Monthly Updates

January 13, 2012

TO: IBA Membership

FR:       Connie Vaughan, IBA National Affairs Committee Chairman

RE:     IBA January 2012 Washington Report

Congress returns next week to start an expected tumultuous even numbered (election) year. While on break and not an official recess for the Christmas and New Year holidays, President Barrack Obama managed to undermine the Constitution and invoke Executive Authority to make several recess appointments. The Republican led House of Representative borrowed a “Pro-Forma in session” strategy often employed by then Senate Majority Leader Harry Reid (D-NV) during the Bush Administration and didn’t officially recess to specially prevent Recess Appoint-ments. The Obama Administration in a sweeping twenty page opinion stated the Holiday break was in fact a recess which validates the three appointments to the National Labor Relations Board and a new Director of the Consumer Protection Financial Bureau. Litigation is expected if and when the agencies take an official action with new appointees.

In good NLRB news, businesses will have until April 30 to post notices informing their employees about their right to join a union. The National Labor Relations Board extended the poster deadline, which previously was set for January 31, at the request of a federal court. Business groups filed a lawsuit challenging the poster requirement, contending the NLRB didn't have the authority to issue such a rule.President Obama took a page from the playbook of former president Ronald Reagan and became the first President since to formally propose elimination of a cabinet agency. Claiming many functions duplicative, he proposes a merger or rolling of the United States Trade Represent-ative’s office into the US Department Commerce. The move “in time” will eliminate 1,000 jobs.

Senate retirements announced over the break bring to nine the number of open seats. IBA friend and recipient of the Horst G. Denk Legislative Service Award, Senator Ben Nelson (D-NE) was one of the most recent retirements. Twenty-one of the 33 seats up for elections are held by Democrats, two by Independents and ten by Republicans. Seven Democrats and Independent Joe Lieberman, also a recipient of the Horst G. Denk Award are among the retirees. Approximately thirty members of the House have announced retirement or are running for other office. We expect this number to increase as additional states unveil redistricting proposals or have current plans challenged in the courts finalized. It’s going to be exciting election year!

Save the dates: On April 14^th IBA will meet in Scottsdale, Arizona and June 11-12^th in DC.

Obama Makes Recess Appointments President Obama made several recess appointments, filling vacancies on the National Labor Relations Board that were left open by the Senate's refusals to confirm appointees. The appointments to the NLRB, a lightning rod for conservatives opposed to any expansion of labor rights, are Sharon Block, currently deputy assistant secretary for congressional affairs at the Labor Department; Terence Flynn, now the chief counsel to NLRB member Brian Hayes; and Richard Griffin, general counsel for the International Union of Operating Engineers. The NLRB appointments followed Obama's controversial recess appointment of Richard Cordray to the Consumer Protection Financial Bureau. Block's appointment fills a vacancy left by Craig Becker, a former associate general counsel to both the Service Employees International Union and the AFL-CIO who was seated on the NLRB via a recess appointment in March 2010. Obama withdrew his appointment of Becker for a full term last month after it was fiercely resisted by Senate Republicans.

NLRB ISSUES RULE ON UNION ELECTIONSThe National Labor Relations Board (NLRB) finalized its “ambush election rule” originally proposed in June.  The rule may effectively shorten the amount of time in which union certification elections take place and could allow votes to occur in as little as 20 days. This is a continuation of dramatic overreach by the NLRB that is harming job creators. The Coalition for a Democratic Workplace immediately filed a legal challenge to this rule in the federal court in Washington, D.C. The final rule, which will go into effect April 30, 2012, is similar to what the Board discussed in a public meeting on November 30. While scaled down from the original rule, the final rule still remains harmful to employers. Specifically, the rule would alter what types of pre-election hearings can be held (such as who is even eligible to vote in the election) and what types of appeals can be filed prior to an election. If certain matters can be discussed only after an election is held, these matters will often become moot, leaving the employer with no voice to be heard prior to the election. The rule also appears to shorten the time between a petition for certification being filed and the election being held. If most pre-election matters will be deferred until after the election, the election itself could take place on a very quick time frame. A copy of the final rule may be found at: https://www.nlrb.gov/sites/default/files/documents/3240/nfrmfinal_0.pdf

Obama Seeks to Merge Six AgenciesPresident Obama said he will ask Congress for the authority to shrink the size of the federal government by merging six agencies. Each agency handles aspects of trade and commerce, and Obama made the case that the overlap in responsibilities causes confusion for American businesses and consumers. Obama needs Congressional approval to do so and he urged lawmakers to act. "This should not be a partisan issue," he told an East Room audience. The reorganization, including the elevation of the Small Business Administration to the Cabinet, would combine the Department of Com-merce, the SBA, the Office of the U.S. Trade Representative, the Export-Import Bank, the Overseas Private Investment Corporation and the Trade and Development Agency. Obama said the consolidated organization would have one web site and better handle modern business needs. "No business or non-profit leader would allow this kind of duplication or unnecessary complexity in their operations," Obama said. "So why is it OK in our government? It's not. It has to change." Under the proposal, the Department of Commerce would cease to exist, handing the National Oceanic and Atmospheric Association over to the Department of the Interior and the rest of its operations to the new organization. The U.S. Census would become part of a statistics branch under the Department of Labor. Approximately 1,000 to 2,000 jobs would be lost, according to White House estimates, though most through attrition. The new organization will be named when the White House sends a formal proposal to Congress. Congress would have 90 days to give or deny Obama the authority, though approval would seem unlikely given the partisan tensions between the White House and the Republican-controlled House. As Republicans seek a nominee to run against Obama in November, the president has been pursuing a "We Can't Wait" for Congress to act campaign, appealing to voter discontent with congressional inaction, and hoping to seize the issue from Republicans pressing the case for smaller government. Obama promised to continue, telling the small business owners, "It would be a lot easier if Congress would help." A spokesman for Senate Minority Leader Mitch McConnell (R-KY) was quick to respond with little enthusiasm. "After presiding over one of the largest expansions of government in history, and a year after raising the issue in his last State of the Union, it’s interesting to see the president finally acknowledge that Washington is out of control," said spokesman Don Stewart. "And while we first learned of this proposal this morning in the press, we'll be sure to give it a careful review once the White House provides us with the details of what it is he wants to do." The head of the Small Business Administration currently is Karen Mills. The president's authority to assemble his own cabinet supersedes Congressional authority and allows him to promote Mills without a vote.

AMERICAN PETROLEUM INSTITUTE - ANNUAL STATE OF AMERICAN ENERGY "Even the status quo will not be enough to fuel our future" stated Jack Gerard, President and CEO of the American Petroleum Institute (API) at its annual "State of American Energy." Mr. Gerard was referring to the current American energy policy. Instead, he called for a "course correction." During the address, he laid out three goals that the energy industry can accomplish: create jobs, stimulate the economy and secure future energy. The industry has the potential to create 1.4 million jobs by 2030 which does not include the 9.2 million jobs that are currently supported by it. In addition to stimulating the economy by creating jobs, the industry also pays the government around $86 million a day or about $31 billion a year in rent, royalties, bonuses and taxes. This money can help stimulate the economy. Economic improvement is not the only area where the industry can help out. With the correct policies, American and Canadian energy supplies could provide 100 percent of US liquid fuel needs within 15 years creating energy security. Yet none of these three objectives can be achieved unless policymakers change the current energy policy. Mr. Gerard laid out what can be done to help reach these goals. First, allow increased access to oil and natural gas resources such as opening off-limits areas in the Gulf, Alaska and both the Pacific and Atlantic Ocean. Policymakers can guarantee common sense regulations by allowing flexibility to deal with unique local issues and ensuring that the EPA regulates within its authority. Improving and accelerating the leasing and permitting process will also be a step in the right policy direction. Opening pipeline infrastructure for the Canadian oil sands, which is currently being delayed, will also improve America's energy outlook. Finally, Mr. Gerard called for the maintaining of standard business cost-recovery measures for the oil and natural gas industry and not to add any punitive new taxes. As it is an election year, API will take advantage of the debate between the candidates to bring up energy policies. Look for advertisements from the group to "vote 4 energy." The idea behind the campaign is to encourage Americans to ask the candidates about their views on energy and what they will do to improve America's energy policy.

Judges set for CFTC position limits challenge

Wall Street's legal challenge to new regulations clamping down on commodity market specul-ation will be heard by one of the judges who ruled earlier against a piece of the landmark Dodd-Frank law plus two Democrat-appointed judges. The randomly selected three-judge panel on the U.S. Appeals Court for the District of Columbia Circuit will hear arguments by two leading financial industry groups that the Commodity Futures Trading Commission exceeded its authority with the new regulation, one of the most contentious of dozens of new rules it is implementing.

Judges Judith Rogers and Merrick Garland, both appointed by President Bill Clinton, and Janice Rogers Brown, appointed to the bench by Republican President George W. Bush, were assigned to the case, the court said. They were selected by random computer assignment. Briefs were ordered completed by January 19 on the CFTC's motion to dismiss the lawsuit challenging the rules setting "position limits" on the number of commodity futures and swaps contracts that a trader could hold. The measure has been decried by many traders as a politically motivated effort to cap prices that will make markets less liquid and more volatile. The selection was viewed as an important moment in the case after a panel of Republican appointed judges, including Brown, last summer knocked down Securities and Exchange Commission rules that had sought to give shareholders more say in naming corporate boards. It was the first rule related to the Dodd-Frank law to have been pushed back by the courts. The Securities Industry and Financial Markets Association and the International Swaps and Derivatives Association in December filed lawsuits challenging the CFTC on grounds similar to the SEC suit -- that regulators failed to show the rules did more good than harm -- and has hired some of the same lawyers. Some legal experts said the presence of Democratic-appointed judges may not offer much hope to the CFTC, which passed the rules in a narrow 3-2 partisan vote in October. It is the first legal challenge of a CFTC action in its 36-year history. In the SEC case, the appeals court found that the agency failed to sufficiently justify the basis for the rule and did not respond to substantial problems raised by interested parties. That opinion was authored by Judge Douglas Ginsburg.

BACKGROUND - RULES ADOPTED IN OCTOBER: The CFTC adopted the new restrictions in October in a bid to curb speculation in volatile commodities markets like gold and oil, limiting the number of futures and swaps contracts any one trader can hold. The futures regulator was given the authority to impose position limits under the Dodd-Frank financial regulatory overhaul legislation passed in 2010. The agency filed a motion to dismiss the industry lawsuit earlier this month arguing that the challenge must be first heard by a lower court.

In the CFTC case, the controversial new rules were approved by a 3-2 margin, a margin that often draws scrutiny from the appeals court. Michael Dunn, a Democratic CFTC commissioner who has since left the agency, said in October he was abiding by the Dodd-Frank financial reform law but blasted the limits as a dangerous distraction from bigger issues. "At worst the limits may harm the very markets they are intended to protect" by making prices more volatile and hedging more difficult, he said at the time. One law professor noted that in the past Congress and the CFTC rejected imposing such limits, which could make justifying the new regulations that much tougher for the agency. "With that history and the widespread opposition to the new rule, it seems the rule was passed for no reason than to allow the CFTC to say that it is getting tough on speculators, a popular theme but that does not itself provide economic justification for the rule," said Jerry Markham, a law professor at Florida International University in Miami. The CFTC rule covers 28 commodities from coffee to crude to copper, including nine crop markets that were already subject to limits, using a predetermined formula based on deliverable physical supply or open interest in the market. It includes for the first time contracts in the $700 trillion swaps market. All the rules will be phased in over time, with the final limits for all contract months set only after the agency has collected a year's worth of swaps data, a process likely to be finished late into 2012, officials said.

Grassley Wants DOJ Say on Recess Appointments Senate Republicans want the legal justification behind President Obama’s decision to make appointments despite the Senate remaining in pro forma session, but the White House so far refuses to detail the legal advice Obama received. Senate Judiciary Committee ranking member Charles Grassley(R-IA) sent a letter asking Attorney General Eric Holder whether the White House sought advice from the Justice Department on the appointments. Justice’s Office of Legal Counsel previously opined that presidents cannot make recess appointments during Senate breaks of less than three days, a view that would at least complicate the president’s assertion of recess authority. “The president needs to make clear why there was a change in position and what rationale the White House counsel used to overturn more than 90 years of Justice Department precedent,” Grassley said. White House spokesman Jay Carney attributed Obama’s decision to make recess appointments to advice from the White House counsel’s office. Carney and other White House officials have declined to say what, if any, advice the Justice Department provided. "We routinely consult with the Department of Justice on a range of legal matters, but we also routinely don't delve into the specifics of any confidential legal guidance the president or the White House in general would receive in the course of those consultations,” Carney said on Thursday. “So I mean, I think that's just standard operating procedure." While the White House may not be required to consult the department, lawyers critical of the White House’s move argued that failure to do so would mark a sharp break with normal practice for major legal questions. “I don’t think any White House has ever avoided the Department of Justice like this,” said C. Boyden Gray, White House counsel under President George H.W. Bush. “Ignoring DOJ and the Office of Legal Counsel is really a bridge too far.” The conservative Heritage Foundation is joining calls for the White House to release a legal justification for the appointments. “It is hard to imagine why the White House would refuse to say whether a Department of Justice memo exists, even if they want to keep its contents concealed,” said David Addington, who is Heritage’s vice president for domestic and economic policy and served as chief of staff and chief counsel to former Vice President Dick Cheney. Separate clauses in the Constitution give the president power to make appointments when Congress is recessed, and bar either congressional chamber from recessing for more than three days without permission from the other. Although the Constitution does not define a recess, a 1993 Justice Department memorandum said the two clauses suggest the president lacks power to make appointments if the Senate does not recess for three days or more. Pro forma sessions, which Senate Majority Leader Harry Reid (D-NV) used in 2007 and 2008 to block recess appointments and which Republicans forced in this Congress, aim specifically to trigger that three-day prohibition. The White House has not specifically rejected the three-day limit. Instead, White House officials argued generally on Wednesday that the pro forma sessions intended solely to block recess appointments do not count as interrupting a recess, because the Senate conducts no real legislative business while in pro forma and cannot act on nominations. The White House argues the Senate has effectively been recessed since December 17. A problem with that claim, Senate Republican staffers noted, is that the Senate has conducted significant legislative business in recent weeks. While in pro forma session on December 23, the Senate by unanimous consent passed a two-month extension of a reduced payroll-tax rate, federal unemployment insurance, and a reimbursement fix for physicians who accept Medicare. The chamber also appointed members to a payroll-tax conference committee while in pro forma session last week. The White House, which celebrated passage of the two-month payroll-tax bill last month, has not addressed how those steps affect claims that the pro forma sessions exclude legislative business.

House Ag Committee Chair Talks Farm Bill in BismarckU.S. Representative Rick Berg (R-ND) brought a major Washington, DC player to Bismarck to help further North Dakota interests. U.S. Representative Frank Lucas (R-OK), chairman of the House Agriculture Committee, has a lot of influence and he wants to hear what issues matter most to North Dakota`s ag community, as Congress goes to work on a new Farm Bill. North Dakota Ag leaders obliged.

"Unfortunately, livestock producers over the last couple of years have had a chance to utilize some of those disaster programs because of some catastrophic weather events, and we think that those programs are important to producers as a, sort of, risk management," said Julie Ellingson, executive vice president of the North Dakota Stockmen`s Association.

Livestock indemnity, research, export assistance and crop insurance seem to top the list for state farmers and ranchers. "The real issues within the committee itself are the different commodity areas. I mean, the weather in North Dakota is different than the weather in Florida, or Oklahoma, or central California. How do you come up with programs, policies that work for everyone? And that`s the challenge," said Lucas.

Lucas also explained the difficult political environment in Washington, which North Dakota farmers and ranchers appreciated."There`s a lot of unknowns there, but I think those (issues important to North Dakota ag interests) have all been a part of past farm bills and I think we`re hopeful," said ND Farmers Union President Woody Barth.

Lucas said regional unity is important. "We have to come up with proposals that all commodity groups, or overwhelmingly all commodity groups, can support. Because if we fracture up, we won`t be able to get the critical mass to pass a bill on the floor of the United States House," said Lucas. Lucas said it`s too early to tell how Congress will act but he would prefer a one year extension of the current Farm Bill if a new one can`t be passed. He also said that the U.S. Senate will probably move a little quicker on it at first.

Ethanol Subsidies Expire - Fuel Mandate Remains On January 1^st government subsidies for the U.S. ethanol industry officially expired, ending three decades of federal tax credits and import tariffs that encouraged the diversion of ethanol from food to fuel. The subsidies, which IBA and others opposed, became a casualty of budget tightening in Washington. But the Congressional mandate requiring oil refiners to blend gasoline with low levels of ethanol remains in effect. Under the policy, nearly 40 percent of U.S. corn production has been used for ethanol, causing higher fuel prices, greater price volatility for farmers and increased costs for government food programs.” After several failed attempts at passing repeal legislation this summer, Congress opted to let the tax credits, known as the Volumetric Ethanol Excise Tax Credit (VEETC), expire at the end of 2011. Environmentalists and fiscal conservatives alike joined IDFA and various groups in calling for an end to the subsidies, which cost the government $6 billion last year alone. In addition, a government-imposed tariff on imported ethanol, originally designed to protect the domestic market, was allowed to sunset along with the tax credits. Not all federal support for ethanol ended with the New Year. The Renewable Fuel Standard (RFS), first adopted as part of the Energy Policy Act of 2005, was expanded in 2007 to require the use of 15 billion gallons of biofuels, such as ethanol, by 2015. More than 11 billion gallons of ethanol were blended into fuel in 2010. The RFS requires the use of 36 billion gallons of biofuel, with 21 billion coming from advanced biofuels, by 2022.

Manufacturers: Utility MACT Is Extremely Costly RegulationNational Association of Manufacturers (NAM) President and CEO Jay Timmons issued this statement on the Utility MACT rule released by the Environmental Protection Agency (EPA): “EPA Administrator Lisa Jackson has finalized one of the most costly regulations that will do more damage to our economy and job growth. In 2015 alone, Utility MACT will cost $11.4 billion. Utility companies have made clear that they will be forced to shut down power generation plants throughout the country, and the reliability of the power grid will be threatened if this rule is implemented. The EPA continues to move forward with an overly aggressive agenda that is harming manufacturers’ ability to compete. Electricity prices will go up with this regulation, impacting many consumers nationwide. Manufacturers use one-third of our nation’s energy supply, so a jump in energy prices will have a devastating impact on companies of all sizes, harming their ability to create jobs, invest and grow. The cumulative burden manufacturers are facing from EPA regulations such as Boiler MACT, national ambient air quality standards, the Cross-State Air Pollution Rule and various other MACT regulations is causing uncertainty for job creators throughout the economy. Manufacturers need policies that will allow them to grow and create much-needed jobs to get Americans back to work.”