Farm bill tops list of big ag stories for 2014
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So 2014 is beginning the same way 2013 ended, with agriculture stakeholders waiting impatiently for lawmakers to approve a five-year farm bill. And while the farm community is focusing on passage and implementation of that legislation, there are lots of other big issues that will likely gain attention from farmers, agribusiness leaders and lawmakers. They include immigration reform, genetically modified food labeling, the Food Safety Modernization Act, an EPA proposal making clear which bodies of water fall under its jurisdiction, trade agreements and reauthorization of the water resources development act, among other issues.
Still, passage of farm policy has the top billing. A conference meeting to settle differences between the Senate and the House was originally expected to be held Thursday, but that timeline was based on lawmakers settling remaining contentious issues, like dairy stabilization provisions, payment limitations and “actively engaged” definitions. Plus, some additional scoring was needed to further refine potential costs. As a result, the conference meeting could be further delayed.
Whenever it happens, conferees are expected to face votes on a list of potential amendments, dealing with a wide range of issues. Some of these issues may be resolved prior to conference, but sources say the list currently includes votes on catfish inspection, the King amendment on interstate commerce, the Southerland amendment regarding a work requirement for SNAP benefits, Country-of-Origin labeling, GIPSA rulemaking, the inclusion of potatoes in the Women's Infants and Children's program, the Sound Science Act, and language exempting new pesticide application permits for applications near waterways.
Senate Majority Leader Harry Reid, D-Nev., said he expects the farm bill to be completed by the end of the month. However, a protracted battle over an extension of unemployment insurance benefits could chew up much of the month's legislative calendar.
Still, Senate President Pro Tempore Patrick Leahy, D-Vt., said yesterday there are “glimmers of hope” that Congress could finally complete the farm bill.
“It has now been more than 460 days since the last farm bill expired, well over a year ago,” Leahy said. “Since then, American farmers, though, have to farm every single day. They can't wait. They have had to make long-term planting decisions.” Leahy noted that more than 20 programs dealing with organic certification, beginning farmers, livestock disaster assistance, renewable energy, and rural small businesses “have all been stranded without funding.”
Stakeholders are watching quite closely. Randy Russell, of the Russell Group and a former deputy assistant secretary of agriculture, said the question is whether conferees will need a public meeting. “We should know in the next 24 hours,” Russell said yesterday. “The big issues are pretty much resolved.”
Dale Moore, executive director of public policy at the American Farm Bureau Federation, said he has been encouraged by the lack of details coming out of conferees. “The fact that we're not hearing a lot, and we're picking up little rumors … that tells me the principals are making progress.”
Complicating farm bill passage is that lawmakers will be tight on time this month as a Jan. 15 deadline to complete an omnibus appropriations package looms and Congress is scheduled to recess from Jan. 20-24. The possible appropriations package, which would include funding for the USDA, reportedly would allocate about $1 trillion in fiscal 2014 for federal departments - a slight increase from fiscal 2013. In addition, a long fight is expected over an extension of unemployment insurance benefits, which the Senate passed on Tuesday.
Technically, USDA will have to start implementing permanent law if there is no new farm bill or another extension. But that's a path no one seemingly wants to pursue, if at all possible.
Here is a summary of some of the other top agricultural stories of the year ahead:
Immigration reform may heat up
Immigration reform continues to flicker now and then on Capitol Hill and in the White House, but farm groups are hoping it catches fire in 2014. Right now, the onus on the legislative effort resides in the House, where leadership has been tight-lipped about its plans. The Senate has already approved a comprehensive reform bill (S. 744) that could lead to lawful permanent resident status for farm workers who successfully jump through several bureaucratic hoops. The House could take up legislation (H.R. 1773) that would replace the existing H-2A agricultural visa program with a new H-2C program - minus a path to legal status. Some 500,000 farm workers would remain in the states for up to 18 months, as opposed to the current 12 months. House Judiciary Committee Chairman Bob Goodlatte, R-Va., authored the bill. Dale Moore, executive director of public policy at the American Farm Bureau Federation, said he expects some action from the House before the Memorial Day recess. “Leadership wants to know Goodlatte has the truck ready to move,” Moore said. Several groups, such as the National Council of Farmers Cooperatives and the United Farm Workers, will be watching this closely.
The push for GMO labeling
Thus far, the fight for labeling of genetically modified, or GMO, food has been primarily local and regional. California's Proposition 37, which would have required the labeling of most genetically engineered food, was defeated in 2012 after some hefty spending by both opponents and proponents; Washington's Initiative 522 went down in similar fashion last November; Connecticut passed a provisional law that would only take effect under certain circumstances; Maine has followed suit. But if the ag and food industry has its way, 2014 will see a new initiative: a national one. “A 50 state patchwork of labeling laws is not in the best interests of consumers,” the Grocery Manufacturers Association's Louis Finkel told Agri-Pulse. In April, Sen. Barbara Boxer, D-Calif., and Rep. Peter DeFazio, D-Ore., introduced legislation to require the nationwide labeling of genetically engineered (GE) foods, but that bill went nowhere. But an industry-backed voluntary labeling bill, which could be introduced within weeks, will be the next attempt to avoid a state-by-state patchwork of regulations. Draft legislation, spearheaded by the Grocery Manufacturers, has been circulating, and would preclude all state labeling laws while allowing industry the option of quelling consumer fears by adding a “GE” label. Such an action would fall under the oversight of FDA, which has had a voluntary labeling guideline on hold since the beginning of this millennium. But sponsors for such a bill have yet to step forward and it's unlikely whether such a bill would garner enough votes in the Senate, whose members may be loath to step into such a messy regulatory and emotional battle.
GE opponents, meanwhile, say a voluntary national standard does not satisfy a consumer's “right to know” what's in his or her food - even though they could look no further than food labeled “organic” which is already GMO free. And their activities will continue on a state level in 2014 - Arizona, New Hampshire, New York, Vermont and Ohio could see action in their state legislatures this year.
While some food companies, like General Mills, saw the need to respond to activists' complaints and are now touting one brand of Cheerios that will be GMO free, there are other signs that the ag industry's effort to be more transparent about the benefits of biotechnology are also gaining some traction. Last year, the industry made a foray into shaping consumer consciousness with GMOAnswers.com, which lets Internet users ask scientists and other experts about their food concerns. And the work of mainstream journalists like Amy Harmon of the New York Times and Nathanael Johnson of Grist increasingly defending the science behind GMOs could eventually mean a sea change in the court of public opinion.
FDA faces busy year on food safety
The FDA will have yet another busy year, as the June 2015 deadline for implementation of the Food Safety Modernization Act (FSMA) draws ever nearer. Just one of the seven congressionally mandated rules - this one regulating the transportation of food - has yet to be proposed, and it will arrive by next month. That means 2014 will be a year of quiet, mostly behind-the-scenes hustle at the agency, as it struggles to collect public comment, satisfy industry and consumer groups and placate budget hawks in Congress, who worry that new regulations will balloon FDA expenditures - not to mention the billions of dollars that farmers and the food industry will need to spend on compliance. Last month, FDA announced it would release another round of produce safety rules in early summer 2014 in response to industry complaints about proposed regulations including those governing water quality on farms and manure use. That FDA is taking a step back is an indication of just how heated these regulatory battles could get. Another complication: a House farm bill provision could amend FSMA to require the Health and Human Services secretary to conduct another scientific and economic analysis - pushing back the timeline for the new food safety system's implementation. “For the most part, it's all pretty messy,” says Bruce Silverglade, a principal at OFW Law who works closely with FDA.
Other matters to keep your eye on: FDA has named “broad, gradual reductions” in trans fat, sodium and caffeine in the food supply among its 2014 priorities. On sodium, there is a possibility that the agency proposes new limits by food category, creating a regulatory nightmare for food companies. The agency's trans fat effort, introduced late last year, met little public resistance from the food industry, but sources say it's a sleeper issue that will also add tremendous cost to food products.
Regulatory control of U.S. waters
Just what are the “waters of the U.S.” and which ones require protection under the Clean Water Act? That's what the EPA is trying to more clearly define in a proposal that's been sent to the Office of Management and Budget and which may be opened for public comment this year. The draft rule is based on an EPA report, “Connectivity of Streams and Wetlands to Downstream Waters.” Regulatory and legal confusion surrounding that term prompted the agency to try to define it through rulemaking. The EPA's efforts have been criticized by some in the agriculture community as overly broad and far-reaching. Don Parrish, senior director of regulatory affairs with the American Farm Bureau Federation, said it looks like the agency is trying to maintain unprecedented regulatory control over U.S. waters. The proposal would affect agriculture and private landowners in two ways. “First, it will shift control of land from private landowners and states to EPA,” Parrish said. “And secondly, it will significantly increase the activities EPA can and will regulate in and around these newly defined ‘waters' - ultimately limiting land use.”
Mississippi River Basin Battle
The legal battles over EPA action - or nonaction -- on nutrient limits for the Mississippi River Basin may heat up in 2014. Environmental groups led by the Natural Resources Defense Council have petitioned EPA to develop numeric limits for nitrogen and phosphorus, often carried in farm runoff, for the 2,530 mile long river and its tributaries. The requested standards are similar to those enforced in the Chesapeake Bay watershed. Although EPA initially denied the petition, a federal court held that the agency has to respond and determine whether numeric limitations on the pollutants are appropriate for the Mississippi's basin. EPA appealed this ruling and a decision on the case is expected this year. Under the Clean Water Act, states are responsible for adopting their own water quality standards, and EPA is supposed to step in only when states demonstrate they cannot or will not comply. Environmental groups assert that most states have done little to meaningfully control the levels of nitrogen and phosphorous, which have been blamed for algae blooms in the Gulf of Mexico. The difficulty of the task requested by the environmental groups is underscored by the sheer size of the Mississippi's basin, which collects water from 31 states. EPA said one in legal brief that efforts to set federal numeric nutrient criteria for even 10 states at one time would involve “sizable regulatory and oversight burdens.”
In states like Iowa, meanwhile, the Iowa Soybean Association, the Iowa Corn Growers, and the Iowa Pork Producers are funding a study by two former chiefs of the USDA Natural Resources Conservation Services (NRCS), Dave White and Bruce Knight, (dubbed White Knight) that is exploring voluntary methods of addressing water quality concerns. “We must demonstrate that agriculture is serious about these issues and that our commitment to improving environmental performance is real,” says ISA's CEO Kirk Leeds.
Water resources and infrastructure
Depleting water resources may be the most significant challenge global agriculture will face in the next decades. And in 2014, U.S. resource and infrastructure problems will likely receive lots of attention from lawmakers in Washington. Problematic areas include the federal reservoirs in the Apalachicola-Chattahoochee-Flint river basin, the Sacramento and San Joaquin river basin, and the Missouri River basin. In the coming weeks, the 113th Congress is also expected to pass the Water Resources Development Act (WRDA), which would re-authorize the U.S. Army Corps of Engineers' support of the nation's port and waterways infrastructure needs, as well as flood protection and environmental restoration. In addition to maintaining and improving the lock and dam infrastructure that affects transport down the Mississippi River, the legislation may support deepening U.S. ports -- necessary after the Panama Canal expansion allowing for wider and bigger ships with larger capacities is completed, possibly next year. “Without reliable, dependable waterways, at which this bill is aimed in large part, there is simply no way to compete in the world market at the lowest price,” said Debra Colbert, senior vice president at Waterways Council Inc. She said the council is optimistic WRDA will be considered early in the congressional year.
Fast-track needed to advance new trade agreements
With several new trade deals, including the Trans-Pacific Partnership, in the works, key lawmakers are pushing to give the White House new fast-track authority with would allow trade agreements to receive an up-or-down vote and move in an expedited fashion. TPA was last granted to President George W. Bush in 2002 and the current authority expired in 2007. Senate Finance Committee Chairman Max Baucus, D-Mont., and House Ways and Means Committee Chairman Dave Camp, R-Mich., have been working on a deal that could be released as early as this week. Baucus - who has been nominated by President Obama to be ambassador to China - seems eager to advance Trade Promotion Authority (TPA) early this year, but Sen. Ron Wyden, D-Ore., who is next in line to chair the powerful Finance Committee, voted against efforts to renew the 2002 version of TPA and has called for more transparency in these types of agreements. In addition to TPA, the White House will be pushing for renewal of Trade Adjustment Assistance (TAA) which expires at the end of 2014. That program, which pays for job training and extended unemployment benefits, has historically moved alongside TPA in an effort to make trade expansion more palatable to American workers whose jobs might be impacted by increased imports. But critics, such as Sen. Orrin Hatch, R-Utah, argue that TAA should no longer be linked to fast-track authority.
The war over the RFS
Renewable energy issues - including probable changes to the federal Renewable Fuel Standard (RFS) - will have significant impact on farmers and rural landowners in 2014. The yearlong battle between biofuel interests and the oil industry over the RFS surged in November with EPA's release of biofuel blending requirements for 2014 that would fall far below the levels authorized when the standard was updated by the Energy Independence and Security Act (EISA) of 2007.The agency is taking public comment on the plan until Jan. 28 and has said it will release a final rule in February.
The proposal would require refiners to blend 15.21 billion gallons of renewable fuels into petroleum-based gasoline and diesel this year, a reduction of 2.94 billion gallons from the target set by EISA and less than the total required in 2013. A lion's share of the proposed reduction would come from the corn ethanol requirement, which would drop from 14.4 billion gallons to a little more than 13 billion gallons, an amount even less than the 13.8 billion gallons required last year. And it would keep this year's biodiesel requirement at about the same 1.28 billion gallons called for last year, despite the fact that U.S. producers were on track to generate 1.7 billion gallons by the end of 2013.
The oil industry contends that U.S. demand for gasoline has dropped to the point that there is insufficient supply to meet the mandatory ethanol blending requirement, creating a “blend wall” that will force prices higher.
The biofuels industry dismisses the “blend wall” argument, saying the oil industry failed to meet its responsibility to install more pumps and infrastructure to handle increased ethanol blends like E15 and E85. And advanced biofuel interests say a cut in the RFS 2014 will chill billions of dollars in investments made in next-generation biofuels. The biodiesel industry says stalling biodiesel blending requirements at 2013 levels would jeopardize 8,000 jobs.
A sharp rise earlier this year in the price of Renewable Identification Numbers (RINs), credits traded among oil companies to certify compliance with the RFS, sparked a major congressional hearing and charges from the oil industry that the RFS was responsible for the price hikes. While congressional leaders rejected oil industry calls that the RFS be repealed, an ad hoc panel of House Energy Committee members was launched to explore modifications to the standard.
Reports out of Washington based on the review of documents related to EPA's RFS proposal and released this week show that White House officials urged EPA last summer to reduce the blending requirements over fears that higher biofuel production would have economic repercussions.
“If volumes are too low, no harm, no foul,” the White House Office of Management and Budget said in an analysis done in August. “If volumes are too high, then the prices of RINs will be high and we will face a real problem.”
Despite the dismissal of the “blend wall” by the biofuels industry, the government documents demonstrate the Obama administration's recognition of the blend wall as a factor the White House says must be dealt with in determining 2014 blending requirements.
However, late last week, the Renewable Fuels Association touted a 16-page report from Iowa State University's Center for Agricultural and Rural Development (CARD) asserting that EPA's proposal to slash 2014 blending requirements is unwarranted and economically irrational.
CARD economists Bruce Babcock and Sebastien Pouliot say that meeting the statutory mandate “is feasible in 2014 with no new stations, modestly lower E85 prices and judicious use of available carryover RINs.”
Meanwhile, the House Energy Committee ad hoc panel charged with looking into possible legislative changes to RFS suspended its work pending the outcome of EPA's RFS proposal, according to a spokesman for Rep. John Shimkus, R-Ill., a member of the panel. The panel “will continue to monitor the situation, but legislation is not imminent,” the spokesman said.
Tax reform waits in the wings
With Sen. Max Baucus is expected to be named the next Ambassador to China, the prospects for comprehensive tax reform seem illusive. However, renewable energy interests are taking a “wait-and-see” approach to the future of the production tax credits (PTC) that expired Dec. 31. Wind, solar and biomass groups have been a little less overt in their calls for extending the tax credits when compared to the numerous times over the past decade when the credits expired.
The more subdued approach is due, in part, to a request from congressional leaders who have asked industry groups to stand down while lawmakers explore tax reform. But industry sources also note that a change in the law made when the credits were revived and extended last year eased the pressure a bit. The law used to require that wind, solar and biomass projects be completed before the credit expired. However, the 2013 change made projects eligible only if construction on them had begun prior to the end of the year.
Still, the uncertainty over the fate of PTCs going forward (and Investment Tax Credits, which are cash payments made in lieu of credits for those projects having difficulty gaining access to limited capital markets), is causing concern for manufacturers of wind turbines, solar panels and other renewable energy components who are seeing orders diminish with a lack of new projects on the horizon.
Rob Gramlich, senior vice president of public policy for the American Wind Energy Association, says that while his industry recovered from a six-month slump following the previous Dec. 31, 2012, expiration of the PTC - “evidence that the tax credit is an effective tool that is working” - the sector “still faces uncertainty in the medium and long term and needs Congress to address that.”
Senate Finance Committee Chairman Max Baucus last month released “discussion drafts” of tax reform legislation that would combine energy tax credits into two categories, those for sources of power and those for transportation fuels. His plan would also extend the credits, including the renewable energy credits, for at least five years, taking the credits off of the policy roller coaster they've been riding for the past decade.
However, there's little to indicate that tax reform will actually take place in this Congress and as the weeks and month may pass with no movement on extending the tax credits, the renewable energy industry may have to renew its campaigns for PTC extension.
“The legislative vehicle could be tax reform, an extenders package, or something else, but ultimately our industry will begin to feel the impacts of uncertainty in 2014,” Gramlich said.