Home

Government Affairs

News

Board of Directors

Events

Join

FAM Links

Michigan.gov

AFS

LEGISLATIVE/REGULATORY SUMMARY OF ACTIONS
IN MARCH 2007

HIGHLIGHTS:

Click Here for information on two important meetings

House Speaker Proposes Utility Tax To Fix Budget/Attorney General Blasts It

House Speaker Andy Dillion has proposed creating a tax (6%) on the state’s utilities to generate an estimated $500 million per year and help close the current year deficit of $600 million. Mr. Dillion’s proposal also calls for the elimination of the current “Customer Choice” competitive electric purchasing program established under PA 141 of 2000. The plan would allegedly help incumbent utilities finance the construction of new base load power plants by eliminating the current “hybrid” market for electric power. Utilities have argued that PA 141 harms their ability to get financing for new plants. Speaker Dillion suggested not all of the tax would be passed through to customers. Apparently, the interest rate savings achieved by utilities achieving lower financing costs (without a competitive market) would somehow be rebated to offset the full cost of the tax to customers. In response, Attorney General Mike Cox blasted Mr. Dillion’s plan and characterized it as a plan to re-establish utilities’ monopoly and impose a new huge tax that will surely be passed on to customers. A recent report by Standard & Poors suggests that re-regulating utilities could actually increase the cost of financing in the utility sector---essentially undercutting the premise upon which Mr. Dillion’s savings rebate plan is based.

Unions & State Chamber Agree On Gas Tax/Registration Fee Increases

The Michigan Chamber of Commerce has joined with unions to call for an increase in the tax on gasoline and diesel fuel. Under a soon to be introduced three-bill package, the current 19 cent per gallon gas tax would increase by 9 cents per gallon in increments of 3 cents per year over the next 3 years. The current 15 cent per gallon diesel tax would increase 7 cents in the first year and an additional 3 cents per year for the next two years. Both taxes would be at 28 cents per gallon within three years. Citing the fact that the last increase in the gas tax took place in 1997, the Michigan Chamber noted that Michigan must maintain the quality of its road infrastructure. House Republican minority leader Craig DeRoche stated the gas tax is more a user fee than a tax. Vehicle registration fees would increase as much as 50% under the yet to be introduced package.

ENVIRONMENTAL ISSUES:

Solid Waste Bills Sent To Study Committee (HB 4485-6/HB 4047)

Solid waste legislation calling for solid waste inspection (HB 4485) and changing how solid waste management plans are crafted (HB 4486) have been assigned to a work group and will return to committee for consideration in mid-April. HB 4485 would also amend and create new definitions pertaining to solid waste and landfills. The House Environment Committee also took testimony on a bill (HB 4047) to impose a moratorium on new landfill construction, but took no action. The Michigan Waste Industries Association, Michigan Association of Counties and Detroit Chamber testified in opposition to the moratorium bill. The Michigan Townships Association remains neutral on the bill.

No Further Action On Landfill Surcharge Legislation (SB 81/HB 4221)

Representative Kathleen Law and Senator Liz Brater have re-introduced their bills (SB 81/HB 4221) to impose a $7.50 per ton surcharge on all waste disposed or in a landfill or incinerator. 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. A bill to revise and require recycling reports for solid waste plans (HB 4484) has been introduced, but not moved.

Business Community Opposes Massive MDEQ Fee Increases

The Michigan Department of Environmental Quality has proposed large increases in user fees ($19+ million) in order to make up for lower general fund revenue. Proposed fees include air fees ($5.5 million increase), groundwater fees ($1.8 million), wastewater management fees ($589,000), hazardous waste fees ($1.2 million), solid waste fees ($1.8 million) and land & water permit fees ($6.2 million). Major trade associations (MMA/Chamber) have testified in opposition to the large increases.

Title V Air Fee Discussions/Debate Continue

The debate over the proper level of fees for operating the federal Title V air program continues. The MDEQ has proposed a new budget of $16,576,000 to support 127 staff (13 more than in 2007) and $2 million more than the agency listed as expenses in 2007. The agency also seeks to raise the facility charges for Category 1, Category 2 and Category 3 facilities as well as increase the emission rate per ton of pollutant from $45.25 to $50.84 per ton. Business interests argue the program should match the “presumptive minimum” provided for by the federal government—or about $12 million in 2007. Industry also opposes incorporating an annual inflation adjustment and insists on a sunset date for the fees.

Toxic Release Inventory (TRI) Data Available

The MDEQ has announced that TRI data for Michigan facilities in 2005 is now available to the public. Total releases and disposal increased by nearly 4 percent in 2005 from 2004. However, the total amount of toxic chemicals released, disposed of, or managed decreased from 2004.

EPA To Revise Solid Waste Definition

The USEPA is proposing to modify the definition of solid waste to streamline regulation of hazardous secondary materials. The proposal would provide for the recycling of solvents, metals, and other chemicals by providing an exclusion for materials that are generated and reclaimed under the control of the generator, materials that are generated and transferred to another person or company for reclamation and materials EPA deems non-waste through a case by case petition process. The proposed rule change was published March 16, 2007 and provides for a 60 day public comment period.

ENERGY:

MPSC Chair’s 21st Century Energy Plan Meets Resistance

MPSC Chairman Peter Lark’s 21st Century Energy Plan provides for three major policy initiatives: 1.) Building New Generation Plant, 2.) Renewable & Alternative Energy, and 3.) Energy Efficiency). Customer choice advocates blasted the plan as an electric “choice killer” that clearly favors incumbent utilities. Other controversial aspects of the plan include mandatory utility renewable portfolio standards and non-by-passable surcharges to fund energy efficiency programs. The full text of the report can be found at: http://www.dleg.state.mi.us/mpsc/electric/capacity/energyplan/index.htm

MPSC Approves Palisades Power Purchase Agreement (U-14992)

Upon the sale of Consumers Energy’s Palisades nuclear plant to Entergy, Consumers entered into a 15 year power purchase agreement to buy back power from Entergy which has been approved by the MPSC. As a result of the sale, Consumers customers will be refunded $255 million in savings ($66 million sale price over book value and $189 in avoided decommissioning costs) over the next 18 months. The average residential customer will receive a refund of approximately $54.

MPSC Approves DTE Renewable Resource Program (U-14569)

The MPSC has approved a revised renewable resource program submitted by DTE. Under the program, DTE will manage and operate a program that obtains renewable energy through REC’s (renewable energy certificates) in the national marketplace as well as increasing attention on developing renewables in its own service territory. Customers could either elect to pay a 2 cent per kw surcharge on all their energy use or purchase blocks of 100 kw for $2.50 each. Under the MPSC order, DTE will be required to submit a report by March 31, 2008 identifying its sources of renewable energy.

Energy Committee Hears Testimony On Customer Choice Under PA 141

The House Energy and Technology has been holding hearings on various subjects including the MPSC’s 21st Century Energy Plan and the Customer Choice and Electric Reliability Act of 2000 (PA 141 of 2000). The Committee heard testimony from Peter Lark, author of the 21st Century Energy Plan and from Legislative Service Bureau staff on the Customer Choice program under PA 141. The committee is scheduled to hear presentations from the Customer Choice Coalition and ABATE supporting continued choice. The committee is also scheduled to hear from Consumers Energy CEO David Joos who will likely criticize the customer choice program.

MPSC Approves DTE Security Costs (U-15160)

The MPSC has authorized DTE to collect an additional $9.1 million in enhanced security costs for the period 2001-2005. The Customer Choice Act allows for the recovery of certain enhanced security measures required by state or federal law providing reasonable security for an act of terrorism.

MPSC Issues 2006 Annual Report

The MPSC has issued its 2006 Annual Report which states the agency distributed $83 million in low income energy assistance grants, lowered DTE electric rates by $78.5 million annually and handled thousands of consumer complaints on electric, natural gas and telecommunications issues. The report also notes the Commission allowed Consumers Energy to increase its natural gas rates by $80 million instead of a requested $130 million and that Consumers will also give $17 million to the low income energy assistance program. Work on the 21st Century Energy Plan was also noted.

More Renewable Portfolio Standard Bills Introduced (SB 385/HB 4539)

Senator Barcia and Representative Brown have joined some their colleagues in calling for the state to impose a mandatory renewable portfolio standard upon all energy suppliers in Michigan. Mr. Barcia’s and Mr. Brown’s bills follow the introduction of earlier bills by Senator Patty Birkholz (SB 213) and Senator Kahn (SB 219). Senator Bruce Patterson, chair of the Senate Energy Committee, is also expected to introduce an RPS bill. The Barcia/Brown bills provide that all “providers” have the following percentage of renewables in their portfolio: 7% by December 31, 2009, 9% by December 2012, 13% by December 2015, 16% by December 2018 and 20% by December 2020. Under their bills, the MPSC would define the types of renewable energy sources meet the standard. A “provider” is any person or entity that is in the business of selling electricity to retail customers in the state.

TAXES & ECONOMIC DEVELOPMENT:

Governor’s Two-Cent Service Tax Proposal All But Dead

In the ongoing battle to find an acceptable replacement for the Michigan Single Business Tax (SBT) which expires at the end of 2007 and generates $1.9 billion annually, Governor Granholm has proposed imposing a 2-cent tax on 92 services as a complement to her previously-announced Michigan Business Tax proposal. The revised MBT, a combination profits and gross receipts tax, will replace $1.4 billion of the 1.9 billion SBT revenues and retain a cut in personal property taxes. However, business groups including the State Bar, Chamber, Realtors, and others have vehemently opposed the new tax on services. Republicans insist huge cuts must be made in state government to address the current year deficit of $600 million, as well as find a replacement for the SBT. Republicans are working on their own BEST plan. The Republican-controlled Senate recently voted down (16-22) the Governor’s 2 percent sales tax on services proposal (SB 307). Meanwhile, the Governor continues to push for her expanded service tax, but most agree the concept is dead. House Democrats have announced they will be coming out with a plan of their own.

Senate BEST Tax Plan Moves Forward With Upgrades (SB 94-96)

In seeking a replacement for the Michigan Single Business Tax, Republicans advanced their BEST tax plan which calls for a tax on profits of 1.5% and or alternatively a tax on gross receipts at a tax rate of .54%. The BEST plan has been upgraded to provide a personal property tax credit of 25% against the business tax and would exempt all industrial personal property purchased 2008 forward from property tax. The “second” BEST plan would replace $1.5 billion of the $1.9 billion the current SBT generates.

Other Business Tax Replacement Plans Considered In House

In addition to the Senate’s BEST plan, there are other plans under consideration. These include a plan proposed by the Michigan Chamber (lower rate/partial property tax relief), a plan by the Grand Rapids Chamber (lower rate/full property tax relief) and Detroit Chamber (franchise/business tax). Each plan has its advocates and detractors. Treasury experts point out the plans each have their own bias.

LANSING POLITICS:

Governor Directs Agencies To Prepare For Government Shut Down

Governor Granholm has directed her cabinet to prepare contingency plans in case the state runs out of money in May and is forced to shut down all but critical operations. The cash crunch is largely the result of a cash flow gap between when expenses are incurred and when tax money is transferred to state coffers. The cash flow gap can be cured through legislation.

Governor Presents Budget-Cutting Executive Orders/Directives

Governor Granholm has presented her Executive Order mandating cuts to the current 2006-2007 budget to the legislature and ten directives to curb current spending. The state faces a current year budget deficit of $400+ million. Executive Order 2007-3 provides for $344 million in cuts and $180 million in delayed payments.

Michigan Likely To Lose Congressional Seat 2010

Political analysts suspect Michigan will lose one of its 15 Congressional districts following the 2010 census. The loss would likely be areas that are currently moderately Republican.

Senate Panel Approves Cooley As New DLEG Director

The Senate Government Operations Committee confirmed the appointment of Keith Cooley as the new director of the Department of Labor & Economic Growth. Cooley comes to the agency from his position as the former head of Focus: HOPE in Detroit.

NATIONAL INDUSTRY NEWS:

AFS GOVERNMENT AFFAIRS CONFERENCE A SUCCESS

The annual AFS Government Affairs Conference was held March 28th – March 30th in Washington, D.C. at the L’Enfant Plaza Hotel. The program included a White House briefing, Hill visits and remarks from syndicated columnist George Will. Issues included: Currency Manipulation, Employee Free Choice Act, Energy SMARRT program for foundries and Expansion of Family Medical Leave.

House Passes Bill Easing Union-Organizing Rules

The House voted 241-185 to pass HR 800, to allow union organizers to bypass secret-ballot elections if they get a majority of employees to sign cards authorizing a union. They did not succeed in obtaining the two-thirds majority needed to override a threatened presidential veto.

USEPA To Revise Definition of Solid Waste

On March 16, the U.S. Environmental Protection Agency (EPA) announced a proposal to modify the definition of solid waste to exclude from hazardous waste regulations certain secondary materials targeted for recycling. The proposed rule would provide for the recycling of such hazardous secondary materials as solvents, metals, and certain other chemicals. The exclusions in the new proposal are based on the idea that if hazardous materials are not "discarded" they should not be regulated as wastes.

In order to qualify for exclusion, the proposed rule states that materials must be:

Generated, reclaimed, and actively under the control of the party that generates the hazardous waste;
Generated and transferred to another person or company under specific conditions; or,
Deemed non-waste by the EPA through a case-by-case petition process.

EPA estimates that streamlining the management of secondary materials in a cost efficient but safe manner will result in an average cost savings of $107 million a year from both reduced regulatory burden and increased recycling. "I am encouraged by EPA's effort to reach out to the industry and promote recycling projects that are both positive for the economy and the environment," said Jerry Call, AFS executive vice president.

Prospects Good for Bill to Apply Duties to Nonmarket Economy Countries

House lawmakers are moving forward on trade legislation, H.R. 1229, which would fix a longstanding inequity in U.S. trade law and expand American employers' ability to obtain trade relief. The bill, the Nonmarket Economy Trade Remedy Act of 2007 would require application of countervailing duty law to both market and nonmarket economies, including China.

U.S. companies can ask the government to impose tariffs - known as countervailing duties - on imported goods if an investigation finds that foreign producers are subsidized by their governments. Domestic companies choosing to challenge subsidies in nonmarket economy countries have been precluded from doing so by previous assertions by the U.S. Department of Commerce. These assertions, made in 1984, have been made irrelevant by events since then, including China’s accession to the World Trade Organization (WTO), adoption of the WTO Agreement on Subsidies and Countervailing Measures, and the adoption of more specific definitions of subsidies in the WTO.

In addition to closing that loophole, the bill would bring Congress in on making the determination of whether a country can graduate from non-market status to market status, giving lawmakers a stronger oversight role.

The measure is scheduled to be marked up in full committee immediately following a hearing scheduled on March 15. A Senate companion bill is expected to be introduced shortly. AFS supports legislation to apply countervailing duty law to China and submitted comments to the U.S. Department of Commerce earlier this year on this matter.

Debate over US China Trade Relationship Continues in Congress

The Senate Finance Committee will hold two hearings this week, one on Opportunities and Challenges in the U.S. - China Economic Relationship and another one on Risks and Reform: The Role of Currency in the U.S. - China Relationship. The Finance Committee chairmen have not yet introduced their China bill. In addition, the US China Economic Security Commission will hold a two-day hearing on China’s Military Modernization and Its Impacts on the Untied States and Asia Pacific.

Commerce Applies Anti-Subsidy Law To China

The U.S. Department of Commerce announced its preliminary decision to apply U.S. anti-subsidy law to imports from China. This is the first time countervailing duties will be imposed on imports from a non-market economy. The decision alters a 23-year old bipartisan policy of not applying the countervailing duty (CVD) law to non-market economy countries, and reflects China’s economic development. The action, announced by Commerce Secretary Carlos M. Gutierrez, signaled a tougher approach to China at a time when the administration’s campaign of quiet diplomacy by Treasury Secretary Paulson has produced few results.

The step also reflected the shift in trade politics since Democrats took control of Congress. The widening American trade deficit with China, which reached a record $232.5 billion last year, or about a third of the entire trade gap, has been seized upon by Democrats as a symbol of past policy failures that have led to the loss of hundreds of thousands of jobs.

Mr. Gutierrez’s announcement has the immediate effect of imposing duties on two Chinese makers of high-gloss paper, one at 10.9 percent and the other 20.4 percent, calculated by adding up the supposedly illegal subsidies.

But trade and industry officials say future actions based on the department’s new policy could lead to duties on imports of Chinese steel, plastics, machinery, textiles and many other products sold in the United States, if as expected those industries seek relief and the department finds that they are harmed by illegal subsidies.

Indeed, industry and administration officials say that they chose the high-quality paper industry last year to serve as a test case for a sweeping revision of the administration’s previous policies, which did not allow for antisubsidy duties for Communist or other nonmarket economies.

Beyond seeking a review of the new policy in coming months, China is expected to challenge it in federal court and also at the World Trade Organization, but not through imposing tariffs of its own on American goods, according to lawyers who have been representing China in the dispute. Under W.T.O. rules, China must seek recourse through the courts or the W.T.O.’s adjudication process if it hopes to get the new tariffs declared illegal.

MICHIGAN INDUSTRY NEWS:

MARK YOUR CALENDARS NOW

MONDAY, MAY 21

Future Energy Options for Michigan Foundries

The Foundry Association of Michigan is pleased to present another in its series of programs on issues of current interest to state foundries. On May 21 we will explore a range of energy issues, from the policy level to the bottom line.

Michigan has long been awaiting the benefits of competition, and now alternative energy sources are getting attention. While individual foundries will have to select what sources meet their individual needs, the program will provide tools to help select the right combination for you.

Here’s a preview of our program:

Energy Options for the Future:

Energy forecasting for the near future
New sources. Michigan State University has created The Product Center to develop and commercialize new energy sources.

The State of Energy in Michigan:

The Michigan Public Service Commission regulates how and what energy is sold in the state. While deregulation is on the books, there are now calls in the legislature to re-regulate the system, and new energy sources need to be included in the regulatory environment.

Electrical and Natural Gas:

Representatives of these providers will discuss their plans and capabilities.

MONDAY, MAY 21 – 10:30 a.m. to 2:30 p.m.
Michigan Chamber of Commerce, Lansing

Watch for more details…