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FRA’s Policy Engagement at the Federal Level
July 5, 2016
The U.S. wood supply system is the largest and most highly developed in the world, providing the raw material that furnishes our country’s seventh largest industrial sector: forest products. Overregulation threatens this system’s ability to continue to serve both its economic and environmental goals in a sustainable manner, especially in view of the large role small business plays in this system’s function and management. FRA monitors and engages public policy processes that impose unreasonable costs and overly burdensome processes on the wood supply chain or that impede sensible reforms that might enhance competitiveness.
Paralysis by overregulation places in jeopardy the livelihoods of mills, employees, and dependent communities; harvesting and forest operations contractors and their employees; and the ten million private, institutional, and industrial forest landowners that support its resource base. In the end, a dysfunctional wood supply system would not only be economically devastating but would expose the forest resource to wildfire and disease, leaving watersheds and wildlife habitat vulnerable and compromising the character of our country’s landscape.
What is overregulation? The intrusion of government into the management of private business to an extent not justified by the duty to promote the general welfare or to achieve transparency in exercising that duty.
Impact: Regulatory overreach makes reforestation on private and public lands unaffordable. Inflexibilities in wage determinations and program rules would conservatively increase annual treeplanting costs by over $260 million.
The Issue: The H-2B Visa program annually authorizes the temporary entry of seasonal foreign guestworkers serving specific employment niches which domestic workers are unwilling to fill. Among those jobs are the hand-planting of hardwood and softwood tree seedlings following timber harvest.
Largely because of its seasonal, itinerant nature, U.S. workers are not interested in this work, even at the artificially high wage rates the Department of Labor has established; however, labor interests have pressured a compliant DOL to press ahead with the fiction that the new rules protect U.S. jobs and serve larger “social justice” goals. In actuality, in making reforestation unaffordable, the rules will discourage reforestation, leading to land conversion, depriving a major industry of its resource base, and thus threatening the employment of millions of U.S. workers.
Status: In 2011, the U.S. Department of Labor began an attempt to retool regulations that had governed the H-2B migrant and seasonal guestworker program since changes implemented in 2008. DOL’s new Wage Rule was finalized over employers’ objections in 2011, as was its new Program Rule in 2012, although each was blocked, by Congress or by litigation. Several rounds of litigation established that the Department of Homeland Security, not DOL, had the actual authority to regulate the H-2B program. On April 29, 2015 DHS published a new rule to govern the program which—in spite of heavy pressure from Congress—retained the unfavorable provisions of the previously proposed rules, including:
- Unworkable wage-determination methodology options;
- No relief for expanding “returning worker” visas beyond the 66,000-worker annual cap;
- No allowance for workers’ “staggered crossings” to adjust workers’ entry to employers’ peak periods;
- Requirement for employers to offer spots to domestic applicants late in the process, even after H-2B fees, worker transportation, and other expenses have been paid.
The new Program Rule also includes a note in its preamble stating that, as a “longstanding position,” DOL expects employers of mobile workforces, such as H-2B reforestation workers, to pay for these workers’ housing. FRA responded with a comment to the record indicating that such is not generally the practice, that there is no legal basis for such a position, and that there is no evidence of DOL wage-and-hour auditors expressing such an expectation.
In May 2015, the Department of Labor released updated guidance to potential H-2B employers, presumably on DHS’s behalf, as well as its own.
The Appropriations Omnibus passed in mid-December 2015 included major improvements to both Wage Rule and interim final Program Rule, for the Fiscal Year ending September 30, 2016:
- Allowing the use of private wage surveys in determining competitive wages for H-2B workers.
- Exempting returning H-2B workers (who have entered under the normal quotas at any time over the past three years) from the 66,000-worker annual cap;
- Defining “seasonal” as ten months(rather than nine);
- Preventing DOL from implementing enforcement provisions which had placed obstructions on auditing and worker recruitment.
The Omnibus does not authorize ‘staggered crossings’ (except for seafood-processing workers) and does not address DOL’s position on requiring employers to pay for workers’ lodging. Although it authorizes the use of private wage surveys in determining competitive wage levels, it does not revive the “four-tier” protocol for wage determinations, which employers had used prior to the 2015 rule changes.
FRA is working with allies to extend the 2016 Appropriations provisions in the 2017 Appropriations process. As of July 1, 2016, House and Senate Appropriators have voted to recommend extending for the fiscal year beginning October 1, 2016 permission to use private wage surveys, to preserve the ten-month limit, and to retain the block on onerous enforcement provisions; and House Appropriators have voted to support renewing the returning worker exemption (although Senate Appropriators have not acted on that provision). Most observers believe the relevant Appropriations bills will not pass floor votes or reach the President’s desk until after the November 8, 2016 Election.
For longer-term reform, on October 30, 2015, Sen. Thom Tillis (R-North Carolina) introduced the Save Our Small and Seasonal Businesses Act (S 2225); and on November 4, 2015, Rep. Steve Chabot (R-Ohio) introduced Strengthen Employment and Seasonal Opportunities Now, or SEASON (HR 3918). Although these bills vary in details, they each would establish:
- a returning worker exemption,
- a staggered entry provision,
- reasonable wage-determination rules,
- that employers pay for H-2B workers’ transportation, under stipulated conditions,
- that employers need not provide or pay for H-2B workers’ housing,
- that DHS, not DOL, is the program administrator.
FRA supports both bills, which may set the stage for a workable H-2B program if Congress addresses immigration reform in 2017.
Impact: Listing the Northern Long-Eared Bat for protection under the Endangered Species Act, and unnecessarily obstructing the forest management operations that have allowed it to thrive and expand its range, would severely damage commercial forest management and the wood supply chain without addressing the root causes of the threat to the species.
The Issue: The epidemic of white-nose syndrome has reduced the numbers of the NLEB significantly and seems likely to reduce them further. Although this obvious threat to the species’s survival throughout its 38-state range is severe, this disease’s contagion is associated with groupings of the NLEB in the caves in which it hibernates, not with the open habitat in which it “roosts” and rears young. The U.S. Fish & Wildlife Service’s decision to designate it as “Threatened,” even with some latitude for activities FWS defines as “forest management,” in the form of a 4(d) rule, places significant burdens and uncertainty on landowners of all sizes.
Status: Following many delays and reviews of new information, many communications from Congress and from state and regional natural resource agencies and advocates, and submissions to the FWS’s public comment record (link and link), on April 2, 2015, FWS announced that it had decided on a “Threatened” listing for the NLEB, supplemented with a 4(d) rule, both in effect as of May 4, 2015. FWS termed this 4(d) rule an “interim” rule, opening yet another public comment process, which concluded July 1, 2015, to review options for refining the interim rule, indicating that the process for issuing a final 4(d) rule was likely to conclude during late 2015. Since the interim 4(d) rule, as published, still imposes burdens on landowners and potential disincentives to forest management, forestry interests are reviewing legislative alternatives and litigation, and submitted a hard-hitting consensus comment to the record.
On January 14, 2016, FWS published its Final 4(d) Rule, which took effect on February 16, 2016. FWS has provided an on-line resource at www.fws.gov/midwest/endangered/mammals/nleb/index.html. Generally, this Final 4(d) Rule appears to lighten the regulatory burden on forestry activities, and on non-forestry activities involving tree removal, compared to the more burdensome terms of the Interim Final Rule, although significant and potentially troubling restrictions remain.
In the spring of 2016, the Center for Biological Diversity and several other green groups sued the U.S. Fish & Wildlife Service, arguing that FWS erred in issuing a “threatened” (rather than “endangered”) listing and that the 4(d) Rule should be withdrawn. FRA and other natural resource advocates are intervening in support of FWS in disputing CBD’s position.
The Details: The Final 4(d) Rule accompanying the “Threatened” designation provides that all normal forest management and harvesting operations will be held harmless for “incidental takes” of the NLEB - however, with these significant exceptions:
- Tree removal activities within a quarter-mile radius of any opening of any known hibernaculum, at any time of year. FWS has made clear that this restriction covers any cave or mine which can be shown to have been formerly used by NLEB, whether or not it is being used in the current year.
- Tree removal activities within 150 feet of any “known, occupied maternity roost tree” during the June 1-July 31 “pup season.” There are no restrictions at any other time of year.
Much-criticized terms in the Interim Final Rule, establishing liability for incidental takes associated with conversion of “mature hardwood, or mixed forest” to “intensively managed monoculture pine plantation stands,” have been eliminated from the Final Rule.
The Final 4(d) Rule makes clear that “project proponents” may apply for special permits for activities that may result in incidental takes but which the 4(d) Rule does not cover—presumably potentially including projects close to hibernacula. FWS’s “Frequently Asked Questions” document (Question #13) lays out FWS’s expectations of “due diligence” for landowners in locating hibernacula and maternity roost trees.
Impact: The U.S. wood supply chain relies on landowners, loggers and other wood suppliers, and wood consumers being able to enter into sales and service contracts within a reasonable framework. Obstructions to the right to contract freely which emerge in Congress and at the Administration’s initiative obstruct wood supply. If logging were done exclusively by company crews, a reasonable estimate would be a 15%-20% average increase in wood costs, exceeding $1 billion annually nationwide.
IRS Status Determination: Since 1978, the “Section 530 Safe Harbor” has established a relationship as “independent” for IRS purposes if it passes the following three tests:
1) The relationship is a longstanding industry practice.
2) There has been no “switching” of an employee to independent contractor status (and no similar treatment of purported “independent contractors” and acknowledged employees).
3) The party paying for the services has filed Form 1099 with the IRS.
A relationship that cannot pass these three tests must prove “independence” through an examination of “control” factors determined under the common law—a complex and ultimately subjective procedure.
Status: The fairness and importance of the Section 530 Safe Harbor has been a prominent FRA educational message to Congress ever since proposals to repeal the provision began to appear in 2008. Although bills to repeal Section 530 have not received strong support,
- modifying or “supplementing” Section 530 remains under consideration among the House Ways & Means Committee’s Republican leadership, and
- President Obama’s proposed Fiscal 2016 Budget advocates complete repeal, along with other provisions damaging to independent contractor relationships.
U.S. Department of Labor Determination: DOL uses “independent contractor” status determination criteria to determine how to apply federal labor laws. One proposal under discussion, but still not formally proposed, is DOL’s “Right to Know Under the Fair Labor Standards Act,” which would require every business:
- to make a declaration of whether personnel it obtains services from are employees or independent contractors.
- to prepare a statement justifying its classification decision.
- to inform the contractor of his or her right to contest the classification, with DOL empowered to refer any contractor to private legal counsel should he or she desire to contest it, the business’s statement being admissible in any legal action.
In FRA’s view, requiring a business to complete and make public such a statement would require it to involve itself sufficiently in the contractor’s affairs to meet a legal standard of due diligence, and thus impose great burdens and risks on that business.
Status: Although DOL has not moved to publish its “Right to Know” regulation, the Payroll Fraud Prevention Act (S 1896, HR 3427), introduced on July 29, 2015, contains similar provisions and would create similar risks; and on March 16, House and Senate introduced another bill along the same lines, but with even more onerous requirements, penalties, and enforcement mechanisms: the so-called Wage Theft Prevention and Wage Recovery Act (S 2697, HR 4763). Both of these bills are strongly partisan and will probably not move in the Republican-controlled Congress.
On March 22, 2016, FRA and the Coalition to Promote Independent Entrepreneurs wrote to key House Appropriations and Labor Committee leaders expressing objections to the Department of Labor’s request for $10 million in funding for states to use to provide “high performance bonuses” for state agency personnel making “misclassification” determinations, suggesting that the policy provides a motivation for state agencies “to find misclassification where none exists.”
Impact: U.S. forest industry is compelled to spend more on per-unit raw material transport than its global competitors do. Enabling a log truck to increase its payload by one quarter could reduce total hauling costs by close to that amount and (conservatively) reduce net costs per delivered ton by 5%.
The Issue: Although transport from woods to mill is a relatively brief phase within the wood supply process, it accounts for approximately 30% of the total cost of raw material. While technological development has lowered the per-unit cost of harvesting, federal truck weight rules—limiting gross vehicle weight to 80,000 pounds on five axles on the Interstate system—have prevented significant savings in basic transport. Our country’s main competitors—Canadian, Nordic, South American—haul under much less restrictive weight rules. Seasonal or freight-specific weight allowances in certain states demonstrate the safety and practicality of gross vehicle reform.
Status: Although the Technical Findings of DOT’s Congressionally mandated “Truck Size & Weight Study,” release on June 5, 2015, generally affirmed the positive impacts earlier studies have attributed to both the 97,000-pound/6-axle and the 91,000-pound/6-axle configurations, by August 2015, it became clear that the 91,000-pound/6/axle configuration had a better chance of passage as a component of the 2015 Highway Bill (The “FAST Act”). On September 10, 2015, Rep. Reid Ribble (R-Wisconsin) introduced the Safe, Flexible & Efficient Trucking Act (HR 3488) with those provisions and on November 3 offered it as a floor amendment to the FAST Act. In spite of a strong push by advocates, the amendment failed to attract majority support, and the House rejected it, 187-236. Nonetheless, this show of support is significant, and FRA will continue to pursue federal truck weight reform by other means.
The FAST Act does contain state-specific Gross Vehicle Weight relief for trucks hauling forest products. Log trucks may now haul with a 98,000-pound/6-axle configuration on a designated 16.2-mile section of Wisconsin Interstate 39; and a 99,000-pound/6 axle configuration for a designated 25.1-mile section of Minnesota Interstate 35 (both priority segments for log haulers). In Idaho, 129,000-pound trucks may now access that state’s Interstate system, provided their configurations are bridge-formula compliant. In Maine and Vermont, the Appropriations Omnibus passed in mid-December 2015 makes permanent the terms of the pending pilot project allowing state-legal truck weights on both states’ Interstate system.
The Appropriations Omnibus also directed DOT to deliver the Truck Size & Weight study’s final report within 60 days and criticized the preliminary Technical Findings report’s claims of “data limitations” that DOT had invoked to avoid making policy recommendations in accordance with available data
Overregulated: FMCSA’s “Compliance, Safety, Accountability” (CSA) Program and Revised “Hours-Of-Service” (HOS) Restart Rules
Impact: These provisions threaten to sideline good truck drivers and to make small carriers uncompetitive. To the extent that they reduce trucking capacity without significantly advancing safety, both CSA and HOS will impose large but unquantifiable new costs on the wood supply chain’s biggest cost component: transportation.
CSA: The Federal Motor Carrier Safety Administration’s “Compliance, Safety, Accountability” program’s scoring system, which demerits both fleets and drivers based on reports provided by state enforcement officials, provides a “BASIC” score, displayed for insurance companies, shippers, attorneys, and others to view, as a means of assessing possible safety exposures. Because scoring criteria vary widely, due to different jurisdictions’ enforcement emphases, the relationship of scores to actual crash risk is obscure. Yet these high scores, unjustified by actual crash risk, may result in
- drivers’ being penalized (or becoming unemployable) with high insurance rates and
- shippers’ avoiding carriers with high BASIC scores.
Some forest products companies, moreover, observe that enforcement officials who have other reasons for disfavoring certain forms of business may single out those businesses’ trucks for extra scrutiny.
Status: The five-year Highway Bill (“FAST Act”) signed into law on December 4, 2015, contains terms calling for CSA “BASIC” scores based on incidents for which the driver was not at fault to be removed from publicly available databases while the National Research Council reviews the program and until NRC’s final report is delivered “and deficiencies have been addressed.”
HOS-Restart: The revised Hours-Of-Service “Restart” rule, finalized in 2013 following nearly a decade of court challenges, limits opportunities for flexibility in driver and haul scheduling, both for long- and short-haul trucking. The (currently suspended) 34-hour “Restart” provision, with its requirement for a minimum of two consecutive nights off-duty, proved especially difficult for driver scheduling and avoiding traffic congestion.
Status: In late 2014, Congress accepted an amendment to the Appropriations Omnibus to suspend the HOS-Restart provision pending completion of a study to evaluate FMCSA’s methodology, to be completed by September 30, 2015. Trucking interests reviewed the study plan and found that the study was largely overlooking the impacts of the Restart provision on short-haul drivers, whose scheduling it impacts; and communicated these concerns to FMCSA.
On June 9, 2015, the House approved the Transportation, Housing & Urban Development (THUD) Appropriations bill, including the THUD Committee’s recommendation to continue the HOS-Restart suspension indefinitely unless the study’s final report demonstrates “statistically significant improvement in all outcomes related to safety, operator fatigue, driver health and longevity, and work schedules.” (See FRA-endorsed letter to House Appropriators.)
The Omnibus Appropriations bill passed in mid-December 2015 included that provision, effective on the date of the bill’s signing. However, an omission in the Appropriations rider’s text has created uncertainty. By DOT’s reading, a negative or indecisive outcome of the study would suspend the entire Restart provision, not just the restrictions—depriving truckers and dispatchers of a valuable tool for accounting for available hours. FRA and other trucking interests have obtained the endorsement of both Senate and House Appropriations Committees for a compromise to protect the Restart, although as of July 1, 2016, final floor votes on the Committees’ recommendations had not been scheduled.
Impact: The Fair Labor Standards Act’s prohibition on loggers employing their own children on family-run logging operations until the child reaches the age of 18 is discouraging the intergenerational transfer of logging businesses, since it prevents effective apprenticeships at a critical age. It is important to sustain existing businesses by facilitating the next generation’s entry into the profession as experienced operators and business managers. In addition, federal rules discourage employment of younger truck drivers, prohibiting drivers under 21 from driving trucks over state lines.
FRA members have identified loss of logging capacity, as the U.S. economy transforms, as a near-term and long-term threat to wood supply chain viability and have placed a high priority on conserving it, with conserving and promoting wood supply entrepreneurs being a key priority.
Status: The five-year Highway Bill (“FAST Act”) signed into law on December 4, 2015, contains terms (Section 5404) establishing a “working group” to consult with the Secretary of Transportation to “conduct, monitor, and evaluate” a pilot program to determine the “feasibility, benefits, and safety impacts” of allowing truck drivers as young as 18 to operate in interstate commerce. The legislation confines participants (“covered drivers”) in the program to members or former members of the armed forces or reserves qualified to operate “a commercial motor vehicle or similar vehicle.”
The FAST Act does not specify the length of the pilot program and does not limit it to a specified number of states. Neither does it mandate any change in current DOT policy based on the report of the pilot program. It does lay forth some markers it expects that report to cover.
On March 3, 2015, Rep. Raul Labrador (R-Idaho) re-introduced his Future Logging Careers Act in the House (HR 1215), which had gathered 20 co-sponsors as of April 7, 2016; and on March 10, 2015 Sen. James Risch introduced identical legislation (S 694), with 3 co-sponsors. The legislation would:
- exempt loggers’ family members as young as age 16 from FLSA’s prohibition of minors working in logging, provided
- they work under direct supervision of a parent; and
- they do not work in chain saw operation or cable skidding.
The American Loggers Council and FRA have both endorsed the legislation, as well as legislation introduced by Rep. Bruce Poliquin with similar provisions, and encourage members to urge additional legislators to co-sponsor it.
The Issue: The Fair Labor Standards Act prohibits the employment of minors (under the age of 18) in occupations, such as logging, classified as hazardous. FRA judges the proposed reform as reasonable in that it restricts minor children’s exposures significantly to work within enclosed cabs; and the requirement that such minor children work under the direct supervision of a parent clearly indicates the intention of the proposed policy to provide an apprenticeship opportunity for business transfer, not simply to stretch the existing employment pool.
The concern is that young people who are denied the opportunity to test their skills and interest in forest work at an age when they are making essential career decisions may miss that opportunity at just the time when their interest could be most significantly engaged. ALC points out that logging families, working under current restrictions, are unable to avail themselves of the kind of “apprenticeship” opportunities available to farm families.
Similar concerns surround young people considering truck driving as a profession. Current rules discourage young people from considering a truck-driving career track. Although technically truck drivers may begin as young as 18, they may not drive a truck across state lines until they reach the age of 21, by which age they will likely have followed a different career track.
Impact: The economic downturn and regulatory reforms of the financial industries have severely constricted small businesses’, and especially logging contractors’, access to credit.
Status: On March 2, 2015, The Credit Union Small Business Jobs Creation Act was reintroduced in the House as HR 1188, obtaining 87 co-sponsors as of April 7, 2016. On September 10, 2015, The Small Business Lending Enhancement Act (S 2028), with similar provisions, was introduced in the Senate, obtaining 7 co-sponsors as of January 18, 2015. Both proposals would increase the 12.25% cap on credit union assets available to small businesses to 27.5%, for credit unions meeting stipulated requirements.
In addition, Rep. Sean Duffy (R-Wisconsin) is advocating that the Farm Service Agency’s Farm Credit System “explore opportunities” to make Rural Development Business and Industry guarantees more available to underwrite loans to the logging sector, thus augmenting credit sources for “viable logging operations that otherwise are unable to meet lenders’ underwriting criteria.” FRA supports this course and is urging House Agriculture Committee members to raise the issue with FSA.
The Issue: Before the recession, and currently, a large segment of the banking industry consolidated and restructured, and banks have implemented more stringent lending policies. Small businesses of all kinds have found it difficult to obtain loans to maintain or grow their businesses, due to tighter lending restrictions, but conditions imposed upon logging businesses appear to be exceptionally severe, both because of these businesses’ structures (particularly the prevalence of short-term contracts) and their rural locations. Don Taylor’s one-page Financial Institutions and Logging Business Financing outlines the characteristics and scope of the situation, and his two-page The Logging Industry and Lending Institutions provides a region-by-region profile of difficulties logging businesses face in obtaining credit.
Impact: The attempt to impose new definitions of water flows under federal regulation, with a corresponding permitting system, raises forest management operational expenses, increases uncertainty in planning, and potentially withdraws land from forest management.
The Issue: The definition of so-called “jurisdictional waters”—meaning those water bodies subject to federal control distinguished from those left to state and local authorities—has been disputed for several years. The federal Clean Water Act is very clear that any discharge to a navigable waterway requires a federal permit. However, another provision of the Act is not as clear: the requirement of a federal permit for any activities resulting in a discharge to a waterbody that has a “significant nexus” to a navigable waterway. Defining such a “significant nexus” has prompted conflicting court decisions, followed by Congressional attempts to settle the matter—so far, without success.
On May 27, 2015, EPA published its final rule, which forestry interests have evaluated as:
- Resolving some of the key issues with respect to classification of water in industrial facilities, such as forest product mills, clarifying that wastewater treatment ponds and other waters on mill-sites are exempt from consideration as WOTUS, specifically exempting log-cleaning ponds.
- Still providing insufficient clarity with respect to waters on forest lands, affirming an exemption from WOTUS for many ditches and wetlands within normal silvicultural operations but
- Treating “intermittent” and “ephemeral” streams differently from each other and failing to provide clarity in distinguishing those two categories—and providing EPA with a right to review any landowner’s determination in categorizing them.
Status: EPA published its final WOTUS rule on May 27, 2015, and it went into effect on August 28, 2015.
However, following extensive challenges from state authorities, and mixed lower court decisions, on October 9, 2015, the Sixth Circuit Court of Appeals suspended the WOTUS rule nationwide, “pending further order of the court.” The ruling states that “petitioners have demonstrated a substantial possibility of success on the merits of their claims,” pointing to ambiguous prior judicial precedent and vagueness in the terms of the rule, itself.
Prior to publication of the Final Rule, both House and Senate introduced legislation to address the expected implications of the new rule. The Regulatory Integrity Protection Act (HR 1732) would give EPA and the Army Corps of Engineers 30 days to withdraw the current rule and then three months to consult with state and local officials on how to address the Clean Water Act regulatory morass. Although it passed the House on May 12, 2015, there is concern that if it does become law, the agencies would simply repropose a similar rule.
In the Senate, Senators John Barrasso (R-Wyoming) and Joe Donnelly (D-Indiana) introduced S 1140, the Federal Water Quality Protection Act, attracting 47 co-sponsors as of April 7, 2016. This bill would require EPA to withdraw the rule and to undertake procedural requirements that were skipped when the rule was first proposed (such as analyzing small business impacts, providing for consultation under the Federalism Executive Order, and other stipulations) before proposing a new rule. The bill also includes a number of principles to guide the re-proposal, including a section clearly indicating certain waters that should be included as WOTUS and others that should not.
On November 3, 2015, S 1140 was brought to the Senate floor but failed to obtain the 60 votes needed to avoid filibuster, and the Senate instead passed a motion to “disapprove” the WOTUS rule by a 53-44 majority—a strong showing but not a veto-proof one. On January 13, 2016, the House passed the same motion to “disapprove” by a strong 253-166 vote, sending the Joint Resolution to the President, who vetoed it.
Although language blocking enforcement of the “Waters of the United States” rule had strong support in both chambers, an agreement among House and Senate leadership to strip environmental riders out of the Appropriations Omnibus resulted in this provision’s deletion from the bill passed and sent to the President in mid-December 2015.
Under Attack: Biomass Carbon Accounting
Impact: Federal carbon policy’s failure to acknowledge the principle of carbon neutrality in diverting woody biomass to energy production would obstruct U.S. energy policy’s potential for reducing total carbon emissions and make both established and emerging biomass energy conversion technologies uncompetitive.
The Issue: Interests that oppose biomass as a fuel source for generating energy have been attacking the environmental attributes of forest-based biomass. Specifically, activists are alleging that biomass combustion emits more carbon to the atmosphere than burning coal does. The attacks cite flawed studies, such as the Manomet report that the Partnership for Policy Integrity published in 2010. In essence, that study took a siloed view of the forest resource, ignoring the larger carbon cycling dynamic that occurs across working forest landscapes. Such attacks on biomass for energy projects have continued as export pellet mills have proliferated in the U.S. South.
FRA advocates public policies recognizing forest-based biomass energy as carbon-neutral, sustainable, and renewable. FRA’s advocacy with respect to greenhouse gas emissions reduction policy at the federal level focuses entirely on defending the well-validated principle of biomass carbon neutrality and its basic role in forest products’ contribution to sustainable forestry. FRA has no position on “climate change” as a policy issue, confining itself to advocating that any policies addressing climate change respect the principle of the carbon neutrality of forest biomass and the science that supports it.
Status: In August 2015, the U.S. Environmental Protection Agency unveiled its final Clean Power Plan (CPP), the Obama Administration’s comprehensive regulatory approach to limiting carbon emissions from coal-fired electric utilities. The final rule addresses biomass and its potential for contributing to the goals of the CPP; however, it does not outline definitive policy on forest-based biomass energy and leaves a number of questions regarding biomass energy open to public comment via a proposed Federal Plan that accompanied release of the final rules. On January 21, 2016, FRA submitted comments on this proposed Federal Plan, which EPA indicates will serve as a model for states to use in crafting their own plans or will become the enforcing document in instances where states fail to submit their own plans.
On February 9, 2016, the U.S. Supreme Court stayed implementation of the Clean Power Plan pending the outcome of related cases before the U.S Court of Appeals. At that time, it appeared that the CPP was destined to be overturned, given that the Supreme Court took the unusual move of staying the rule. However, with the passing of Justice Scalia, the path forward for this rulemaking is anything but clear.
On February 2, 2016, the full Senate approved an amendment to the Energy Bill (S 2012) instructing federal agencies to ensure that federal policies fully recognize the carbon neutrality of forest-based biomass energy; and the full Senate passed the Energy Bill on April 20, with the amendment included; a conference to reconcile the Senate Energy Bill with a corresponding House bill is not yet scheduled. On June 16, the Senate Appropriations Committee approved the FY 2017 Interior Appropriations Bill establishing even stronger guarantees that federal agencies not regulate CO2 emissions from forest biomass energy-generation processes, as long as the Forest Inventory & Analysis program affirms steady or growing carbon stocks, with reference to established baselines. The House Interior Appropriations bill, passed June 15, also contains favorable “carbon neutrality” terms. Both bills must still pass floor votes, probably following the November 8 Election.
Impact: This end-of-life tax assessment obstructs and discourages small business succession planning, weighing on the viability of loggers and other businesses supporting the wood supply chain, while also contributing to forest fragmentation and retention of land in forest.
The Issue: The federal Estate Tax, or “Death Tax,” has become subject to mounting criticism, particularly now that Republicans control both House and Senate, and efforts to repeal it have launched in both chambers. Currently, exclusion thresholds--$5.43 million per individual, or $10.86 million per couple—limit its direct effects to about 2 out of every 1,000 annual deaths. The tax’s impact on estates subject to the tax, however, is considerable--the top rate is 40%, and if assets include the assessed value of a business or timberland holding, the burdens the tax imposes can be disastrous.
Status: The Death Tax Repeal Act, HR 1105, sponsored by Rep. Kevin Brady (R-Texas), passed the House April 16, 2015 by a 240-179 vote. The bill repeals the federal estate tax and, significantly, retains a provision called “stepped up basis” that allows capital gains to escape taxation if they are passed on to heirs. In the Senate, Sen. John Thune (R-South Dakota) has sponsored a similar estate tax repeal bill, S 860, which had 38 cosponsors as of June 8, 2015—all Republican. The bill is awaiting action in the Senate Finance Committee.