November 12, 2001

CONGRESS INCHES FORWARD ON STIMULUS, ENERGY ISSUES

Last Thursday, the Senate Finance Committee approved its version of economic stimulus, sending it to the full Senate for consideration on an 11 to 10 party-line vote. It contains $66 billion in tax cut and spending programs, compared to the $100 billion House version.

Besides being smaller, it has a much greater emphasis on lower-income stimulus than the House version. For example, it extends unemployment benefits by 13 weeks and provides for tax refunds for those whose earnings are so low they pay only payroll taxes but not income taxes. The Senate version includes a 1-year extension of both the Work Opportunity Tax Credit (WOTC) and the Welfare-to-Work Tax Credit; the House version extends them by 2 years..

Not included in the Senate version: any increase in the minimum wage. Also not included: repeal of the Special Occupational Tax (SOT) on retailers of alcoholic beverages..

Whether this partisan Democratic bill will even get to the Senate floor for debate is open to question. It is still considered likely that a substitute, drawn up in majority leader Daschle’s (D-SD) office, will be put forward instead..

Meanwhile, Sen. Daschle has made it clear that he thinks the Senate will have to come back after Thanksgiving, and Sen. Murkowski (R-AK) is continuing to make noises that he will attempt to attach an energy bill to the economic stimulus package. He now hints it might be the already-passed House bill, H.R. 4, instead of the “compromise” version that has been floated by Republican Senators in recent weeks. The House bill, you may recall, includes the boutique fuels study and the environmental compliance tax breaks for small refineries that SIGMA supports.

Speaking of the “compromise” Senate energy bill, Sen. Murkowski and other Republicans were trying to reach an accommodation with Sen. Daschle in that version, which included a renewable fuels mandate (i.e., ethanol). They have pulled back from support of that idea, after SIGMA and other marketer groups made clear our strong opposition to any such “recipe” type of clean fuel mandate..

If this all isn’t confusing enough, Sen. Daschle is now hinting that he will try to substitute last year’s energy bill for whatever Republican bill is brought up, whether as part of economic stimulus or as a free-standing bill.

The bottom line: there has been a lot of action, but little real motion on either the economic stimulus or energy policy fronts. Both will likely end up as part of some big “omnibus” bill at the end of the session, with tradeoffs and horse-trading on lots of unrelated issues rolled together. And even then, it might be subject to a Presidential veto, as Bush is now arguing that the $40 billion approved right after Sept. 11 is all the additional spending he will accept.

EPA APPROPRIATION

Late last week, House and Senate conferees worked out differences on the bill containing EPA’s appropriation for the current fiscal year, and Thursday evening both House and Senate approved the compromise. Overall, the EPA appropriation is $597 million more than requested by President Bush and $77 million more than last year. However, spending from the LUST Trust Fund was approved at the level of $73 million, which represents little increase at all. .

NEW MILEAGE RATE

The Internal Revenue Service has announced that the 2002 standard mileage rate for business use of automobiles will increase by 2 cents per mile from the 2001 mileage rate. It will be 36.5 cents per mile, versus the 2001 rate of 34.5 cents per gallon. Employees reimbursed at this rate do not have to prove actual expenses for tax deductibility purposes, among other applications. Reason for the increase: higher gasoline prices during the past year.

BOUTIQUE FUEL ASSUMPTIONS

In reviewing EPA’s extensive Boutique Fuels “White Paper”, part of the study ordered by the Bush Administration, our attorneys have so far identified three major “assumptions” EPA made in outlining its options with which we disagree. First, EPA assumes that the system of multiple boutique fuels works fine except when there is a refinery fire or other unexpected emergency. SIGMA would argue that boutique fuels are causing supply disruptions on a routine basis. Second, EPA assumes that there must be some kind of ethanol mandate – i.e., that the choice is only between a renewable fuels mandate and the current oxygenate mandate, without considering the option of neither. SIGMA would argue that this is a political judgement, not something that EPA should be including in its calculations. Finally, EPA assumes that, whatever it does, it should still allow states to have their own fuel mandates, primarily so they can ban MTBE. SIGMA would argue that, if the Federal government is going to get involved in fuel specifications, it should pre-empt the states or, at minimum, restrict them to a limited number of options; otherwise, there will inevitably be dozens of different “boutique” fuels. SIGMA expects to file comments on the study along these lines, perhaps jointly with one or more other associations.

LEGISLATIVE MEETING

SIGMA’s Annual Meeting in Seattle is about to begin as we go to press. One of the most important aspects of the convention will be the Legislative Committee meeting, where members will be asked to make recommendations on SIGMA policy in a number of areas. One of those issues is the pending EPA proposal on transition from winter to summer gasoline. Those who are unable to attend the Seattle meeting can nonetheless make their views heard on this issue. Go to the SIGMA website, www.sigma.org, and click on the “Options Paper for Gasoline Transition Issues”. Do this no later than 12:00 noon Eastern time (9:00 am Pacific) on Sunday, Nov. 11, and if you have strong opinions one way or another you can call them in to the SIGMA convention office at 206-621-9000 x5985. If you get voice mail, leave your name, company, and your preference among the 4 options listed. .