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California Institute for Federal Policy Research
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California Capitol Hill Bulletin
Volume 8, Bulletin 24 — July 27, 2001
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House Resources Considers CALFED Bay-Delta Reauthorization
House International Relations Votes Short-Term EAA Extension
Beale AFB To Be Site For Global Hawk UAV Mission
Administration To Deliver Base Closure Bill Before August Recess
FERC Begins Process to Define California Power Refund Amounts
Senate Cloture Vote May Restrict Mexican Truck Access to U.S. Roads
Governor Davis Signs 2001-2001 Budget
Senate Governmental Affairs Holds Hearing on Media Ratings
House Supports Economic Relations With Vietnam
State Coalition Report: Framework for the Future of Agriculture
Brookings Institution Releases Two Urban Sprawl Reports
Rep. Mike Honda Speaks at California Institute Breakfast
House Resources Considers CALFED Bay-Delta Reauthorization
The House Resources Subcommittee on Water and Power held a hearing on Thursday, July 26 to consider two bills that would reauthorize the CALFED Bay-Delta restoration program. The first bill, H.R. 1985, has been introduced by Rep. Ken Calvert (Corona) and several other members of the California congressional delegation; the second bill, H.R. 2404, has more recently been introduced by Rep. George Miller (Martinez), also with additional California co-sponsors.
The hearing was chaired by Rep. Calvert. Several other California members of the Committee also attended, including: Reps. Miller, George Radanovich (Mariposa), Grace Napolitano (Norwalk) and Hilda Solis (El Monte).
Among the witnesses, Secretary of the Interior Gale Norton testified, as did Thomas M. Hannigan, Director of the California Department of Water Resources. Secretary Norton testified that the Administration supports the integrated comprehensive approach of the CALFED program and H.R. 1986. She referenced certain concerns with such issues as the funding and governance provisions and the South of the Delta water assurances language, and pledged to work with the Committee to resolve these issues as the legislation moves forward. As to H.R. 2402 she expressed concern that it focuses on the Department of the Interior and not on non-federal public and private entities, which are critical to the CALFED federal-state partnership.
Mr. Hannigan testified that Governor Davis and the agency support the objectives of H.R. 1985, but they have concerns with several aspects of the bill. Among those concerns are: provisions that appear to constrain State agencies and limit State control; and the South of the Delta water assurances language, which guarantees delivery of 65-70 percent of water contract amounts in a normal year. He applauded Committee willingness to consider several technical and substantive changes and offered to continue to work with the Committee as the bill moved forward to address additional changes.
Other witnesses included: Ronald R. Gastelum, CEO, Metropolitan Water District; Cynthia L. Koehler, Legal Director, Save the Bay; David Guy, Executive Director, Northern California Water Association; William G. Luddy, Director, Labor Management, Education and Development Fund, United Brotherhood of Carpenters; David L. Sunding, Director, Sustainable Resource Development, Univ. of California, Berkeley; Peter Carlson, Partner, Will and Carlson Inc.; and Clifford W. Schulz, Special Water Counsel, Kern County Water Agency.
The Senate considered its CALFED bill, S. 976, sponsored by Sen. Dianne Feinstein last week. See, Bulletin, Vol. 8, No. 23 (7/19/01). Testimony from the hearing can be obtained through the Committee’s website at: http://www.house.gov/resources .
House International Relations Votes Short-Term EAA Extension
On Wednesday, July 25, the House International Relations Committee reported out by voice vote a bill to extend the provisions of the Export Administration Act. The bill, H.R. 2602, would extend the EAA through November 20, 2001. In P.L. 106-508, passed last year, Congress extended the provisions of the law through August 20, 2001. H.R. 2602 would give Congress additional time to complete consideration of new legislation, without allowing the law to lapse.
Both the House and Senate are considering major legislation to substantively rewrite the EAA. Currently, the Senate is poised to take up S. 149, its version, on the floor in the near future, and perhaps before the August recess begins. Chairman Henry Hyde (IL) of the House International Relations Committee stated at Wednesday’s markup that the Committee would consider reauthorization legislation on August 1st. Rep. David Dreier (San Dimas) introduced H.R. 2568, which is identical to S. 149, introduced by Sen. Michael Enzi (WY).
Beale AFB To Be Site For Global Hawk UAV Mission
According to Reps. Wally Herger (Marysville) and Doug Ose (Sacramento), the Air Force will announce on Friday, July 27, that Beale Air Force Base will become the final beddown for the Global Hawk Unmanned Aerial Reconnaissance Vehicle (UAV). The Air Force is expected to officially name Beale AFB as it releases its Annual Force Structure announcement. According to the Congressmen’s offices, the Global Hawk squadron at Beale is projected to add 1,673 jobs and $146 million to the economy of the surrounding Northern California community.
In a prepared statement, Rep. Herger said, "This is a tremendous victory for Northern California and the future of our world-wide surveillance technology," adding, "Global Hawk and the greater Beale community are going to make a great team." Rep. Ose said, "This decision will create new jobs and spur economic growth in Northern California."
While the Secretary of the Air Force made the final beddown decision, Beale AFB was an apparent early favorite because of its location, with the climate allowing Beale to remain fully operable for more than 90 percent of the year. In addition, Beale currently houses the 9th Reconnaissance Wing, responsible for operation of the U-2 manned surveillance aircraft. In addition to its strategic importance as one of the few unmanned military aircraft, the Global Hawk UAV will provide a high-altitude, long-endurance vehicle, with nearly real-time intelligence capabilities. The first of the 18 primary aircraft and personnel are projected to arrive at Beale in 2002 and 2003, the statement said.
Administration To Deliver Base Closure Bill Before August Recess
Secretary of Defense Donald Rumsfeld reiterated to a meeting of Republican lawmakers on Thursday, July 26, that he and Pentagon leaders would pursue base closures. According to press reports, Rear Adm. Craig Quigley on Thursday commented that legislation to create a base closure process was not quite ready but that, "the goal is to get it submitted to the Congress before the August recess."
Earlier in the day, the ranking Republican on the Senate Armed Services Committee, Sen. John Warner (VA), had predicted that the Bush Administration would send to Congress legislation authorizing additional rounds of base closures during the FY 2002 fiscal year. According to press reports, Warner made the comments in the context of a story about whether or not bases in the Southeastern U.S. might be targeted.
The President’s February 2001 Budget Blueprint document estimated that there is roughly a 25% surplus in military facilities at present, and Administration officials have on several occasions commented that a base closure round or rounds would be necessary. During four rounds of military base closures in 1988, 1991, 1993 and 1995, California bore a vastly disproportionate share of the burden, shouldering 60% of the nation’s net personnel cuts despite having housed only 15% of the nation’s personnel before the closures began.
FERC Begins Process to Define California Power Refund Amounts
On Wednesday, July 25, the Federal Energy Regulatory Commission released an order beginning the process which will eventually lead to FERC’s defining an amount of refunds to be due to California and its utilities from power generators for overcharges over the preceding 8-9 months. The order covers only spot market transactions from October 2, 2000, through June 20, 2001, mirroring largely a proposal issued by FERC administrative law judge Curtis L. Wagner. (FERC will separately consider overcharges in the Pacific Northwest.)
In addition, FERC seeks to significantly expand its scope of authority by include sales by both public and non-public utilities into these markets. To date, only private transactions have been under the FERC purview. Commissioners William Massey and Linda Breathitt have expressed disagreement with the Commission’s plan to include municipal utilities in the refund orders, and the municipal power authorities are likely to challenge the plan in court.
One California utility company was critical that the order did not go far enough. A statement from Southern California Edison said, "This order does not address, however, the hundreds of millions of dollars in excess costs paid by SCE throughout the summer of 2000. FERC has not only the authority but also the duty to order refunds back to at least May 2000, when the exercise of market power and unreasonable pricing became clear. In addition, SCE believes that the remedies proposed by FERC should not be limited to the ISO and PX spot markets, but to all markets tainted by the exercise of market power."
The State of California had sought to include overcharges dating back to May 2000, and FERC has so far declined to do so. In its July 25 report, the FERC majority reiterates its position that it lacks the Congressional authorization to order refunds for the preceding period, which begins 60 days after an August 2000 filing by California utilities. The FERC document states, "Several parties argue that the Commission’s statutory duty to protect consumers and its broad legal and equitable authority to do so requires that the Commission remedy unjust and unreasonable rates for the period prior to October 2 by ordering refunds. Other parties agree with the November 1 Order’s conclusion that the Commission has no legal authority to grant refunds for overcharges prior to October 2. … [W]e conclude that the Commission lacks the authority to order retroactive refunds of unjust and unreasonable rates charged prior to October 2."
Governor Gray Davis strongly expressed concern that speculated refund levels were far below the $8.9 billion sought by the State. In a statement, he commented, "If FERC does not make California whole, we will see you in court." While no specific amount was quoted, Judge Wagner had said that California may be owed "hundreds of millions of dollars, probably more than a billion dollars in aggregate sum…" But he had also noted that the State may already owe that much or more in back payments to generators, thus largely or even completely wiping out any potential gain from refunds. FERC Chairman Hebert Jr. acknowledged that litigation is likely, stating, "This is going to the circuit court anyway."
The order requires the California Independent System Operator (ISO) to provide raw data to FERC within 45 days regarding market transactions to help FERC determine what prices should have been charged during the period in question. A just and reasonable price level will be determined by calculating the spot market price for electricity generated by the least-efficient plant operating.
In a separate order, FERC required increased reporting of natural gas prices in California.
The FERC meeting was the last before a lengthy summer break. After the Commission reconvenes in the fall, there is widespread speculation that Commissioner Patrick H. Wood III, recently appointed by President Bush, will take over as FERC Chairman from current Chair Curt Hebert.
The FERC orders are available on the Commission’s website, at http://www.ferc.gov/electric/bulkpower.htm .
Senate Energy Committee Hears From FERC Commissioners; Feinstein to Pursue Legislation to Broaden FERC Authority Over Prices
The Senate Committee on Energy & Natural Resources Committee held a hearing on Thursday, July 27 to hear from the five commissioners of the Federal Energy Regulatory Commission. Much of the discussion focused on the FERC order issued the previous day (see above article). In addition, there was discussion of a Committee white paper, authored by Chairman Jeff Bingaman (NM), which proposes legislative action in several areas, including transmission jurisdiction; reliability; rates and market power; regional planning and siting; and market transparency rules.
During the hearing Senator Dianne Feinstein stated that she will push for legislation to grant the FERC additional authority to address the issue of refunds for unjust and unreasonable energy prices. Feinstein’s legislation would be in line with a number of recommendations outlined by Commissioner William Massey, who had dissented in part from the July 25 order. Feinstein commented, "Unfortunately, FERC is now seen by many as a somewhat ‘toothless tiger’ and I want to help give this important agency some additional teeth." Recommendations by Commissioner Massey which Feinstein will seek to support include: additional authority to issue electricity refunds for all times, not just after the Commission has initiated an investigation; increased authority to oversee natural gas markets and authority to issue refunds for "unjust and unreasonable" transportation costs of natural gas; additional oversight authority over on-line trading firms that deal in natural gas and electricity; direct authority to mitigate market power and authority to re-evaluate the criteria FERC uses to allow market rates for electricity; and sufficient authority to review mergers and acquisitions that involve generation facilities. Additionally, Senator Feinstein commented that she is concerned that FERC does not have authority to regulate transactions among holding companies and their subsidiaries or between affiliated companies.
Most of the testimony was supportive of much of the white paper’s thrust, though commissioners supported some provisions more than others. Chairman Hebert reiterated his opinion that "The best way for Congress to help electricity consumers is to promote wholesale competition through the legislative changes." Commissioner Nora Meade Brownell commented that the white paper is "well thought out," and Commissioners Patrick Wood and Brownell stressed the importance of RTOs to laying the groundwork for regional market transformation.
Prepared testimony from all five FERC Commissioners is available on the Energy & Natural Resources Committee website, at http://www.senate.gov/~energy/ .
The Senate committee’s white paper on the topic is available on the web at http://energy.senate.gov/legislation&docs/pdf/107-1/electricity_leg.pdf .
Senate Cloture Vote May Restrict Mexican Truck Access to U.S. Roads
By a 70-30 vote on Thursday, July 27, the Senate invoked cloture and thereby will force a vote on a Democratic-sponsored proposal to impose tight standards on Mexican trucks traveling in the United States. The motion limits debate on the FY2002 transportation appropriations measure to 30 hours. A similar restriction was passed by the House in June. Administration officials and supporters of more flexible standards on Mexican trucks entering the U.S. have argued that the proposed Senate action violates provisions of NAFTA and had hoped for more time to negotiate a compromise. The Senate may hold a final vote on Friday regarding the truck question, though supporters of freer access may use procedural tactics to slow consideration of the matter.
At present, Mexican trucks may only operate in a 20-mile commercial zone near the international border which allows transfer of cargo to American trucks. Under the 1993 North American Free Trade Agreement, the United States must open its roads to Mexican trucks beyond the 20-mile border zone starting next year. Opponents are promoting legislation to bar processing of applications for Mexican trucks operating in the United States until completion of rigorous safety inspections. Reportedly, Mexico has threatened trade sanctions of their own in retaliation for restrictions on Mexican truck mobility, including limits on U.S. exports of corn syrup into Mexico.
For further information, see also, Bulletin, Vol. 8, No. 23 (7/19/01).
Governor Davis Signs 2001-2001 Budget
On Thursday, July 26, Governor Davis signed the 2001-2002 Budget bill. The $101 billion spending plan invests heavily in education, increasing investment in K-12 education by $2.5 billion and per-pupil spending by $324. The budget maintains funding for public safety, health care and the environment. For public safety, $232.6 million is included for the Citizens’ Option for Public Safety (COPS) and the Juvenile Justice Crime Prevention program.
In health care, the Budget includes $819.8 million to provide health care and related benefits to adult family members and children through the adult expansion of the Health Families program, the States Children’s Health Insurance Program (S-CHIP). Environmental projects included in the budget include $81 million for CALFED and $35 million for coastal cleanup projects throughout the state.
The Budget also includes $4.3 billion in tax relief, including Senior Citizens’ Property Tax and Renters’ Tax Assistance, for low income seniors and disabled individuals. The Budget also maintain a $2.6 billion reserve for economic uncertainties. For more information on the State Budget, visit the California Department of Finance website at http://www.dof.ca.gov .
Senate Governmental Affairs Holds Hearing on Media Ratings
On Thursday, July 26, the Senate Governmental Affairs Committee held a hearing entitled Rating Entertainment Ratings: How Well are They Working for Parents and What Can be Done to Improve them? The Committee heard testimony from Senator Sam Brownback (KS), who sponsored the original legislation calling for an Federal Trade Commission study of entertainment industry marketing.
Also appearing before the committee were Dale Kunkel, Professor of Communication, University of California Santa Barbara, and Mr. Jack Valenti, President and CEO of the Motion Picture Association of America. Professor Kunkel discussed why media rating were initially developed and how well they are working. H e also provided recommendations on how media ratings can be improved, indicating more active monitoring and oversight of the ratings process is needed and that the prospect of a universal rating system that could be applied across all media should be seriously considered.
Representing the motion picture industry, Mr. Valenti testified on why the film industry’s voluntary movie rating system has endured, indicating that an FTC survey revealed 80% of parents were satisfied with movie ratings. He also discussed how the industry responded to the first FTC report and was later commended several times in the second report for improving the marketing of movies. Mr. Valenti also provided comment on the Accountability Act of 2001, proposed legislation which he described as sanctioning "the intrusion of the FTC into a voluntary rating system."
Others testifying included Actor Billy Baldwin, President of Creative Coalition; Mr. Doug Lowenstein, President, Interactive Digital Software Association; Mr. Doug McMillon, Senior Vice President, WalMart Stores; Ms. Hilary Rosen, President and CEO, Recording Industry Association of America; Mr. Roger Pilon, Vice President for Legal Affairs, CATO Institute; Dr. Michael Rich, Assistant Professor of Pediatrics, Harvard Medical School; and Ms. Laura Smit, a parent. To view the testimony of all witnesses visit the committee website at http://www.senate.gov/~gov_affairs .
House Supports Economic Relations With Vietnam
On Thursday, July 26, the House voted to support continued economic ties with Vietnam. On a 324-91 vote, it rejected a resolution, introduced by Rep. Dana Rohrabacher (Huntington Beach) that would have disapproved the Administration’s June 1 decision to grant the extension for another year.
The waiver grants nondiscriminatory trade treatment to Vietnam which allows it to continue to avail itself of U.S. government credits or investment guarantees for trade between it and the U.S. Sample sources for such credits and guarantees are the Export-Import Bank and the Department of Agriculture.
Latest figures show that about 37 percent of Vietnamese emigrants settle in California.
California’s exports to Vietnam in 2000 amounted to $92 million.
State Coalition Report: Framework for the Future of Agriculture
NFACT, a coalition of departments of agriculture from New Mexico, Florida, Arizona, California and Texas, has recently released a report entitled NFACT: Framework for the Future of Agriculture. NFACT, formed in February 1999, was organized in an effort to give the agricultural communities of the NFACT states greater recognition at the national level. California is represented in the coalition by Secretary William J. Lyons of the California Department of Food and Agriculture.
The report was developed to highlight for Congress and the Bush Administration the shared interest and concerns of the five states’ agricultural communities in the context of upcoming farm policy legislation. The report makes recommendations based on input from hundreds of farmers, ranchers, educators, conservationists, environmentalists and state and local officials in all five states.
Specific recommendations are made to Congress and the Administration in animal and plant health; conservation; international and domestic markets; research, extension and education; and risk management. In the area of animal and plant health the coalition recommends that Congress should ensure that Agricultural Quarantine Inspection user fees are deployed to the maximum extent and that Congress include the Animal Health Protection Act as part of the 2002 farm policy legislation. NFACT recommends that Congress reauthorize, expand and fully fund farm policy legislation conservation programs, return the Conservation Reserve Program cap to 45 million acres and increase the Wetland Reserve Program cap to 2 million acres.
For international and domestic markets, NFACT supports restoring funding for the Market Access Program to $200 million and increasing the purchase of domestically produced agricultural products in the government’s food programs. The coalition is also calling for the augmentation of U.S. Department of Agriculture’s research programs in general and for expediting research that supports speciality crop pesticide registrations through the Interregional Research-4 Program. Finally in the area of risk management, NFACT recommends Congress support the farm income safety net proposal as developed by the National Association of State Departments of Agriculture, as well as expand crop insurance to include all specialty crops, livestock, poultry and aquaculture.
Along with more extensive recommendations in each of the areas outlined here, the report also provides agricultural profiles of each state. For more information on NFACT visit the California Department of Food and Agriculture website at http://www.cdfa.ca.gov/nfact .
Brookings Institution Releases Two Urban Sprawl Reports
The Brookings Institution recently released two reports of surveys on urban sprawl entitled, Who Sprawls Most? How Growth Patterns Differ Across the U.S. and Job Sprawl: Employment Location in the U.S. Metropolitan Areas. The first report assesses how metropolitan areas are growing and reports significant regional disparities in growth patterns and the urbanization of land. The study indicates that the Northeast and Midwest have a more significant sprawl problem than the West because both areas are reurbanizing large amounts of land but not gaining residents, whereas in the West the pace of land consumption and population growth are about equal. The West has some of the densest metropolitan areas in the country with 10 of the 15 densest areas in California, Nevada and Arizona.
The second report on job sprawl, examines the location of jobs in the 100 largest U.S. metropolitan areas. The study finds that across these 100 areas on average only 22% of people work within three miles of the city center while over a third (35%) work more than 10 miles from the city center. The study shows that in general the Northeast has the least job sprawl, but that several metropolitan areas in the West, including San Francisco also have concentrated job centers.
The report breaks the 100 metropolitan areas into four groups, dense employment metros, centralized employment metros, decentralized employment metros, and extremely decentralized employment metros. Along with San Francisco, Fresno also ranked on the list of dense employment metros where 25% or more of the metro employment is within 3 miles on the Central Business District (CBD). Anaheim, San Jose and Sacramento are listed among the centralized employment metros where 10-25% of the metro employment is within 3 miles of CBD and more than 60% is within 10 miles. Oakland and San Diego are among the metropolitan areas classified as decentralized employment metros, where still 10-25% of metro employment is within 3 miles of CBD but less than 60% is within 10 miles. Finally, Los Angeles and Riverside/San Bernardino were ranked among the extremely decentralized employment metros where less than 10% of metro employment is within 3 miles of CBD.
Both reports can be accessed at http://www.brookings.edu/urban .
Rep. Mike Honda Speaks at California Institute Breakfast
On Tuesday, July 24, the California Institute hosted a breakfast for its Advisory Board with Rep. Mike Honda to discuss bipartisan issues and their impact on California. IBM was the host for the breakfast event. Honda spoke regarding his committee appointments, which include the Committees on Budget, Science, and Transportation & Infrastructure.
Rep. Honda also responded to questions focused on the issues of education as it relates to the budget and the Bay Area technology slowdown and its effects on the economy. He also responded to questions about the CALFED water program, the energy problem, and his views on the budget process.
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