Washington Insider -- Monday

The Increasingly Particular Budget Fight

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Focus on Biofuels Continues

Reuters and others are now following up with reports that President Donald Trump has ordered EPA and USDA to come up with options on US biofuel policy, a development first reported by the Wall Street Journal.

The focus is in part on small refiner exemptions (SREs) on their Renewable Fuel Standard (RFS) obligations. Reports also indicate that the exam is taking a look at other areas that have been discussed and debated before – reallocating gallons covered by the SREs, issuing partial exemptions and cutting down on the number of SREs that are approved. Some also note this could be slowing progress on the administration’s proposed levels for 2020 biofuels and 2021 biodiesel under the RFS and the reset of the RFS, both of which are under review at the Office of Management and Budget (OMB).

June is listed as being the timetable for the notice of proposed rulemaking on both plans with a final rule in December.

Since the 2020 biofuel and 2021 biodiesel plan arrived at OMB in May, there have been 11 meetings on the topic with biofuel industry groups, refiners, petroleum-related groups along with truck stop operator and fueling station representatives. The latest meeting took place June 14.

As for the RFS reset, two meetings took place this week, one is scheduled for today and a fourth is set for next Wednesday. Those sessions are with a similar mix – biofuel backers and refining/oil interests. Given that the agency is still holding meetings, that suggests the RFS reset plan is not yet ready to be sent back to EPA.

It is also not clear if the White House budget office is ready to send the 2020 biofuel and 2021 biodiesel plan back to EPA nor is it clear if EPA will move the two proposed rules forward on the same track.

USDA Shifts Date on Haying/Grazing Of Cover Crops Planted On Prevent Plant Acres

Farmers who planted cover crops on prevented plant acres will be permitted to hay, graze or chop those fields as of September 1, earlier than the prior November 1 deadline, USDA’s Risk Management Agency (RMA) announced Thursday. The RMA action applies only to 2019 and is aimed at helping farmers who were prevented from planting because of flooding and excess rainfall this spring.

RMA also determined that silage, haylage and baleage should be treated in the same manner as haying and grazing for this year. Producers can hay, graze or cut cover crops for silage, haylage or baleage on prevented plant acres on or after September 1 and still maintain eligibility for their full 2019 prevented planting indemnity.

Some are noting that this now potentially opens up another “payment” avenue for farmers in that they can collect their prevented planting payment, earn money for their cover crops on the market, additional funds via the disaster aid package and even the yet-to-be-decided “minimal” Market Facilitation Program 2 (MFP 2). But there remains far more questions than answers on the reports of up to four payments.

Washington Insider: The Increasingly Particular Budget Fight

This is an increasingly high-tension period as the crucial G20 meetings along with trade talks with China loom, and as the Congress works to craft a budget deal for the coming year. On the matter of future spending, The Hill says that there is a sharp split on strategy among Republicans and that the fight has become increasingly personal.

Senate Republicans, eager to avert a government shutdown or automatic spending cuts, want acting White House chief of staff Mick Mulvaney pushed to the sidelines in budget negotiations with Democrats, The Hill said this week.

The GOP lawmakers would prefer Treasury Secretary Steven Mnuchin take the lead in representing the White House, as they see him being more amenable to a two-year spending deal that would also raise the debt limit, The Hill said.

Mulvaney, by contrast, is viewed as resistant to striking a two-year deal, which would take the prospect of another government shutdown off the table until after the 2020 election.

Republicans point to Mulvaney’s time in the House as the reason for their concern, The Hill says. As a founding member of the conservative House Freedom Caucus, Mulvaney was an outspoken critic of budget deals that swell the federal deficit.

The Hill says that GOP lawmakers say they were pleased that Mnuchin took the lead in a recent meeting Speaker Nancy Pelosi, D-Calif., hosted in her office with Congress’s other top leaders.

Republicans think Mnuchin will be more amenable to striking a deal with Democrats because he is eager to raise the debt limit in a timely and orderly way. A budget agreement would be a convenient vehicle to raise the debt limit, as it would likely pass both the Senate and House by wide margins.

Reaching a spending deal soon would also send a reassuring signal to financial markets.

In a somewhat unusual development, Democrats publicly, and Republicans privately, have identified Mulvaney as a continuing obstacle to a deal. Mulvaney and Mnuchin have been on the same page in meetings with congressional leaders, but lawmakers suspect Mulvaney is more of an obstacle than Mnuchin, largely because of his past affiliation with the House Freedom Caucus.

“I think Mulvaney does not want a deal, and I think that’s the biggest problem. Mulvaney believes his negotiating authority or positioning will be better if there’s no deal,” said House Majority Leader Steny Hoyer, D-Md., who said he’s been briefed by Pelosi on the negotiations.

“One of the problems, of course, is the Republicans can’t get agreement among themselves, between the Republican senators and the White House, and that’s unfortunate,” added Hoyer. Senate Republicans fear they will lose leverage the longer the talks remain stalled, a Republican lawmaker said, warning that letting the impasse drag out later in the year risks the chance of a government shutdown in December.

“Why would the president want to start the election year like that?” the senator asked, predicting that Republicans would get most of the blame for another government shutdown. A senior administration official said, “It does no good for Republicans to negotiate with ourselves.”

The senior administration official said Democrats are to blame for the lack of progress and downplayed the likelihood of another shutdown or the scarier prospect of the federal government not being able to pay its obligations by failing to raise the debt ceiling.

The Hill argues that Mulvaney has frustrated GOP and Democratic lawmakers alike by pushing for a one-year deal instead of the two-year deal that Republican leaders and most Senate Republicans favor. “I think Mulvaney wants a one-year deal,” Sen. Richard Shelby, R-Ala., said before the meeting.

Republicans were frustrated this week when Mnuchin and Mulvaney proposed a fallback option of passing a one-year continuing resolution that would essentially freeze spending at fiscal 2019 levels. While Mnuchin was the one who proposed a one-year stopgap measure as a plan B, lawmakers saw Mulvaney, who still serves as the White House budget director in addition to his role as acting chief of staff, as the main impetus behind it.

“I hate that idea,” said Sen. Lindsey Graham, R-S.C., who has otherwise defended Mulvaney as doing a good job, when asked about the idea of a yearlong CR.

Sen. Susan Collins, R-Maine, said, “A one-year CR is a very bad idea.” “CRs lock in spending from the previous year and do not take into account priorities or changed circumstances,” she said.

Sen. Lisa Murkowski, R-Alaska, said, “You know how I feel about CRs. I’m not a fan.” Another Republican member of the Senate Appropriations Committee also called a one-year stopgap “a terrible idea.”

It is clear that there are very few supporters of a long fight over the debt ceiling or over next year’s budget—and that there are many on both sides of the aisle who worry that those who want that fight may be bad news for almost everybody. The result is an odd moment when strange alliances seem to be in the offing in the very serious struggle to keep the government running. These are fights that producers should watch closely as they emerge, Washington Insider believes.

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