June 16, 2017 Washington Update

This Week in Congress . House – The House passed the Verify First Act (H.R. 2581), the Department of Veterans Affairs Accountability and Whistleblower Protection Act of 2017 (S. 1094), and the Broader Options for Americans Act (H.R. 2579). . Senate – The Senate passed the Russia-Iran sanctions bill (S. 722) and confirmed Kenneth Rapuano to be Assistant Secretary of Defense.

Next Week in Congress . House – The House may consider the Accelerating Individuals into the Workforce Act (H.R. 2842); H.R. 1873, the Electricity Reliability and Forest Protection Act, and the Water Supply Permitting Coordination Act (H.R. 1654). . Senate – The Senate will consider the nomination of Brock Long to be Administrator of Federal Emergency Management Agency. Also under consideration will be the cloture votes on two Department of the Treasury nominees, Sigel Mandelker to be Under Secretary of the Treasury for Terrorism and Financial Crimes and Marshall Billingslea to be Assistant Secretary of the Treasury for Terrorist Financing.

Brady said that “[m]y current thinking on TAX border adjustment -- after listening to our businesses large and small and our members -- Brady Floats Five Year Phase-in for Border is a very gradual five-year transition on the Adjustment Tax and Suggests Some border adjustment tax…[which] reflects really Exceptions the input we’ve gotten, the feedback we’ve gotten.” He added that ”[a] very gradual five- Key Points: year phase in really resolves the major . The House Ways and Means Committee challenges.” Chairman suggests that border adjustment tax would be phased-in over a five-year period as Brady also said his plan would include targeted way to alleviate concerns about its impact on rules for the financial services, insurance, economy and specific industries such as communications and digital-services retailers. industries. These specific industry rules are . Brady also mentioned limited exceptions for BAT and interest disallowance Table of Contents

Taxes 1 On Tuesday, House Ways and Means Financial Services 5 Committee Chairman Kevin Brady (R-TX) Energy & Environment 9 signaled that he would be open to making some Defense 13 changes to help alleviate concerns about the Health 18 transition to the proposed border adjustable tax Transportation & Infrastructure 19 (BAT). Speaking at a Wall Street Journal event, Technology 23 ______©2017 Williams & Jensen, PLLC 701 8th Street, N.W. Suite 500 Washington, D.C. 20001

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Williams & Jensen – Washington Update June 16, 2017

needed because “[i]t’s hard to determine where…the border begins in the cloud” he On June 16, Senate Finance Committee said. Chairman Orrin Hatch (R-UT) announced that the Committee would seek public input on tax The phase-in would allow companies to deduct reform issues with a deadline of July 16. most of the cost of imported goods but the deductions would slowly phase out. The In his letter, Hatch stated: phase-in would also apply to exports which become fully exempt after the period. As this effort moves forward, it is important that everyone – including Brady also suggested that small businesses, real members of Congress, administration estate and utilities might have an exception to officials, and stakeholders – manage the general disallowance of the deductibility of expectations and remain willing to business interest which is included in the compromise on ideal policy Blueprint. preferences. Make no mistake, I intend to be ambitious in crafting effective tax In response to the Chairman’s suggested phase- reform legislation. However, all of us in, groups including the Americans for must keep in mind the fiscal, economic, Affordable Products signaled they remain and procedural constraints inherent in opposed to the BAT. In addition, House Ways this exercise. Therefore, it is my hope and Means Committee Members expressed that any input submitted in response to some skepticism that a phase-in would truly this request will keep those realities in alleviate the concerns posed by the mind. BAT. Representative Pat Tiberi (R-OH) said “I think it helps some…[but] I don’t know to Some details for the submission process what extent.” He remarked that “I don’t have include: enough information…[but] [a] CEO in my . All comments should be submitted via district who has a lot of employees, he email at suggested a 20-year phase in.” Several [email protected], by members of the House Freedom Caucus, no later than July 16. which as a group does not yet have a formal . While comments on any tax-related position on the BAT, also said they remain subject will be appreciated, the focus is opposed to adding a new BAT tax to the tax code. Upcoming Dates July 28: August Recess scheduled to Senate Finance Chairman Asks for Tax begin Reform Input September 30: FY 2017 ends and FAA, SCHIP, and NFIP authorizations Key Points: expire . Hatch calls for public comments on tax reform Fall 2017: CBO’s projections of when by July 16 Treasury exhausts extraordinary . Allows opportunity for input and then measures Committee can move to potential action on tax December 31, 2017: Title VII of FISA reform expires

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Williams & Jensen – Washington Update June 16, 2017

on the following four categories: After previously pushing Congress to increase the debt ceiling before leaving for the August 1. Providing much-needed tax relief to recess, Secretary of the Treasury Steven middle-class individuals and families Mnuchin now says that his department has a through reforms to the individual income plan in place to avoid default through tax system; September. The Bipartisan Policy Center, an 2. Strengthening businesses – both large and independent think tank that produces fairly small – by lowering tax rates and accurate forecasts, reiterated its target of broadening the relevant tax base in order October or November for the limit to be to put the economy on a better growth path reached but cited additional uncertainty. An and create jobs; October deadline would give House Speaker 3. Removing impediments and disincentives Paul Ryan (R-WI) more leverage to get the for savings and investment that exist in increase approved as he could attach it to must- the current tax system; and pass spending legislation to keep the 4. Updating our international tax system in government funded after the fiscal year ends order to make our nation more competitive September 30. in the global economy and preserve our tax base. Support for Extending Budget Window Grows, Could Allow Longer “Temporary” This request will no doubt generate a Tax Cuts significant amount of input, most of it likely already submitted or shared in a variety of Key Points: contexts. The request and process also allows . Senate Finance Committee Chairman the Senate Finance Committee to indicate it Orrin Hatch signaled an openness to held a process seeking information, so it can extending the 10-year budget window move top tax reform without hearings and traditionally used to in scoring budget such. In the recent past, Republican staff and legislation. Senators have suggested the Finance . The idea of extending the traditional Committee has held enough hearings and window to a longer 15-to-20 year window working groups on the broad reform issues and is viewed as making passing tax it was time to act. legislation that loses revenue easier under the budget reconciliation rules. Mnuchin Says Treasury Can Avoid Default Through September Senate Finance Committee Chairman Orrin Hatch (R-UT) added his support to an idea Key Points: several other Senators had raised that would . Secretary Mnuchin said that he believes expand the ten year budget window, calling the that an increase in the statutory debt limit current rules “problematic.” Current Senate could be postponed until September. He rules require that any budget provision in latest remarks clarify previous statements reconciliation (the legislative vehicle being indicating that Congress needed to act considered for tax reform) cannot lose revenue prior to the August recess. or increase the deficit beyond the budget window. Current practice uses a ten year budget window. But the “Congressional

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Budget Act of 1974” does not prevent a longer could be a benefit to individual tax reform, but budget window. It was this Senate rule that not a panacea for business tax reform. meant the 2001 “Bush” tax cuts had to sunset after ten years. Ways and Means Marks Up Nuclear Production Tax Credit Extension In the Senate, Republicans only having 52 seats, so passing comprehensive tax reform Key Points: without Democratic votes requires that the . The Committee marks up two bills legislation fall under the reconciliation rules that mandate no deficits increase after the On June 15, the House Ways and Means budget window. If comprehensive tax reform Committee considered H.R. 1551, a bill that were to take place, some Senate Republicans would modify the tax credit for production would like for the budget window to be from advanced nuclear power. The Committee extended so that tax cuts and other measures reported the bill out by voice vote. The do not expire in ten years, requiring Committee also considered and reported out reauthorization under unknown political H.R. 2842, a bill to establish employment circumstances. demonstration projects for welfare assistance beneficiaries. Secretary of the Treasury Steven Mnuchin also has suggested support for the option, though Upcoming Hearings and Events he stated he prefers a bipartisan effort. Senators Pat Toomey (R-PA) and June 20 Lindsey Graham (R-SC) have both announced Tax Reform Speech: House Speaker Paul support while Senator Bob Corker (R-TN) said Ryan (R-WI) will address the tax reform debate that he would be skeptical of anything that in a speech to the National Association of makes it easier to increase the deficit. Grover Manufacturers. Norquist and the Club for Growth both support the move to a longer window. House June 21 Ways and Means Committee Chairman Kevin FY 2018 Budget Request and Trade: The Brady (R-TX) allowed that he would consider Senate Finance Committee will hold a hearing it, as did House Freedom Caucus Chairman on the proposed budget request for FY 2018 Mark Meadows (R-NC). and the trade policy agenda. U.S. Trade Representative Robert Lighthizer will testify. However, it may run into issues with the scorekeepers especially with regard to business Trade: The House Small Business Committee taxes (as opposed to individual taxes). A recent will hold a hearing on “Partners in Commerce: letter from the Joint Committee on Taxation The Trade Promotion Coordinating suggests that even a three year corporate rate Committee.” cut would violate the Senate rule in years after the ten year budget window because companies June 22 can carry losses and credits forward. U.S. Trade Policy: The House Ways and Individuals generally cannot carryforward tax Means Committee will hold a hearing on the attributes as much. So a longer budget window U.S. Trade Policy Agenda, featuring U.S. Trade Representative Robert Lighthizer.

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reports that will be focused on: capital markets; For more information about tax issues you may email asset management and insurance industries; and or call Christopher Hatcher at 202-659-8201. Nick non-bank financial institutions, including Karellas contributed to this section. financial technology.

FINANCIAL SERVICES Treasury included a summary of the reforms recommended in the bank and credit union Treasury Releases First Report on report: Financial Regulation; Secretary Mnuchin . Improving regulatory efficiency and Testifies on Regulatory Reform effectiveness by critically evaluating mandates and regulatory fragmentation, Key Points: overlap, and duplication across . Treasury released the first of several reports regulatory agencies; that included recommendations for regulatory . Aligning the financial system to help reform of the financial sector. This report support the U.S. economy; focused on banks and credit union regulation . Reducing regulatory burden by and called for changes to capital, liquidity and decreasing unnecessary complexity; leverage rules, as well as structural reform to . Tailoring the regulatory approach based the CFPB and other agencies. on size and complexity of regulated . Mnuchin stressed the need to fix the Volcker firms and requiring greater regulatory Rule. cooperation and coordination among financial regulators; and On June 12, the Department of the Treasury . Aligning regulations to support market (Treasury) released its first report in series of liquidity, investment, and lending in the reports in response to the President’s Executive U.S. economy. Order on core principles for financial regulation. The report, entitled, “A Financial The 146 page report includes a number of System that Creates Economic Opportunities: specific recommendations for reforms for Banks and Credit Unions,” is focused on bank Congress to address legislatively and for and credit union regulation. It identifies financial regulators to address through changes which could be undertaken to rulemaking or other means. Several examples “meaningfully simplify and reduce regulatory of recommendations include: broadening the costs and burdens, while maintaining high statutory mandate of the Financial Stability standards of safety and soundness and ensuring Oversight Council (FSOC) to enable it to the accountability of the financial system to the assign a lead regulator as the primary regulatory American public.” The recommendations in on issues that have conflicting or overlapping the report “are focused on identifying laws, jurisdiction; modifying stress test regulations, and other government policies that Comprehensive Capital Analysis and Review inhibit regulation of the financial system (CCAR), Liquidity Coverage Ratio (LCR), and according to the Core Principles” of the Single-Counterparty Credit Limit (SCCL) rules; Executive Order. simplifying the capital regime for small banks; assessing how the Community Reinvestment Treasury is dividing its review of the financial Act (CRA) can be improved; applying system into a series of reports, with other enhanced prudential standards for foreign

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banking organizations based upon their U.S. he asked about the challenges firms have faced risk profile rather than global assets; modifying in implementing the rule. Mnuchin said the the Volcker Rule; creating an off-ramp from Administration is working on ways to fix the some rules for highly capitalized banks; Volcker Rule, stating that their focus is on changing the structure of the Consumer ensuring that proper market making functions Financial Protection Bureau (CFPB) and other occur. CFPB reforms; and modifying mortgage lending and servicing rules. Senator David Perdue (R-GA) asked if Mnuchin would repeal the Dodd-Frank Act On June 13, the Senate Budget Committee held (DFA) if he were “king for a day.” Mnuchin a hearing to discuss the President’s Fiscal Year responded in the affirmative, stating that he (FY) 2018 budget and revenue proposals, would start over. He suggested that most of the receiving testimony from Secretary of the DFA is unnecessary. He said the Treasury’s Treasury Steven Mnuchin. In response to a report on regulations found that 70 or 80 question by Ranking Member Bernie Sanders percent of the needed changes can be achieved (I-VT) regarding Glass-Steagall, Mnuchin through executive orders and working with stated that the President does not support regulators. breaking up big banks, but believes there should be prudent regulations for big banks. House Financial Services Committee Begins Markup of Flood Insurance Bills Senator Mike Crapo (R-ID) commended the Treasury’s report on reducing regulatory Key Points: burdens. He said the report is an important . The Committee approved a pair of bills to step and includes helpful recommendations. He reform the National Flood Insurance asked about the need to tailor regulations. Program. Mnuchin said the banking system is now . The Committee will reconvene on Wednesday, sufficiently capitalized. He said the report’s June 21 to consider additional bills. overarching theme is that community and regional banks must be allowed to grow On June 15, the House Financial Services properly, stating that these banks do not put Committee began a markup of seven bills the system at risk. He said regulations must be related to the National Flood Insurance appropriately tailored not to put undue burdens Program (NFIP). The Committee favorably on community banks. Crapo said there was reported the following bills: some agreement in Congress last year on  “The National Flood Insurance raising the systemically important financial Program Policyholder Protection Act institution (SIFI) threshold and modifying the of 2017” (H.R. 2868), introduced by application of Comprehensive Capital Analysis Representative Lee Zeldin (R-NY), and Review (CCAR) stress tests. He asked how which would require a maximum 1-4 exempting some regional banks from CCAR residential premium at $10,000 and and streamlining the process for others would provide for mitigation credit for certain help economic growth. Mnuchin said this is mitigation activities unique in urban critical to economic growth. Crapo noted the areas. The Committee favorably report includes recommendations on reported H.R. 2868 by a roll call vote of simplifying and clarifying the Volcker Rule, and 53-0.

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 “The 21st Century Flood Reform Act provide for greater transfer of risk of 2017” (H.R. 2874), introduced by under the National Flood Insurance Representative Sean Duffy (R-WI), Program to private capital and which would achieve reforms to reinsurance markets. improve the financial stability of the  A bill to require the use of replacement National Flood Insurance Program, to cost value in determining the premium enhance the development of more rates for flood insurance coverage accurate estimates of flood risk through under the National Flood Insurance new technology and better maps, to Act, and for other purposes (H.R. increase the role of private markets in 2565), introduced by Luetkemeyer. the management of flood insurance  “The National Flood Insurance risks, and to provide for alternative Program Administrative Reform Act of methods to insure against flood peril. 2017” (H.R. 2875), introduced by The Committee favorably reported Representative Nydia Velazquez (D- H.R. 2874, as amended, by a roll call NY), which would make administrative vote of 30-26, with Representative reforms to the National Flood Peter King (R-NY) voting in Insurance Program to increase fairness opposition. and accuracy and protect the taxpayer from program fraud and abuse. The Committee will reconvene on Wednesday, June 21 to consider the following bills: Chairman Jeb Hensarling (R-TX) said there are  “The Flood Insurance Market Parity multiple important stakeholders who must and Modernization Act” (H.R. 1422), heard from in the debate on flood insurance, introduced by Representative Dennis including homeowners, homebuilders, and Ross (R-FL), which would amend the insurers, but the most important voice is that Flood Disaster Protection Act of 1973 of the taxpayer. He stressed the need to address to require that certain buildings and the growing debt of the NFIP. He suggested personal property be covered by flood that there should not be a permanent taxpayer insurance. subsidy for flood insurance. He stressed the  “The Repeatedly Flooded Communities need for reforms to make the NFIP fiscally Preparation Act” (H.R. 1558), sustainable, suggesting that policyholders introduced by Representative Ed Royce should be transitioned to actuarial rates. He (R-CA), which would amend the said under the bill some people would be National Flood Insurance Act of 1968 transitioned to actuarial rates over 15 years. He to ensure community accountability for emphasized the need to increase private sector areas repetitively damaged by floods. involvement, improve financing mechanisms,  “The Taxpayer Exposure Mitigation and spread risks globally. Act of 2017” (H.R. 2246), introduced by Representative Blaine Luetkemeyer Ranking Member Maxine Waters (D-CA) (R-MO), which would repeal the stressed the need to ensure the availability and mandatory flood insurance coverage affordability of flood insurance. She expressed requirement for commercial properties concern that the bills being considered would located in flood hazard areas and to reduce coverage and increase costs. She noted

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that she worked with Representative Sean leadership. Ranking Member Nita Lowey (D- Duffy (R-WI) to address her concerns, but did NY) stressed international financial institutions, not reach a satisfactory result. She expressed such as the World Bank and the International concern with the piecemeal approach being Monetary Fund, play a critical role in reducing taken by the Committee, questioning when the global poverty and are essential to U.S. bills will be combined and what their development efforts. She noted the Treasury cumulative impact will be. Waters stated that Department leads the world in disrupting she would be working with Senator Bob terrorist financing networks and enforcing Menendez (D-NJ), Senator John Kennedy (R- sanctions against Russia, Iran and North LA), Senator Elizabeth Warren (D-MA), Korea. Senator Chris Van Hollen (D-MD) and Senator Marco Rubio (R-FL), as well as Republicans Rogers and Representative David Price (D-NC) and Democrats in the House, to adopt flood noted the importance of the JCPOA. Rogers insurance reauthorization legislation. She asked what Treasury is doing to “put pressure” stressed the need to ensure that the NFIP is in Iran to stop its destabilizing actions. reauthorized before it expires in September. Secretary of the Treasury Steven Mnuchin explained this is one of the most important House Appropriations Discusses FY ‘18 functions of Treasury and he spends about half Treasury International Programs Budget of his time focused on sanctions. He stated they will continue to use sanctions to the full Key Points: extent possible. . House Appropriations Committee discusses the FY18 budget request of the Treasury’s Lowey noted reports have indicated that the International Programs. White House intends to rescind some of the . Secretary Mnuchin stated he would support sanctions on Russia. Mnuchin stated there are returning the Export-Import Bank to normal no plans to remove Russia sanctions and operations. existing sanctions will be enforced.

On June 14, the House Appropriations Representative Charlie Dent (R-PA) noted the Committee’s State, Foreign Operations, and importance of the Export-Import Bank to the Related Programs Subcommittee held a hearing economy. Mnuchin stated that the to discuss the FY 2018 budget request for the Administration supports returning the Export- Department of the Treasury’s International Import Bank to normal operations. Dent asked Programs. The hearing focused on the Joint about legislation which would allow the Bank Comprehensive Plan of Action (JCPOA), to operate without a quorum. Mnuchin terrorism finance, Russia, and the Export- suggested allowing Cabinet members to serve Import Bank. Chairman Hal Rogers (R-KY) on the Bank’s board until a quorum is achieved. noted that the Department’s budget request is $1.5 billion for international programs which is Upcoming Hearings and Events $295 million below the enacted level. He stated in this time of tight budgets the Committee will June 20 scrutinize the budget request in a manner CFTC MRAC Meeting: The Commodity which balances the fiscal constraints with the Futures Trading Commission’s (CFTC) Market desire to maintain U.S. participation and Risk Advisory Committee (MRAC) will hold a

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meeting to: “(1) respond to a presentation by the CFTC’s Division Clearing and Risk on how Financial Regulators: The Senate Banking it conducts risk surveillance of central Committee will hold a hearing entitled counterparties (CCPs); (2) discuss how to “Fostering Economic Growth: Regulator better inform the CCP regulatory framework Perspective.” The scheduled witnesses for the through academic research and economic hearing are Federal Reserve Board Governor analysis; and (3) advise the Commission of the Jerome Powell, FDIC Chairman Martin potential effects of Brexit on financial Gruenberg, NCUA Acting Chairman J. Mark markets.” McWatters, Acting Comptroller of the Currency Keith Noreika, and Texas June 21 Department of Banking Commissioner Charles Flood Insurance Markup: The House Cooper, testifying on behalf of the Conference Financial Services Committee will continue a of Bank Supervisors. markup of a package of bills to reauthorize and reform the National Flood Insurance Program. June 23 Terrorism Financing: The House Financial June 22 Service Committee’s Subcommittee on SEC Investor Advisory Committee Terrorism and Illicit Financing will hold a Meeting: The Securities and Exchange hearing entitled “The Exploitation of Cultural Commission Investor Advisory Committee will Property: Examining Illicit Activity in the meet to discuss the following agenda items: Antiquities and Art Trade.” “remarks from Commissioners; nominations for open officer positions; a discussion June 27 regarding capital formation, smaller companies, Department of Labor Budget: The Senate and the declining number of initial public Appropriations Committee’s Subcommittee on offerings; the announcement of election results Labor, Health and Human Services, Education for open officer positions on the Investor and Related Agencies will hold a hearing on the Advisory Committee; an overview of certain FY2018 budget request for the Department of provisions of the Financial CHOICE Act of Labor. Secretary of Labor Alexander Acosta is 2017 relating to the SEC; and a nonpublic scheduled to testify. administrative work session”. For more information about financial services issues you Student Loan Servicing: The Consumer may email or call Joel Oswald at 202-659-8201. Alex Financial Protection Bureau (CFPB) will hold a Barcham and Rebecca Konst contributed to the articles. field hearing to discuss student loan servicing. CFPB Director Richard Cordray is scheduled ENERGY & ENVIRONMENT to speak at the event. Bureau of Land Management Postpones CFTC Chairman Nomination: The Senate Venting and Flaring Rule Compliance Agriculture Committee will hold a hearing to Dates consider the nomination of J. Christopher Giancarlo to serve as Chairman of the Key Points: Commodity Futures Trading Commission . This week, the Bureau of Land Management (CFTC). published a notice that it would delay the

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compliance dates for provisions of the agency’s therefore will not be postponed by the “Venting and Flaring” rule that have not yet Notification include: taken effect. . “the requirement that operators submit . The Venting and Flaring Rule, finalized by a ‘waste minimization plan’ with the Obama Administration in late 2016, applications for permits to drill”; would impose requirements on oil and gas . “new regulations for the royalty-free producers on federal lands to limit methane use of production”; emissions and the flaring of natural gas. . “new regulatory definitions of ‘unavoidably lost’ and ‘avoidably lost’ On June 15, the Department of Interior’s oil and gas”; Bureau of Land Management (BLM) published . “limits on venting and flaring during a Notification titled “Waste Prevention, drilling and production operations”; Production Subject to Royalties, and Resource and Conservation; Postponement of Certain . “requirements for downhole well Compliance Dates”. The BLM announced that maintenance and liquids unloading”. it would delay the January 17, 2018 compliance date for certain provisions of the “Venting and BLM also announced that it would “conduct a Flaring” rule promulgated late in the Obama notice-and-comment rulemaking to suspend or Administration. extend the compliance dates of those sections affected by the Rule.” Citing ongoing litigation, the Trump Administration’s review of the rule, and the The BLM published the final rule on authority of agencies under the Administrative November 18, 2016. The rule was intended “to Procedure Act to “postpone the effective date reduce waste of natural gas from venting, of action taken by it, pending judicial review”, flaring, and leaks during oil and natural gas the BLM announced that it would delay production activities on onshore Federal and compliance dates for parts of the rule that are Indian…leases….[and would] also clarify when not yet in force. The Notification states that produced gas lost through venting, flaring, or the BLM will postpone the compliance dates of leaks is subject to royalties, and when oil and provisions of the rule requiring operators to: gas production may be used royalty-free on- . “capture a certain percentage of the gas site.” As described in a Department of Interior they produce”; press release, the rule would require operators . “measure flared volumes”; to “periodically inspect their operations for . “upgrade or replace pneumatic leaks, and replace outdated equipment that equipment”; vents large quantities of gas into the air… [and] . “capture or combust storage tank limit venting from storage tanks and to use best vapors”; and practices to limit gas losses when removing . “implement leak detection and repair liquids from wells.” (LDAR) programs”. The Trump Administration has identified the BLM notes that “provisions [of the rule] with rule as one of the Obama Administration compliance dates that have passed” and regulations that will be subject to review and potential modification or repeal. On March 28, 2017, President Trump signed an Executive

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Order titled “Promoting Energy Independence establish best system of emissions reduction and Economic Growth” (E.O. 13783), which (BSER) requirements “for certain new, directed the Secretary of Interior to review the modified, and reconstructed equipment, final rule, and “if appropriate…publish for processes, and activities across the oil and notice and comment proposed rules natural gas source category”, including: suspending, revising, or rescinding” the rule. . “hydraulically fractured oil well The following day, Secretary of Interior Ryan completions”; Zinke issued Secretarial Order 3349 directing a . “pneumatic pumps”; review of the rule. . “fugitive emissions from well sites and compressor stations”; EPA Delays Implementation of Oil and . “hydraulically fractured gas well Gas Methane Emissions Rule Provisions completions”; . “equipment leaks at natural gas Key Points: processing plants”; . This week, the EPA announced that it would . “pneumatic controllers”; further delay certain parts of the New Source . “centrifugal compressors”; and Performance Standards for the oil and gas . “reciprocating compressors”. sector. . The rules would establish new requirements for On March 28, 2017, President Donald Trump oil and gas producers, natural gas pipeline signed Executive Order (E.O.) 13873, which operators, and natural gas storage operators to directed the EPA Administrator to review limit methane emissions from their equipment rules, including the new source oil and gas and facilities. sector final rule, and, “if appropriate…as soon as practicable, suspend, revise, or rescind, or On June 13, the Environmental Protection publish for notice and comment proposed rules Agency (EPA) issued a press release suspending, revising, or rescinding” the rule. announcing that it would provide an extended On April 4, the EPA published a notice delay of certain requirements included in the announcing that it is reviewing the final rule, “Oil and Natural Gas Sector: Emission and, “if appropriate, will initiate reconsideration Standards for New, Reconstructed, and proceedings to suspend, revise or rescind this Modified Sources” final rule issued by the rule.” On April 18, the EPA announced, Obama Administration last year. The EPA through a letter to industry trade associations, states that it is “proposing a two-year stay of that it will reconsider portions of the final rule the fugitive emissions, pneumatic pump and in response to the trade associations’ petitions professional engineer certification requirements for reconsideration. in the rule while the agency reconsiders issues associated with these requirements.” The EPA’s press release also stated: “Earlier this month, EPA used its Clean Air Act The Obama Administration EPA published the authority to issue a 90-day administrative stay final rule on June 3, 2016. The regulations of these requirements…EPA will take would impose significant new requirements for comment on both of the proposed stays for 30 the oil and gas industry, including producers days after they are published in the Federal and natural gas pipeline operators, to identify Register.” and limit methane emissions. The rule would

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Yucca Mountain is fully licensed and Environment Subcommittee Approves prepared to receive shipments.” Three Bills . The Subcommittee also approved the “Brownfields Enhancement, Economic Key Point: Redevelopment, and Reauthorization . On Thursday, the House Energy and Act of 2017” (H.R.___) by a voice vote. Commerce Committee’s Environment As described by the Committee, the bill Subcommittee approved bills addressing “makes improvements to the brownfields redevelopment, nuclear waste and Brownfields Program, encourages EPA, regulation of ground level ozone pollution. states, and local governments to work together to redevelop properties, On June 15, the House Energy and Commerce creates jobs, and provides for economic Committee’s Environment Subcommittee held development.” a markup, and approved three bills: . The Subcommittee voted 12-8 to The full Energy and Commerce Committee will approve the “Ozone Standards mark up the bills before they advance to the Implementation Act of 2017” (H.R. House floor. 806). As described in a Committee press release, the bill “would provide Upcoming Hearings and Events states the flexibility needed to implement the National Ambient Air June 20 Quality Standards (NAAQS) for Department of Interior Budget: The Senate ground-level ozone on an efficient and Energy and Natural Resources Committee will realistic timeline.” On October 26, hold a hearing on “the president’s budget 2015, the Environmental Protection request for the Department of the Interior for Agency (EPA) published a final rule, Fiscal Year 2018.” lowering the NAAQS for ground-level ozone to 70 parts per billion (ppb). Innovative Water Infrastructure Financing: . The Subcommittee approved the The Senate Environment and Public Works “Nuclear Waste Policy Amendments Committee’s Subcommittee on Fisheries, Act of 2017” (H.R.___) by voice vote. Wildlife and Water will hold a hearing titled As described by the Committee, the “Innovative Financing and Funding: legislation: “provides practical reforms Addressing America’s Crumbling Water to the nation’s nuclear waste Infrastructure.” management policy to ensure the federal government’s legal obligations Department of Energy Budget: The House to dispose of spent nuclear fuel and Appropriations Committee’s Energy and Water high-level waste will be fulfilled”; and Development Subcommittee will hold a “preserves Yucca Mountain as the most hearing on the budget for the Department of expeditious path for spent nuclear fuel Energy. and high-level radioactive waste disposal while authorizing interim June 21 storage, including private storage Department of Energy Budget: The Senate initiatives, to provide optionality until Appropriations Committee’s Subcommittee on

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Energy and Water Development will hold a induced seismicity”; “The future of nuclear “hearing on proposed budget estimates and power”; “Gasoline fuel quality and octane justification for FY2018 for the Energy supply”; “Big data and energy information”; Department.” Secretary of Energy Rick Perry is “Natural gas infrastructure to serve growing scheduled to testify. markets”; “Coal and natural gas competition”; and “Human behavior and energy use in Interior Budget: The Senate Appropriations buildings”. Committee’s Subcommittee on Interior, Environment and Related Agencies will hold a June 26-28 “hearing on the budget estimates and Increasing Market and Planning Efficiency justification for FY2018 for the Interior through Improved Software: The Federal Department.” Energy Regulatory Commission (FERC) will hold a technical conference on “opportunities Helium: The House Natural Resources for increasing real-time and day-ahead market Committee’s Subcommittee on Energy and efficiency through improved software.” Mineral Resources will hold a hearing on the “Helium Extraction Act of 2017” (H.R.__). June 29-30 Pipeline Safety Information Sharing: The Environmental Technologies: The House Pipeline and Hazardous Materials Safety Science Committee’s Environment Administration will convene a “public meeting Subcommittee will hold a hearing titled of the recently created Voluntary Information- “Leading the Way: Examining Advances in Sharing System (VIS) Working Group.” Environmental Technologies”. According to PHMSA, “[t]he VIS Working Group will convene to continue the discussion June 22 on the need for, and the identification of, a DOE Budget: The Senate Energy and Natural voluntary information-sharing system.” Resources Committee’s Public Lands, Forests and Mining Subcommittee will hold a hearing For more information about energy and environment on “the president’s budget request for the issues you may email or call Frank Vlossak at 202- Department of Energy for Fiscal Year 2018.” 659-8201. Updates on energy and environment issues are also available on twitter. Interior Budget: The House Natural Resources Committee will hold a hearing titled DEFENSE “Examining the Department of the Interior’s Spending Priorities and the President’s FY2018 Mattis and Dunford Testify On FY 2018 Budget Proposal.” DOD Budget Request

June 26-27 Key Points: EIA Energy Conference: The Energy . Some Members pushed back on the Information Administration (EIA) will hold its Administration’s cut in non-defense funding to annual Energy Conference. Conference topics pay for an increase in Pentagon funding include: “U.S. exports of crude oil and . Other Members took issue with the DOD petroleum products”; “Renewable finance and topline project costs”; “The energy-water nexus and

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. The Secretary explains how he plans on failing to pass the budget on time or eliminate deciding the number of troops the U.S. will the threat of sequestration Congress sidelined commit to Afghanistan itself from its active constitutional oversight role.” He stated that “[c]ontinuing resolutions, This week, Secretary of Defense James Mattis, coupled with sequestration blocked new Chairman of the Joint Chiefs of Staff General programs, prevented service growth, stalled James Dunford, and Under Secretary of industry initiative and place troops at greater Defense (Comptroller) David Norquist risk.” Mattis stated that “[d]espite the appeared before the four committees of tremendous efforts of this Committee, jurisdiction to testify on the Trump Congress as a whole has met the present Administration’s FY 2018 Department of challenge with lassitude not leadership.” He Defense (DOD) budget request. noted that “I retired from military service three months after sequestration took effect…[and] In all, the Trump Administration proposed an [f]our years later, I’ve returned to the increase in the defense discretionary budget cap Department and I have been shocked by what I of $54 billion (from $549 billion to $603 have seen about our readiness to fight.” Mattis billion) offset by a reduction in the non-defense asserted that “[i]t took us years to get into this spending cap of $54 billion (from $516 billion situation. It will require years of stable budgets to $462 billion). The Administration requested and increased funding to get out of it.” He said $77 billion in Overseas Contingency that “ Operations (OCO) funding for FY 2018 that I urge members of this committee and would be split among departments thusly: $64.6 Congress to achieve three goals: billion for the DOD and $12 billion for the . First, fully fund our request which Department of State. In briefing materials, the required an increase to the defense Pentagon explained that its base budget request budget caps. is $574.5 billion and OCO$64.6 billion for a . Second, pass an FY 2018 budget in a total of $639.1 billion for FY 2018, some $52 timely manner to avoid yet another billion above the defense funding cap. harmful continuing resolution. . And third, eliminate the threat of future The DOD broke out its funding request: sequestration cuts so we can provide a . Procurement: $115.0 billion stable budgetary planning horizon. . Military Personnel: $141.6 billion . Operations & Maintenance: $223.3 Dunford said that “Russia, China and Iran field billion a wide range of cyber, space, aviation, maritime . Research, Development, Testing & and land capabilities…[a]nd these are Evaluation: $82.7 billion specifically designed to limit our ability to . Military Construction and Family deploy, employ and sustain our forces.” He Housing, Other: $11.9 billion claimed that “[i]n just a few years, if we don’t change the trajectory, we’ll lose our qualitative House Armed Services and quantitative competitive advantage…[and] [t]he consequences will be profound.” Dunford On June 12, at a House Armed Services contended that “[i]t will adversely affect our Committee hearing, Mattis stated that “by nuclear deterrence, our conventional deterrence and our ability to respond if deterrence fails.”

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He said that “[a]lternatively, we can maintain answered that he did not and explained that our competitive advantage with sustained, “we’ve been digging down into what we can do sufficient and predictable funding…[and] [t]o right now to get the force ready in its current that end, the FY ‘18 budget is an essential step, situation that we confront.” He added that “I however, this request alone will not fully think there’s pretty common understanding restore readiness or arrest the erosion of our here that the force is going to have to be competitive advantage.” Dunford stated that improved…and we’re going to have to move “[d]oing this will require a sustained investment out smartly and in concert with the Congress as beyond FY ‘18.” He added that “[s]pecific we sort out what can be done and what the recommendations for FY ‘19 and beyond will targets are.” be informed by the forthcoming strategy development, however, we know now that Senate Armed Services continued growth in the base budget where at least three percent above inflation is the floor At a June 13 hearing, Mattis and Dunford necessary to preserve today’s relative testified before the Senate Armed Services competitive advantage.” Committee.

Chairman Mac Thornberry (R-TX) said “the Chairman John McCain (R-AZ) noted that first President has said specifically he’d like have a conversation he had with Mattis “was about a Navy of 350 ships…[and] talked about 12 strategy for Afghanistan.” He claimed that aircraft carriers….about Army end strength of “[w]e’re now six months into this 540,000…increasing the number of fighter Administration, we still haven’t got a strategy aircraft and so forth.” He asked “for this for Afghanistan…[which] makes it hard for us budget in ‘18 that we’ve gotten so far, it does to support you when we don’t have a strategy.” not really advance any of those goals, does it?” McCain claimed that “[w]e know what the Mattis responded that “it gets us in the right strategy was for the last eight years, don’t direction…[and] it’s going to take three to five lose…[and] [t]hat hasn’t worked.” He asked percent in the future to actually to grow the “[w]hen can we expect the Congress of the force along the lines of what you’re talking United States to get a strategy for Afghanistan about, but I would also point out that this is that is a departure from the last eight years, $52 billion above the “Budget Control Act of which is, don’t lose?” Mattis responded that “I 2011” cap.” believe by mid-July we will be out of brief you in detail..[and] we’re putting it together now Ranking Member Adam Smith (D-WA) said and there are actions being taken to make that “[i]f I’m not mistaken, there actually wasn’t certain that we don’t pay a price for the delay.” a Future Years Defense Program (FYDP) In response to a McCain assertion that “unless offered by the President’s budget, which is we get a strategy from you, you’re going to get unusual.” He asserted that “I can’t help but a strategy from us,” Mattis said that “[w]e are think that it’s because…you didn’t want to look not winning in Afghanistan right now…[a]nd at it and see just how outlandish those numbers we will correct this as soon as possible.” would be versus the money we have.” Smith asked “do you have a number” and whether the Ranking Member Jack Reed (D-RI) contended Administration has full five year numbers to that “even if you get the additional $52 billion, match the President’s articulated goals. Mattis with sequestration in place, you would

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essentially have to turn around and forfeit that and…our approach to how we deal with this in across-the-board cuts.” Mattis agreed. Reed government.” further claimed that “those across-the-board cuts would be more disruptive than anything I Senator Richard Shelby (R-AL) noted that can conceive because there would be no “Admiral Harris, who’s commander of the prioritization, it would just be taking from the Pacific Command, recently testified to the most sensitive program…in fact, leaving Senate…that getting to the present stated goal money in programs that might not even need of at least 350 ships would enable him to meet it.” Mattis again agreed and claimed that “[i]t what he called his steady state requirements, in would be injurious, and again, it would sideline the Pacific theater.” He asked Dunford both this Committee and myself in making wise whether he agreed with Harris. Dunford decisions.” responded that “I think Admiral Harris’ numbers are right to meet his Senate Appropriations requirement…[and] [o]f course our priorities that we provided to you this year are within the At a June 14 hearing, the Senate top line that we’re given.” He said he wanted to Appropriations Committee’s Defense reemphasize an important point regarding Subcommittee had their first opportunity to funding by noting “the minimum amount of question Mattis and Dunford on the money that we would need to maintain our Administration’s DOD budget request. competitive advantage at about 3% in order to get to the 355 ships and grow the Army and the Ranking Member Dick Durbin (D-IL) stated Air Force commensurately, those numbers that “I look at the situation in Afghanistan and really are closer to 5[%] and beyond…[a]nd so the president’s recent delegation of authority to to get to a 355 ship Navy would require a you.” He said that “I’d like to ask you at this significant more resources.” point, what are the likely prospects that sending more military troops, risking more American House Appropriations lives, spending billions more in dollars, will make any difference 16 years from now than it At a June 15 hearing, Full Committee Ranking has for the first 16 years?” Mattis responded Member Nita Lowey (D-NY) quoted Mattis’ that “I would say that the reason we have not 2013 testimony before the Senate Armed been attacked over many years from where the Services Committee in which he asserted “[i]f 9/11 attack originated, is heavily due to the you don’t fund the State Department fully, then sacrifices that we have made over years as we I need to buy more ammunition ultimately.” have kept the enemy on the back foot.” He She said that “I, frankly, am extremely asserted that “[i]t’s hard for them to conduct concerned that the FY 2018 budget request external operations out of that former drastic increases in defense spending at the stronghold, when they’re just trying to hang expense of non- defense discretionary onto their own lives and avoid us.” Mattis priorities, including foreign aid and explained that the U.S. and North Atlantic international development programs.” Lowey Treaty Organization (NATO) forces need to asked Mattis if he stood by his 2013 remarks. change their strategic approach by “chang[ing] Mattis stated that “I have not reviewed where the way we fight…the regional construct the cuts come to Secretary of State Tillerson’s budget so I do not want to speak off-hand

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without having done my homework.” He Appropriations Bill,” the first by the Military added that he and Tillerson are “going to look Construction-Veteran Affairs” Subcommittee at the priorities for where we need to engage in and the other by the full Committee. The bill the world…[and] [t]his Committee also gives moved forward despite neither Congress not me development funds and we have married having passed a FY 2018 budget resolution nor the two, we’ll set the priorities together, so that the Committee setting 302(b) allocations that we get the best possible use of the dollars mark the topline funding for each of the 12 allocated to each of the departments working in appropriations packages. concert.” In the Committee’s press release, a summary of Representative Ken Calvert (R-CA) stressed the package was provided: that funding for the DOD “cannot be obtained . In total, the legislation on the back of non-defense discretionary provides $88.8 billion in discretionary spending.” He asserted that “[w]e need the funding – $6 billion above the fiscal Administration…the Senate, the House, to year 2017 level. This includes $638 come to a workable number that we can agree million in Overseas Contingency to, to get rid of the sequestration and the Operations funding, which includes Budget Control Act and come up with realistic funding for European Reassurance numbers, both on the discretionary side and Initiative projects. the non-discretionary side.” He asked Mattis to . Within this total, funding for the share “your thoughts on the size of the civilian Department of Veterans Affairs is workforce within the DOD as we grow our increased by $4 billion – 5 percent – forces and what is the overarching plan to over the fiscal year 2017 level, match capability with requirements.” Mattis including funding to increase access to explained that “we are on track right now to services for veterans, and to increase reduce our headquarters by 30 percent…[and] I oversight and accountability within the would add that I’ve met twice now with the department. This includes the advance authors of the report that found the $125 funding provided for veterans in the billion in waste, as they pointed out, I do not fiscal year 2017 appropriations bill. agree with everything in the report.” . Military construction is increased by $2.1 billion – 25 percent over the fiscal FY 2018 MilCon-VA Bill Reported Out of year 2017 level – to provide the Committee necessary resources to continue to rebuild our military, to prepare our Key Points: service members to be to face existing . House Appropriations moves forward with and emerging threats, and to care for FY 2018 markups without budget resolution military families. or 302(b) numbers . The bill would provide a $6 billion increase The Committee provided more detail in a over FY 2017 enacted levels summary and the draft Committee Report.

This week, House Appropriations Committee For more information on defense issues you may email held two markups of the “FY 2018 Military or call Michael Kans at 202-659-8201. Construction and Veterans Affairs

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HEALTH President Donald Trump and Vice President Mike Pence both met with 13 Senate Senate Likely to Miss July 4 Deadline for Republicans this week to discuss the status of Action on Health Care the health care bill. Reportedly at the meeting, Trump called the House-passed “American Key Points: Health Care Act” (H.R. 1628) “mean.” . Republican Senators continue to debate Senators who attended the meeting said the provisions for health care reform but have yet to President did not provide any specific policies put together formal legislative text. he would like to see in the bill or set a deadline. . Senate is unlikely to meet their previous July 4 The ACA cost-sharing reduction payments deadline for passing health care reform. were discussed at the meeting. Republican committee leaders in the House and Senate Despite being presented with proposals last have called for the Administration to continue week, Republican Senators have still failed to the payments while Republicans work on a plan reach a consensus on health care reforms to fully repeal and replace the ACA. which will repeal and replace the “Affordable Care Act” (ACA). Importantly, the text will Upcoming Hearings and Events need to be sent to the Congressional Budget Office before it can be voted on. June 19 Opioids: The Association of Schools and Senator Majority Leader Mitch McConnell (R- Programs of Public Health will host a briefing KY) is said to be continuing to push for a quick entitled “The Opioid Epidemic: Findings from resolution to health care so the Senate can Public Health Research Experts.” move on to other priorities. Senate Majority Whip John Cornyn (R-TX) suggested “a Tropical Diseases: The House and Senate deadline is helpful because it tends to make Malaria and Neglected Tropical Disease Caucus people focus.” Meanwhile others such as will hold a briefing on “The U.S. Role in Senator Shelley Moore Capito (R-WV) have Ending Neglected Tropical Diseases and asserted the end-of-June deadline “was a Reducing Their Impact on the World’s Most stretch anyway.” Vulnerable People.”

Senate Democrats continue to push for hearing June 20 on the bill before a floor vote. They are FDA Budget: The Senate Appropriations introducing legislation known as the “No Committee will hold a hearing on the proposed Hearing, No Vote Act” which would require budget estimates and justification for FY2018 any bill be passed under reconciliation to be for the Food and Drug Administration. voted on by at least one committee and have at least one hearing. Senate Minority Leader Medicaid: The Commonwealth Fund will hold Chuck Schumer (D-NY) stated the a conference call briefing on “How Would the Republicans’ attempt to pass the bill “in the American Health Care Act Change Medicaid dark of night, without any transparency is one and Impact States’ Economies?” of the most egregious examples of legislative malpractice in decades.” Pandemics: The Senate Foreign Relations Committee will hold a hearing on “The World

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Health Organization and Pandemic Protection in a Globalized World.” TRANSPORTATION AND INFRASTRUCTURE Pandemics: The Bipartisan Policy Center will hold a discussion on “Fighting an Unseen Chao Testifies on FY 2018 Budget Request Enemy: Reducing the Pandemic Threat to Global Security.” Key Points: . Members disagree with proposed funding cuts June 21 and pressed the Secretary for more details on Opioids: The Washington Post will hold a the Administration’s infrastructure proposal discussion on “Addiction in America,” focusing on the roots of the country’s opioid On June 15, the House Appropriations crisis and solutions for combating addiction in Committee’s Transportation, Housing and America. Urban Development, and Related Agencies Subcommittee held a hearing on the FY 2018 Cancer: The Young Adult Cancer Alliance will budget request for the Department of hold a briefing on “Barriers to Survive and Transportation. Topics discussed in the hearing Thrive Adolescent and Young Adult Cancers.” included: (1) Air Traffic Control; (2) Congressional Oversight; (3) Autonomous June 22 Vehicles; (4) Permitting Process; (5) Gas Tax; Antimicrobial Resistance: The Center for (6) Trump Administration Infrastructure Plan; Strategic and International Studies will hold a (7) Capital Investment Grants; (8) Railways; (9) discussion on “EU Efforts and Transatlantic Metropolitan Planning Organization; (10) Cooperation in Combating Antimicrobial Project Transparency; and (11) TIGER Grants. Resistance.” Chairman Mario Diaz-Balart (R-FL) called for NIH Budget: The Senate Appropriations Congress and DOT to work together to Committee will hold a hearing on the FY2018 maintain and improve safety in the United budget for the National Institutes of Health. States’ transportation systems. He argued infrastructure investments should lead to Alcohol Abuse: The National Institute on economic growth and improve the day-to-day Alcohol Abuse and Alcoholism will hold a lives of Americans. He noted the President’s briefing on “The Changing Patterns of FY 2018 budget request for the Department Women’s Drinking and Their Impact on Public includes $16.3 billion in discretionary authority Health.” and $59.6 billion in mandatory programs for a total budget request of $76 billion. He stated June 23 safety is the Subcommittee’s top priority and he User Fees: Third Way will hold a discussion was pleased to see the Department’s budget on “Why Congress Must Act on Prescription request prioritize safety programs that were Drug User Fees.” originally funded by the “Fixing America’s Surface Transportation Act” (FAST Act) (P.L. For more information about healthcare issues you may 114-94). He said, in addition to safety, email or call Nicole Ruzinski or George Olsen at 202- Congress and the Department must ensure that 659-8201. the economy grows through fiscally responsible

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infrastructure investments. He stressed the public transit, rail, and other multimodal importance of not leaving rural American projects. He stated the budget request behind in these efforts. He expressed concern discontinues the Capital Investment Grants regarding the President’s proposal to terminate program for projects that currently lack Full the Department’s work with local governments Funding Grant Agreements despite the fact on several dozen transit projects. He said he that funding for this program was increased in believes the Administration’s proposal to the “Consolidated Appropriations Act, 2017” transfer the operations of Air Traffic Control (P.L. 115-31). He said the federal government (ATC) into a corporate, non-governmental should be encouraging more state and local entity would result in a monopoly – whether it investment in infrastructure. He expressed is controlled by the government or “by concern that the budget request also zeroes out somebody else.” He argued ATC should be the Transportation Investment Generating accountable to the public and Congress should Economic Recovery Discretionary Grant continue to play its important oversight role. Program (TIGER Grants). He said Amtrak He said preserving the public’s voice is the only national routes would be slashed and a 28 way to maintain American air space as a percent cut would be applied to the heavily national asset and to protect access for all travelled Northeast Corridor. He stated he is users. “puzzled by these cuts.” Price stated the Administration has endorsed the privatization Ranking Member David Price (D-NC) said the proposal regarding ATC. He said he has grave issue of infrastructure in the U.S. is enormously concerns about this plan as he believes it would important because it affects the flow of sever the FAA’s ability to regulate safety and commerce and Americans in their everyday life. would reduce transparency and oversight. He He stated investing in infrastructure keeps the added this proposal would jeopardize public safe and improves the American successful NextGen modernization efforts and economy while also creating jobs. He noted the assumes an unrealistic pace of privatization. He state of American infrastructure is “not doing contended that the Administration’s so well” and has been given a grade of D+ by infrastructure initiative has the potential for the American Society of Civil Engineers. He bipartisan support but more details are needed. argued private investment will not deliver the He cautioned the appropriation process is at results the country without a strong core of the risk of breaking down if the Committee is federal funding. He said it is time to take bold forced to write its bills to sequestration levels. steps to reduce the backlog of deferred maintenance on infrastructure projects. He Secretary of Transportation Elaine Chao, contended the Administration’s DOT budget Secretary said the Department and Congress request falls short of the expectations of share the same goal of ensuring that the United Congress and the American people. He States’ transportation system is safe, expressed concerns that the request largely dependable, and ready to integrate new relies on funding levels agreed upon in the technologies. She stated the Trump FAST Act for programs that rely on trust fund Administration’s FY 2018 budget request for dollars but overall budget authority would be DOT represents a bold vision for the future of cut by $3.1 billion or 16 percent. He noted the American infrastructure. She explained the brunt of these reductions falls upon Department has taken a close look at programs discretionary accounts designed to advance that are not meeting their intended purposes,

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have outlasted their usefulness, or could be On June 14, the Senate Commerce, Science, made more efficient. She explained the and Transportation Committee held a hearing Department’s budget request is $76 billion and entitled “Paving the Way for Self-Driving includes full funding for surface transportation Vehicles.” Topics discussed included, but were programs included in the FAST Act and steady not limited to: (1) Automated Vehicle state funding for other DOT programs. She Regulation; (2) Safety Issues; (3) Automated stated the President is committed to addressing Vehicle Development; (4) Potential Impact of the country’s problem of crumbling Automated Vehicles; and (5) Cybersecurity. infrastructure by reforming the ways in which infrastructure projects are regulated, funded, In advance of the hearing, Chairman John delivered, and maintained. She said the budget Thune (R-SD), Ranking Member Bill Nelson request also includes an incentive for state, (D-FL), and Senator Gary Peters (D-MI) local, and private funding through the released “Principles for Bipartisan Legislation leveraging of $200 billion in federal dollars. She on Self-Driving Vehicles”: explained the DOT budget request also . Prioritize Safety represents a major shift for the Federal . Promote Continued Innovation and Aviation Administration (FAA) and ATC. She Reduce Existing Roadblocks said current ATC technology is outdated and . Remain Tech Neutral compromises passenger safety. She said the . Reinforce Separate Federal and State issue of ATC reform is even more important Roles when one considers rising ridership and freight . Strengthen Cybersecurity levels. She noted the Trump Administration . Educate the Public to Encourage has proposed moving the operations of ATC to Responsible Adoption of Self-Driving a non-profit, non-governmental, independent Vehicles cooperation. She explained safety and regulatory oversight functions will remain Thune said self-driving vehicles have the under the purview of FAA. She said over 50 potential to make transportation smarter, safer countries have this same structure of separating and more accessible, but there are challenges ATC and air safety regulators. She said the FY with safety and testing which must be 2018 budget request also proposes reforms to addressed. He said the CEO of GM has said programs such as Capital Investment Grants, she envisions more change in the auto industry Amtrak long distance routes, and TIGER in the next 5 years than in the past 50. He Grants. She added the Trump Administration noted that 3,500 people are killed per day in is sensitive to the concerns of rural America. auto accidents worldwide, with 90 percent being a result of human error. He suggested Senate Commerce Hearing on Self-Driving that self-driving vehicles could help to reduce Cars this number, stating that self-driving vehicles cannot drive drunk or fall asleep at the wheel. Key Points: Thune said self-driving vehicles will help to . After key Commerce Members reach consensus improve the mobility of the elderly and the on principles for legislation, the Committee disabled. He stated that stepping stones to self- examines the issues related to automated driving vehicles, such as automatic breaking, vehicles are already in use today. He suggested that self-

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driving vehicles could be in place by 2021, and (4) electrification. He said the move toward noting that Audi plans to release a level three autonomy during this past decade has vehicle next year. He stated that automakers accelerated significantly, with advanced driver have requested regulatory certainty in this area. assist systems that offer important features like Thune said he, Nelson, and Peters are working adaptive cruise control and active lane keeping. on legislation to guide the regulatory efforts for He asserted that as these technologies make self-driving vehicles. He said current laws and their way into the national fleet, consumer regulations do not address, or in some cases acceptance will grow materially. Bainwol conflict, with automated technologies. He said observed that Society of Automotive Engineers Congress must not pick winners and losers in (SAE) Level 1 and 2 vehicles are on sale today, the self-driving vehicle space. He said while Level 3 vehicles will be available in 2018, Level Congress should work to get self-driving 4 vehicles will be available around 2021, and vehicles on the road quickly, safety must Level 5 vehicles, which are vehicles that can remain the priority. He stated that the industry operate anywhere a person can drive a must show that the technology is safe and conventional vehicle today, are unlikely to reliable. He said Congress and regulators must happen until around 2025 or after. He said AVs seek outside expertise in updating laws and are not anticipated to be the majority of the regulations. He stated that automated vehicles fleet for 30 years and ubiquity is unlikely for ten (AV) will require changes to laws, insurance, years. Bainwol contended that AVs can offer law enforcement, and infrastructure. tremendous social benefits, particularly for the elderly and the disabled. He suggested that they Peters said there are complex issues which need could also offer great economic benefits, as to be addressed to bring self-driving vehicles well as reduced fuel costs and insurance forward. He stated that he will be working on premiums. He acknowledged that there will be bipartisan legislation in this area. He said this disruptions and challenges. Bainwol conceded technology might be the most transformative there will be regulatory issues which need to be innovation in the auto industry since the addressed. He stated that for conventional assembly line. He emphasized the tremendous vehicles the states regulate the drivers and the economic potential from this technology, federal government regulates the vehicles, suggesting that it could have impacts across the suggesting that AVs dramatically change this entire economy. He suggested that self-driving paradigm. He stated that a patchwork of state vehicles could help to reduce the number of regulatory regimes will delay deployment and lives lost on the road each year. He said the benefits of autonomy. He noted that there Michigan is leading the way on innovation. are 70 bills in 30 states on AVs, stressing the need for clarity from the federal government. Alliance of Automobile Manufacturers He urged Congress to take three actions: (1) President and Chief Executive Officer Mitch pass legislation significantly expanding the Bainwol said automakers are investing billions number and duration of the Federal Motor of dollars in automation. He commended the Vehicle Safety Standard (FMVSS) exemptions Chairman and Ranking Member for moving the National Highway Transportation Safety forward with bipartisan principles. He claimed Administration (NHTSA) can grant under the that four trends are converging to allow self- Safety Act; (2) pass legislation clarifying federal driving vehicles to move forward: (1) increased versus state regulatory roles to facilitate automation; (2) connectivity; (3) ride sharing; innovation and the expeditious deployment of

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life-saving self-driving technologies; and (3) interests and despite improving cyber defenses, work with the Department of Transportation nearly all information systems will be at risk for (DOT) to refresh safety standards applicable to years. He said the report mentions China, AVs. North Korea, Russia, and Iran as the four cyber actors of the greatest concern. He noted For more information on transportation issues you may yesterday, the Washington Post reported that email or call Michael Kans at 202-659-8201. Alex hackers aligned with the Russian government Hopkins and Jackson McLendon contributed to this have devised a cyber weapon that has the section. potential to be the most disruptive yet. He explained this is the same group that attacked TECHNOLOGY the Ukraine electric grid and left thousands without power. He stressed the WannaCry Foreign Relations Considers Cyber Policy ransomware affected users in 151 countries, by exploiting machines with an unpatched security Key Points: flaw. He said policies have not kept up with . The Subcommittee examined the challenges emerging threats and efforts to develop cyber and dangers facing the U.S. from adversary norms have also “sputtered.” Gardner argued nations and other actors in the cyber realm the good actors are being out-paced by the “dark arts of cyber.” He asserted the U.S. On June 13, the Senate Foreign Relations diplomatic response has also been lacking. He Committee’s East Asia, the Pacific, and said last year, he lead the “North Korean International Cybersecurity Subcommittee held Sanctions and Policy Enhancement Act” (P.L. a hearing entitled “State-Sponsored Cyberspace 114-122), the first legislation to mandate Threats: Recent Incidents and U.S. Policy sanctions on cyber actors, but not one has been Response.” designated. He argued cyber attackers do not sleep and the U.S. must use all instruments of Topics discussed in the hearing included, but power to deter cyber actors. were not limited to: (1) U.S. Cyber Policy Formulation; (2) China; (3) Cyber Deterrence; Ranking Member Ed Markey (D-MA) stated (4) Cybersecurity Standards; (5) North Korea; the WannaCry attack revealed the vulnerability (6) 2016 Election Interference; and (7) of digital devices to exploitation and potential International Cyber Cooperation. of disruption by malicious actors. He said the current era is represented by the Internet of Chairman Cory Gardner (R-CO) said state- Things (IoT). He noted that the IoT could also sponsored cyberspace threats have emerged as be called the Internet of Threats. He cited a one of the primary challenges of the U.S. and hearing in 1993 where a group of specialists the primary threat to the nation’s infrastructure. demonstrated that data could be stolen using He argued the national and economic security simple tools. He argued that the internet was depends on securing networks and deterring created for ease of access and not security. He the U.S.’ adversaries, who are getting stronger. said having data stolen could impact national Gardner stated according to the 2017 World security and economic prosperity. He declared Wide Threat Assessment of the U.S. that these issues are not new. He cited a intelligence community, U.S. adversaries are Washington Post article that said Russia has becoming more adept in cyberspace to threaten developed a cyber weapon which can attack

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U.S. electricity systems. He asserted that this posture by both raising the costs and weapon has already disrupted power in decreasing the benefits to hostile actors of Ukraine. He said the U.S. should double down engaging in this conduct. on protection of its infrastructure. House OGR ON FITARA Scorecard Foundation for Defense of Democracies Senior Advisor Dr. Samantha Ravich said the Key Points: use of cyber means by adversarial states to . Despite one agency achieving an A in the purposefully undermine the U.S. economy in annual scorecard on information security, the order to weaken the U.S. militarily and overall grade of government agencies failed to politically is an issue that is “woefully rise underappreciated yet cannot be more . Members expressed particular frustration with important for our country.” She contended that the DOD’s lack of progress and cooperation the threats are real, the warfare is ongoing, and the U.S. government is inadequately structured On June 13, the House Oversight and to properly and comprehensively detect, Government Reform Committee’s evaluate, and address cyber-enabled economic Government Operations and Information threats. She argued the U.S. government has Technology Subcommittees held a joint hearing made great strides in organizing itself to protect entitled “The Federal Information Technology and defend the .gov and .mil realms but the Acquisition Reform Act (FITARA) Scorecard country’s greatest vulnerability may lie with 4.0.” Topics discussed included, but were not adversarial attacks on the U.S. private sector. limited to: (1) state grants; (2) improved scores; She stated the U.S. private sector is at risk of (3) Department of Defense; (4) hiring freeze; being hollowed out from the inside by (5) efficiencies; (6) software inventories; (7) everything from theft of intellectual property to culture issues; and (8) reporting structures the malicious infection of the supply chain to the degradation of confidence in American Information Technology Subcommittee commerce, banking, and transportation sectors. Chairman William Hurd (R-TX) stated nearly two years ago the Committee released the first Harvard University’s Belfer Center for Science the “Federal Information Technology and International Affairs Co-Director Eric Acquisition Reform Act” (FITARA) (P.L. 113- Rosenbach expressed disappointment and 291) Scorecard (Scorecard). He stated this concern that no country, including the U.S., has bipartisan Committee product is intended to responded to Russia’s recent potent hybrid of drive technology across the government. He cyber and information attacks in a way that is noted the most recent Scorecard adjusted some visible and forceful enough to deter future of the metrics. Hurd stated for Scorecard 4.0 attacks. He contended the fragility of the U.S. they simplified the calculation to capture more cybersecurity posture, combined with its incremental projects and adjusted the Office of adversaries’ perception that Russia’s recent Management and Budget (OMB) optimization actions achieved unprecedented success, metrics. Hurd stated they are also considering increases the likelihood that the U.S. and its new scores on software licensing. He suggested allies will experience more serious attacks in the there is no excuse for agencies to not have an coming years. He called for Congress to play its inventory of their software licensing. He stated part in bolstering the United States’ deterrence the Department of Defense’s (DOD) grade

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dropped from a D to an F. He suggested the information technology (IT) was there was no lack of transparency at the DOD is follow up. He expressed hope to extend the “unacceptable.” Hurd explained United States sunset provisions in FITARA. Connolly Agency for International Development applauded the progress which has occurred at (USAID) is the first A on the Scorecard and he USAID. He noted USAID reached out to applauded their work. He noted the GAO, listened to advice and then implemented Department of Health and Human it. He suggested USAID has proven that this Services (HHS) currently has 44 open improvement is possible. He noted at the other Government Accountability Office (GAO) end of the spectrum is a “recalcitrant and recommendations and has gotten a D on all arrogant” leadership policy at the DOD. He Scorecards. stated this mindset is disturbing because DOD has such a large budget. He reiterated that they Information Technology Subcommittee need to come into compliance like any other Ranking Member Robin Kelly (D-IL) stated the agency. He suggested the Scorecard is an Scorecard has been key for oversight of IT. She important tool for measuring progress and he stated the latest Scorecard shows that the hiring thanked GAO for helping them to develop it. freeze has already begun impacting the He noted it is not a “scarlet letter” but a means progress which had begun at the agencies. of having transparency and responsibility. He Kelly stated under the OMB directive agencies stated the slow nominations process has slowed are directed to reduce civilian employee. She some of the progress which is why they are suggested this freeze is impacting hiring considering extending the sunset provisions. expertise to fully implement FITARA. She noted experts agree that one of the most Government Accountability Office (GAO) IT critical components of modernizing Management Issues Director David A. Powner government IT is the ability to hire experts. stated this is the first time that overall FITARA Kelly stated prior Scorecards had showed Scorecard grades have not improved. He overall progress but the new Scorecard attributed this to transitioning Administrations indicates that progress has stalled. She and an expansion of the metrics. He stated the suggested the Administration’s workforce transparent reporting on data center progress policies are harmful. needs to continue beyond 2018 and that extending FITARA sunset dates is important. Government Operations Subcommittee Powner noted incremental development now Chairman Mark Meadows (R- NC) stated it is captures more software development. He becoming critically important that they address stated there is still significant room for these issues. He explained in a bipartisan improvement for reducing duplicative licensing. manner this Committee is taking this extremely He noted that only three agencies have seriously and it will impact appropriations. complete inventories of their licensing agreements and that FITARA is improving Government Operations Subcommittee relations between CIOs and Chief Financial Ranking Member Gerald Connolly (D- VA) Officers (CFOs), but there is room for even stated one of the big differences between this more improvement. He said that CIOs need to and other issues is that they have worked in a be governing all IT. bipartisan manner. He stated what was lacking under prior attempts to make progress in House E&C Examines IOT

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and Scientific Director Dr. William S. Marras Key Points: why he believes security provisions for patients . In another of its continuing series of hearings are a barrier for researchers seeking to on disrupting technologies, the Subcommittee aggregate information. Marras said the models took another look at the Internet of Things his lab has put together rely on the ability to pinpoint the different between normal and On June 13, the House Energy and Commerce abnormal spinal issue. He explained this means Committee’s Digital Commerce and Consumer a large amount of data is needed on patients Protection Subcommittee held a hearing but the process of gaining this information and entitled “Disrupter Series: Update on Internet coordinating with Institutional Review Boards of Things (IOT) Opportunities and (IRB) is burdensome and time consuming Challenges.” Topics discussed included, but were not limited to: (1) Medical Applications of Representative Leonard Lance (R-NJ) said IOT; (2) Automobile Industry; (3) Privacy; (4) there are different definitions regarding privacy. Industrial IOT; (5) Increased Productivity; and He asked if the market is able to address the (6) Cyber Security. issue of privacy as it relates to IOT going forward. Integra Devices CTO and Co- Chairman Robert Latta (R-OH) said Dr. Founder Mark Bachman said the IOT space is William S. Marras’ team at the Spine Research continuously evolving and a silver bullet Institute at Ohio State University is using IOT solution does not currently exist. He said technology in a variety of ways to help business privacy will continue to be an important matter adjusts task to reduce on the job injuries. He with which industry and government officials stated he is looking forward to hearing more will continue to wrestle. from the witnesses about their innovative use of IOT technology and how policymakers can For more information on technology issues you may address any existing regulatory burdens that email or call Michael Kans at 202-659-8201 Alex may be stifling IOT innovation. Hopkins, Ryan Schnepp, and Rebecca Konst contributed to this section. Ranking Member Janice Schakowsky (D-IL) praised Northwestern University’s efforts to This Week in Congress was written by Ryan Schnepp. promote innovation and commercially viable products. She highlighted several award- winning projects spearheaded by Northwestern students. She said she looks forward to hearing from the witnesses about the enormous potential that exists in the IOT sector as well as the challenges they have faced. She stressed that the Subcommittee values the input of industry leaders as Congress determines how the federal government can help consumers realized the full benefit of IOT technologies.

Schakowsky asked Ohio State University’s Spine Research Institute Executive Director

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