Washington Insider - Friday

Turning Attention to Infrastructure

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

Pro-Biofuel Lawmakers Await Plans from Sen. Cruz

As expected, a staff-level session at the White House on biofuel policy did not yield any conclusions on the next policy direction under the Renewable Fuel Standard (RFS). Biofuel supporters Sens. Chuck Grassley and Joni Ernst of Iowa are awaiting proposals from Sen. Ted Cruz, R-Texas, on potential policy changes, but remain firm that they are not going to agree to anything that negatively impacts the program in their view.

Sources advise that Cruz's staff focused on capping prices for Renewable Identification Numbers (RINs), biofuel credits that refiners can purchase to demonstrate compliance with the RFS. But they offered no plan in the meeting.

Besides Cruz, other senators have expressed their own concerns about RIN prices. "The RIN values are a huge consideration because you’re talking about millions and millions. And it wasn’t meant to be that way. Anytime you have a value system that jumps around from eight cents to $800 dollars, that shows it’s a broken system," said Sen. Jim Inhofe, R-Okla., who is reported to be working with Senate Majority Whip John Cornyn, R-Texas, on a plan to address RIN prices.

"The integrity of the RFS is Senator Grassley’s priority and there was an understanding expressed broadly in the meeting that any outcome cannot undermine the integrity of the RFS," Grassley spokesman Michael Zona said.

"While we are happy to review any proposals Senator Cruz offers in the time ahead, we remain firm that our top priority in these meetings is ensuring that the spirit and the letter of the RFS is supported as intended by Congress," Ernst spokeswoman Leigh Claffey said.

It is not clear yet when Cruz may offer the plans. But so far, the meetings to date – one last week with Senators backing small oil refiners and the session Wednesday at the staff level – have not been enough for Cruz to lift his hold on the nomination of Bill Northey to be a USDA undersecretary. Cruz told Politico that while "real progress towards a productive solution" has been made, the hold was still in place. "We are making positive and productive steps forward to reaching a win-win solution that both protects corn farmers and avoids bankrupting refineries," he said.

Meanwhile, a tax incentive extenders bill would revive the lapsed $1-per-gallon tax credit for biodiesel and continue it through 2018, according to Grassley. The biggest hurdle, however, remains a lack of support for the measure from key House GOP members, including Ways and Means Chairman Kevin Brady, R-Texas.

Commerce's Ross Insists US Is Not Exiting Asia

While the US pulled out of the Trans-Pacific Partnership (TPP) agreement, Commerce Secretary Wilbur Ross said at an event put on by the Atlantic Council that the US is not pulling out of the region. "We are not withdrawing from Asia," Ross stated. "To the contrary, the new Asia-Pacific strategy is more encompassing than even the TPP would have been. Our goal is a rules-based economic order with fair and equal market access."

That involves bilateral trade deals, though none have been initiated as of yet. And on the negotiations with South Korea on the free trade deal with the US, Ross pledged there will be a "permanent" fix for the trade imbalances there. "Our automotive imports from Korea are almost nine times our exports of autos to them," Ross noted. "As remarkable as it may sound, we export to Korea more dollars' worth of corn and beef combined, than we do cars." He called on South Korea to further take down trade barriers on US auto exports and source more materials from the US.

Washington Insider: Turning Attention to Infrastructure

POLITICO says this week that the administration is now planning to turn to its infrastructure plan—once the tax bill is signed into law. However, the group says the approach being considered must have bi-partisan support and is already “drawing resistance from Democrats who are in no mood to cooperate.”

The $1 trillion plan set for release in January is expected to call for as much as $200 billion in federal spending over the next decade--with the rest coming from private investment, state or local funding and cuts to other federal programs.

An administration official added new details this week, telling POLITICO that a wide variety of projects would compete for federal assistance with participants showing they're prepared to put their own money on the table. It seems that the "primary" factor for cities and states wanting help from Washington would be how much revenue they are willing to raise, from taxes, fees or other sources, an official told POLITICO.

White House officials have said they plan to release their plan as a lengthy statement of "principles" sometime before the State of the Union address Jan. 30. Then, it would be up to Congress to develop legislation and it's unknown how quickly that will happen as lawmakers wrestle with other priorities like a spending bill, potential changes to safety net programs or perhaps another whack at repealing Obamacare, POLITICO says.

None of the package's details so far are music to the ears of Democrats who have pitched their own proposal for $1 trillion in new federal infrastructure money and have said they won’t support a plan stuffed with budget cuts and environmental rule rollbacks.

Because any infrastructure package would need 60 votes in the Senate, many questions remain. Democrats say they've already heard enough about the still-unreleased plan to be skeptical. "I don’t know what the path is," said Rep. Peter DeFazio, D-Ore., the top Democrat on the House Transportation Committee. "I think we’re lost in the wilderness."

DeFazio observed that the administration has been “rolling out concepts for a year,” and ticked off some of the ways its proposal has morphed since Trump took office. "They’ve gone from a trillion dollars to $200 billion that would be done with [public-private partnerships], and then Trump doesn’t like [public-private partnerships], so it’s $200 billion that [White House aide D.J. Gribbin] said last week would be cut from other domestic spending," DeFazio said.

Florida Sen. Bill Nelson, D-Fla., the Senate Commerce Committee's top Democrat, scoffed at the thought that states and localities would raise their own taxes or enter into public-private partnerships to pay for infrastructure needs, including those already covered by the cash-strapped Highway Trust Fund.

Even a top Republican infrastructure advocate, House Transportation Chairman Bill Shuster, R-Pa., has had questions about the idea of expecting states and local governments to pick up at least some of the tab.

“Well, I gotta see exactly what they mean by it," the Pennsylvania Republican said last week. "Some of it sounds a little bit like devolution. And I’ve not talked to a single governor that wants the federal government not to have a role. It’s a national transportation system."

The administration is well aware it needs Democrats on board to get its infrastructure push formalized into legislation and then passed by Congress, a White House official told POLITICO.

“I think we are very cognizant of the fact that this bill is not going to be under reconciliation and we’ll need 60 votes in the Senate, so it needs to be a bipartisan effort," the official said, speaking on condition of anonymity to discuss a plan that has yet to be unveiled.

The White House has said the $200 billion federal share of the package would be split into four buckets: funding for states and localities that promise to take on more of the financial burden of infrastructure building and upkeep; block grants for rural areas; existing federal loan programs; and money for "transformational" projects "that will truly change the face of our country."

The administration has not made it clear exactly where it would find even $200 billion for the federal share of the package, especially after a long year of partisan bickering over nominations, health care and taxes — especially given the months-long wait for a plan that was originally promised within the first 100 days of Trump's presidency, POLITICO says.

So, we will see. Almost no one doubts that infrastructure needs are vast now, and it is surprising that the administration has given these proposals such low priorities. Since next year’s infrastructure debate will need to be bipartisan, it is one producers should watch especially closely as it evolves, Washington Insider believes.

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