Government Affairs Update | September 7, 2017

Good afternoon and welcome to the third Fennemore Craig newsletter of the Nevada legislative interim. We hope you enjoyed a relaxing Labor Day weekend, the passage of which marks the unofficial beginning of the long political season here in the state. Campaigns will now begin to ramp up their efforts in anticipation of a contentious 2018 midterm election, and a variety of state agencies will prepare to implement the next wave of legislative bills which become effective on October 1.

In order to help our clients navigate the interim regulatory environment and prepare for the impending 80th Legislative Session, Fennemore Craig offers a variety of services during the interim period, including tracking regulatory changes, sending reports of potential candidates for office, and ultimately making recommendations on potential campaign contributions. Feel free to reach out to any of the members of our Government Affairs team throughout the state if you wish to receive more information about these services.

REGULATORY OVERVIEW

The interim period until the next session begins is teeming with activity that may impact you and your business. Government agencies are now engaged in the rulemaking process, in which they interpret and implement the legislation that survived the last session. The rulemaking process allows for public participation and stakeholder input in agency governance. Rulemaking may also be used as a tool for fostering better understanding of legal requirements between an agency and those subject to the laws administered by the agency. By the adoption of interpretive rules, agencies may attempt to remove uncertainty or ambiguity in the law.

There are three types of regulations, each with different implementation procedures. Permanent regulations are vetted the most extensively prior to adoption and are the only regulations that become part of the Nevada Administrative Code. Temporary regulations are subject to most of the same procedures but expire by limitation. Emergency regulations may be adopted quickly in response to unforeseen circumstances, but are only effective for 120 days.

In order to adopt permanent and temporary regulations, state agencies must engage in ongoing dialogue with constituents and affected parties. At least one “workshop” must be conducted prior to the implementation of regulations to discuss the general topics of interest in the proposal. Any written and oral testimony given during this time is retained for the record and must be considered by the board, commission, or agency in making a decision. The same governmental entity must also consider the potential impact of the regulation on the state’s small businesses and prepare a small business impact statement.

The Government Affairs team at Fennemore Craig is here to help you navigate through the regulatory rulemaking process. As part of our ongoing engagement, you may receive notice of impending workshops and hearings that may affect your operations. In addition, the firm will provide in-person representation upon request.

Healthcare in the Interim
The month of August kicked off with a surprise move from Centene subsidiary SilverSummit. In a press conference with Nevada’s popular Governor, Brian Sandoval (R), the company announced that it would be offering individual and small group health insurance plans in all of Nevada’s 17 counties on the Silver State Health Insurance Exchange for plan year 2018. SilverSummit will partner with Hometown Health, the health insurance branch of Northern Nevada healthcare giant Renown Health, to provide a comprehensive network of providers in the rural market. The move came in response to the departure of other carriers from the Nevada exchange, which was fueled by uncertainty in Washington DC. Congressional Republicans lost key battles to pass controversial healthcare reform in the waning days of July. And though the Affordable Care Act remains intact, the industry has been badly affected by the instability emanating from the Capitol. SilverSummit and Health Plan of Nevada will be the only two companies to offer insurance on the Nevada exchange in 2018. SilverSummit will operate in all 17 counties across the state, while Health Plan of Nevada will serve Clark, Nye, and Washoe counties. 

Implementation of Pharmaceutical Transparency Bill Goes Awry
The waning hours of Nevada’s 79th Legislative Session saw a flood of bills pass out of both houses and on to the Governor’s desk. One of the more provocative bills to do so was Senate Minority Leader Michael Roberson’s (R- Henderson) Senate Bill 539 (“SB539”). The bill was initially drafted to require transparency from pharmacy benefit managers (“PBMs”), but left the legislative building with several provisions of Senator Yvanna Cancela’s (D- Las Vegas) SB265 attached to it. The resulting language requires pharmaceutical manufacturers and PBMs alike to disclose pricing information as it relates to the sale of insulin to diabetes patients. The measure faced heavy resistance from both industries during the session, which will now take their arguments on to court.

The Pharmaceutical Research and Manufacturers of America (“PhRMA”) and the Biotechnology Innovation Organization (“BIO”), filed a lawsuit in U.S. District Court on August 31st which argues that the statute violates both federal law and the United States Constitution. The two groups are opposed to provisions of the bill that require manufacturers of insulin that increase the national list price of their medication by more than the medical care component of the Consumer Price Index (“CPI”) to disclose information about why they increased the price. Both PhRMA and BIO argue that this is a violation of Federal Trade Secret laws as well as the Dormant Commerce Clause of the Fifth Amendment, and that it would serve as a price capping mechanism not only in the state of Nevada, but across the country as well.

Implementation of SB539 has already caused confusion throughout the healthcare industry, as the State has yet to release its list of “essential diabetes drugs” that will determine which companies are required to comply. The Department of Health and Human Services anticipates that this list will be released in mid-September.

Energy in the Interim
On top of a busy schedule for the Governor’s Committee on Energy Choice, which is tasked with making recommendations for the implementation of the Energy Choice Ballot Initiative, the energy industry in Nevada has been teeming with activity.

Net Metering
The Public Utilities Commission of Nevada (“PUCN”) voted unanimously to approve an amended order for the implementation of Assembly Bill 405 (“AB405”), which was shepherded through the legislative process by Assemblyman Chris Brooks (D- Las Vegas) to revive Nevada’s rooftop solar industry. Rooftop solar installation ground to a figurative halt when the PUCN voted to phase out retail-rate net metering in late 2015. Under AB405, new rooftop solar customers will be able to enroll in a net metering program with more favorable rates based on a percentage of the retail rate of electricity, with the credit decreasing for new applicants as the more people sign up for the program. NV Energy’s initial proposal to implement the bill would have raised rates for all electric customers to offset the costs of net metering. The PUCN ultimately approved some parts of NV Energy’s application and denied others. For instance, the order grants the utility the use of a “regulatory asset” to measure debt incurred by placing rooftop solar customers in the same rate class as other consumers. But the order ruled in favor of the rooftop solar industry by requiring that excess energy generated by rooftop customers be measured over a monthly period instead of hourly as was suggested by NV Energy. 

Google Ushers Industry Shakeup
On September 1st, the PUCN ruled in favor of Google in a landmark case for large-scale electric customers. Under Chapter 704B of Nevada Revised Statutes (“NRS”), those large-scale electric customers (with an average annual load of at least one megawatt) who apply to leave the NV Energy electric grid and purchase power on the open market are required to pay a substantial “impact fee” to offset the cost of their departure. These costs arise because NV Energy plans for generation in three-year cycles. However, the Google case is unique because the company doesn’t currently buy power from NV Energy. It is seeking to avoid entering the utility’s service territory altogether, rather than seeking to exit it like the other customers that have filed 704B applications. This raised several questions regarding the process for out-of-state applicants to set up operations in Nevada without the use of NV Energy resources. In its order, the PUCN ruled that there is no minimum duration of time required for large customers to utilize NV Energy’s services before filing an application to purchase power on the open market; that prospective out-of-state applicants to purchase energy on the open market can prove that they meet the minimum one-megawatt energy usage threshold by providing reliable documentation to the PUCN; and that Google and other similarly positioned companies are not required to pay an impact fee to purchase energy on the open market.

In August, Peppermill Resorts became the latest company to file and receive approval to procure energy on the open market under the provisions of Chapter 704B. The company’s path towards departure from NV Energy is consistent with past applicants’ and will require the payment of a $3.32 million impact fee to the utility. 

The Road to Marijuana Legalization
Recreational marijuana sales came closer to being a reality in part of Southern Nevada on September 5th. The City of Henderson voted 3-2 to end a seven-month moratorium on legalized sales following contentious debate and the threat of a filibuster from one City Council member. The vote laid out a path for five dispensaries and roughly a dozen combined cultivation, testing, and production facilities to begin operating in the recreational market. Licensed facilities with “early start” permits issued by the Department of Taxation are now required to apply for local permits and business licenses before conducting sales. The legalization of recreational marijuana is expected to bring roughly $5 million in tax revenues to the City of Henderson annually.

Though more of Southern Nevada’s residents will now be able to purchase and possess marijuana legally, its tourists will continue to face roadblocks. Clark County Commissioners voted unanimously to ban the possession of marijuana at McCarran International Airport and other County-owned aviation properties. This policy is in line with Federal Aviation Administration (FAA) guidelines and did not come as a surprise. However, it serves as yet another reminder of local governments’ and businesses’ unwillingness to jeopardize federal funding in the quest for legalization. Tourists that plan to vacation on the Strip for example, have nowhere to consume the drug legally. It is against the law to do so “in public”, and hotels and casinos along Las Vegas Boulevard have banned the possession and consumption of marijuana on their properties to avoid trouble with federal gaming authorities.

All the while, the battle for marijuana distribution rights continues to impact the industry’s ability to supply product as the Independent Alcohol Distributors of Nevada (IADON) allege that they have been denied their rightful place in the market by dispensaries and the State. IADON has gone head to head with the industry since March because of the way that the recreational marijuana ballot initiative was drafted. The language established an 18-month period in which marijuana distribution would be the exclusive right of liquor distributors, with the caveat that the Department of Taxation could expand the pool to include marijuana companies in the face of a shortfall. The Department ruled on August 10th that there was indeed a shortage of distributors; however, IADON contends that state officials went into the hearing with preconceived notions and that their statement of insufficiency had been drafted prior to hearing testimony from stakeholders. They sought a temporary restraining order against the Department, which was initially granted and then lifted, and appealed the Department’s decision, which was unanimously denied by the Tax Commission. Ever optimistic, IADON will take their fight to yet another venue this week as the case moves to the Nevada Supreme Court.

2018 ELECTIONS

Though the summer is winding down, campaign season here in Nevada is heating up. Traditionally, candidates wait to make their initial push towards seeking office until after Labor Day. But as tradition goes, the 2018 election cycle is wholly unique. August saw a rush of political activity leading up to the holiday, excerpts of which you will find below.

Senate Field Deepens with Entrance of Candidate
Republican Senator Dean Heller drew a primary opponent in the form of Danny Tarkanian (R-Henderson), who recently lost the election for Congressional District 3 (“CD3”) to Jacky Rosen (D-Henderson) in 2016. Tarkanian is hoping to capitalize on a series of votes taken by Senator Heller during the healthcare debate in July that left many questioning his stance on the Affordable Care Act. Both campaigns released conflicting polling data which shows their candidate wildly in the lead amongst registered Republicans. Despite his “perennial candidate” status, Tarkanian has proven that he is a worthy adversary in primary races; however, campaign contributions may not flow in his favor. Senate Majority Leader Mitch McConnell (R-KY) and the National Republican Senatorial Committee (“NRSC”) have each voiced their support for the incumbent Senator Heller and have pledged considerable financial support in both the primary and general elections on his behalf.

Meanwhile, Representative Rosen continues her fight to leave CD3 in order to take on Senator Heller during the general election. The congresswoman recently spoke at the latest Las Vegas Metro Chamber of Commerce “Eggs and Issues” session about the importance of bipartisan cooperation and the ways in which Nevada’s congressional delegation is fighting for the Silver State in D.C.  She has yet to garner a primary challenger, though many expect longtime Southern Nevada Representative Dina Titus (D) to enter the race. 

Governor’s Race
Clark County Commissioner Steve Sisolak (D-Las Vegas) officially has a Republican opponent in his gubernatorial quest, just not the one we’ve all been anticipating. Republican State Treasurer Dan Schwartz announced his intention to run for the office on September 5th. He faces an uphill battle against members of his own party, some of whom launched attack ads against his candidacy in the hours prior to his official announcement.

Attorney General Adam Laxalt (R) was widely expected to make an announcement regarding his plans to run at his “3rd Annual Basque Fry” fundraiser in late August, but left attendees and political pundits in the state without an answer. The event, which takes place in Gardnerville, featured a slew of national conservative stalwarts including House of Representatives Majority Leader Kevin McCarthy (R-CA), American Conservative Union Chairman Matt Schlapp, and New Mexico Governor Susana Martinez (R). Republican state legislators also came out in support of the Attorney General’s future ambitions, though they have yet to be officially declared.

Commissioner Sisolak intensified his own run in August by hiring an experienced team of veteran political operatives to run his campaign. He will likely face a primary challenge from fellow Clark County Commissioner Chris Giunchigliani (D-Las Vegas) who is seen as a more liberal candidate that may drive Sisolak away from his moderate base.

Fight for the State Senate
As the nation grapples with President Trump’s decision to end the Deferred Action for Childhood Arrivals program (“DACA”), state Republicans are using immigration reform as a keystone issue in their campaign platform. Senator Roberson is spearheading a ballot initiative to ban so-called “sanctuary cities”, places that limit how local law enforcement can cooperate with federal immigration agents. Democrats and immigration advocates have spoken out against the proposal, and Governor Sandoval has expressed skepticism about the need for the ballot initiative, though he will “withhold judgment” until he reads the text itself. Despite receiving pushback, the issue will likely remain at the top of the state party’s priority list throughout the 2018 campaign.

The fight against sanctuary cities is also being used to garner support for recall campaigns against three state senators. No sanctuary city language passed during the 2017 session; however, Senator Joyce  Woodhouse (D-Henderson) is being targeted for co-sponsoring a bill that would have prevented local governments from divulging a person’s immigration status to their federal counterparts. Former Republican Assemblyman Stephen Silberkraus is sponsoring the effort to recall Senator Woodhouse and replace her with her Republican opponent from the 2016 election, Carrie Buck. Senator Patricia Farley (NP- Las Vegas) is facing a recall effort from John Gibson, chairman and president of conservative political action group the Keystone Corporation. Gibson and fellow recall sponsors seek to replace her with Crossfit gym owner Jared Glover. Following the discovery of the recall efforts, Senator Farley announced that she had long since decided not to seek reelection to spend more time with her children. Senator Nicole Cannizzaro (D-Las Vegas) is the third and final state lawmaker battling recall efforts in Southern Nevada. The sponsors of her recall want to replace her with Las Vegas-area attorney April Becker.

In order to circulate a petition for recall, interested parties must file a notice of intent with the appropriate County Clerk, Registrar of Voters, City Clerk, or the Secretary of State. This notice of intent must be signed by three registered voters who voted in the district in the prior general election, but the sponsors of the recall effort are not required to provide an explanation for why the official should be recalled. Once the notice of intent has been filed, backers must obtain signatures from at least 25 percent of voters who participated in the previous election within 90 days to qualify for a special election. To date, no Nevada legislator has ever been successfully recalled from office.

Other Important Announcements

• State Senator Michael Roberson (R-Henderson) will leave SD20 to run for Lieutenant Governor.
• Current Lieutenant Governor Mark Hutchison (R) will not seek re-election.
• Assemblyman Ira Hansen (R- Las Vegas) will run for SD14. His wife, Alexis Hansen (R- Las Vegas) will run for his current seat, AD32.
• Former Republican State Senator Elizabeth Halseth (R- Las Vegas) will run for SD8.
• Las Vegas City Councilman Stavros Anthony (R) will run for CD4.
• Former Assemblywoman Victoria Seaman (R-Las Vegas) and Las Vegas-area businessman Jack Love (D) will both run for CD3.
• State Controller Ron Knecht (R) and former City Councilman Bob Beers (R-Las Vegas) will attempt to put a Commerce Tax repeal initiative on the 2018 ballot. Beers will run for State Treasurer in 2018.
   

Fennemore Craig is committed to advocating for our clients’ best interests no matter the outcome of these elections; however, if you wish to receive more information about a candidate or upcoming race, feel free to reach out to our team.