GOVERNMENT AFFAIRS – UPDATE OCTOBER 20, 2017

Dawn Caldwell
Head of Government Affairs at Aurora Cooperative
Government Affairs Update October 20, 2017

Two topics have been at the forefront the past several weeks – Renewable fuels and Section 199 within our current tax code.

RENEWABLE FUELS
Chris Vincent, penned an excellent op-ed supporting bio-fuels. If you haven’t seen that, you can read it here. As of this morning, we have confirmation that EPA Secretary Pruitt has committed to upholding the RFS, as well as directing EPA staff to “actively explore” whether the agency has legal authority to grant a waiver allowing year-round sales of E15 gasoline. The following article from Agri-Pulse details the impact of not only the comments submitted, but also the strong influence of our Senators.

Pruitt offers assurances on RFS
10/20/17 10:12 AM By Spencer Chase

PruittWASHINGTON, Oct. 20, 2017 – As a comment period for a controversial renewable fuels proposal came to a close, EPA Administrator Scott Pruitt sent a letter to Capitol Hill seeking to calm the nerves of frustrated lawmakers.

The letter, addressed to seven farm state Senate Republicans, contains pledges to implement the Renewable Fuel Standard according to the language passed by Congress. The assurance being provided in black and white follows numerous conversations between the Trump administration and concerned lawmakers who thought Pruitt was going back on his word.

“The question might be ‘well, how do you know that any assurances you get now will come to fruition?’ We’ve asked for them in writing so that we have those copies of what we’re negotiating,” Iowa Republican Joni Ernst told Agri-Pulse. “We’ll continually remind them: This is what you have stated in private and in public and we expect that you will uphold not just the letter of the law but the spirit of the law.”

Ernst’s efforts came to light after she held up approval of EPA nominees who were scheduled to be cleared out of the Senate Environment and Public Works Committee. In particular, Ernst took issue with what she described as “evasive, squishy answers regarding the RFS” from Bill Wehrum, nominated to be EPA’s Assistant Administrator for the Office of Air and Radiation, which has governance over the RFS.

Pruitt makes several specific assurances in the letter. First, he says he has directed his staff to reject a petition seeking to change the point of obligation under the RFS from refiners and importers to blenders. Biofuels backers were concerned such a change would have cut the legs out from under the program, essentially forcing fuel refiners to no longer have to worry about RFS compliance.

Second, Pruitt addressed the Notice of Data Availability issue surrounding biodiesel blending levels without specifically mentioning it. In September, the EPA announced that it would seek input on “potential reductions” in RFS blending levels based on new data. That comment period officially began in October and came to a conclusion on Thursday.

Pro-RFS lawmakers and organizations were furious, expressing concern that the administration was going back on RFS support pledges made by President Donald Trump during his campaign for the presidency. In comments on the NODA, the National Biodiesel Board said the proposal would “devastate the industry – costing thousands of jobs in rural areas and severely harming America’s farmers.” Growth Energy CEO Emily Skor said the potential reductions “would pave a path that would reverse the progress of the Renewable Fuel Standard and undercut the benefits our nation is currently gaining from the RFS.”

In the letter, Pruitt says the EPA will finalize the upcoming Renewable Volume Obligations by the end of November – the statutory timeline called for by Congress – and noted that “preliminary analysis suggests that all of the final RVOs should be set at amounts that are equal to or greater than the proposed amounts,” including the biodiesel volumes the EPA was considering lowering through the NODA.

Pruitt also said he would welcome the opportunity to sell gasoline blended with 15 percent ethanol year round – something that is currently blocked due to interpretation of the Clean Air Act. The Administrator closed off his promises by saying the EPA would not pursue regulations that would allow exported ethanol to count toward a refiner’s RFS compliance.

In a statement, Renewable Fuels Association President and CEO Bob Dinneen said the industry was “grateful for Administrator Pruitt’s epiphany on the road to the RFS.”

“As for the members of Congress, governors, and others who advocated so strongly for farmers and consumers,” Dinneen added, “we thank you profusely.”

The letter and the corresponding assurances follow a meeting between Pruitt and Sens. Chuck Grassley, RIowa, Pat Roberts, R-Kan., John Thune, R-S.D., Mike Rounds, R-S.D., Deb Fischer, R-Neb., Ben Sasse, RNeb., and Ernst. That meeting was scheduled at the request of President Trump, who reached out to Grassley personally after the senator voiced public consternation with EPA’s actions that he perceived as anti-RFS.

Now, commitments in hand, these seven senators and other pro-RFS stakeholders will watch for EPA’s RVO rollout by the end of next month.

“I’m glad the administration is feeling the heat right now,” Ernst said, specifically noting Trump’s pro-RFS commitments on the campaign trail. “He needs to stand by that.”

SEC 199 PASS THROUGH TAX DEDUCTION
When the House of Representatives made public their proposed tax reform outline,
section 199 was specifically called out to be eliminated in lieu of a rate reduction for all
businesses. Section 199 is unique for cooperatives, as the deduction may be passed through to the members. From 2014-2016, the Aurora Cooperative passed $29 million in tax deductions to farmer-owners to utilize in their own tax returns, and as we close out 2017, that trend looks to continue. Cooperatives are working diligently to inform Congress as to the importance of Sec. 199 to their owners and the resulting economic impact on rural America. I anticipate a grassroots effort soon; when it is time for that, I will provide talking points for you to reach out to your Congressman and Senators.

TRADE
I can’t go without mentioning trade. 31% of U.S. gross farm income is a direct result of
exports and about 1 in every 10 planted acres in the U.S. feeds people in Mexico or Canada. With that being said, the importance of NAFTA cannot be overstated. Certainly there are parts of the agreement that need to be modernized and made more fair to farmers across the regions, not to mention manufacturing. However, the segments of agriculture who have benefited continue to push for a “do no harm” end result in the negotiations. See the clipping below from an interview with Senator Roberts, chair of the Senate Ag Committee:

ROBERTS: AG EXPORTS KEY TO TRUMP’S NAFTA DEFICIT STRATEGY: The Trump
administration is telling lawmakers that part of its strategy for reducing the trade deficit through NAFTA renegotiations will be pushing more U.S. agriculture exports into Canada and Mexico.

“Mr. Lighthizer, when I spoke to him today, indicated the best way for our good trading partners to buy down the deficit is to buy U.S. agricultural products,” Senate Agriculture Committee Chairman Pat Roberts told reporters on Thursday after a committee business meeting to advance two agriculture department nominees . “He made that very clear and will continue to make that clear.”

The United States is making a major play to gain more access to Canada’s dairy market, which has import restrictions through a supply management program that aims to stabilize farmer income.

Roberts said the administration needs to have its chief agricultural negotiator at the table. “Basically we need to get Gregg Doud down there so he can be of help,” Roberts said. Doud’s nomination is awaiting Senate confirmation.

“Basically I think [Lighthizer] could use additional help, but I know there is a lot of concern expressed within the agricultural community about trade,” Roberts said. “Bob assured me he knows full well about the value of that, as well as the situation we are in with regards to farm prices across the board.”