LEGISLATIVE/REGULATORY SUMMARY OF ACTIONS
IN FEBUARY 2007
HIGHLIGHTS:
Study Calls For Dune Mining Phase Out/State Newspapers Publicize Study
Several newspapers on the west side of the state have written articles about a recent study released by the Alliance For The Great Lakes (formerly Lake Michigan Federation). The study suggests that all dune sand mining should be phased out in the state. Partners in the project include: Alliance For The Great Lakes, Ford Motor Company, MSU, NOAA, and the MDEQ. The study recommends working with sand mining companies and the foundry industry continue the investigation into the viability, development and use of inland sand deposits, have the Geological Survey Department of the MDEQ utilize the study’s findings, support incentives for sand mining companies to move to inland mining and provide funds to DEQ for build upon project results.
Hearing Held On Landfill Moratorium Bill (HB 4047)
A bill (HB 4047) has been introduced by Rep. Ebli to provide for a moratorium on the expansion or construction of landfills until January 1, 2012. The MDEQ may issue a permit to construct an expansion to an existing landfill if the applicant demonstrates it has less than 3 years remaining disposal capacity, but only for an additional 8 years of capacity. Captive (private) landfills are not impacted. A hearing on HB 4047 was held on Wednesday, January 31st. In her testimony, Representative Ebli referenced the recent MDEQ report which showed Michigan increasing its import of out of state and Canadian waste over the last 5 years (from 1.8 million tons in 1996 to 6.0 million tons in 2006). Ms. Ebli noted that when the current moratorium expired recently, four landfills sought expansion permits, including Carleton Farms in Monroe County that accepts Canadian waste. Ms. Ebli also noted that 30% of all waste disposed of in Michigan comes from outside the state. Michigan currently has an estimated 18 years of available capacity. The MDEQ supported the bill, adding that its 2005 recommendations to enhance funding for local recycling programs, expand bottle bill, and improved solid waste planning should also be pursued. Environmental groups supported the bill and noted that we are below neighboring state rates for waste disposal fees and below the national average for recycling. The Michigan Environmental Council criticized the elimination of the 75 cent per ton perpetual care trust fund payment to fund the orphan share of contaminated sites. The Michigan Manufacturers and Michigan Chamber both opposed the bill, noting that 80% of the Canadian waste goes to 2 landfills in the state. No vote was taken on the bill.
MDEQ Issues 2006 Solid Waste Report
The MDEQ has issued its annual solid waste report for 2006. The report notes that imported waste made up 31% of the waste stream. The report notes that imported waste from Canada and nearby states was up slightly while waste generated from residents was down 6%. A copy of the report can be found at: http://www.deq.state.mi.us/documents/deq-whm-stsw-ReportSolidWasteLandfilledFY2006.PDF
Landfill Surcharge Bill (SB 81) Reintroduced By Senator Brater
A bill to impose a $7.50 per ton surcharge on all municipal and commercially generated waste has been reintroduced by Senator Liz Brater (D-Ann Arbor). Certain industrial wastes (construction debris, industrial waste, sludge, ash, manufacturing process waste, cement kiln dust, remediation waste, and foundry sand) are excluded from the definition of commercial waste. Money raised by the fee is to be funneled to a Michigan Green Communities Fund, which shall be distributed to municipalities to promote the public health, safety and welfare of its citizens, for recycling programs, etc.
ENVIRONMENTAL ISSUES:
“Green Chemistry” Group Meets
The MDEQ hosted the first meeting of the Green Chemistry work group following the Governor’s issuance of her Green Chemistry executive directive last month. At a January 15th meeting of the work group, the discussion centered around implementing the Governor’s directive and appointing members to the Advisory Board. The program is voluntary and it was discovered many companies are doing many of the things recommended under the initiative under industry programs such as the American Chemistry Council’s “Responsible Care” program.
MMA Continues Title V Air Fee Discussions With MDEQ
The Michigan Manufacturers Association is engaged in discussion with the MDEQ about the renewal of Title V air fees which sunset in the Fall of 2007. The MDEQ has scheduled a meeting of the air fee group for February 14th at 1:30 p.m.
Phosphorus Work Group Near Recommendations
A work group looking into ways to reduce discharges of phosphorus into the environment is getting ready to issue its draft final report. There is concern about proposed regulatory measures including lower permit limits and potential product bans.
ENERGY:
Michigan’s 21st Century Energy Plan Unveiled
After nearly a year of study, Michigan Public Service Commission chair Peter Lark has unveiled Michigan’s 21st Century Energy Plan. The plan provides for three major policy initiatives: 1.) Building New Generation Plant, 2.) Renewable & Alternative Energy, and 3.) Energy Efficiency.
Under “building new generation,” the plan recommends two alternative regulatory frameworks—traditional “used & useful” approach or a new integrated resource plan approach wherein the MPSC would issue a “certificate of need” after a contested case proceeding. Once a certificate of need is issued for a project, there could be no later challenge to the “usefulness” of the plant. The plan also recommends other regulatory measures to allow utilities to predict customer demand and revenues while maintaining a hybrid market. These measures include rates based upon actual cost of service, requiring customers who cause the need for new plant capacity to pay for it and imposing new time limits on customers who have left regulated service and wish to return.
Under “renewable & alternative energy,” the plan recommends a required renewable energy portfolio (10 percent of energy sales from renewable by 2015) with flexibility to deal with changing circumstances (market supply & economics). The plan also recommends property tax relief for homeowners who install solar, wind, fuel cell or other small renewable sources as well as investigating the cost of extending requirements to bury power lines.
Under “energy efficiency,” the plan recommends a comprehensive statewide energy efficiency program entitled the Michigan Energy Efficiency Program with third party audit. Initial funding for the MEEP is to be $68 million annually increasing to $110 million in the third year which will be funded by a non-by passable surcharge of up to 1 mill. Conservation programs are estimated to reduce peak demand by 660 MW after 10 years. The plan also recommends the Commission be authorized to require the use of active load management by utilities immediately---with pilot programs employing real time pricing information to customers. The plan also recommends improved energy efficiency of new construction in Michigan and development of state appliance efficiency standards by the State Energy Office. The full text of the report is available at the following link: http://www.dleg.state.mi.us/mpsc/electric/capacity/energyplan/index.htm
TAXES & ECONOMIC DEVELOPMENT:
Senate Republicans Introduce “BEST” Business Tax Replacement (SB 94-96)
Senate Republican majority leader Mike Bishop and Senate Finance Committee Chair Nancy Cassis introduced a comprehensive Business and Economic Stimulus Tax (BEST) plan to replace the Michigan Single Business Tax (SBT) and rejuvenate Michigan’s economy. The proposal (SB 94, SB 95, SB 96) calls for replacing only $1.51 billion of the $1.8 billion currently generated by the SBT, providing a personal property tax exemption for all new industrial property beginning in 2008 and exempting 10% of industrial property investments made over the previous five years. Additionally, a “Michigan Entrepreneurial Exemption” would provide firms under $25 million in gross receipts pay no taxes for up to three years if they meet certain criteria. Tax rates for firms with receipts between $100,000 and $350,000 will pay a flat $100 fee. Larger firms can elect to pay either a gross receipts tax at a yet-to-be-determined rate or business income at a rate estimated to be around 1.25% -----which together will generate the necessary $1.51 billion in revenue. The intent is for the gross receipts to contribute about 81% of total revenues. The BEST plan was reported out of the Senate Finance Committee to the Senate floor on January 30th, despite some details yet to be determined.
Tax Foundation Critiques Business Tax Replacement Proposals
The Tax Foundation has found fault with all seven tax proposals to replace Michigan’s single business tax (SBT)---stating all proposals put Michigan outside the “mainstream.” The Foundation’s report faults the presumption that tax revenue cannot be replaced by taxes on individuals, their reliance on a “gross receipts” tax that results in “pyramiding,” and lack of emphasis on a straight corporate tax which tax administrators are familiar with. The Foundation liked the growth stimulus of the Michigan Chamber’s plan, but criticized its gross receipts component, transparency and neutrality. The Foundation criticized the Grand Rapids Chamber plan for its inclusion of a gross receipts component, but did like its simplicity and $350 million tax reduction. The Foundation liked certain aspects of the Governor’s plan including its neutrality, low tax rate and structure but criticized its transparency and potential pyramiding. The Foundation reviewed the Fair Tax Proposal (increased sales tax only) and liked its simplicity and consumption-based approach but was concerned about accurate revenue projections and loss of border sales.
Expansion of Sales Tax To Services Suggested As Revenue Solution
Senator Ron Jelinek (R-Three Oaks) has suggested that the solution to the state’s revenue woes could lie in the expansion of the state’s sales tax to services combined with a lower overall sales tax rate.
Senate Majority Leader Bishop Pushes Local Government ConsolidationSenate Majority Leader Bishop Pushes Local Government Consolidation
Senate Majority Leader Mike Bishop is suggesting local government consolidation of services needs to be considered as part of the state’s budget solution. Bishop urged governments to look at working as a “region” instead of individual fiefdoms.
Road Group Says Roads Under Funded/State Fuel Taxes Should Be Increased
A report issued by the DriveMI campaign suggests Michigan is under funded by nearly $2 billion per year as the cost of maintenance and total vehicle miles driven have increased. The group is proposing a 3-cent increase in the state gasoline tax and a 4 cent increase in the diesel tax.
LANSING POLITICS:
Governor’s Looks To “Next Michigan”/1st Gentleman To “Next Great Companies”
Governor Granholm’s second inaugural address called for residents to look towards the “Next Michigan” with a transformed economy and greater state in the 21st century. In the meantime, First Gentleman Dan Mulhern is leading a new initiative called “Next Great Companies Project” which will combine business experts and business leaders to figure out how to create great workplaces in Michigan.
State of the State Address Scheduled For February 6th
The Governor’s State of the State address is scheduled for Tuesday evening, February 6th at 7:00 p.m.
Governor Granholm Issues Government “Spending Cut” Directive
Governor Granholm has issued an Executive Directive to all executive departments to drastically cut spending by cutting rent, travel, materials, energy and more. No specific dollar figure for cuts has been set. In the meantime, Budget Director Bob Emerson has directed three departments that overspent their 2005-6 budgets by $69 million to immediately finalize their spending plans and imposed additional spending controls.
Senate Fiscal Agency Sees $800 Million Current Year (Fiscal 2006-7) Deficit
The Senate Fiscal Agency is projecting a current year General Fund deficit of more than $441 million and a School Aid Fund deficit of $377.4 million. In a memo to leadership, the agency has outlined a total of $1.3 billion in proposed cuts available by cutting each agency’s budget by 10%.
Governor Names Financial Emergency Panel
Governor Granholm has appointed a blue ribbon bi-partisan panel consisting of past governors and state executives to review the state’s financial crisis and propose solutions. The 12 member panel is to report back to the Governor by the end of January. The expectation is that the panel will not make specific tax or spending proposals, but rather see to address the state’s revenue shortfalls and funding needs.
United States Supreme Court Denies Appeal of Proposition 2 Opponents
The U.S. Supreme Court has denied a petition by opponents of the recently enacted Ballot Proposal #2 to stay the application of the proposal which outlaws the use of affirmative action on the basis of race and sex in university admissions, government hiring and contracting.
NATIONAL INDUSTRY NEWS:
SAVE THE DATE: AFS GOVERNMENT AFFAIRS CONFERENCE - Washington, D.C. April 28-30th L’Enfant Plaza Hotel
The annual AFS Government Affairs Conference is scheduled for April 28th – April 30th in Washington, D.C. and will again be held at the L’Enfant Plaza Hotel. The hotel cut off date is March 1st. The program includes a White House briefing, Hill visits and special guest speaker George Will. Don’t miss this important opportunity to meet and talk with your U.S. Senators and Congressmen!!
Comments Due February 16th On AFS/USEPA MACT Settlement Agreement
The Iron and Steel MACT settlement agreement between AFS and the U.S. Environmental Protection Agency (EPA) was published in today's Federal Register (copy attached). The agreement is subject to public comment until February 16, 2007.
AFS Files Comments with US Department of Commerce on Whether Countervailing Duties Should be Applied to Nonmarket Economies
On December 15, the International Trade Commission (ITC) preliminarily determined that allegedly dumped and subsidized coated free sheet paper from China, Indonesia, and Korea could be injuring or threatening injury to a U.S. industry. This decision cleared the way for the Commerce Department to continue its investigation into whether countervailing duties should be applied to the Chinese paper imports. It would be the first countervailing duty investigation that the Department has brought against China, or any nonmarket economy country, since 1991. The Commerce Department also requested comments on if it should continue its long-standing policy of not applying countervailing duty law to nonmarket economies, such as China.
In response to this request, AFS submitted comments to the Commerce Department on January 16 noting that the foundry industry is deeply concerned about the threat posed to U.S. production of castings by Chinese imports, many of which continue to be subsidized by the Chinese government in violation of that country’s WTO obligations. Furthermore, AFS stated that the Department has the authority, and the obligation, to apply the CVD law to Chinese imports in order to ensure the continued effectiveness of that law as a remedy for U.S. companies. In addition, the application of the CVD statute to China is consistent with the statutory language and, while it would represent a change in the Department’s practice, the Department has the authority to make such a change.
Next step - The Commerce Department is due to make a preliminary determination on whether countervailing duties should be imposed on imports from the three Asian nations by Jan. 24, and to make preliminary determinations on antidumping duties by April 9, 2007, according to a commission statement.
China Currency Legislation to be Re-Introduced
Legislation that could have traction in the 110th Congress is some version of the so-called Hunter-Ryan measure (H.R. 1498), introduced in the last Congress by Reps. Duncan Hunter (R-Calif.) and Timothy Ryan (D-Ohio). AFS supported this legislation in the 109th Congress. The measure would be directed at overvaluation of the Chinese currency and would define China's fixed currency as an illegal subsidy.
The bill would allow U.S. industries to seek countervailing duties on Chinese products under U.S. trade laws, even though China is a non-market economy. The bill could be considered by certain members of Congress as a "modest first step" to address the overvaluation of the Chinese currency. The measure could be re-introduced as early as the week of January 22nd.
Rep. Sander Levin (D-Mich.), the new chairman of the House Ways and Means Trade Subcommittee, has said he would re-introduce legislation in the 110th Congress clarifying that the U.S. countervailing duty law should be applied to products from a non-market economy like China's. He also said that Chinese currency manipulation should be considered a subsidy, which could trigger countervailing duties against Chinese imports.
In the Senate, Senators Jim Bunning (R-KY) and Debbie Stabenow (D-MI) are expected to introduce a companion bill to Hunter-Ryan. Senate Finance ranking member Charles Grassley, R-Iowa, anticipates working with Senate Finance Chairman Max Baucus (D-MT) and Sens. Charles Schumer (D-NY) and Lindsey Graham (R-SC), on a China trade bill to be completed by mid-year.
Grassley has indicated that he expects more stringent language to pressure China to allow the yuan's value rise than was included in the bill he co-authored with Baucus last year. The Grassley-Baucus currency bill would create a process for consultation with countries with undervalued currencies and would allow the US to withhold support for multilateral bank financing if the problem cannot be resolved. Last year, AFS urged that this bill be strengthened.
During the February Government Affairs Conference call, we will be discussing which currency legislation AFS will support and lobby on Capitol Hill.
U.S. Expects to File New Trade Complaints Against China at WTO
The United States is expected to file additional dispute settlement complaints against China at the World Trade Organization, according to Deputy U.S. Trade Representative John Veroneau. Last year, the United States joined China and the European Union in filing a complaint against China's restrictions on imports of vehicle parts. Members of the WTO agreed last October to set up a panel to hear the case--the first to be established by the WTO to rule on an alleged violation of global trade rules by China since it joined the organization in December 2001.
European Trade Commissioner Peter Mandelson has also warned that Brussels would take a harder line against what it views as unfair trading practices by China.
U.S. officials have been saying for nearly a year that the United States was considering filing a WTO case against China for failing to prevent the piracy and counterfeiting of U.S.-origin intellectual property such as computer software and DVDs. Deputy U.S. Trade Representative Karan Bhatia has also raised the possibility of launching a WTO case against China over its industrial subsidies.
