Supply Chain Relief by Way of Partial Lift of Steel and Aluminum Tariffs

The Fabricator - for the original article go HERE:

White House looks to ease supply chain troubles, crack down on Chinese imports from Europe

A key U.S. steel users group voiced mixed feelings about the new U.S.-European Union agreement partially lifting 25% import tariffs on steel and 10% import tariffs on imported aluminum from European countries. The agreement has a dual purpose: easing supply chain problems for a broad cross section of U.S. manufacturers who use steel and tamping down cheap Chinese steel slithering into the U.S. through Europe.

Additionally, follow-on tariff rate quota agreements appear to be in the works with the United Kingdom and Japan, based on two, parallel U.S Department of Commerce statements on Oct. 31. The statements said: “The United States and the [United Kingdom or Japan, depending on the statement] are consulting closely on bilateral and multilateral issues related to steel and aluminum, with a focus on the impacts of overcapacity on the global steel and aluminum markets; the need for like-minded countries to take collective action to address the root causes of the problem; and the climate impacts of the sectors.”

The Biden administration will eliminate tariffs on 3.3 million metric tons of imported European steel, which is the average of those imports between 2015 and 2017. Imports above that level will continue to be subject to duties of 25%. To be eligible for duty-free treatment under the quota, 54 product categories of steel imports must be “melted and poured” in the EU. Manufacturers that won exclusions to import duties in the past will have those exclusions extended to Dec. 31, 2023. Those totals will not be counted against the 3.3-million-ton ceiling.

Aluminum imports allowed in tariff-free amount to 18,000 metric tons for unwrought aluminum under two product categories and 366,000 metric tons for semifinished (wrought) aluminum under 14 product categories. Derivative articles of aluminum are exempt. The U.S. will maintain its aluminum product exclusion process.

The Coalition of American Metal Manufacturers and Users (CAMMU) called the agreement good news, but said, “It is disappointing that the agreement will not completely terminate these unnecessary trade restrictions on our allies. CAMMU is concerned that replacing the tariffs with a tariff rate quota will hurt its members because the threat of tariff reinstatement looms with the surge in steel and aluminum demand expected when the bipartisan infrastructure bill passes.”

The somewhat conflicted view of users parallels the hitches in the view of steel manufacturers expressed by the American Iron and Steel Institute (AISI). Kevin Dempsey, AISI president/CEO, appreciated the Biden administration’s “commitment to addressing the global steel overcapacity crisis and to combatting unfair trade practices in the global steel sector.” But he went on to stress the importance of proper enforcement of the agreement particularly with regard to preventing seepage of cheap Chinese steel into the U.S. through Europe and the need for “new trade approaches to address climate change, including through development of effective carbon border adjustment measures.”

U.S. steel production, which relies heavily on electric-arc furnaces, is regarded as having far lower carbon emissions than the coal-fueled blast furnaces prevalent in China.

Widespread Industry Support for Updated Mechanical Power Press Safety Standard

Industry is showing widespread support for the Occupational Safety and Health Administration (OSHA) to update its current mechanical power press standard with ANSI B11.1-2009 (R2020).

The agency issued a request for information on July 28. The OSHA standard includes requirements for inspecting, maintaining, and modifying mechanical power presses to ensure that they are operating safely as well as a special reporting requirement for injuries to employees operating mechanical power presses. The standard also includes requirements for safeguarding the point of operation.

The Precision Metalforming Association (PMA) told the OSHA the latest ANSI B11.1 standard, which is comprehensive and proven effective, also includes requirements for increasingly popular servo presses and requirements for the composite press production system, including automation.

That said, the Industrial Fasteners Institute wants the OSHA to grandfather older mechanical presses that comply with the 1971 standard. “Older machines may be perfectly safe and functioning properly, but since their wiring was done before the current ANSI standard was issued, then it would be unreasonable to expect a costly, unnecessary upgrade,” the organization said in a statement.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Approach to Bond Rating Under Scrutiny

Strategic Finance - for the original article go HERE:

Lawmakers in the United States are pushing to revamp the bond and credit rating industry and its “issuer pay” model. The U.S. House Financial Services Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets held a hearing in July 2021 to examine the nationally recognized statistical rating organizations (NRSROs).

Chairman of the subcommittee, Rep. Brad Sherman (D.-Calif.), raised the issue of “unchecked conflicts of interest,” referring to a suspicion that when companies pay a rating agency to rate a corporate bond, the agency is pressured to give the bond a more favorable rating, fearing loss of business.

Sherman is sponsoring the Commercial Credit Rating Reform Act that would require the establishment of a credit rating agency assignment board within the jurisdiction of the U.S. Securities & Exchange Commission (SEC). The board would be responsible for assigning the NRSROs to provide ratings for corporate issuers and issuers of new asset-backed securities. Currently, there are nine rating agencies registered with the SEC as NRSROs. As of December 31, 2019, 95.1% of all credit ratings outstanding were published by the three largest NRSROs: S&P Global Ratings, Moody’s Investors Service, and Fitch Ratings.

Not only is there support for eliminating the “issuer pay” model and diversifying the credit rating industry, but additional corporate disclosure could also be in the cards. The SEC’s Fixed Income Market Structure Advisory Committee (FIMSAC) made a number of recommendations in June 2020, which included requiring companies to make new disclosures regarding their choice of credit rating agencies. One recommendation stated, “We encourage the SEC to partner with appropriate trade groups to develop a set of best practices for choosing NRSROs and, once established, to require corporate issuers to disclose if/why they deviated from them in their annual reports.”

Amy McGarrity, chief investment officer of the Colorado Public Employees’ Retirement Association, agrees that a “conflict of interest lies at the heart of the discussion of improving credit rating quality.” McGarrity chaired the credit ratings subcommittee of the FIMSAC, which suggested the SEC should oversee a random assignment process for both structured products and corporate bond ratings, with at least two NRSROs being assigned to each issue, to provide diversity of views.

But some advocacy groups don’t support the proposed reforms. Michael Bright, CEO of the Structured Finance Association, said, “Over the long-term, our members are concerned a government-controlled assignment system will perversely reduce the incentive to compete on the quality of ratings.”

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Pipelines Sail into Political Winds in Washington in 2021

Pipeline & Gas Journal - for the original article go HERE.

With the ascension of President Joe Biden and environmentally friendly Democratic agency heads taking over U.S. regulatory and independent agencies, interstate gas pipelines face a host of newly emboldened, top-level appointees – many of them gas pipeline skeptics – who will make their political weight felt across federal permitting and safety requirements. 

In that regard, the biggest impact is likely to be at the Federal Energy Regulatory Commission (FERC), which is apt to give greater consideration to prospective emissions of greenhouse gases when considering applications for construction of new gas transmission pipelines.  

Biden will appoint one of the two current Democratic FERC commissioners as chairman. For pipelines, neither is a particularly appetizing choice. Richard Glick has repeatedly opposed approval of new pipelines because of their impact on greenhouse gas emissions and for other reasons. 

Allison Clements, a Democrat confirmed by the Senate in November, was previously in charge of the Sustainable FERC Project at the Natural Resources Defense Fund (NRDC). Clements’ successor at the NRDC FERC Project is Gillian Giannetti, who wrote a blog in November 2019 headlined “Reform Is Long Overdue for FERC’s Gas Pipeline Reviews.” 

FERC will continue to have a 3-2 Republican-to-Democrat advantage until July 2021 when Biden will have a chance to appoint a Democrat to a Republican seat, allowing Glick, who is likely to be appointed the chairman soon after Biden ascends, to take FERC pipeline approval policy in a potentially radical new direction.  

But the winds of change will probably blow before the FERC majority shifts to 3-2 Democratic. Gillian Giannetti thinks Glick or Clements will immediately begin to develop a climate test that FERC can use when considering applications for new pipeline construction. 

In the past, FERC has been unsure of the extent to which greenhouse gas emissions can be considered, in part because federal court case rulings had left a lot to be interpreted clearly.  

But Giannetti believes the National Environmental Policy Act (NEPA) and the Natural Gas Act (NGA) make a clear case for FERC considering “direct” GHG emissions, those created by the construction of a project and emissions from operation of the pipeline.  

“Those are the lowest hanging fruits,” she said. Even though she admits those direct emissions are a small part – though not de minimus – of GHG emissions from a project, calculating those would be a good first step, she said.  

Giannetti thinks many in the pipeline industry would agree with factoring direct emissions into the FERC’s consideration of pipeline applications. “I would be shocked if Joan Dreskin disagreed with me,” she said, referring to the senior vice president, secretary and general counsel of the Interstate Natural Gas Association of America (INGAA).  

But Giannetti and other environmentalists believe that ultimately FERC needs to come up with an assessment tool that measures the lion’s share of GHG emissions created by new pipelines, those from upstream and downstream operations. 

Dreskin said FERC already considers direct emissions.  

“Pipeline project developers provide FERC with information regarding the direct GHG emissions from their proposed projects, which include emissions from pipeline construction and operation,” Dreskin responded. “FERC has historically analyzed and reported these emissions. Current NEPA regulations, however, no longer subdivide effects in this manner. We anticipate FERC will continue to consider what were previously referred to as ‘direct effects’ in its analysis.” 

The question is, however, how far does current law allow FERC to go to block new pipeline projects? 

“Were FERC to find that a project is not in the public interest because of GHG emissions, this in my view would be a seismic shift for the agency, and it would have difficulty surviving judicial review,” offered Emily Mallen, who closely follows FERC activities as a partner in Washington with the law firm Sidley Austin LLP. “That said, FERC could deny a pipeline project under the NGA if it found lack of public need, and Commissioner Glick’s dissents have also centered on whether a particular project is really needed.” 

Mallen believes FERC’s consideration of public necessity will become more onerous and affiliate agreements likely will be subject to greater scrutiny going forward. 

“That said, I can foresee no scenario in which FERC will stop allowing affiliate agreements to serve as a basis for project need,” she added. “But the project sponsors may need to put more data into the record to bolster that needs assessment.” 

Mallen points out one other presumably anti-pipeline factor that may rear its head under a Democratic-controlled FERC: environmental justice (EJ), which has the potential to affect a proposed project on communities of color.  

“When it comes to EJ concerns raised in pipeline and LNG certificate matters, FERC has applied its own methodology to the review that is based on the EPA’s Environmental Justice Mapping and Screening (EJSCREEN) tool,” Mallen explained. “If modifications are made to the EJSCREEN tool to strengthen it, this is certain to impact future FERC analyses. Moreover, we’ve seen dissents by Commissioner Glick on FERC’s approach to EJ review that suggests the agency’s approach could shift under a Democratic-led Commission.” 

Almost as certain as tougher reviews for pipelines at FERC is the likelihood that the Environmental Protection Agency (EPA) will withdraw the Trump final rule issued in September 2020, called Oil and Natural Gas Sector: Emission Standards for New, Reconstructed, and Modified Sources Review and referred to as the “Methane Repeal Rule.”  

It did two favorable things for interstate pipelines: 1) canceled the 2012 Obama rule that make transmission pipelines subject to Clean Air rules on volatile organic chemical emissions and 2) canceled a 2016 Obama rule that made transmission pipelines and all other sectors of the oil industry subject to methane restrictions on air emissions. 

Environmental groups such as NRDC, Environmental Defense Fund and Sierra Club are challenging that Trump final rule in federal court, said David Doniger, senior strategic director, climate and clean energy program at the NRDC who oversees the case. 

“In short, we are very confident the court will reject EPA’s methane rollbacks if the case is seen through to decision. The incoming Biden administration is near certain,” he said. “However, to reverse course administratively, reissue the rules and proceed to regulate existing equipment, the case may not actually proceed to decision.”  

What will also be affected by the incoming Biden administration are Trump administration proposed rules that were not finalized by the time Biden was inaugurated. If these were finalized prior to Biden taking office, the Senate with its Democratic majority could potentially cancel those rules via the Congressional Review Act, since they would have been finalized within 60 days of a new administration taking office.

This is being written prior to Biden’s inauguration, so it isn’t known whether two key proposed rules will be finalized or whether they won’t, leaving the Biden administration to make changes or simply cancel the rulemakings outright. 

The first one is the Army Corps of Engineers proposed revisions to nationwide permits that industries use when digging around wetlands with very little environmental damage. Gas pipelines use NWP12 to which the Corps proposed a number of changes, all of them opposed by the INGAA.  

Interestingly, environmental groups opposed the changes, too, though for different reasons. The Corps is likely to hold off issuing a final rule because of numerous controversies about many aspects of its proposal. However, the law says the Corps must reissue NWPs every five years, meaning in this case by 2022. Among changes environmental groups are seeking is one totally eliminating NWP12.  

Another “hanging chad” is the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) proposed rule giving pipelines a new alternative to replacing old pipe when the population density around that pipe increases from a Category 1 to a Category 3 location.  

Instead of having to replace old pipe, which the pipelines prefer not to do because of cost, the Trump PHMSA wants to allow pipelines to use integrity management procedures to assure the safety of that pipe in the now higher density area. This proposed rule has a somewhat lower visibility but still faces opposition from state safety officials represented by National Association of Pipeline Safety Representatives (NAPSR).  

That proposed rule will probably be carried over to the Biden administration. The fiscal 2021 appropriations bill passed by Congress at the end of December included the Protecting our Infrastructure of Pipelines and Enhancing Safety (PIPES) Act of 2020.  

That bill has minimal impact on gas transmission pipelines, but, more importantly, establishes new safety programs for both distribution pipelines and liquefied natural gas (LNG) facilities. So those two gas sectors will likely see the PHMSA begin to roll out new regulatory programs for them in 2021.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Army Corps on Hot Seat over Changes to Pipeline Approvals

Pipeline & Gas Journal - for the original article go HERE.

With the arrival of the Biden administration and the ascension of environmental concerns to provide a spike in political pressure, the Army Corps of Engineers (USACE) may have to rethink its proposed changes to the nationwide permits (NWPs) it issues for all sorts of dredge and fill construction activities around wetlands, including gas and water pipelines.   

The Corps’ proposal last September was in response to a Trump presidential directive requiring federal agencies to review existing regulations that potentially burden the development or use of domestically produced energy resources.  

The proposed changes have created an unusual political dynamic with both pipelines and environmental groups, usually on opposing sides in these matters, opposed to the changes. Only electric utilities support trifurcating NWP 12 into three parts, one for oil and gas pipelines, one for electric and telecommunications pipelines and another for water pipelines.   

But the broad opposition to the proposal may make it difficult for the Corps to issue a final rule prior to the Trump administration leaving town on Jan. 20. If it refuses to make significant changes, or even if it does, the new Congress has an option to delete any final rule within a certain timeframe after a new administration takes office. There is, too, always the option of a legal challenge to any final rule.  

“This is an invitation for litigation, as recently occurred with NWP 12, creating uncertainty and delays for the many industries that rely on the NWP program,” stated Holly C. Pearen, senior attorney, ecosystems, Environmental Defense Fund.  

One of the major changes the Corps proposed was to NWP 12, which pipelines use extensively when doing construction that causes minimal damage to the environment in and around wetlands.   

That construction ranges from large pipeline expansions, maintenance, inspection and repair activities to comply with pipeline integrity requirements and for modernization projects, such as replacing pipeline facilities with newer, more efficient facilities and installing alternative power sources to reduce greenhouse gas emissions from compressor stations.   

The Corps estimates that approximately 47,750 NWP 12 activities could be authorized over the next five years.  

Regarding NWP 12, the Corps proposes two changes. First, it would keep NWP 12 for oil and gas pipelines only and establish an NWP C and NWP D. The NWP C would be for electric utility lines and telecommunication lines, and NWP D for utility lines that convey water and other substances.   

In addition, preconstruction notification (PCN) requirements, which determine if an NWP 12 application for a Clean Water Act permit needs an extra level of review from the Corps district in which the project would take place, would be changed. Five current PCNs would be eliminated, two retained and, most importantly perhaps, a new one added for pipelines over 250 miles (402 km).  

There is a total of 52 NWPs, and they were last issued in 2017 and are in effect until 2022. The Corps wants to “trifurcate” NWP 12 because the overwhelming number of applications are for oil and gas pipeline projects.   

The Corps explained it was subdividing NWP 12 to “… address the differences in how different linear projects are constructed, the substances they convey, and the different standards and best management practices that help ensure those NWPs authorize only those activities that have no more than minimal adverse environmental effects.”  

While the Trump executive order theoretically dictated deregulatory changes, the Interstate Natural Gas Association of America (INGAA) and the American Petroleum Institute (API) both think the NWP 12 changes go in the opposite direction.  

Amy Emmert, senior policy advisor, API, complains, “Proposing three NWPs for the same types of utility line activities when one NWP has been sufficient is the antithesis of streamlining and the USACE’s rationale related to the “potential” need for industry-specific national terms rings hollow, especially when there are ample opportunities available for tailoring activities at regional or case-specific level.”   

With regard to the threat of “best management practices,” which the Corps hopes to impose on oil and gas NWP 12 applications, Steven Kramer, senior vice president, general counsel and corporate secretary, Association of Oil Pipelines (AOPL), argues, “There are no additional best management practices that could be practically or lawfully imposed via NWP 12. Indeed, creating and imposing any such requirements would risk conflict with or redundancy with the many other applicable conditions.”   

Joan Dreskin, senior vice president and general counsel at INGAA, argues pipeline, utility and water pipeline construction are very similar so there is really no reason to have separate and distinct NWP programs for each.   

In fact, the requirements that would be applicable to NWP 12, C and D “are nearly the same,” Dreskin said. “The record does not include, for example, a comparison of the dredge and fill impacts of constructing a 12-inch natural gas pipeline versus the dredge and fill impacts of constructing a 12-inch water pipeline,” she adds.   

Jim Murphy, legal advocacy director, the National Wildlife Federation (NWF), stated, “The use of NWP 12 to authorize massive oil and gas pipelines known to have significant adverse cumulative adverse impacts on aquatic resources violates … the CWA, and the Corps should eliminate NWP 12 authorizations and require individual permits for such pipelines.”  

Jimmy Hague, senior water policy advisor, The Nature Conservancy, argues that if the Corps establishes a mileage threshold in NWP 12, it should be no greater than 25 miles (40 km), not the 250 miles the Corps has proposed.   

The Corps would mandate three PCNs for NWP 12 in which (1) a Rivers and Harbors Act permit is required; (2) the discharge will result in the loss of greater than 1/10th acre of Waters of the United States (WOTUS); or (3) the proposed oil or natural gas pipeline activity is associated with an overall project that is greater than 250 miles in length and the project purpose is to install new pipeline along the majority of the distance of the overall project length.

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Getting an Exclusion From Steel, Aluminum Tariffs Just Got Harder

The Fabricator - for the original article go HERE. 

President Joe Biden is unlikely to quickly eliminate steel and aluminum tariffs imposed by former President Donald Trump, particularly because the U.S. Department of Commerce has theoretically given the Biden administration new breathing room in the form of its latest changes to the exclusion process. Many manufacturers argue that they should not be subject to the tariffs because the steel or aluminum they need is not available from U.S. manufacturers, and they use this exclusion process as they seek relief.

U.S. metal manufacturers have complained loudly about that exclusion process since Trump imposed the 25% tariff on steel and the 10% tariff on aluminum in 2018. They cite the time it takes for the Commerce Department to either approve or disapprove an exclusion application and the favor that the agency has appeared to show U.S. steel manufacturers in objecting to those exclusion requests.

But metal manufacturing companies will view the mid-December interim final rule as mostly thin gruel. On the positive side, the Commerce Department established general approved exclusions (GAEs), categories of specific steel and aluminum products that had been reviewed as part of exclusion requests and did not receive any objections. As a result, products found within these GAEs are exempt from the import tariffs, and the product manufacturers do not need to apply for exclusion requests. This change is expected to result in an estimated immediate decrease of 5,000 exclusion requests annually. The Commerce Department reported the possibility of adding more GAEs in the future. Unlike individual exclusion requests, GAEs do not include quantity limits.

Two separate supplements exist for GAEs—one for steel and another for aluminum. The rule added 108 GAEs for steel articles and 15 GAEs for aluminum articles. The two new supplements specified that, to use a GAE, the importer must reference the GAE identifier in the Automated Commercial Environment system that corresponds to the steel or aluminum articles being imported. Agency officials said that the manufacturing community should expect no retroactive relief for GAEs.

The Commerce Department, in consultation with the other agencies referenced in the new supplements, will determine what steel or aluminum articles warrant being included in a GAE. The public will not be involved in requesting new or revised GAEs, but the Commerce Department will use the information provided in exclusion requests to inform its review process for what additional GAEs should be added or what revisions should be made to existing GAEs.

While the new GAEs are a positive development for steel product manufacturers, steel and aluminum producers have their own reasons to be excited about a couple of changes that accompany the new GAEs. In fact, these new developments far outweigh anything being done for the steel users.

The Commerce Department added a new certification requirement for exclusion volumes requested. In the past, applicants for exclusion only had to estimate the total quantity of metal that they needed. Because some administration officials had concerns that some applicants might have exaggerated their raw material requirements, manufacturers seeking relief from the tariffs now have to attest that they have a purchase order for the imported products or that they intend to process the imported metal within the next 12 months. The applicants also must attest that the imported metal is not being used solely as a hedge against current market prices. Without documentation to justify these assertions, a manufacturer will have its exclusion request deemed incomplete and rejected.

In addition, steel and aluminum producers are getting a bit of breathing room when supplying steel to manufacturers that otherwise would be relying on imported sources. In the past, if a company such as U.S. Steel, for example, argued against a particular exclusion request, it had to be able to supply the domestically produced steel “immediately,” which the Commerce Department defined as within six to eight weeks. But a foreign steel producer that objected had no time limit. Now the term “immediately” is retained, but language has been modified to apply the same time standard to U.S. objectors, giving them more “wiggle room.”

Paul Nathanson, executive director, Coalition of American Metal Manufacturers and Users, said the new certification requirement “will make it even more difficult for manufacturers seeking an exclusion for a steel product.” He pointed out that there is no parallel requirement for suppliers to certify they can make the product.

“The rule also sets users up for more denials of exclusions requests by removing the eight-week reasonable delivery time period domestic producers had to meet prior to this change,” he adds.

The Biden Commerce Department will probably issue future regulatory fixes to the exclusion process, but Nathanson argued, “No changes to the exclusion process can adequately address the steel shortages and price spikes that are hurting steel- and aluminum-using manufacturers who are already confronting severe economic challenges caused by the COVID pandemic. Instead of ‘fixing’ the exclusion process, the Biden Administration should terminate the Section 232 steel and aluminum tariffs as quickly possible because of the damage they are inflicting on U.S. manufacturers.”

Author bio:
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

What the COVID-19 Stimulus Packages Mean for Manufacturers

The Fabricator - for the original article go HERE.

Congress passed the Coronavirus Aid, Relief, and Economic Security Act to help private businesses during this economic slowdown. Perhaps the most anticipated part of the relief package is the $350 billion Paycheck Protection Program for small businesses with fewer than 500 employees.

The manufacturing community did not get everything it wanted in the Coronavirus Aid, Relief, and Economic Security (CARES) Act and is watching expectantly as Congress considers a follow-on stimulus bill. That next package may headline major infrastructure spending and additional tax concessions, but its passage, or even its development, by Congress is anything but certain.

The National Association of Manufacturers (NAM) had called for a $1.4 trillion COVID-19 Resiliency Fund. The CARES bill did not include such a fund but did provide $350 billion in the form of a Paycheck Protection Program, which is meant to help small businesses, and $454 billion in emergency lending to businesses, states, and cities through the U.S. Treasury’s Exchange Stabilization Fund. But that total is well short of the $1.4 trillion the NAM sought.

In accentuating the positive, NAM CEO Jay Timmons said, “The bill also takes key steps from the NAM plan by increasing the maximum amount of tax deductions for interest on business loans and by creating an incentive, through loan forgiveness, for small manufacturers to retain their employees during this crisis.”

In addition to the tax benefit on business loans, the CARES Act allows companies to take net operating losses (NOLs) earned in 2018, 2019, or 2020 and carry back those losses five years. The NOL limit of 80% of taxable income is suspended, so firms may use NOLs they have to fully offset their taxable income. The net interest deduction limitation, which currently limits businesses’ ability to deduct interest paid on their tax returns to 30% of earnings before interest, tax, depreciation, and amortization (EBITDA), has been expanded to 50% of EBITDA for 2019 and 2020.

However, the NAM wanted any bill to adopt a federal designation that deemed the manufacturing supply chain “essential.” That designation would be important with regard to state and federal laws allowing essential companies to remain open during the coronavirus emergency. The federal Department of Homeland Security (DHS) issued some guidance—which has no legal standing—on March 19, and it did include some manufacturers as part of its list of “essential critical infrastructure workers.”

The Precision Metalforming Association (PMA) said on March 20 that the guidance covers approximately 2,500 companies in its association and companies belonging to the National Tooling and Machining Association. The DHS guidance explicitly covers manufacturers making medical devices, food equipment, and packaging equipment, for example, but it makes no mention of metal fabricators that supply parts to industries such as automotive, appliances, railroads, energy, and many others.

The DHS later clarified in update guidance on March 29 that workers who support crucial supply chains and enable functions for critical infrastructure should be included in the grouping of essential personnel. “The industries they support represent, but are not limited to, medical and health care, telecommunications, information technology systems, defense, food and agriculture, transportation and logistics, energy, water and wastewater, law enforcement, and public works,” the guidance stated. But the 12 pages of detailed listings of “covered employees” in those industries included very few references to “manufacturers.”

Christie Carmigiano, PMA spokeswoman, argues the DHS guidance is by end product, not supplier. “PMA believes that focusing on the end product, while not a clear directive for the industry, does provide for maximum flexibility as governments cannot be expected to become experts in the manufacturing process as they will exclude critical industries, such as stampers who supply those critical products,” she said.

Many metalworking companies view the $350 billion Paycheck Protection Program for small businesses with fewer than 500 employees as the most important provision in the bill. The small-business loans, with a maturity of two years and a 1% interest rate, are available through any bank approved as a Small Business Administration lender. The loans can be as much as $10 million to cover payroll costs, mortgage, and rent payments and health care benefits for employees, including paid sick leave. In some cases, they also can cover interest on other debts.

The new loans apply to costs incurred retroactive to Feb. 15 through June 30. The CARES Act includes loan forgiveness for companies able to keep employees on payroll or continue paying bills throughout the coronavirus crisis. The amount of loan forgiveness will include payroll costs for individuals below $100,000 in annual income and mortgage and rent obligations, including interest and utility payments.

Both Democrats and Republicans in Congress have been talking about another stimulus package focusing on infrastructure, which manufacturing and construction companies have been clamoring for since President Donald Trump’s election in 2016. For example, the chair of the House Committee on Transportation and Infrastructure, Peter DeFazio, D-Ore., said the next step should be “a true stimulus that creates jobs and rebuilds our decaying infrastructure.”

Author Bio:
Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

House Dems to Approve Tough Pipeline Bill

Pipeline & Gas Journal - for the original article go HERE.

Democrats in the House are about to pass a new pipeline safety bill which is unlikely to attract any Republican support. The Pipeline Safety Act (H.R. 5120), passed by two House committees in November with no GOP votes in favor, also clashes with the bi-partisan bill passed last summer by the Senate Commerce, Science and Transportation Committee.

The House Democratic bill was praised by the Environmental Defense Fund (EDF), an environmental group, which has typically been at loggerheads with the Interstate Natural Gas Association of America (INGAA) with regard to how safety and environmental factors should affect pipeline permitting. The INGAA supported a rival bill proposed by Republicans in the House Transportation and Infrastructure Committee. That bill attracted support from one Democrat.

A few days before the Transportation and Commerce Committees voted to approve H.R. 5120 on November 19 and 20, a number of natural gas industry trade groups, including the INGAA and American Petroleum Institute, sent a letter to members of those committees expressing concern about the lack of bipartisan support for H.R. 5120. The letter stated: “Pipeline safety legislation historically has been enacted on a bipartisan basis, and bipartisanship will ultimately be essential to achieve the bicameral support needed in this Congress to reauthorize PHMSA.” The PHMSA is the Pipeline and Hazardous Materials Safety Administration. Its legislative authorization ceased at the end of September 2019 but the agency can continue to do its business nonetheless although new legislation is eventually needed, and sooner rather than later.

The INGAA letter ticked off a number of actions the industry would support in a new pipeline safety bill, including: enhancing PHMSA’s workforce, increasing funding for State pipeline safety regulators, reauthorizing emergency responder grant funding, promoting innovative technologies, and updating PHMSA regulations to address the intent of relevant National Transportation Safety Board recommendations.

Prior to the November 19 and 20 votes by both House committees, Democrats in the Energy & Commerce Committee supported a much milder version of H.R. 5120. But they ditched that bill and jumped on the more radical—from industry’s perspective—bill presented by the House Transportation and Infrastructure Committee.

Elizabeth Gore, Senior Vice President, EDF, lauded H.R. 5120 called the Safe, Accountable, Fair and Environmentally Responsible Pipelines Act of 2019. "By putting in place critical new public safety and climate protections, the SAFER Pipelines Act is a win-win for all American families. It's well past time to give PHMSA the tools and direction to contribute to our nation's efforts to prevent the worst impacts of climate change."

One of the provisions of the bill would essentially prohibit the Environmental Protection Agency from completing an ongoing rulemaking announced last September which would change current regulations imposed in 2012 and 2016 obligating pipelines to reduce methane leaks. The creation in those years of Clean Air Act new source performance standards (NSPS) subparts OOOO and OOOOa subjected pipelines to limits on emissions of volatile organic chemicals and methane from controllers and compressor stations. There were subsequent legal challenges in 2016 and 2017 which led to the EPA reconsidering a few provisions of the 2016 final rule, including those having to do with fugitive emissions. Then, last September, in a proposed rule, the Trump EPA essentially proposed cancelling the 2016 final rule which dealt primarily with methane.

At the end of November 2019, a week after the House committees acted, the INGAA submitted comments on the EPA’s September proposed rule. The group said it was particularly concerned about the provisions in the 2016 EPA final rule dealing with “certain repairs” but added: “Although INGAA’s participation in the legal challenge of NSPS OOOOa was limited to this particular technical issue, INGAA does support a broad review of these rules...”

The comments point out that the INGAA board of directors had formally committed to methane reductions in voluntary pledges issued on July 19, 2018. These included core principles such as minimizing emissions from interstate natural gas pipelines, pneumatic controllers and compressor stations. More specifically, members of INGAA said they will install air-driven, low-bleed, or intermittent pneumatic controllers when installing new pneumatic controllers, unless a different device is required for safe operations; minimize emissions during maintenance, repair and replacement of pipelines; replace rod packing on all transmission and storage reciprocating compressors; conduct leak surveys at all member-owned and operated transmission and transmission and storage compressor stations by 2022 and at all natural gas storage wells owned and operated by INGAA member companies by 2025; and transparently report methane emissions.

Those voluntary commitments obviously did not move House Democrats. H.R. 5120 goes beyond the Obama-era 2016 “methane release from pipelines regulation” by imposing a host of new federal requirements in the area of leak detection and elsewhere. Another provision would require comprehensive pipeline mapping for the first time. Automatic shutoff or remote-controlled valves would be required on existing, new and replaced pipelines. The maximum civil penalties that could be imposed by the PHMSA would be increased from $200,000 to $2 million per violation. It would be easier for the PHMSA to assess criminal penalties for operators who act recklessly. Operators would have to immediately repair major gas leaks.

Democrats in the House believe those far-reaching actions are necessary. “There are nearly 3 million miles of pipelines transporting hazardous liquid and natural gas just feet below countless communities across the U.S., yet federal efforts to ensure these pipelines are safe, reliable and environmentally-sound are woefully outdated,” Transportation Chair Peter DeFazio (D-OR) said, “Last year alone, there were 636 pipeline incidents that left eight people dead and injured another 90, including the horrific incident that killed one person, sent 21 others to the hospital, and damaged 131 structures in Merrimack Valley, Massachusetts. Moreover, it’s estimated that this industry is responsible for one-third of our country’s emissions of methane, a greenhouse gas that is 84 times more potent than carbon dioxide in the first few decades of its release and a major contributor to climate change.”

But those provisions go too far for the pipeline industry, and for Republicans in the House, and most likely, for GOPers in the Senate, where Republicans are in control. After the Transportation Committee vote on November 20, ranking member Sam Graves (R-MO), said, “The most disappointing fact about today’s partisan markup is that if Republicans had been offered the chance to work on these bills with our colleagues in the majority, we could have produced legislation that every member of the committee supported.” The GOP bill, which one Democrat supported, is called the Pipeline Safety Improvement Act of 2019. It includes a number of industry “asks” including prohibiting three overt actions that jeopardize safety: unauthorized turning of a valve; puncturing of a pipe, pump, or valve; and causing a defect to a pipe, pump, or valve. It also creates a safety-enhancing testing program for innovative technologies and operational practices.

Don Santa, President and Chief Executive Officer of the INGAA, said, “The Pipeline Safety Improvement Act of 2019 includes a number of provisions that enjoy wide support…and along with elements of the SAFER Pipeline Act of 2019 reflects the bipartisan approach that has characterized each renewal of this important law. We urge the committees to work together to reconcile these proposals into a legislative package that can be signed into law.”

The House Democratic bill is considerably different from the bill passed by the Senate Commerce Committee on July 31. That bill is milder than even the bill the House Energy and Commerce Committee passed, and then jettisoned on November 19 in favor of the tougher H.R. 5120. The Senate bill is the Protecting Our Infrastructure of Pipelines Enhancing Safety (PIPES) Act of 2019 (S. 2299).

Author Bio:
Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

House and Senate At Odds On Drug Pricing Legislation

P&T Journal - for the original article go HERE.

Neither bill will pass as is but there’s room for compromise.

Momentum in Congress to pass legislation aimed at slowing down prescription drug price increases seems to have slowed as Democrats and Republicans are at loggerheads over competing solutions. However, given the heated criticism of pricing by drug manufacturer from both parties, Congress is likely to do something, perhaps passing legislation forcing companies to provide transparency on costs of drug development and other pricing factors. Key committees in both houses of Congress have passed separate bills.

The Democratic House bill is called the Lower Drug Costs Now Act (H.R. 3). It passed three separate House committees with nary a Republican “yea.” It was expected to be approved by the House sometime before the end of 2019 and, again, probably along party lines. It won’t pass the Senate as is. The Senate bill, which was approve by the Senate Finance Committee, is called the Prescription Drug Pricing Reduction Act (S. 2543). The legislation represents the bipartisan work of the Republican chairman, Sen. Chuck Grassley of Iowan, and ranking Democrat, Sen. Ron Wyden of Oregon. The bill, which has not come to the Senate floor as P&T went to press, passed the committee by a vote of 19-9. Every Democrat voted for the bill, but most of the Republicans, with the exception of Grassley and a few others, voted against it.

Both the House and Senate bills have many provisions aimed at lowering drug prices for seniors, and, in some cases, all consumers. The bills would also reduce costs for the Medicare and Medicaid programs. But the key provisions in each attempt to limit drug price increases and introductory prices, but they do so in very different ways. That divergence is the main reason neither bill will pass Congress as is.

Republican support of the Senate bill is doubtful because many in the party see the provision in the bill that forces down manufacturers’ prices as federal price controls, a characterization that Grassley and Wyden refute. The provision they are arguing about would require prescription drug and biological manufacturers to pay a rebate to Medicare equal to the difference their price hikes for Medicare Part B or D drugs or biologicals and the inflation rate, as measured by the Consumer Price Index for All Urban Consumers (CPI-U).

Adding to the bill’s political tribulations is a threat by Wyden to withdraw Democratic support unless a vote is held on the Senate floor on cementing insurance protections for people with pre-existing conditions.

In the House, the partisan divide is clear and thorough: Democrats are solidly behind the bill and the Republicans just as solidly against it. The legislation, which was put together with strong input from House Speaker Nancy Pelosi, would allow the Health and Human Services secretary to directly negotiate prices of drugs that are determined to contribute the most to Medicare drug costs and are without generic competitors. As written, the legislation says that a minimum of 25 drugs can be on that list and a maximum of 250 drugs. Drug manufacturers who opt out of accepting the secretary’s negotiated rates would incur steep penalties, beginning at 65% of the drug manufacturer’s gross sales of the drug from the prior year. For every quarter the drug manufacturer elects not to participate, the penalty would increase by 10%, with a maximum penalty of 95% of a drug’s gross sales. Like the Senate bill, the House bill has less controversial other provisions, such as reducing out-of-pocket costs and creating discount programs for eligible Medicare beneficiaries.

The Pharmaceutical Research Manufacturers Association (PhRMA) opposes both the Senate and House bill. “If H.R. 3 becomes law, it is lights out for a lot of very small biotech companies that are pre-revenue and depend on attracting capital,” Steve Ubl, PhRMA CEO told reporters in October. A PhRMA blog criticizes the Senate bill this way: “Unfortunately, the Senate Finance Committee has pushed for changes that would upend Part D without any immediate and meaningful savings for most patients at the pharmacy counter.”

Some patient advocacy groups are concerned that the Pelosi bill will cause drug manufacturers to tap the brakes on drug development. But other groups, like AARP, support the legislation and the stated intent of reining in drug prices.

The near certainty that neither bill will pass as is doesn’t mean that there isn’t room for compromise. For example, the Senate bill has a provision that requires companies to report “documentation to justify price increases” in 2021 for drugs with price increases of 100% in the preceding 12 months or at least 150% in the preceding two years. The numbers change slightly in successive years. The House requires reporting on drug price increases of 10% in one year or 25% over three years. Compromise legislation might a middle ground between the two bills.

Stephanie Kennan, a senior vice president at McGuireWoods Consulting, a major lobbying firm who was health policy advisor to Sen. Wyden for about 10 years, says, “The House has passed bills that reflect some of the provisions in the Senate Finance Committee’s proposal. It would make sense that some form of the Senate Finance Committee’s bill becomes the base of a compromise.”

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.

P&T Committees May Want to Alter Some Formulary Policies Because of New Medicare Part D Standards

P&T Journal - for the original article go HERE.  For a PDF version go HERE.

Medicare’s proposed use of a new electronic prescribing (eRx) standard for prior authorization requests between physicians and Part D plans has been well received by the various players in the prescription drug delivery chain. That doesn’t mean, however, that it is problem free and without a number of concerns.

The new standard, which won’t be implemented prior to 2021, may force pharmacy and therapeutics committees to reconsider which tiers they put a couple of categories of drugs on. It may also prompt revision of step therapy policies.

The first thing to remember, though, is that there is no requirement that prescribers or plans implement eRx for seniors with Medicare outpatient drug coverage. But if they do, they must use standards sanctioned by the Centers for Medicare and Medicaid Services (CMS).

The current standard with regard to electronic prior authorization—the X12 278 standard designed to conduct batch transactions—was adopted mainly because it is compliant with HIPAA and was established mostly for durable medical equipment. So, understandably, the X12 standard is not really the right tool for the job. Important prescribing information can’t be inputted, and it doesn’t allow for “real-time” responses, or follow-up by physicians, health plans, or pharmacies.

For these and other reasons, CMS has proposed replacing the standards with National Council for Prescription Drug Programs (NCPDP) SCRIPT Standard Version 2017071. CMS had already designated that SCRIPT standard for eRx prescriptions starting January 1, 2020. It would become mandatory for electronic prior authorization transactions one year later, if CMS finalizes its proposed rule.

Today under Medicare Part D, prior authorization requests and responses are transmitted mostly by fax and phone using the X12 standard. Prior authorization, both within and outside Medicare health plans, is a big deal these days as more plans use it for opioid prescriptions in response to overprescribing and the opioid epidemic.

Prior authorization requirements for oncology drugs are also an issue because the drugs are increasingly expensive. Howard Burris III, MD, the president of the American Society of Clinical Oncology, expressed reservations about streamlining prior authorization in his comments on the new standard. He urged the agency to “exercise caution in order to avoid unintended consequences of restricting or delaying care, resulting in harmful outcomes.”

CMS was required to designate a standard for electronic prior authorization by the 2018 SUPPORT for Patients and Communities Act. CMS had endorsed the SCRIPT standard for Medicare eRX standards prior to the SUPPORT Act, but it was constrained from extending the SCRIPT standard to electronic prior authorization transactions by the HIPAA issue. The SUPPORT Act eliminated that barrier by saying a new standard could be adopted “notwithstanding” any other provision of law, if such proposals were made in consultation with stakeholders and the NCPDP or other standard-setting organizations. As a result, HIPAA noncompliance is not a barrier to adoption of the SCRIPT standard by Medicare.

Health plans and pharmacists appear to be generally happy with the application of the SCRIPT standard to prior authorization requests and decisions, even though some health plans with both Medicare and commercial plans currently use non-SCRIPT standards.

Joel White, the executive director of the Opioid Safety Alliance pointed out in his comments to CMS that in considering only two sets of electronic prior authorization transaction standards (X12 and SCRIPT) CMS “seemingly ignores current industry use of HL7 FHIR standards or APIs [application programming interfaces].” Leaving these additional standards out of consideration “unnecessarily and prematurely” limits the scope of public consideration and comments, wrote White. The agency’s proposed solution also runs “contrary to other agency efforts, such as increased interoperability and prohibiting information blocking,” he stated.

The American Association of Family Physicians has a different concern: the “significant administrative burden and/or access issues” that general practitioners face in introducing relevant software into their practices. The AAFP wants a “safe harbor” for primary care physicians and, like the Opioid Safety Alliance, the freedom to use standards other than SCRIPT if both a prescriber and a health plan agree to that. One of the concerns about imposing SCRIPT is that physicians might be faced with having to use different standards for e-prescribing within the state Prescription Drug Monitoring Programs and the Part D programs.

When all is said and done, CMS is likely to give physicians, pharmacies, and Part D plans some leeway in a final rule for eletronic prior authorization. Even so, P&T commmitees in and out of Medicare will have to consider new factors when putting together their prior authorization policies and programs.

Author bio: 

Mr. Barlas is a freelance writer in Washington, D.C. who covers issues inside the Beltway.