Washington Insider -- Thursday

By DTN's Washington Insider

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

EPA Issues E15 Waiver in 12 States as Harvey Response Continues

The sale of gasoline with up to 15 percent ethanol (E15) will be allowed in 12 states and Washington, DC, under a temporary waiver issued by the Environmental Protection Agency (EPA) in response to the impacts from Hurricane Harvey.

"The shut-down of nearly a dozen refineries and extreme weather prohibiting fuel barge movement in the Gulf-area, with several other refineries operating at reduced capacity, has continued to limit the production and availability of fuel to areas both within and outside of the Gulf area," EPA Administrator Scott Pruitt said in a letter to officials in the states and Washington, DC. The Colonial Pipeline that provides fuel to the U.S. East Coast has also been impacted, operating a reduced capacity, he noted.

Under provisions of the Clean Air Act (CAA), the use of low volatility gasoline is required during summer months, situation which has prevented the sale of E15 in summer months. The temporary action is in effect through September 15, 2017, but effectively ends the summer driving season restrictions in the states and Washington, DC, covered by the announcement.

"I have determined that an 'extreme and unusual fuel supply circumstance' exists that will prevent the distribution of an adequate supply of gasoline to consumers," Pruitt said. "This extreme and unusual fuel circumstance is the result of a hurricane, an event that could not reasonably have been foreseen or prevented, and is not attributable to a lack of prudent planning on the part of suppliers of the fuel to these areas."

The waiver of federal Reid vapor pressure (RVP) requirements in designated states is to "minimize or prevent problems with the supply of gasoline to these areas," Pruitt said. While stating the waiver is only effective through September 15, he said, "Should conditions warrant, this waiver may be modified, terminated or extended, as appropriate."

The waiver applies to Alabama, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, South Carolina, Tennessee, Texas, Virginia and the District of Columbia.

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Top Mexican Trade Officials in US for Talks

Mexican Foreign Minister Luis Videgaray and Economy Minister Ildefonso Guajardo are meeting with top officials in the Trump administration on trade and other matters, with sessions between Videgaray and Secretary of State Rex Tillerson and National Security Adviser H.R. McMaster on tap.

Plus, Videgaray and Guajardo will meet with Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer. The meetings come just ahead of the second round of NAFTA 2.0 talks set for September 1-5 in Mexico.

Meanwhile, Guajardo told lawmakers in Mexico City that trade between U.S. and Mexico would continue without NAFTA. “No one sits down to trade talks without a plan B,” Guajardo said. "This is not going to be easy," Guajardo told senators in Mexico City.

"The start of the talks is like a roller coaster." He said Mexico would not accept a NAFTA 2.0 deal that comes at too high a cost, and that Mexico can pass laws to reassure foreign investors that they are protected even without NAFTA. Some Mexican products would face high tariffs without NAFTA. Responding to the comments, Canadian Prime Minister Justin Trudeau said his government would continue to work "seriously" to improve the trade agreement.

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Washington Insider: Hurricane Aid Adds to GOP’s Dreadful September

Bloomberg is reporting this week that, as House Speaker Paul Ryan’s office noted, the onus is on the Trump administration to first detail a disaster relief request.

In fact, House Speaker Ryan, R-Wis., and Senate Majority Leader Mitch McConnell, R-Ky., already face a daunting September, with deadlines looming to avoid a government shutdown and debt default.

Now they’ll likely have to add a multibillion-dollar aid package to the list to address the devastation from Hurricane Harvey.

“I think you’re going to see very rapid action from Congress, certainly from the president. You’re going to get your funding,” Trump said at a news conference. “I’ve already spoken to Congress, and everybody feels for you.”

For their part, GOP congressional leaders aren’t yet giving concrete signs on how they might swoop in with assistance, but they could attach an emergency spending package to a continuing resolution needed to fund the government.

Still, it won’t be especially easy and some conservative Republicans are likely to balk at any increased spending, as they have after previous natural disasters — which could further inflame the conflict between the likes of the hard-line House Freedom Caucus and GOP leadership.

“There’s a huge amount of political pressure. You can’t vote against this,” says David Inserra, a policy analyst at the conservative Heritage Foundation. “So there’s going to be pressure to put money out there, whether it’s in a supplemental or a CR (Continuing Resolution).”

The thinking is that the extra element of Harvey funding could actually be a boon for GOP leaders who were already planning to ditch their most conservative flank on key fiscal votes and who have long been resigned to needing Democrats to get must-pass spending legislation to the president, Bloomberg says.

“The wise thing to do would be to attach it to the CR. It avoids the shutdown fight,” said a defense lobbyist who works on appropriations, adding that bundling Harvey funds with the typically toxic vote to raise the debt limit could also be advantageous.

Besides solidifying support from the minority party, the disaster money could guarantee support from the Texas delegation — the largest GOP contingent in Congress, with 25 Republicans. For Trump, decades of political precedent suggest the commander in chief show unwavering support for recovery efforts — or risk the kind of criticism George H.W. Bush fielded after Hurricane Andrew struck Florida in 1992 and the heat George W. Bush took in the aftermath of Hurricane Katrina.

As Ryan’s office noted, the onus is on the Trump administration to first detail a disaster relief request, as President Barack Obama did in asking for $60.4 billion in supplemental funding nine days after Hurricane Sandy decimated much of the country’s Eastern Seaboard in 2012.

Whether Republican leaders decide to pair such a request with a bill to keep the government funded beyond Sept. 30 or a broader funding package expected in December could put Trump in a tough spot.

The president has threatened to shut down the government if Congress doesn’t begin to fund a wall along the U.S.-Mexico border, but Democrats are resisting and could effectively dare him to veto a spending bill with Harvey aid.

“I’m interested to see whether the administration will put its money where its mouth is in terms of making sure that we’re putting the resources into FEMA and those other federal agencies that have the responsibility for the cleanup when the cameras are gone,” Sen. Kamala Harris, D-Calif., told reporters Monday.

Harris took aim at Trump’s budget proposal to slash FEMA funding by $667 million in the coming fiscal year. The president shrugged off similar critiques Monday, saying “FEMA money is relatively small compared to the rebuilding” and that he expects Congress to “very quickly” deliver on “many billions of dollars.”

Determining the total cost of recovery will take “months more than weeks,” said Tim Frazier, faculty director for the emergency and disaster management program at Georgetown University.

Frazier added that money will be wasted over the long haul if there is a rush to rebuild without improving infrastructure to lessen the blow of future disasters. “Are we just going to dump a bunch of money to rebuild and recover? We obviously weren’t ready for the event,” he said.

Meanwhile, current recovery funding will be spent quickly, said Nick Crossley, vice president of the International Association of Emergency Managers. And any emergency spending Congress provides may have to last communities for a while.

“You could very well have to ask for a supplemental by the end of the fiscal year,” Crossley said. “And then, that supplemental may have to carry.”

So, it will be interesting to watch how the administration deals with these new political realities amid all the festering political issues now before it. Certainly, producers should watch these debates very closely as they emerge, and as almost every issue faces new and changing political and budget realities, Washington Insider believes.

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