Legislative Outlook
9/8/2014
Steve Kopperud, government affairs consultant
Monday, September 8, 2014
by: Steve Kopperud, government affairs consultant

Section: Fall 2014




All that needs to be said about what Congress will achieve before the end of the 113th Congress is that its a mid-term election year. I could end this Journal piece now and save you a lot of reading time...


As this is written in mid-July, election pundits are confident the House will retain a republican majority, but Senate majority control is a tossup. With one-third of the Senate up for re-election—and more democrats than republicans defending seats—the GOP has a procedural advantage and needs six seats to take control. However, the time between now and the election is an eternity in the political world. 
 
If the Senate goes republican, then the achievements of the 113th Congress are tallied by what’s completed pre-election; there would be no advantage for the GOP to give outgoing Majority Leader Harry Reid (D-Nev.) any “legacy wins” during lame duck. However, if the democrats retain control of the Senate in November, then the lame duck session—likely to begin just after Thanksgiving and end just before Christmas—will be that time when much “sensitive” and must-pass unfinished business gets done whether the GOP likes it or not. 
 
The following is my prognosis for those issues on which the American Feed Industry Association is working hard on Capitol Hill, with an indication of whether we can expect resolution pre-election or during the lame duck session: 
 
FSMA: While both House and Senate committee-approved fiscal year 2015 ag/U.S. Food and Drug Administration spending bills contain report language chastising FDA for going too far, too fast in its Food Safety Modernization Act rule writing, basically instructing the agency to back up and start again, the odds of any major legislative action on FSMA beyond that during the remainder of Congress is slim and none. Behind the scenes, staff will tell you the three-year FSMA slog to enactment was too painful to reopen the law in an election year when any move to simplify or change requirements for feed or food would be attacked as jeopardizing food safety for people and animals. 
 
However, it’s expected between now and the November elections, bills and amendments to “fix” FSMA for one segment of regulated industry or another are expected. A lot depends on what the feed rule looks like when it’s republished in August. If FDA’s Center for Veterinary Medicine clarifies or revisits some parts of the rule along with adding the indicated new sections on suppliers, importers, etc., it may mitigate the perceived need for legislative action. However, with the overblown politics surrounding the fate of spent grains for feed from beer and liquor distillers—FDA said it will clarify these products are not exempt if a company sells them—and some food companies believing the co-products of food processing sold to the feed industry should be exempt from the feed rule, AFIA has adopted a “no exemption” policy and this has been communicated to Capitol Hill and other industries. 
 
Also adding fuel to the FSMA fire is the cost of proposed rulemaking. AFIA, the National Grain and Feed Association and the National Renderers Association met with the White House Office of Management and Budget in July, allowing AFIA to lay out a Virginia university’s independent economic analyses showing the rule will cost far more—with much less benefit—than FDA contends, and NGFA to share its own in-house economic study on the rule’s price tag, again dramatically illustrating FDA’s underestimation of the rule’s cost to industry. 
 
Outcome: There will be much noise and a lot of paper waving in Congress, but no substantive action will be taken for all of the political reasons obvious in the pre-election time frame. In lame duck, depending on how the appropriations process evolves (see below), Congress will send a strong message that FDA’s FSMA proposed rulemakings are a whole lot of steps way too far.
 
21st Century Cure: This issue is legacy legislation for House Energy and Commerce Committee Chair Fred Upton (R-Mich.). Under House rules, Upton must surrender the chair of his committee—which has jurisdiction over all things related to FDA, Health and Human Services, National Institutes of Health and federal science entities—at the end of the next two-year Congress beginning January 2015. Upton’s vision is to reverse what he sees is a history of federal regulation of science/research, either through bad legislation or mishandling by the administration, stifling U.S. innovation and forcing companies—and technologies—overseas where submissions, approvals and oversight are more technology friendly than in the U.S. This results in lost employment, tax income and U.S. reputation in the global marketplace. 
 
Through a series of hearings and roundtables, the committee has examined various existing and cutting edge technologies to discover U.S.-developed cures, treatments, devices, drugs and other breakthroughs in order to ensure the industries not only stay in the U.S., but flourish. 
 
AFIA has met with key committee staff to discuss how a push to modernize and streamline federal animal food regulation—from ingredient development through product manufacture—fit into the 21st Century Cure model. These discussions will continue with AFIA recommendations on how to modify FDA feed/pet food regulation. 
 
Outcome: Action thus far in 2014 is to set the stage for serious committee action in the 114th Congress beginning in January. AFIA will continue to work with staff and others to ensure if there’s an opportunity for modernizing FDA’s oversight of the feed industry the industry will capitalize on it. 
 
CFTC Reauthorization: Congress must reauthorize all authorities and programs for the Commodity Futures Trading Commission by the end of the year. In a rare show of legislative efficiency, the House passed its version; the Senate’s bill is a work in progress. The House passed the “Customer Protection and End-User Relief Act” in June. The bill is actually several individual pieces of legislation approved by the House Agriculture Committee during the past 18 months, many already passed by the House, but rolled into a single CFTC package for reauthorization purposes. Notably, the bill curtails some Dodd-Frank rulemakings, but includes end-user protections and cost-benefit analyses for new rules. 
 
Senate Agriculture Committee Chair Debbie Stabenow (D-Mich.) praised the House action because it provides greater end-user protections, but criticized the package because it stints on spending. She said there must be more money given to the CFTC because “21st century markets need a 21st century regulator.”  
 
The House’s Dodd-Frank action was taken because many of the rules are considered “unnecessary,” and end users, those who actually use the futures markets to hedge risk, are being buried under new rules with little new protection. The end-user protections reduce recordkeeping, and prevent the physical delivery of a commodity from being treated as a swap. End users are exempt from new margin or cash reserve requirements on derivatives trading. The bill blocks the CFTC’s actions on cross-border derivatives trading. Commodity trading firms must calculate and report customer account balances electronically to regulators on a set schedule. This will require firms, which become undercapitalized, to immediately notify regulators and impose strict new reporting and permission requirements before agents can move customer funds from one account to another. All rules developed by the CFTC would require cost-benefit analyses before being finalized. 
 
Outcome: The CFTC reauthorization package will be enacted by Congress before the election, with a reconciliation of the spending authorization in the House bill with what’s inevitably going to be a higher number in the Senate version. The key, however, is not what the authorizers want, but what the appropriators are willing to give the agency, leading critics of the process to comment the CFTC will remain underfunded. 
 
RFS: The federal Renewable Fuel Standard  is an invention of Congress included in 2007 alternative energy legislation under which the U.S. Environmental Protection Agency mandates annual levels of alternative fuels gasoline producers must mix as a means of cutting U.S. dependence on foreign oil. The underlying legislation not only gives EPA the authority to set these levels, but also mandates specific gallon amounts of each fuel type on a yearly basis. 
 
The RFS has been under attack for the last several years by industries—including the feed, livestock and food industries—which compete against ethanol producers for corn. These industries contend the RFS creates an arbitrary market for ethanol, and while several factors conspire to influence corn prices, the RFS is a key component in price spikes in recent years. AFIA believes the RFS should be rewritten to remove the arbitrary biofuel levels, which must be mixed with gasoline annually, but also must take into account existing and prospective corn stocks when setting the RFS for corn ethanol. 
 
Similar to the political assault on ethanol in the last Congress during which ethanol makers lost a federal tax credit as well as import protections, the livestock and petroleum industries are pushing for a repeal of the RFS. In House hearings last year, Rep. John Shimkus (R-Ill.), who has both farmers and ethanol makers in his district, tried to broker a good faith rewrite of the RFS, but to no avail. In the Senate, Sen. Dianne Feinstein (D-Calif.) is leading the charge against the RFS just as she did against the ethanol tax credit/import tariffs in the last Congress. 
 
Outcome: No legislative action is expected on the RFS either before the elections or during the lame duck session. Anxiously awaited is EPA’s final recommendation on the 2014-15 RFS for various biofuels, now expected in August, which when proposed in February cut the corn ethanol RFS to a level well below the legislative mandate. EPA’s lower RFS proposal was based on the so-called “blend wall,” the point at which gasoline makers must blend at levels higher than the legally allowed 10 percent per gallon of gasoline if they are to meet their total ethanol use obligation under the law. Most expect EPA to increase only marginally on total RFS requirements for biofuels based on current gasoline consumption data. Another major factor working against efforts to repeal the RFS is the prospective bumper corn crop, high corn stocks and lower export demand, which have conspired to bring corn prices down.  
 
Immigration reform: This is now a two-track issue. The first track is whether anything will be done in the House on comprehensive immigration reform. The second track involves how the emergency supplemental spending bill, requested by the White House to deal with the Texas border crisis, will look when Congress is done with it. 
 
House Speaker John Boehner (R-Ohio) moved in June to end speculation on if/when the House would act on immigration reform legislation this session when he said flatly there would be no votes before the election. Boehner has steadfastly refused to take up the bipartisan Senate comprehensive immigration bill, opting instead to move individual bills dealing with various components of reform. 
 
However, the Texas border crisis may force the House to at least to amend the William Wilberforce Trafficking Victims Protection Reauthorization Act of 2008, a law that includes specific protections for immigrant children, but which the White House says ties the president’s hands when it comes to deporting more than 60,000 minors who’ve entered Texas illegally. Sen. John McCain (R-Ariz.) and others are expected to propose amendments; the authors of the bill, particularly Sen. Dianne Feinstein (D-Calif.), said the law has sufficient flexibility to deal with the Texas crisis and more immigration judges are needed to sort out who goes and who stays. 
 
On a bicameral, bipartisan basis, supplemental spending to deal with the Texas situation is a philosophical given. However, the $3.7-billion package the president requested to deal with illegal immigrant children at the border will likely include fewer federal dollars and will be a more targeted piece of legislation, with increased spending for border security beyond the level the president requested. The big hurdle will be to overcome budget hawks who will likely insist other federal programs be cut to pay for the new immigration spending. 
 
Outcome: There will be no comprehensive immigration reform bill coming from Congress until the outcome of the November mid-term elections, which means the game likely starts again in January 2015, because it will be major issue in the 2016 presidential campaigns. There may be “tweaks” offered by the House on border security reform for lame duck action, but nothing approaching the comprehensive bill passed by the Senate last year. The supplemental appropriation bill will be approved, but at a level significantly less than $3.7 billion, with money directed at stronger border protections. 
 
FY2015 Appropriations: Battles between party leadership in the Senate on amendments—how many, which and by whom—scuttled an attempt by Sen. Barbara Mikulski (D-Md.) to move a “minibus” of three spending bills, including the ag/FDA package. There has been no progress to resolve the Senate amendment issue. In the House, the ag/FDA bill was bogged down in debate in early June over language allowing school districts who can show financial pain to opt out of a U.S. Department of Agriculture—mandated new school meal dietary standards, with school districts on one side and first lady Michelle Obama on the other. Another sticking point is the lack of any major funding increase for the CFTC. The House pulled its bill when Majority Leader Eric Cantor 
 
(R-Va.) lost his primary election and leadership “became distracted,” coincidentally; right about the time the White House declared it would veto the House bill. The lack of progress means Congress will likely move a continuing resolution through the end of 2014 to keep the government operating past the Oct. 1 beginning of its new fiscal year, punting final action until the lame duck session. 
 
Outcome:  Congress has three options when it comes to spending bills. First, it can enact 12 independent department spending bills, which it almost never does; second, it can bundle non-controversial spending bills into a series of packages or as one 12-bill “omnibus” and enact that; or third, it can surrender on new spending bills—as it does more often than not—and pass a long-term continuing resolution keeping the government running at FY2014 spending levels. It appears Congress is headed for option two; a 12-bill omnibus spending package, likely approved during the lame duck session. 
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