LEGISLATIVE/REGULATORY SUMMARY OF ACTIONS
IN NOVEMBER 2006

HIGHLIGHTS:

Granholm Presents Single Business Tax Replacement Proposal

Following a clear voter mandate for incumbent Governor Granholm, her administration presented its proposed re-write/replacement of the recently-repealed Michigan Single Business Tax (SBT) which is set to expire December 31, 2007. The new Michigan Business Tax uses a formula based on profits, assets and gross receipts. It removes compensation and benefits from the tax base and largely favors manufacturers. The highlights of the proposal include:

• 1.875 percent tax on profits measured by federal taxable income
• .125 percent tax on gross receipts
• .125 percent tax on assets
• Eliminate 24 mills of property tax on commercial/industrial property (46% cut)
• Raise tax on insurance premiums by .25 percent
• Create a research & development credit

The proposal is expected to raise $2.5 billion, with an estimated $600 million being transferred back to the School Aid Fund from the general fund to make up for the loss in personal property tax income. The proposal is therefore being billed as “revenue-neutral”---simply replacing the $1.9 billion previously generated by the SBT.

ENVIRONMENTAL ISSUES:

Democrat Control Of House Opens Door To Increased Waste Fee

With Democrats taking control of the House of Representatives, proponents of an increased waste surcharge (from the current 21cents) to fund recycling programs and discourage the import of foreign and out-of-state waste have found new opportunity. Democrats have long wanted to impose waste surcharges from $6.00-$7.50 per ton, but were stymied by Republican leadership of Senate and House Committees. Expect a waste fee bill to clear the House and be cheered by the Governor’s office. The question is whether Senate Republicans will stand together to oppose it or a few will cave under pressure. Strong opponents of an increased surcharge, including the Michigan Chamber and Michigan Manufacturers, may resort to pushing alternatives such as the “Penny Plant” where one cent is added to each cash register sale in excess of $2 to fund recycling.

Business/Environmental Groups Collide On Proposed Michigan Waste Policy

A Solid Waste Advisory Group has been working on a proposed Michigan Solid Waste Policy over the past several months. The group is readying its draft report, but business interests have demanded multiple changes to the document or they refuse to endorse the policy. In a joint letter to the advisory group, the Michigan Chamber, Michigan Manufacturers Association and Michigan Waste Industries Association have submitted 15 amendments to the draft policy document required for their support of the final policy.

Comments Sought on Part 111 Hazardous Waste Rule Amendments

The MDEQ is seeking comments on a pre-publication set of rules amending the existing hazardous waste rules under Michigan’s Natural Resources & Environmental Protection Act (NREPA). The draft rules were previously sent out to a “short list” of people for initial comments. The MDEQ is now seeking broader comments prior to formally submitting the rules package for approval. The proposed rules can be found at: http://www.mma-net.org/content/pdf/hw_part111draftrules103006.pdf

USEPA Redesignates 11 Counties Into Ozone Attainment

The United State Environmental Protection Agency has approved the Michigan Department of Environmental Quality’s application to redesignate 11 counties into compliance with ozone air quality standards. The redesignated counties include: Ingham, Eaton, Kent, Ottawa, Van Buren, Clinton, Kalamazoo, Calhoun, Benzie, Mason and Huron.

ENERGY:

Renewable Portfolio Standards (RPS) Bill Introduced By Sen. Birkholz

Senator Patty Birkholz has introduced a bill (SB 1504) that would require “providers” of electricity to retail customers in Michigan to meet established renewable energy portfolio standards on an annual basis. A "portfolio standard" is defined as the required minimum percentage of a providers total annual retail kilowatt hour electricity sales in the state that is composed of electricity produced from a renewable fuel source. The portfolio standard shall require the provider to generate of acquire electricity from renewable energy systems or acquire renewable energy credits in the following amounts:

• January 1, 2007 to December 31, 2007 not less than 4%
• January 1, 2008 to December 31, 2009 not less than 5%
• January 1, 2010 to December 31, 2011 not less than 6%
• January 1, 2012 to December 31, 2013 not less than 7%
• After January 1, 2013 not less than 8%

"Renewable energy fuel" sources include: biomass, geothermal, solar, wind, hydroelectric (except for pump storage), gas from decomposition of waste and that potion of a fuel mixture that is a biomass fuel. The bill is not expected to see any action this session, but will likely be reintroduced during the upcoming 2007-2008 legislative session. Governor Granholm has mentioned RPS in her gubernatorial debates and directed MPSC chair Peter Lark to incorporate them in his 21st Century Energy Plan.

MPSC To Investigate Interconnection Of Independent Power Projects With Utilities

The MPSC has initiated an investigation into the interconnection of independent power projects with electric utilities. Rules governing such interconnections were established for 17 utilities in September of 2003, but there have been numerous examples of problems with independent projects getting connected. The investigation will identify any problems or deficiencies in existing interconnection procedures and develop and implement remedies. The commission directed 18 electric utilities to file a listing of all interconnections completed pursuant to the previously-approved procedures.

MPSC Approves Settlement Agreement Authorizing MCV Sale

The MPSC has approved (U-14981) a settlement agreement that authorizes Consumers Energy to sell all of its interests in the Midland Cogeneration Venture Limited Partnership to MCV Power Partners, Inc, an unaffiliated entity. Consumers is required to file a report on the net proceeds of the sale and also file an amendment to its PSCR plan that addresses any issues related to the sale by May 1, 2007.

MPSC Approves Revision of “Return To Service” Requirements In DTE Territory

The MPSC has approved an order (U-15098) that revises the return to service notice requirements in the DTE service territory from December 1, 2006 to January 5, 2007.

TAXES & ECONOMIC DEVELOPMENT:

Action On Business Tax Replacement Likely To Be Held Next Session

Despite efforts to speed the Governor’s new Michigan Business Tax proposal through the lame duck legislature, the more likely scenario is that the tax replacement debate will be held in the new 2007-2008 legislature. There are too many business group that want to fully analyze the effect of the proposal on their businesses to expect any action yet this year. The joint tax committee will hear presentations of the tax proposals from the Grand Rapids Area Chamber, Detroit Regional Chamber, Michigan Chamber and from Mr. Gary Wolfram of Hillsdale College and a representative from the Fair Tax (total sales tax) proposals on Monday, December 4th.

LANSING POLITICS:

Parties Elect Leadership For 2007-2008 Legislative Session

Republicans and Democrats elected their new leadership for the upcoming 2007-2008 legislative session which starts in mid January, 2007. Clearly, the leadership elections indicate a shift of power from West Michigan to Southeast Michigan.

Senate:
Senator Mike Bishop (R-Rochester) was elected majority leader of the Republican-controlled Senate and Alan Cropsey (R-DeWitt) as majority floor leader. Senator Mark Schauer (D-Battle Creek) was elected minority leader and Senator Buzz Thomas (D-Detroit) minority floor leader.

House:
Representative Andy Dillion (D-Redford) was elected Speaker of the House and Representative Steve Tobocman (D-Detroit) as majority floor leader. Representative Craig DeRoche (R-Novi) was elected minority leader and Representative Chris Ward (R-Brighton) as minority floor leader. DeRoche and Ward were previously speaker and majority floor leader respectively prior to Democrats taking control of the House.

INDUSTRY NEWS:

AFS Government Affairs Committee To Meet December 7th In Schaumburg

The AFS Government Affairs Committee will meet at the AFS headquarters in Schaumburg, Illinois on December 7th to discuss national and regional issues including silica, mercury switch program, Part UUU, Washington, D.C. Government Affairs Conference and more.