Agriculture Competition Enhancement Act of 2007

Mr. President, I ask for the regular order on amendment No. 3823.

I am asking for the regular order on amendment No. 3823.

I ask for the regular order.

The managers of the amendments are trying to get amendments brought up. I am ready to go, and they asked if I was ready to go.

Mr. President, amendment No. 3823 deals with agricultural competition and increased consolidation in the agricultural industry. The amendment is cosponsored by me, Senator Grassley, and two Democrats--Senator Kohl and Senator Harkin.

I wish to make it very clear--and I will get into some detail--there may be some people who feel the amendment I have put before the Senate is exactly the same as a bill Senator Kohl and I had introduced previously. It is very slimmed down from that bill. So any staff who is watching the debate and getting nervous about an amendment coming up that every big industry in the United States may find fault with, we are talking about a very slimmed-down version of it. I will explain all that shortly.

I have been concerned with competition in the agricultural marketplace and increased competition in the agricultural industry for quite some time now. You have heard me speak about it on the floor. We have had hearings on it. I had hearings in the Senate Finance Committee, as well as hearings I participated in under both Republican and Democratic chairmanships of the Judiciary Committee.

Agriculture, as you know, is a fairly risky business. I know that from personal experience because I have lived and worked on a farm all my life. But for some time, working in agriculture has become even more difficult for the little guy. The trend has been for companies in the agricultural sector to consolidate. I am talking about businesses that serve agriculture with input. I am talking about industry that processes agriculture. So there has been consolidation in that industry. I am not talking about the consolidation of farms. There has been that as well. That has been going on since 1790, when 90 percent of the people in this country were farmers. Today, 2 percent of the people in this country are farmers. I am talking about the impact of agriculture agribusiness consolidation and the impact upon the 2 percent of the people in this country who are farmers.

This consolidation has created new business giants impacting competition in the marketplace for the family farmers, for producers, and for consumers. Family farms and independent producers are feeling the pressure of concentration in agriculture. Small and independent producers are seeing fewer choices--who the farmer can buy from and to whom the farmer can sell.

All this consolidation in industry at both the horizontal and vertical levels leads to the very real possibility of fewer product choices and higher prices for consumers.

I don't believe all mergers are, per se, bad, and I don't believe all are wrong and all lead to unfairness. But I think at the same time we need to make sure--we need to make very sure--open and fair access to the marketplace is preserved for everyone. We need to make sure large businesses are not acting in a predatory or anticompetitive manner. We need to make sure family farmers and independent producers can compete on a level playing field. We need to make sure consumers have as many choices as possible.

So I am not talking just about mergers and lack of competition being harmful just to farmers, I am talking about the impact that might have on consumers paying more. The antitrust laws are all about protecting consumers, not about protecting producers. But in the case of family farmers, they are purchasers of input, and so they are consumers. But they also have to make sure that the marketplace is protected for the ultimate end-consumer, the consumer of our agricultural products.

By looking out for these things, you know what we end up doing, Mr. President? We keep our economy strong because of competition. We keep our agricultural community vibrant. We keep it competitive. And hopefully, in the end, we keep our consumers happy, with quality food at a relatively inexpensive price. American consumers don't know that, but they already have that environment from our farmers. We take too much for granted in America, so I am not so sure consumers know that, and I like to remind them from time to time.

So we have this amendment before us. It is an amendment cosponsored, as I said, by Senator Kohl and Senator Harkin. The language of this amendment draws from a bill that Senator Kohl, Senator Thune, and I introduced earlier this year--S. 1759. It is called the Agriculture Competition Enhancement Act, ACE for short. We call it the ACE Act. However--and this is the point I started out with--I wish to make clear that this amendment which is being offered to the farm bill is quite different from the ACE Act as originally introduced earlier this year. Amendment No. 3823, which I have called up here under regular order, does not include all the provisions of S. 1759 and either eliminates provisions in that bill or incorporates many changes to address concerns raised by members of the agricultural industry, by the administration, as well as Senators on both sides of the aisle.

I also worked with the chairman and ranking member of the Judiciary Committee because this bill, S. 1759, was referred to the Judiciary Committee. Because we are offering it as an amendment to this bill, I also worked with the ranking member of the Agriculture Committee to address issues that were in that original S. 1759, which I was hoping to offer here, to take care of some opposition to this bill coming up and yet still accomplishing quite a bit about the problems I see with lack of competition. So the amendment I have called up under regular order is the product of these discussions we had with business, with agricultural leaders, with the White House--or I should say with the administration generally, not necessarily the White House--and, of course, with the Judiciary Committee members and the ranking member of the Agriculture Committee.

Now, I want to explain what this bill does after having explained to you, as I just did, that it is not what we had introduced as a bill.

First, the amendment would create an Agriculture Competition Task Force to study problems in agricultural competition, establish ways to coordinate Federal and State activities to address competition problems in agriculture, and make recommendations to Congress. In particular, the task force would establish a smaller working group on buyer power to study the effects of concentration, the effects of monopsony, and the effects of oligopsony in agriculture, and make recommendations to the Department of Justice and to the Federal Trade Commission on and for agricultural guidelines. The task force will help give our antitrust regulators real insight and expertise specific to the farm community that I believe is currently lacking when they address competition issues in agriculture.

Second, the amendment would require the Justice Department and the Federal Trade Commission to issue agricultural guidelines, taking into account the special conditions of the agriculture industry, and require the Department of Justice and the Federal Trade Commission to report to Congress on the guidelines.

Both the Senate Judiciary Committee and the Agriculture Committee heard witnesses in several hearings testify that there is a need for agriculture-specific guidelines when the Department of Justice and the Federal Trade Commission look at agriculture mergers.

Currently, the Department of Justice and the Federal Trade Commission have guidelines for specific industries and issues, such as health care and intellectual property, but not for agriculture. So it makes sense-- not just to me but to these many experts in agriculture and antitrust law that we heard in these several hearings before our committees--that our Federal regulators should have agricultural guidelines because of the special circumstances and special characteristics particular to the agriculture industry and particularly because there tends to be, in Washington, DC, outside of the Agriculture Department, little consideration and understanding of the unique industry of agriculture. Some people would say that even within the U.S. Department of Agriculture there is a lack of understanding in Washington, DC, of what the problems of agriculture are all about.

I don't pretend that even with the adoption of this amendment we are necessarily going to bring about the total understanding that there ought to be for the 2 percent of the people in this country who produce food for the other 98 percent, as well as a lot of surplus that is exported beyond. But whatever we can do to help, and particularly when there are policy decisions made dealing with agriculture when it is not fully understood, if we can just get some attention on agriculture in those areas, I think we will be taking a giant step forward.

Those characteristics I am talking about include monopsony, which is a situation where there is a single purchaser of goods, and oligopsony, which is a situation where there are few buyers who, at the same time, have a disproportionate amount of market power.

Third, the amendment would formalize the Department of Agriculture's review of agriculture mergers with the Justice Department and the Federal Trade Commission, requiring the Department of Agriculture to provide comments on larger mergers in the industry--mergers that submitted second requests for information under the Clayton Act. That is already a process that is in law.

Currently, the Justice Department or the Federal Trade Commission informally consults with the Department of Agriculture when they analyze ag mergers. These agencies have what we call a memorandum of understanding to consult with each other. But I believe, following on the advice of experts who have testified on this matter before the Agriculture Committee, that the current process--meaning the current process of the memorandum of understanding--does not sufficiently ensure that farm community concerns are adequately considered.

Far more than the Justice Department and far more than the Federal Trade Commission, the Department of Agriculture has extraordinary knowledge and expertise in agricultural matters. The Department of Agriculture formulates agricultural policy for our great Nation and works closely with the farm community and agricultural industry about various concerns. They have experts and economists who know and work with the data on a daily basis. The Department of Agriculture is the office that can best assess the true impact of ag mergers and other business transactions for farmers, ranchers, and independent producers, as well as the trickle-down effect on the consumer. So that is why it makes sense that the role the Department of Agriculture plays presently in antitrust review of ag mergers be more than just a memorandum of understanding; that, in fact, it be permanent and a formal role, not one that is informal and loosely contained in the memorandums.

Moreover, having such a requirement of formal participation or consultation is not some new novel idea. I wish I could claim a new novel idea. Other agencies, such as the Federal Communication Commission or the Department of Transportation, formally participate in the review of mergers in their industries. They render formal decisions that are then shared with the FTC or the Department of Justice. So along the lines of the precedent set by the FCC and the Department of Transportation, I am asking that we do the same thing with the Department of Agriculture and the FTC and the Department of Justice.

I hope I have described to you what is a very modest approach, much more modest than the ideas Senator Kohl and I had in the bill that I am saying I am offering a stripped-down version of here. I basically put in statute what the Department of Justice and the Federal Trade Commission are allegedly already supposed to be doing with the U.S. Department of Agriculture. The approach we advocate in this amendment will ensure that all of agriculture's concerns and needs are fully discussed when Federal agencies examine proposed ag business mergers. By guaranteeing inclusion and openness, we will go a long way toward alleviating understandable anxiety about an increasingly concentrated industry.

Finally, the amendment would provide for additional resources to the Department of Justice and the U.S. Department of Agriculture's GIPSA division to enhance their ability to look at agricultural transactions and competition issues.

I want my colleagues to know that we worked very closely with several

agricultural and antitrust experts on the language contained in this very amendment, as we did in the original bill. The amendment is supported by a number of farm groups, and I would like to read these to you: the Organization for Competitive Markets, the Campaign for Contract Agriculture Reform, the Center for Rural Affairs, Food and Water Watch, the Institute for Agriculture and Trade Policy, R-CALF USA--and just in case people don't understand that acronym, those are people who are cattle producers but who aren't necessarily affiliated with the National Cattlemen's Association. They could have dual memberships, but they do have some different points of view. Then another organization is the Sustainable Agriculture Coalition, and lastly the Western Organization of Resource Councils.

Mr. President, I ask unanimous consent to have printed in the Record a December 10, 2007, letter in support of this amendment.

So my colleagues are clear, once again to repeat, Senator Kohl and I listened very carefully to the concerns expressed by companies and groups that contacted us about S. 1759, the original Agriculture Competition Enhancement Act--we call that ACE for short-- and in response to those concerns, we made significant changes and elimination to the language which has been incorporated in this amendment. This amendment does not make any substantive changes in antitrust laws. I am going to address that a little more specifically because that is one of the things we have heard against this amendment. Maybe it would be an applicable criticism of the bill but not of this amendment.

Also, there is no mandatory adoption of the task force recommendations on the guidelines to which I have referred. The constitutional issues raised have been taken care of and more contentious provisions have been eliminated. The bottom line is the concerns that were raised by certain companies, as well as the Justice Department and the FTC, about our previous iterations of the ACE bill have been taken care of in the amendment. The bottom line is, this amendment is very much an attempt to address everyone's concerns and to reach a fair compromise because I think we could have gone a lot further and been even a lot more aggressive in dealing with agricultural competition issues. I had a hard time convincing Senator Kohl we ought to make these changes, but he has agreed as well.

There is a real need for this amendment. We need it to beef up our ability to address competition issues in agriculture and to address concerns with consolidation in the industry. My amendment is an itty- bitty step in the right direction; maybe some would say too small of a step but still a good first step at getting something done.

I urge my colleagues to support the Grassley-Kohl-Harkin amendment.

I do have some other things I want to say, but I do not want to take all the time right now. I do want to speak about some of the differences between what was in our bill and what is in our

amendment. I am willing to yield the floor if other people want to speak on the amendment that I have before us.

Mr. President, I listened to the Senator from Kansas. I am a farmer. I am not a lawyer like he is. He is a lawyer and farmer, so he might have some intuition. But I would just like to have him come, and I will deliver it to his desk--he needs to read my amendment. What he has said is an analysis of the bill that Senator Kohl and I introduced, but that is not the amendment. Maybe he missed my opening remarks, but I went to great length in those opening remarks to explain how my amendment differs from the bill. I want to point that out to the Senator from Kansas because I think I have addressed every concern he has presented to the Senate in his very good speech.

I have taken care of his concerns, and I am going to mention those concerns he has brought up, and then I am going to go to some length to tell you how I have taken care of that. But there is no special counsel amendment in this bill, as the Senator from Kansas has said. There are no additional reviews of transactions that have already taken place. That was in the original bill. It is not in this amendment.

He spoke two or three times about changing the burden of proof. That was in the original bill. It is not in this slimmed-down amendment. There is no burden of proof shifting in the amendment.

The task force that we provided for has no review or study provisions in the amendment, as indicated by the Senator from Kansas.

Now I am going to go into some detail, because obviously people are not listening to anything I have said. I want to state in a more elaborate way how this bill differs--this amendment differs from the bill that I said Senator Kohl and I first introduced, and the length we went to take care of concerns that the White House, the administration has raised, concerns that both the ranking member and the chairman of the Judiciary Committee raised, because this bill was referred to Judiciary, and then lastly, working with the ranking member of the Agriculture Committee, to address concerns he had.

There has been a lot of smoke and mirrors--I think you heard some of that--about the provision of the bill, and most of those charges are not factual, as I have indicated.

The fact is, this amendment is very different from the bill Senator Kohl and I introduced earlier this year. This amendment is also different from another amendment I had already filed to this bill. Let me list some of the things

that are not in our amendment that are before us in 3823.

I am hearing that people are concerned about the shifting of the burden of proof in the amendment. The burden-of-proof shifting provision that was in the prior iteration has been eliminated. It is not in this amendment. There are no substantive changes to antitrust laws at all.

I am hearing concerns about reviews that will be done after mergers have been approved. The provisions that allow the task force to do a study of agricultural mergers that were approved within the past 10 years have been eliminated, not in this amendment.

In addition, the provisions requiring the Justice Department and the Federal Trade Commission to review ag mergers 5 years after they have been approved have been eliminated as well.

The provision creating an Assistant Attorney General for Agricultural Antitrust at the Justice Department has been eliminated. In other words, it is not in the amendment pending before the Senate.

The constitutional concerns raised by the administration, not by Senator Brownback, about the agricultural competition task force are gone, the constitutional concerns.

We changed the provisions requiring adoption by the Justice Department of task force working group recommendations on agricultural guidelines. The amendment now has the Justice Department and the Federal Trade Commission consulting with the task force working group on the guidelines.

Any so-called constitutional concerns have been eliminated. We have made other changes to the prior writings of this amendment and/or the bill, all of which were incorporated in amendment 3823. We made these changes to address concerns that we agreed with, and we made changes in order to reach a fair compromise.

The fact is, big business and the agricultural giants do not want anything that might put up any sort of review by people who know something about agriculture, of their expansion and concentration efforts. The fact is, our Federal antitrust regulators refuse to recognize that agriculture is unique and should have industry-specific guidelines to make sure that special circumstances of the agricultural landscape are considered.

This brings about consideration, this does not bring about any change. Any movement to them, no matter how small, to try to address concentration and competition issues in agriculture is going to be decried by the powerful interest groups and their lobbyists. So when something reasonable is suggested, such as the Grassley-Kohl-Harkin amendment No. 3823, we still are going to get the outrageous claims that this is a bad amendment. The reality is the sky is not falling.

I advise my colleagues, particularly the Senator from Kansas, to read the amendment. Forget about the bill he has been referring to. Instead, listen, and stop listening to those sensational cries being made by agribusiness and their allies. We need to pass this amendment.

I yield the floor.

I will probably do that. Let me make an inquiry. Can I do that, Mr. President, without setting aside or yielding my right to continue discussion of this amendment?

I yield.

Amendment No. 3771

I do not have a whole lot more to say about this bill if you want to move on. But I do want to continue to correct a couple of things the Senator from Kansas has spoken about.

First, I was listening as he was quoting from the Department of Justice letter. And he may have a later letter, but those exact words that he was reading from appear in a November 15 letter that Senator Leahy received as chairman of the Judiciary Committee with objections from the Department of Justice.

But those objections are about the bill S. 1759, the bill that I said we have modified considerably as an amendment here, so that it does not do all of the things that have been attributed to it.

OK.

But in the paragraph you were quoting, it says exactly the same thing in the letter I got of November 15 in which they were commenting on 1759, and they surely can't find the same fault with the amendment that they found with the bill because we met with them and made changes according to what they asked us to do.

My staff corrects me that we didn't actually meet with the Department of Justice, but we were well aware of the changes they were demanding, and those changes are taken into consideration in this legislation.

Then we keep hearing from the Senator from Kansas about investigations and reviews. Get that out of your system. I have spoken twice on that issue--no reviews, no investigation.

Then when you hear all of these faults the bill is going to bring about--you are going to increase the cost of food to the consumer or maybe decrease profitability to the farmer--I don't see that anything like that is a result of a task force that is going to help the Justice Department and the FTC in determining whether mergers are anticompetitive. These are guidelines. They are not making decisions. The Department of Justice and the FTC will be making those decisions. But is there anything wrong with having a little bit of input into agricultural issues before those two agencies from experts in this town in the Department of Agriculture who may have some understanding of agriculture? I don't think the sky is going to fall if you have that sort of input.

I hope we can vote on my amendment and move on. I will only speak to the extent I have to to continue to defend misunderstandings of what the amendment does as opposed to what the original bill did.

Before I consent to that, and I probably will, as the manager of the amendment, is there any determination you can give me when we can vote on this or are we going to stack votes and vote all at once?

I will not object.

Mr. President, for the past five years, I have been working with my colleagues to close the Enron loophole that, since 2000, has exempted electronic energy markets for large traders from government oversight. This loophole opened the door to price manipulation and excessive speculation, and American consumers have been paying the price ever since with sky-high prices for crude oil, natural gas, gasoline, diesel fuel, home heating oil, propane, and other energy commodities vital to a functioning U.S.

economy. That is why I am pleased to stand before the Senate today in support of bipartisan legislation, sponsored by Senator Feinstein, myself, Senator Snowe and others, that will close the Enron loophole and put the cop back on the beat in all U.S. energy markets in an effort to stop price manipulation and excessive speculation.

I would like to thank a number of my colleagues for not only making this bipartisan legislation possible, but also agreeing to include it in the farm bill today. Senator Harkin, chairman of the Committee on Agriculture, played a key role in getting us together and encouraging us to resolve our differences. Senator Chambliss, the committee's ranking republican, agreed to address the problems we identified and helped work through our differences. Senator Feinstein of California provided unending determination needed to get this problem solved. There are many more who played a critical role in this legislation as well, including Senator Bingaman, Senator Snowe, Senator Dorgan who cosponsored our original bill, S. 2058, the Close the Enron Loophole Act, and Senator Crapo who helped us produce a bipartisan product.

I thank not only the Senators, but also their staffs who put in many hours on this legislation, provided invaluable expertise, and repeatedly came up with creative solutions to tough problems. I would like to thank in particular Dan Berkovitz of my subcommittee staff who has lived with this issue for the last 5 years and devoted so much time, work, and expertise to it.

A stable and affordable supply of energy is, of course, vital to the national and economic security of the United States. We need energy to heat and cool our homes and offices, to generate electricity for lighting, manufacturing, and vital services, and to power our transportation sector--automobiles, trucks, boats, and airplanes.

Over 80 percent of our energy comes from fossil fuels--oil, natural gas, and coal. About 50 percent is from oil and natural gas. The U.S. consumes around 20 million barrels of crude oil each day, over half of which is imported. About 90 percent of this oil is refined into products such as gasoline, home heating oil, jet fuel, and diesel fuel.

The crude oil market is the largest commodity market in the world, and hundreds of millions of barrels are traded daily in the various crude oil futures, over-the-counter, and spot markets. The world's leading exchanges for crude oil futures contracts are the New York Mercantile Exchange--NYMEX--and the Intercontinental Exchange, known as ICE Futures in London.

Natural gas heats the majority of American homes, is used to harvest crops, powers 20 percent of our electrical plants, and plays a critical role in many industries, including manufacturers of fertilizers, paints, medicines, and chemicals. It is one of the cleanest fuels we have, and we produce most of it ourselves with only 15 percent being imported, primarily from Canada. In 2005 alone, U.S. consumers and businesses spent about $200 billion on natural gas.

Today, only part of the natural gas futures market is regulated. Natural gas produced in the United States is traded on NYMEX and on an unregulated ICE electronic trading platform headquartered in Atlanta, GA. The price of natural gas in both the futures market and in the spot or physical market depends on the prices on both of these U.S. exchanges.

The ``Enron loophole'' is a provision that was inserted at the last minute, without opportunity for debate, into commodity legislation that was attached to an omnibus appropriations bill and passed by Congress in late December 2000, in the waning hours of the 106th Congress. This loophole exempted from U.S. government oversight the electronic trading of energy commodities by large traders. The loophole has helped foster the explosive growth of trading on unregulated electronic energy exchanges. It has also rendered U.S. energy markets more vulnerable to price manipulation and excessive speculation, with resulting price distortions.

Since 2001, the Permanent Subcommittee on Investigations, which I chair, has been examining the vulnerability of U.S. energy commodity markets to price manipulation and excessive speculation. Beginning in 2002, we have held 6 days of hearings and issued 4 reports on issues related to inflated energy prices.

The subcommittee first documented some of the weaknesses in U.S. crude oil markets in a 2003 staff report I released which found that crude oil prices were

Affected by trading not only on regulated exchanges like the

NYMEX, but also on unregulated ``over-the-counter'' (OTC)

markets which have become major trading centers for energy

contracts and derivatives. The lack of information on prices

and large positions in these OTC markets makes it difficult

in many instances, if not impossible in practice, to

determine whether traders have manipulated crude oil prices.

In June 2006, the subcommittee issued a staff report entitled, ``The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put the Cop Back on the Beat.'' This bipartisan staff report analyzed the extent to which the increasing amount of financial speculation in energy markets had contributed to the steep rise in energy prices over the past few years. The report concluded that: ``[s]peculation has contributed to rising U.S. energy prices,'' and endorsed the estimate of various analysts that the influx of speculative investments into crude oil futures accounted for approximately $20 of the then- prevailing crude oil price of approximately $70 per barrel.

The 2006 report recommended that the CFTC be provided with the same authority to regulate and monitor electronic energy exchanges, such as ICE, as it has with respect to the fully regulated futures markets, such as NYMEX, to ensure that excessive speculation in the energy markets did not adversely effect the availability and affordability of vital energy commodities through unwarranted price increases.

In June 2007, the subcommittee released another bipartisan report-- ``Excessive Speculation in the Natural Gas Market.'' Our report found that a single hedge fund named Amaranth had dominated the U.S. natural gas market during the spring and summer of 2006, and Amaranth's large- scale trading significantly distorted natural gas prices from their fundamental values based on supply and demand.

The report concluded that the current regulatory system was unable to prevent these distortions because much of Amaranth's trading took place on an unregulated electronic market and recommended that Congress close the ``Enron loophole'' that exempted such markets from regulation.

The report describes in detail how Amaranth used the major unregulated electronic market, ICE, to amass huge positions in natural gas contracts, outside regulatory scrutiny, and beyond any regulatory authority. During the spring and summer of 2006, Amaranth held by far the largest positions of any trader in the natural gas market. According to traders interviewed by the subcommittee, during this period natural gas prices for the following winter were ``clearly out of whack,'' at ``ridiculous levels,'' and unrelated to supply and demand. At the subcommittee's hearing in June of this year, natural gas purchasers, such as the American Public Gas Association and the Industrial Energy Consumers of America, explained how these price distortions increased the cost of hedging for natural gas consumers, which ultimately led to increased costs for American industries and households. The Municipal Gas Authority of Georgia calculated that Amaranth's excesses increased the cost of their winter gas purchases by $18 million. Also at the hearing the New England Fuel Institute and the Petroleum Marketers Association of America made clear how rampant speculation in energy trading harms the smaller businesses that trade in energy commodities.

Finally, when Amaranth's positions on the regulated futures market, NYMEX, became so large that NYMEX directed Amaranth to reduce the size of its positions on NYMEX, Amaranth simply switched those positions to ICE, an unregulated market that is beyond the reach of the CFTC. In other words, in response to NYMEX's order, Amaranth did not reduce its size; it merely moved it from a regulated market to an unregulated market.

This regulatory system makes no sense. It is as if a cop on the beat tells a liquor store owner that he must obey the law and stop selling liquor to minors, yet the store owner is allowed to move his store across the street and

sell to whomever he wants because the cop has no jurisdiction on the other side of the street and none of the same laws apply. The Amaranth case history shows it is clearly time to put the cop on the beat in all of our energy exchanges.

At the subcommittee's 2007 hearings, both of the major energy exchanges, NYMEX and ICE, testified that they would support a change in the law to eliminate the current exemption from regulation for electronic energy markets, in order to reduce the potential for manipulation and excessive speculation. Consumers and users of natural gas and other energy commodities--the American Public Gas Association, the New England Fuel Institute, the Petroleum Marketers Association of America, and the Industrial Energy Consumers of America--also testified in favor of closing the Enron loophole. That testimony helped galvanize the current effort to produce legislation in this area.

Just last week, my subcommittee teamed up with Senator Dorgan's Subcommittee on Energy to hold still another hearing examining how excessive speculation is continuing to add to crude oil prices, harming consumers and the American economy as a whole. During that hearing, Senators from both sides of the aisle expressed the need to develop new tools to address this problem.

The legislation being added to the farm bill today will do just that. It will help fix a number of the problems identified in the subcommittee's hearings and reports. Most importantly, it will put an end to the Enron-inspired exemption from government oversight now provided to electronic energy trading markets set up for large traders. By ending that exemption, this legislation will restore the ability of the Commodity Futures Trading Commission--CFTC--to police all U.S. energy exchanges to prevent price manipulation and excessive speculation.

The legislation would do more than require CFTC oversight; it would also require electronic exchanges, for the first time, to begin policing their own trading operations and become self-regulatory organizations in the same manner as futures exchanges like NYMEX. Specifically, the legislation would establish 5 ``core principles'' to which electronic exchanges must adhere, each of which parallels core principles already applicable to other CFTC-regulated exchanges and clearing facilities. Implementing these core principles would require an electronic exchange to monitor the trading of contracts which the CFTC has determined affect energy prices, ensure these contracts are not susceptible to manipulation, require traders to supply information about these contracts when necessary, supply large trader reports to the CFTC related to these contracts, and publish daily trading data on the price, trading volume, opening and closing ranges, and open interest for these contracts.

In addition, the electronic exchanges would have to establish position limits and accountability levels for individual traders buying or selling these contracts in order to prevent price manipulation and excessive speculation. Electronic exchanges are intended to implement these position limits and accountability levels in the same way as futures exchanges like NYMEX. Moreover, it is intended that the CFTC will take steps to ensure that the position limits and accountability levels on all exchanges are comparable to prevent traders from playing one exchange off another.

In implementing these core principles, electronic exchanges are given the same flexibility accorded to other CFTC regulated entities, subject to CFTC approval. In addition, the legislation states explicitly that, when implementing the requirements for position limits, accountability levels, and emergency authority to require reductions of positions, the electronic exchanges are allowed to take into account differences between trades which are cleared and not cleared, and the CFTC would police implementation of those core principles in an appropriate manner recognizing those differences.

Although the legislation provides an electronic trading facility with flexibility to implement the core principles, in the same manner as futures exchanges have with respect to the core principles applicable to them, and the flexibility to take into account the differences between cleared and uncleared trades in certain circumstances, in all instances the CFTC has the ultimate responsibility and authority to interpret the core principles, establish rules or guidance as to how they should be applied, and determine whether a facility or exchange is complying with the core principles.

The legislation would also require electronic exchanges to establish procedures to prevent conflicts of interest and anti-trust violations in their operations. These provisions parallel core principles already applicable to other CFTC-regulated exchanges and clearing facilities and are intended to function in a similar manner. These provisions are not restricted to trades involving contracts that affect energy prices, but apply to the entire exchange to ensure it operates in a fair manner.

In addition to requiring electronic exchanges to become self- regulatory organizations, the legislation would require the CFTC to oversee these exchanges in the same general way that it currently oversees futures exchanges like NYMEX. The legislation also, however, assigns the CFTC a unique responsibility not present in its oversight of other types of exchanges and clearing facilities. The legislation would require the CFTC to review the contracts on each electronic exchange to identify those which ``perform a significant price discovery function'' or, in other words, have a significant effect on energy prices. The CFTC would make this determination by looking at such factors as whether the electronic exchange's contract is explicitly linked to a contract used on a futures exchange; whether the electronic exchange's contract price is used by traders to set prices in other contracts; whether traders take positions in the contract and use those positions to arbitrage prices in other energy markets; and whether the contract is traded in sufficient volume to affect market prices. The CFTC can also look at other factors to determine if a contract is affecting energy prices. Contracts designated by the CFTC as performing a significant price discovery function are those that would be policed by both the exchange and the CFTC.

The legislation directs the CFTC to conduct a rulemaking to implement this requirement. The legislation also states clearly that a CFTC determination that a contract performs a significant price discovery function is a determination that is within the Commission's discretion; this determination is not intended to be subject to formal challenge through administrative proceedings. The legislation would also require the CFTC to review the contracts at an electronic exchange on at least an annual basis to determine which perform significant price discovery functions. This review is not intended to require the CFTC to conduct an exhaustive examination of every contract traded on an electronic exchange, but instead to concentrate on those contracts that are most likely to meet the criteria for performing a significant price discovery function. The legislation also directs the electronic exchange to bring to the CFTC's attention any contract which it believes is affecting energy prices.

To enable the CFTC to conduct oversight of its operations, in particular to prevent price manipulation and excessive speculation, electronic exchanges are required to file large trader reports with the CFTC for trades involving contracts that perform a significant price discovery function. These are the same large trader reports already filed by other CFTC-regulated exchanges and clearing facilities. In addition, electronic exchanges found to be trading contracts that perform a significant price discovery function are treated as a ``registered entity'' under the Commodity Exchange Act. This designation ensures that the CFTC has the same enforcement authority over electronic exchanges as it has with respect to other exchanges and clearing facilities to ensure compliance with its regulatory and statutory requirements.

One last issue. Another provision in the legislation states that its provisions are not intended to limit or affect the jurisdiction of the CFTC or any other agency involved with protecting our markets from price manipulation and excessive speculation. A legal battle is going on in the courts right now over enforcement actions by the CFTC

and the Federal Energy Regulatory Commission accusing Amaranth of manipulating or attempting to manipulate natural gas prices. This legislation is not intended to affect that court battle in any way. We are all waiting to see how it plays out and how the courts will interpret the law. This legislation is intended to play an absolutely neutral role in those enforcement actions, and should not be interpreted as changing the status quo in any way.

The provisions I have just discussed are the product of lengthy negotiations and compromises over the best way to close the Enron loophole. They seek to provide stronger government oversight of U.S. energy markets, while preserving the legitimate trading operations of electronic exchanges like ICE. Senator Feinstein and I have introduced a number of bills over the years to tackle this problem, each of which took a somewhat different approach to strike the right balance. My latest effort, introduced a few months ago with Senator Dorgan and others, was S. 2058, the Close the Enron Loophole Act. While that bill is more comprehensive than the legislation being added to the farm bill today, the combined legislation before us now preserves our bill's intent and ensures that both the exchanges and the CFTC can enforce prohibitions against price manipulation and excessive speculation. That, to me, is the most important aspect of the legislation and why I support it today.

The legislation reflects input from the CFTC, industry, consumer groups, and a wide range of Senators. Some compromises were made, but again, those compromises did not weaken the ability of the CFTC to police out energy markets--in fact, if this legislation is enacted into law, the CFTC will be in a stronger position since 2000 to protect our markets from trading abuses.

The House is working on similar legislation, so I am hopeful that we can get something enacted into law as part of the farm bill early next year. I will be working to ensure that the enforcement provisions we have worked so hard to include in this legislation are preserved.

In addition to these provisions closing the Enron loophole, the farm bill will include a host of other provisions to reauthorize and strengthen the Commodity Exchange Act. Those provisions include stronger civil and criminal penalties for manipulation, better enforcement authority for currency exchange trading abuses, among others, all of which I support. I thank my colleagues for including them in the farm bill as well.

Preventing price manipulation and excessive speculation in U.S. energy markets is not an easy undertaking. I thank my colleagues, industry, consumers and others for their good-faith suggestions to improve the legislation that is now before the Senate. Recent cases have shown that market abuses and failures did not stop with the fall of Enron. They are still with us. We cannot afford to let the current situation continue, allowing energy traders to use unregulated markets to avoid regulated markets. It is time to put the cop back on the beat in all U.S. energy markets. The stakes for our energy security and for competition in the market place are too high to do otherwise.

Intent of the Commodity Exchange Act

The Senator from New Mexico raises an interesting and important question, on which I have conferred with the CFTC. In addition to the savings clause in section 13203(c)(2) that preserves FERC's jurisdiction under its statutes as a threshold matter, I believe that FERC's jurisdiction over these transactions would, in any event, be preserved. It is my view that the kinds of cash transactions that you cite would not be captured within the amendment's ``significant price discovery contract'' test. The test is reserved for those transactions conducted ``in reliance'' on the exemption

in paragraph 2(h)(3) of the Commodity Exchange Act. Because the CEA does not apply to cash transactions for purposes of regulation, these transactions cannot, by definition, be conducted ``in reliance'' on this exemption. As such, FERC's authority in this area is preserved on all accounts.

For many of the same reasons I have cited in relation to natural gas markets, I believe--and it is certainly my intention, as one of the amendment's authors--that FERC's authority over RTOs would be unaffected. To my knowledge, no RTO operates pursuant to the exemption in paragraph 2(h)(3) of the Commodity Exchange Act. Moreover, the savings clause in section 13203(c)(2) makes abundantly clear that FERC's existing authorities are preserved.

Mr. President, I would like to speak on the Grassley amendment. I am certainly willing to yield to the Senator from Iowa, if he wants to have his colleague from Wisconsin speak right with him or if he wants to go afterwards.

Mr. President, I want to speak in opposition to the Grassley amendment. I appreciate the heart of the Senator from Iowa, and his intent. He has been consistent. He has been longstanding and heartfelt on this issue. I have been in the meetings he has called with the head of packing and stockyard compensation about concerns of concentration in the agricultural industry. I have seen him press on this issue. I agree with his heart on this amendment and his effort and his desire.

I absolutely disagree with this amendment. I agree with the sentiment, what he is trying to get done. This is not the way. I would like to express to this body what I believe, clearly, will take place in my State were this amendment to pass.

The cattle industry is a major industry in my State. We are third in the number of cattle on ranches and feed yards--6.4 million. There are more than twice as many cattle than people in my State. It is big business. It is a feed yard business where a lot of cattle from all over the country come to be fed out and processed. It is a very big business. It is $6.25 billion in cash receipts a year in my State, my rural State.

This is a business where there are a lot of contractual engagements and obligations back and forth. A man may have cattle from Alabama, and he puts them on a feed yard near Dodge City, KS. The processing plant is near Dodge City and the feed yard may have a contractual arrangement with the processor, saying: I am going to deliver you a thousand head of cattle a day for every working day. That keeps your processing plant orderly and organized. In exchange for that, I am going to get a higher value of cattle that he then passes on to that Alabama cattleman who owns the cattle there.

It is an arrangement that has worked to produce a very highly effective system. Some people do not like the scale of it. In many respects I do not. I would rather it be dispersed to a huge number of family farms across the country the way it used to be, like the farm where I grew up where we had chickens and pigs and cattle. Instead, we have much more integrated operating units. But this would go right at the heart of this industry, as far as changing the burden of proof and changing it on one specific industry. It will not have the intended effect of recreating the family farm system. That is not what is going to be the spill-out of this.

What will end up taking place is the Alabama cattleman is going to end up getting less money for his cattle, and the consumer is going to get less of a directed product they want. I want to develop that for the body, to explain why I like the heart of the people proposing this, but this will not produce the results they want.

The amendment creates an Agricultural Competition Task Force with the stated purpose to examine problems in agricultural competition. The task force has virtually unlimited authority to investigate transactions and business arrangements in the livestock industry--read special counsel for agriculture. It puts in several millions of dollars in that area. The task force is unaccountable to anyone. It is not required to hold public meetings nor abide by the Administrative Procedure Act nor acquire evidence from all parties. Under this amendment, the livestock industry and entire agricultural industry could be subject to limitless reviews of transactions.

I think the biggest piece I have concern about--and I have concerns about

this as a lawyer, and as an agricultural lawyer I have concerns about this. This is the area that I taught in. This is the area I have written in. I have written on the Packers and Stockyards Act. It is an important piece of legislation that this Government passed in the 1920s, when we had a very diffuse agriculture with a very monopolistic packing industry. We said this is not fair, so we are creating the Packers and Stockyards Act to oversee this structure. That is what they have been charged with doing.

In this particular amendment they would shift the burden of proof in the justice system and say this is a guilty transaction, monopolistic in nature, and then you prove your way out of it. To support that, I want to quote from the Department of Justice letter they wrote on the particular provisions. I understand my colleague from Iowa has changed some of the provisions but not this piece of it.

This would change the standards of certain mergers, acquisitions, and actions under the Clayton Act. That is the base bill. In particular, in all agricultural merger cases brought by the Government, Federal and State, and all private cases where the merging parties' combined market share is 20 percent or more--this is the DOJ letter--it puts the burden of proof on the defendant to show the transaction would not substantially impact or lessen competition or tend to create problems in the marketplace.

I am paraphrasing monopoly in the marketplace at the end.

The current setting is, no, we have to prove that against the individual or the group. To date, the Federal antitrust laws apply unaltered to mergers across virtually all industries, with the overriding objective to protect competition to the benefit of consumers because the Department has not been prevented from challenging anticompetitive mergers. They can challenge, and do now, in agriculture under the current legal standards. Shifting the burden of proof is unnecessary. This is a big deal, to shift the burden of proof on one particular industry, and then also to put in industry-specific guidelines.

Let me tell you what is taking place now. I described the situation of an Alabama cattle producer who puts cattle on feed in Kansas, who gets more money for his cattle because they are on feed there and because that feed yard guarantees a certain flow of cattle. If you put this in place, it has lawyers paid for by the Government to go out and examine any contract that is taking place. It can go, pick a feed yard, a Kansas feed yard, and it can go out and say: You have a contractual arrangement with this packer, and we are going to examine that.

Now, you pay for lawyers to say this is not a noncompetitive transaction--and they are going to have to hire lawyers to do that. They are going to end up having a big legal bill on a shifted burden, where the guilt is assumed, not innocence is assumed. It is going to be different from any other industry around. You are going to then have people driving down the price of the commodity. And you have a number of groups that are in these innovative market mechanisms. I described one earlier, a group of people at the Knight Feedyard that have certified hormone-free, antibiotic-free beef. It is a group of producers. They formed an association. They go to a big packer and say: Will you process our cattle and deliver it to the shelves in Connecticut and New York as hormone-free, additive-free, antibiotic- free beef? The packer agrees to do so. That is a contractual arrangement that will be subject to investigation, that will be presumed guilty under this.

My Kansas producers, under this innovative marketing approach that they initiated, get a substantial benefit by being able to market this sort of product that the consumer wants, and they have to go to a major packer to do it because he is the person--that is the group that can process cattle and get it to the shelf in a good quality state.

But my guys are the ones who get the money out of the system. They will be presumed guilty. It will be presumed to violate this. It will be subject to a great deal of legal investigation taking place, and my belief is it will not happen. Then my producers get less money for their cattle, and the consumers do not get the product they want. This is a specialty product that people want. It costs more to produce this type of beef and the consumer is not going to get that product and my cattlemen are going to get less money for their product.

I appreciate the heart of the proposal. What it is going to end up doing is getting less money to cattlemen in particular. I can't speak for other agricultural or livestock industries as well as I can for business that is in my State. The National Cattleman's Beef Association is strongly opposed to this amendment. The Department of Justice is opposed to this amendment for reasons of shifting standards for one industry but not for any others; for having different standards for that industry. The cattlemen believe it is going to hurt them substantially, subject them to a number of legal costs that they do not currently have and that they cannot afford to deal with. It is going to hurt the consumer as well.

While I appreciate the intent, I appreciate the presentation of it-- my family farms. My brother is a farmer. This is not going to take us in the right direction. I believe the route to go is what we have been doing in the Packers and Stockyards Administration and having industry standards that are similar across all industries, and that we should support the Packers and Stockyards Administration, support the laws that are there, fund those entities--which I support doing--maintaining those standards but allowing these innovative approaches to take place for a major industry in my State and for my producers and cattle producers across the country.

I know others want to speak on this issue. I may speak on it again in a while.

I yield the floor.

Mr. President, I wish to respond to the good Senator from Iowa and a couple of his comments about the amendment. But first I ask unanimous consent to insert in the Record after my statement a letter from the Department of Justice opposing the bill.

Mr. President, we just received this from the Department of Justice. They state in the first paragraph:

The Department of Justice strongly opposes the amendment.

To read their summation sentence, which I do not think is fair, given the detail and the work the Senator from Iowa has gone into on this, and substantial changes that he has made--we have been reviewing his amendment. I have the amendment.

But in the DOJ summary sentence, they state this:

However, DOJ believes certain provisions included in the

amendment would not accomplish its stated goal of protecting

rural communities and family farms and ranches, but instead

would unnecessarily duplicate

existing collaboration efforts, increase costs and

uncertainty and may hinder effective antitrust enforcement

and harm competition in agriculture and other industries.

Therefore DOJ strongly opposes the amendment.

Then they go on further to develop the points they have here. As I said, I appreciate the modifications the Senator from Iowa has made. I can tell you in my State, and in the cattle industry, they view this as hurting the price that they are going to be able to get for cattle is the bottom line issue. They view this as driving up substantially their legal costs, and most farmers do not like to have any legal costs, let alone having a number of legal costs.

They believe this is going to do it, and that is not--that is coming from the National Cattlemen's Beef Association, it is coming from the Kansas Livestock Association, where I was a couple of weeks ago at their annual meeting. This was one of their lead concerns, and the reason it was one of their lead concerns is they are looking at that and saying: Look, we are going into a number of different marketing transactions now, and we feed cattle for a lot of people around the country.

My guess is a fair number of Iowa's cattle are on feed in my State in Kansas, and that that is taking place is a good thing. We invite more farms to come there because of the efficiency, of our feeding operations, because of the weather conditions for those, because of the packers that are located there, and the efficiency of being able to do that, and then of these innovative marketing arrangements so that they can get a premium price for Angus cattle that come out of Iowa or Alabama or California or somewhere else. They are able to get a premium price for those because they do special things. They say we are going to keep these Angus fed separately here, and we are going to track them through the whole system. Then we are going to make sure they are hormone free, if that is what the group wants, or we are going to do something else to have premium beef that is going to be marketed only in certain high-end restaurants.

All of that segments the marketplace, but those segmented marketplaces are through contractual arrangements, and they get a premium to the producer that will be under investigation with this. That is why DOJ opposes it. That is why the Kansas Livestock Association, when I was meeting with them, was very fearful of this.

I appreciate some of the changes that were made and were noted here. The base concerns remain what was stated here by the Department of Justice and by the Kansas livestock producers.

Now, different people look at this different ways. A lot of us are deeply concerned, and have been for some time, about the concentration that has taken place in the agriculture business. How do you go at it differently? I spent 6 years as agriculture secretary in Kansas, and many times was trying to come up with innovative, different market segments, whether we could do it on a small scale, farmers' markets, and getting products closer to consumers, whether we can do different products which are coming out now.

We are a big cotton producer in Kansas, looking at canola oil--some of it got going; some of it did not--or confection of sunflower seeds which are under contract, I might point out as well.

So we went through a period we are not making enough money off of the commodity-based business, and we have got to segment this. But when you segment it, that generally requires some sort of identity being preserved and some sort of contractual relationship. And, yes, you get a benefit for that, you get paid more than someone who just has a commodity product.

Well, now, if you say: You cannot do that, or if you do that, we are going to presume you are guilty and you are going to have to pay a lawyer to fight your way out of it. With all due respect to the people whose intent is pure on this, this is going to hurt producers in my State.

That is why many of them--not all, some--support this approach, but many would be strongly opposed to this, as the Department of Justice is.

I urge my colleagues to vote against it.

Exhibit 1

U.S. Department of Justice,

Office of Legislative Affairs,

Washington. DC, December 13, 2007.

Hon. Patrick Leahy,

Chairman, Committee on the Judiciary, U.S. Senate,

Washington, DC.

Dear Mr. Chairman: The Department of Justice (DOJ) has

reviewed Senate Amendment 3823 to H.R. 2419. DOJ works

vigorously to ensure that the benefits of competition are

maintained in all markets, including agricultural markets, to

the benefit of American consumers. However, DOJ believes that

certain provisions included in the amendment would not

accomplish its stated goal of protecting rural communities

and family farms and ranches, but instead would unnecessarily

duplicate existing collaboration efforts, increase costs and

uncertainty, and may hinder effective antitrust enforcement

and harm competition in agriculture and other industries.

Therefore, DOJ strongly opposes the Amendment.

Senate Amendment 3823 to H.R. 2419 calls on DOJ and the

Federal Trade Commission (FTC) to issue agriculture merger

guidelines. To date, the Federal antitrust laws apply

unaltered to mergers across virtually all industries, with

the overriding objective to protect competition to the

benefit of consumers. As such, there is no need for any

industry-specific merger guidelines. The Horizontal Merger

Guidelines (Guidelines) issued by the DOJ and FTC apply

consistently to mergers across the entire economy, and no

need has been demonstrated to depart from that generally

applicable approach. DOJ has not been prevented from

challenging anti competitive mergers in agriculture under the

current legal standards. To the extent that there is a

suggestion that monopsony is a problem particularly

significant to agriculture, the guidelines address monopsony

and thus no industry specific guideline is warranted for that

concern.

DOJ believes that current merger policy is sufficiently

flexible to address market conditions that may be unique to

agricultural markets. For example, DOJ and FTC recently

issued a Commentary to the Horizontal Merger Guidelines

(2006), which provides several examples of how agricultural

matters are reviewed. This commentary, DOJ's merger

challenges in matters such as General Mills/Pillsbury (2001),

Archer-Daniels-Midland/Minnesota Corn Processors (2002),

Syngenta/Advanta (2004). and Monsanto/DPt (2007), competitive

impact statements issued as part of those challenges, and the

closing statements DOJ has issued for certain agricultural

matters, demonstrate that merger policy under the Guidelines

is effective at protecting consumers and maintaining

competition in agriculture industries. Changing the well-

established policy is not necessary and could deter

efficiency enhancing transactions that would benefit

consumers by resulting in lower prices.

Subsection (c) of Senate Amendment 3823 creates an

Agriculture Competition Task Force (Task Force), made up of

representatives from DOJ, FTC, United States Department of

Agriculture (USDA), State governments and attorneys general,

small and independent farming interests, and academics or

other experts. The Task Force is charged with devoting

additional resources focused solely on agriculture industries

to study competition issues, coordinate Federal and State

activities to address ``unfair and deceptive practices'' and

concentration, and work with representatives from rural

communities to ``identify abusive practices.'' In addition,

the Task Force shall report on the state of family farmers

and ranchers. DOJ believes such a task force would at best

duplicate existing enforcement activities, and at worst could

impede existing coordination between DOJ, USDA, and state

governments by creating a bureaucratic structure that would

increase the cost to the American taxpayer without any

benefit to competition or independent farmers. Furthermore,

to the extent the amendment requires consideration of the

effects on ``rural communities'' there is no clear

explanation regarding how this factor should be considered,

and such consideration could be inconsistent with overall

antitrust objectives.

Subsection (e) of this amendment requires notification to

the USDA of Hart Scott Rodino (HSR) filings with the FTC and

DOJ as well as the sharing with the Secretary of Agriculture

of any second request materials obtained under such merger

reviews. Under this section, USDA may submit and publish

comments on whether mergers ``present significant competition

and buyer power concerns,'' such that further review by DOJ

or the FTC is warranted. Congress provided essential

confidentiality for HSR filings and for productions of

documents under that process, and no need has been shown to

change that important protection. Through the existing

Memorandum of Understanding between DOJ, the FTC and USDA,

the antitrust agencies seek expertise and information from

USDA on agriculture matters, and as part of that cooperative

relationship, USDA expresses its views regarding antitrust

merger enforcement matters, and thus no need for radical

change has been shown. In addition, concurrent jurisdiction

likely would increase costs and time delays inherent in

duplicative review and has the potential for inconsistent

standards and outcomes.

DOJ shares the concern of the amendment's sponsors that

agriculture, as a key part of our economy, should maintain

its competitive nature so that producers and consumers alike

benefit from adequate supply and choice of agricultural

products at competitive prices. Moreover, we take seriously

concerns expressed in the agriculture community about

competitiveness in the agriculture sector. However, because

Senate

Amendment 3823 has several provisions that raise concerns for

DOJ, both about unintended consequences as well as about

competition and public policy, DOJ strongly opposes these

provisions.

Thank you for the opportunity to provide our views on this

proposed legislation. The Office of Management and Budget has

advised us that there is no objection to this letter from the

perspective of the Administration's program.

Sincerely,

Brian A. Benczkowski,

Principal Deputy Assistant Attorney General.

If my colleague will yield, my letter is dated today, December 13. It is a subsequent letter to the letter the Senator is quoting from.

It is on the amendment.

Mr. President, may I inquire of the Senator from Iowa, if this is voted on, will this require a 60-vote threshold?

Mr. President, I want to congratulate the primary sponsors of this amendment on achieving a hard-won compromise on an issue

that has been intensely debated by Members of this body for a number of years. As I understand the purpose of the amendment, it would essentially close what is come to be known as the ``Enron Loophole'' in the Commodity Exchange Act, CEA.

This loophole in the law, included in the Commodity Futures Modernization Act, CFMA, of 2000, has allowed large volumes of energy derivatives contracts to be traded over-the-counter, OTC, and on electronic platforms, without the federal oversight necessary to protect both the integrity of the market and our nation's energy consumers.

Mr. President, my Committee--the Senate Committee on Energy and Natural Resources--first heard testimony on this issue on January 29, 2002. At that hearing, Mr. James Newsome, then the chairman of the Commodity Futures Trading Commission, described the impacts of the CFMA thusly:

With respect to the energy markets, the CFMA exempts two

types of markets from much of the CFTC's oversight. Such

markets are described in Section 2(h) of the CEA, as amended

by the CFMA. The Act defines exempt commodities as, roughly

speaking, all commodities except agricultural and financial

products. This category, which for the most part represents

futures contracts based on metals and energy products may be

traded on the two types of markets covered by Section 2(h).

The first is bilateral, principal-to-principal trading

between two eligible contract participants . . . The second

is electronic multilateral trading among eligible commercial

entities, which include, among others, eligible contract

participants that can also demonstrate an ability to either

make or take delivery of the underlying commodity and dealers

that regularly provide hedging services to those with such

ability.

It is my understanding that the amendment before us would address the current lack of regulatory authority governing the second category of trading that Mr. Newsome described back in 2002. It would grant the CFTC new authority to impose important requirements on electronic, OTC transactions that rely on the current exemption contained in Section 2(h)(3) of the CEA, but serve a significant price discovery function. These requirements include the implementation of market monitoring, the establishment of position limitations or accountability levels, the daily publication of trading information, and a number of other standards key to restoring transparency to this important corner of our energy markets.

Ensuring that proper oversight exists in these markets is of critical importance to our nation's energy consumers, and to the efficient operation of the physical, or cash, energy markets that fall under the purview of the Federal Energy Regulatory Commission--FERC--and my committee's jurisdiction. To illustrate why, I would like to once again go back to the testimony we heard at our January 2002 hearing. As described by Mr. Vincent Viola, the then-chairman of the NYMEX:

[In] the energy marketplace, there is a very substantial

interaction between NYMEX and the unregulated, physical and

over-the-counter energy markets. The interaction was clearly

apparent in the case of Enron.

Indeed, subsequent to that hearing, FERC, CFTC and the Department of Justice conducted investigations of the various aspects of what became perhaps one of the largest scandals in American corporate history. In its March 2003 ``Final Report on Price Manipulation in Western Markets,'' the FERC staff reported the following:

FERC Staff obtained information indicating that Enron

traders potentially manipulated the price of natural gas at

the Henry Hub in Louisiana to profit from positions taken in

the over-the-counter--OTC--financial derivatives markets--OTC

markets. It is staff's opinion that Enron traders, through

transactions falling within the commission's jurisdiction and

authorized through a blanket certificate, successfully

manipulated the physical natural gas markets. The

manipulation yielded profits in the financial OTC markets.

It was findings like these that motivated a number of Members of my Committee to work together to ensure FERC had the proper tools at its disposal, to stamp out the kind of manipulation that occurred during the Western energy crisis of 2000-2001. During consideration of the Energy Policy Act of 2005, EPACT 2005, Public Law 109-58, I was pleased to work with Senators Cantwell, Feinstein and Wyden on these provisions, along with Senator Domenici, who then chaired the Energy Committee, and Senators Craig and Smith.

Indeed, sections 315 and 1283 of EPACT 2005 added anti-manipulation provisions to both the Natural Gas Act and the Federal Power Act, respectively. Both make it unlawful for anyone to use ``any manipulative or deceptive device or contrivance . . . in contravention of'' the rules of the Federal Energy Regulatory Commission. Both closely track the language used in section 10(b) of the Securities and Exchange Act and define ``any manipulative or deceptive device or contrivance'' by reference to section 10(b). The Federal Energy Regulatory Commission issued a final rule implementing the two anti- manipulation provisions in January 2006.

The Energy Policy Act of 2005 provided FERC these much-needed, new authorities in response to the Western energy crisis. However, it is also clear that further regulatory authority is needed, to ensure the CFTC has the tools at its disposal to ensure the integrity of financial energy markets. The present circumstance is one in which the CFTC has essentially been blind to a large portion of these markets for a number of years. This is of critical concern to me, and to my committee, because--as Mr. Viola observed in 2002, and as Enron demonstrated--all of these markets are linked.

In fact, there is also significant reason to believe that these markets have become more fully intertwined since that hearing 5 years ago. In its 2006 State of the Markets Report, FERC devoted an entire section, section 7, to the ``Growing Influence of Futures and Financial Energy Markets'' on physical energy prices. The report notes that this impact is particularly acute as it relates to natural gas prices--but effects electricity prices as well, to the extent that a growing percentage of our nation's electric generating capacity is gas-fired. The FERC report details the link between prices set in the financial derivatives market, and the physical natural gas contracts that ultimately dictate the prices paid by American consumers.

Overall, I believe the current situation was most recently and accurately described by FERC Chairman Joseph Kelliher in December 12, 2007, testimony before the Subcommittee on Oversight and Investigations of the House Committee on Energy and Commerce:

[It] is important to understand that price formation in

sophisticated energy markets has become increasingly complex.

Regulators must understand and consider the interplay between

financial and futures energy markets, on the one hand, and

physical energy markets, on the other hand. While FERC has

jurisdiction over physical wholesale gas sales, and the

Commodity Futures Trading Commission (CFTC) has jurisdiction

over futures, the link between futures and physical markets

cannot be overstated. In a sense, these markets have

effectively converged. Manipulation does not recognize

jurisdictional boundaries and we must be vigilant in

monitoring the interplay of these markets if we are to

adequately protect consumers.

For these reasons, I support the amendment being offered today. It would enhance the CFTC's authority to protect the integrity of financial energy markets, which in turn play an increasingly important price discovery role in physical energy markets. And it would do so in a manner that also preserves FERC's important role in guarding against market manipulation and protecting American natural gas and electricity consumers. For that, I congratulate the sponsors. In addition, I will enter into a colloquy with the distinguished Chairman of the Senate Agriculture Committee, Senator Harkin, along with Senators Feinstein and Levin, regarding the intent of this amendment with respect to its jurisdictional implications for FERC and the CFTC.

Mr. President, I believe the primary sponsors of this amendment, as well as the distinguished chairman of the Senate Agriculture Committee, Senator Harkin, share my desire for the Federal Energy Regulatory Commission, FERC, and Commodity Futures Trading Commission, CFTC, to coordinate seamlessly in their efforts to oversee the increasingly interdependent energy markets under their respective jurisdictions. Moreover, it is important to clarify that nothing included in this amendment would interfere or prejudice the respective Commissions' ongoing, enforcement-related proceedings and litigation.

I would like to inquire of the chairman of the Agriculture Committee, Senator Harkin, do you concur in my assessment that nothing in this amendment would prejudice or interfere with ongoing, energy market enforcement-related litigation or administrative proceedings currently involving FERC and the CFTC?

Likewise, I believe we have taken pains in this amendment to ensure that the current jurisdictional boundaries between the two Commissions are maintained, with respect to the authorities of FERC under the Federal Power and Natural Gas Acts, and the CFTC under the Commodity Exchange Act. How do you view this matter?

Finally, I ask if, in your view, anything contained in this amendment would limit FERC's existing ability to gain information from market participants?

I would also like to make an inquiry of the senior Senator from Michigan, Senator Levin, another primary author of the amendment now before the Senate. As I understand this amendment, it expands the CFTC's authorities with respect to the requirements it may impose on transactions it deems ``significant price discovery contracts.'' This ``significant price discovery contract'' determination may be applied to contracts, agreements, and transactions that are conducted in reliance on the exemption included in section 2(h)(3) of the Commodity Exchange Act. As a conforming matter, paragraph (c)(1) of section 13203 extends the CFTC's exclusive jurisdiction over these ``significant price discovery contracts.''

As the Senator from Michigan knows, the meaning and expanse of CFTC's exclusive jurisdiction over the regulation of futures markets is currently the subject of litigation. As we have heard from the chairman of the Agriculture Committee and Senator Feinstein, another one of the amendment's authors, this amendment was written to ensure it would not interfere with any such ongoing litigation; and further, to maintain the current jurisdictional division between FERC and the CFTC. I am satisfied with those assurances.

But in addition, as a forward-looking matter, it is important to clarify the intent of the amendment with respect to this new class of ``significant price discovery contracts.'' I am aware of the fact that certain electronic trading facilities that currently operate under the exemption included in section 2(h)(3) of the Commodity Exchange Act for purposes of trading energy swaps also trade physical--or cash-- contracts in electricity and natural gas. For oversight and enforcement purposes, it is crucial that FERC retain its jurisdiction over these physical energy transactions. In your view, how would the amendment impact FERC's jurisdiction over these transactions?

I have a similar question as it relates to the status and functions of regional transmission organizations, RTOs, under this language. RTOs often deal in the auction of financial transmission rights and ancillary services associated with the orderly operation of electricity markets. Do you believe this ``significant price discovery contract'' provision would impact FERC's authority in this area?

I thank the Senators for their assurances in this regard, and congratulate them on their amendment.

rolling spot contracts

Mr. President, I thank the Senator from Iowa for offering this amendment. I am a cosponsor and a proud supporter.

I have been listening to the debate taking place, and quite frankly I do not understand the opposition by the Senator from Kansas. After all, as Senator Grassley pointed out, this is not the original bill. It was modified quite a bit.

All this amendment really does is create an Agriculture Competition Task Force to study problems in agricultural competition, establish ways to coordinate Federal and State activities, address unfair and deceptive practices in concentration, create a working group on buyer power to study effects of concentration in agriculture, and make recommendations to assist the Department of Justice and the Federal Trade Commission in drafting agricultural guidelines. I don't know that anything could be more advisory than that. All we are doing is saying, use the expertise they have at the Department of Agriculture to look at these issues and advise and inform DOJ. It doesn't say that DOJ has to do what they say. It doesn't say they have to follow everything they say. It is advisory. I don't see why there would be such an objection to this kind of advice which would be given to DOJ and the Federal Trade Commission. There are some other things in there, but that is sort of basically the essence.

Again, as many times as we have seen decisions come down from the Department of Justice and the Federal Trade Commission, you wonder if they have anybody over there who understands anything at all about rural America. You wonder how many of these lawyers over there at the Department of Justice--I don't want to pick on any schools; we always say Harvard-trained lawyers and Yale-trained lawyers--have had any dirt under their fingernails from a farm or how many of them know anything about livestock issues.

This is a good amendment. Quite frankly, I am surprised there is this kind of opposition.

Having said that, I wonder if the Senator from Iowa--if we could ask to set the amendment aside temporarily so we can move on to a couple other amendments.

We are working out a unanimous consent agreement now. It is bouncing back and forth. Hopefully within a few minutes or so, we will have that. I have a feeling these votes might be stacked. I can't say right now. I have a feeling they will probably be stacked.

I asked my ranking member about that. He would insist on 60 votes. I am not insisting on 60 votes. He informed me that it would require 60 votes.

Amendment No. 3851 to Amendment No. 3500

(Purpose: To promote legal certainty, enhance competition, and reduce systemic risk in markets for futures and over-the-counter derivatives,

and for other purposes)

I ask unanimous consent that the pending amendment be set aside. I send an amendment to the desk and ask for its immediate consideration.

I ask unanimous consent that reading of the amendment be dispensed with.

Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. President, would the Chair please state what the amendment is before the Senate right now?

Mr. President, that is the amendment I had sent to the desk prior to the quorum call being established?

I thank the Chair.

This is basically an extension of the Commodity Exchange Act of 2013. I wish to state for the record we would not ordinarily include the Commodity Exchange Act in the farm bill, but for various reasons we were unable to reauthorize the CEA in the last Congress.

This amendment further regulates energy transactions that perform a significant price discovery function. This is an issue Senators Feinstein and Levin have been working hard on.

The amendment also addresses fraud and retail transactions in foreign exchange markets. It gives the CFTC broader authority to prosecute fraud in other commodities such as heating oil. I am very pleased we are able to work through the reauthorization issues with the ranking member, Senator Crapo, and numerous cosponsors of this amendment.

I yield the floor.

I thank Senator Chambliss. It is a great effort, a great product.

I see one of the main architects of the provisions of this bill, and I yield the floor.

Yes, I agree with the assessment of the chairman of the Energy and Natural Resources Committee.

Again, I concur with the Senator from New Mexico. Nothing in this amendment would erode either Commission's authorities under the statutes that you have cited.

No, this amendment would not infringe on FERC's current ability to gain information from market participants.

This bill includes reauthorization of the Commodity Exchange Act. One of the issues addressed in the reauthorization is the problem of so-called ``rolling spot'' contracts, a type of contract that unscrupulous criminals use to defraud retail customers while avoiding the jurisdiction of the Commission. Because of several adverse court decisions addressing rolling spot contracts used in retail foreign exchange fraud, the Commission has been severely hampered in its efforts to protect consumers.

This reauthorization clarifies the jurisdiction of the Commission over these ``rolling spot'' contracts. In addition, because these ``rolling spot'' contracts have begun to be used in other commodities such as metals, this reauthorization clarifies the Commission's authority to address ``rolling spot'' contracts should they spread to other agricultural or exempt commodities.

Yes.

No. The provisions explicitly say that they have no effect on whether contracts are considered legal futures contracts or not.

Mr. President, I ask unanimous consent to add onto that amendment Senators Dorgan, Durbin, and Conrad as cosponsors.

Mr. President, will the Senator yield?

Mr. President, I thank the Senator for his comments, and I thank him for all his help throughout a long year in the Agriculture Committee, helping us with our budget problems and getting us to this point.

I appreciated the fact that the Senator said the managers had handled this bill with grace. The Senator doesn't see what I do when I go home. I act out my frustrations later.

I say to the Senator, it has been frustrating, but that is the process of the Senate. The Senator is absolutely right, our leader is correct in calling for cloture. I am not disappointed. I am managing the bill under the rules we had, which was to try to accommodate as many amendments as possible, to move them as rapidly as possible, to get votes on them. Let's face it, we have had enough, and we have had enough amendments and we debated them.

This is a good bill. Some of the amendments that were not adopted maybe I wish were, and some that were adopted maybe I wish were not. That is the process. It is a good bill with which to go to conference. It is a bill that does a lot, as the Senator knows, in energy, it does a lot in conservation, and it provides a great safety net for our farmers, and what we do for specialty crops that we have never done before in any farm bill, and what we do for nutrition. We answer the call of church groups and people around the country who said we had to do more to take care of low-income people in the Nation and to meet our obligations to the poorest among our society. We have done that in this bill. We have done great work in the food stamp and nutrition programs.

It is a good bill. All of us worked very hard on it. We will go to cloture this evening. Quite frankly, I am not disappointed. I am happy we are bringing this to a close so we can get to conference. I hope we can get the conference concluded by the time we get back in January so we can have a conference report sometime toward the end of January.

I thank the Senator from North Dakota for his many kindnesses, for all of the hard work he has done, and his staff through this long process in getting us here. I thank him very much.

Mr. President, we are now operating postcloture on the farm bill. As we know, there are 30 hours. And germane amendments are obviously acceptable postcloture.

Right now I am working with Senator Chambliss to try to come up with a roadmap on how we proceed on this yet this evening and tomorrow. We had basically a kind of a finite list. Since there were only 20 amendments allowed on either side, we kind of know what that universe is.

Prior to the cloture vote, we were down to about 11--if the Chair will indulge me, 11 votes that could be held. Now some of those, it is just my own observation, without being the Parliamentarian, are nongermane.

For example, one of my own amendments I can truthfully say is not germane. The others I do not know, and those will have to be decided by the Parliamentarian. I would say, however, if there is anyone here who has a germane amendment--and I do believe perhaps the Feingold-Menendez amendment appears to be fully germane.

Now, again, there may be an objection raised to that, and the Parliamentarian will have to decide it, but that seems to me--that seems to be one in front of us now that is germane. I would say if the authors of that amendment, either Mr. Feingold or Mr. Menendez, were willing to debate that amendment this evening, under some reasonable time limit, we would like to do that.

So I hope that is at least one we might get to tonight that looks to be thoroughly germane to the bill. There is the Grassley-Kohl amendment. I am not certain about that one. That one is maybe a little bit more uncertain. But, again, that is up to the Parliamentarian to decide. But at least that decision could be made, and we might be able to move ahead.

So with the concurrence of my ranking member----

Right. The Coburn amendment is probably germane.

I agree. The only reason I was saying this is, keep in mind there is a limited amount of time. So I am saying, anyone who believes they have a germane amendment in this list, they ought to probably want to debate it tonight.

I suggest the absence of a quorum.

I ask unanimous consent that the Wyden amendment No. 3736 be withdrawn.

I thank the Senator. It is my understanding that she would like to speak about an issue facing the sugar beet industry in California.

I ask the Senator, how has this decrease in California's portion of the national allocation impacted growers and other sugar beet refineries in your State?

How much more in allocation would California need to keep the facility in Mendota open?

I appreciate the Senator providing that information. Can she suggest a possible solution that would allow the Mendota refinery to remain open?

I will raise this issue when the Senate and House meet to finalize a farm bill conference report.