A bill to amend the Internal Revenue Code of 1986 to allow a 15-year applicable recovery period for depreciation of certain electric transmission property.

Mr. President, I rise today to congratulate my colleagues on our efforts to pass an energy bill through the Senate that does not include exemptions for the oil and gas industry from drinking water and clean water protections. Section 327 of H.R. 6 as reported contains an exemption to the Safe Drinking Water Act for the practice of hydraulic fracturing. Section 328 of H.R. 6 contains an exemption for the oil and gas industry from obtaining stormwater discharge permits under the Clean Water Act, rolling back fifteen years of environmental

protection. These efforts to weaken the protections applied to our Nation's waters should be stricken from the bill as the conferees on H.R. 6 work to resolve the differences between the two bills.

Over half of our Nation's fresh drinking water comes from underground sources. Hydraulic fracturing occurs when fluids are injected at high rates of speed into rock beds to fracture them and allow easier harvesting of natural oils and gases. It is these injection fluids, and their potential to contaminate underground sources of drinking water, that are of high concern. In a recent report, the EPA acknowledged that these fluids, many of them toxic and harmful to people, are pumped directly into or near underground sources of drinking water. This same report cited earlier studies that indicated that only 61 percent of these fluids are recovered after the process is complete. This leaves 39 percent of these fluids in the ground, risking contamination of our drinking water.

In June of 2004, an EPA study on hydraulic fracturing identified diesel as a ``constituent of potential concern.'' Prior to this, EPA had entered into a Memorandum of Agreement with three of the major hydraulic fracturing corporations, whom all voluntarily agreed to ban the use of diesel, and if necessary select replacements that will not cause hydraulic fracturing fluids to endanger underground sources of drinking water. However, all parties acknowledged that only technically feasible and cost-effective actions to provide alternatives would be sought.

Litigation over the last several years has resulted in findings that hydraulic fracturing should be regulated as part of the underground injection control program in the Safe Drinking Water Act. Yet, EPA indicated in a letter in December of 2004 that they have no intention of publishing regulations to that effect or ensuring that state programs adequately regulate hydraulic fracturing.

I will include our letter to EPA dated October 14, 2004, and their response dated December 7, 2004, in the Record.

We need to be moving in the right direction--taking steps to ensure that hydraulic fracturing is appropriately regulated under the Safe Drinking Water Act. I have introduced S. 1080, the Hydraulic Fracturing Safety Act of 2005 to ensure that the practice of hydraulic fracturing is regulated under the Safe Drinking Water Act through the Underground Injection Control, UIC, Program. I would like to thank Senators Lautenberg, Boxer, and Lieberman for co-sponsoring that bill. The House energy bill takes steps in the wrong direction--exempting hydraulic fracturing from the Safe Drinking Water Act.

I urge the conferees of this energy bill to strike section 327 of the House-passed energy bill. By striking this language, the conferees will help to ensure that the drinking water enjoyed by all Americans is not damaged through the process of hydraulic fracturing.

This exemption for hydraulic fracturing is not the only step backwards that the House energy bill takes. Section 328 of the bill exempts the oil and gas industry from stormwater protections in the Clean Water Act.

Stormwater runoff is a leading cause of impairment to the nearly 40 percent of surveyed U.S. water bodies that do not meet water quality standards.

Currently, the oil and gas industry is regulated under Phase I of EPA's stormwater regulations which requires National Pollution Discharge Elimination System, NPDES, permits for medium and large municipal storm sewer systems and eleven, 11, categories of industrial activity, including construction sites disturbing more than 5 acres of land. In 1999, EPA adopted the Phase II permitting requirements, effective March 10, 2003, covering small municipal separate stormwater systems and construction sites affecting one to five acres of land. However, EPA extended the Phase II permitting deadline to June 12, 2006 for only the oil and gas industry.

Now, section 328 of the House energy bill completely exempts the oil and gas industry from compliance with both Phase I and Phase II of the NPDES stormwater program.

This action will adversely impact water quality. Oil and gas construction activities require companies to undertake a number of earth disturbing activities, including: clearing, grading, and excavating. Oil and gas site development may also include road construction to transport equipment and other materials, as well as pipeline construction. The stormwater pollution created from these activities can be devastating to the environment.

According to the EPA, over a short period of time, stormwater runoff from construction site activity can contribute more harmful pollutants, including sediment, into rivers, lakes, and streams than had been deposited over several decades. Sediment clouds water, decreases photosynthetic activity, reduces the viability of aquatic plants and animals; and ultimately destroys animals and their habitat. Sediment rates from cleared and graded construction sites are typically 10 to 20 times greater than those from agricultural lands and one-thousand to two-thousand times greater than those from forest lands. Other harmful pollutants in stormwater runoff from construction sites include phosphorous and nitrogen, pesticides, petroleum derivatives, construction chemicals, and solid wastes that may be mobilized when land surfaces are disturbed.

More than 5,000 cities, towns, and counties and eleven, 11, industrial sectors are required to obtain NPDES stormwater permits. Large oil and gas construction sites covered under the Phase I stormwater program have been taking action to reduce the impact of sediments and pollutants on water quality since 1990. In 2005, GAO reported that over a one-year period, 4,330 oil and gas construction sites obtained Phase I stormwater permits in three of the six largest oil and gas producing states. In 20 the Warren County Conservation District submitted information to EPA indicating that 70 percent of the oil and gas projects they inspected between 1997 and 2002 were in violation of Phase I permit conditions. If this amendment is adopted, these actions will no longer be required. In FY 2002/2003, the Alaska Department of Environmental Conservation estimated that they would review 400 engineering plans as part of the stormwater permitting process. The House provision would exempt these sites from 15-year-old requirements to reduce the pollution they send into surrounding waters through stormwater discharges.

The environmental impact from this amendment is even more severe when you factor in the approximately 30,000 oil and gas ``starts'' per year that EPA anticipates could be covered by the Phase II stormwater regulation. EPA is currently reviewing the impact of the regulation on these sites. Adopting this amendment would circumvent this review process and exempt thousands of sites from taking action to protect water quality.

Section 402(l) of the Clean Water Act contains a limited exemption for specific types of uncontaminated discharges from specific types of oil and gas sites from stormwater permit requirements. The language of the Act and the legislative history of this section indicate that when adopted, section 402(l) was intended to give a narrow exemption for specific circumstances in the oil and gas industry that did not include construction activities at every oil and gas--related site.

I urge the conference committee on H.R. 6 to reject the Clean Water and Safe Drinking Water Act exemptions included in the House energy bill. These provisions represent a major step backward in efforts to protect water quality and could pose a direct threat to the safety of drinking water supplies. Should these exemptions be included in the final conference report, we will see our Nation's water quality standards go down the drain.

I ask unanimous consent to print the above-referenced letters in the Record.

Mr. President. I thank Senator Grassley, Senator Baucus and the other members of the Senate Finance Committee for agreeing to my recycling amendment, which I call the Recycling Investment Saves Energy, RISE, provisions. These provisions were added to the tax title of the energy bill last week and have now been incorporated into the Energy bill as section 1545 of H.R. 6.

The current Senate Energy bill contains important provisions to promote the use of energy savings in vehicles, appliances, new homes, and commercial buildings. As we move forward with fostering energy efficiency, we must not neglect recycling. Recycling should be an integral component of our nation's energy efficiency strategy.

The RISE provisions will create jobs, increase productivity, and conserve energy by establishing a tax credit to preserve and expand America's recycling infrastructure. Specifically, the provisions establish a 15 percent tax credit for the purchase of qualified recycling equipment used to sort or process packaging and printed materials, such as beverage containers, cardboard boxes, glass jars, steel cans and newspapers.

The tax credit could be claimed by material recovery facilities, manufacturers or other persons that purchase recycling equipment that sorts or processes residential or commercial recyclable materials, even if such equipment also is used to handle material from industrial facilities.

This national investment in our recycling infrastructure is necessary to reverse the declining recycling rate of many consumer commodities, including aluminum, glass and plastic, which are near historic lows. For example, 55 billion aluminum cans were wasted by not being recycled in 2004, which represents approximately $1 billion of aluminum lost to industry. The recycling rate of paper is estimated to be roughly 50 percent, glass containers 35 percent, and PET plastic bottles less than 20 percent.

The energy savings from greater recycling are significant. Increasing the recycling of containers, packaging and paper could save the equivalent energy output of 15 medium-sized power plants on an annual basis. Recycling aluminum cans, for example, saves 95 percent of the energy required to make the same amount of aluminum for its virgin source. Increasing the U.S. recycling rate to 35 percent would result in annual energy savings of 903 trillion BTUs, enough to meet the annual energy needs of 8.9 million homes.

Due to the diminishing quantity and quality of available recyclable materials, many companies are not able to obtain the volume of quality recycled feedstock needed to meet demand. This

new economic challenge makes it even harder for recycled products to compete in the marketplace. For example, two Michigan plastic recycling facilities recently closed, affecting 100 jobs, as a result of inconsistent supply of recycled plastic. Similarly 17 percent of the recycling capacity at U.S. paper mills has been shut down, in part due to insufficient quality recyclable materials. One leading glass manufacturer also reports that they are able to obtain only a small fraction of the volume of recycled glass that their facilities can use.

In some cases, recyclers have been forced to shut down their operations in the United States and relocate to other countries due in part to insufficient or poor quality recycled feedstocks. This is particularly unfortunate as, on a per-ton basis, sorting and processing recyclables are estimated to sustain 10 times more jobs than landfilling or incineration.

The RISE provisions aim to reverse the declining recycling rate and resulting energy loss by incentivizing greater collection of quality recyclable materials. The bill would expand collection efforts by making innovative technology more affordable, such as reversible vending machines that collect and process empty containers. It could also be used to finance equipment at recycling collection centers.

This targeted tax credit would address quality concerns by reducing the barriers hindering investment in optical sorting and other state of the art equipment needed at material recovery facilities. By reducing material loss and improving quality, RISE will increase both the quantity and quality of recycled feedstock available to manufacturers.

Reducing the barriers to recycling also serves a number of environmental goals, including lessening the need for new landfills, preventing emissions of many air and water pollutants, reducing greenhouse gas emissions, and stimulating the development of green technology. But most importantly, recycling helps preserve resources of our children's future. For these reasons, I urge my colleagues to support these provisions.

Mr. President, last night the Senate narrowly defeated the Kerry amendment No. 844, sense-of- the-Senate resolution on climate change. I was unable to be present for the vote, but I strongly supported this sense of the Senate. The United States has consistently failed to constructively engage in international discussions in a manner consistent with our obligations under the United Nations Framework Convention on Climate Change or even under a basic good neighbor policy. The Bush administration policy on global warming is ineffective, unproductive, and irresponsible.

The administration's voluntary approach and efforts to address global warming have been underfunded and will not produce real emissions reductions in the timeframe necessary. Fortunately, many of the States have taken up the mantle of leadership, since there is a tremendous vacuum in the White House. By reversing his pledge to control carbon dioxide from powerplants, walking away from the Kyoto Protocol, and now snubbing British Prime Minister Tony Blair's request for assistance from the United States on this critical climate change problem, the President is reneging on this Nation's responsibility and opportunity to be a world leader.

Carbon dioxide levels have never been higher and the United States disproportionately contributes to the global warming problem. We need to reengage with the world in producing a binding global plan that reduces greenhouse gases below levels that would cause dangerous interference with the Earth's climate.

The administration and the world should pay close attention to the passage of the Bingaman-Specter resolution that committed the Senate to adopting legislation containing mandatory controls on carbon dioxide. This is an important resolution and it should serve as a wakeup call to the administration and those among the carbon-intensive industries. We must shoulder our moral responsibility to reduce the risks of global warming.

Mr. President, I thank the bill managers, Senator Domenici and Senator Bingaman, for agreeing to accept my amendment in the managers' package that was agreed to last night by unanimous consent. My amendment directs the Architect of the Capitol to study the feasibility of installing energy and water conservation measures on the rooftop of the Dirksen building, specifically the roof area above the cafeteria in the center of the building.

Today, all that exists is open space in the center of the building. My amendment will assist the Architect in obtaining information that will allow this space to be used in a more efficient manner and save taxpayer dollars.

During debate on the energy bill, the Senate has heard numerous arguments on the importance of conserving energy. In August of 2003, nearly 50 million people in the Northeast and Midwest were affected by a massive power outage. This event emphasized the vulnerability of the U.S. electricity grid to human error, mechanical failure, and weather- related outages. Failure to maintain a reliable grid had a huge impact on our Nation's economy, businesses, and individuals' everyday lives.

It is vital, then, that we here in the Senate do our part and put measures in place to make the Nation's Capitol a more secure and sustainable user of electricity. The Capitol Complex is largely dependent upon the electrical grid for power. Our daily operations should not be compromised by grid failure.

My amendment moves us forward in the right direction. Technology already exists to ensure that our operating systems can continue to operate despite loss of a main power supply. By creating onsite generating capacity through the installation of cogeneration equipment at the power plant and using solar powered equipment, like photovoltaic panels, we could produce energy to operate essential systems during a blackout or significant loss of power. We can start slowly by powering emergency lighting and notification systems in hallways so the occupants know how to exit the building safely or upgrade the electrical generating capacity of the complex. Technology is only getting better. My amendment asks the Architect of the Capitol to explore the use of this new technology to ensure that the Nation's Capitol always has reliable power.

In addition, this new technology also has the potential to provide significant savings in the Capitol's operating budget. We are all looking for ways to save the taxpayers money and reduce the Nation's deficit. We have the opportunity today to set an example and practice what we preach. As Members of Congress, we can educate ourselves and our staff on the benefits of energy efficiency, and see first hand the savings it can generate. The Nation's Capitol can join those already utilizing this technology and help encourage others to adopt it as well.

My amendment requires a feasibility study be conducted to look at the Dirksen building rooftop, including the open space in the center of the building directly above the cafeteria. The study will focus on more efficient use of the space while providing energy and water savings to the Capitol Complex.

I envision a wonderful park and garden area that Members and staff can actually use. These gardens would not only provide a beautiful environment by utilizing native plants, but they would also reduce energy use, and provide insulation for the building to reduce heat and energy loss.

These gardens would also provide a collection system for rainwater to limit the amount of stormwater runoff in the area. This collected water could be utilized for basic plumbing, watering the vegetation, or even the fire sprinkler systems; thereby reducing the use of water in the Capitol Complex.

Installation of technology, like photovoltaic panels, could collect the rays of the sun and provide energy to the building. These can be installed on the rooftops of our buildings in many different areas. These panels are now made to blend into any environment

There is even technology that exists to funnel natural daylight into the cafeteria in the basement. Imagine enjoying natural daylight as you consume your lunch or hold that quick meeting. Preliminary studies show that exposure to daylight improves worker productivity and results in less absenteeism due to illness.

The Architect of the Capitol is currently updating the master plan for the

Capitol Complex. This small project fits into that plan. The Architect is making great strides to update our operating systems with newer and efficient technology with sustainable features. I appreciate his efforts and encourage him to continue doing so.

Before I conclude, I would like to thank a former staffer who helped me develop this great idea, Mary Katherine Ishee. Mary Katherine was creative enough to look beyond the barren view from the committee offices on the fourth floor of the Dirksen building and realize the opportunity it presented.

It is about time we bring our home, the Capitol Complex, up to date with the rest of the world. This language is a step in that direction. We have the potential to use the latest technology to save energy, address security concerns, conserve our resources, and make more efficient use of this space.

We will all benefit from a wonderful, efficient, and useful park in the middle of the Dirksen building, and the taxpayers will benefit from our reduced energy and water use in the form of lower utility bills. I am very pleased that this measure has been added and I hope it will be retained by the conferees.

Mr. President, I want to thank Senators Domenici and Bingaman for adopting my amendment No. 774, as part of the Senate Energy bill. The amendment authorizes up to $20 million a year for 7 years for the establishment of a new Department of Energy grant program to aid local governments, municipal utilities, rural electric cooperatives, and not- for-profit agencies. The cost of repairing transmission lines is proving particularly difficult for small communities in Vermont and across America.

I became interested in creating such a program due to the challenges that communities in my State are facing with respect to the upgrading and siting of transmission and distribution lines. For example, residents in Lamoille County, VT, have been struggling to find ways to expand the transmission system to accommodate the demands of a growing tourism industry without overly burdening local residents with the cost of such an upgrade. Currently, the transmission system that delivers electricity to this area of my State is at peak capacity, leaving the local community in jeopardy should a single event like a fallen power line or damage to a key piece of equipment occur.

Not only must communities afford the costs of the infrastructure itself, but also the costs of integrating these new technologies into the rural landscape in a way that does not destroy their scenic quality and protects their lifestyle.

These grants will help rural communities meet these needs. They can be used for increasing energy efficiency, siting or upgrading transmission lines, or providing modernizing electric generating facilities to serve rural areas. Under the generation grants portion of the program, preference will be given to renewable facilities such as wind, ocean waves, biomass, landfill gas, incremental hydropower, livestock methane, or geothermal energy.

By adopting my legislation as part of this Energy bill, small electric cooperatives and local governments in Lamoille County, VT, will be eligible to apply for Federal grants to construct new facilities and transmission upgrades. This is a good amendment and it should be retained by the conferees.

Mr. President, last night the Senate defeated amendment No. 961 that would have banned the siting of windmills in many areas in the lower 48 States and made them ineligible to receive Federal tax subsidies. Had I been present to vote, I would have opposed this amendment. In my 30 years in Congress, I have been a strong proponent of renewable energy sources including wind power. I am very optimistic about the role wind energy can play in satisfying a growing proportion of this Nation's energy needs.

If the objective of this amendment was to protect scenic qualities of America's lands and shorelines, it did not achieve that goal. The amendment only targeted the siting of windmills within 20 miles of Federal public lands, but did not address the siting of coal-fired powerplants and other energy sources that have far greater impacts to our public lands. Just look at the impacts that air pollution blowing in from coal-fired Midwest powerplants is currently having on the Great Smoky Mountain National Park, Shenandoah National Park, and the protected areas in the beautiful green mountains of Vermont.

This amendment also failed to treat all public lands and wildlife refuges equally. As ranking member of the Environment and Public Works Committee, the committee with jurisdiction over our Nation's wildlife refuges, I was concerned that, had this amendment been approved, no wind turbine situated anywhere near Federal lands in the lower 48 States would have been eligible to receive Federal tax subsidies, thereby severely limiting the expansion of wind power in the United States. Oddly, this amendment specifically exempted some other federally protected areas such as coastal wildlife refuges in Louisiana and Alaska. By defeating this amendment by a wide margin, the Senate sends a strong message that wind power has a role to play in satisfying this Nation's energy needs.

Mr. President, Section 261 of the underlying bill contains provisions designed to reform the hydroelectric relicensing process. These provisions are the result of a hard-won compromise, and I thank the chairman and ranking member, along with Senators Craig, Smith and Feinstein for their leadership on this issue. In particular, these provisions significantly differ from previous House- and Senate- passed versions, as they will allow States, tribes and the public to propose alternative licensing conditions, and will further allow these entities to trigger the trial-type hearing process outlined in this section. I believe these public participation provisions are key improvements in this legislation. I would also like to more fully explore the process by which alternative conditions proposed by these stakeholders should be considered.

Before an alternative condition or prescription to a license may be approved, the Secretary must concur with the judgment of the license applicant that it will either cost significantly less to implement, or result in improved operation of the hydro project for electricity production--at the same time it provides for adequate protection of the resource--or in the case of fishway prescriptions, will be no less protective than the fishway initially proposed by the Secretary. This provision does not provide the license applicant a so-called veto power over proposed alternatives, because this judgment requires the Secretary's concurrence. In addition, it is the Senate's intent that these judgments be supported by substantial evidence as required by Section 313 of the Federal Power Act. I would like to ask the senior Senator from New Mexico the following question: If the Secretary determines that a license applicant's judgment has been based on inaccurate data and thus fails to meet the test of being supported by substantial evidence, can the Secretary withhold his or her concurrence?

Mr. Domenici. The Senator from Washington is correct in expressing our intent that the license applicant's judgment be supported by substantial evidence. It is not our intent to provide an incentive for applicants to provide poor data in order to prompt the rejection of a condition by other stakeholders. If the Secretary of a resource agency determines that the evidence provided by the license applicant is of insufficient quality and therefore does not meet the substantial evidence test, the Secretary should not concur with the license applicant's judgment in the matter.

Mr. President, I wish to clarify for my colleagues the intent of section 1270 of the underlying Energy bill, which is a provision of extreme importance to my Washington State constituents. Ratepayers in my State were harmed by the Western energy crisis and the manipulation and fraudulent practices of Enron in wholesale electricity markets. A number of proceedings remain underway at the Federal Energy Regulatory Commission, which will determine the relief granted to consumers harmed by Enron's unlawful trading practices. An important issue that remains is whether utilities--such as Washington State's Snohomish County Public Utility District--should be forced to make termination payments to Enron, for power Enron never delivered in the midst of its scandalous collapse into bankruptcy.

The intent of section 1270 of the underlying bill and the technical correction we have adopted today is simply to affirm that the Federal Energy Regulatory Commission has exclusive jurisdiction under sections 205 and 206 of the Federal Power Act to determine whether these termination payments should be required. This provision expresses Congress's belief that the issues surrounding the potential requirement to make termination payments associated with wholesale power contracts are inseparable and inextricably linked to the commission's jurisdictional responsibilities.

This provision in no way prejudices or predetermines FERC's decisions in those matters. During the Senate Energy Committee's work on this legislation, the supporters of this amendment and I initially considered offering an amendment that would have gone further to require a certain outcome, had the commission made certain findings. We chose not to pursue that amendment in response to concerns that were raised by colleagues. Section 1270 of this legislation is completely neutral regarding how the commission uses its authority under sections 205 and 206 of the Federal Power Act. As such, the provision does not in any way implicate what is known as the Mobile-Sierra doctrine, related to which standard FERC should apply to its review of jurisdictional wholesale power contracts.

The clarifications to section 1270 effectuated by the amendment accepted today are consistent with the committee's intent in adopting section 1270. In addition, they are completely consistent with Supreme Court precedent.

The committee sought assurances that section 1270 would not disturb underlying legal doctrines such as the Mobile-Sierra doctrine or the separation of powers principles. The amendment provides further clarity that section 1270 is not intended to otherwise disturb or modify the Mobile-Sierra doctrine by adding the phrase ``or contrary to the public interest.'' This phrase, when coupled with the standard recital of FERC's exclusive authority to determine whether a charge is just and reasonable, makes it clear that Congress is making no pronouncements regarding the manner in which FERC exercises its authority, but rather only that it is the appropriate forum to resolve these issues. Congress is giving no guidance to FERC on Mobile-Sierra one way or another through this provision.

The committee's overarching intent with respect to section 1270 was to ensure that the Federal Energy Regulatory Commission, and not the bankruptcy court involved in the Enron matter, decides all of the issues surrounding whether termination payments are lawful. The addition of the phrase ``rate schedules and contracts entered thereunder'' ensures that result.

In addition, this clarification is completely consistent with Supreme Court decisions permitting Congress to give a Federal agency the authority to resolve matters that are also normally addressed by our judicial branch of government. As the Supreme Court stated in a case entitled Commodity Futures Trading Commission v. Schor, 478 U.S. 833, 854 (1986),

``looking beyond form to the substance of what Congress has

done'', we are persuaded that the congressional authorization

of limited CFTC jurisdiction over a narrow class of common

law claims as an incident to the CFTC's primary, and

unchallenged, adjudicative function does not create a

substantial threat to the separation of powers. Thomas v.

Union Carbide Agricultural Products Co., 473 U.S. 568, 589

(1985).

Similarly, in this instance, the grant of authority to FERC to decide this matter is exceedingly narrow insofar as it relates solely to the legality of Enron collecting additional profits in the form of termination payments for power not delivered. Clearly, it is directly related to the agency's core function to ensure just and reasonable rates and guard against market manipulation. Moreover, these are public rights that are at stake in this dispute--the rights of electric ratepayers across the country to just and reasonable rates, rights that have existed under federal statute since 1935--and not mere private rights that should be resolved by a non-article III bankruptcy tribunal. Accordingly, the clarification provided by the amendment is completely consistent with Supreme Court precedent on the separation of powers principle.

Mr. President, I rise to speak to a particular section of the comprehensive energy bill (S. 10) that we have been discussing for the past 2 weeks. My comments focus specifically on section 1270 of this legislation.

Section 1270 was an amendment I offered in the Energy & Natural Resources Committee mark-up of this legislation. It was accepted after considerable debate and discussion, on a bipartisan voice vote. Since then, I have continued to work with my colleagues on the Energy Committee, to further clarify and perfect this language. In fact, I was pleased to work with my colleague from Idaho, Senator Craig, on a technical amendment to this language, amendment No. 895, to refine it even further.

This provision, entitled ``Relief for Extraordinary Violations,'' is extremely important to the consumers of Washington State and ratepayers in other parts of the West, who bore tremendous costs as a result of Enron's schemes to manipulate our wholesale electricity markets. The principle at the heart of this provision is simple. The consumers of Washington State must not be forced to become the deep-pockets for Enron's bankruptcy. The same ratepayers who have paid so dearly for the Western energy crisis and Enron's schemes to manipulate markets should not be forced to pay even more--four years later--for power that Enron never even delivered.

I must thank my colleagues on the Energy Committee for their thoughtful consideration of this issue, particularly my colleagues from the Pacific Northwest and West as a whole who have seen first-hand the toll the crisis has taken on our economy and our constituents. I must also express my gratitude to the rest of the members of the committee, and to the chairman and ranking member for indulging what was a very thoughtful debate on this issue.

At the conclusion of the committee debate, this Senator was extremely satisfied; first, because of the very nature of the debate itself, in which--for almost an entire hour--a bipartisan group of Senators focused their valuable time and attention on a situation that is highly complicated, and likely unprecedented in the history and application of our Nation's energy laws. And second, because, at the end of the day, the committee struck a blow for justice and for Western consumers. It was an important statement. This is not the kind of country where we should reward Enron for its criminal conspiracy to commit fraud; a fraud of historic proportions perpetrated against the consumers of the West.

As my colleagues appreciate by now, my State was particularly ravaged by the western energy crisis of 2000-2001. One of my State's public utility districts, Public Utility District No. 1 of Snohomish County, had a long-term contract with Enron, to purchase power. The contract was terminated once Enron began its scandalous collapse into bankruptcy. Nonetheless, Enron has asserted before the bankruptcy court the right to collect all of the profits it would have made under the contract through so-called ``termination payments.'' Enron has made this claim even though Enron never delivered the power under the contract, even though Enron had obtained its authority to sell power fraudulently, and even though Enron was in gross violation of its legal authority to sell power at the very time the contract was entered into. This has been demonstrated by the criminal guilty pleas of the senior managers of Enron's Western power trading operation, in which it has been admitted that Enron was engaged in a massive criminal conspiracy to rig electric markets and rip off electric ratepayers. But it has been further illustrated by the now-infamous Enron tapes, in which Enron employees discuss many unsavory topics, including specifically how they were ``weaving lies together'' in their negotiations related to the contract with Snohomish.

I will tell my colleagues that there is no way under the sun that I believe my constituents owe Enron another penny. Not one single penny more. What this amendment does is ensure that, when the Federal Energy Regulatory Commission FERC comes to a conclusion

later this year about how to cleanup the Enron mess, that the bankruptcy court cannot overturn FERC's decision about whether these ``termination payments'' are just, reasonable or in the public interest. It says to FERC, ``do your job to protect consumers, and when you make a decision, that decision will stand.'' Interpreting our nation's energy consumer protection laws is not the job of a bankruptcy judge.

Now, this Senator has a very strong opinion on this matter in general. I believe there is no way no stretch of the imagination, or interpretation of law in which these termination payments could be deemed just, reasonable or in the public interest, knowing everything we know today about what Enron did to the consumers of my state. In fact, during committee debate on the underlying provision in this bill, some of my colleagues suggested that we should just out-right abrogate these contracts; simply declare them null and void on their face. But what we recognized, relying on the legal expertise of the committee staff, is that an act like that--as tempting as it may seem--would pose certain constitutional issues. We recognized that this provision section 1270--is the best way for Congress to express its will in this matter.

I have, as my colleagues know, had substantial differences with FERC over the course of the past few years. But I am glad to say today, after 4 long years, it appears that the commission may be on the right track on this issue. This March, FERC issued a ruling in which the commission definitely found that the termination payments at issue here ``are based on profits Enron projected to receive under its long-term wholesale power contracts executed during the period when Enron was in violation of conditions of its market-based rate authority.'' For the first time, FERC found that Enron was in violation of its market-based rate authority at the time victimized utilities such as Washington's Snohomish PUD inked power sales contract with the now-bankrupt energy giant. That FERC process is on-track to wrap-up this year; but so long as that process is ongoing, utilities like Snohomish have been operating under the threat that the bankruptcy court would swoop in and demand payments for Enron, regardless of the pattern of market manipulation and fraud. In a series of rulings, the bankruptcy court has expressed its will to do just that. What this provision does is ensure the bankruptcy court cannot force these utilities and their consumers to make termination payments that are unjust, unreasonable or contrary to the public interest.

Section 1270 states that notwithstanding any other provision of law, and specifically the bankruptcy code, FERC ``shall have exclusive jurisdiction'' to make these determinations. Many of my colleagues might naturally assume that this provision merely sets forth what is already the case. But as I stated earlier, that is not necessarily the case. This provision is necessary and critical because the Federal bankruptcy court has already concluded that it will not defer to FERC with respect to whether our constituents will be required to make termination payments. Not only has the bankruptcy court not deferred to FERC, it compounded the seriousness of the issue by enjoining FERC from proceeding with its own specific inquiry into whether Enron is owed the termination payments. It forced FERC to stop on a matter that FERC had said required its special expertise.

Imagine making it through the arduous and frustrating, years-long process of proving the case against Enron and proving it to FERC, only to find out at the end of the day that the bankruptcy court would intervene and force these termination payments anyway. It is this situation--a collision between FERC and the bankruputcy court that this legislation addresses. And what the Congress is saying with this amendment, as counsel for the Energy Committee stated during our extended discussion, is that ``the Commission, not the bankruptcy [court], is the proper forum in which these question be resolved.'' That is certainly my view, and the view of many of us who represent ratepayers harmed by Enron.

I do not assume this position in denigration of the responsibility of the bankruptcy court. The bankruptcy court has an important role to play in our law and our economic community. However, I do think it is fair to say that it is a forum in which it naturally looks first to maximizing the assets of the estate. In contrast, the Federal Energy Regulatory Commission's first obligation is to protect our nation's ratepayers. In this very unique context, in which a seller of electricity that has fraudulently and criminally manipulated the market in violation of the tariffs on file with the commission--and where the seller is now seeking to reap the profits from that activity in the form of termination payments for power never delivered--what we are saying here, unequivocally, is that FERC is the forum in which this should be resolved. FERC is the entity that is supposed to look after our nation's ratepayers, and should have make the decision about whether termination payments are permissible under the Federal Power Act..

Given the nuanced, legal nature of this provision, I can assure my colleagues that this ``rifle shot,'' as the ranking minority member of the committee called it, is narrowly drawn in order to minimize any unanticipated impacts. It is only applicable to contracts entered into during the electricity crisis with sellers of electricity that manipulated the market to such an extent that they brought about unjust and unreasonable rates. There is only one such seller, and that is Enron, and there are only a handful of terminated contracts with Enron that haven't been resolved as of this date.

As a result, the amendment does not tamper with or otherwise disturb long-standing legal precedents. It does not tamper with the Mobile- Sierra doctrine, nor does it disturb other recent federal court decisions regarding the relationship of the bankruptcy courts and FERC in the context of the rejection in bankruptcy of FERC approved power sales contracts. It is, as the ranking minority member of the committee observed, a ``clean shot'' that ``affirms that FERC is the entity with the authority to review whether termination payments associated with cancelled Enron power contracts are lawful under the Federal Power Act.''

The ultimate disposition of this issue is of paramount concern to my constituents. It will decide whether they will be on the hook for more than $120 million, an amount that means more than $400 in the pocket of each ratepayer in Snohomish County, WA. It is critical that this issue be decided by the forum with the specialized expertise in matters relating to the sale of electricity with a stated mission of protecting ratepayers, and that is the Federal Energy Regulatory Commission.

Let me conclude by saying that I am very pleased that this provision has broad bipartisan support as well as the support of the Edison Electric Institute, the National Rural Electric Co-operative Association and the American Public Power Association. I believe my colleague from Oregon, Senator Smith, said it exactly right when this amendment was debated in committee, and I am extremely grateful for his support. He essentially said that no Senator Republican or Democrat should feel any limitation in ``lending their shoulder to this wheel,'' to get this situation fixed. Senator Smith, Senator Allen, and Senator Craig all played important roles during the mark-up in allowing this measure to move forward.

And I would be remiss if I did not mention the invaluable assistance from the Senators from Nevada on this issue the minority leader, Senator Reid, but also Senator Ensign. While Senator Ensign does not serve on the Energy Committee, he played a crucial role in ensuring that colleagues on both sides of the aisle understood the importance and reasonableness of this measure, and the importance of this provision to him and to the people of Nevada.

I thank my colleagues, look forward to the passage of this provision out of the Senate and to working together to ensure this critical measure is included in legislation that emerges from the Energy bill conference with the House of Representatives.

Mr. President, this week, American taxpayers face another Federal income tax deadline. The date of April 15 stabs fear, anxiety, and unease into the hearts of millions of Americans. Every year during ``tax season,'' millions of Americans spend their evenings poring over page after page of IRS instructions, going through their records looking for information and struggling to find and fill out all the appropriate forms on the Federal tax returns. Americans are intimidated by the sheer number of different tax forms and their instructions, many of which they may be unsure whether they need to file. Given the approximately 325 possible forms, not to mention the instructions that accompany them, simply trying to determine which form to file can in itself be a daunting and overwhelming task. According to a 2002 study conducted by the Tax Foundation, American taxpayers, including businesses, spend more than 5.8 billion hours and $194 billion each year in complying with tax laws. That works out to more than $2,400 per U.S. household. Much of this time is spent burrowing through IRS laws and regulations which fill 17,000 pages and have grown from 744,000 words in 1955 to over 6.9 million words in 2000. By contrast, the Pledge of Allegiance has only 31 words, the Gettysburg Address has 267 words, the Declaration of Independence has about 1,300 words, and the Bible has only about 1,773,000 words.

The majority of taxpayers still face filing tax forms that are far too complicated and take far too long to complete. According to the estimated preparation time listed on the forms by the IRS, the 2004 Form 1040 is estimated to take 13 hours and 35 minutes to complete. Moreover this does not include the estimated time to complete the accompanying schedules, such as Schedule A, for itemized deductions, which carries an estimated preparation time of 5 hours, 37 minutes, or Schedule D, for reporting capital gains and losses, shows an estimated preparation time of 6 hours, 10 minutes. Moreover, this complexity is getting worse each year. Just from 2000 to 2004 the estimated time to prepare Form 1040 jumped 34 minutes.

It is no wonder that well over half of all taxpayers, 56 percent according to a recent survey, now hire an outside professional to prepare their tax returns for them. However, the fact that only about 30 percent of individuals itemize their deductions shows that a significant percentage of our taxpaying population believes that the tax system is too complex for them to deal with. We all understand that paying taxes will never be something we enjoy, but neither should it be cruel and unusual punishment. Further, the pace of change to the Internal Revenue Code is brisk--Congress made about 9,500 tax code changes in the past thirteen years. And we are far from being finished. Year after year, we continue to ask the same question--isn't there a better way?

My flat tax legislation would make filing a tax return a manageable chore, not a seemingly endless nightmare, for most taxpayers. My flat tax legislation will fundamentally revise the present tax code, with its myriad rates, deductions, and instructions. This legislation would institute a simple, flat 20 percent tax rate for all individuals and businesses. This proposal is not cast in stone, but is intended to move the debate forward by focusing attention on three key principles which are critical to an effective and equitable taxation system: simplicity, fairness and economic growth.

My flat tax plan would eliminate the kinds of frustrations I have outlined above for millions of taxpayers. This flat tax would enable us to scrap the great majority of the IRS rules, regulations and instructions and delete most of the 6.9 million words in the Internal Revenue Code. Instead of billions of hours of non-productive time spent in compliance with, or avoidance of, the tax code, taxpayers would spend only the small amount of time necessary to fill out a postcard- sized form. Both business and individual taxpayers would thus find valuable hours freed up to engage in productive business activity, or for more time with their families, instead of poring over tax tables, schedules and regulations.

My flat tax proposal is dramatic, but so are its advantages: a taxation system that is simple, fair and designed to maximize prosperity for all Americans. A summary of the key advantages are:

Simplicity: A 10-line postcard filing would replace the myriad forms and attachments currently required, thus saving Americans up to 5.8 billion hours they currently spend every year in tax compliance.

Cuts Government: The flat tax would eliminate the lion's share of IRS rules, regulations and requirements, which have grown from 744,000 words in 1955 to 6.9 million words and 17,000 pages currently. It would also allow us to slash the mammoth IRS bureaucracy of approximately 117,000 employees, creating opportunities to put their expertise to use elsewhere in the government or in private industry.

Promotes Economic Growth: Economists estimate a growth due to a flat tax of over $2 trillion in national wealth over seven years, representing an increase of approximately $7,500 in personal wealth for every man, woman and child in America. This growth would also lead to the creation of 6 million new jobs.

Increases Efficiency: Investment decisions would be made on the basis of productivity rather than simply for tax

avoidance, thus leading to even greater economic expansion.

Reduces Interest Rates: Economic forecasts indicate that interest rates would fall substantially, by as much as two points, as the flat tax removes many of the current disincentives to savings.

Lowers compliance costs: Americans would be able to save or invert up to $194 billion they currently spend every year in tax compliance.

Decreases fraud: As tax loopholes are eliminated and the tax code is simplified, there will be far less opportunity for tax avoidance and fraud, which now amounts to over $120 billion in uncollected revenue annually.

Reduces IRS costs: Simplification of the tax code will allow us to save significantly on the $10 billion annual budget currently allocated to the Internal Revenue Service.

The most dramatic way to illustrate the flat tax is to consider that the income tax form for the flat tax is printed on a postcard--it will allow all taxpayers to file their April 15 tax returns on a simple 10- line postcard. This postcard will take 15 minutes to fill out.

At my town hall meetings across Pennsylvania, there is considerable public support for fundamental tax reform.

This is a win-win situation for America because it lowers the tax burden on the taxpayers in the lower brackets. For example in the 2004 tax year, the standard deduction is $4,850 for a single taxpayer, $7,150 for a head of household and $9,700 for a married couple filing jointly, while the personal exemption for individuals and dependents is $3,100. Thus, under the current tax code, a family of four which does not itemize deductions would pay taxes on all income over $22,100--that is personal exemptions of$12,400 and a standard deduction of $9,700. By contrast, under my flat tax bill, that same family would receive a personal exemption of $30,000, and would pay tax on only income over that amount.

The tax loopholes enable write-offs of some $393 billion a year. What is eliminated under the flat tax are the loopholes, the deductions in this complicated code which can be deciphered, interpreted, and found really only by the $500-an-hour lawyers. That money is lost to the taxpayers. $120 billion would be saved by the elimination of fraud because of the simplicity of the Tax Code, the taxpayer being able to find out exactly what they owe.

This bill is modeled after a proposal organized and written by two very distinguished professors of law from Stanford University, Professor Hall and Professor Rabushka. Their model was first introduced in the Congress in the fall of 1994 by Majority Leader Richard Armey. I introduced the flat tax bill--the first one in the Senate--on March 2, 1995, Senate bill 488. On October 27, 1995, I introduced a Sense of the Senate Resolution calling on my colleagues to expedite Congressional adoption of a flat tax. The Resolution, which was introduced as an amendment to pending legislation, was not adopted. I reintroduced my legislation in the 105th Congress with slight modifications to reflect inflation-adjusted increases in the personal allowances and dependent allowances. I re-reintroduced the bill on April 15, 1999--income tax day--in a bill denominated as S. 822. I then introduced my flat tax legislation as an amendment to S. 1429, the Tax Reconciliation bill; the amendment was not adopted. During the 108th Congress, I introduced my flat tax legislation once again on April 11, 2003. On May 14, 2003, I offered an amendment to the Tax Reconciliation legislation urging the Senate to hold hearings and consider legislation providing for a flat tax; this amendment passed by a vote of 70 to 30 on May 15, 2003. I then testified on this issue at a subsequent hearing held by the Joint Economic Committee on November 5, 2003.

Over the years and prior to my legislative efforts on behalf of flat tax reform, I have devoted considerable time and attention to analyzing our nation's tax code and the policies which underlie it. I began the study of the complexities of the tax code over 40 years ago as a law student at Yale University. I included some tax law as part of my practice in my early years as an attorney in Philadelphia. In the spring of 1962, I published a law review article in the Villanova Law Review, ``Pension and Profit Sharing Plans: Coverage and Operation for Closely Held Corporations and Professional Associations,'' 7 Villanova L. Rev. 335, which in part focused on the inequity in making tax-exempt retirement benefits available to some kinds of businesses but not others. It was apparent then, as it is now, that the very complexities of the Internal Revenue Code could be used to give unfair advantage to some. Einstein himself is quoted as saying ``the hardest thing in the world to understand is the income tax.''

The Hall-Rabushka model envisioned a flat tax with no deductions whatever. After considerable reflection, I decided to include in the legislation limited deductions for home mortgage interest for up to $100,000 in borrowing and charitable contributions up to $2,500. While these modifications undercut the pure principle of the flat tax by continuing the use of tax policy to promote home buying and charitable contributions, I believe that those two deductions are so deeply ingrained in the financial planning of American families that they should be retained as a matter of fairness and public policy--and also political practicality. With those two deductions maintained, passage of a modified flat tax will be difficult, but without them, probably impossible.

In my judgment, an indispensable prerequisite to enactment of a modified flat tax is revenue neutrality. Professor Hall advised that the revenue neutrality ofthe Hall-Rabushka proposal, which uses a 19 percent rate, is based on a well-documented model founded on reliable governmental statistics. My legislation raises that rate from 19 percent to 20 percent to accommodate retaining limited home mortgage interest and charitable deductions.

This proposal taxes business revenues fully at their source, so that there is no personal taxation on interest, dividends, capital gains, gifts or estates. Restructured in this way, the tax code can become a powerful incentive for savings and investment--which translates into economic growth and expansion, more and better jobs, and raising the standard of living for all Americans.

The key advantages of this flat tax plan are threefold: First, it will dramatically simplify the payment of taxes. Second, it will remove much of the IRS regulatory morass now imposed on individual and corporate taxpayers, and allow those taxpayers to devote more of their energies to productive pursuits. Third, since it is a plan which rewards savings and investment, the flat tax will spur economic growth in all sectors of the economy as more money flows into investments and savings accounts.

Professors Hall and Rabushka have projected that within seven years of enactment, this type of a flat tax would produce a 6 percent increase in output from increased total work in the U.S. economy and increased capital formation. The economic growth would mean a $7,500 increase in the personal income of all Americans. No one likes to pay taxes. But Americans will be much more willing to pay their taxes under a system that they believe is fair, a system that they can understand, and a system that they recognize promotes rather than prevents growth and prosperity. My flat tax legislation will afford Americans such a tax system.

I ask unanimous consent that a copy of my flat tax postcard, a variety of specific cases that illustrate the fairness and simplicity of this flat tax, and an example flat tax table be printed in the Record following my statement.

I ask unanimous consent that the text of this bill be printed in the Record.

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Mr. President, I have sought recognition today to introduce the Prescription Drug and Health Improvement Act of 2005 to reduce the high prices of prescription drugs for Medicare beneficiaries. I introduced a similar version of this bill in the 108th Congress, S. 2766. To increase the likelihood that this bill may become law this bill does not include a costly provision which would have closed the gap in prescription drug costs for Medicare beneficiaries.

Americans, specifically senior citizens, pay the highest prices in the world for brand-name prescription drugs. With 45 million uninsured Americans and many more senior citizens without an adequate prescription drug benefit, filling a doctor's prescription is unaffordable for many people in this country. The United States has the greatest health care system in the world; however, too many seniors are forced to make difficult choices between life-sustaining prescription drugs and daily necessities.

The Centers for Medicare and Medicaid Services estimate that in 2004 per capita spending on prescription drugs rose approximately 12 percent, with a similar rate of growth expected for this year. Much of the increase in drug spending is due to higher utilization and the shift from older, lower cost drugs to newer, higher cost drugs. However, rapidly increasing drug prices are a critical component.

High drug prices, combined with the surging older population, are also taking a toll on State budgets and private sector health insurance benefits. Medicaid spending on prescription drugs increased at an average annual rate of nearly 19 percent between 1998 and 2002. Until lower priced drugs are available, pressures will continue to squeeze public programs at both the State and Federal level.

To address these problems, my legislation would reduce the high prices of prescription drugs to seniors by repealing the prohibition against interference by the Secretary of HHS with negotiations between drug manufacturers, pharmacies, and prescription drug plan sponsors and instead authorize the Secretary to negotiate contracts with manufacturers of covered prescription drugs. It will allow the Secretary of HHS to use Medicare's large beneficiary population to leverage bargaining power to obtain lower prescription drug prices for Medicare beneficiaries.

Price negotiations between the Secretary of HHS and prescription drug manufacturers would be analogous to the ability of the Secretary of Veterans Affairs to negotiate prescription drug prices with manufacturers. This bargaining power enables veterans to receive prescription drugs at a significant cost savings. According to the National Association of Chain Drug Stores, the average ``cash cost'' of a prescription in 2001 was $40.22. The average cost in the Veterans Affairs (VA) health care system in fiscal year 2001 was $22.87.

In the 108th Congress, in my capacity as chairman of the Veterans' Affairs Committee, I introduced the Veterans Prescription Drugs Assistance Act, S. 1153, which was reported out of committee, but was not considered before the full Senate. In the 109th Congress, I have again introduced the Veterans Prescription Drugs Assistance Act, S. 614.

This legislation will broaden the ability of veterans to access the Veterans Affairs' Prescription Drug Program. Under my bill, all Medicare-eligible veterans will be able to purchase medications at a tremendous price reduction through the Veterans Affairs' Prescription Drug Program. In many cases, this will save veterans who are Medicare beneficiaries up to 50 percent on the cost of prescribed medications, a significant savings for veterans. Similar savings may be available to America's seniors from the savings achieved using the HHS bargaining power, like the Veterans Affairs bargaining power for the benefit of veterans. These savings may provide America's seniors with fiscal relief from the increasing costs of prescription drugs.

I believe this bill can provide desperately needed access to inexpensive, effective prescription drugs for America's seniors. The time has come for concerted action in this arena. I urge my colleagues to move this legislation forward promptly.

I ask unanimous consent that the text of the bill be printed in the Record.

Mr. President, I rise today for myself and fellow Alaska Senator Ted Stevens to introduce legislation concerning a complex issue, the Quality Bank that is used to facilitate payments between shippers using the Trans-Alaska Oil Pipeline System to reflect variations in the value of different crude oil streams that are injected into the pipeline.

Since its opening in June 1977, the Trans-Alaska Pipeline System, TAPS, has carried crude oil from Alaska's North Slope to Valdez where the oil is shipped to market. The pipeline carries crude oil from various sources and of varying quality--the oil injected into the line before the pipeline's Pump Station One near Deadhorse, AK, and commingled as the blended stream of oil travels south to Valdez. The TAPS Quality Bank was established to compensate producers of higher quality crude oil for the difference in the value of the crude injected at the North Slope and that of the lower-quality commingled stream received in Valdez, since each shipper receives a quantity of the blended stream equivalent to the amount it injected into the line.

Companies injecting low-quality crude oil pay into the Quality Bank, while companies injecting high quality crude receive a payment from the Quality Bank. In addition, between the North Slope and Valdez, two refineries, Flint Hills and Petro Star, withdraw a portion of the common stream from TAPS, partially refine the crude oil into products such as gasoline, diesel and jet fuel, and reinject into TAPS the other components of crude left over after their refinery processes. Each fuel extracted from the crude is called a ``cut.'' To compensate producers for the loss in value of the crude oil because of what is removed by these refineries, refiners also pay into the Quality Bank. The objective of the Quality Bank is to make monetary adjustments so that each shipper is in the same economic position it would enjoy if it received the same oil in Valdez that it delivered to TAPS on the state's North Slope.

The methodology used to determine Quality Bank payments has been a subject of controversy since the Quality Bank's creation. The problem arises because there is no independent market for the crude injected on the North Slope and thus no way to objectively determine its value. The methodology is set by the Federal Energy Regulatory Commission. Since the early 1980s, FERC-approved methodologies have been challenged in court and revised multiple times. In 1993, the majority of North Slope shippers proposed and FERC approved a settlement calling for the use of a ``distillation'' methodology, which would value crude oil based on the market price of various cuts created when the components are separated based on different boiling points--the distillation process. This methodology replaced the former ``gravity'' methodology where oil was valued based on its relative gravity.

Since 1993, disputes have focused largely on the valuation of cuts at the highest boiling points--the ``Heavy Distillate'' cut that evaporates at temperatures between 350 and 650 degrees F. and the Resid, residual, cut, which includes the portion remaining after distillation of all other cuts at boiling points up to 1050 degrees F. Two additional cuts are also at issue, the VGO and Naptha cuts.

In 1997, responding to a D.C. Circuit Court of Appeals ruling, FERC approved a settlement with a revised valuation methodology for Distillate and Resid. Under the FERC order, the new valuation methodologies were to be applied on a prospective basis only. Later, the D.C. Circuit in 1999 told FERC to revise some particular details of the Resid valuation and also held that FERC had ``failed to provide an adequate explanation'' as to why the new methodology should not be made retroactive to 1993.

Responding to the ruling, the Administrative Law Judge, who in 1997 had decided that all changes should only apply prospectively, reversed his position and released a decision in August 2004 calling for changes in the Resid and Heavy Distillate cuts to be applied retroactively, in the case of Resid to as far back as 1993. In addition, the administrative law judge decided to apply new valuations for VGO and Naptha, prospectively. Currently, the judge's decision is awaiting a final decision by the FERC on whether to impose the Initial Decision or alter it.

There are clearly major public policy implications resulting from this Quality Bank issue. While the bank is a ``zero sum'' game as far as money paid in and out of the bank is concerned, the impacts on the parties and thus on the citizens of Alaska are anything but equal.

For decades Alaskans suffered under the impacts of having to import all refined fuel products into the State from West Coast refineries. Besides higher prices caused by transportation, that left the State wholly dependent on fuel supplies that needed to travel at least 2,000 miles on average to reach Alaska consumers--sometimes through bad weather and difficult sea conditions. With the construction of in-State refineries, Alaskans finally saw greater security of supply, less dependence upon weather for shipment arrivals, and the possibility of lower fuel prices because of potentially reduced transportation costs. The greater dependability of fuel supplies improved aviation freight shipments at the Anchorage and Fairbanks international airports, helping create jobs in air freight and related industries.

But the decision of the Administrative Law Judge to apply new Quality Bank methodology assessments retroactively, places the economics of in- State refineries at risk. That in turn not only impacts the job security for the roughly 400 Alaskans who work at the refineries, but also threatens the State's energy and economic security.

The problem is that both of the refineries must make long- and short- term business decisions based on crude costs when they process crude oil into product. Refineries optimize their production slates based on current market realities. It is difficult for them to operate, given low profit margins, if oil values can change years later as a result of Quality Bank decisions. They simply have no way to make rational business decisions when the value of their products can be determined retroactively long after they can protect themselves for perceived mistakes in FERC-approved valuation methodologies. This certainly threatens the ability of the refineries to attract capital, money needed for them to modernize and meet new ultra-low sulfur diesel ``clean fuel'' requirements soon to go into effect.

The State's Congressional Delegation last fall in report language added to the Federal budget expressed its concern with the equity of long retroactive Quality Bank valuation adjustments. Last autumn we urged FERC to look carefully at the justice of the Initial Decision of the Administrative Law Judge in this case and we encouraged all of the eight parties that includes the State of Alaska, to reach an out-of- court settlement of the 1993 case to bring finality to this complex case before it harms instate refinery capabilities. At the time we avoided a legislative solution to this purely Alaskan case. We are renewing our pleas for action in a letter sent to FERC on Thursday.

In the intervening six months, while one mediation session has occurred, the parties report little or no progress toward reaching a mutually agreeable settlement. While opinions may differ on whether Congress should intervene to settle the on-going case, there is little doubt that Congress should step forward to prevent such an arcane dispute from ever again threatening Alaska's energy industry.

For that reason prior to the next mediation session, today we introduce legislation to limit the ability of FERC in the future to make retroactive the impacts of future Quality Bank valuation methodology changes. By this legislation, after December 31, 2005, FERC still will be able to change the methodology for determining the value of oil flowing through the pipeline but will not be permitted to apply changes to Quality Bank valuation methodologies on anything other than a prospective basis.

We have proposed this provision to prevent this legal nightmare from happening again. This provision will first eliminate the perverse current incentive for all sides to promote further litigation regarding Quality Bank valuations based on the expectation of a retroactive application of changes that would result in a large economic windfall. The retroactive application of valuation methodology changes encourages the sides in a dispute to sue in hopes of gaining a larger benefit in the future. This is a ``lottery,'' however, that Alaskans are guaranteed to lose.

By setting December 31, 2005, as the date that FERC can no longer apply Quality Bank valuation methodologies on a retroactive basis, the legislation will put the FERC and the litigants on record that the current dispute must be resolved by the end of this year.

Requiring FERC to apply valuation methodology changes in connection with any future disputes on a prospective basis only will eliminate the risk and uncertainty associated with the prospect of nearly unlimited retroactive application of Quality Bank payment methodology changes. That will allow all Quality Bank participants to be able to conduct business with the certainty of knowing that prices received and paid for oil today cannot be altered years down the road. In addition, this will eliminate the strong incentive that currently exists for some parties to engage in endless litigation, in hopes of gaining windfall benefits from retroactive application changes.

While we continue to call on all sides in the current dispute to compromise and settle this case now, this bill will discourage if not eliminate this type of dispute in the future--a benefit for all Alaskans.

Mr. President, I rise to thank my colleagues for including a provision in this bill which give the people of Nevada a fair chance to keep their hard earned money away from the clutches of Enron.

Enron is still seeking to extract an additional $326 million in profits from my State's utilities for power that was never delivered. Enron, after all of its market manipulation and financial fraud, is still trying to profit from its wrong-doing at the expense of each and every Nevadan.

Section 1270 of the Energy Policy Act ensures that the proper government agency will determine whether Enron is entitled to more money from Nevada. That agency is the Federal Energy Regulatory Commission. When FERC was established by Congress, its fundamental mission was, and remains, to protect ratepayers. FERC has specialized expertise required to resolve the issues surrounding some of the contracts that Enron entered into and eventually terminated.

Many of my colleagues know that Enron has filed for bankruptcy protection. There is an issue in the bankruptcy case as to whether Enron can enforce contracts that it terminated. The enforceability of these contracts should not be decided by a bankruptcy court. A bankruptcy judge does not have the specialized expertise required for this job. A bankruptcy court is responsible for considering different equities than an oversight agency, like FERC, would. The bankruptcy court is responsible for enhancing the bankruptcy estate for the benefit of creditors. FERC, on the other hand, sees a more complete picture which includes protecting the interests of the general public.

This is why section 1270 is so important. It is a provision that is limited in scope. It does not seek to resolve the issue in the favor of one party. Though many Senators from affected States may have been tempted to legislate the outcome, we have refrained from doing so. Let me set the stage for why this provision is so critical. It is a complicated story. It is one that should be told in order to understand why I so strongly support this provision and why I believe the provision should be enacted into law.

There are two major utilities that serve Nevada: Nevada Power and Sierra Pacific Power. Both need to buy power in the wholesale power market to meet the growing energy needs of Nevada. Las Vegas is the fastest growing city in the country. It takes a lot of power to keep the lights on in Las Vegas, Reno, and other parts of our growing State. At the height of the western electricity crisis, when spot market prices for electricity were going not just through the roof but through the stratosphere, FERC urged utilities like the Nevada utilities to reduce their purchases of spot supplies and enter into long-term contracts for electricity.

That is precisely what the Nevada utilities did. Enron was one of the biggest suppliers of wholesale electricity at the time. Starting in December 2000, the Nevada utilities entered into long-term contracts with Enron to meet a significant portion of their long-term needs. At the time, no one was aware of Enron's on-going criminal conspiracy to manipulate the market. No one knew that Enron had engaged in fraud to hide its true financial picture.

The prices that the Nevada utilities agreed to pay Enron for long- term power were truly outrageous. The prices fully reflected Enron's success in manipulating the market. Prices were three times as high as the threshold that FERC had established as a ceiling price that would trigger close scrutiny under the just and reasonable standard. As a result, in November 2001, the Nevada utilities asked FERC to review the rates to determine whether those contract prices were just and reasonable.

Two days after the Nevada companies filed their complaints against Enron, Enron filed for bankruptcy. Its financial house of cards had finally collapsed. As one definitive study of Enron concluded, Enron had been insolvent at the time the company entered into each and every contract with the Nevada utilities.

The contracts between Enron and the Nevada utilities incorporated the Western Systems Power Pool Agreement, a master agreement on file and approved by FERC. This master agreement governs transactions of more than 200 parties throughout the west.

Under the terms of that agreement, if one of the parties files for bankruptcy, the other party may rescind the agreement. So in this case, Enron's bankruptcy would have given the Nevada utilities cause to terminate the contracts. Under the unique terms of this agreement, however, the commercial party that is ``in the money'' will still be able to benefit if the contract is rescinded. So while the Nevada companies could terminate the contract, they still would have had to pay Enron the difference between the contract price and the market price at the time of terminating, to say nothing of the need to buy replacement power.

When Enron entered bankruptcy, the price for electricity had fallen to the level power had sold for prior to Enron's market manipulation. This demonstrates that there was a huge difference between the artificially and unlawfully manipulated price that Enron commanded at the time of the contract and the market price at the time Enron filed for bankruptcy. Given the huge financial hit that the Nevada companies would have had to pay to terminate the Enron contracts, the Nevada companies continued to honor their commitment to purchase power under these contracts.

In March 2002, the Public Utilities Commission of Nevada refused to allow the Nevada utilities to pass more than $400 million in purchased power costs on to ratepayers. As a result, the credit ratings of the Nevada utilities fell below investment grade. Under the terms of the WSPPA, this downgrade gave Enron the right to request assurances regarding the Nevada companies'

intentions with respect to their contracts. In meetings and in telephone calls, the Nevada Companies assured Enron that they would be able to pay Enron everything that would be owed under the contracts.

The WSPPA required Enron to use ``reasonable'' discretion with respect to the contracts. Despite this requirement, Enron terminated the contracts with the Nevada companies and demanded that the Nevada companies pay Enron termination payments totaling approximately $326 million. These termination payments represent pure profit to Enron on power than Enron never delivered. By pure profit, I mean just that. The termination payments are calculated, as I previously noted, by the difference between the cost of power today and the outrageous, manipulation-based prices Enron was able to extract during the energy crisis that Enron had unlawfully created.

The Nevada companies refused to make payment. At this time, it was known that Enron had manipulated the entire western market. As part of Enron's bankruptcy, an ``adversary proceeding'' was initiated to determine the enforceability of these contracts and whether Enron would be allowed to continue to profit under fraudulent contracts at the expense of Nevada's ratepayers.

At this point, the legal proceedings become very complex but the proceedings should be summarized so my colleagues will understand exactly what has happened.

On June 24, 2003, FERC determined that the ``just and reasonable'' standard of review is not available to the Nevada companies with respect to their long-term contracts with Enron. This decision was made because FERC argued that it had previously ``pre-determined'' that the contracts would be just and reasonable when they granted Enron its authority to sell electricity at market-based rates years earlier.

On the very next day, FERC withdrew Enron's authority to sell electricity at market-based rates because of its ``market manipulation schemes that had profound adverse impacts on market outcomes'' which violated its ``market-based rate authorizations.''

The bankruptcy court judge, on August 23, 2003, ruled on a summary judgment motion that the Nevada utilities were required to pay Enron $326 million in termination payments. The court held that, because FERC had not found that Enron's contracts should be modified by virtue of its market manipulation, the filed-rate doctrine applied. It further ruled that it did not need to defer to FERC on whether Enron had complied with the tariff since it could interpret the tariff as well as