[Congressional Record Volume 143, Number 67 (Tuesday, May 20, 1997)]
[Senate]
[Pages S4753-S4760]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE RIGHT-TO-KNOW MORE AND POLLUTION PREVENTION ACT OF 1997
Mr. LAUTENBERG. Mr. President, today the Environmental Protection
Agency is making public its annual inventory of toxic chemical
releases. This information is made available to the public under the
Emergency Planning and Community Right-to-Know Act which I authored in
1986.
EPA announced today a 45.6 percent decrease nationwide in the release
of toxic chemicals since 1988, when these data were first collected. In
my State of New Jersey, which has a large chemical industry, releases
were reduced by a stunning 70 percent.
Mr. President, the right-to-know law has been an enormous success.
Shedding the light of day on toxic pollution has encouraged industries
to find ways to reduce the threat of these cancer causing materials to
our communities. We should build on that success.
Today I am introducing with Senators Torricelli, Boxer, Kerry,
Graham, Kennedy and Wellstone the Right-to-Know More and Pollution
Prevention Act of 1997, which will significantly expand the public's
right-to-know about toxic chemicals in their homes, workplaces, and
communities.
The landmark 1986 Right-to-Know Act requires companies to list the
amount of certain chemicals that leave their facilities as pollution
and enter our air, water, or soil. It has often been cited as one of
the most effective environmental laws on the books. By shining a public
spotlight on pollution, the public is better informed, and many
companies have taken voluntary steps to reduce pollution.
In fact, without using traditional ``command and control
requirements,'' the publication of right-to-know data has led companies
to voluntarily reduce their releases of toxic chemicals by almost 46
percent, or 1.6 billion pounds, between 1988 and 1994.
The bill I am introducing today significantly expands the community
right-to-know reporting requirements by tracking toxic materials as
they move through a facility--to tell us what comes in, what is
transformed into product or waste, and what leaves a facility as
pollution. This tracking system, known as chemical use or materials
accounting, can further decrease the use of toxic chemicals and their
release into the environment.
When my own State of New Jersey began collecting information on toxic
chemicals used by industries, in addition to recording toxic chemical
releases, the results were dramatic. Whereas the national decrease in
toxic emissions reported is 45.6 percent since 1988, in New Jersey it
has been 70 percent. The discrepancy between New Jersey and the rest of
the country, I believe, is due to the State requirement for materials
accounting.
The reason that materials accounting data is so valuable is that it
provides information to industry and incentives to prevent pollution.
With this data, industrial facilities have the information necessary to
develop pollution prevention plans.
Pollution prevention is the highest priority in managing waste, and
falls at the top of the ladder of steps industry can take to reduce
pollution--starting with prevention, then recycling, and then
treatment, with disposal or release into the environment the least
desirable last step. This so-called hierarchy of waste management has
been endorsed by the Environmental Protection Agency as well as many
Fortune 500 companies and the armed services.
Materials accounting makes pollution prevention planning possible.
You can't reduce toxic use if you don't know the quantity of toxics
used and how they're used. That's why materials accounting data is so
important. The bill requires companies which collect materials
accounting data to prepare pollution prevention plans to decrease their
use of toxics to protect those who might be exposed to them and can
help companies improve their bottom line.
[[Page S4754]]
It represents a strong marriage between environmental concerns and
economic efficiency.
A recent New Jersey study found that for every dollar spent on
additional reporting, companies actually saved between five and eight
dollars in reduced costs. By reducing waste, companies reduce their
cost of doing business.
Mr. President, materials accounting provides a framework for
identifying opportunities to reduce pollution at the source through
changes in production, operation and raw materials use. A random survey
of 42 New Jersey facilities showed that 62 percent of the companies
questioned anticipated that pollution prevention initiatives, based on
information gleaned from materials accounting data, could save them
money. Business wins, the public wins, and the public health and
environment wins.
Mr. President, my bill directs the EPA to expand right-to-know
reporting to include information on toxic chemicals being transported
through communities and used by industries in their products and
workplaces.
It would fill reporting gaps in the existing law by requiring all
companies that have more than the stipulated threshold amounts to file
reports, regardless of the industrial classification in which they
fall. EPA could exempt categories of industry groups if the benefits
and paperwork requirements are disproportionate to any benefit.
Finally, the bill requires businesses to prepare pollution prevention
plans based on the materials accounting data they collect.
Mr. President, EPA has proposed requiring materials accounting data
under existing authorities of the Emergency Planning and Community
Right-To-Know Law [EPCRA] and other statutes.
I believe the law gives them that authority. However, some industry
groups have challenged literally every action by the office that
implements the Right-to-Know Law. To avoid continuing court fights and
avoid needless delays, this law would clarify congressional intent.
Mr. President, this bill will help ensure a healthier environment for
all of us, and can save industry money, making our economy and chemical
industry more cost competitive. It makes good environmental sense and
good business sense. And it's legislation that the public wants. I hope
we will move to enact it in this Congress.
Mr. President, I ask unanimous consent that the text of the bill be
inserted in the Record, along with letters from EPA Administrator
Browner and USPIRG and the Environmental Information Center supporting
the bill.
There being no objection, the material was ordered to be printed in
the Record, as follows:
S. 769
Be it enacted by the Senate and House of Representatives of
the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Right-To-
Know-More and Pollution Prevention Act of 1997''.
(b) Table of Contents.--The table of contents of this Act
is as follows:
Sec. 1. Short title; table of contents.
TITLE I--PUBLIC RIGHT TO KNOW ABOUT TOXIC CHEMICAL USE
Sec. 101. Reporting requirements.
Sec. 102. Disclosure of toxic chemical use.
Sec. 103. Environmental reporting and public access to information.
Sec. 104. Trade secret protection.
Sec. 105. Civil actions.
TITLE II--COMMUNITY RIGHT TO KNOW AND POLLUTION PREVENTION PLANNING
Sec. 201. Toxic chemical release forms.
Sec. 202. Pollution prevention planning.
Sec. 203. Information gathering and access.
Sec. 204. Public availability.
Sec. 205. Federal facilities.
Sec. 206. Enforcement.
TITLE I--PUBLIC RIGHT TO KNOW ABOUT TOXIC CHEMICAL USE
SEC. 101. REPORTING REQUIREMENTS.
(a) Thresholds for Toxic Chemicals with Certain Significant
Risks.--Section 313(f) of the Emergency Planning and
Community Right-To-Know Act of 1986 (42 U.S.C. 11023(f)) is
amended--
(1) in paragraph (1), by adding at the end the following:
``(C) With respect to each of the toxic chemicals described
in paragraph (3) that are released from a facility, the
amount of the threshold for the toxic chemical under that
paragraph.''; and
(2) by adding at the end the following:
``(3) Thresholds for toxic chemicals with certain
significant risks.--
``(A) Establishment of thresholds.--Not later than 2 years
after the date of enactment of this paragraph, the
Administrator shall establish a threshold for each toxic
chemical that the Administrator determines may present a
significant risk to children's health or the environment
because of--
``(i) the tendency of the toxic chemical to persist or to
bioaccumulate or disrupt endocrine systems; or
``(ii) other characteristics of the toxic chemical.
``(B) Chemicals to be included.--Among the toxic chemicals
for which the Administrator shall establish thresholds under
subparagraph (A) shall be lead, mercury, dioxin, cadmium,
chromium, and the substances listed as bioaccumulative
chemicals of concern in the notice published by the
Administrator at 60 Fed. Reg. 15393.''.
(b) Additional Chemicals.--Section 313(c) of the Emergency
Planning and Community Right-To-Know Act of 1986 (42 U.S.C.
11023(c)) is amended--
(1) by striking ``are those'' and inserting the following:
``are--
``(1) the'';
(2) by striking the period at the end and inserting ``;
or''; and
(3) by adding at the end the following:
``(2) dioxin and substances listed as bioaccumulative
chemicals of concern in the notice published by the
Administrator at 60 Federal Register 15393.''.
(c) Releases.--Subsections (a) and (b)(1) of section 313 of
the Emergency Planning and Community Right-To-Know Act of
1986 (42 U.S.C. 11023) are amended by striking ``or otherwise
used'' and inserting ``otherwise used, or released''.
(d) Civil Actions.--Section 326(a)(1)(B) of the Emergency
Planning and Community Right-To-Know Act of 1986 (42 U.S.C.
11046(a)(1)(B)) is amended--
(1) by redesignating clauses (iii) through (vi) as clauses
(iv) through (vii), respectively, and
(2) by inserting after clause (ii) the following:
``(iii) Establish a reporting threshold for a toxic
chemical described in section 313(f)(3).''.
(e) Revised Thresholds.--Section 313(f)(2) of the Emergency
Planning and Community Right-To-Know Act of 1986 (42 U.S.C.
11023(f)(2)) is amended in the first sentence by striking
``paragraph (1)'' and inserting ``subparagraph (A) or (B) of
paragraph (1)''.
SEC. 102. DISCLOSURE OF TOXIC CHEMICAL USE.
(a) Toxic Chemical Release Form.--
(1) In general.--Section 313(g) of the Emergency Planning
and Community Right-To-Know Act of 1986 (42 U.S.C. 11023(g))
is amended--
(A) in paragraph (1)(C)--
(i) by inserting ``for the preceding calendar year'' after
``items of information'';
(ii) in clause (i) by striking ``is'' and inserting
``was'';
(iii) in clause (ii) by striking ``preceding'';
(iv) in clause (iv) by striking ``annual quantity of the
toxic chemical entering'' and inserting ``quantity of the
toxic chemical that entered''; and
(v) by adding at the end the following:
``(v) The number of employees (including contractors) at
the reporting facility, the number of employees (including
contractors) at the reporting facility who were potentially
exposed to the toxic chemical;
``(vi) The following materials accounting information:
``(I) A description of the uses of the toxic chemical at
the facility.
``(II) The starting (as of January 1) inventory of the
toxic chemical at the facility.
``(III) The quantity of the toxic chemical produced at the
facility.
``(IV) The quantity of the toxic chemical that was
transported to the facility and the mode of transportation
used.
``(V) The quantity of the toxic chemical consumed at the
facility.
``(VI) The quantity of the toxic chemical that was shipped
out of the facility as a product or in a product and the
quantities intended for industrial use, commercial use,
consumer use, and any additional categories of use that the
Administrator may designate by regulation.
``(VII) The quantity of the toxic chemical that entered any
waste stream (or that was otherwise released into the
environment) prior to recycling, treatment, or disposal (as
required to be reported under section 6607(b)(1) of the
Pollution Prevention Act of 1990 (42 U.S.C. 13107(b)(1))).
``(VIII) The amount of toxic chemical at the facility as of
December 31.
``(IX) The amount of the toxic chemical recycled at the
facility that was used during the calendar year at the
facility.
``(X) The toxic chemical use of the chemical that is
calculated by adding the quantities reported under subclauses
(II), (III), (IV), and (IX) and subtracting the quantity
reported under subclause (VIII).
``(XI) If the sum of the quantities reported under
subclauses (II), (III), (IV), and (IX) does not equal the sum
of the quantities reported under subclauses (V), (VI), (VII),
and (VIII), a statement of the cause of the discrepancy.
``(vii) The reduction (from the calendar year preceding the
calendar year for which the form is submitted) in the
quantity of the toxic chemical that is reported under clause
(vi)(VII), as a result of the following: equipment or
technology modifications; process or procedure modifications;
reformulation or
[[Page S4755]]
redesign of products; substitution of raw materials; and
improvements in housekeeping, maintenance, training, or
inventory control.
``(viii) The reduction (from the calendar year preceding
the calendar year for which the form is submitted) in the
quantity of toxic chemical use as defined in subclause (X) as
a result of the following: equipment or technology
modifications; process or procedure modifications;
reformulation or redesign of products; substitution of raw
materials; and improvements in housekeeping, maintenance,
training, or inventory control.''; and
(B) by adding at the end the following:
``(3) Computations.--Quantities reported under this
subsection shall be complete and verifiable by computations
under generally accepted principles of materials
accounting.''.
(2) Definition of materials accounting information.--
(A) In general.--Section 329 of the Emergency Planning and
Community Right-To-Know Act of 1986 (42 U.S.C. 11049) is
amended--
(i) by redesignating paragraphs (7), (8), (9), and (10) as
paragraphs (8), (9), (10), and (11), respectively; and
(ii) by inserting after paragraph (6) the following:
``(7) Materials accounting information.--The term
`materials accounting information' means the information
described in section 313(g)(1)(vi).''.
(B) Conforming amendment.--Section 6603(4) of the Pollution
Prevention Act of 1990 (42 U.S.C. 13102(4)) is amended by
striking ``329(8)'' and inserting ``329''.
(3) Regulation.--Not later than 2 years after the date of
enactment of this Act, the Administrator of the Environmental
Protection Agency shall promulgate a regulation regarding the
information to be provided under clauses (v), (vi), (vii),
and (viii) of section 313(g)(1)(C) of the Emergency Planning
and Community Right-To-Know Act of 1986 (42 U.S.C.
11023(g)(1)(C)), as added by paragraph (1).
(b) Other Requirements.--The Administrator of the
Environmental Protection Agency shall by regulation integrate
the reporting requirements under the Emergency Planning and
Community Right-To-Know Act of 1986 (42 U.S.C. 11001 et seq.)
and the Pollution Prevention Act of 1990 (42 U.S.C. 12101 et
seq.).
SEC. 103. ENVIRONMENTAL REPORTING AND PUBLIC ACCESS TO
INFORMATION.
(a) Streamlined Data Collection and Dissemination.--Section
313 of the Emergency Planning and Community Right-To-Know Act
of 1986 (42 U.S.C. 11023) is amended by adding at the end the
following:
``(m) Streamlined Data Collection and Dissemination.--
``(1) In general.--To enhance public access and use of
information resources, to facilitate compliance with
reporting requirements, and to promote multimedia permitting,
reporting, and pollution prevention, not later than 3 years
after the date of enactment of this subsection, the
Administrator shall--
``(A) create standard data formats for information
management;
``(B) integrate information resources, using common
company, facility, industry, geographic, and chemical
identifiers and any other identifiers that the Administrator
considers appropriate;
``(C) establish a system for indexing, locating, and
obtaining agency-held information about parent companies,
facilities, industries, chemicals, geographic locations,
ecological indicators, and the regulatory status of toxic
chemicals and entities subject to agency regulation;
``(D) consolidate all annual reporting requirements under
this title and other Federal environmental laws for small
businesses, including by permitting reporting to a single
point of contact using a single form or electronic reporting
system; and
``(E) provide the public a single point of contact for
access to all the publicly available information gathered by
the Administrator for any regulated entity.
``(2) Consolidation.--Not later than 5 years after the date
of enactment of this subsection, the Administrator shall
consolidate all annual reporting under this title and other
Federal environmental laws administered by the Administrator
for each entity required to report, including by permitting
reporting to a single point of contact using a single form or
electronic reporting system.
``(3) Ease of compliance.--In improving the means by which
the Administrator provides information to the public and
requires information be reported by regulated entities, as
required by paragraphs (1) and (2), the Administrator,
building on the experiences of the States, shall use
technology to facilitate reporting by regulated entities and
improve access to the data by the public.''.
(b) Disclosure of Uses of Toxic Chemicals.--
(1) Basic requirement.--Section 313(a) of the Emergency
Planning and Community Right-To-Know Act of 1986 (42 U.S.C.
11023(a)) is amended in the second sentence by inserting
``toxic chemical uses and'' before ``releases''.
(2) Use of release form.--Section 313(h) of the Emergency
Planning and Community Right-To-Know Act of 1986 (42 U.S.C.
11023(h)) is amended in the second sentence by inserting
``the uses of toxic chemicals at covered facilities and''
before ``releases of toxic chemicals to the environment''.
SEC. 104. TRADE SECRET PROTECTION.
Section 322 of the Emergency Planning and Community Right-
To-Know Act of 1986 (42 U.S.C. 11042) is amended--
(1) in subsection (a)(1) by adding the following at the
end:
``(C) Withholding of materials accounting information.--A
person that is required to submit materials accounting
information under section 313(g)(1)(C)(vi) may withhold an
element or portion (as defined by a regulation promulgated by
the Administrator under subsection (c)) of the information if
the person complies with paragraph (2) with respect to the
information to be withheld.'';
(2) in subsection (b)(4) by inserting ``or other
information withheld'' after ``The chemical identity'';
(3) in subsection (d)--
(A) in paragraph (1), in the first sentence, by striking
``toxic chemical which'' and inserting ``toxic chemical or
other information that'';
(B) in paragraph (2), by inserting ``or other information
withheld'' after ``specific chemical identity'';
(C) in paragraph (3)--
(i) in subparagraph (A), by inserting ``or other
information withheld'' after ``specific chemical identity'';
(ii) in subparagraph (B), by inserting ``or other
information withheld'' after ``chemical identity''; and
(iii) in subparagraph (C), in the first sentence, by
inserting ``or other information withheld'' after ``chemical
identity'' each place it appears; and
(D) in paragraph (4)(A), by inserting ``or other
information withheld'' after ``chemical identity'';
(4) in subsection (f), by inserting ``or other information
withheld under subsection (a)(1)'' after ``specific chemical
identity''; and
(5) in subsection (h)--
(A) in paragraph (1), by inserting ``or other information
withheld'' before ``is claimed as a''; and
(B) in paragraph (2), by inserting ``or other information
withheld'' after ``identity of a toxic chemical''.
SEC. 105. CIVIL ACTIONS.
(a) Past and Ongoing Violations.--Section 326(a)(1)(A) of
the Emergency Planning and Community Right-To-Know Act of
1986 (42 U.S.C. 11046(a)(1)(A)) is amended by inserting ``any
past or ongoing'' after ``An owner or operator of a facility
for''.
(b) Venue.--Section 326 of the Emergency Planning and
Community Right-To-Know Act of 1986 (42 U.S.C. 11046(b)) is
amended--
(1) in subsection (b), by striking paragraph (2) and
inserting the following:
``(2) Actions against the administrator.--
``(A) Petitions in the united states court of appeals for
the district of columbia circuit.--
``(i) In general.--Review of an action of the Administrator
described in clause (ii) shall be sought by filing a petition
for review in the United States Court of Appeals for the
District of Columbia.
``(ii) Actions of the administrator.--The actions of the
Administrator described in this clause are--
``(I) a final agency action in response to a petition filed
under section 313(e);
``(II) a final agency action to revise a threshold under
section 313(f)(2);
``(III) a final rule to modify nationally the reporting
frequency under section 313(i);
``(IV) any other rulemaking of general applicability under
this title; and
``(V) any other action that is based on a determination of
nationwide scope or effect if, in taking the action, the
Administrator publishes a finding that the action is based on
such a determination.
``(B) Petitions for review in other circuits.--
``(i) In general.--Review of an action of the Administrator
described in clause (ii) shall be sought by filing a petition
for review in the United States Court of Appeals for the
circuit in which the geographic region to which the action
relates is situated.
``(ii) Actions of the administrator.--The actions of the
Administrator described in this clause are--
``(I) a final rule to modify the reporting frequency under
section 313(i) for a particular geographic region; and
``(II) any other rulemaking specific to a particular
geographic region.
``(C) Civil actions in united states district court.--An
action of the Administrator under subsection (a) other than
an action described in subparagraph (A) or (B) shall be
brought in the United States District Court for the District
of Columbia.''; and
(2) by adding at the end the following:
``(i) Time for Filing Petition for Review of Action by the
Administrator; Exclusive Means of Review.--
``(1) Time for filing petition.--A petition for review of
an action of the Administrator under subparagraph (A) or (B)
of subsection (b)(2) shall be filed not later than 60 days
after the date on which notice of the action is published in
the Federal Register.
``(2) Exclusive means of review.--An action of the
Administrator with respect to which review can be or could
have been obtained under subparagraph (A) or (B) of
subsection (b)(2) shall not be subject to judicial review in
a civil or criminal enforcement proceeding.''.
[[Page S4756]]
TITLE II--COMMUNITY RIGHT TO KNOW AND POLLUTION PREVENTION PLANNING
SEC. 201. TOXIC CHEMICAL RELEASE FORMS.
Section 313(b) of the Emergency Planning and Community
Right-To-Know Act of 1986 (42 U.S.C. 11023(b)) is amended--
(1) by striking paragraph (2); and
(2) in paragraph (1)--
(A) by striking ``(A) The requirements'' and inserting
``The requirements'';
(B) by striking ``and that are in Standard Industrial
Classification Codes 20 through 39 (as in effect on July 1,
1985)'';
(C) by striking subparagraph (B) and inserting the
following:
``(2) Deletion of Facilities.--
``(A) In general.--The Administrator, at the instance of
the Administrator or in response to a petition, may delete by
rule a particular facility or category of facilities from the
requirements of this section based on a determination that
reporting by the owner or operator of the facility or
category of facilities is inconsistent with the efficient
operation of this title.
``(B) Considerations.--In making a determination under
subparagraph (A), the Administrator may consider the toxicity
of the toxic chemical, proximity to other facilities that
release the toxic chemical or to population centers, the
history of releases of toxic chemicals at the facility or
category of facilities, and such other factors as the
Administrator considers appropriate.'';
(D) in subparagraph (C) --
(i) by striking ``(C) For purposes'' and inserting ``(3)
Definitions.--For purposes'';
(ii) by redesignating clauses (i) and (ii) as subparagraphs
(A) and (B); and
(iii) in subparagraph (B) (as redesignated by clause (ii)),
by redesignating subclauses (I) and (II) as clauses (i) and
(ii).
SEC. 202. POLLUTION PREVENTION PLANNING.
(a) In General.--Title III of the Emergency Planning and
Community Right-To-Know Act of 1986 (42 U.S.C. 11001 et seq.)
is amended--
(1) by redesignating subtitle C as subtitle D; and
(2) by inserting after subtitle B the following:
``Subtitle C--Pollution Prevention Planning
``SEC. 316. POLLUTION PREVENTION PLANS.
``(a) Definitions.--In this section:
``(1) Authorized state.--The term `authorized State' means
a State authorized under subsection (m) to carry out the
Administrator's authorities and responsibilities under this
section.
``(2) Byproduct.--The term `byproduct' means a toxic
chemical that--
``(A) is generated prior to storage, recycling (except in-
process recycling), treatment, control, disposal, or release;
``(B) is not intended for use as a product; and
``(C) is required to be reported under section 6607 of the
Pollution Prevention Act of 1990 (42 U.S.C. 13107).
``(3) Facility.--The term `facility' means a facility for
which a toxic chemical release form is required to be
submitted under section 313.
``(4) In-process recycling.--The term `in-process
recycling' means the practice of returning a recycled toxic
chemical to a production process using dedicated equipment
that is directly connected to and physically integrated with
a production process.
``(5) Pilot facility.--The term `pilot facility' means a
facility, or designated area of a facility, used for pilot-
scale development of a product or process not primarily
involved in the production of a good for commercial sale.
``(6) Pollution prevention.--The term `pollution
prevention' means--
``(A) toxic use reduction; or
``(B) source reduction.
``(7) Production process.--The term `production process'
means a process, line, method, activity, or technique used to
produce a product or to reach a planned result.
``(8) Recovery.--
``(A) In general.--The term `recovery' means the act of
extracting or removing the toxic chemical from a waste stream
that includes--
``(i) the reclamation of the toxic chemical from a stream
that entered a waste treatment or pollution control device or
process (including an air pollution control device or
process, wastewater treatment or control device or process,
Federal or State permitted treatment or control device or
process, and any other type of treatment or control device or
process) where destruction of the stream or destruction or
removal of certain constituents of the steam occurs; and
``(ii) the reclamation for reuse of an otherwise used toxic
chemical that is spent or contaminated and that must be
recovered for further use in the original operation or any
other operation.
``(9) Recycling.--The term `recycling' means--
``(A) the recovery for reuse of a toxic chemical from a
gaseous, aerosol, aqueous, liquid, or solid stream; or
``(B) the reuse or the recovery for reuse of a toxic
chemical that is a hazardous waste or is a constituent of a
hazardous waste under the Solid Waste Disposal Act (42 U.S.C.
6901 et seq.), as determined by the Administrator.
``(10) Research and development laboratory.--The term
`research and development laboratory' means a facility or a
designated area of a facility used for research, development,
and testing activity, and not primarily involved in the
production of a good for commercial sale, in which a toxic
chemical is used by or under the direct supervision of a
technically qualified person.
``(11) Source reduction.--The term `source reduction' has
the meaning given the term in section 6603 of the Pollution
Prevention Act of 1990 (42 U.S.C. 13103).
``(12) Targeted production process.--The term `targeted
production process' means a production process or a group of
production processes (identified by the owner or operator of
a facility) that accounts for 90 percent or more of--
``(A) the total toxic chemical use calculated in accordance
with section 313(g)(1)(C)(vi)(X); or
``(B) the total quantity of byproducts generated at the
facility.
``(13) Toxic use reduction.--The term `toxic use reduction'
means the reduction in the quantity of toxic chemical use
reported under section 313(g)(1)(C)(viii) that is reduced so
as to reduce potential exposure to the public, workers,
consumers, and the environment.
``(b) Pollution Prevention Planning.--
``(1) In general.--To promote the assessment and
implementation of pollution prevention alternatives, the
owner or operator of a facility shall periodically complete a
pollution prevention plan.
``(2) Initial plan and updates.--The owner or operator of a
facility shall--
``(A) complete a pollution prevention plan on or before
July 1 of the second calendar year that begins after the date
of enactment of this section; and
``(B) review and update the pollution prevention plan
biennially thereafter.
``(3) Contents of pollution prevention plans.--
``(A) Items to be included.--Except as provided in section
317, a pollution prevention plan shall include--
``(i) a statement of management policy regarding pollution
prevention;
``(ii) a written certification by the owner or operator of
the facility regarding the accuracy and completeness of the
plan;
``(iii) 2- and 5-year pollution prevention goals for
targeted production processes, including a numerical
statement regarding the intended reduction in the quantity of
each toxic chemical manufactured, processed, or otherwise
used;
``(iv) a statement of progress achieved toward previously
submitted pollution prevention goals;
``(v) an analysis of each targeted production process,
including--
``(I) an assessment of materials accounting information of
toxic chemicals with respect to the targeted production
process; and
``(II) a full cost accounting of the direct and indirect
costs (including liabilities) of toxic chemical purchase,
use, and waste management;
``(vi) an evaluation of the options for reducing the use of
toxic chemicals or the generation of byproducts in the
targeted production unit process by means of the substitution
of raw materials, reformulation or redesign of products,
production unit modifications, and improvement in operation
and maintenance, including--
``(I) identification of options that minimize potential
exposure to workers, consumers, the public, and the
environment; and
``(II) an assessment of the technical and economic
feasibility of the options identified under subclause (I);
``(vii) an identification of options identified under
clause (vi)(I) that are technically feasible and have a
payback period of less than 2 years;
``(viii) a schedule for implementing the options identified
under clause (vii) that the owner or operator of the facility
intends to implement; and
``(ix) if there is an option identified under clause (vii)
that is not included in the schedule developed under clause
(viii), a statement of the reason why the option is not
included.
``(B) Items not to be included.--A pollution prevention
plan shall not include a waste management or control
activity.
``(4) Pollution prevention plan summaries.--
``(A) In general.--For each pollution prevention plan, the
owner or operator of a facility shall prepare a pollution
plan summary.
``(B) Contents.--A pollution plan summary shall include the
information reported under--
``(i) clauses (i), (ii), (iii), and (iv) of paragraph
(3)(A); or
``(ii) if applicable, subparagraphs (A), (B), (C), and (D)
of section 317(c)(2).
``(c) Pollution Prevention Plan Progress Reports.--
``(1) In general.--Beginning with the second full calendar
year after a pollution prevention plan has been prepared
under subsection (b), the owner or operator of a facility
shall prepare a pollution prevention plan progress report
annually for the facility in accordance with the schedule for
the submission of toxic release forms under section 313.
``(2) Contents.--A pollution prevention progress report
shall include--
``(A) a description of the facility and identification of
each targeted production process;
``(B) a numerical statement demonstrating the progress of
the facility towards achieving each of its 5-year goals for
pollution prevention; and
[[Page S4757]]
``(C) if the annual progress of the facility does not
achieve the level of progress anticipated in the pollution
prevention plan schedule for implementation, an explanation
of the reasons why that level of progress was not achieved.
``(d) Guidelines for Preparation of Pollution Prevention
Plans.--Not later than 2 years after the date of enactment of
this section, the Administrator shall by regulation establish
guidelines for the preparation of pollution prevention plans,
pollution prevention plan summaries, and pollution prevention
plan progress reports.
``(e) Availability of Pollution Prevention Plans,
Summaries, and Reports.--
``(1) Pollution prevention plans.--
``(A) In general.--The owner or operator of a facility
shall--
``(i) retain each pollution prevention plan at the
facility; and
``(ii) make each pollution prevention plan available for
inspection by the Administrator or authorized State.
``(B) Not public records.--A document or other record
obtained from or reviewed at a facility owned or operated by
a private person shall not be considered to be a public
record.
``(2) Pollution prevention plan summaries and progress
reports.--
``(A) Submission.--The owner or operator of a facility
shall submit a pollution prevention plan summary for the
facility and progress reports, with the toxic release forms
required under section 313 for the year in which the summary
is required, to the Administrator and to the State in which
the facility is located, in a format that is compatible with
electronic information storage and retrieval and compatible
with the data submitted under section 313 (except in a case
in which the Administrator determines that preparation in
electronic format would create a significant hardship).
``(B) Public availability.--The Administrator shall, using
electronic and other means, make pollution plan summaries and
progress reports available to the public consistent with
section 313(j).
``(f) Required Modification.--
``(1) In general.--The Administrator or an authorized State
may require the modification of a pollution prevention plan
or pollution prevention plan summary if the Administrator or
authorized State determines that the pollution prevention
plan does not meet the requirements of subsection (b) or the
pollution prevention plan summary does not meet the
requirements of subsection (b)(4).
``(2) Time for completion of required modification.--Any
modification required by the Administrator or authorized
State shall be completed by the owner or operator of the
facility not later than 90 days after the date on which the
Administrator or the State provides written notice that the
modification is required.
``(g) Product Formulas.--Nothing in this subtitle
authorizes the Administrator or a State to require that
information concerning nontoxic chemicals, or product
formulas for mixtures that include only nontoxic chemicals,
be included in a pollution prevention plan, summary, or
progress report.
``(h) Grouping of Processes.--The Administrator may publish
rules establishing criteria pursuant to which the
Administrator may permit an owner or operator of a facility
to consider production processes that use similar ingredients
to produce 1 or more similar products as a single production
process.
``(i) Training.--The Administrator or an authorized State
may require that individuals that prepare pollution
prevention plans for facilities in particular industrial
categories or subcategories receive training or attend
seminars and workshops on the proper preparation of toxic
release inventories and pollution prevention plans and on the
use of available pollution prevention measures.
``(j) Research and Development Laboratories.--The owner or
operator of a facility shall not be required to prepare a
pollution prevention plan, pollution prevention plan summary,
or pollution prevention progress report concerning a research
and development laboratory located at the facility.
``(k) Pilot Facilities.--The owner or operator of a
facility shall not be required to prepare a pollution
prevention plan, pollution prevention plan summary, or
pollution prevention plan progress report for a pilot
facility.
``(l) Technical Assistance.--
``(1) In general.--At the request of the owner or operator
of a facility, the Administrator or an authorized State may
provide technical assistance in pollution prevention
planning.
``(2) Reimbursement.--The Administrator may seek full (or
in the case of a small business, full or partial)
reimbursement for any technical assistance provided to a
facility.
``(3) No requirement of particular measures or standards.--
Nothing in this subsection authorizes the Administrator to
require that a particular pollution prevention measure be
implemented or that a pollution prevention performance
standard be achieved at a facility or targeted production
process.
``(m) State Administration.--
``(1) Request for state authorization.--
``(A) Guidelines.--Not later than 1 year after the date of
enactment of this section, the Administrator shall publish
guidance that would be useful to the States in submitting a
program for approval under this paragraph.
``(B) Submission of programs.--A State may submit to the
Administrator a program for carrying out this section in the
State.
``(C) Implementation of state programs.--On and after the
date that is 180 days after date on which the Administrator
receives a State program under subparagraph (B), the State
may carry out the program in the State in place of the
Federal program under this section, unless the Administrator
notifies the State that the program is not approved.
``(2) Criteria for state authorization.--
``(A) In general.--The Administrator shall approve a State
program submitted under paragraph (1) if the Administrator
determines that the State program requires that--
``(i) each facility develop a pollution prevention plan
that includes materials accounting for full cost accounting;
and
``(ii) each pollution prevention plan address the reduction
of the use and generation as byproduct of toxic chemicals
subject to this section so as to reduce overall risks to the
public, workers, consumers, and the environment without
shifting risks between them.
``(B) Disapproval.--If the Administrator does not approve a
State program, the Administrator shall notify the State in
writing of any revisions or modifications that are necessary
to obtain approval.
``(3) Withdrawal of state authorization.--
``(A) In general.--If the Administrator determines after
public hearing that a State program approved under paragraph
(1) no longer meets the criteria of paragraph (2), the
Administrator shall so notify the State in writing. If
appropriate corrective action is not taken within a
reasonable time (not to exceed 90 days after notification),
the Administrator shall withdraw authorization of the program
and establish a Federal program under this section.
``(B) Notification.--The Administrator shall not withdraw
authorization of a State program unless the Administrator
first notifies the State and makes public in writing the
reasons for the withdrawal.
``(4) No preemption of state programs.--Nothing in this
subsection affects the authority of a State or political
subdivision of a State to establish or continue in effect any
regulation or any other measure relating to pollution
prevention.
``(n) Reports.--
``(1) In general.--Not later than 4 years after the date of
enactment of this section and not less frequently than every
3 years thereafter, the Administrator shall submit a report
to the President and Congress that describes the pollution
prevention plans that have been prepared under this section.
``(2) Matters to be addressed.--A report under paragraph
(1) shall include--
``(A) a detailed analysis that indicates the progress
achieved toward any pollution prevention goals established by
the Administrator under section 6604 of the Pollution
Prevention Act of 1990 (42 U.S.C. 13103); and
``(B) a detailed analysis of the steps that need to be
taken to ensure that the goals are achieved, including an
identification of the industrial categories or subcategories
that should be the highest priority for pollution prevention
measures and that need improvement with respect to pollution
prevention.
``SEC. 317. SMALL BUSINESS POLLUTION PREVENTION COMPLIANCE
AND TECHNICAL ASSISTANCE PROGRAM.
``(a) Establishment of Program.--The Administrator shall
establish a small business pollution prevention compliance
and technical assistance program to assist owners and
operators of facilities in identifying and applying methods
of pollution prevention.
``(b) Elements of Program.--The program under subsection
(a) shall--
``(1) provide compliance assistance, technical assistance,
and other assistance to small businesses;
``(2) use funds provided under this subsection for matching
grants to State and local government agencies for programs to
promote the use of pollution prevention techniques by small
businesses; and
``(3) allow small businesses to comply with the pollution
prevention planning requirements of this by title complying
with subsection (c).
``(c) Use of Manual and Checklist In Lieu Of Pollution
Prevention Plan.--
``(1) In general.--The Administrator may by regulation
allow a small business in a commercial sector for which a
pollution prevention opportunity assessment manual and
checklist have been published under paragraph (2) to comply
with the pollution prevention planning requirements of
subsections (a) and (b) of section 316 by completing the
checklist and retaining on site the manual and checklist in
lieu of preparing a pollution prevention plan.
``(2) Contents of manual and checklist.--The Administrator
may publish a manual and checklist for any commercial sector
by the use of which a small business in the commercial sector
would develop--
``(A) a statement of management policy regarding pollution
prevention;
``(B) a written certification by the owner or operator of
the facility regarding the accuracy and completeness of the
plan;
``(C) 2- and 5-year pollution prevention goals for targeted
production processes, including a numerical statement
regarding the intended reduction in the quantity of each
toxic chemical produced or used and each toxic chemical
generated as a byproduct;
[[Page S4758]]
``(D) a statement of progress achieved toward previously
submitted pollution prevention goals;
``(E) an estimate of the costs associated with toxic
chemical purchase, use, and waste management;
``(F) an evaluation of production processes and material,
storage, and treatment practices;
``(G) an evaluation of toxic use reduction and source
reduction opportunities; and
``(H) an economic impact analysis of options for achieving
reductions in toxic chemical use and byproduct generation.''.
(b) Civil Action.--Section 326(a)(1)(A) of the Emergency
Planning and Community Right-To-Know Act of 1986 (42 U.S.C.
11046(a)(1)(A)) is amended by adding at the end the
following:
``(v) Complete and submit a pollution plan summary or
pollution plan progress report under section 316.''.
(c) Table of Contents.--The table of contents in section
300(b) of the Emergency Planning and Community Right-To-Know
Act of 1986 (42 U.S.C. prec. 11001) is amended by striking
the item relating to subtitle C and inserting the following:
``Subtitle C--Pollution Prevention Planning
``Sec. 316. Pollution prevention plans.
``Sec. 317. Small business pollution prevention compliance and
technical assistance program.
``Subtitle D--General Provisions.''.
SEC. 203. INFORMATION GATHERING AND ACCESS.
Section 325 of the Emergency Planning and Community Right-
To-Know Act of 1986 (42 U.S.C. 11045) is amended by adding at
the end the following:
``(g) Provision of Information and Records; Inspections.--
``(1) Definitions.--In this subsection:
``(A) Authorized officer.--The term `authorized officer'
means--
``(i) an officer, employee, or representative of the
Administrator; or
``(ii) an officer, employee, or representative of an
authorized State carrying out that section 316.
``(B) Authorized state.--The term `authorized state' means
a State that is authorized to carry out and enforce section
316 under section 317.
``(2) Provision of information and records.--At the request
of an authorized officer, a person who has or may have
information relevant to the identification, nature, or
quantity of materials, including hazardous chemicals,
extremely hazardous substances, toxic chemicals, or other
materials subject to this title that may have been
manufactured, processed, or otherwise used, stored, or
otherwise managed (including recycling, treating, combusting,
releasing, or transferring from a facility subject to the
requirements of this title) shall--
``(A) furnish to the authorized officer information
pertaining to the identification, nature, and quantity of the
materials; and
``(B) at the option and expense of the person--
``(i) afford the authorized officer access at all
reasonable times to the facility or location to inspect and
copy all documents and records relating to the
identification, nature, and quantity of the material; or
``(ii) copy and furnish to the authorized officer all such
documents and records.
``(3) Inspections.--
``(A) In general.--At the request of an authorized officer,
the owner or operator of a facility subject to the
requirements of this title shall permit the authorized
officer to enter, at reasonable times--
``(i) the facility; or
``(ii) any other facility, establishment, or other place or
property owned or operated by the owner or operator of the
facility, if, in the opinion of the authorized officer, entry
is needed to determine compliance with and enforce this title
with respect to the facility.
``(B) Samples.--An authorized officer may inspect and
obtain--
``(i) samples from any facility subject to the requirements
of this title or from a facility, establishment, or other
place or property described in subparagraph (A)(ii); or
``(ii) samples of any containers of toxic chemicals or
other materials maintained at the facility.
``(C) Prompt completion.--An inspection under this
paragraph shall be completed with reasonable promptness.
``(D) Receipt for samples and copies of analyses.--If an
authorized officer obtains a sample under subparagraph (B),
the authorized officer shall--
``(i) before leaving the premises, give to the owner or
operator of the facility a receipt describing the sample
obtained and, if requested, a portion of the sample; and
``(ii) furnish promptly to the owner or operator of the
facility a copy of the results of any analysis made of the
sample.
``(4) Compliance orders.--
``(A) Issuance.--If the owner or operator of a facility
failed to comply with a request of an authorized officer
under this subsection, the Administrator or authorized State
may, after such notice and opportunity for consultation as is
reasonably appropriate under the circumstances, issue an
order directing compliance with the request.
``(B) Civil action.--
``(i) In general.--The Administrator may request the
Attorney General to commence a civil action to compel
compliance with a request or order under this subsection.
``(ii) Relief.--If the court finds that there is a
reasonable basis on which to believe that there may be a
violation of this title, unless the court finds that, under
the circumstances of the case, the request or order under
this subsection was arbitrary and capricious, an abuse of
discretion, or otherwise not in accordance with law, the
court--
``(I) shall enter an order directing compliance with the
request or order; and
``(II) may assess a civil penalty of not more than $10,000
for each day of noncompliance.
``(5) Other authority.--Nothing in this subsection
precludes the Administrator or an authorized State from
securing access or obtaining information in any other lawful
manner.''.
SEC. 204. PUBLIC AVAILABILITY.
Section 313(j) of the Emergency Planning and Community
Right-To-Know Act of 1986 (42 U.S.C. 11023(j)) is amended in
the second sentence by striking ``on a cost reimbursable
basis''.
SEC. 205. FEDERAL FACILITIES.
Section 329(7) of the Emergency Planning and Community
Right-To-Know Act of 1986 (42 U.S.C. 11049(7)) is amended by
inserting before the period at the end the following: ``or
the United States''.
SEC. 206. ENFORCEMENT.
Section 325(c)(1) of the Emergency Planning and Community
Right-To-Know Act of 1986 (42 U.S.C. 11045(b)(1)) is amended
by striking ``or 313'' and inserting ``, 313, or 316''.
____
U.S. Environmental
Protection Agency,
Washington, DC, May 20, 1997.
Hon. Frank Lautenberg,
U.S. Senate,
Washington, DC.
Dear Senator Lautenberg: I am writing to thank you for your
leadership on community right to know. As you are aware,
expanding the public's right to know about harmful pollutants
in our communities is a top priority for this Administration.
We understand that your bill, The Right to Know More and
Pollution Prevention Act of 1997, seeks to advance community
right to know, pollution prevention planning and the
information available to the public on chemical use.
This Administration believes that putting environmental and
public health information into the hands of the American
people is one of the most effective ways to reduce local
pollution and prevent it from occurring in the future. In
fact, the Agency recently made final a rule to add seven new
industry categories to the Toxics Release Inventory (TRI),
increasing the number of covered facilities to 31,000--a
thirty percent increase. During the coming year, we will be
working on ways to further improve TRI, including a
stakeholder process to address reporting burdens, an
examination of types of data collected, consideration of new
thresholds for persistent, bioaccumulating toxic chemicals
and developing options regarding chemical use information.
I look forward to working with you in the future to further
the public's right to know about environmental health threats
in their homes, schools and communities.
Sincerely,
Carol M. Browner.
____
U.S. Public Interest
Research Group,
Washington, DC, May 20, 1997.
Dear Senator Lautenberg: We are writing on behalf of U.S.
PIRG and the State PIRGs with more than a million members
nation wide, to express our support for the Right to Know
More and Pollution Prevention Act of 1997. This bill will
dramatically improve the amount and quality of information
that citizens count on to keep themselves and their children
safe. This bill will also encourage pollution prevention. The
reduction of toxic chemical use and waste is urgent while
waste generation is steadily increasing nationwide, except in
New Jersey and Massachusetts where companies are required by
state law to collect and report toxic use data. The Right to
Know More and Pollution Prevention Act of 1997 will reverse
the dangerous trend for the rest of the nation.
The Community Right to Know Act is the best source of
public information about toxic pollution and is lauded by the
administration, environmentalists, and often industry leaders
as one of the most effective environmental protections.
Unfortunately, reporting under this law is woefully
inadequate. Less than 5% of pollution information is reported
to the public. We need to protect and expand the public's
Right to Know. The Right to Know More and Pollution
Prevention Act of 1997 will expand the public's Right to Know
to include:
1. Toxics use reporting which tells the public about toxic
chemicals transported through their neighborhoods; produced,
used and stored in the work place and put into consumer
products.
2. More complete data on toxic emissions including
information from all major industrial sources of toxic
pollution and data on extremely hazardous substances like
dioxins and mercury which are currently not collected under
the law.
3. Pollution Prevention Planning which will direct
companies to develop pollution prevention plans by setting
their own goals for pollution reduction.
The public has a right to know more than they currently do
about toxic chemicals. In addition, preventing pollution must
be our
[[Page S4759]]
goal in light of the data revealing the steady rise in waste
creation throughout the nation. We hope each Senator makes
this legislation a top environmental priority.
Sincerely,
Carolyn Hartmann,
Environmental Program Director.
Andrea Askowitz,
Right to Know Campaign Coordinator.
____
Environmental Information Center,
Washington, DC, May 19, 1997.
Hon. Frank Lautenberg,
U.S. Senate,
Washington, DC.
Dear Senator Lautenberg: I want to express the support and
appreciation of the Environmental Information Center for your
efforts to expand the Emergency Planning and Community Right
to Know Act. Your efforts should provide additional and
useful information about toxic chemicals to every community
and family in the country.
The last decade has proven how well community right to know
laws work. You know well the success of the more
comprehensive facility reporting statute in New Jersey, and
we commend you for seeking to expand use data to better
inform workers and families about toxic chemicals in their
communities. In addition, bill language aimed at improving
pollution prevention will help to eliminate problems before
they occur.
We will support early consideration and passage of this
legislation and look forward to working with you on this
bill.
Sincerely,
Philip E. Clapp,
Executive Director.
______
By Mr. NICKLES:
S. 770. A bill to encourage production of oil and gas within the
United States by providing tax incentives, and for other purposes; to
the Committee on Finance.
the domestic oil and gas production and recovery act
Mr. NICKLES. Mr. President, I rise today to introduce the Domestic
Oil and Gas Production and Preservation Act. This legislation is an
effort to help revive our domestic oil and gas industry which plays
such a vital role in our national security. If our domestic industry is
to survive, then Congress needs to act now to provide tax incentives to
encourage production in America.
Since the early 1980's, oil and gas extraction employment has been
cut in half. Employment in the oil and gas industry has declined by
500,000 since 1984. Imports of crude oil products were $68 billion in
1996, up 24 percent over last year and the import dependency ratio now
exceeds 50 percent. From 1973 to 1996, crude oil production dropped 44
percent in the lower 48 States. We must take action now to save
domestic production not only for the sake of the oil and gas industry
but for the sake of the national security of this Nation.
To date, the Clinton administration has done nothing to encourage
domestic production. In fact, in 1996, crude oil reserves continued to
decline by 788 million barrels. Natural gas reserves fell by 2,600 Bcf
to 162,415 Bcf. In the President's budget there is nothing to aid this
industry. That is why I am introducing this bill today.
The Domestic Oil and Gas Production and Preservation Act is intended
to do just what its name implies--encourage oil and gas production and
preserve and revitalize the domestic oil and gas industry. This bill
would accomplish these goals through specific tax proposals. Section 2
of the bill would allow current expensing of geological and geophysical
costs incurred domestically including the Outer Continental Shelf.
These costs are an important and integral part of exploration and
production for oil and natural gas, and should be expensed.
In addition to the G&G expensing, this bill provides for the
elimination of the net income limit on percentage depletion. Currently,
the net income limitation requires percentage depletion to be
calculated on a property-by-property basis and disallows depletion to
the extent it exceeds the net income from a particular property, thus
discouraging producers from investing income from other oil and gas
properties to maintain marginal wells.
Furthermore, this bill clarifies that delay rental payments are
deductible, at the election of the taxpayer, as ordinary and necessary
business expenses. This clarifies an otherwise gray area in Treasury
regulations and eliminates costly administrative and compliance burdens
on both taxpayers and the IRS. It would also extend the 90-day
prepayment period to 180 days for determining when deductions may be
taken on certain oil and gas investments. Harsh winter conditions in
many States make the current 90-day limitation for commercial drilling
impractical.
Lastly, section 6 includes hydro injection as a tertiary recovery
method for purposes of the enhanced oil recovery credit. Although the
Treasury Department is tasked with continued evaluations and editions
to the list of recovery methods covered under the EOR, they have proven
notably lax in pursuing this objective. By legislating this outcome,
this bill keeps domestic production of our endangered marginal wells on
the cutting edge of available technology.
Collectively, the provisions of this bill provide much-needed
incentives to an industry that is vital to our national security. The
sooner the administration and Congress acknowledge the critical
importance of the domestic oil and gas industry and stop burdening this
industry with high taxes and regulatory obstacles, the sooner we can
take the necessary actions to preserve and revitalize this important
sector of our economy.
Mr. President, I ask unanimous consent that a summary of the bill be
printed in the Record.
Summary of the Domestic Oil and Gas Production and Recovery Act
Section 2. Election to expense geological and geophysical expenditures
Current law treatment
G&G costs are not deductible as ordinary and necessary
business expenses but are treated as capital expenditures
recovered through cost depletion over the life of the field.
G&G expenditures allocated to abandoned prospects are
deducted upon such abandonment.
Reasons for change
These costs are an important and integral part of
exploration and production for oil and natural gas. They
affect the ability of domestic producers to engage in the
exploration and development of our national petroleum
reserves. Thus, they are more in the nature of an ordinary
and necessary cost of doing business. These costs are similar
to research and development costs for other industries. For
those industries such costs are not only deductible but a tax
credit is available.
Crude oil imports are at an all-time high which makes the
U.S. vulnerable to sharp oil price increases or supply
disruptions. Domestic exploration and production must be
encouraged now to offset this potential threat to national
security and our economy. Allowing current deductibility of
G&G costs would increase capital available for domestic
exploration and production activity.
The technical ``infrastructure'' of the oil services
industry, which includes geologists and engineers, has been
moving into other industries due to reduced domestic
exploration and production. Stimulating exploration and
development activities would help rebuild the critical oil
services industry.
Encouraging the industry to use the best technology
available and to reduce its environmental footprint are
important public policy reasons to clarify that these
ordinary and necessary business expenses for the oil and gas
industry should be expensed.
Section 3. Elimination of net income limitation on percentage depletion
for oil and gas
The net income limitation severely restricts the ability of
independent producers to use percentage depletion. Depletion
is subject to many other limitations. First, it may only be
taken by independent producers and royalty owners and not
by integrated oil companies. Also, depletion may only be
claimed up to specific daily production levels (1,000
barrels of oil or 6,000 mcf of natural gas). The depletion
allowance is further limited to 65% of taxable income.
The net income limitation requires percentage depletion to
be calculated on a property by property basis and disallows
percentage depletion to the extent it exceeds the net income
from a particular property. The current requirement creates a
nightmarish quagmire of record keeping, paperwork and
compliance for taxpayers and the IRS. The typical independent
producer can have numerous oil and gas properties, and many
of them can be marginal properties (with high operating costs
and low production yields). During periods of low prices, the
producer may not have net income from a particular property,
especially from these marginal properties. In this situation,
when domestic production is most susceptible to being plugged
and abandoned, the net income limitation discourages
producers from investing income from other oil and gas
properties to maintain marginal wells.
proposal: eliminate the net income limitation on percentage depletion
Reasons for change
The Interstate Oil and Gas Compact Commission (IOGCC)
estimates there are more than 433,000 marginal wells in the
U.S. which produced more than 333 million barrels of oil in
1995. This represented more than 18% of all the oil produced
in the U.S. (excluding Alaska). The United States is the only
country with significant production from marginal wells. They
represent the ultimate in
[[Page S4760]]
conservation, since once wells are plugged and abandoned
access to the remaining resource is often lost forever.
Eliminating the net income limitation on percentage depletion
will encourage producers to keep marginally economic wells in
production and enhance optimum oil and natural gas resource
recovery. Relief would be focused to independent producers
and royalty owners.
Eliminating the net income limitation on percentage
depletion would simplify record keeping and reduce the
administrative and compliance burden for taxpayers and the
IRS.
section 4. election to expense delay rental payments
Delay rental payments are made by producers to an oil and
gas lessor prior to drilling or production. Unlike bonus
payments (made by the producer in consideration for the grant
of the lease) which generally is treated as an advance
royalty and thus capitalized, producers have historically
been allowed to elect to deduct delay rental payments
under Treasury Regulations 1.612-3(c). However, in
September, 1995, the IRS issued a technical advice (LTR
9602002) stating that such payments are preproduction
costs subject to capitalization under Section 263A of the
Internal Revenue Code. The legislative history of Section
263A is unclear and subject to varying interpretation.
Proposal: Clarify that delay rental payments are deductible, at the
election of the taxpayer, as ordinary and necessary business expenses
Reasons for change
In passing the Section 263A uniform capitalization rules,
Congress broadly intended to only affect the ``unwarranted
deferral of taxes.'' Congress did not intend to grant the IRS
the authority to repeal the well-settled industry practice of
deducting ``delay rentals'' as ordinary and necessary
business expenses.
Treasury Reg. 1.612-3. states that, ``a delay rental is an
amount paid for the privilege of deferring development of the
property and which could have been avoided by abandonment of
the lease, or by commencement of development operations, or
by obtaining production.'' Such payments represent ordinary
and necessary business expenses, not an ``unwarranted
deferral of taxes.'' Given the clear disagreement over the
legislative history and the likelihood of costly and
unnecessary litigation to resolve the issue, clarification
would eliminate administrative and compliance burdens on
taxpayers and the IRS.
section 5. extension of spudding rule
The Internal Revenue Code provides a ``spudding'' exception
to the ``economic performance rule'' in determining the year
in which deductions may be taken on certain oil and gas
investments. The economic performance rule will be satisfied,
in certain circumstances, when amounts are paid during the
preceding tax year so long as the well is spudded (the
initial boring of the hole) within 90 days of the beginning
of the following year.
proposal: extend the 90 day prepayment period to 180 days
Reasons for change
Harsh winter weather conditions in many states and
locations make the 90 day limitation for the commencement of
drilling impractical. Moreover, the current shortage of
skilled drilling rig personnel and the high utilization rate
of land-based drilling equipment, make it difficult, and in
some parts of the country impossible, to meet the 90-day
requirement. This personnel shortage has resulted from
skilled workers moving into other industries due to vastly
reduced domestic exploration and production activity over the
past few years.
Expanding the 90 day prepayment period to 180 days would
ease the industry's ability to attract capital.
seciton 6. include hydro injection as a tertiary recovery method under
the enhanced oil recovery tax credit
Marginal wells are our most endangered domestic energy
resource. By providing incentives for new methods for
enhanced recovery, we ensure domestic production of the
marginal wells remains on the cutting edge of available
technology.
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