[Congressional Record Volume 144, Number 125 (Friday, September 18, 1998)]
[Senate]
[Pages S10588-S10595]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. DURBIN (for himself, Ms. Snowe, Ms. Collins, Mr. 
        Torricelli, Ms. Mikulski, Mr. Graham, Ms. Landrieu, and Mr. 
        Lieberman):
  S. 2497. A bill to ban certain abortions; to the Committee on the 
Judiciary.


             the late-term abortion limitation act of 1998

  Mr. DURBIN. Mr. President, today the Senate is beginning 
consideration of a very controversial and contentious issue, the veto 
override of the Partial-Birth Abortion Ban Act.
  I will vote to sustain the President's veto of this bill, which I 
believe is seriously flawed. But to make my position clear and state in 
positive terms what I believe we should do to address this troubling 
issue, I am introducing legislation today known as the Late-Term 
Abortion Limitation Act of 1998.
  I am pleased to have a bipartisan group of Senators as original 
cosponsors of this legislation, including Senators Snowe, Collins, 
Torricelli, Mikulski, Graham, Landrieu, and Lieberman.
  We believe that post-viability abortions should be allowed in only 
two types of situations--when the life of the mother is in danger or 
when she faces a medically certified risk of grievous physical injury.
  Senators Daschle and Snowe put forward a measure last year that 
reflected this principle. I support them, and our legislation builds on 
what they did.
  Our bill has one significant difference from the Daschle proposal, an 
addition that we believe enhances the Daschle amendment. Our 
legislation would require a second non-treating doctor's certification 
that the abortion is medically necessary to protect the life of the 
mother or prevent grievous physical injury. This second certification 
could be waived only in the case of a medical emergency, and the 
physician would have to document the nature of the medical emergency.
  We believe this approach is one that can be passed in the United 
States Senate. It is backed by a substantial and bipartisan group of 
Senators. It is a compromise approach that can bring to a reasonable 
conclusion the long-running debate over late-term abortion procedures. 
I urge my colleagues to read the language closely and give it careful 
consideration as a good faith effort to resolve this troubling issue in 
a fair and humane manner.
  Unlike the Partial Birth Abortion Ban Act, this legislation would 
actually reduce the number of late-term abortions because, instead of 
banning only one procedure, the measure would ban all post-viability 
abortions except when a continuation of the pregnancy risks grievous 
physical injury to the mother or poses a threat to her life.
  At the same time, the legislation holds to the Roe versus Wade 
standard which makes a clear distinction between abortions occurring 
before and after viability. Unlike the partial birth abortion ban, our 
bill preserves this important distinction and is thus more likely to 
pass court scrutiny. Before viability, a decision to have an abortion 
must be made by a woman, her doctor, her family, and her conscience. 
But in the closing weeks of a pregnancy, the court affirms a role for 
addressing the public concern about late-term abortions and makes it 
clear that the State can draw the line limiting abortions to the most 
serious circumstances.
  I hope the legislation we are introducing today can help us resolve 
this debate once and for all, in a manner that is consistent with our 
laws and the views of most of the American people.
  I ask unanimous consent that a summary of the bill and the text of 
the measure be printed in the Record.
  There being no objection, the items were ordered to be printed in the 
Record, as follows:

                                S. 2297

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Late Term Abortion 
     Limitation Act of 1998''.

     SEC. 2. BAN ON CERTAIN ABORTIONS.

       (a) In General.--Title 18, United States Code, is amended 
     by inserting after chapter 73 the following:

                 ``CHAPTER 74--BAN ON CERTAIN ABORTIONS

``Sec.
``1531. Prohibition of post-viability abortions.
``1532. Penalties.
``1533. Regulations.
``1534. State law.
``1535. Definitions

     ``Sec. 1531. PROHIBITION OF POST-VIABILITY ABORTIONS.

       ``(a) In General.--It shall be unlawful for a physician to 
     intentionally abort a viable fetus unless the physician prior 
     to performing the abortion--
       ``(1) certifies in writing that, in the physician's medical 
     judgment based on the particular facts of the case before the 
     physician, the continuation of the pregnancy would threaten 
     the mother's life or risk grievous injury to her physical 
     health; and
       ``(2) an independent physician who will not perform nor be 
     present at the abortion and who was not previously involved 
     in the treatment of the mother certifies in writing that, in 
     his or her medical judgment based on the particular facts of 
     the case, the continuation of the pregnancy would threaten 
     the mother's life or risk grievous injury to her physical 
     health.
       ``(b) No Conspiracy.--No woman who has had an abortion 
     after fetal viability may be prosecuted under this chapter 
     for conspiring to violate this chapter or for an offense 
     under section 2, 3, 4, or 1512 of title 18.
       ``(c) Medical Emergency Exception.--The certification 
     requirements contained in subsection (a) shall not apply 
     when, in the medical judgment of the physician performing the 
     abortion based on the particular facts of the case before the 
     physician, there exists a medical emergency. In such a case, 
     however, after the abortion has been completed the physician 
     who performed the abortion shall certify in writing the 
     specific medical condition which formed the basis for 
     determining that a medical emergency existed.

[[Page S10589]]

     ``Sec. 1532. PENALTIES.

       ``(a) Action by the Attorney General.--The Attorney 
     General, the Deputy Attorney General, the Associate Attorney 
     General, or any Assistant Attorney General or United States 
     Attorney specifically designated by the Attorney General may 
     commence a civil action under this chapter in any appropriate 
     United States district court to enforce the provisions of 
     this chapter.
       ``(b) First Offense.--Upon a finding by the court that the 
     respondent in an action commenced under subsection (a) has 
     knowingly violated a provision of this chapter, the court 
     shall notify the appropriate State medical licensing 
     authority in order to effect the suspension of the 
     respondent's medical license in accordance with the 
     regulations and procedures developed by the State under 
     section 1533(b), or shall assess a civil penalty against the 
     respondent in an amount not to exceed $100,000, or both.
       ``(c) Second Offense--Upon a finding by the court that the 
     respondent in an action commenced under subsection (a) has 
     knowingly violated a provision of this chapter and the 
     respondent has been found to have knowingly violated a 
     provision of this chapter on a prior occasion, the court 
     shall notify the appropriate State medical licensing 
     authority in order to effect the revocation of the 
     respondent's medical license in accordance with the 
     regulations and procedures developed by the State under 
     section 1533(b), or shall assess a civil penalty against the 
     respondent in an amount not to exceed $250,000, or both.
       ``(d) Hearing.--With respect to an action under subsection 
     (a), the appropriate State medical licensing authority shall 
     be given notification of and an opportunity to be heard at a 
     hearing to determine the penalty to be imposed under this 
     section.
       ``(e) Certification Requirements.--At the time of the 
     commencement of an action under subsection (a), the Attorney 
     General, the Deputy Attorney General, the Associate Attorney 
     General, or any Assistant Attorney General or United States 
     Attorney who has been specifically designated by the Attorney 
     General to commence a civil action under this chapter, shall 
     certify to the court involved that, at least 30 calendar days 
     prior to the filing of such action, the Attorney General, the 
     Deputy Attorney General, the Associate Attorney General, or 
     any Assistant Attorney General or United States Attorney 
     involved--
       ``(1) has provided notice of the alleged violation of this 
     chapter, in writing, to the Governor or Chief Executive 
     Officer and Attorney General or Chief Legal Officer of the 
     State or political subdivision involved, as well as to the 
     State medical licensing board or other appropriate State 
     agency; and
       ``(2) believes that such an action by the United States is 
     in the public interest and necessary to secure substantial 
     justice.

     ``Sec. 1533. REGULATIONS.

       ``(a) Federal Regulations.--
       ``(1) In general.--Not later than 60 days after the date of 
     enactment of this chapter, the Secretary of Health and Human 
     Services shall publish proposed regulations for the filing of 
     certifications by physicians under this chapter.
       ``(2) Requirements.--The regulations under paragraph (1) 
     shall require that a certification filed under this chapter 
     contain--
       ``(A) a certification by the physician performing the 
     abortion, under threat of criminal prosecution under section 
     1746 of title 28, that, in his or her best medical judgment, 
     the abortion performed was medically necessary pursuant to 
     this chapter;
       ``(B) a description by the physician of the medical 
     indications supporting his or her judgment;
       ``(C) a certification by an independent physician pursuant 
     to section 1531(a)(2), under threat of criminal prosecution 
     under section 1746 of title 28, that, in his or her best 
     medical judgment, the abortion performed was medically 
     necessary pursuant to this chapter; and
       ``(D) a certification by the physician performing an 
     abortion under a medical emergency pursuant to section 
     1531(c), under threat of criminal prosecution under section 
     1746 of title 28, that, in his or her best medical judgment, 
     a medical emergency existed, and the specific medical 
     condition upon which the physician based his or her decision.
       ``(3) Confidentiality.--The Secretary of Health and Human 
     Services shall promulgate regulations to ensure that the 
     identity of a mother described in section 1531(a)(1) is kept 
     confidential, with respect to a certification filed by a 
     physician under this chapter.
       ``(b) State Regulations.--A State, and the medical 
     licensing authority of the State, shall develop regulations 
     and procedures for the revocation or suspension of the 
     medical license of a physician upon a finding under section 
     1532 that the physician has violated a provision of this 
     chapter. A State that fails to implement such procedures 
     shall be subject to loss of funding under title XIX of the 
     Social Security Act.

     ``Sec. 1534. STATE LAW.

       ``(a) In General.--The requirements of this chapter shall 
     not apply with respect to post-viability abortions in a State 
     if there is a State law in effect in that State that 
     regulates, restricts, or prohibits such abortions to the 
     extent permitted by the Constitution of the United States.
       ``(b) Definition.--In subsection (a), the term `State law' 
     means all laws, decisions, rules, or regulations of any 
     State, or any other State action, having the effect of law.

     ``Sec. 1535. DEFINITIONS.

       ``In this chapter:
       ``(1) Grievous Injury.--
       ``(A) In general.--The term `grievous injury' means--
       ``(i) a severely debilitating disease or impairment 
     specifically caused by the pregnancy; or
       ``(ii) an inability to provide necessary treatment for a 
     life-threatening condition.
       ``(B) Limitation.--The term `grievous injury' does not 
     include any condition that is not medically diagnosable or 
     any condition for which termination of the pregnancy is not 
     medically indicated.
       ``(2) Physician.--The term `physician' means a doctor of 
     medicine or osteopathy legally authorized to practice 
     medicine and surgery by the State in which the doctor 
     performs such activity, or any other individual legally 
     authorized by the State to perform abortions, except that any 
     individual who is not a physician or not otherwise legally 
     authorized by the State to perform abortions, but who 
     nevertheless directly performs an abortion in violation of 
     section 1531 shall be subject to the provisions of this 
     chapter.''.
       (b) Clerical Amendment.--The table of chapters for part I 
     of title 18, United States Code, is amended by inserting 
     after the item relating to chapter 73 the following new item:

1531.''.on certain abortions......................................
                                  ____


         The Late-Term Abortion Limitation Act of 1998--Summary

       The Late-Term Abortion Limitation Act of 1998 would ban all 
     post-viability abortions except in cases where both the 
     attending physician and an independent non-treating physician 
     certify in writing that, in their medical judgment, the 
     continuation of the pregnancy would threaten the mother's 
     life or risk grievous injury to her physical health. Grievous 
     injury is defined, as in last year's Daschle-Snowe 
     alternative to the partial-birth abortion ban bill, as (1) a 
     severely debilitating disease or impairment specifically 
     caused by the pregnancy of (2) an inability to provide 
     necessary treatment for a life-threatening condition, and is 
     limited to conditions for which termination of the pregnancy 
     is medically indicated. The certification requirements could 
     be waived in a medical emergency, but the physician would 
     subsequently have to certify in writing what specific medical 
     condition formed the basis for determining that a medical 
     emergency existed.
       This legislation provides a more effective and 
     constitutional approach to this difficult issue than the 
     partial-birth abortion ban:
       This legislation will actually reduce the number of late-
     term abortions. In contrast, the partial-birth abortion ban 
     will not stop a single abortion at any stage of gestation. 
     The partial-birth abortion ban, by prohibiting only one 
     particular procedure, will merely induce physicians to switch 
     to a different procedure that is not banned. The Late-Term 
     Abortion Limitation Act will stop abortions by any method 
     after a fetus is viable, except when medical necessity 
     indicates otherwise.
       This legislation fits clearly within the constitutional 
     parameters set forth by the U.S. Supreme Court for government 
     restriction of abortion. In contrast, the partial-birth 
     abortion ban, by prohibiting certain types of abortions 
     before viability, breaches the court's standard that the 
     government does not have a compelling interest in restricting 
     abortions prior to viability.
       This legislation retains the abortion option for mothers 
     facing extraordinary medical conditions such as breast 
     cancer, preeclampsia, uterine rupture, or non-Hodgkin's 
     lymphoma, for which termination of the pregnancy may be 
     recommended by the woman's physician due to the risk of 
     grievous injury to the mother's physical health or life. In 
     contrast, the partial-birth abortion ban provides no such 
     exception to protect the mother from grievous injury to her 
     physical health.
       At the same time, by clearly limiting the medical 
     circumstances where post-viability abortions are permitted, 
     this legislation protects fetal life in cases where the 
     mother's health is not at such high risk.
       The Late-Term Abortion Limitation Act is similar to the 
     legislation proposed by Senators Daschle, Snowe, and others 
     last year as an alternative to the partial-birth abortion ban 
     bill, with one significant change:
       The legislation requires a second doctor to certify the 
     medical need for a post-viability abortion, to ensure that 
     post-viability abortions take place only when continuing the 
     pregnancy would prevent the woman from receiving treatment 
     for a life-threatening condition related to her physical 
     health or would cause a severely debilitating disease or 
     impairment to her physical health.
       Enforcement of the legislation is identical to the 
     enforcement mechanism in the Daschle-Snowe alternative. The 
     Justice Department could initiate a civil action against a 
     physician who knowingly violated this law, with penalties of 
     up to $100,000 and/or loss of medical license (up to $250,000 
     and/or loss of medical license for repeat offenses).

  Ms. COLLINS. Mr. President, I am pleased to be joining with my 
colleagues, Senators Durbin and Snowe, in introducing this bill to ban 
all late-term abortions, including partial birth abortions, that are 
not necessary to save the mother's life or to protect her from grievous 
physical harm.

[[Page S10590]]

  Let me be clear from the outset. I am strongly opposed to all late-
term abortions, including partial birth abortions. I agree that they 
should be banned. However, I believe that an exception must be made for 
those rare cases when it is necessary to save the life of the mother or 
to protect her from grievous physical harm. Fortunately, these 
procedures are extremely rare in my State, where there were just two 
late-term abortions between 1984 and 1996.
  We believe that this debate should not be about one particular method 
of abortion, but rather about the larger question of under what 
circumstances should late-term, or post-viability, abortions be legally 
available. We believe that all late-term abortions--regardless of the 
procedure used--should be banned, except in those rare cases where the 
life or the physical health of the mother is at serious risk.
  In my view, Congress is ill-equipped to make judgments on specific 
medical procedures. As the American College of Obstetricians and 
Gynecologists--which represents over 90 percent of ob-gyns and which 
opposes the partial birth abortion ban--has said, ``the intervention of 
legislative bodies into medical decision-making is inappropriate, ill 
advised, and dangerous.'' Most politicians have neither the training 
nor the experience to decide which procedure is most appropriate in a 
given case. These medically difficult and highly personal decisions 
should be left for families to make in consultation with their doctors.
  The Supreme Court, in Roe v. Wade, has identified ``viability''--the 
point at which the fetus is capable of sustaining life outside the womb 
with or without support--as the defining point in determining the 
constitutionality of restrictions on abortion. While I don't believe 
that it is appropriate for us to dictate medical practice, I do believe 
that it is appropriate for Congress to determine the circumstances 
under which access to late-term abortions--by any procedure--should be 
restricted.
  That is what the legislation we are introducing today would do. Our 
bill goes beyond the partial birth abortion ban, which simply prohibits 
a specific medical procedure and will not prevent a single abortion. 
Let me emphasize that point. The partial birth legislation would not 
prevent a single late-term abortion. A physician could simply use 
another, perhaps more dangerous method to end the pregnancy.
  By contrast, our bill would prohibit the abortion of any viable 
fetus, by any method, unless that abortion is necessary to preserve the 
life of the mother or to prevent ``grievous injury'' to her physical 
health. We have taken great care to tightly limit the health exception 
in this bill to ``grievous injury'' to the mother's physical health. It 
would not allow late-term abortions to be performed simply because the 
woman is depressed or feeling stressed or has a minor health problem 
because of the pregnancy.
  ``Grievous injury'' is narrowly and strictly defined by our bill as 
either a ``severely debilitating disease or impairment specifically 
caused by the
pregnancy,'' or ``an inability to provide necessary treatment for a 
life-threatening condition.'' Moreover, ``grievous injury'' does not 
include any condition that is not medically diagnosable or any 
condition for which termination of the pregnancy is not medically 
indicated.
  This bill includes an additional safeguard. The initial opinion of 
the treating physician that the continuation of the pregnancy would 
threaten the mother's life or risk grievous injury to her physical 
health must be confirmed by a ``second opinion.'' This second opinion 
must come from an independent physician who will not be involved in the 
abortion procedure and who has not been involved in the treatment of 
the mother. This second physician must also certify--in writing--that, 
in his or her medical judgment, the continuation of the pregnancy would 
threaten the mother's life or risk grievous injury to her physical 
health.
  What we are talking about are the severe, medically diagnosable 
threats to a woman's physical health that are sometimes brought on or 
aggravated by pregnancy.
  Let me give you a few examples: primary pulmonary hypertension, which 
can cause sudden death or intractable congestive heart failure; severe 
pregnancy-aggravated hypertension with accompanying kidney or liver 
failure; complications from aggravated diabetes such as amputation or 
blindness; or an inability to treat aggressive cancers such as 
leukemia, breast cancer, or non-Hodgkins lymphoma.
  These are all obstetric conditions that are cited in the medical 
literature as possible indications for pregnancy terminations. In these 
extremely rare cases--where the mother has been certified by two 
physicians to be at risk of losing her life or suffering grievous 
physical harm--I believe that we should leave the very difficult 
decisions about what should be done to the best judgment of the women, 
families and physicians involved.
  Mr. President, the legislation we are introducing today is a fair and 
compassionate compromise on this extremely difficult issue. It would 
ensure that all late-term abortions--including partial birth 
abortions--are strictly limited to those rare and tragic cases where 
the life or the physical health of the mother is in serious jeopardy, 
and I urge my colleagues to join me in supporting it. This legislation 
presents an unusual opportunity for both ``pro-choice'' and ``pro-
life'' advocates to work together on a reasonable approach.
  I also ask unanimous consent that a recent editorial from the Bangor 
Daily News endorsing our approach be included in the Congressional 
Record at the conclusion of my remarks.
  There being no objection, the editorial was ordered to be printed in 
the Record, as follows:

              [From the Bangor Daily News, Sept. 11, 1998]

                             Abortion Vote

       Back when the subject of abortion was debated on moral and 
     religious grounds, opponents could disagree while 
     understanding how each arrived at a position. Now that 
     abortion is a vehicle for fund raising there is no room for 
     understanding because understanding doesn't bring in the 
     bucks or whip up the membership.
       With the Senate's vote next week on late-term abortion, the 
     Christian Coalition, according to The Washington Post, has 
     directed at five senators radio advertisements, 300,000 
     postcards and countless automated telephone calls. Two of the 
     five senators are Maine's Olympia Snowe and Susan Collins. 
     The purpose of this extensive campaign is to harass these 
     senators into dropping their support for a compromise measure 
     that allowed late-term abortions to protect against 
     ``grievous injury'' to the physical health of the mother.
       But the vote is more about power than pregnancy--Maine had 
     only two third-term abortions between 1984 and 1996, 
     consistent with other states. If abortions were the primary 
     concern, the coalition could with one magazine ad extolling 
     the effectiveness of condoms do more to reduce unwanted 
     pregnancies than this entire Senate campaign. As a bonus, the 
     condom ad might also help reduce sexually transmitted 
     diseases.
       The coalition's main goal is to remain relevant now that 
     its best-known leader, Ralph Reed, has moved on. The group 
     has two themes, abortion and gay rights, and even Mr. Reed 
     says gay rights is a sure loser. That leaves the coalition 
     trying to override a presidential veto of a ban on so-called 
     partial-birth abortions, but its lack of sincerity is evident 
     in its refusal to accept an exemption for the physical health 
     of the mother.
       Assuming for a moment that telling doctors what procedures 
     they may use to perform an abortion is constitutionally 
     legal--and the court's 1976 Danforth decision says it isn't--
     this compromise should be seen as a fair way for opponents to 
     agree. The grievous injury provision is not the large 
     loophole that the coalition claims. It is narrowly defined to 
     cover either a ``severely debilitating disease or impairment 
     specifically caused by the pregnancy'' or an ``inability to 
     provide necessary treatment for a life-threatening 
     condition.'' It does not include any condition that is not 
     medically diagnosable or any condition that can be treated 
     without ending a pregnancy.
       The grievous injury exemption would allow treatment for 
     such illnesses as leukemia or non-Hodgkins lymphoma, primary 
     pulmonary hypertension, which can cause sudden death or 
     congestive heart failure, and pregnancy-aggravated 
     hypertension, which can cause kidney or liver failure.
       Instead of recognizing the humanity in allowing for 
     abortions under the threat of these illnesses, the coalition 
     continues to demand an end to the partial-birth procedure, 
     with an exemption only for the near-certain death of the 
     mother. Banning a procedure, of course, doesn't reduce the 
     number of abortions; it forces physicians to use riskier 
     procedures.
       Sens. Snowe and Collins have supported a fair and 
     compassionate compromise in the extremely difficult issue of 
     abortion. They deserve support from constituents who 
     recognize the coalition's agenda as having little to do with 
     unwanted pregnancies and everything to do with power.
                                 ______
                                 
      By Mr. GRASSLEY (for himself and Ms. Moseley-Braun):
  S. 2498. A bill to amend the Internal Revenue Code of 1986 to clarify 
the tax

[[Page S10591]]

treatment of agricultural cooperatives and to allow declaratory 
judgment relief for such cooperatives; to the Committee on Finance.
                                 ______
                                 
      By Ms. MOSELEY-BRAUN (for herself and Mr. Grassley):
  S. 2501. A bill to amend the Internal Revenue Code of 1986 to exempt 
small issue bonds for agriculture from the State volume cap; to the 
Committee on Finance.


                      Agricultural Tax Legislation

 Mr. GRASSLEY. Mr. President, today we introduce two bills that 
will help farmers. These bills take another step in insuring the 
viability of family farming into the next century.
  This first bill clarifies the laws regarding both Section 521 and 
Subchapter T agricultural cooperatives. Recent action by the Internal 
Revenue Service hinders farmers' attempts to form value-added 
cooperatives and to use these cooperatives as a source of income and 
stability. Specifically, the IRS changed its position of allowing 
cooperatives, in connection with their marketing functions, to 
manufacture or otherwise change the basic form of their members' 
products without jeopardizing the cooperatives' status.
  Farmers value-added cooperatives were designed to encourage farmers 
to own the businesses that process their products, and to give them the 
benefit of the finished product. These cooperatives help create new 
products that benefit farmers. The IRS is choosing to differentiate 
between using a machine process and using a biological process to 
manufacture the finished product. There should be no difference--there 
isn't for business, there isn't for farmers, so there shouldn't be for 
the IRS.
  The second bill that we are introducing today will take Aggie bonds 
out from under the private activity bond cap. Aggie bonds are an 
important tool for first time farmers. Removing them from the existing 
cap will greatly enhance the opportunities for beginning and less 
established farmers and ranchers to acquire affordable, low cost credit 
for agricultural purchases. Most industrial revenue bonds are typically 
issued for millions of dollars, underwritten, rated and sold to 
investors. Aggie bonds, which cannot exceed $250,000, are not 
underwritten, are not rated, and are not sold to investors. Rather, 
they are sold to local lenders who finance beginning farmers with a 
lower than normal interest rate. Several states would like to start 
offering Aggie bonds but cannot because their volume cap is already 
used for non-agricultural projects. Many other states, including my 
state of Iowa, cannot meet the demand for Aggie bonds.
  These are two bills that will help farmers now, and always. These 
offer immediate help, and are part of the tax code restructuring that 
we must enact to make the playing field fair to America's farmers. I 
want to thank Senator Moseley-Braun for working with me on these 
important pieces of legislation.
 Ms. MOSELEY-BRAUN. Mr. President, I am pleased to introduce 
two bills today with my distinguished colleague from Iowa, Senator 
Grassley, that will benefit farmers in rural America.
  As my colleagues may be aware, farmer-owned cooperatives play a major 
role in providing food and fiber to consumers. These cooperatives also 
provide their farmer-owners with additional market stability and help 
to strengthen farm income.
  Current tax law states that farmers, fruit growers, or ``like 
associations'' that are organized and operated on a cooperative basis 
for the purpose of marketing the products of its members or other 
producers shall be exempt from federal income tax if those cooperatives 
are developed for the purpose of marketing the products of the members 
or other producers, and turning back to the members proceeds of the 
sales, less marketing expenses.
  Farmers nationwide are joining together in self-help efforts to 
develop cooperatives and to develop new uses for the commodities that 
they grow, but recently the Internal Revenue Service (IRS) ruled that 
in certain instances, some forms of value-added farmer-owned 
cooperatives are not tax exempt. The Grassley/Moseley-Braun bill would 
overturn that IRS ruling and amend the current section of the tax code 
to explicitly cover these types of cooperatives.
  Another concern that farmers have shared with me is the future of 
agriculture and the ability of their children and other beginning 
farmers to enter into farming as a way of life. I have worked in the 
Senate to change federal policies that will lower the obstacles for 
younger farmers who enter into farming as a profession.
  One such program is the ``Aggie Bonds'' program. In the 103rd 
Congress, I cosponsored the law that granted a permanent tax exemption 
for these bonds. I also worked to include provisions in the Small 
Business Tax Relief Act of 1996 to widen eligibility for the bonds, 
increasing the amount of land a beginning farmer may own to qualify for 
the loan.
  Today my Iowa colleague and I introduce a bill that further improves 
this successful program by exempting aggie bonds from the volume cap on 
industrial revenue bonds. Currently, Federal law allows states to issue 
tax exempt industrial revenue bonds that are earmarked for purchases of 
farmland, equipment, breeding livestock, as well as farm improvements 
by new or beginning farmers. The Farm Service Agency (FSA) also has 
authorized State chartered, non-profit corporations to make guaranteed 
mortgage and farm operating loans. Unfortunately, the aggie bond 
program and the FSA guaranteed farm mortgage programs have size limits 
of $250,000 and $300,000 respectively.
  Given the rise in property costs, these limits fail to provide 
meaningful funds for small farm purchase or often time prevent certain 
classes of farmers from obtaining credit. In addition, aggie bonds are 
subject to statewide ``caps'' applicable to both small farmers and 
established users.
  Most industrial revenue bonds are typically issued for million of 
dollars, underwritten, rated and sold to investors. Aggie bonds, which 
cannot exceed $250,000, are not underwritten, are not rated, and are 
not sold to investors; they are sold to local lenders who finance 
beginning farmers with a lower than normal interest rate. Most of the 
private-activity bond volume is used by large corporations for 
manufacturing or for multi-family housing. Aggie bonds are used by 
beginning farmers and ranchers.

  Several states, such as Illinois, has discovered that the volume cap 
is already used up by non-agricultural projects, and many states cannot 
meet the demand for Aggie Bonds.
  Exempting Aggie Bonds from the volume cap would greatly enhance the 
opportunities for young or beginning, less established farmers and 
ranchers to acquire affordable, low cost credit for agricultural 
purchases such as land, livestock, machinery, and farm improvements. 
The Moseley-Braun/Grassley bill exempts aggie bonds from the volume 
cap.
  These two bills will help farmers in Illinois, Iowa, and all of rural 
America. I hope my colleagues will join us in supporting these bills 
and I urge their swift passage in the United States Senate.
                                 ______
                                 
      By Mr. GLENN:
  S. 2499. A bill to provide for a transition to market-based rates for 
power sold by the Federal Power Marketing Administrations and the 
Tennessee Valley Authority, and for other purposes; to the Committee on 
Energy and Natural Resources.


               Power Marketing Administrations Reform Act

 Mr. GLENN. Mr. President, today, I introduce the Power 
Marketing Administration Reform Act, a bill that will require the Power 
Marketing Administrations, or PMAs, to sell power at market rates. The 
Tennessee Valley Authority, or TVA, will also be included in the bill's 
requirements. My bill is a companion to H.R. 3518, introduced by 
Representatives Bob Franks (R-NJ) and Marty Meehan (D-MA) in the House.
  PMAs have failed to recover their operating costs for too long. My 
colleagues in the Senate are well aware of my activities to rectify 
this discrepancy that has brought about a fiscal shortfall and 
significant environmental damage. I have been joined by many in this 
Chamber in requesting reports from the Government Accounting Office, 
the Congressional Budget Office, and the Inspector General of the U.S. 
Department of Energy, the federal department that oversees the 
operation of the PMAs. All of the reports on the

[[Page S10592]]

PMAs and the TVA have indicated severe financial problems.
  According to the Congressional Budget Office, in a report released in 
March, 1997, selling PMA electricity at market rates rather than at the 
currently subsidized rates will raise approximately $200 million per 
year, money that will be returned to the U.S. Treasury. Later in 1997, 
CBO concluded that eliminating this costly subsidy would complement 
steps already taken by Congress to deregulate energy markets and to 
reduce government interference in market operations.
  When the PMAs were established during Franklin Roosevelt's 
administration, they served a useful and necessary purpose. Jobs were 
created for a nation that was struggling out of a horrible depression. 
Areas that could not afford the cost of purchasing power lines and 
generators for their residents were provided electricity at below 
market rates. At that time, below market sales were a good idea that 
allowed many more Americans than could afford electricity to enjoy its 
benefits. CBO concludes that over the past sixty years, many of the 
concerns that brought about the federal government's role in supplying 
power have diminished greatly. Nearly 60% of federal sales go to just 
four states: Tennessee, Alabama, Washington, and Oregon. In fact, 
nonfederal dams produced an average of 20% more electricity per unit of 
capacity than did dams supplying the PMAs.
  According to a General Accounting Office report entitled, ``Federal 
Electricity Activities,'' released in October, 1997, in fiscal 1996, 
Bonneville, the three other PMAs, and the Rural Utilities Service cost 
the American taxpayer $2.5 billion. In the four year period from 1992 
to 1996, the government's net costs were $8.6 billion. In March, 1998, 
the GAO released an additional study entitled, ``Federal Power: Options 
for Selected Power Marketing Administrations' Role in a Changing 
Electricity Industry.'' Among the conclusions in this report were that 
for that same four year period from 1992-1996, the federal government 
incurred a net cost of $1.5 billion from its involvement in the 
electricity-related activities of Southeastern, Southwestern, and 
Western. Up to $1.4 billion of nearly $7.2 billion of the federal 
investment in assets derived from these activities is at some risk of 
nonrecovery.
  As for fairness in lending, the GAO found that the interest paid by 
the PMAs on their outstanding debt (3.5%) is often substantially below 
the rate that the U.S. Treasury incurred while providing funding to the 
PMAs (9%), resulting in a shortfall on interest alone of 5.5%. And 
rates charged by these PMAs were 40% or more below market rates.
  Mr. President, it is important to note that my bill does not close 
the PMAs or the TVA. Rather, it helps them to transition to a market-
based operation whereby the vast majority of consumers who do not 
benefit from PMA below-cost power sales will no longer be penalized so 
that a few large power companies can purchase cheap, bulk power. My 
bill will provide for full cost recovery rates for power sold by the 
PMAs and the TVA. To accomplish this goal, PMA and TVA rates will be 
recalculated and resubmitted to the Federal Energy Regulatory 
Commission (FERC) for approval.
  In addition, the bill requires that PMA and TVA transmission 
facilities are subject to open-access regulation by the FERC, and that 
regulation will be strengthened by authorizing FERC to revise such 
rates. Cooperatives and public power entities will be given the right 
of first refusal of PMA and TVA power at market prices. Revenue accrued 
from the revisal of these rates will go first to the U.S. Treasury to 
cover all costs. The residual amount will then be disbursed by formula 
to the Treasury to mitigate damage to fish and wildlife and other 
environmental damage attributed to the operation of PMAs and the TVA, 
and to support renewable electricity generating resources.
  Mr. President, these figures speak for themselves. In an era where 
the Congress has taken great strides toward eliminating the 
government's involvement in private industry, the PMAs are a white 
elephant. Sixty years after its inception, public power is less 
expensive, more accessible, and more widely available than ever before. 
There is no reason for the government to continue this wasteful subsidy 
to the fiscal detriment of the American people and the U.S. Treasury. I 
urge my colleagues to join me and my colleagues, Senators Moynihan and 
Reed of Rhode Island, in supporting this bill.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2499

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Power Marketing 
     Administration Reform Act of 1998''.

     SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds that--
       (1) the use of fixed allocations of joint multipurpose 
     project costs and the failure to provide for the recovery of 
     actual interest costs and depreciation have resulted in--
       (A) substantial failures to recover costs properly 
     recoverable through power rates by the Federal Power 
     Marketing Administrations and the Tennessee Valley Authority; 
     and
       (B) the imposition of unreasonable burdens on the taxpaying 
     public;
       (2) existing underallocations and underrecovery of costs 
     have led to inefficiencies in the marketing of Federally 
     generated electric power and to environmental damage; and
       (3) with the emergence of open access to power transmission 
     and competitive bulk power markets, market prices will 
     provide the lowest reasonable rates consistent with--
       (A) sound business principles;
       (B) maximum recovery of costs properly allocated to power 
     production; and
       (C) encouraging the most widespread use of power marketed 
     by the Federal Power Marketing Administrations and the 
     Tennessee Valley Authority.
       (b) Purposes.--The purposes of this Act are to provide 
     for--
       (1) full cost recovery rates for power sold by the Federal 
     Power Marketing Administrations and the Tennessee Valley 
     Authority; and
       (2) a transition to market-based rates for the power.

     SEC. 3. SALE OR DISPOSITION OF FEDERAL POWER BY FEDERAL POWER 
                   MARKETING ADMINISTRATIONS AND THE TENNESSEE 
                   VALLEY AUTHORITY.

       (a) Accounting.--Notwithstanding any other provision of 
     law, as soon as practicable after the date of enactment of 
     this Act, the Secretary of Energy, in consultation with the 
     Federal Energy Regulatory Commission, shall develop and 
     implement procedures to ensure that the Federal Power 
     Marketing Administrations and the Tennessee Valley Authority 
     use the same accounting principles and requirements 
     (including the accounting principles and requirements with 
     respect to the accrual of actual interest costs during 
     construction and pending repayment for any project and 
     recognition of depreciation expenses) as are applied by the 
     Commission to the electric operations of public utilities.
       (b) Development and Submission of Rates to the 
     Commission.--
       (1) In general.--Notwithstanding any other provision of 
     law, not later than 1 year after the date of enactment of 
     this Act and periodically thereafter but not less frequently 
     than once every 5 years, each Federal Power Marketing 
     Administration and the Tennessee Valley Authority shall 
     submit to the Federal Energy Regulatory Commission a 
     description of proposed rates for the sale or disposition of 
     Federal power that will ensure the recovery of all costs 
     incurred by the Federal Power Marketing Administration or the 
     Tennessee Valley Authority, respectively, for the generation 
     and marketing of the Federal power.
       (2) Costs to be recovered.--The costs to be recovered under 
     paragraph (1)--
       (A) shall include all fish and wildlife expenditures 
     required under treaty and legal obligations associated with 
     the construction and operation of the facilities from which 
     the Federal power is generated and sold; and
       (B) shall not include any cost of transmitting the Federal 
     power.
       (c) Commission Review, Approval, or Modification.--
       (1) In general.--The Federal Energy Regulatory Commission 
     shall review and either approve or modify rates for the sale 
     or disposition of Federal power submitted to the Commission 
     by each Federal Power Marketing Administration and the 
     Tennessee Valley Authority under this section, in a manner 
     that ensures that the rates will recover all costs described 
     in subsection (b)(2).
       (2) Basis for review.--The review by the Commission under 
     paragraph (1) shall be based on the record of proceedings 
     before the Federal Power Marketing Administration or the 
     Tennessee Valley Authority, except that the Commission shall 
     afford all affected persons an opportunity for an additional 
     hearing in accordance with the procedures established for 
     ratemaking by the Commission under the Federal Power Act (16 
     U.S.C. 791a et seq.).
       (d) Application of Rates.--
       (1) In general.--Beginning on the date of approval or 
     modification by the Commission of rates under this section, 
     each Federal

[[Page S10593]]

     Power Marketing Administration and the Tennessee Valley 
     Authority shall apply the rates, as approved or modified by 
     the Commission, to each existing contract for the sale or 
     disposition of Federal power by the Federal Power Marketing 
     Administration or the Tennessee Valley Authority to the 
     maximum extent permitted by the contract.
       (2) Applicability.--This section shall cease to apply to a 
     Federal Power Marketing Administration or the Tennessee 
     Valley Authority as of the date of termination of all 
     commitments under any contract for the sale or disposition of 
     Federal power that were in existence as of the date of 
     enactment of this Act.
       (e) Accounting Principles and Requirements.--In developing 
     or reviewing the rates required by this section, the Federal 
     Power Marketing Administrations, the Tennessee Valley 
     Authority, and the Commission shall rely on the accounting 
     principles and requirements developed under subsection (a).
       (f) Interim Rates.--Until market pricing for the sale or 
     disposition of Federal power by a Federal Power Marketing 
     Administration or the Tennessee Valley Authority is fully 
     implemented, the full cost recovery rates required by this 
     section shall apply to--
       (1) a new contract entered into after the date of enactment 
     of this Act for the sale of power by a Federal Power 
     Marketing Administrator or the Tennessee Valley Authority; 
     and
       (2) a renewal after the date of enactment of this Act of an 
     existing contract for the sale of power by a Federal Power 
     Marketing Administration or the Tennessee Valley Authority.
       (g) Transition to Market-Based Rates.--
       (1) In general.--If the transition to full cost recovery 
     rates would result in rates that exceed market rates, the 
     Secretary of Energy may approve rates for power sold by 
     Federal Power Marketing Administrations at market rates, and 
     the Tennessee Valley Authority may approve rates for power 
     sold by the Tennessee Valley Authority at market rates, if--
       (A) operation and maintenance costs are recovered, 
     including all fish and wildlife costs required under existing 
     treaty and legal obligations;
       (B) the contribution toward recovery of investment 
     pertaining to power production is maximized; and
       (C) purchasers of power under existing contracts consent to 
     the remarketing by the Federal Power Marketing Administration 
     or the Tennessee Valley Authority of the power through 
     competitive bidding not later than 3 years after the approval 
     of the rates.
       (2) Competitive bidding.--Competitive bidding shall be used 
     to remarket power that is subject to, but not sold in 
     accordance with, paragraph (1).
       (h) Market-Based Pricing.--
       (1) In general.--Not later than 2 years after the date of 
     enactment of this Act, the Secretary of Energy shall develop 
     and implement procedures to ensure that all power sold by 
     Federal Power Marketing Administrations and the Tennessee 
     Valley Authority is sold at prices that reflect demand and 
     supply conditions within the relevant bulk power supply 
     market.
       (2) Bid and auction procedures.--The Secretary of Energy 
     shall establish by regulation bid and auction procedures to 
     implement market-based pricing for power sold under any power 
     sales contract entered into by a Federal Power Marketing 
     Administration or the Tennessee Valley Authority after the 
     date that is 2 years after the date of enactment of this Act, 
     including power that is under contract but that is declined 
     by the party entitled to purchase the power and remarketed 
     after that date.
       (i) Use of Revenue Collected Through Market-Based 
     Pricing.--
       (1) In general.--Revenue collected through market-based 
     pricing shall be disposed of as follows:
       (A) Revenue for operations, fish and wildlife, and project 
     costs.--Revenue shall be remitted to the Secretary of the 
     Treasury to cover--
       (i) all power-related operations and maintenance expenses;
       (ii) all fish and wildlife costs required under existing 
     treaty and legal obligations; and
       (iii) the project investment cost pertaining to power 
     production.
       (B) Remaining revenue.--Revenue that remains after 
     remission to the Secretary of the Treasury under subparagraph 
     (A) shall be disposed of as follows:
       (i) Federal budget deficit.--50 percent of the revenue 
     shall be remitted to the Secretary of the Treasury for the 
     purpose of reducing the Federal budget deficit.
       (ii) Fund for environmental mitigation and restoration.--35 
     percent of the revenue shall be deposited in the fund 
     established under paragraph (2)(A).
       (iii) Fund for renewable resources.--15 percent of the 
     revenue shall be deposited in the fund established under 
     paragraph (3)(A).
       (2) Fund for environmental mitigation and restoration.--
       (A) Establishment.--
       (i) In general.--There is established in the Treasury of 
     the United States a fund to be known as the ``Fund for 
     Environmental Mitigation and Restoration'' (referred to in 
     this paragraph as the ``Fund''), consisting of funds 
     allocated under paragraph (1)(B)(ii).
       (ii) Administration.--The Fund shall be administered by a 
     Board of Directors consisting of the Secretary of the 
     Interior, the Secretary of Energy, and the Administrator of 
     the Environmental Protection Agency, or their designees.
       (B) Use.--Amounts in the Fund shall be available for making 
     expenditures--
       (i) to carry out project-specific plans to mitigate damage 
     to, and restore the health of, fish, wildlife, and other 
     environmental resources that is attributable to the 
     construction and operation of the facilities from which power 
     is generated and sold; and
       (ii) to cover all costs incurred in establishing and 
     administering the Fund.
       (C) Project-specific plans.--
       (i) In general.--The Board of Directors of the Fund shall 
     develop a project-specific plan described in subparagraph 
     (B)(i) for each project that is used to generate power 
     marketed by the Federal Power Marketing Administration or the 
     Tennessee Valley Authority.
       (ii) Use of existing data, information, and plans.--In 
     developing plans under clause (i), the Board, to the maximum 
     extent practicable, shall rely on existing data, information, 
     and mitigation and restoration plans developed by--

       (I) the Commissioner of the Bureau of Reclamation;
       (II) the Director of the United States Fish and Wildlife 
     Service;
       (III) the Administrator of the Environmental Protection 
     Agency; and
       (IV) the heads of other Federal, State, and tribal 
     agencies.

       (D) Maximum amount.--
       (i) In general.--The Fund shall maintain a balance of not 
     more than $200,000,000 in excess of the amount that the Board 
     of Directors of the Fund determines is necessary to cover the 
     costs of project-specific plans required under this 
     paragraph.
       (ii) Surplus revenue for deficit reduction.--Revenue that 
     would be deposited in the Fund but for the absence of such 
     project-specific plans shall be used by the Secretary of the 
     Treasury for purposes of reducing the Federal budget deficit.
       (3) Fund for renewable resources.--
       (A) Establishment.--
       (i) In general.--There is established in the Treasury of 
     the United States a fund to be known as the ``Fund for 
     Renewable Resources'' (referred to in this paragraph as the 
     ``Fund''), consisting of funds allocated under paragraph 
     (1)(B)(iii).
       (ii) Administration.--The Fund shall be administered by the 
     Secretary of Energy.
       (B) Use.--Amounts in the Fund shall be available for making 
     expenditures--
       (i) to pay the incremental cost (above the expected market 
     cost of power) of nonhydroelectric renewable resources in the 
     region in which power is marketed by a Federal Power 
     Marketing Administration; and
       (ii) to cover all costs incurred in establishing and 
     administering the Fund.
       (C) Administration.--Amounts in the Fund shall be expended 
     only--
       (i) in accordance with a plan developed by the Secretary of 
     Energy that is designed to foster the development of 
     nonhydroelectric renewable resources that show substantial 
     long-term promise but that are currently too expensive to 
     attract private capital sufficient to develop or ascertain 
     their potential; and
       (ii) on recipients chosen through competitive bidding.
       (D) Maximum amount.--
       (i) In general.--The Fund shall maintain a balance of not 
     more than $50,000,000 in excess of the amount that the 
     Secretary of Energy determines is necessary to carry out the 
     plan developed under subparagraph (C)(i).
       (ii) Surplus revenue for deficit reduction.--Revenue that 
     would be deposited in the Fund but for the absence of the 
     plan shall be used by the Secretary of the Treasury for 
     purposes of reducing the Federal budget deficit.
       (j) Preference.--
       (1) In general.--In making allocations or reallocations of 
     power under this section, a Federal Power Marketing 
     Administration and the Tennessee Valley Authority shall 
     provide a preference for public bodies and cooperatives by 
     providing a right of first refusal to purchase the power at 
     market prices.
       (2) Use.--
       (A) In general.--Power purchased under paragraph (1)--
       (i) shall be consumed by the preference customer or resold 
     for consumption by the constituent end-users of the 
     preference customer; and
       (ii) may not be resold to other persons or entities.
       (B) Transmission access.--In accordance with regulations of 
     the Federal Energy Regulatory Commission, a preference 
     customer shall have transmission access to power purchased 
     under paragraph (1).
       (3) Competitive bidding.--If a public body or cooperative 
     does not purchase power under paragraph (1), the power shall 
     be allocated to the next highest bidder.
       (k) Reforms.--The Secretary of Energy shall require each 
     Federal Power Marketing Administration to implement--
       (1) program management reforms that require the Federal 
     Power Marketing Administration to assign personnel and incur 
     expenses only for authorized power marketing, reclamation, 
     and flood control activities and not for ancillary activities 
     (including consulting or operating services for other 
     entities); and

[[Page S10594]]

       (2) annual reporting requirements that clearly disclose to 
     the public, the activities of the Federal Power Marketing 
     Administration (including the full cost of the power projects 
     and power marketing programs).
       (l) Contract Renewal.--Effective beginning on the date of 
     enactment of this Act, a Federal Power Marketing 
     Administration shall not enter into or renew any power 
     marketing contract for a term that exceeds 5 years.
       (m) Restrictions.--Except for the Bonneville Power 
     Administration, each Federal Power Marketing Administration 
     shall be subject to the restrictions on the construction of 
     transmission and additional facilities that are established 
     under section 5 of the Act entitled ``An Act authorizing the 
     construction of certain public works on rivers and harbors 
     for flood control, and for other purposes'', approved 
     December 22, 1944 (commonly known as the ``Flood Control Act 
     of 1944'') (58 Stat. 890)).

     SEC. 4. TRANSMISSION SERVICE PROVIDED BY FEDERAL POWER 
                   MARKETING ADMINISTRATIONS AND TENNESSEE VALLEY 
                   AUTHORITY.

       (a) In General.--Subject to subsection (b), a Federal Power 
     Marketing Administration and the Tennessee Valley Authority 
     shall provide transmission service on an open access basis, 
     and at just and reasonable rates approved or established by 
     the Federal Energy Regulatory Commission under part II of the 
     Federal Power Act (16 U.S.C. 824 et seq.), in the same manner 
     as the service is provided under Commission rules by any 
     public utility subject to the jurisdiction of the Commission 
     under that part.
       (b) Expansion of Capabilities or Transmissions.--Subsection 
     (a) does not require a Federal Power Marketing Administration 
     or the Tennessee Valley Authority to expand a transmission or 
     interconnection capability or transmission.

     SEC. 5. INTERIM REGULATION OF POWER RATE SCHEDULES OF FEDERAL 
                   POWER MARKETING ADMINISTRATIONS.

       (a) In General.--During the date beginning on the date of 
     enactment of this Act and ending on the date on which market-
     based pricing is implemented under section 3 (as determined 
     by the Federal Energy Regulatory Commission), the Commission 
     may review and approve, reject, or revise power rate 
     schedules recommended for approval by the Secretary of 
     Energy, and existing rate schedules, for power sales by a 
     Federal Power Marketing Administration.
       (b) Basis for Approval.--In evaluating rates under 
     subsection (a), the Federal Energy Regulatory Commission, in 
     accordance with section 3, shall--
       (1) base any approval of the rates on the protection of the 
     public interest; and
       (2) undertake to protect the interest of the taxpaying 
     public and consumers.
       (c) Commission Actions.--As the Federal Energy Regulatory 
     Commission determines is necessary to protect the public 
     interest in accordance with section 3 until a full transition 
     is made to market-based rates for power sold by Federal Power 
     Marketing Administrations, the Federal Energy Regulatory 
     Commission may--
       (1) review the factual basis for determinations made by the 
     Secretary of Energy;
       (2) revise or modify those findings as appropriate;
       (3) revise proposed or effective rate schedules; or
       (4) remand the rate schedules to the Secretary of Energy.
       (d) Review.--An affected party (including a taxpayer, 
     bidder, preference customer, or affected competitor) may seek 
     a rehearing and judicial review of a final decision of the 
     Federal Energy Regulatory Commission under this section in 
     accordance with section 313 of the Federal Power Act (16 
     U.S.C. 825l).
       (e) Procedures.--The Federal Energy Regulatory Commission 
     shall by regulation establish procedures to carry out this 
     section.

     SEC. 6. CONFORMING AMENDMENTS.

       (a) Transfers from the Department of the Interior.--Section 
     302(a)(3) of the Department of Energy Organization Act (42 
     U.S.C. 7152(a)(3)) is amended by striking the last sentence.
       (b) Use of Funds to Study Noncost-Based Methods of Pricing 
     Hydroelectric Power.--Section 505 of the Energy and Water 
     Development Appropriations Act, 1993 (42 U.S.C. 7152 note; 
     106 Stat. 1343) is repealed.

     SEC. 7. APPLICABILITY.

       Except as provided in section 3(l), this Act shall take 
     apply to a power sales contract entered into by a Federal 
     Power Marketing Administration or the Tennessee Valley 
     Authority after July 23, 1997.
                                 ______
                                 
      By Mr. ENZI (for himself, Mr. Thomas, and Mr. Bingaman):
  S. 2500. A bill to protect the sanctity of contracts and leases 
entered into by surface patent holders with respect to coalbed methane 
gas; to the Committee on Energy and Natural Resources.


         Coalbed Methane Patent Holders Protection Legislation

  Mr. ENZI. Mr. President, I rise today, with my colleagues, Senator 
Craig Thomas of Wyoming, and Senator Jeff Bingaman of New Mexico, to 
introduce a very important bill for our western States and for others 
that have a lot of federally-owned coal. We have been working with 
other members, members of the Energy Committee, and with the Department 
of Interior to put together a good consensus bill.
  On July 20, the 10th Circuit Court of Appeals, in a final en banc 
decision, ruled that methane gas produced out of coal seams is part of 
the coal itself, and not actually a gas. That means instead of 
belonging to the owner of the oil and gas, as it has for the past 80 
years, it may now belong to the owner of the coal. In Wyoming, the 
owner of the oil and gas is often different from the owner of the 
coal--which in most cases is the Federal Government.
  What does that mean? In my home county, the Federal Government owns 
only about 55% of the oil and gas, but it owns 95% of the coal. That 
means, in many places where these two resources occur together, there 
are separate owners. This decision is poised to strip away a majority 
of the private ownership of gas in Campbell County. It could be an 
immediate transfer of $250 million over thirty years from private 
owners to the government--a loss of income and economic activity that 
will destroy the economy in my home town.
  The effects will be widespread because this decision would overturn a 
decades-old U.S. Government policy. This Interior policy has acted as 
the basis for thousands of gas contracts across the west. People have 
been using since 1981 to govern the development of their contracts and 
leases. Today, the Circuit Court's decision places all of those 
contracts in legal limbo. That limbo threatens the livelihood of entire 
regions in the States like Wyoming, Colorado, Utah and New Mexico.


                      WHO CURRENTLY OWNS THE GAS?

  For those of my colleagues who haven't been deeply involved in 
western public lands energy issues--across the west, oil and gas is 
often owned separately from the coal. It may also be separate from 
hardrock minerals, and over time through sale, can also be separate 
from the surface rights. This system of split mineral estates is the 
result of many layers of Federal statutes that granted varying levels 
of patents to homesteaders.
  The particular problem before us, arises out of the Coal Land Acts of 
1909 and 1910. Those statutes specified that homesteaders could retain 
surface rights (including the oil and gas) but reserved the coal to the 
U.S. Government. Now the question about whether methane is a gas, or 
coal, leads to questions of ownership.

  In Wyoming today, gas producers--through lease agreements with 
federal, state and private owners in Wyoming--produce over a billion 
cubic feet of methane gas per month. These leases are between the 
producers and the owners of the gas and many of them have been in 
effect for as long as twenty years and more. In New Mexico and 
Colorado, they are producing over 75 billion cubic feet of gas per 
month under the same system. This Court decision--which would attach 
the methane to the coal owner or lessee--jeopardizes all of the gas 
leases that govern these wells--including the federal gas leases.


                           how serious is it?

  The effect of this decision will have a profound impact in certain 
regions. Consider some of these effects:
  1. For the farm families who have secured mortgages with their 
royalties, this invalidation could deprive them of much needed lease 
income and force them into bankruptcy.
  2. For the small community banks who hold those loans, a number of 
bankruptcies could jeopardize their solvency.
  3. For the producing companies operating--or planning to operate--on 
those leases, this could delay their production--and all the jobs that 
come with it--for a year or more. So while the judicial system is 
sorting out the ownership issue, drilling and servicing companies are 
going to go belly up. Oil exploration has stalled because of low 
prices, so if they can't drill for cheap gas, there isn't much 
business.
  I received a letter in my office the other day from a small bank in 
Buffalo, Wyoming. In the letter, they discussed the effects this 
decision may have on interest owners and various trusts held by their 
bank. The advisory committee for one particular trust voted to suspend 
all further royalty payments to the trust beginning September 1. That 
decision was made based on the tax consequences and on the potential 
liability of having to repay royalties should any retrospective 
decisions be made.

[[Page S10595]]

  Another constituent contacted me to tell me that his multi-million 
lease agreement--that he had worked on for more than a year--had just 
fallen apart because this court decision had clouded the title. The 
investors had been unwilling to go through with the deal.

  These stories are just the start of a devastating series of 
consequences that will arise out of this decision. Each breakdown will 
have a multiplying effect on unemployment and loss of confidence in 
western states.
  This is a very serious situation, Mr. President, but it is one that 
can be stabilized.
  Today, we are offering a bill that would grandfather the leases that 
have been negotiated, in good faith, according to the explicit policies 
of the U.S. Government. The amendment would ensure that existing leases 
to produce methane--or natural gas out of the coalseam, as some of the 
older leases read--remain valid and that there is no future assertion 
of ownership by the Federal Government on these parcels.
  The amendment applies only to federally owned coal. It would not have 
any effect on tribally owned or state-owned coal. We have worked this 
out with the Chairman of the Indian Affairs Committee, Senator Campbell 
from Colorado.
  Furthermore, we have worked with the coal companies, who have valid 
concerns about their existing and future leases to mine federal coal. 
We have made it clear that nothing in this bill should be construed to 
limit their ability to mine federal coal under valid leases, nor should 
anything be construed to expand their liabilities to coalbed methane 
owners covered by the bill.
  The timing of the decision means we will be working to move this bill 
as soon as possible. Next year, we will pursue a more in-depth review 
of the situation. This body will need to conduct hearings and look at 
ways to work out problems with future leases and with conflicting 
resource use issues. These are details that demand very careful 
consideration.
  For now, however, we should take this opportunity to provide some 
certainty for people with existing agreements. This is a statement of 
support for the sanctity of those contracts--and a statement of support 
for the economies in our states.
  In closing, I would like to thank the Republican and Democratic 
members of the Senate who have been so important in helping us to work 
out this legislation. A special thanks to the Indian Affairs Committee 
for helping us craft language to accommodate tribal lands and a special 
thanks to the Department of Interior, who is helping us to protect 
eighty years of doing business. They have also helped us remove the 
possibility of devastating private property takings, retroactive 
liabilities, and mountains of litigation.
  Mr. THOMAS. Mr. President, I rise today to strongly support this 
legislation designed to protect contracts and leases of surface patent 
holders for coalbed methane. This legislation, which my colleague 
Senator Enzi and I are jointly introducing along with our House 
colleague Congresswoman Cubin, is vitally important to coalbed methane 
producers and lease holders in Wyoming and will address a problem which 
arose due to an appellate court decision rendered earlier this summer.
  On July 20, 1998, the Tenth Circuit Court of Appeals turned years of 
precedent and practice on its head by ruling that coalbed methane 
should be classified as a coal-by-product rather than a form of natural 
gas. That decision was completely contrary to past interpretation, and 
will severely impact coaled methane lease holders in Wyoming and 
throughout the nation. The ruling will also delay completion of leases 
and drilling, which will negatively impact our state's economy.
  The court's decision is particularly troubling for producers because 
the Office of the Solicitor at the Department of Interior had issued 
two earlier opinions regarding ownership of coalbed methane in 
federally-owned coal, which were directly opposite to the appellate 
court's ruling. Both in 1981 and in 1990, the Solicitor's office issued 
options which stated that coalbed methane was not part of the 
federally-reserved coal protected under the 1909 and 1910 Coal Lands 
Acts. Now, leaseholders and producers, who believed they were acting in 
good faith and compliance with federal law, are faced with the 
troubling possibility that their leases may be revoked.
  The legislation that we are introducing today is designed to remedy 
many of the problems caused by the appellate court's decision. This 
bill would protect current contracts and leases of surface patent 
holders for coalbed methane gas. The measure does not address future 
leases or contracts and only deals with folks who are already engaged 
in the production of coalbed methane gas or who have leased land for 
drilling and exploration. It is a fair and reasonable proposal and 
would simply protect people who acted in compliance with the law as it 
was interpreted by the Department of Interior.
  Mr. President, I hope the Senate will take quick action on this 
measure and approve it as quickly as possible. Coalbed methane 
production is a growing and vibrant part of Wyoming's economy and we 
need to take action to ensure that the lives of folks who rely on 
stable production of coalbed methane are not completely disrupted. 
Producers acted in good faith and in compliance with the law as they 
knew it. We should not punish them for actions beyond their control and 
should work to ensure that the blood and sweat which they invested into 
their businesses is not swept away by the actions of the court.

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