[Congressional Record Volume 143, Number 10 (Thursday, January 30, 1997)]
[Senate]
[Pages S856-S863]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Ms. MOSELEY-BRAUN (for herself, Mr. Abraham, Mr. D'Amato, Mr. 
        Jeffords, Mr. Lieber- man, Mr. Daschle and Mrs. Murray):
  S. 235. A bill to amend the Internal Revenue Code of 1986 to 
encourage economic development through the creation of additional 
empowerment zones and enterprise communities and to encourage the 
cleanup of contaminated brownfield sites; to the Committee on Finance.


                 THE COMMUNITY EMPOWERMENT ACT OF 1997

  Ms. MOSELEY-BRAUN. Mr. President, it gives me great pleasure, 
together with my colleagues, Senators Abraham, D'Amato, Jeffords, 
Lieberman, Murray, and Daschle to reintroduce the Community Empowerment 
Act of 1997. This legislation is designed to create new jobs and spur 
economic growth by encouraging the cleanup and reuse of contaminated 
industrial and commercial sites known as Brownfields. This bill also 
creates 20 new additional empowerment zones and 80 new enterprise 
communities all across the Nation.

  I like to call them environmentally challenged sites. They are sites 
on which there has been some contamination but not to a level 
sufficient to reach Superfund status. But they are contaminated 
nonetheless. They are, on the one hand, excellent locations for 
industrial and commercial redevelopment because the transportation, 
more often than not, already exists. The infrastructure, the utilities, 
and the labor force already exists.
  However, these properties are often unattractive to potential 
redevelopers because of the known, unknown, or perceived contamination 
that may exist on the property. This factor creates an incentive for 
companies to locate and develop in greenfields, which are undeveloped 
areas generally in the suburbs. This urban flight contributes to urban 
sprawl, taking jobs away from the city.
  It also results in the paving off of many of the greenfield areas of 
our country.
  The challenge for all of us is to stop this trend. And one way to do 
that is by encouraging businesses through the Tax Code to redevelop and 
to reuse the existing brownfield sites; to reclaim, if you will, sites 
that have been contaminated which have been used or used up.
  At present, if an industrial property owner does environmental damage 
to their property and then cleans up the site, the owner is allowed to 
deduct the cost of that cleanup from a single year's earnings. However, 
in a strange twist of logic, someone who buys an environmentally 
damaged piece of property and cleans up that property is not allowed to 
expense these cleanup costs, but instead must capitalize the cost and 
depreciate the cleanup expense over many years.
  The result of this? The result has been an urban landscape littered 
with vacant or abandoned properties, properties that attract crime and 
bring down property values in surrounding neighborhoods.
  Confronting the brownfields issue can help to address many of the 
problems that face high unemployment in older communities, including 
job creation, economic renewal, environmental justice, and 
environmental improvement. The collective efforts of everyone, 
particularly the nonprofit community, the private sector, government at 
all levels, developers, and community groups, are essential to begin 
the process of returning brownfields property back to productive use 
and to bring economic growth back to disadvantaged cities and rural 
areas.
  Under the provisions of this legislation, qualifying brownfields will 
be provided full first-year expensing of environmental cleanup costs 
under the Federal Tax Code. Full first-year expensing simply means that 
a tax deduction will be allowed for the cleanup costs in the year that 
those costs are incurred.
  The Community Empowerment Act provides tax incentives that we hope 
will break through some of the current barriers preventing the private 
sector from investing in brownfields cleanup projects.
  So it provides a carrot, if you will, to the private sector to begin 
to help not only with the environmental cleanup but also with urban 
redevelopment. So it becomes a win-win in both regards in that way.
  In my own State of Illinois, the brownfields provisions will have a 
major impact on efforts to help restore neglected and abandoned 
industrial areas. It will facilitate the cleanup of some 300 to 500 
sites in Illinois, each of

[[Page S857]]

which has a remediation cost ranging from $250,000 to $500,000 per 
site.
  The Treasury Department estimates that this act will provide $2 
billion in tax incentives that will leverage an additional $10 billion 
in private investment, returning an estimated 30,000 brownfields across 
the country to productive use again. The $2 billion investment will be 
included in the President's balanced budget plan and so it will be paid 
for.
  The Federal assistance that this proposal envisions will be 
concentrated in neighborhoods with the most severe problems and that 
are truly in need of such investment. The bill targets four areas.
  First, the empowerment zones and enterprise communities across the 
country.
  Second, areas with a poverty rate of 20 percent or more that are near 
industrial or former industrial sites.
  Third, existing EPA brownfields pilot areas. The Environmental 
Protection Agency has already designated brownfields sites across the 
country.
  Fourth, areas with a population of under 2,000 or more than 75 
percent of which is zoned for industrial or commercial use.
  So this is not just a big-city solution. This is something that will 
affect the cities, the suburbs, and the rural areas as well in 
providing an incentive to reclaim these environmentally challenged 
areas of our country.
  In my hometown, in Chicago, Mayor Daley has taken the initiative to 
establish a brownfields pilot program which has made public investment 
leverage substantial private investment dollars. One of these projects 
is known as the Scott Peterson Meats Co., in Chicago. The site had been 
tax delinquent for several years when Scott Peterson Meats and the city 
began to work together. The city conducted an assessment of potential 
hazards that were identified and which included asbestos-containing 
materials, lead-based paints, and some 11 underground storage tanks, 
some of which were filled with tar. The city paid for environmental 
investigation, cleanup, and building demolition, which totaled some 
$250,000 in contractor costs. Due to the city's investment, however, 
the company, Scott Peterson Meats, then turned around and invested an 
additional $5.2 million in a new smokehouse on its existing property, 
and it has hired over 100 additional employees to date. So with the 
win-win of environmental cleanup and urban reclamation we also have job 
creation coming out of this legislative initiative.

  Another example of a successful public-private partnership pulling 
people together to clean up a brownfields site is the Madison Equipment 
site located in Illinois. This abandoned industrial building was a 
neighborhood eyesore. Scavengers had stolen most of the wiring and 
plumbing, and illegal or what is called midnight dumping of trash and 
debris was rampant. Madison Equipment needed expansion space, but it 
feared the environmental liability. However, in 1993, the city of 
Chicago took the initiative to invest just a little over $3,000 in this 
project, in this environmental reclamation, this brownfields project, 
and 1 year later the company, Madison, put in $180,000 of its own to 
redevelop the building. The critical reason that lenders and investors 
look at this area now is because the city committed the public 
investment to spur private redevelopment and investment. When local 
government demonstrates the confidence to commit public funds, private 
financial institutions are more likely to follow suit. These types of 
examples show how a little investment can go a long way and how we can 
engage the partnership between the public and the private sector in 
nonbureaucratic ways in order to spur a result that truly is in the 
public interest.
  Chicago's pilot project will successfully return all the pilot sites 
to productive use for a total of about $850,000 in public money. This 
pilot project is a perfect example of what this legislation can 
accomplish on a national level. But in order to make it happen, 
cooperation is the key. Effective strategies require strong 
partnerships among government, industry, organized labor, community 
groups, developers, environmentalists, and financiers, who all realize 
that when their efforts are aligned, when we work together, progress is 
made easier.
  The second component of this legislation is the establishment of 20 
more empowerment zones and 80 additional enterprise communities. They 
will receive a variety of tools for redevelopment from the Government.
  First, they receive a package of tax incentives and flexible grants 
available over a 10-year period.
  Second, they receive priority consideration for other Federal 
empowerment programs.
  Third, they receive assistance in removing bureaucratic redtape and 
regulatory barriers that prevent innovative uses of the Federal 
assistance that they have received.
  This approach recognizes that a top-down, big Government solution 
does not work in these times and what we have to do is enhance public-
private partnerships and the involvement and engagement of all sectors 
in order to bring about again the public policy result that we are all 
desirous of seeing.
  Economic empowerment can be achieved, but it is best done, I believe, 
through these public-private partnerships. Economic revitalization in 
this Nation's most distressed communities is essential to the growth of 
our entire country. With the concept of team effort, we can rebuild 
cities by stimulating investments and creating jobs. Environmental 
protection used in this way can and will be good business. It is also 
good policy. With this legislation, we will begin the effort to restore 
economic growth back into our country's industrial centers and rural 
communities all the while improving our environment.
  Again, I wish to thank my colleagues, Senators Abraham, D'Amato, 
Jeffords, Lieberman, Murray, and Daschle for their original 
cosponsorship of this legislation and for making this legislation a 
truly bipartisan effort. I urge all of my colleagues to join in 
supporting the quick passage of this legislation.
  I ask unanimous consent that the full text of the bill and a section-
by-section analysis be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 235

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. AMENDMENT OF 1986 CODE.

       Except as otherwise expressly provided, whenever in this 
     Act an amendment or repeal is expressed in terms of an 
     amendment to, or repeal of, a section or other provision, the 
     reference shall be considered to be made to a section or 
     other provision of the Internal Revenue Code of 1986.
                 TITLE I--ADDITIONAL EMPOWERMENT ZONES

     SEC. 101. ADDITIONAL EMPOWERMENT ZONES.

       (a) In General.--Paragraph (2) of section 1391(b) (relating 
     to designations of empowerment zones and enterprise 
     communities) is amended--
       (1) by striking ``9'' and inserting ``11'',
       (2) by striking ``6'' and inserting ``8'', and
       (3) by striking ``750,000'' and inserting ``1,000,000''.
       (b) Effective Date.--The amendments made by this section 
     shall take effect on the date of the enactment of this Act, 
     except that designations of new empowerment zones made 
     pursuant to such amendments shall be made during the 180-day 
     period beginning on the date of the enactment of this Act.
       TITLE II--NEW EMPOWERMENT ZONES AND ENTERPRISE COMMUNITIES

     SEC. 201. DESIGNATION OF ADDITIONAL EMPOWERMENT ZONES AND 
                   ENTERPRISE COMMUNITIES.

       (a) In General.--Section 1391 (relating to designation 
     procedure for empowerment zones and enterprise communities) 
     is amended by adding at the end the following new subsection:
       ``(g) Additional Designations Permitted.--
       ``(1) In general.--In addition to the areas designated 
     under subsection (a)--
       ``(A) Enterprise communities.--The appropriate Secretaries 
     may designate in the aggregate an additional 80 nominated 
     areas as enterprise communities under this section, subject 
     to the availability of eligible nominated areas. Of that 
     number, not more than 50 may be designated in urban areas and 
     not more than 30 may be designated in rural areas.
       ``(B) Empowerment zones.--The appropriate Secretaries may 
     designate in the aggregate an additional 20 nominated areas 
     as empowerment zones under this section, subject to the 
     availability of eligible nominated areas. Of that number, not 
     more than 15 may be designated in urban areas and not more 
     than 5 may be designated in rural areas.
       ``(2) Period designations may be made.--A designation may 
     be made under this subsection after the date of the enactment 
     of this subsection and before January 1, 1999.

[[Page S858]]

       ``(3) Modifications to eligibility criteria, etc.--
       ``(A) Poverty rate requirement.--
       ``(i) In general.--A nominated area shall be eligible for 
     designation under this subsection only if the poverty rate 
     for each population census tract within the nominated area is 
     not less than 20 percent and the poverty rate for at least 90 
     percent of the population census tracts within the nominated 
     area is not less than 25 percent.
       ``(ii) Treatment of census tracts with small populations.--
     A population census tract with a population of less than 
     2,000 shall be treated as having a poverty rate of not less 
     than 25 percent if--

       ``(I) more than 75 percent of such tract is zoned for 
     commercial or industrial use, and
       ``(II) such tract is contiguous to 1 or more other 
     population census tracts which have a poverty rate of not 
     less than 25 percent (determined without regard to this 
     clause).

       ``(iii) Exception for developable sites.--Clause (i) shall 
     not apply to up to 3 noncontiguous parcels in a nominated 
     area which may be developed for commercial or industrial 
     purposes. The aggregate area of noncontiguous parcels to 
     which the preceding sentence applies with respect to any 
     nominated area shall not exceed 1,000 acres (2,000 acres in 
     the case of an empowerment zone).
       ``(iv) Certain provisions not to apply.--Section 1392(a)(4) 
     (and so much of paragraphs (1) and (2) of section 1392(b) as 
     relate to section 1392(a)(4)) shall not apply to an area 
     nominated for designation under this subsection.
       ``(v) Special rule for rural empowerment zones and 
     enterprise communities.--The Secretary of Agriculture may 
     designate not more than 1 empowerment zone, and not more than 
     5 enterprise communities, in rural areas without regard to 
     clause (i) if such areas satisfy emigration criteria 
     specified by the Secretary of Agriculture.
       ``(B) Size limitation.--
       ``(i) In general.--The parcels described in subparagraph 
     (A)(iii) shall not be taken into account in determining 
     whether the requirement of subparagraph (A) or (B) of section 
     1392(a)(3) is met.
       ``(ii) Special rule for rural areas.--If a population 
     census tract (or equivalent division under section 
     1392(b)(4)) in a rural area exceeds 1,000 square miles or 
     includes a substantial amount of land owned by the Federal, 
     State, or local government, the nominated area may exclude 
     such excess square mileage or governmentally owned land and 
     the exclusion of that area will not be treated as violating 
     the continuous boundary requirement of section 1392(a)(3)(B).
       ``(C) Aggregate population limitation.--The aggregate 
     population limitation under the last sentence of subsection 
     (b)(2) shall not apply to a designation under paragraph 
     (1)(B).
       ``(D) Previously designated enterprise communities may be 
     included.--Subsection (e)(5) shall not apply to any 
     enterprise community designated under subsection (a) that is 
     also nominated for designation under this subsection.
       ``(E) Indian reservations may be nominated.--
       ``(i) In general.--Section 1393(a)(4) shall not apply to an 
     area nominated for designation under this subsection.
       ``(ii) Special rule.--An area in an Indian reservation 
     shall be treated as nominated by a State and a local 
     government if it is nominated by the reservation governing 
     body (as determined by the Secretary of Interior).''
       (b) Employment Credit Not To Apply to New Empowerment 
     Zones.--Section 1396 (relating to empowerment zone employment 
     credit) is amended by adding at the end the following new 
     subsection:
       ``(e) Credit Not To Apply to Empowerment Zones Designated 
     Under Section 1391(g).--This section shall be applied without 
     regard to any empowerment zone designated under section 
     1391(g).''
       (c) Increased Expensing Under Section 179 Not To Apply in 
     Developable Sites.--Section 1397A (relating to increase in 
     expensing under section 179) is amended by adding at the end 
     the following new subsection:
       ``(c) Limitation.--For purposes of this section, qualified 
     zone property shall not include any property substantially 
     all of the use of which is in any parcel described in section 
     1391(g)(3)(A)(iii).''
       (d) Conforming Amendments.--
       (1) Subsections (e) and (f) of section 1391 are each 
     amended by striking ``subsection (a)'' and inserting ``this 
     section''.
       (2) Section 1391(c) is amended by striking ``this section'' 
     and inserting ``subsection (a)''.

     SEC. 202. VOLUME CAP NOT TO APPLY TO ENTERPRISE ZONE FACILITY 
                   BONDS WITH RESPECT TO NEW EMPOWERMENT ZONES.

       (a) In General.--Section 1394 (relating to tax-exempt 
     enterprise zone facility bonds) is amended by adding at the 
     end the following new subsection:
       ``(f) Bonds for Empowerment Zones Designated Under Section 
     1391(g).--
       ``(1) In general.--In the case of a new empowerment zone 
     facility bond--
       ``(A) such bond shall not be treated as a private activity 
     bond for purposes of section 146, and
       ``(B) subsection (c) of this section shall not apply.
       ``(2) Limitation on amount of bonds.--
       ``(A) In general.--Paragraph (1) shall apply to a new 
     empowerment zone facility bond only if such bond is 
     designated for purposes of this subsection by the local 
     government which nominated the area to which such bond 
     relates.
       ``(B) Limitation on bonds designated.--The aggregate face 
     amount of bonds which may be designated under subparagraph 
     (A) with respect to any empowerment zone shall not exceed--
       ``(i) $60,000,000 if such zone is in a rural area,
       ``(ii) $130,000,000 if such zone is in an urban area and 
     the zone has a population of less than 100,000, and
       ``(iii) $230,000,000 if such zone is in an urban area and 
     the zone has a population of at least 100,000.
       ``(C) Special rules.--
       ``(i) Coordination with limitation in subsection (c).--
     Bonds to which paragraph (1) applies shall not be taken into 
     account in applying the limitation of subsection (c) to other 
     bonds.
       ``(ii) Current refunding not taken into account.--In the 
     case of a refunding (or series of refundings) of a bond 
     designated under this paragraph, the refunding obligation 
     shall be treated as designated under this paragraph (and 
     shall not be taken into account in applying subparagraph (B)) 
     if--

       ``(I) the amount of the refunding bond does not exceed the 
     outstanding amount of the refunded bond, and
       ``(II) the refunded bond is redeemed not later than 90 days 
     after the date of issuance of the refunding bond.

       ``(3) New empowerment zone facility bond.--For purposes of 
     this subsection, the term `new empowerment zone facility 
     bond' means any bond which would be described in subsection 
     (a) if only empowerment zones designated under section 
     1391(g) were taken into account under sections 1397B and 
     1397C.''
       (b) Effective Date.--The amendment made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 203. MODIFICATIONS TO ENTERPRISE ZONE FACILITY BOND 
                   RULES FOR ALL EMPOWERMENT ZONES AND ENTERPRISE 
                   COMMUNITIES.

       (a) Modifications Relating to Enterprise Zone Business.--
     Paragraph (3) of section 1394(b) (defining enterprise zone 
     business) is amended to read as follows:
       ``(3) Enterprise zone business.--
       ``(A) In general.--Except as modified in this paragraph, 
     the term `enterprise zone business' has the meaning given 
     such term by section 1397B.
       ``(B) Modifications.--In applying section 1397B for 
     purposes of this section--
       ``(i) Businesses in enterprise communities eligible.--
     References in section 1397B to empowerment zones shall be 
     treated as including references to enterprise communities.
       ``(ii) Waiver of requirements during startup period.--A 
     business shall not fail to be treated as an enterprise zone 
     business during the startup period if--

       ``(I) as of the beginning of the startup period, it is 
     reasonably expected that such business will be an enterprise 
     zone business (as defined in section 1397B as modified by 
     this paragraph) at the end of such period, and
       ``(II) such business makes bona fide efforts to be such a 
     business.

       ``(iii) Reduced requirements after testing period.--A 
     business shall not fail to be treated as an enterprise zone 
     business for any taxable year beginning after the testing 
     period by reason of failing to meet any requirement of 
     subsection (b) or (c) of section 1397B if at least 35 percent 
     of the employees of such business for such year are residents 
     of an empowerment zone or an enterprise community. The 
     preceding sentence shall not apply to any business which is 
     not a qualified business by reason of paragraph (1), (4), or 
     (5) of section 1397B(d).
       ``(C) Definitions relating to subparagraph (b).--For 
     purposes of subparagraph (B)--
       ``(i) Startup period.--The term `startup period' means, 
     with respect to any property being provided for any business, 
     the period before the first taxable year beginning more than 
     2 years after the later of--

       ``(I) the date of issuance of the issue providing such 
     property, or
       ``(II) the date such property is first placed in service 
     after such issuance (or, if earlier, the date which is 3 
     years after the date described in subclause (I)).

       ``(ii) Testing period.--The term `testing period' means the 
     first 3 taxable years beginning after the startup period.
       ``(D) Portions of business may be enterprise zone 
     business.--The term `enterprise zone business' includes any 
     trades or businesses which would qualify as an enterprise 
     zone business (determined after the modifications of 
     subparagraph (B)) if such trades or businesses were 
     separately incorporated.''
       (b) Modifications Relating to Qualified Zone Property.--
     Paragraph (2) of section 1394(b) (defining qualified zone 
     property) is amended to read as follows:
       ``(2) Qualified zone property.--The term `qualified zone 
     property' has the meaning given such term by section 1397C; 
     except that--
       ``(A) the references to empowerment zones shall be treated 
     as including references to enterprise communities, and
       ``(B) section 1397C(a)(2) shall be applied by substituting 
     `an amount equal to 15 percent of the adjusted basis' for `an 
     amount equal to the adjusted basis'.''

[[Page S859]]

       (c) Effective Date.--The amendments made by this section 
     shall apply to obligations issued after the date of the 
     enactment of this Act.

     SEC. 204. MODIFICATIONS TO ENTERPRISE ZONE BUSINESS 
                   DEFINITION FOR ALL EMPOWERMENT ZONES AND 
                   ENTERPRISE COMMUNITIES.

       (a) In General.--Section 1397B (defining enterprise zone 
     business) is amended--
       (1) by striking ``80 percent'' in subsections (b)(2) and 
     (c)(1) and inserting ``50 percent'',
       (2) by striking ``substantially all'' each place it appears 
     in subsections (b) and (c) and inserting ``a substantial 
     portion'',
       (3) by striking ``, and exclusively related to,'' in 
     subsections (b)(4) and (c)(3),
       (4) by adding at the end of subsection (d)(2) the following 
     new flush sentence:
     ``For purposes of subparagraph (B), the lessor of the 
     property may rely on a lessee's certification that such 
     lessee is an enterprise zone business.'',
       (5) by striking ``substantially all'' in subsection (d)(3) 
     and inserting ``at least 50 percent'', and
       (6) by adding at the end the following new subsection:
       ``(f) Treatment of Businesses Straddling Census Tract 
     Lines.--For purposes of this section, if--
       ``(1) a business entity or proprietorship uses real 
     property located within an empowerment zone,
       ``(2) the business entity or proprietorship also uses real 
     property located outside the empowerment zone,
       ``(3) the amount of real property described in paragraph 
     (1) is substantial compared to the amount of real property 
     described in paragraph (2), and
       ``(4) the real property described in paragraph (2) is 
     contiguous to part or all of the real property described in 
     paragraph (1),

     then all the services performed by employees, all business 
     activities, all tangible property, and all intangible 
     property of the business entity or proprietorship that occur 
     in or is located on the real property described in paragraphs 
     (1) and (2) shall be treated as occurring or situated in an 
     empowerment zone.''
       (b) Effective Dates.--
       (1) In general.--The amendments made by this section shall 
     apply to taxable years beginning on or after the date of the 
     enactment of this Act.
       (2) Special rule for enterprise zone facility bonds.--For 
     purposes of section 1394(b) of the Internal Revenue Code of 
     1986, the amendments made by this section shall apply to 
     obligations issued after the date of the enactment of this 
     Act.
        TITLE III--EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS

     SEC. 301. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

       (a) In General.--Part VI of subchapter B of chapter 1 is 
     amended by adding at the end the following new section:

     ``SEC. 198. EXPENSING OF ENVIRONMENTAL REMEDIATION COSTS.

       ``(a) In General.--A taxpayer may elect to treat any 
     qualified environmental remediation expenditure which is paid 
     or incurred by the taxpayer as an expense which is not 
     chargeable to capital account. Any expenditure which is so 
     treated shall be allowed as a deduction for the taxable year 
     in which it is paid or incurred.
       ``(b) Qualified Environmental Remediation Expenditure.--For 
     purposes of this section--
       ``(1) In general.--The term `qualified environmental 
     remediation expenditure' means any expenditure--
       ``(A) which is otherwise chargeable to capital account, and
       ``(B) which is paid or incurred in connection with the 
     abatement or control of hazardous substances at a qualified 
     contaminated site.
       ``(2) Special rule for expenditures for depreciable 
     property.--Such term shall not include any expenditure for 
     the acquisition of property of a character subject to the 
     allowance for depreciation which is used in connection with 
     the abatement or control of hazardous substances at a 
     qualified contaminated site; except that the portion of the 
     allowance under section 167 for such property which is 
     otherwise allocated to such site shall be treated as a 
     qualified environmental remediation expenditure.
       ``(c) Qualified Contaminated Site.--For purposes of this 
     section--
       ``(1) Qualified contaminated site.--
       ``(A) In general.--The term `qualified contaminated site' 
     means any area--
       ``(i) which is held by the taxpayer for use in a trade or 
     business or for the production of income, or which is 
     property described in section 1221(1) in the hands of the 
     taxpayer,
       ``(ii) which is within a targeted area, and
       ``(iii) which contains (or potentially contains) any 
     hazardous substance.
       ``(B) Taxpayer must receive statement from state 
     environmental agency.--An area shall be treated as a 
     qualified contaminated site with respect to expenditures paid 
     or incurred during any taxable year only if the taxpayer 
     receives a statement from the appropriate agency of the State 
     in which such area is located that such area meets the 
     requirements of clauses (ii) and (iii) of subparagraph (A).
       ``(C) Appropriate state agency.-- For purposes of 
     subparagraph (B), the appropriate agency of a State is the 
     agency designated by the Administrator of the Environmental 
     Protection Agency for purposes of this section. If no agency 
     of a State is designated under the preceding sentence, the 
     appropriate agency for such State shall be the Environmental 
     Protection Agency.
       ``(2) Targeted area.--
       ``(A) In general.--The term `targeted area' means--
       ``(i) any population census tract with a poverty rate of 
     not less than 20 percent,
       ``(ii) a population census tract with a population of less 
     than 2,000 if--

       ``(I) more than 75 percent of such tract is zoned for 
     commercial or industrial use, and
       ``(II) such tract is contiguous to 1 or more other 
     population census tracts which meet the requirement of clause 
     (i) without regard to this clause,

       ``(iii) any empowerment zone or enterprise community (and 
     any supplemental zone designated on December 21, 1994), and
       ``(iv) any site announced before February 1, 1997, as being 
     included as a brownfields pilot project of the Environmental 
     Protection Agency.
       ``(B) National priorities listed sites not included.--Such 
     term shall not include any site which is on the national 
     priorities list under section 105(a)(8)(B) of the 
     Comprehensive Environmental Response, Compensation, and 
     Liability Act of 1980 (as in effect on the date of the 
     enactment of this section).
       ``(C) Certain rules to apply.--For purposes of this 
     paragraph, the rules of sections 1392(b)(4) and 1393(a)(9) 
     shall apply.
       ``(D) Treatment of certain sites.--For purposes of this 
     paragraph, a single contaminated site shall be treated as 
     within a targeted area if--
       ``(i) a substantial portion of the site is located within a 
     targeted area described in subparagraph (A) (determined 
     without regard to this subparagraph), and
       ``(ii) the remaining portions are contiguous to, but 
     outside, such targeted area.
       ``(d) Hazardous Substance.--For purposes of this section--
       ``(1) In general.--The term `hazardous substance' means--
       ``(A) any substance which is a hazardous substance as 
     defined in section 101(14) of the Comprehensive Environmental 
     Response, Compensation, and Liability Act of 1980, and
       ``(B) any substance which is designated as a hazardous 
     substance under section 102 of such Act.
       ``(2) Exception.--Such term shall not include any substance 
     with respect to which a removal or remedial action is not 
     permitted under section 104 of such Act by reason of 
     subsection (a)(3) thereof.
       ``(e) Deduction Recaptured as Ordinary Income on Sale, 
     Etc.--Solely for purposes of section 1245, in the case of 
     property to which a qualified environmental remediation 
     expenditure would have been capitalized but for this 
     section--
       ``(1) the deduction allowed by this section for such 
     expenditure shall be treated as a deduction for depreciation, 
     and
       ``(2) such property (if not otherwise section 1245 
     property) shall be treated as section 1245 property solely 
     for purposes of applying section 1245 to such deduction.
       ``(f) Coordination With Other Provisions.--Sections 280B 
     and 468 shall not apply to amounts which are treated as 
     expenses under this section.
       ``(g) Regulations.--The Secretary shall prescribe such 
     regulations as may be necessary or appropriate to carry out 
     the purposes of this section.''
       (b) Clerical Amendment.--The table of sections for part VI 
     of subchapter B of chapter 1 is amended by adding at the end 
     the following new item:

``Sec. 198. Expensing of environmental remediation costs.''

       (c) Effective Date.--The amendments made by this section 
     shall apply to expenditures paid or incurred after the date 
     of the enactment of this Act, in taxable years ending after 
     such date.
                                  ____


                      Section-by-Section Analysis


                 Title I--Additional Empowerment Zones

       Section 101 would authorize the designation of an 
     additional two urban empowerment zones under the 1994 first 
     round.


       Title II--New Empowerment Zones and Enterprise Communities

       Section 201 authorizes a second round of designations, 
     consisting of 80 enterprise communities and 20 empowerment 
     zones. Of the 80 enterprise communities, 50 would be in urban 
     areas and 30 would be in rural areas. Of the 20 empowerment 
     zones, 15 would be in urban areas and 5 would be in rural 
     areas. The designations would be made before January 1, 1999.
       Certain of the eligibility criteria applicable in the first 
     round would be modified for the second round of designations. 
     First, the poverty criteria would be relaxed somewhat, so 
     that unlike the first round there would be no requirement 
     that at least 50 percent of the population census tracts have 
     a poverty rate of 35 percent or more. In addition, the 
     poverty criteria will not be applicable to areas specified in 
     the application as developable for commercial or industrial 
     purposes (1,000 acres in the case of an enterprise community, 
     2,000 acres in the case of an empowerment zone), and these 
     areas will not be taken into account in applying the size 
     limitations (e.g., 20 square miles for urban areas, 1,000 
     square miles for rural areas). The Secretary of Agriculture 
     will be authorized to designate up to one rural empowerment 
     zones and five rural enterprise communities

[[Page S860]]

     based on specified emigration criteria without regard to the 
     minimum poverty rates set forth in the statute. Rural census 
     tracts in excess of 1,000 square miles or including a 
     substantial amount of governmentally owned land may exclude 
     such excess mileage or governmentally owned land from the 
     nominated area. Unlike the first round, Indian reservations 
     will be eligible to be nominated (and the nomination may be 
     submitted by the reservation governing body without the State 
     government's participation). The empowerment zone employment 
     credit will not be available to businesses in the new 
     empowerment zones, and the increased expensing under section 
     179 will not be available in the developable acreage areas of 
     empowerment zones.
       Section 202 authorizes a new category of tax-exempt 
     financing for businesses in the new empowerment zones. These 
     bonds, rather than being subject to the current State volume 
     caps, will be subject to zone-specific caps. For each rural 
     empowerment zone, up to $60 million in such bonds may be 
     issued. For an urban empowerment zone with a population under 
     100,000, $130 million of these bonds may be issued. For each 
     urban empowerment zone with a population of 100,000 or more, 
     $230 million of these bonds may be issued.
       Section 203 liberalizes the current definition of an 
     ``enterprise zone business'' for purposes of the tax-exempt 
     financing available under both the first and second rounds. 
     Businesses will be treated as satisfying the applicable 
     requirements during a 2-year start-up period if it is 
     reasonably expected that the business will satisfy those 
     requirements by the end of the start-up period and the 
     business makes bona fide efforts to that end. Following 
     the start-up period a 3-year testing period will begin, 
     after which certain enterprise zone business requirements 
     will no longer be applicable (as long as more than 35 
     percent of the business' employees are residents of the 
     empowerment zone or enterprise community). The rules under 
     which substantially renovated property may be ``qualified 
     zone property,'' and thereby be eligible to be financed 
     with tax-exempt bonds, would also be liberalized slightly.
       Section 204 liberalizes the definition of enterprise 
     business for purposes of both the tax-exempt financing 
     provisions and the additional section 179 expensing by 
     reducing from 80 percent to 50 percent the amount of total 
     gross income that must be derived within the empowerment zone 
     or enterprise community, by reducing how much of the 
     business' property and employees' services must be located in 
     or provided within the zone or community, and by easing the 
     restrictions governing when rental businesses will qualify as 
     enterprise zone businesses. A special rule is also provided 
     to clarify how a business that straddles the boundary of an 
     empowerment zone or enterprise community (e.g., by straddling 
     a population census tract boundary) is treated for purposes 
     of the enterprise zone business definition.


        title iii--expensing of environmental remediation costs

       Section 301 would provide a current deduction for certain 
     remediation costs incurred with respect to qualified sites. 
     Generally, these expenses would be limited to those paid or 
     incurred in connection with the abatement or control of 
     environmental contaminants. This deduction would apply for 
     alternative minimum tax purposes as well as for regular tax 
     purposes.
       Qualified sites would be limited to those properties that 
     satisfy use, geographic, and contamination requirements. The 
     use requirement would be satisfied if the property is held by 
     the taxpayer incurring the eligible expenses for use in a 
     trade or business or for the production of income, or if the 
     property is of a kind properly included in the inventory of 
     the taxpayer. The geographic requirement would be satisfied 
     if the property is located in (i) any census tract that has a 
     poverty rate of 20 percent or more, (ii) any other census 
     tract (a) that has a population under 2,000, (b) 75 percent 
     or more of which is zoned for industrial or commercial use, 
     and (c) that is contiguous to one or more census tracts with 
     a poverty rate of 20 percent or more, (iii) an area 
     designated as a federal EZ or EC or (iv) an area subject to 
     one of the 40 EPA Brownfields Pilots announced prior to 
     February 1997. Both urban and rural sites may qualify. 
     Superfund National Priority listed sites would be excluded.
       The contamination requirement would be satisfied if 
     hazardous substances are present or potentially present on 
     the property. Hazardous substances would be defined generally 
     by reference to sections 101(14) and 102 of the Comprehensive 
     Environmental Response Compensation and Liability Act 
     (CERCLA), subject to additional limitations applicable to 
     asbestos and similar substances within buildings, certain 
     naturally occurring substances such as radon, and certain 
     other substances released into drinking water supplies due to 
     deterioration through ordinary use.
       To claim the deduction under this provisions, the taxpayer 
     would be required to obtain a statement that the site 
     satisfies the geographic and contamination requirements from 
     a State environmental agency designated by the Environmental 
     Protection Agency for such purposes or, if no such agency has 
     been designated by the EPA, by the EPA itself.
       This deduction would be subject to recapture under current-
     law section 1245. Thus, any gain realized on disposition 
     generally would be treated as ordinary income, rather than 
     capital gain, up to the amount of deductions taken with 
     respect to the property.

   Mr. D'AMATO. Mr. President, I join my colleagues, Senators 
Moseley-Braun, Abraham, Jeffords, Daschle, Lieberman, and Murray, in 
introducing legislation that will provide a new tax incentive to 
encourage the private sector to clean up thousands of contaminated, 
abandoned sites known as brownfields. Brownfield sites are abandoned or 
vacant commercial and industrial properties suspected of being 
environmentally contaminated.
  Under current law, the IRS has determined that costs incurred to 
clean up land and ground water are deductible as business expenses, as 
long as the costs are incurred by the same taxpayer that contaminated 
the land, and that taxpayer plans to use the land after the cleanup for 
the same purposes used prior to the cleanup. That means that new owners 
who wish to use land suspected of environmental contamination for a new 
purpose, would be precluded from deducting the costs of cleanup in the 
year incurred. They would only be allowed to capitalize the costs and 
depreciate them over time. Therefore, it is time for us to recognize 
the need for aggressive economic development policies for the future 
economic health of communities around the country, and to recognize the 
inequity of current tax law. My colleagues and I believe that our 
legislation is the type of initiative the Federal Government needs to 
encourage development of once abandoned, unproductive sites that will 
bring real economic benefits to urban distressed and rural areas across 
the United States. By encouraging redevelopment, jobs will be created, 
economic growth will continue, property values will increase as well as 
local tax revenues.
  Mr. President, I am proud to say that in my State of New York, the 
city of Elmira has been selected as a fourth round finalist for the 
EPA's Brownfields Economic Redevelopment Initiative Demonstration Pilot 
Program. The city of Elmira has primed an unsightly and unsafe urban 
brownfield and is now in the final stages of turning it into a revenue- 
and jobs-producing venture. The city of Elmira initiated this important 
project with no guarantees of public or private funding and has done 
this at very minimal cost to taxpayers. Can you imagine what could and 
would be done if the public and private sector had the encouragement to 
also become involved?
  Mr. President, I urge my colleagues on both sides of the aisle to 
join us in cosponsoring this important legislation.
 Mr. JEFFORDS. Mr. President, I am pleased to join with 
Senators Moseley-Braun, D'Amato, Abraham, and Lieberman in sponsoring 
the Community Empowerment Act of 1997, which will encourage the cleanup 
of abandoned industrial sites known as brownfields in Vermont and 
across the country.
  The term ``brownfields'' refers to contaminated industrial sites. 
Most of these sites were abandoned during the 1970's and 1980's, as 
industrial development migrated away from urban areas to the greener 
landscape of the suburbs. One such site in Vermont is the Holden-
Leonard Mill, a 20-building complex in Bennington, VT, that is poised 
to become a brownfields success story after 10 years of work.
  Once employing one-quarter of Bennington's work force, the mill shut 
down in 1939 and then was owned by a patchwork of owners until the 
1980's. After soil tests disclosed high levels of pollutants, the mill 
sat empty after 1986. Fortunately, a buyer of the site came forward in 
1992 and with cooperation between the business, State agencies, and the 
EPA the mill has been refurbished and over 200 new employees have been 
hired. The process, however, of revitalizing this site began in 1986 
and is still going on.
  Our aim with this legislation is to provide tax incentives to 
businesses willing to clean up and redevelop brownfields sites so that 
more brownfield sites can be returned to productive use and so that the 
process doesn't have to take 10 years.
  Last November, I sponsored a forum on brownfields redevelopment in 
Burlington, VT. There is only one unpolluted site in Burlington 
available for industrial development. Yet there are currently 17 
brownfields sites in the city, all with great potential for

[[Page S861]]

development. I toured several of these sites and saw this potential 
first hand. Burlington is both an EPA brownfields pilot city and an 
enterprise community. Under our legislation, businesses that acquire 
these sites would be able to claim tax deductions for their 
environmental cleanup costs. With tax incentives for brownfields 
redevelopment, I am hoping that we will see more of these abandoned 
sites returned to productive use.
  We treasure our open spaces in Vermont, and we are looking at ways to 
give incentives to companies to invest in our downtowns. When a company 
builds a facility on a brownfield site it takes advantage of existing 
infrastructure. the revitalization of a brownfield site means one less 
farm or field is paved over or forest cut down for the sake of a new 
plant or facility.
  I urge my colleagues to join us in supporting this bill.
 Mr. LIEBERMAN. Mr. President, I am delighted to join this 
distinguished group of Senators in introducing legislation to provide 
tax incentives for the cleanup of brownfields. This legislation will 
provide a powerful incentive to clean-up these sites. And that clean up 
will be followed by more jobs and more economic growth in areas that 
very much need both of those things. I am encouraged by the broad, 
bipartisan support both here in the Congress and in the administration 
and in the environmental community and in the business community, to 
provide tax incentives to get these sites cleaned up.
  Brownfield sites are abandoned commercial and industrial properties 
that are environmentally contaminated. Developers and lenders avoid 
these sites both for liability reasons and because the tax incentives 
for cleaning up these sites is so limited. The result is an urban 
landscape littered with vacant and abandoned properties--properties 
which invite crime, depress surrounding housing and commercial prices, 
and hinder economic growth in these areas. Additionally, by 
discouraging the clean-up of brownfields, we are encouraging the 
development of undeveloped areas known as greenfields.
  This bill is simple: it allows taxpayers who purchase contaminated 
properties to deduct the costs of cleaning up brownfields in the year 
that cleanup expenses occur. This tax incentive would apply to existing 
and future empowerment zones and enterprise communities, in areas with 
a poverty rate of 20 percent or more and in adjacent industrial and 
commercial areas and in existing brownfields pilot areas as designated 
by the Environmental Protection Agency. Currently, a taxpayer who buys 
a contaminated property and cleans it up must spread the costs of that 
cleanup over time. We expect the cost of this bill to be about $2 
billion over 7 years. The administration has estimated that this 
proposal may bring as many as 30,000 brownfield sites back to 
productive use.
  In Connecticut, my home State, we know first hand about the problems 
these brownfield sites can pose for a community. In her soon to be 
released study of various brownfields sites, Edith M. Pepper of the 
Northeast-Midwest Institute included the Bryant Electric Plant in 
Bridgeport, CT, as one of her case studies. As she notes, the Bryant 
Electric Plant shut down in 1988 after 90 years of operating in 
Bridgeport's west end. It is no secret that Bridgeport is in difficult 
shape economically. Closing this 500,000 square foot facility did 
nothing to help that situation.
  However, as Ms. Pepper notes in her case study of this brownfields 
site, it appears that hope is on the way. A non-profit development 
group, the West End Community Development Corp. [CDC] is working to 
form a large business park on and around the Bryant site. Over $15 
million has already been invested in the site, including a significant 
amount for cleanup. According to city officials, the developer plans to 
create 300-400 new jobs and invest $20-50 million in Bridgeport's west 
end.
  The brownfields bill we are introducing today could help in 
Bridgeport. Undoubtedly it could help in places like New Haven and 
Hartford as well.
  The bill we are introducing today expands upon a bill that Senator 
Abraham and I introduced in the last Congress, S. 1542. That bill 
limited these cleanup incentives to the 104 empowerment zones and 
enterprise communities that exist in 42 States across the country. I am 
delighted by today's effort to expand on the number of regions and 
sites that will be covered in the brownfields legislation and I urge my 
colleagues to join us in cosponsoring this important 
legislation.
 Mr. ABRAHAM. Mr. President, I join Senator Moseley-Braun, 
Senator Jeffords, Senator Lieberman, Senator D'Amato, and others in 
introducing the Community Empowerment Act of 1997. This legislation 
builds upon the legislation Senator Lieberman and I introduced last 
Congress, as well as the similar legislation introduced by Senators 
Moseley-Braun, D'Amato, and Jeffords.
  Having now joined forces for the new Congress, the Moseley-Braun-
Abraham legislation will provide tax incentives for the environmental 
cleanup of brownfields located in economically distressed areas. There 
are between 100,000 and 300,000 of these sites across the country, Mr. 
President, and they are a blight on both the landscape and the economy 
of our communities.
  I am sponsoring this legislation because, in my view, too many of our 
troubled cities, towns, and rural areas have both environmental and 
economic problems. These problems conspire to produce an endless cycle 
of impoverishment. Contaminated sites are abandoned and new companies 
refuse to take over the property for fear of environmental lawsuits 
from government and/or private parties. As a result, contamination and 
joblessness continue and even get worse.
  For example, a survey of Toledo, OH businesses found that 
environmental concerns were affecting 62 percent of the area's 
commercial and industrial real estate transactions. These effects are 
all but universally negative in terms of job creation and economic 
development.
  Another example: Construction of a $3 million lumber treatment plant 
in Hammond, IN, was abandoned after low levels of contamination were 
found at the proposed site. The developer concluded that uncertain 
costs and potential liabilities outweighed the site's benefits.
  The city of Hammond lost construction jobs, 75 full-time lumber plant 
jobs, and any reasonable prospect that a developer would assume the 
risk of developing property anywhere on the 20 acre site.
  In Flint, the former site of Thrall Oil Co., now sits vacant. 
Economic development officials believe this property should attract 
future manufacturing development. Unfortunately, because the Michigan 
Department of Environmental Quality has labeled it ``contaminated,'' 
developers cannot be found.
  For decades now, Mr. President, the Federal Government has tried, 
with little success, to revitalize economically distressed areas. The 
blight remains. Urban renewal and various welfare programs too often 
have only made things worse by spawning dependency on government help. 
Environmental laws have fared little better. Intended to force cleanup 
of contaminated sites, these laws instead have scared away potential 
investors with potentially unlimited liability, including liability for 
contamination the investors did not cause or even know about.
  Environmental regulations and liability established under the Federal 
Superfund Program along with various other Federal and State 
environmental rules have helped create thousands of these brownfield 
properties in the United States. These are industrial or commercial 
sites suspected of being in some way environmentally contaminated. 
Although not serious threats to public health and safety, these 
properties have become unavailable for economic use, because legal 
rules make them too financially risky for investment and job creation.
  Potential liability scares businesses and investors away from these 
sites, creating permanently abandoned blights on the urban and rural 
landscape. Investors are afraid of being dragged into multimillion-
dollar litigation and cleanup over contamination they did not cause. 
Worse, investors willing to shoulder the liability of a potential 
environmental cleanup find that they cannot write off the cost of 
environmental remediation of brownfields. Instead these costs must be 
spread over a number of years. Thus, the Tax Code and environmental 
laws combine to scare away potential sources of investment and growth,

[[Page S862]]

often from our most economically distressed areas.
  To help both our economy and our environment, the Moseley-Braun-
Abraham legislation would target tax benefits at brownfields in 
economically distressed areas to encourage cleanup and job creation. We 
would allow investors in brownfields to expense their cleanup costs 
immediately--without having to split these costs up over a number of 
years. This will have three positive effects.
  First, these incentives will help our communities. By encouraging 
redevelopment of abandoned, unproductive sites, these tax incentives 
will reinvigorate economic growth in distressed communities across the 
country. They will provide economic opportunity rather than government 
dependence by encouraging investment and entrepreneurship where it is 
most needed.
  Second, this legislation will help the environment. These tax 
incentives will significantly improve our ability to clean up 
environmentally contaminated sites. The legacy of existing cleanup laws 
is a remarkable lack of progress. With thousands of sites across the 
country categorized as brownfields, we need to start cleaning them now, 
and we need private investment to get the job done. Furthermore, 
encouraging brownfields cleanup will save undeveloped land from 
unnecessary development. For every brownfield that is cleaned up and 
reused there will be a green field that remains clean and unused. 
Third, this solution, unlike those attempted in the past, utilizes the 
private sector to reclaim contaminated land and reinvigorate distressed 
communities. By encouraging private investment, rather than attempting 
to purchase or force cooperation with government mandates, we can free 
up private capital and initiative to do its job of revitalizing these 
distressed areas.
  By adopting this approach, the Senate will take a significant step 
toward revitalized, reinvigorated, and renewed urban and rural zones. 
With the incentives, included in this amendment, good jobs and a clean 
environment will go together, to everyone's benefit. I thank Senators 
Moseley-Braun, D'Amato, Lieberman, Jeffords, and our other cosponsors 
for joining me in this important effort, and I look forward to seeing 
meaningful brownfields reforms passed this Congress.
       By Mr. GRAMS (for himself, Mr. Abraham, Mr. Ashcroft, Mr. 
     Faircloth, Mr. Hutchinson, Mr. Kyl, Mr. McCain, Mr. Stevens 
     and Mr. Hagel):
  S. 236. A bill to abolish the Department of Energy, and for other 
purposes; to the Committee on Energy and Natural Resources.


                THE DEPARTMENT OF ENERGY ABOLISHMENT ACT

  Mr. GRAMS. Mr. President, I introduce legislation aimed at improving 
government as we know it. The Department of Energy Abolishment Act of 
1997 comes after nearly two decades of debate. The basic question has 
always remained the same: Why should we expend taxpayer dollars on this 
Cabinet-level agency? And today, we ask the same question.
  Following a year's worth of discussions on the blueprint I am putting 
forth, much progress has been made. When the 104th Congress began to 
tackle this issue, we looked at three main issues. First, we examined 
the fact that the Department of Energy no longer has a mission--which 
is clearly reflected by the fact that nearly 85 percent of its budget 
is expended upon nonenergy programs. Next, we studied those programs 
charged to the DOE and reviewed its ability to meet the related job 
requirements. And finally, we looked at the DOE's bloated budget in 
light of the first two criterion--determining whether the taxpayers 
should be forced to expend over $16 billion annually on this hodge-
podge collection.
  Nearly a year later, this Nation continues to grow increasingly 
dependent upon foreign oil--in total contrast to the DOE's core 
mission. Even in light of this administration's focus on alternative 
energy, the DOE expends less than one-fifth of its budget on energy-
related programs. And after examining key DOE mission programs, such as 
the Civilian Nuclear Waste program, it is clear that the goals of those 
missions are not being met.
  So we are challenged to either accept the status quo or move to 
change it. I must admit that the status quo may be easier in the short-
term. But in the context of the proverbial big picture, we cannot 
afford to turn our backs. Besides the fact that it is the role of 
Congress to oversee taxpayer expenditures and ensure a fair rate of 
return on their investments, this Nation is faced with a national debt 
in excess of $5.3 trillion.
  However, gaining consensus on the need for change is easier than 
effecting such change. So, last year I worked with the Senate Task 
Force on Government Agency Elimination to develop a blueprint. Under 
the direction of the former Senate Majority Leader, Senator Dole, I 
worked with Senators Faircloth, Abraham, and Stevens to study proposals 
on the DOE.
  After months of discussions with experts in the fields of energy and 
defense, we introduced legislation--legislation which is the core of 
the bill I am introducing today.
  Let me be the first to state that the ideas contained within this 
bill are not all of my own. Just as the idea to eliminate the 
Department of Energy is not a new one--since its creation in 1978, 
experts have been clamoring to abolish this agency in search of a 
mission. This bill represents the comments and input of many who have 
worked in these fields for decades, but like all things--I consider it 
a work in progress.
  As many of our colleagues will recall, the Senate Energy and Natural 
Resources Committee held a hearing on this very bill last September. 
During the hearing, we received testimony from such distinguished 
witnesses as the Former Assistant Energy Secretary Shelby Brewer and 
the Former Defense Secretary Caspar Weinberger in support of the 
proposal. Having either directly run these programs, or relied upon 
them, they provided strong firsthand evidence as to the detriment of 
leaving things as they are.
  The committee also received testimony from the current Acting 
Secretary and then-Assistant Energy Secretary, Charlie Curtis, who 
testified in support of improving the delivery of the Department's 
missions, at lower cost, for the benefit of the American people. His 
testimony focused upon how the DOE was working to improve its efforts 
to fulfill various missions, and how changing horses midstream would 
derail the DOE's efforts. In his remarks, Mr. Curtis dismissed the DOE 
Abolishment Act because the DOE did not believe it appropriate to 
entertain matters of this moment and complexity in the context of a 
bill which has as its proposed objective changing the organizational 
structure and fate of the Department of Energy.
  What the DOE fails to recognize is that the conclusions--to abolish 
the DOE--arise from an analysis of the Department's activities, rather 
than from any antigovernment ideology or mere desire to reduce 
government spending, as pointed out by Dr. Irwin Stelzer of the 
American Enterprise Institute. Supporters of the DOE Abolishment Act 
have always agreed that there are core functions performed by the DOE 
which must continue to be done, but the DOE has yet to provide a 
compelling argument as to why the DOE itself must continue to exist or 
successfully respond to our reasons for its elimination.
  But Mr. Curtis' objections are understandable when placed in the 
context of remarks by Nobel-prize economist, Dr. Milton Friedman: ``The 
Department of Energy offers an excellent example of a major difference 
between private and government projects. If a private project is a 
failure, it will be closed down; if a government project is a failure, 
it will be expanded. * * * It is in the self-interest of the Government 
officials in charge to keep the project alive; and they always have the 
ready excuse that the reason for failure was the lack of sufficient 
funds.''
  So today, I am joined by my colleagues, Senator Abraham of Michigan, 
Senator Ashcroft of Missouri, Senator Faircloth of North Carolina, 
Senator Hutchinson of Arkansas, Senators Kyl and McCain of Arizona and 
Senator Stevens of Alaska, in reaffirming congressional intent to 
change the Department of Energy as we know it.
  Under the Department of Energy Abolishment Act of 1997, we dismantle 
the patchwork quilt of government initiatives--reassembling them into 
agencies better equipped to accomplish

[[Page S863]]

their basic goals; we refocus and increase Federal funding toward basic 
research by eliminating corporate welfare; and, we abolish the bloated, 
duplicative upper management bureaucracy.
  First, we begin by eliminating Energy's Cabinet-level status and 
establish a 3-year Resolution Agency to oversee the transition. This is 
critical to ensuring progress continues to be made on the core 
programs.
  Under title I, the Federal Energy Regulatory Commission [FERC] is 
spun off to become an independent agency, like it was prior to the 
creation of the DOE. The division which oversees hearings and appeals 
is eliminated, with all pending cases transferred to the Department of 
Justice for resolution within 1 year. The functions of the Energy 
Information Administration are transferred to the Department of the 
Interior with the instruction to privatize as many as possible. And 
with the exception of research being conducted by the DOE labs, basic 
science and energy research functions are transferred to Interior for 
determination on which are basic research, and which can be privatized. 
Those deemed as core research will be transferred to the National 
Science Foundation and reviewed by an independent commission. Those 
that are more commercial in nature will be subject to disposition 
recommendations by the Secretary of the Interior.
  The main reasoning behind this is to ensure the original mission of 
the DOE--to develop this Nation's energy independence--is carried out. 
With scarce taxpayer dollars currently competing against defense and 
cleanup programs within the DOE, it's no surprise that little progress 
has been made. However, by refocusing dollars into competitive 
alternative energy research--we will maximize the potential for areas 
such as solar, wind, biomass, and so forth. For States like Minnesota, 
where the desire for renewable energy technologies is high, growth in 
these areas could help fend off our growing dependence upon foreign oil 
while protecting our environment.
  Under Title II, the laboratory structure within the DOE is revamped. 
First, the three defense labs are transferred to the Defense 
Department. They include Sandia, Los Alamos and Lawrence Livermore. The 
remaining labs are studied by a nondefense energy laboratory 
commission. This independent commission operates much like the Base 
Closure Commission and can recommend restructuring, privatization, or a 
transfer to the DOD as alternatives to closure. Congress is granted 
fast-track authority to adopt the Commission's recommendations.
  Title III attempts to assess an inventory of the Power Marketing 
Administration's assets, liabilities, and so forth. This inventory is 
aimed at ensuring fair treatment of current customers and a fair return 
to the taxpayers. All issues, including payments by current customers 
must be included in the General Accounting Office's [GAO] audit.
  Petroleum reserves are the focus of title IV. The Naval Petroleum 
Reserve is targeted for immediate sale. Any of the reserves that are 
unable to be disposed of within the 3-year window will be sold 
transitionally from the Interior Department. With the Strategic 
Petroleum Reserve, it is transferred to the Defense Department and an 
audit on value and maintenance costs is conducted by the GAO. Then, the 
DOD is charged with determining how much oil to maintain for national 
security purposes after reviewing the GAO report.
  Under titles V and VI, all of the national security and environmental 
restoration-management activities to the Department of Defense. 
Therefore, all defense-related activities are transferred back to 
Defense, but are placed in a new civilian controlled agency--Defense 
Nuclear Programs Agency--to ensure budget firewalls and civilian 
control over sensitive activities such as arms control and 
nonproliferation activities.
  And the program which has received much criticism as of late, the 
Civilian Nuclear Waste Program, is transferred to the Corps of 
Engineers. This section dovetails legislation adopted by the Senate 
last Congress. A key element is that the interim storage site is 
designated at Nevada's test site area 25. Building upon legislation I 
introduced last Congress, the GAO is directed to recommend 
privatization options and provide cost saving estimates for the overall 
program.
  For 35 States, including my home State of Minnesota, timely 
resolution to the nuclear waste issue is essential. The continued 
impasse over the designation of interim and permanent waste sites 
implies additional slippages in the DOE's legal requirement to accept 
nuclear waste by 1998. Minnesota stands to lose nearly 30 percent of 
its energy resources shortly after the turn of the century, but 34 
other States face similar crisis. Having paid over $250 million into 
the Nuclear Waste Trust Fund, Minnesota's ratepayers want resolution, 
not the continual foot-dragging we have seen from the DOE. And when we 
look at the $12 billion collected to date in contrast to the lack of 
progress over the past 15 years, it is clear that the status quo is not 
working. That is primarily the impetus behind today's announcement by 
the Nuclear Waste Strategy Coalition that they are petitioning the 
Courts for approval to stop payments to the Nuclear Waste Trust Fund. 
Until the Court order in July, the DOE even denied accountability for 
the program. It is time for a change if we want results. This 
legislation provides that change.
  Overall, outside models estimate savings between $19 and $23 billion 
in the first 5 years, and approximately $5 to $7 billion annually 
thereafter. This is in sharp contrast to the former Secretary's 
Strategic Alignment Initiative, which boasts unconfirmed savings of $14 
billion but no savings in the outyears.
  In introducing this bill, our goals are to build upon the issues 
raised during last year's hearing; to hold additional hearings in 
conjunction with those who have expressed concerns over the Department 
of Energy--including Senator Brownback of Kansas, chairman of the 
Government Affairs Subcommittee on Government Management Oversight; 
and, to move forward on implementing a widely supported proposal. And, 
in the coming weeks, Representative Tiahrt of Kansas will be 
introducing companion legislation in the House of Representatives in 
the near future.
  Contrary to proponents of the status quo, the momentum is far from 
being derailed. In fact, if we were to look at the Department of 
Energy's own Report on External Regulation issued in December 1996, 
even its own working group recommended transferring the regulation of 
its nuclear facilities to outside entities. The report concluded that 
by through external regulation, and adoption of the private sector's 
safety culture, program safety and public confidence would be greatly 
enhanced. We agree. And we would like to see such concepts applied 
across the board to DOE's programs--and the DOE ultimately eliminated. 
We welcome any input to that end from the administration.
  And so looking back over the past year--examining how the debate has 
transformed from one of whether or not to maintain the status quo, to 
one of how to change it--I am encouraged over the progress we have 
made. Today, we mark the beginning of the debate on achieving our goal 
of streamlining government and improving the delivery of government 
services at lower costs to the American taxpayers. One year from now, 
it is my hope that we will be working toward the implementation of a 
restructuring plan on the Department of Energy.
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