September 23, 2002

ENERGY BILL COMING DOWN TO THE WIRE; SOME MOVEMENT

Conferees trying to work out a compromise Energy Bill between the House and Senate made some progress last week, reaching agreement on fuel economy standards for light-duty trucks (including SUVs). The agreement calls for CAFE standards that will result in a reduction of 5 billion gallons in the amount of oil used between 2006 and 2012. Both proponents and opponents of tougher mileage standards for such vehicles were left unhappy with the compromise.

On the ethanol front, the Clean Fuels Development Coalition wrote to Rep. Tauzin (R-LA), chairman of the conference committee, responding to the earlier suggestions for changes to the energy bill made by SIGMA and NACS. CFDC’s arguments would be amusing, were it not for the fact that they deal with a serious legislative proposal. CFDC says:

• SIGMA and NACS are “confusing supply and price.” In CFDC’s fairy tale world, apparently there is no connection between supply and price.

• The ethanol industry “cannot yield on” the requirement for year-round ethanol use, because it will “avoid imbalances in supply” and “reduce storage costs”. For the ethanol industry, of course – but not for anyone else.

• Our proposal to repeal the tariff on imported ethanol draws the particular ire of CFDC, as was probably predictable. The domestic ethanol industry apparently cannot or will not produce a price-competitive product (competitive with either gasoline or imported ethanol), and needs government mandates, tax incentives, tax subsidies, AND tariff protection.

• Slowing the growth rate mandated for ethanol use would “defeat the entire purpose of the program.” No reason is given for why this is so. Apparently the “entire purpose of the program” is a specific subsidy to the ethanol industry – a “price” that must be paid in order to eliminate the previous attempted ethanol mandate, the oxygenate standard?

The one thing that CFDC says they can work with us on is our proposal to take a marketer ethanol liability exemption contained in the bill and extend it to MTBE as well (and while we’re at it, they think it should be extended to cover ETBE, an ether made from ethanol.) Separately last week, 10 members of the conference committee signed on to a letter urging that the ethanol liability provision be extended to MTBE.

The tax provisions in the energy bill are also beginning to get attention, as members of the House Ways and Means Committee met jointly with the Senate Finance Committee last week for a walk-through of the competing House/Senate versions. Both bills contain a small refiner tax incentive for upgrading to new low-sulfur diesel standards, a provision supported by SIGMA.

Rep. Tauzin had earlier set a deadline of Sept. 30 for completion of the conference committee’s work. He has scheduled two working sessions for this week in an attempt to move things forward. But many contentious issues remain, including the ethanol provisions, and some Republicans are beginning to make noises that perhaps no bill at all would be better than what is shaping up so far. As Sen. Lott (R-MS) put it, “. . . the bill that is in conference has a long way to go to justify being completed.”   

TAX PROPOSAL POSTPONED

Sen. Baucus (D-MT) introduced a package of tax breaks for small business and farmers last week, scheduled a markup of the bill, and then cancelled (postponed) the markup session. The bill includes a wide range of both general and industry-specific tax provisions. One of the biggest items in the package is repeal of the Special Occupational Tax (SOT) on retailers of beer and wine. As introduced, the bill would have been a net gainer for the government, as tax cuts would be more than offset by increased revenue from curtailment of tax shelters, taxes on companies moving off-shore, and “fair taxation” of executive compensation. The reason for the postponement of the markup session appears to be related to efforts by Republicans to attach provisions which would permanently repeal the estate tax and make other tax reductions from last year’s tax bill permanent. Many experts are now predicting there will be no tax bill this year, except maybe the tax provisions in the energy bill.   

LOW-SULFUR DIESEL

The final meeting of the diesel FACA – the “Clean Diesel Independent Review Panel” which is supposed to give independent advice to EPA on the ultra-low-sulfur diesel program – is scheduled for this Tuesday and Wednesday. This is the panel on which Alan Wright of Pilot Oil is serving, representing marketer groups including SIGMA. By the end of the meeting, the group is supposed to issue a final report. There remain many issues to be debated, including what goes into the final report. There may be rebellion from refiners and marketers if the others in the group attempt to “gag” us and not allow our issues to be mentioned.

Separately, the actual implementation issues for the new diesel rule will be addressed in an industry/EPA Workshop similar to those done at the time of the roll-out of reformulated gasoline. SIGMA will co-sponsor the workshop. Mark your calendar now for Nov. 20-21, in Houston, Texas. Details will be coming in a couple of weeks, but this much we know already: the workshop will run from mid-morning (10 or 11 am) on the 20th to early afternoon (2 or 3 pm) on the 21st. “Below-the-rack” issues will be scattered throughout the session, but will be intense toward the end, so when making your travel plans do NOT plan to leave early!  

SUPERFUND & LUST TAXES

Sen. Baucus has introduced a bill to reinstate the Superfund tax (effective 1/1/03), extend the oil spill liability tax (from 12/31/02 to 10/1/12), and extend the Leaking Underground Storage Tank (LUST) tax (from 4/1/05 to 10/1/12). SIGMA has historically opposed extending the Superfund tax until that program is reformed; currently, the vast majority of its money is spent on “transaction costs” such as attorney’s fees. And while we support the LUST Trust Fund, our support of continuing that tax is also questionable – until the money is being used for its intended purpose, rather than building up surpluses to offset other deficit spending, it’s hard to justify support for its continuation. Both issues – Superfund and LUST taxes – are being discussed by the SIGMA Board of Directors this week.   

TRIBAL TAXES

Although our efforts to push for legislation to require the payment of state and local sales and excise taxes hasn’t moved in this Congress, we continue to work on it. More and more legislators are looking up and seeing the problem in their home states and districts. Last week, the Senate Indian Affairs Committee held a hearing on a proposal by Sens. Dodd (D-CT) and Lieberman (D-CT) to put a moratorium on the Federal recognition of additional Indian tribes until some of the issues of equity can be addressed. Maybe we will have success soon on the tough tax-equity issue!   

DUCKS ALREADY ACTING LAME

The term “lame ducks” usually refers to elected officials who have already been voted out of office but are still serving. A “lame duck session” of Congress is one held after an election but before the new Congress is sworn in. Such a session is likely this year, because the current Congress – although not officially “lame” – can’t seem get its work done. Thirteen appropriations bills are supposed to be enacted to fund the government beyond next Monday, the end of the fiscal year. None are fully enacted yet (2 are close). It’s likely Congress will pass a series of short term “Continuing Resolutions” to keep the government funded as they continue to work through Oct. 11, then another CR to last until after the election. When Congress comes back after the election, there will be either a serious attempt to complete work on appropriations bills, or a decision to “punt” – a CR to last until sometime next spring so the new Congress can deal with it. Which it will be will depend in large part on the election results.

OFF-ROAD FUEL ISSUES

Two issues on this subject. First, EPA has issued a rule regulating the emissions from off-road vehicles such as forklifts, snowmobiles, and diesel engines over 50 horsepower in recreational boats, yachts, and cruisers. The rule is phased in, and deals primarily with engines rather than with fuels. Separately, IRS has scheduled a hearing on Feb. 27, 2003 on a proposal to include mobile machinery in the definition of a highway vehicle subject to road taxes – machinery that, while normally used off-road, is designed to be able to travel upon highways going from job to job. SIGMA will be involved in this issue.   

MISCELLANEOUS NOTES

The Dept. of Justice has announced that, after reviewing the proposed merger between ADM and Minnesota Corn Processors, the #1 and #2 U.S. ethanol producers, it will not conduct a full-scale investigation. With the merger, ADM will officially control 46% of the ethanol market.

DOT’s RSPA has published a final rule with two changes which might affect some members. First, it has adopted the North American Industry Classification System (NAICS) to replace SIC codes for determining who is a small business. Also, the rules will allow payment of fees by “any credit card” acceptable to the agency, rather than specifying only Visa and MasterCard. (We don’t know which other credit cards the agency plans to consider “acceptable”.) Decision on reducing fees for transporters of Hazmat, as required by law, is once again postponed – RSPA keeps hoping Congress will change the law to let them keep the extra money!