Oversight and Investigations Informer – March 21, 2022

What We Are Watching:

GAS CLAPS BACK AT FERC: After FERC announced a new policy last year to more strongly consider the climate and environmental justice impacts of gas pipelines, the natural gas industry and a state attorney general are letting the independent agency know exactly how they feel about it. The new policy is an “unlawful expansion of the Commission’s role and responsibilities” that would raise costs, the American Gas Association argued in a filing last week. The American Petroleum Institute alleged similar harm, and Texas Attorney General Ken Paxton said the Commission “has erected nearly impenetrable barriers for most projects to obtain regulatory approval, to the detriment of the natural gas industry, consumers, and states like Texas.”

SEC’S CLIMATE RULE DEBUTS: After many delays, the U.S. Security and Exchange Commission’s highly-anticipated climate disclosure rule was unveiled today. Early previews suggested the rule will require companies to disclose their Scope 3 emissions, or those of their suppliers and customers, which is surely to meet fierce resistance from the business community and Republicans, who will argue the rule oversteps the Commission’s authority. It’s difficult for businesses to quantify their Scope 3 emissions, which in many industries represent the majority of a company’s footprint, because it’s unclear where one party’s responsibility ends and another’s begins.

Week Ahead:  

• FERC will hold an open meeting where they will discuss the new policy that has generated forceful pushback from the industry and Texas on Tuesday March 24 at 10 a.m.

Key Insights:

DEMS HAUL OIL CEOS IN OVER HIGH GAS PRICES: Congressional Democrats are jockeying with each other to call in oil company CEOs to testify over high gas prices, with invitations sent out from the Senate Commerce, Science and Transportation Committee, the House Natural Resources Committee, and the House Energy and Commerce Committee. While the two commerce committees are targeting the big oil companies whose names shine above retail gas stations, suggesting they are concerned about price-gouging, the Natural Resources Committee is calling in companies who do not sell gasoline to consumers.

What We Are Watching:

WITHDRAWING HER NOMINATION: Sarah Bloom Raskin withdrew her nomination to become vice chair for supervision of the Federal Reserve Board last week. Her withdrawal came after she failed to gain support for a full Senate confirmation, especially after influential Sen. Joe Manchin (D-WV), openly opposed her nomination. She also faced fierce opposition from Republican Senators on the Senate Banking Committee over her views on climate and her previous involvement on the board of a fintech company. In a statement, President Biden urged the Senate Banking Committee to act quickly and confirm the remaining nominees. Later last week, Acting Chairman of the Federal Reserve Jerome “Jay” Powell was approved for another term as Federal Reserve Board Chair by the committee.

WARREN CRYPTO BILL: Last Thursday, Sen. Elizabeth Warren (D-MA), announced a new bill, The Digital Assets Sanctions Compliance Enhancement Act, to block cryptocurrency companies from starting business with sanctioned companies. This was introduced with ten other Democratic Senators. The Bill aims to ensure Vladimir Putin and other elites do not use digital assets to undermine economic sanctions and it would strengthen the U.S. sanctions program. However, leaders of the crypto community have said that digital assets would not play a role in helping Russia evade sanctions.

Week Ahead:  

• The Senate Banking Committee will hold a hearing titled “Strengthening Oversight and Equity in the Appraisal Process”, on Thursday, March 24 at 10:00 AM.

Key Insights:  

On March 17, the Senate Committee on Banking, Housing, and Urban Affairs convened a hearing entitled, “Understanding the Role of Digital Assets in Illicit Finance.” Participants discussed how Russia could use digital assets to evade sanctions and how Ukraine uses cryptocurrency to support its war efforts. Senator Elizabeth Warren introduced her “Digital Asset Sanctions Compliance Enhancement Act,” which would allow the President to sanction cryptocurrency firms that do business with sanctioned Russian entities. However, all the witnesses agreed that it is very unlikely that President Putin will use cryptocurrency to maneuver sanctions since it would not be able to handle the size of the Russian economy. Michael Mosier, former Acting Director of the Financial Crimes Enforcement Network, also called for regulation to prevent illicit affairs with crypto and regulation that provides clarity for crypto exchanges in the U.S. Pressure from Russia’s invasion of Ukraine could expedite these regulation talks.

What We Are Watching:

BIPARTISAN COMMITTEE LEADERS URGE DEPARTMENT OF JUSTICE (DOJ) AND TREASURY TO REVIEW DRUGMAKERS’ OPIOD $26 BILLION TAX SETTLEMENT: On Monday, March 14, the House Oversight and Reform Committee sent a letter to the DOJ Attorney General Merrick Garland, and Treasury Secretary Janet Yellen, requesting an investigation into the tax deductions of four U.S drug companies—Cardinal Health, McKesson Corporation, AmerisourceBergen, and Johnson & Johnson, and their agreement to the $26 billion ­­opioid settlement. In the letter, leaders expressed concern that the companies are attempting to put taxpayers on the hook for billions in settlement costs.

U.S LAWMAKERS DEMAND THAT PHARMA PROVIDE ACCURATE INFORMATION INTO HIGH DRUG PRICING: Democratic leaders sent a second letter to the CEO of the Pharmaceutical Research and Manufacturers of America (PhRMA) after their inadequate response to lawmakers’ initial (March 1, 2022) letter. In their initial letter, lawmakers expressed concerns over the rapid price increase of prescription medicines and requested documentation to explain how drug manufacturers justify their price increases. In their follow-up letter, lawmakers noted multiple problems with PhRMA’s initial response about brand drug manufacturers’ price inflations, the impact their prices had on patients with high co-pays, and their attempt to blame insurers for high drug prices.

SEN. CHUCK GRASSLEY PRESSES CMS AND DOJ TO INVESTIGATE CONDITIONS AT A NEW JERSEY NURSING HOME: Ranking Judiciary Committee Member Sen. Grassley (R-IA) along with two GOP senators, wrote a letter to U.S. Attorney General Merrick Garland urging him to launch an investigation into the harsh conditions of a New Jersey nursing home facility—Woodland Behavioral Health—which has made numerous headlines amid the COVID-19 pandemic.

Week Ahead:

• On Wednesday, March 23, 2022, at 10:00am, the Senate Committee on Health, Education, Labor & Pensions will hold a hearing entitled “Strengthening Federal Mental Health and Substance Use Disorder Programs: Opportunities, Challenges, and Emerging Issues.”

Key Insights:  

On Tuesday, senior White House officials sent a memo to reporters warning that the Biden Administration will run out of funds to address the COVID-19 pandemic if Congress fails to pass additional funding. The officials indicated that relief initiatives, including orders of COVID-19 treatments, vaccines, and boosters, testing and therapeutic capabilities, are at risk of being scaled back, or cancelled as early as next week. The officials also noted that Congress needs to approve no less than $22.5 billion simply to maintain existing initiatives, which reflects the amount requested earlier this month by U.S. Department of Health and Human Services (HHS) Secretary Xavier Becerra. House Speaker Nancy Pelosi and Senate Majority Leader Chuck Schumer announced they are working to address the funding issue; however, it is unclear when a bill will be considered.

What We Are Watching:

CONGRESS LOOKS TO REFORM OCEAN SHIPPING: Politico reports that there is bipartisan and bicameral interest in Congress in reforming the shipping container industry, especially in light of supply chain issues and inflation concerns. In the Senate, Commerce Chair Maria Cantwell (D-WA) has proposed the Ocean Shipping Reform Act, S. 3580, that would impose new regulations on ocean shipping companies, and in the House shipping regulations are included in the China competition bill, H.R. 4521.

LAWMAKERS QUESTION RENTAL CAR FEES: Two House Democratic Representatives, Raja Krishnamoorthi of Illinois and Katie Porter of California, wrote a letter to rental car companies Hertz and Avis seeking answers about rising rental costs and corporate profits.

What We Are Watching:

MUSK’S CHINA ENTANGLEMENTS CREATE UNEASE IN WASHINGTON: Several Republican lawmakers have articulated concerns to committees and in private briefings about the potential for China to gain access to classified information, including through SpaceX’s foreign suppliers that might have ties to Beijing, as well as the unclear division of SpaceX and automaker Tesla, which has developed advanced battery packets sought by the Chinese.

AMAZON ANTITRUST SUIT THROWN OUT: An antitrust law suit brought by District of Columbia Attorney General Karl Racine was thrown out in court on Friday by DC Superior Court Judge Hiram Puig-Lugo, 10 months after it was initially filed, claiming Amazon’s restrictive policies harm consumers by forcing sellers to raise their prices on Amazon and other online platforms. A representative for the D.C. AG said the ruling did not consider the detailed allegations in the complaint, but the office would continue fighting to develop reasoned antitrust jurisprudence in local courts through other legal options.

INSTACART ADDS FUEL FEE: Grocery deliver platform has joined Uber, Lyft and other apps as the next company to announce a fuel surcharge in an effort to offset the higher-than-normal gas prices its driver-shoppers are paying. Instacart detailed the decision in a blog post, saying it would begin to charge an extra $0.40 per order, and will be in effect for one month following implementation.

Week Ahead:

• On Tuesday, March 22^nd, The Senate Commerce, Science and Transportation Committee holds a markup of  S. 3014 (117), the “Next Generation Telecommunications Act” beginning at 10 a.m.
• On Wednesday, March 23^rd, The Senate Commerce, Science and Transportation Committee holds a hearing on “Developing Next Generation Technology for Innovation” beginning at 10 a.m.

Key Insight:

In one of her first major moves as FTC commissioner, Lina Khan chose not to challenge Amazon’s acquisition of MGM Studios after the agency’s commissioners split on bringing a suit. The decision not to challenge was reportedly driven by the reality that Khan lacked votes at the FTC to support a case (with Democrat Alvaro Bedoya’s confirmation still hanging in the Senate). This dynamic underscores how the ability of the Biden Administration to press its agenda through agencies like the FTC could be significantly impacted should Republicans win control of the Senate in November elections.