Oversight and Investigations Informer – July 11, 2022

What We Are Watching:

FEDS INVESTIGATE LARGE GAS LEAK FROM COLONIAL PIPELINE: Federal pipeline regulators are investigating the leak, which occurred at a TransColorado pipeline compressor station near Olathe. Kinder Morgan spokesperson Vicky Oddi said the suspected cause was equipment malfunction. The Pipeline and Hazardous Materials Safety Administration (PHMSA) — the agency investigating the June 25 gas release — is working on rules to more aggressively police methane leaks. Congress passed legislation near the end of 2020 that directs the agency to draft new rules requiring companies to use new technology to find and fix leaks.

NEW LITIGATION LEVELED AGAINST DOE: Functional Government Initiative (FGI) announced transparency litigation against the Department of Energy (DOE) seeking records on the Administration’s decision to release millions of barrels of oil from the Strategic Petroleum Reserve (SPR). FGI’s document request was triggered by concerns the decision to drawdown was in response to the Administration’s falling approval numbers, due in part to rising gas prices, rather than disruptions in supplies.

Week Ahead:  

• On July 13th at 2:30 PM ET, the Senate Committee on Energy and Natural Resources will hold a hearing titled “Energy Subcommittee Hearing on Pathways to Lower Energy Prices.”

Key Insights:

“President Biden has botched American energy policy so badly that this news isn’t surprising,” Rep. Ralph Norman, R-S.C., the ranking member of the House Oversight Subcommittee on Environment, told Fox News Digital. “Our strategic reserves are for national security, not to satisfy global oil markets. This administration owes us an immediate explanation as to why our reserves were sent to other nations,” Norman said.

What We Are Watching:

FDIC LAUNCHES CRYPTO-LENDING INVESTIGATIONS: The Federal Deposit Insurance Corporation (FDIC) is probing Voyager’s marketing of crypto accounts as insured by the FDIC. Voyager said it partnered with Metropolitan Commercial Bank, one of a small group of banks that work with crypto firms, to offer FDIC insurance. Voyager stated that its consumer accounts were insured because Metropolitan was insured, yet those deposits are only insured in the event of Metropolitan’s failure, not Voyager’s. This practice of Voyager and other crypto firms could bring about additional regulatory scrutiny and possible legal penalties.

G20 BOARD PROPOSES DIGITAL ASSET REGULATION: The G20’s Financial Stability Board (FSB) said that it would propose global crypto rules in October, stating that recent market volatility has highlighted the need for regulation. Previously, the group said that crypto did not pose a systemic risk but may now reverse course. The FSB said stablecoins as a means of payment and the “speculative purposes” of digital assets will be of interest. Although the FSB has no formal lawmaking ability, a proposal could put pressure on the EU and U.S. to do more to regulate digital assets.

Week Ahead:  

The House Committee on Financial Services will convene one hearing this week:

• A Subcommittee on Consumer Protection and Financial Institutions hearing entitled, “Better Together: Examining the Unified Proposed Rule to Modernize the Community Reinvestment Act.” The hearing will be held on Wednesday, July 13 at 10:00am ET.

The Senate Committee on Finance will convene one hearing this week:

• A Full Committee hearing to consider the nomination of Jay Curtis Shambaugh to be an Undersecretary of the Treasury. The hearing will be held on Tuesday, July 12 at 10:00 am ET

The Senate Committee on Banking, Housing, and Urban Affairs will convene two hearings this week:

• A Full Committee hearing entitled, “Advancing Public Transportation under the Bipartisan Infrastructure Law: Update from the Federal Transit Administration.” The hearing will be held on Tuesday, July 12 at 10:00am ET.
• A Full Committee hearing entitled, “Advancing National Security and Foreign Policy Through Export Controls: Oversight of the Bureau of Industry and Security.” The hearing will be held on Thursday, July 14 at 10:00am ET.

Key Insights:  

The Treasury Department’s recently proposed framework for international engagement in the digital asset space lays out the Biden Administration’s plan for involvement with foreign counterparts and forums. The framework is built around the existing principal policy objectives as established in the Administration’s Executive Order (EO) on Ensuring Responsible Development of Digital Assets. This framework is intended to ensure that as digital assets are developed, core principles are secured. These core principles include democratic values, consumer and business protections, global financial system connectivity and interoperability, and the safety and security of the global financial system. The framework also discusses the importance of greater cooperation with international stakeholders, the need for uniformity in enforcement, and regulatory clarity. This focus on cooperation and regulatory clarity is intended to prevent illicit activity and reduce friction in cross-border transactions.

The Administration will also focus on establishing standards for digital assets and Central Bank Digital Currencies (CBDCs), in consort with international partners, with the intent of improving and protecting financial markets. The focus of these standards will be on the full breadth of issues faced by digital assets including financial market stability, consumer protection, and illicit activities. Regarding specific commitments, which remain vague with the full framework yet unreleased, the framework lays out specific target forums for engagement on digital assets.

What We Are Watching:

AFTER FAILED MERGER BID, CARE NEW ENGLAND VOWS TO REMAIN INDEPENDENT: In 2021 Lifespan and Care New England (CNE) planned to merge into a single academic medical system with Brown University. The Federal Trade Commission (FTC) sued to block the deal in February, citing increased prices and reduced care quality as the driving factors behind the suit. Following the FTC suit, both companies opted to cease pursuing a merger and looked to obtain a Certificate of Public Advantage to shield them from federal antitrust enforcement. The Road Island state insurance commissioner recently expressed concerns that such a merger would negatively impact the state’s health care system and as a result CNE is moving forward as an independent firm.

HOUSE OVERSIGHT COMMITTEE LAUNCHES INVESTIGATION INTO REPRODUCTIVE HEALTH DATA COLLECTION: In response to calls from state legislatures to pursue patients who seek abortions in legal states as well as fears that personal health information could be used to identify such patients, the House Oversight and Reform Committee is examining how data brokers collect and distribute sensitive data. The committee sent letters to SafeGraph, Digital Envoy, Placer.ai, Gravy Analytics, Babel Street, Flo Health, Glow, BioWink, GP International and Digitalchemy Ventures. The letters requested information and documents regarding data privacy, collection, distribution, use and sale.

Week Ahead:

• On July 13th at 10:00 AM ET, the House Oversight and Reform Committee will hold a hearing titled “The Impact of the Supreme Court’s Dobbs Decision on Abortion Rights and Access Across the United States.”On July 14th at 10:00 AM ET, the House Veterans Affairs Committee will hold a hearing titled “Examining VA Community Care Access, Utilization, and Expenditures.”

Key Insights:  

The move by the House Oversight and Reform Committee to send letters to data brokers suspected of selling information that could be used to identify women who received abortion services is a sign that future federal and state oversight and investigative efforts in this vein are likely to ramp up. Data privacy has increased in importance in recent years while technological developments have emerged that are difficult to engage within the current regulatory framework. The data broker industry has experienced increased scrutiny in recent years and moves by GOP state legislators to criminalize seeking abortion services out of state is likely to push Democratic lawmakers to advocate for new healthcare data privacy regulations.

What We Are Watching:

PARTISAN BACKLASH ON GOOGLE SPAM PROPOSAL: Google responded to Republican accusations that its spam filters disproportionately flagged conservative emails with changes. The Verge now reports that Democrats are unhappy, alleging that the company’s move is simply an appeasement of “bad faith” criticism.

COMMANDERS OWNER SYNDER NEGOTIATING WITH HOUSE OVERSIGHT: Fox Sports reports that Washington Commanders owner Daniel Snyder has offered to appear remotely with the Oversight Committee later this month. The offer comes after Snyder snubbed the committee’s request to testify at a hearing with NFL Commissioner Roger Goodell. The tiff has taken on a partisan character as committee Republicans have vowed to end the probe should they take the gavel following November elections.

Week Ahead:

On July 12th at 10:00 AM ET, the Senate Committee on the Judiciary will hold a hearing titled “A Post-Roe America: The Legal Consequences of the Dobbs Decision.”

On July 14th at 10:00 AM ET, the House Committee on the Judiciary will hold a hearing titled “What’s Next: The Threat to Individual Freedoms in a Post-Roe World.”

We expect technology, digital privacy, and cooperation with law enforcement to be among the issues discussed at both hearings.

Key Insights:

July may be do-or-die time for efforts by Rep. David Cicilline (D-RI) and Sen. Amy Klobuchar (D-MN) to pass meaningful antitrust legislation in the near future and much of the tech sector watches to see if it gets a Senate floor vote. There are two schools of thought on congressional oversight. The first is classic fact-finding to inform legislation – this is what Rep. Cicilline undertook and won plaudits for his methodical approach. If the legislation passes, the oversight that preceded it will become oversight canon. But if it does not lead to significant legislative changes, you can count on critics questioning the strategy. The other school of thought on oversight is the public shaming and pressure approach – whereby withering public criticism puts pressure on regulators, companies, and even public attitudes to make changes outside of the legislative process. Bet that if Republicans take gavels after November, their approach to overseeing tech companies will skew to the latter.

What We Are Watching:

FTC TARGETING MANUFACTURERS WITH RESTRICTIVE REPAIR POLICIES: The Biden administration is cracking down on manufacturers that place heavy restrictions on who can do repairs—voiding warranties, for instance, if work is not done by an authorized dealer. Many legal departments have lots of decisions to make to avoid ending up in regulators’ sights, legal observers say. They expect the Federal Trade Commission to unleash additional regulatory actions along the lines of a settlement it reached with Harley-Davidson last month forcing it to back away from warranty terms that voided coverage if customers used anyone other than the company or its authorized dealers for repairs. The agency also recently settled with Columbus, Ohio-based MWE Investments, the company that makes Westinghouse-branded power generators. Under the agreement, MWE retreated from what the FTC alleges were illegal warranty terms. The Biden administration signaled last year that it was going to launch a regulatory assault on right-to-repair policies, arguing that restrictive policies raise prices for consumers and shut out independent repair shops.