December 03, 2015

H.R. 22 – Fixing America’s Surface Transportation (FAST) Act

Noteworthy

Background: On July 30, 2015, the Senate passed the Developing a Reliable and Innovative Vision for the Economy (DRIVE) Act by a vote of 65-34. H.R. 22 (Hire More Heroes Act of 2015) was used as the revenue shell for the highways legislative package. On November 5, 2015, Chairman Schuster of the House Transportation and Infrastructure Committee introduced a motion to go to conference on H.R. 22, which was adopted by the House. On November 10, 2015, the Senate passed a motion to go to conference on H.R. 22. On Tuesday, December 1, 2015, the House filed the conference report for H.R. 22, the Fixing America’s Surface Transportation (FAST) Act and passed the bill on December 3 by a vote of 359-65.

Floor Situation: It is anticipated the Senate will vote on the bill this week.

Executive Summary: The bill authorizes a five-year, $305 billion package for federal surface transportation programs, extending authorization for transit programs through September 30, 2020. The bill requires approximately $70 billion in offsets to keep the Highway Trust Fund solvent. The authorization would apply to highways, highway safety, motor carrier safety, transit, and other programs funded out of the HTF. The current authorization for transportation programs expires on December 4, 2015.

Overview of the Issue

Congress created the Highway Trust Fund in 1956 to fund surface transportation projects. The HTF is comprised of two accounts: the highway account, which funds programs administered by the Federal Highway Administration, the Federal Motor Car Safety Administration, and the National Highway Safety Traffic Administration; and the mass transit account, which funds programs through the Federal Transit Administration.

The primary revenues for the HTF come from federal motor fuel taxes – set at 18.4 cents per gallon on gasoline and 24.4 cents per gallon on diesel fuel – and related truck excise taxes.

This gas tax brings in about $34 billion per year, while the federal government spends approximately $50 billion per year on transportation projects.

Under President Obama, the Democrat-controlled Senate never managed to pass a long-term transportation funding bill. Starting in October 2009, Democrats passed 12 short-term extensions for highway funding, averaging about six months per extension (including MAP-21). This would be the longest highway bill since 1998. 

Considerations on the Bill

On December 4, 2015, authorization for funding the Highway Trust Fund expires. Prior to multiple short-term extensions in 2015, the Highway and Transportation Funding Act of 2014 authorized approximately $10.8 billion to extend highway, highway safety, motor carrier safety, transit, and other programs through the fund. The costs were offset by pension smoothing ($6.4 billion), customs user fees ($3.5 billion), and a transfer from the Leaking Underground Storage Tank ($1 billion) account.

Prior to that, Congress had kept the HTF solvent primarily with general fund money – transferring $54 billion since 2008. Without an extension, federally backed transportation projects could face funding challenges. A long-term transportation bill would provide certainty for the transportation sector.

The FAST Act extends surface transportation programs and contains significant provisions regarding rail and freight safety, in addition to heightened consumer protections. These safety provisions include sections on Amtrak, rental cars, data security and privacy, and civil liability protections. H.R. 22 also includes increased funding going out by formula (controlled by the states), a new freight formula program to address critical goods movement impediments that will help the economy, and allowing state environmental laws to stand in for NEPA. The conference report reauthorizes the Export-Import Bank for four years, lowers the bank’s borrowing cap to $135 billion in fiscal years 2015-2019, and requires higher loan loss reserves, among other reforms. 

The FAST Act largely incorporates the Senate-passed DRIVE Act. The conference report, however, contains some keys differences in pay-fors and offsets.

Significant Extensions/Pay-fors/Offsets in Conference Report:

Extensions

  1. Extends authority to spend from the Surface Transportation trust fund, the Sportfish Restoration and Boating trust fund, and the Leaking Underground Storage Tank trust fund.
  2. Extends provisions governing highway-related taxes.

Tax Compliance

  1. Allows the revocation of a passport or denial of a passport application if a person has more than $50,000 in unpaid federal taxes. 

Fees and Receipts

  1. Indexes to inflation (CPI-U) the dollar amounts for various customs fees. This provision would raise approximately $5 billion.
  2. Retains the Federal Reserve surplus account, but caps it at $10 billion, with any amounts that exceed the cap to be remitted to the U.S. Treasury. Raises $33.04 billion over five years.
  3. Retains the existing 6 percent dividend for Federal Reserve System member banks with consolidated assets of $10 billion or less, indexed to inflation. For member banks with consolidated assets greater than $10 billion, the conference report reduces the dividend paid on capital paid into the Federal Reserve System with the lesser of the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of a dividend, and 6 percent. Provision effective on January 1, 2016. Raises $2.77 billion over five years.
  4. Provides for drawdown and sale of 66 million barrels of crude oil from the Strategic Petroleum Reserve from fiscal years 2023 through 2025, raising $6.2 billion in offsets. Requires amounts received to be deposited in the general fund of the Treasury.
  5. Repeals Section 201 of the Bipartisan Budget Act of 2015, which required the U.S. Department of Agriculture to renegotiate the Standard Reinsurance Agreement by December 31, 2016, and at least once every five years thereafter. Section 201 also established an 8.9 percent cap on the overall rate of return for insurance providers under the Standard Reinsurance Agreement, which was a decrease from the negotiated rate of approximately 14.5 percent. This provision increases spending by $3 billion from 2016 through 2025.

Notable Bill Provisions

Title I Federal-Aid Highways

Section 1101 – Authorization of appropriations for federal-aid highways

Extends the authorization of the federal-aid highway program, transportation infrastructure and innovation program, federal lands and tribal transportation programs, territorial and Puerto Rico highway program, research, technology and education authorizations.

Section 1317 – Modernization of the environmental review process

This section requires the federal government to examine ways to modernize, simplify, and improve the implementation of the National Environmental Policy Act of 1969 no later than 180 days after enactment of the bill.

Section 1402 – Highway Trust Fund transparency and accountability

This provision is a reporting requirement for information and transparency about the Highway Trust Fund. The report shall contain comprehensive data for each program, organized by states, financial data, and information on any funds transferred.

Title II Innovative Project Finance

Section 2001 – Transportation Infrastructure Finance and Innovation Act of 1998

Extends eligibility for the Transportation Infrastructure Finance and Innovation Act by allowing states to use National Highway Performance Program, STP block grant, and NSFHP funds to pay the subsidy and administrative costs associated with providing TIFIA credit assistance.

Title III Public Transportation

Section 3028 – Dedicated funding for Positive Train Control

Clarifies the establishment of a new limited authorization with guaranteed funding for the secretary of transportation to provide commuter railroads and states with grants and/or loans that can leverage approximately $2 billion in financing for PTC implementation.

Title IV Highway Traffic Safety

Section 4005 – Grants for national priority safety programs

Enables states to spend more funds on pressing safety needs by reallocating unspent national priority safety program funds and reforms the impaired driving, distracted driving, and state graduated driver licensing incentive grants. Adds a new separate grant for states with 24-7 sobriety programs and adds a new grant to enhance safety for non-motorized users.

Title V – Motor Carrier Safety

Subtitle D – Commercial Motor Vehicle Drivers

Section 5401 – Commercial driver opportunities for veterans

Establishes a pilot program to address the driver shortage by allowing qualified current or former members of the armed forces, who are between 18 and 21 years old, to operate a commercial motor vehicle in interstate commerce. Currently, 48 states allow 18-21 year olds to drive intrastate on county, state, and interstate highways.

Section 5402 – Use of hair testing for pre-employment and random substances tests

This section adds bipartisan legislation that allows trucking companies the option to use hair testing rather than urinalysis for employee drug testing.

Title XI – Hazardous Materials Transportation

Section 7101 – Authorization of appropriations

Authorizes hazardous materials safety provisions at baseline levels – $422 million over five years, with $283 million authorized from the general fund and $139 million from the emergency preparedness fund.  This title also increases administrative flexibility for planning and training grants, enhances information available to first responders, and improves tank car safety requirements.

Title IX National Surface Transportation and Innovative Finance Bureau

Section 9001 – National Surface Transportation and Innovative Finance Bureau

Establishes the National Surface Transportation and Innovative Finance Bureau within DOT. The bureau will help states and local government to receive federal financing or funding assistance, as well as technical assistance, in order to advance transportation projects.

Title XI Rail

Section 11101 – Authorization of grants to Amtrak

Authorizes Amtrak by business line at $8.05 billion over five years, a nearly 20 percent decrease over the previous authorization and an increase over current appropriations.  This title also includes revised accounts and planning structures, provisions for Amtrak to manage its assets more like a business, and authorizes rail grants of $2.2 billion  over five years to improve existing infrastructure.

Section 11411 – Installation of audio and image recording devices

Requires all passenger railroads to install inward-facing cameras to better monitor train crews and assist in accident investigations, and outward-facing cameras to better monitor track conditions, fulfilling a long-standing recommendation from the National Transportation Safety Board.

Section 11415 – Rail passenger liability

Increases the passenger rail liability cap to $295 million (adjusting the current $200 million cap for inflation), applies the increase to the Amtrak accident in Philadelphia on May 12, 2015, and adjusts the cap for inflation every five years going forward. 

Section 11503 – Efficient Environmental Reviews
Streamlines environmental and historic preservation reviews to expedite the delivery of rail projects, applying to rail the processes and exemptions used to expedite highway projects.

Title XXIV Vehicle Safety

Section 24103 – Improvements in availability of recall information

Requires NHTSA to improve the safercar.gov website and the consumer complaint filing process.

Section 24105 – State notification to consumers of motor vehicle recall status

Creates a state pilot grant to inform consumers of open recalls at the time of vehicle registration.

Section 24107 – Dealer requirement to check for open recall

Incentivizes dealers to inform consumers of open recalls at service appointments.

Section 24109 – Rental car safety

Prohibits covered rental companies from renting or selling an unrepaired vehicle under recall.

Section 24110 – Increase in civil penalties for violations of motor vehicle safety

Triples penalties for auto safety violations per incident and triples the overall penalty cap to $105 million, provided that NHTSA conducts a previously required rulemaking on penalty assessment factors.

Section 24112 – Corporate responsibility for NHTSA reports

Requires rules on corporate responsibility for reports to NHTSA.

Section 24116 – Information regarding components involved in recalls

Requires manufacturers to identify and include applicable part numbers when notifying NHTSA of safety defects.

Section 24301 – Driver Privacy Act of 2015

Makes clear that the owner of a vehicle is the owner of any information collected by an event data recorder.

Section 24321 Safety Through Informed Consumers Act of 2015

Incentivizes adoption of crash avoidance technology by requiring that crash avoidance information be indicated on new car stickers to inform vehicle purchasing decisions.

Section 24352 – Motor vehicle safety whistleblower incentives and protections

Incentivizes auto workers to come forward with information about safety violations by authorizing the secretary of transportation to award a percentage of certain collected sanctions to whistleblowers.

Section 24407 – Improvement of data collection on child occupants in vehicle crashes

Improves crash data collection to include information about child restraint systems.

Title XXXI – Highway Trust Fund and related taxes

Section 31101 – Extension of trust fund expenditure authority

This provision extends the Highway Trust Fund expenditure authority.

Section 31102 – Extension of highway-related taxes

This provision extends the highway-related taxes.

Title XXXII – Offsets

Sections 32101 through 32104 – Tax Compliance Provisions

Section 32101 – Unpaid taxes

Allows the revocation of a passport or denial of a passport application if a person has more than $50,000 in unpaid federal taxes. 

Section 32104 – Filing of Annual Return/Report of Employee Benefit Plan

The conference report repeals the provision in the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 that provided an automatic 3 ½-month extension for filing Form 5500 (the Annual Return/Report of Employee Benefit Plan). Under the conference report, the extended due date for Form 5500 will return to being determined under Department of Labor and Internal Revenue Service rules in effect before enactment of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015.

Sections 32201 through 32105 – Fees and Receipts

Section 32201 – Index Customs user fees to inflation. 

Indexes to inflation (CPI-U) the dollar amounts for various customs fees. This provision would raise $5 billion.

Section 32202 – Surplus funds of Federal Reserve Banks

Retains the Federal Reserve surplus account, but caps it at $10 billion, with any amounts that exceed the cap to be remitted to the U.S. Treasury. Raises $33.04 billion over five years.

Section 32203 – Dividends of Federal Reserve Banks

Retains the existing 6 percent dividend for Federal Reserve System member banks with consolidated assets of $10 billion or less, indexed to inflation. For member banks with consolidated assets greater than $10 billion, the conference report reduces the dividend paid on capital paid into the Federal Reserve System with the lesser of the rate equal to the high yield of the 10-year Treasury note auctioned at the last auction held prior to the payment of a dividend, and 6 percent. Provision effective on January 1, 2016. Raises $2.77 billion over five years.

Section 32204 – Strategic Petroleum Reserve drawdown and sale

Provides for drawdown and sale of 66 million barrels of crude oil from the Strategic Petroleum Reserve from fiscal years 2023 through 2025, raising $6.2 billion in offsets. Requires amounts received to be deposited in the general fund of the Treasury.

Provides emergency protection by prohibiting sale of crude oil in quantities that would limit the secretary of energy’s authority to sell petroleum products for the prevention or reduction of adverse impacts from severe domestic energy supply interruptions. Authorizes an increase in the sale of crude oil to maximize the financial return to the United States, but limits the sale to a maximum of $6.2 billion of revenue to the Treasury.  

The Senate-passed DRIVE Act provided for sale of 101 million barrels of crude oil from the SPR from fiscal years 2018 through 2025, raising $9.0 billion in offsets. It prohibited the sale of crude oil in quantities that would result in an SPR that contains less than 90 days of emergency reserves.

Section 32205 – Repeal of statute relating to federal crop insurance

Repeals Section 201 of the Bipartisan Budget Act of 2015, which required the U.S. Department of Agriculture to renegotiate the Standard Reinsurance Agreement by December 31, 2016, and at least once every five years thereafter. Section 201 also established an 8.9 percent cap on the overall rate of return for insurance providers under the Standard Reinsurance Agreement, which was a decrease from the negotiated rate of approximately 14.5 percent. This provision increases spending by $3 billion from 2016 through 2025.

Section 201 was controversial during the Bipartisan Budget Act debate because it was not contemplated as part of the budget process. A colloquy among Leader McConnell, Senator Cornyn, Senator Thune, and Senator Roberts resulted in a commitment to address the provision by the end of the year.

The Senate passed the DRIVE Act before it passed the Bipartisan Budget Act of 2015. Therefore, the DRIVE Act did not address Section 201 of the Bipartisan Budget Act of 2015.

DIVISION D – MISCELLANEOUS

Title XLI - Federal Permitting Improvement

Establishes the Federal Permitting Improvement Steering Council. Requires inventory of covered projects that are pending the environmental review or authorization of the head of any federal agency. Requires designation of facilitating agency for each category of project. Requires development of recommended performance schedules, including intermediate and final completion dates, for environmental reviews and authorizations most commonly required for each category of project.

Requires issuance of recommendations on best practices for enhancing early stakeholder engagements; ensuring timely decisions regarding environmental reviews and authorizations; improving coordination between federal and non-federal governmental entities; increasing transparency; reducing information collection requirements and other administrative burdens on agencies, project sponsors, and other interested parties; and developing and making available to applicants appropriate geographic information systems and tools. Requires development of an online database known as the “permitting dashboard” to track the status of federal environmental reviews and authorizations for any project in the inventory.

Grants consent of Congress for three or more contiguous states to enter into an interstate compact establishing regional infrastructure development agencies to facilitate authorization and review of projects, under state law or in the exercise of delegated permitting authority, that will advance infrastructure development, production, and generation within the states that are parties to the compact.

Bars a claim arising under federal law seeking judicial review of any authorization issued by a federal agency for a project more than two years after the date of publication in the Federal Register of the final record of decision or approval or denial of a permit, with certain exceptions. Requires a federal agency to consider new information received after the close of the comment period if the information satisfies the requirements under regulations implementing the National Environmental Policy Act.

In an action seeking a temporary restraining order or preliminary injunctive relief against a federal agency or a project sponsor in connection with review or authorization of a project, requires the court to consider the potential effects on public health, safety, and the environment, and the potential for significant negative effects on jobs resulting from an order or injunction. Also requires that the court not presume that the aforementioned harms are reparable.   

Authorizes federal agencies to issue regulations establishing a fee structure for project proponents to reimburse the United States for reasonable costs incurred in conducting environmental reviews and authorizations for projects, after public notice and an opportunity for comment.

Requires an annual report to Congress detailing the progress accomplished under this title during the previous fiscal year. Requires a report by the Government Accountability Office within three years that analyzes whether the provisions of this title could be adapted to streamline the federal permitting process for smaller projects that are not covered projects. Terminates this title after seven years. The Senate-passed DRIVE Act did not include the sunset provision terminating the title after seven years.

DIVISION E – EXPORT-IMPORT BANK OF THE UNITED STATES

The conference report lowers the bank’s borrowing cap from $140 billion to $135 billion in fiscal years 2015-2019 and requires higher loan loss reserves. In the event the default rate reaches 2 percent or more, the lending cap would be frozen until it is less than 2 percent. The bank is to hold not less than 5 percent of the aggregate amount of disbursed and outstanding loans, guarantees and insurance of the bank in reserve, not later than one year after enactment. 

Requires a review of fraud control measures by the inspector general not later than four years after enactment, and every four years thereafter, and to submit a written report with findings to Congress. Creates an Office of Ethics within the bank to oversee ethics practices of bank employees. The office is to be headed by a chief ethics officer who will report to the board. Creates a chief risk officer and a risk management committee to manage the bank’s risk exposure, and require the inspector general to audit the bank’s risk management procedures regularly.

Allows the bank to introduce a reinsurance pilot program to share risks associated with the bank’s activities with private sector entities in an amount not to exceed $10 billion in one fiscal year, or $1 billion to any one entity. The conference report increases the amount of bank lending to small businesses from 20 percent to 25 percent of all activity, applicable to fiscal year 2016 and thereafter.

Addresses modernization of operations that includes provisions for electronic payments and documents, and reauthorization of the information technology updating through 2019. Raises the threshold for consideration of environmental impacts from $10 million to $25 million, with an exception for international agreements. Ensures that bank policies do not discriminate against energy source projects. 

Requires the president to submit a strategy for ending government-supported export subsidies internationally. Reduces spending subject to appropriations by $2.125 billion over five years.

DIVISION F – ENERGY SECURITY

Section 61003. Critical electric infrastructure security

Authorizes the secretary of energy to issue orders for emergency measures to protect or restore the reliability of critical electric infrastructure or of defense critical electric infrastructure whenever the president issues a written directive or determination identifying a grid security emergency. Requires the secretary to establish rules of procedure that ensure such authority can be exercised expeditiously.

A “grid security emergency” means the occurrence or imminent danger of:

  1. A malicious act using electronic communication or an electromagnetic pulse, or a geomagnetic storm event, that could disrupt the operation of those electronic devices or communications networks that are essential to the reliability of critical electric infrastructure or of defense critical electric infrastructure; and disruption of the operation of those devices or networks, with significant adverse effects on the reliability of such critical infrastructure as a result of such act; or
  2. A direct physical attack on critical electric infrastructure or of defense critical electric infrastructure; and significant adverse effects on the reliability of such critical infrastructure as a result of such physical attack.

Authorizes the establishment of a mechanism that permits owners, operators, or users of critical electric infrastructure who have incurred substantial costs to comply with an order for emergency measures to recover such costs. Facilitates the protection and voluntary sharing of critical electric infrastructure information between private sector asset owners and the federal government.

The Senate-passed DRIVE Act did not include this provision.

Section 61004 – Strategic Transformer Reserve

Requires the secretary of energy to prepare and submit to Congress a plan to establish a Strategic Transformer Reserve for the storage, in strategically located facilities, of spare large power transformers and emergency mobile substations in sufficient numbers to temporarily replace critically damaged large power transformers and substations that are critical electric infrastructure or serve defense and military installations.

The Senate-passed DRIVE Act did not include this provision.

DIVISION G – FINANCIAL SERVICES

The conference report includes a series of bipartisan finance bills, many of which passed the House by voice vote. Notable in the package:

Title LXXI – Provisions to make changes related to the treatment of emerging growth companies and their registration with the Securities and Exchange Commission.

Title LXXII

Directs the SEC to revise some of its regulations to scale and eliminate unnecessary disclosure requirements and modernize certain of its rules.

Title LXXIV

Amends the Investment Advisers Act to reduce the regulatory burden and costs of advisers to small business investment companies and preempts state registration requirements for some advisers.

Title LXXV

Amends Gramm-Leach-Bliley privacy notice requirements to clarify that an annual privacy notice is only required when a company’s disclosure policies change.

Title LXXVIII

Allows tenants on a fixed income to have their income verified every three years instead of annually for the purpose of determining eligibility for certain federal assistance housing programs.

Title LXXXI

Allows the Department of Housing and Urban Development to establish a demonstration program to enter into budget-neutral, performance-based agreements that result in a reduction in energy or water costs.

Title LXXXIII

Allows privately insured, state-chartered credit unions to apply for membership in the Federal Home Loan Bank System.

Title LXXXIII

Raises from $500 million to $1 billion the threshold for well-capitalized banks to be eligible for an 18-month exam cycle, rather than annually.

Title LXXXVI

Applies the shareholder registration and deregistration thresholds for bank holding companies in the JOBS Act to savings and loan holding companies.

Title LXXXVI

Repeals the indemnification requirements added by the Dodd-Frank Act for regulatory authorities to obtain access to swap data, and to aid data to be shared with foreign authorities.

Title LXXXVIII

Amends the Secure and Fair Mortgage Licensing Act of 2008 to direct the attorney general to provide appropriate state officials responsible for regulating financial service providers with access to criminal history information to the extent that criminal history background checks are required under state law for the licensing of non-depository licensees beyond mortgage loan originators.

Title LXXXIX

Amends the Dodd-Frank Act to require the Consumer Financial Protection Bureau to create a petition process for interested parties to apply for an area not designated by the Bureau as rural to be so designated. 

Administration Position

On December 2, 2015, White House Spokesman Josh Earnest spoke on the FAST Act and noted, “If it’s passed, the president would sign it.”

Cost

CBO estimates that the conference agreement “would reduce budget deficits by $71 billion over the 2016-2025 period.” CBO found that implementing the major provisions of the conference report would “result in the additional discretionary spending totaling $201 billion over the 2016-2020 period.” According to CBO, implementation of the FAST Act would “lead to a balance at the end of fiscal year 2020 of approximately $8 billion in the highway account ... and about $2 billion in the transit account.”

Amendments

There are no amendments scheduled to be voted on at this time.