House Spending Action on RFS Expected, Kasich Says Make Ethanol Supports Go Away

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1 State Association Weekly Washington Report Congress Approves TPA, TAA; Obama to Sign In what observers call an unusual demonstration of trust among pro-trade congressional Republicans, Democrats and the White House, Congress this week approved both trade promotion authority (TPA) and reauthorization of the Trade Adjustment Act (TAA), sending both bills to the President s desk. President Obama says he ll sign both as pillars of his trade agenda. The American Feed Industry Assn. (AFIA) thanked the Senate for moving quickly on TPA a major association policy priority and praised the bipartisan actions. AFIA said TPA gives U.S. trade negotiators authority and credibility with trade partners, leading to treaties that will help the animal feed industry grow globally through direct exports and increased U.S. livestock and poultry product sales. AFIA was joined by the American Farm Bureau Federation (AFBF), National Association of Corn Growers (NCGA), the American Soybean Assn. (ASA), the National Cattlemen s Beef Assn. (NCBA), the National Chicken Council (NCC), the National Pork Producers Council (NPPC) and the National Milk Producers Federation (NMPF) in applauding the action. TPA was approved June 24 by the Senate on a vote, with the chamber moving to approve TAA separately on a voice vote. The House approved TAA, on June 25, clearing both bills for the White House in advance of the July 4 recess beginning next week. A month ago, the Senate plan was to merge the two bills into one, and follow approval of that single bill with approval of a bill reauthorizing African trade preferences and another reauthorizing U.S. Customs enforcement. This quartet of trade actions was the key compromise necessary to getting TPA through the Senate. However, the package broke down in the House, and that chamber passed only TPA after rejecting TAA in a political revolt by Democrats led by House Minority Leader Nancy Pelosi (D, CA). Sen. Ted Cruz (R, TX) tried to hold the TPA bill hostage this go around, saying he d vote against it if the Senate did not vote to kill the Export-Import Bank. Cruz s maneuver failed; Pelosi voted for both bills on second swing through the House. In order to get the Senate to act, House GOP leadership pledged that if the Senate would take up TPA and TAA as stand-alone bills, the House would vote on TAA immediately after its approval of TPA and send both bills to Obama. The White House complicated the scenario, wading in at the 11th hour saying the President would only sign the much-desired TPA bill if it was accompanied by TAA. TPA sets priorities and parameters for U.S. negotiators trying to hammer out trade deals. Congress sets those standards in exchange for giving up its ability to amend the treaty when it comes to it for review and approval. TAA is a series of federal programs designed to provide worker assistance and retraining if U.S. companies are negatively impacted by trade agreements. House Spending Action on RFS Expected, Kasich Says Make Ethanol Supports Go Away Action to repeal or significantly change the Renewable Fuels Standard (RFS), particularly for corn ethanol, ramped up this week as a House EPA spending bill amendment to withhold spending during 2016 is expected, and a state governor with White House aspirations attacked the ethanol RFS during a visit to Iowa.

2 As reported last week, Sen. Bill Cassidy (R, LA) introduced legislation to kill the federal requirement that ethanol be blended with gasoline. Cassidy s bill joins efforts by Sen. Dianne Feinstein (D, CA) and Sen. Pat Toomey (R, PA) to end the ethanol RFS. Reports surfaced this week that Rep. Barry Louderman (R, GA) is expected to offer a floor amendment to the Interior-EPA FY2016 spending bill that would defund EPA implementation of the RFS during all of FY2016. House leadership began debate on the spending package this week, but does not plan amendment votes or a final vote until after the July 4 recess. Meanwhile, Ohio Gov. John Kasich (R) was in Des Moines this week testing his GOP presidential chances, and responding to a reporter s question said he opposes any kind of federal subsidy, particularly subsidies for ethanol. I don t know much about the RFS and what all that means, but we have it in Ohio and I ve never supported that subsidy (for ethanol). I have people working (in the industry) so let s try to work it out. I don t think it s appropriate to continue it in the long term, but you have to have a reasonable solution. One More Time Senate Introduces Bill to Undo Duplicative EPA Permit Process Legislation that would remove duplicative EPA permitting requirements for pesticides used on or near water has once again been introduced in the Senate. The bill would not require new National Pollution Discharge Permits (NPDES) if a pesticide is already regulated under the Federal Insecticide, Fungicide & Rodenticide Act (FIFRA). Supporters of the bill say it was never Congress intent to burden farmers and ranchers with a dual permitting system, particularly since a NPDES permit on top of a FIFRA permit provides no environmental benefit. The bill, introduced by Sens. Mike Crapo (R, ID) and Claire McCaskill (D, MO), is now before the Senate Agriculture Committee. In March, the House Agriculture Committee approved similar legislation. The House approved similar legislation in the last Congress, but the Senate failed to act. WHO Continues Chemical Reviews, says 2,4-D Possible Carcinogen As expected, the International Agency for Research on Cancer (IARC), a unit of the World Health Organization (WHO), said this week the herbicide 2,4-D possibly causes cancer in humans, bringing the chemical in line with a similar IARC determination for glyphosate. The herbicide has been used since 1945 to control weeds in agriculture, cities and residential areas. The group said in a press release: There is strong evidence that 2,4-D induces oxidative stress and moderate evidence that 2,4-D causes immunosuppression. However, epidemiological studies did not find a strong or consistent increase in non-hodgkin lymphoma or other cancers in relation to 2,4-D. One IARC official said the primary studies reviewed reported mixed results. IARC classifications have no regulatory impact on the use of chemicals reviewed, but the imprimatur of WHO can influence regulators and the public. One report indicated that after IARC called glyphosate a possible carcinogen several regulators and politicians called for limits on its use. Dow AgroSciences, which uses 2,4-D and glyphosate in a new herbicide, said the IARC classification is flawed and inconsistent with government findings in nearly 100 countries that have found 2,4-D to be

3 safe when used as labeled. The Environmental Working Group (EWG) said the IARC action underscore the risk of 2,4-D, recently approved for use in genetically engineered crops. Tax Writers Struggle with Highway Funding; Hatch, Ryan Still Far Apart While both House and Senate tax writing committees continue to struggle with how to fund a long-term reauthorization of federal highway programs, they agreed that an increase in the federal gasoline tax is likely not an option going into the 2016 elections. The chairs of those tax panels and charged with finding a way to fund a $92-billion shortfall in federal revenue while trying to bail out the bankrupt federal Highway Trust Fund (HTF), don t see eye to eye on where to get the money. Congress is faced with at least a short-term extension of the programs and will likely need budget gimmickry to pay for it as the current short-term extension of highway programs expires at the end of July, and the HTF is expected to be bankrupt by the end of August. Sen. Orrin Hatch (R, UT), chair of the Senate Finance Committees, says he ll find the pay-fors and give them to Senate leadership to mull over. Rep. Paul Ryan (R, WI), chair of the House Ways & Means Committee, continues to push for an $11-billion extension of programs through the end of the year, but even that price tag may prove to be too high. While many, particularly Republicans in the House, are saying they ll only vote for a six-year reauthorization, and the Senate Environment & Public Works Committee this week approved a six-year bill, Hatch called that committee action pie in the sky because the committee has no idea how the government will pay for the long-term reauthorization. The only way you could possible reach those kinds of monies (to pay for a six-year bill) would be with further tax increases, and I don t think we re going to be able to do that under current monetary and economic systems we have today, said Hatch on the Senate floor this week, referring to the Republicans aversion to any kind of tax increases. Both Hatch and Ryan oppose raising the federal gasoline tax, and Hatch has rejected a proposal by some Democrats to fund the highway bill by allowing a one-time repatriation of U.S.-based multinational company tax deferred foreign profits. Sen. John Cornyn (R, TX) said GOP leaders are still looking at funding options. It s a question of what we can pay for. We ve got a $90-billion hole and we need to get more than just the Finance Committee involved. There s ongoing discussion, but no conclusion yet. House and Senate Democrat leadership say they want a multi-year extension of federal highway programs, but are willing to negotiate on a shorter than six-year bill if it helps Hatch find the offsets necessary to pay for the measure. The HTF gets $37-38 billion a year from gasoline taxes, a level that s been dropping because of more fuel efficient cars and less driving. However, the Department of Transportation is facing $75 billion in obligations to the states for highway construction and repair, as well as for maintenance of urban commuter systems. Senate Holds Repeal Hearing, Stabenow Tries for Voluntary COOL Senate Agriculture Committee Chair Pat Roberts (R, KS) held a hearing this week on the possibility of repealing federal country-of-origin labeling (COOL) requirements for fresh meats, and warned

4 committee members, Whether you support COOL or oppose COOL, the fact is retaliation is coming, and this committee has to fix it. The House repealed the fresh meat sections of the COOL law two weeks ago. Roberts referred to nearly $3.2 million in retaliatory tariffs the governments of Mexico and Canada pledge to bring against imports if the U.S. government doesn t repeal the COOL law. The World Trade Organization (WTO) has ruled four times in favor of Canadian and Mexican complaints the U.S. law discriminates against their meat exports. Meanwhile, both Canadian and Mexican governments, responding to a bill introduced this week by Sen. Debbie Stabenow (D, MI), ranking member of the Agriculture Committee, to allow U.S. companies to voluntarily label their products, sent letters to Roberts rejecting the legislation and saying full repeal of the U.S. COOL law is the only acceptable remedy. House Agriculture Committee Chair Mike Conaway (R, TX) called the Stabenow bill inadequate to forestall retaliatory tariffs, and said it contradicts the House-passed bill to repeal the fresh meat sections of the law. Any conversation about a voluntary program must be preceded by a full repeal of COOL, as we have an obligation to our trading partners to come into compliance with WTO rules. Most of the tariffs contemplated by the two countries focus on meat and consumer goods. No feed products are included in the Canadian list, but Mexico includes pet foods on its list. Senate Approves STB Reauthorization The full Senate this week approved the Surface Transportation Board (STB) Reauthorization Act, legislation allowing the STB to continue operating through FY2019. The House has not taken up the measure. The National Industrial Transportation League (NITLeague) reports the Senate-approved bill is a significant positive development in efforts to improve the operation of the STB. The bill expands voluntary arbitration processes in order to shorten and make less costly rate disputes; provides the STB with authority to begin investigations in some areas on its own initiative; sets rate review timelines, and requires the board to create a database of complaints and prepare quarterly reports on such cases. Further, membership would be increased from three to five and allow board members to discuss action without prior hearing notices; require the STB to study more efficient and simple rate review methods, and require the Government Accountability Office (GAO) to report on the effects of bundled contracts with multiple origin-to-destination pairs. Groups Want Tighter GM Crop Regulation Calling the current federal system of genetically modified (GM) crop regulation a failure, consumer, food and related business groups this week called on USDA to implement stronger regulation of GM crops. In comments filed on a USDA rulemaking in which the department said it s looking at ways to improve the current GM plant regulation process, the groups comments were part of an estimated 74,000 received. The rulemaking is a follow up to a 2008 proposed rule that came after USDA s oversight was

5 criticized for being lax, court rulings went against the department, and several highly publicized contamination issues led to recalls and trade problems. While currently, the primary criterion for deregulation of a GM plant variety is whether or not the new plant poses a risk to plant health, the 37 groups and companies led by the National Family Farm Coalition and the Organic Consumers Assn. (OCA) said they want to see assessments of safety when it comes to human and animal consumption, harm to ecosystems and the close monitoring of production systems for weed resistance. They also want to see stronger efforts by USDA to prevent contamination of convention crop production by GM crops. House Approves State Opt-Out on EPA Power Plant GHG Rules The House this week approved a bill to allow states to opt out of compliance with an EPA proposed rule designed to recapture carbon and cut greenhouse gas (GHG) emissions while court challenges to the rulemaking are unresolved. The rule in question would impose new GHG/carbon recapture requirements on existing power plants, actions EPA says will cut carbon pollution by 30% below 2005 levels by Each state would be assigned an emission reduction target, and would have to submit plans to reach those targets by June, 2016, with the possibility of an extension to 2017 or Oklahoma and Indiana have informed President Obama they either refuse to submit a compliance plan or are prohibited by new state laws from submitting a plan, with Indiana Gov. Mike Pence (R) telling Obama he won t act until EPA takes action on concerns raised by the states over costs and reliability. Under the bill passed this week, states could opt out of the rule s requirements if a governor determined compliance would cause major adverse effects on electricity rates and reliability. President Obama says he ll veto the bill if it reaches his desk. Bonus Depreciation Bill Introduced by Roberts Legislation to make permanent a federal 50% depreciation bonus on the purchase of new equipment and property much-used by farmers, ranchers and rural businesses was introduced this week by Sen. Pat Roberts (R, KS), chair of the Senate Agriculture Committee. Roberts said his bill is designed to provide greater certainty in the tax code so rural businesses can do a better job of planning investments. The depreciation tax break is one of the several tax extenders that have expired and extended several times, and Roberts wants to give producers and rural businesses predictability over the federal tax code. He s joined on the bill by Sens. Johnny Isakson (R, GA), Roy Blunt (R, MO) and Pat Toomey (R, PA). Drought-Relief Bill Introduced by House GOP The Western Water & American Food Security Act was introduced this week by a group of Republican House members, legislation designed to rebalance water needs between endangered fish species and farm communities in drought-stricken California. The bill, on which Sen. Dianne Feinstein (D, CA) was consulted during months of collaboration, was called an important step to helping restore the water our communities desperately need by more fully utilizing the most sophisticated water in the world, according to House Majority Leader Kevin McCarthy

6 (R, CA), one of the authors of the measure. The bill was introduced by Rep. David Valadao (R, CA) and is supported by the entire GOP California delegation. Sen. Barbara Boxer (D, CA), who retires at the end of her current term, slammed the bill as a same old, same old solution, and said the measure would reignite water wars. She said the GOP House members should support a bill she introduced that promotes recycling, conservation, desalination and improved water storage and management. The bill seeks to increase the amount of water being pumped south from the delta of the Sacramento and San Joaquin Rivers into the Central Valley of California, while allowing more of the water from storms to be captured in reservoirs. Right now, much of that water is dedicated to retaining habitats for protected species, including the Delta smelt and Chinook salmon, and eventually runs into the Pacific Ocean, authors said. The bill would also require state water regulators to use new science on the status of the fish, protected since 2008, since there are likely more fish than previously counted. The bill also preserves existing water right. Feinstein, who has fought water actions that undermine the Endangered Species Act (ESA) that she contends only benefit big agribusiness in the state, said, I continue to believe we need a comprehensive approach with both short and long-term solutions to include increased flexibility as well as desalination, water storage and water recycling. This is an incredibly complex issue, and I will continue to work with both sides to come up with a workable solution. New Republican Rep. Tent Kelly Joins House Ag Committee House Agriculture Committee Chair Mike Conaway (R, TX) this week announced Rep. Trent Kelly (R, MS) has joined the committee, and will serve on the Livestock & Foreign Agriculture Subcommittee, as well as the Commodity Exchanges, Energy & Credit Subcommittee. Kelly was elected to the House in a May special election held after the death of Rep. Alan Nunnelee (R, MS).