November 11, 2002

ELECTION IMPACT ON MARKETERS SOMEWHAT HARD TO PREDICT

As everyone knows, Republicans won control of the Senate in the mid-term elections last Tuesday, as well as expanding their slim majority in the House of Representatives. Most marketers will probably welcome that result as favorable. It should be remembered, though, that each politician is more than a party label – they don’t march in lockstep on every issue. Thus, the simple question of party control – while important in setting the tone and the agenda on the big picture items – is not necessarily the most important question on industry-specific issues.

Pending any changes from the recount in South Dakota and the runoff election in Louisiana, there are ten new Senators – eight of them Republicans and two Democrats. One of the two Democrats is Frank Lautenberg, a long-term former Senator. The “experience factor” may work to the benefit of Democrats, in the short run, as the Senate’s arcane rules take some time to master.

In general, the new crop of Senators may average out as no more conservative than the Senators they replaced. In the three cases where Republicans are replacing outgoing Democrats, the change is clearly more conservative. However, Sununu from New Hampshire, Pryor from Arkansas, and Dole from North Carolina are viewed as clearly more moderate than Smith, Hutchinson, and Helms.

Changes in Senate leadership may have an effect on marketer issues, sometimes unpredictably. While Sen. Lott (R-MS) returns as Majority Leader, there will probably be a new Republican Whip – Sen. Craig (R-ID). The Senate Finance Committee will likely be chaired by Sen. Grassley (R-IA), a strong supporter of ethanol, replacing Sen. Baucus (D-MT), who had been author of legislation to repeal the Special Occupational Tax (SOT) on beer retailers. Sen. Inhofe (R-OK), a strong supporter of oil and gas in general and a number of specific marketer issues, probably replaces Sen. Jeffords (I-VT), who is a co-sponsor of pending UST legislation which SIGMA supports, as chairman of the Senate Environment and Public Works Committee. And chairmanship of the Senate Energy and Natural Resources Committee likely passes from one New Mexican to another, Dominici (R-NM) replacing Bingaman (D-NM). All of this assumes no other “shocks” – deaths, party switches, etc.

In the House, the Republican pick-up of 6 or 7 seats will make governing a little easier for Speaker Hastert (R-IL). In the last Congress, the narrow margin of party control meant a half-dozen Republicans could successfully demand accommodation on a given issue; now it will take more like a dozen to have such power.

The resignation of Dick Gephardt (D-MO) as House Democratic Leader is likely to set off a power struggle between Martin Frost (D-TX), a moderate, and Nancy Pelosi (D-CA), a liberal. There are also rumors that Sen. Daschle (D-SD) might also resign his leadership post, opening up a similar leadership struggle among Senate Republicans.

On a more short-term basis, there is still a lot of question about how things will play out during the two expected lame duck sessions of Congress, one this week and one sometime in December. It appears increasingly likely that Republicans will take control early, since Sen. Talent (R-MO) will be seated as soon as his election is certified, and under Senate rules the same may apply to Sen. Coleman (R-MN). Even if Sen. Coleman isn’t seated in time for the lame duck sessions, it is possible the Reform party interim Senator from Minnesota might vote with the Republicans.

Sen. Daschle has indicated he wants the Senate to act on Homeland Security, on terrorism insurance, and possibly on an energy bill. We think it is very questionable whether the Republicans in the Senate, even if they strongly wanted an energy bill, wouldn’t want to start over next January with a bill that would include drilling in ANWR.

In general, it’s worth noting that none of our particularly close “friends” in either party in either House or Senate were among the losers on Tuesday. SIGMAPAC, SIGMA’s Political Action Committee, contributed nearly $100,000 to the campaigns of 61 candidates for Senate and House – a mix of Republicans and Democrats, incumbents and challengers. Of those, 55 were victorious, or 90%. The losing candidates we supported included one incumbent Senator, one Senate candidate, and 1 House candidate who lost in the primaries, and 1 incumbent and 2 challengers for House seats who lost in the general election.   

OFF-ROAD DIESEL

At Saturday morning’s Legislative Committee meeting, we will be discussing – among other items – a proposal on off-road diesel fuel. EPA wants to require off-road engine diesel (not including home heating oil) to meet a 15 ppm sulfur standard by 2008 – a standard that will apply to on-road diesel in 2006 with a 2-year phase-in for a small portion of the market. API is suggesting an alternative – that off-road diesel be reduced to 500 ppm by 2007, and to 15 ppm by 2008. The API proposal would make off-road diesel mesh more closely with the phase-in of on-road low-sulfur diesel, and would actually lead to a faster reduction in overall sulfur levels than the EPA proposal. API has requested that SIGMA take a position on their proposal, which we will consider.