up with Extension

Today begins continuous sign-up for the Conservation Reserve Program. Farmers who have contracts that expire in September are also eligible for one-year extensions. Eligible land can be enrolled at any time with contracts of up to 10-15 years.

The U.S. Department of Agriculture also said a new provision of the Farm Bill allows farmers enrolled through general sign-up for more than five years to opt out of the program under certain conditions.

Secretary of Agriculture Tom Vilsack said retiring farmers enrolled in the CRP have the option – with up to two years of continued payments – to transfer part of their enrolled acres to beginning, disadvantaged or veteran producers through the Transition Incentives Program. Vilsack said this helps new farmers overcome the high cost of land, a primary barrier to entering the industry.

USDA gives first overview of corn crop

Just over 75 percent of the 2014 U.S. corn crop in 18 producing states is in good to excellent condition as of June 1, USDA reported last week in its first rating of crop conditions this year. Last year at this time, 63 percent of the crop was rated good or excellent. The U.S. Department of Agriculture said 80 percent of corn crop has emerged, compared with 71 percent last year at this time, and in line with the five-year average.  The report indicates 78 percent of the soybean crop in major producing states was in the ground by June 1, compared with 55 percent of the crop last year at this time. About 50 percent of the bean crop has emerged, ahead of last year’s 29 percent and the five-year average of 45 percent.