[Congressional Record Volume 149, Number 84 (Tuesday, June 10, 2003)]
[Senate]
[Pages S7576-S7599]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             CHANGE OF VOTE

  Mr. SHELBY. Mr. President, on Thursday, June 5, on rollcall vote No. 
209, I voted yea. It was my intention then to vote nay. Therefore, I 
ask unanimous consent that I be permitted to change my vote since it 
will not affect the outcome.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The PRESIDING OFFICER. Under the previous order, the Senator from 
Oregon is recognized.


                           Amendment No. 875

(Purpose: To strike the provision relating to deployment of new nuclear 
                             power plants)

  Mr. WYDEN. Mr. President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report.
  The assistant legislative clerk read as follows:

       The Senator from Oregon [Mr. Wyden], for himself, Mr. 
     Sununu, Mr. Bingaman, Mr. Ensign, Mr. Reid, Mr. Feingold, Mr. 
     Jeffords, and Ms. Snowe, proposes an amendment numbered 875.

       Strike subtitle B of title IV.
  Mr. WYDEN. Mr. President and colleagues, this amendment is sponsored 
by three Democrats, three Republicans, and one Independent. I hope this 
afternoon that it will have the support of Senators with varying 
degrees of views about the advisability of nuclear power. I am 
particularly pleased that the lead cosponsor, Senator Sununu, is with 
us today.
  I will make a few brief remarks to begin the debate and then I am 
anxious to have plenty of time for colleagues.
  The reason three Democrats and three Republicans and one Independent 
are sponsoring this amendment is that I think many of us in the Senate 
are neither pronuclear nor antinuclear but we are definitely 
protaxpayer. That is why we are on the floor this afternoon, because 
the loan guarantees that are in this legislation to construct nuclear 
power facilities are unprecedented and represent, in my view, 
particularly onerous and troublesome risks to the taxpayers of this 
country.
  Frankly, people in my part of the country know a bit about this. It 
is not an abstraction for the people of the Pacific Northwest where we 
had the WPPSS debacle and 4 out of 5 facilities were never built. It 
was the biggest municipal bond failure in history, and it has certainly 
colored my thinking with respect to why we are on the floor today.
  The loan guarantees--we did some research into this--are 
unprecedented with respect even to nuclear power. As far as I can tell, 
in the early days of nuclear power, there were subsidies for nuclear 
power but never before were the taxpayers on the hook from the get-go. 
That is what the Senate is confronted with now.
  When it comes to the question of risk, I hope the Senate will focus 
on what the nonpartisan Congressional Budget Office has said on this 
topic. I will quote. It is at page 9 of the Congressional Budget Office 
analysis that we have made available to Senators. The Congressional 
Budget Office considered:

       The risks of default on such loan guarantees to be very 
     high, well above 50 percent.

  Colleagues, first, when we are talking about risk--because nothing in 
life is foolproof and there are no guarantees of anything--I hope in 
looking at these guarantees you will first focus on the fact that the 
Congressional Budget Office has specifically said in their analysis 
that the risk of default on the

[[Page S7577]]

guarantees is very high. If those plants default, the exposure to 
taxpayers is enormous.
  I will quote from the Congressional Research Service report they did 
with respect to these subsidies. They said:

       . . . the potential cost to the federal government of the 
     nuclear power plant subsidies that would be provided by [this 
     title] would be in the range of $14-$16 billion in 2002 
     dollars.

  I think it is worth noting that the Senate spent a great deal of time 
on the child tax credit last week. There we were focusing on something 
involving $3 billion. If one or two of these plants go down, taxpayers 
are on the hook for a sum greater than that child tax credit.
  Now, in the course of today's discussion, we will hear a number of 
arguments against the Wyden-Sununu amendment. One of the first will be: 
There are tax credits for a variety of energy sources in this 
legislation, for wind and solar and a variety of energy alternatives. 
That is correct. But those tax incentives are fundamentally different 
than the loan guarantees because in those instances the producer faces 
substantial risk.
  With respect to, say, a wind facility, if the producer takes the 
initial risk and later on produces some wind power, they would get a 
credit in order to defray some of their costs. With respect to the loan 
guarantees for nuclear power, the producer faces no such risk. The 
producer has the Government, in effect, guaranteeing, right at the 
outset, much of the risk.
  So with respect to these nuclear loan guarantees, unlike the 
incentives for wind or solar, what we are talking about is that the 
Government will socialize the losses but will let private investors 
pick up the gains. The losses will be socialized; the gains will be 
privatized. And that is unique in this legislation.
  I also say to my colleagues in the Senate, the White House has never 
asked for these loan guarantees. These loan guarantees are not in the 
House bill. Senators' phones are not ringing off the hook from the 
Secretary of Energy or others clamoring that this must be done. This is 
something that, in my view, is far out of the mainstream in terms of 
energy policy, not because I am antinuclear--and I don't intend to talk 
about safety issues--but because it is such a large exposure to 
taxpayers.
  For example, a number of reports have come out already with respect 
to how nuclear power stands up with respect to other costs such as 
natural gas or coal. One of the reasons, in my view, the Congressional 
Budget Office believes there is such a high risk of default is that the 
objective analyses show that nuclear has not been competitive with 
other sources such as coal.
  I hope Senators will look at those two reports: a report done by the 
Congressional Budget Office documenting a high likelihood of default, 
and a report done by the Congressional Research Service talking about 
exposure to taxpayers.
  I would finally say to the Senate, it did not have to be this way. I 
know the distinguished chairman of the Energy Committee feels very 
strongly about this subject. He is a longtime family friend. I was very 
willing, and I think other Senators were as well, to have had a modest 
program. We had been talking, for example, about one experimental 
initiative to look at advanced technologies of one sort or another. I 
think that would have been acceptable. But here we are talking about 
guarantees for up to seven plants.
  I will make reference to the legislation. The bill authorizes DOE to 
provide loan guarantees for up to 50 percent of the construction costs 
of new nuclear plants and, on top of that, would authorize the 
Department of Energy to enter into long-term contracts for the purchase 
of power from those plants. The Secretary could provide loan guarantees 
for up to seven plants.

  That is not a modest experiment that would have been acceptable to 
this Member of the Senate, but it is a very significant exposure to the 
taxpayers of this country at a time when every Senator is concerned 
about deficits.
  Mr. President, I intend to allow time for my colleagues. I see 
Senator Sununu is on the floor. Senator Reid has strong views on this.
  I also express my appreciation to the distinguished ranking minority 
member of the Energy Committee. He has worked very closely with me. He 
embodies the philosophy of a lot of our colleagues in that he has been 
supportive of nuclear power in the past but believes these subsidies 
are too rich.
  I am hopeful that today Senators with varying degrees of views on the 
nuclear power issue will agree with the Congressional Budget Office, 
will agree with the Congressional Research Service on these issues with 
respect to the taxpayers, and support the Wyden-Sununu amendment.
  Mr. President, I yield at this time so other colleagues who have time 
constraints may speak. I will have the opportunity to speak later in 
the debate.
  The PRESIDING OFFICER. Who yields time?
  The Senator from New Hampshire.
  Mr. SUNUNU. Mr. President, I begin by thanking my colleague from 
Oregon for his work on this amendment. I am pleased to join as a 
cosponsor. As he pointed out, this is ultimately about what kind of an 
energy policy we want, what kind of an economic policy makes sense, and 
whether we can do the right thing and protect taxpayers from being 
exposed to the potential liability and cost that Senator Wyden 
described.
  This provision we are trying to strike in this bill guarantees 50 
percent of the construction costs of up to six nuclear powerplants. 
Those plants could cost anywhere from $2 to $4 billion. And any 
taxpayer out there can simply do the math as to what kind of exposure 
this would provide.
  It has been a pleasure to work with the Senator from Oregon. We are 
going to get into the substance of this debate and the details of this 
debate over the next couple of hours, but at this time I yield the 
floor to the Senator from Nevada, who has been a very strong voice on 
this and other matters having to do with energy.
  The PRESIDING OFFICER (Mr. Domenici). The Senator from Nevada.
  Mr. REID. Mr. President, I express my appreciation to the Senator 
from New Hampshire for allowing me to speak. I have to speak at a 
memorial service in just a short time, and but for his kindness and 
generosity I would have had to either miss the ability to debate this 
matter or be late to debate this matter. So I appreciate very much the 
comity of my friend from New Hampshire.
  I express my appreciation to my longtime friend and colleague, 
Senator Wyden, for this legislation. I also say the way this 
legislation has been approached is the way to approach legislation. 
This is a bipartisan amendment. This is a good debate we are having on 
the Senate floor.
  My friend from New Mexico, the manager of this bill, believes very 
deeply in the renewal of nuclear power. I understand how he feels about 
this.
  As I say, this is the way legislation should be handled. This is a 
good, fair, open debate. I approach this more from an environmental 
perspective than my friend from New Hampshire does. Even though he has 
been here just a short period of time, the Senator from New Hampshire 
is always focused on numbers, taxpayer dollars.
  I rise in support of this amendment offered by my colleagues, the 
Senator from Oregon and the Senator from New Hampshire. I really do 
appreciate their efforts to bring to light the tremendous financial 
risks this Energy bill places on the backs of American working men and 
women and their families.
  Let me underline and underscore, my opposition to this amendment has 
nothing to do with the longstanding, seemingly never-ending debate on 
nuclear waste. This has nothing to do with nuclear waste.
  This Energy bill contains a provision, which this amendment would 
strike, that would make the Federal Government the guarantor of the 
costs of building new nuclear powerplants.
  The Energy bill would allow the Secretary of Energy to enter into 
agreements with nuclear powerplant owners to give Federal loan 
guarantees for loans to construct new reactors or to enter into new 
contracts for guaranteed purchases of power from these reactors.
  According to the Congressional Budget Office, what we refer to as 
CBO, this is an extremely risky financial endeavor. In fact, the CBO 
considers ``the risk of default on such a loan guarantee to be very 
high--well above 50 percent.''

[[Page S7578]]

  That means the American taxpayer will be footing the bill for 
construction of these nuclear powerplants, the way the Senator from 
Oregon indicated we would have really a socialization of the costs and 
the nonbenefits of this legislation. If this provision remains in the 
bill, the Federal Government will be entering into loan guarantees and 
power purchase agreements that could cost at least $14 billion.
  CBO is not alone in its assessment of the financial risk of backing 
the new reactor construction.
  We have from Standard & Poor's a document I ask unanimous consent to 
print in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

             Time for a New Start for U.S. Nuclear Energy?

                            (By Peter Rigby)

       Since its beginnings, commercial nuclear energy has offered 
     the tantalizing promise of clean, reliable, secure, safe, and 
     cheap energy for a modern world dependent upon electricity. 
     No one did more than Lewis Strauss, chairman of the U.S. 
     Atomic Energy Commission, to define expectations for the 
     industry when he declared in 1954 that nuclear energy would 
     one day be ``too cheap to meter.'' But the record proved far 
     different. Nuclear energy became the most expensive form of 
     generating electricity and the most controversial following 
     accidents at Three Mile Island and Chernobyl. And today's 
     electricity industry's credit problems of too much debt and 
     too many power plants will do little to invite new interest 
     in an advanced design nuclear power plant. Yet energy bills 
     circulating through the U.S. Senate and House of 
     Representatives hope to change that perception and perhaps 
     lower the credit risk sufficient enough to attract new 
     capital. Will Washington, D.C.'s new energy initiatives lower 
     the barriers to new nuclear construction? Many would like to 
     think so, but it will be an uphill battle.
       The House version of the Energy Bill modestly ``. . . sets 
     the stage for building new nuclear reactors by reauthorizing 
     Price-Anderson. . . .'' Since 1957, the Price-Anderson Act 
     has indemnified the private sector's liability if a major 
     nuclear accident happens on the premise that no private 
     insurance carriers could provide such coverage on commercial 
     terms. Without Price-Anderson, it is difficult to envision 
     how nuclear plants could operate commercially, now or in the 
     future. The more ambitious Senate version of the Energy Bill 
     seeks to jump-start new nuclear plants in the U.S. by 
     providing measurable financial resources for new projects. 
     According to the latest version of the Senate Energy Bill, 
     the Secretary of Energy could provide financial assistance to 
     supplement private sector financing if the proposed new 
     nuclear plant contributes to energy security, fuel, or 
     technology diversity or clean air attainment goals. The bill 
     would limit financial assistance to 50% of the project costs 
     with financial assistance being defined as a line of credit, 
     secured loan, loan guarantee, purchase agreement, or some 
     combination of these assistance plans.
       In light of how well U.S. nuclear plants have generally 
     been operating recently and with promising new technology on 
     the horizon, nuclear energy would seem to have a future. 
     Currently, about 20% of the nation's electricity comes from 
     nuclear power plants. The introduction of competition and 
     deregulation in the U.S. has helped drive the nuclear fleet 
     into achieving record availabilities and load factors, as 
     independent owners have taken ownership from utilities that 
     divested generation. Even utilities that did not divest their 
     nuclear plants have experienced greatly improved performance 
     across the board. Today's nuclear power plant operation and 
     maintenance and fuel costs are remarkably low compared with 
     many fossil fuel plants--as low as 1.68 cents per kWh 
     according to the Nuclear Energy Institute. Although the high-
     profile accidents at Three Mile Island and Chernobyl greatly 
     raised the threshold for safer operations, operating success 
     stories may overstate what may be achievable with new 
     designs. Nuclear operators in the U.S. have had a few decades 
     to work out operationsl problems, and with original debt paid 
     off, more cash resources have been dedicated to improving 
     performance. Providers of new capital for advanced, nuclear 
     energy will want some comfort that credit and operating risks 
     are covered. But the industry's legacy of cost growth, 
     technolgy problems, cumbersome political and regulatory 
     oversight, and the newer risks brought about by competition 
     and terrorism concerns may keep credit risk too high for even 
     the Senate bill to overcome.


                      Historic Risks Will Persist

       A nuclear power plant's life cycle exposes capital 
     providers to four distinct periods of credit risk that 
     history has shown will persist. These periods are pre-
     construction, construction, operations, and decommissioning. 
     The risks tend to be asymmetrical with an enormous downside 
     bias against credit providers and little or no upside 
     benefits. To attrack new capital, future developers will have 
     to demonstrate that the risks no longer exist or that the 
     provisions of the Energy Bill can effectively mitigate the 
     risks.
       During a nuclear plant's pre-construction, phase, lenders, 
     as they do with other projects, face the risks of cost growth 
     and delay. When nuclear engineers encountered technology 
     problems during the planning stages in the 1960s and 1970s, 
     solutions inevitably resulted in scope changes or re-designs, 
     or both. A 1979 Rand Corp. study for the U.S. Dept. of Energy 
     still serves as a warning to investors in new, untested 
     nuclear technology. The study found that cost budget 
     estimates grew on average 114% over first estimates and that 
     final actual costs exceeded those estimates by 141%. Half of 
     the plants in the study never reached commercial operations. 
     An extreme example of delays and cost overruns, which remains 
     fresh in investors' minds, is Long Island Lighting Co.'s 
     Shoreham nuclear power station. Begun in 1965 at an initial 
     cost estimate of $65 million-$75 million, Shoreham endured 20 
     years of construction delays and design changes due to legal 
     battles, local opposition, regulatory and political 
     intervention, and technical problems that pushed the final 
     cost to almost $6 billion. In the end, a complete and fully 
     licensed power plant never went operational, and ratepayers, 
     investors, and taxpayers are still footing the bill. Another 
     example is TXU Corp.'s 2,300 MW Comanche Peak Units 1 and 2, 
     which took longer than any nuclear plant to build and saw 
     costs mushroom to nearly $12 billion by the time full 
     operations began in 1993.
       That no new nuclear plant construction has begun in the 
     U.S. for over 2 years suggests that a new one would be 
     susceptible to cost growth risk as engineers incorporate 
     advances in control and power systems, fuel systems, safety 
     and regulatory requirements (which could become more onerous 
     during the years of design and construction), material 
     sciences and information technology. Even promising new 
     designs, such as the pebble bed reactor (PBR) design that 
     Eskom Holdings Ltd. of South Africa plans to build soon, 
     would likely risk design changes and attendant cost growth 
     if built in the U.S. Cost growth and delay can also arise 
     from design and scope changes due to the efforts of 
     effective interveners, such as the anti-nuclear citizen 
     activist groups that successfully delayed Shoreham and 
     ultimately prevented it from going commercial.
       History also suggests that the construction and start-up 
     phases of new nuclear power will likely encounter problems 
     that will result in increased costs and delays. Licensing 
     delays, construction management problem procurement holdups, 
     troubles with new technologies and construction defects, 
     among other problems extended construction beyond 10 years 
     for some U.S. nuclear power plants. It would be overly heroic 
     to assume that the first nuclear plant to be built in more 
     than two decades would escape the industry's legacy of 
     construction problems. For a debt-financed construction 
     endeavor, likely to cost hundreds of millions of dollars 
     (possibly into the billion dollar plus range), these 
     problems, or even the possibility of such problems, will 
     likely drive risk-averse lender to demand a significant risk 
     premium unless a third party assumes completion and delay 
     risks. In the world of cost-of-service, rate-of-return 
     environments, utilities could, and did, pass these costs onto 
     ratepayers to a certain extent. The bankruptcies of El Paso 
     Electric Co. and Public Service Company of New Hampshire in 
     the 1980s, however, attest to the limits of ratepayers' 
     capacity to absorb construction risk.
       Today, no utility or independent power producer or their 
     capital provide will want to take unmitigated construction 
     risk, particularly if it is difficult to quantify. In 
     addition, given the possibility that much of the construction 
     risk of a new nuclear plant may lay outside of the 
     engineering, procurement, and construction contractor's 
     control, no contractor will want to risk its balance sheet to 
     provide the fixed-price, date-certain, turnkey construction 
     contracts that have given great certainty to the cost of 
     today's new fossil-fueled power plants. Because of the long 
     lead-time historically associated with nuclear power, 
     securing 100% financing upfront, as the industry has become 
     accustomed to, may be difficult. That could introduce 
     financing risks if projects encounter problems during 
     construction; delays in securing final financing would, among 
     other problems, drive up capitalized interest costs during 
     construction and ultimately the project's cost.
       While U.S. nuclear power plants have operated without major 
     mishap for over 20 years, unexpected costs during the 
     operational phase of a nuclear plant can be substantial. And 
     it is unclear whether and if proposed government programs 
     will be able, or willing, to offset the risk of these costs. 
     Still, today's operators have demonstrated that they can 
     safely operate older nuclear power plants. Yet the potential 
     that incidents,such as last year's wholly unanticipated 
     corrosion problem at FirstEnergy Corp's Davis Besse 900 MW 
     plant, are not unique, one-time affairs will keep credit risk 
     high for nuclear plant owners. In addition, investors will 
     remember that the Davis Besse repair costs of about $400 
     million, not including replacement power, are unrecoverable 
     from ratepayers, leaving investors to shoulder the costs, 
     incidentally, had the outage occurred during a period of high 
     power prices and tight supply, as was the case two years ago, 
     the cost to investors would have been much higher.
       Decommissioning costs, which entail the considerable 
     expense of tearing down a plant and safely disposing or 
     storing the radioactive waste, remain uncertain at best given

[[Page S7579]]

     how few U.S. nuclear plants have undergone decommissioning. 
     Progress toward creating a permanent disposal site for 
     nuclear waste at the government's Yucca Mountain site in 
     Nevada will help mitigate decommissioning risk, as well as 
     spent fuel disposal costs. Again, it is not clear who will 
     bear decommissioning costs, but if lenders foresee any lender 
     liability risk, they will steer clear of new nuclear 
     investments or require steep compensation. That, as a point 
     aside, may be one of the reasons so many plants have been 
     granted license extensions. Refurbishing a depreciated 
     nuclear power plant costs far less than decommissioning one.
       Finally, for many of the reasons described above and all 
     else being equal, Standard & Poor's Ratings Services has 
     found that an electric utility with a nuclear exposure has 
     weaker credit than one without and can expect to pay more on 
     the margin for credit. Federal support of construction costs 
     will do little to change that reality. Therefore, were a 
     utility to embark on a new or expanded nuclear endeavor, 
     Standard & Poor's would likely revisit its rating on the 
     utility.


          competition introduces new risks for nuclear energy

       As electricity deregulation and industry reform have 
     progressed, capital providers to the nuclear power sector 
     face some of the same risks as capital providers to other 
     power generation technologies. Again, if policymakers want to 
     attract capital to the industry, lenders in particular will 
     likely have to be convinced that at least some of the risks 
     are covered or mitigated. The sheer size of most new nuclear 
     investments suggests that downside risk for lenders could be 
     considerable indeed.
       Clearly, buying and selling electricity in a competitive 
     environment comes with its risks, both market and political. 
     The wake of California's electricity reform problems forced 
     one utility into bankruptcy and brought another to the brink 
     of bankruptcy. Independent power producers are resisting 
     efforts by California and its Department of Water Resources 
     to abrogate or renegotiate recently executed power sales 
     agreements. These events, combined with the credit crunch 
     that has hit many other utilities and energy merchants, have 
     understandably moved public utility commissioners and capital 
     providers into more risk-averse postures. Absent these 
     problems, nuclear power would still be challenged to attract 
     new capital; in this environment, however, the task is all 
     the more difficult. Competition has dramatically shifted 
     risks from ratepayers to lenders and other investors; that is 
     not likely to change.
       In a competitive wholesale power environment, nuclear 
     plants would likely sell power as a base load generator 
     behind hydroelectric and ahead of coal and gas. Capital costs 
     would be higher than coal plants and much higher than natural 
     gas plants, but marginal operating costs would be very low, 
     as they are now. Nonetheless, an owner of a new nuclear plant 
     would likely want a long-term--20 years or more--
     power contract with a creditworthy utility to ensure that 
     fixed and variable cost are covered in order to attract 
     the massive amount of capital needed for construction. 
     Alternatively, a utility that wants to add a new nuclear 
     plant to its portfolio would need regulatory assurances 
     from its public utility commission that the entire cost of 
     the plant would be recoverable from its rate base. In the 
     first instance, few utilities, or their regulators, want 
     such long-term contract obligations, especially in an 
     environment of excess generation that can be purchased on 
     the cheap. That gas costs and clean-air compliance costs 
     could be on the rise might offset some of those concerns. 
     For some of the same reasons, public utility commissioners 
     may not be so forthcoming with their authority to grant 
     rate-based treatment of a new nuclear plant, especially in 
     the preconstruction period if cost growth risk remains 
     uncovered. For many commissioners, the all-in costs of 
     alternative generation will likely seem more predictable 
     and cheaper than a new nuclear plant.
       The current backlash against regulatory reform and open 
     markets in parts of the country could also put a new nuclear 
     plant at risk. A large, new nuclear plant will typically need 
     access to a large electrical network with a geographically 
     dispersed customer group--the network that a structured 
     regional transmission organization, as envisioned by FERC, 
     could provide. However, if transmission access is limited or 
     if states have chosen to maintain barriers to electricity 
     trading and marketing, physical or otherwise, as many have, a 
     new nuclear power plant may find itself operating within a 
     much smaller system, a situation that could raise its credit 
     risk, all else being equal. One obvious mitigant to this rise 
     would be to build much smaller nuclear plants, such as the 
     100-MW modular PBR designs.
       Whether a new nuclear plant is financed directly from the 
     wallets of captive ratepayers or with long-term contracts, a 
     large nuclear plant's size relative to its market raises 
     outage-cost risk. A nuclear plant with a long-term power 
     contract will likely contain provisions to provide 
     replacement power, or the financial equivalent, if the plant 
     becomes temporarily unavailable. Given nuclear power's 
     vulnerability to rare, but extended forced outages, 
     replacement power costs for 1,000-2,000 MW of base load power 
     could be considerable, which would factor into credit risk. 
     Similarly, a utility that owns a large nuclear station could 
     find itself spending hundreds of millions of dollars to cover 
     its short position while its station was down without 
     assurances of recovery from ratepayers. Again, smaller PBRs 
     would mitigate this risk.
       Some the preliminary provisions of the Senate Energy Bill 
     contemplate some of these risks. A long-term power contract, 
     for example, with the federal government that covers 50% of 
     the plant's costs might mitigate some of concerns of 
     operating in a competitive environment. Similarly, loan 
     guarantees or lines of credit could also offset the costs. 
     However, if gas- and coal-fired plants can be built for much 
     less (e.g., 50% less) and the operational risk of extended 
     nuclear plant outages remains uncovered, a government program 
     could fall short of relieving investors' credit concerns. 
     Moreover, as with any government subsidy program, offenders 
     would invariably factor U.S. government counterparty risk in 
     the form of subsidy re-authorization uncertainty. Would the 
     programs envisioned by the Senate bill last through the 
     capital recovery period? Maybe. Maybe not.
       A new risk for nuclear energy that has caught everyone's 
     attention is terrorism. Because of the dangers that nuclear 
     energy brings, security and insurance costs for nuclear 
     facilities--new and old--are much higher than for fossil or 
     renewable power plants. Therefore, in a competitive power 
     environment, stakeholders in power generation may be 
     reluctant to assume new risks that cost more to mitigate. 
     Again, if a government subsidy can put security costs for new 
     nuclear plants on an even playing field with conventional 
     power generation, the industry could attract new capital. 
     However, most new programs envisioned by Washington only 
     address the construction risk.
       As a note aside, some power generators and utilities may 
     oppose efforts to support new U.S. nuclear generation 
     capacity beyond existing subsidies, such as Price-Andersen, 
     if they are heavily invested in coal and gas. New nuclear 
     energy's low variable operating costs would likely displace 
     existing coal-fired and gas-fired generation units in today's 
     environment. It will do little, however, to displace oil-
     fired generation or lower U.S. oil imports because so little 
     electricity, about 2% of the U.S. load, is actually generated 
     by oil and much of that is for peak load, which nuclear 
     energy would not serve anyway. But for stakeholders--
     investors, state politicians and regulators, lenders, 
     customers--the risk that new nuclear generation could strand 
     investment in conventional fossil-fuel-fired generation may 
     be unacceptable unless the government provides financial 
     compensation. And for a government trying to contain federal 
     spending, those costs could be prohibitively expensive.


                an energy bill could mitigate the risks

       To attract new capital to build the next generation of 
     nuclear power plants in the U.S., developers will need to 
     convince capital providers that the following risks are not 
     materially greater than for fossil fuel power plants:
       The expense of cost growth, scope change, technology risk 
     and start-up delay.
       The costs of unforeseen design problems that manifest 
     themselves well after commercial operations begin.
       The costs resulting from the activities of effective 
     interveners.
       The costs resulting from regulatory changes, including 
     growth in oversight and compliance costs.
       The cost arising from forced outages in a competitive 
     wholesale environment.
       The costs of replacing credit counterparties who are 
     unwilling or unable to honor obligations or commitments upon 
     which a nuclear plant's financing decisions were made.
       The added and uncertain expense of providing insurance and 
     terrorism protection that nuclear plants need and that would 
     disadvantage a nuclear plant operating in a 
     competitive wholesale market.
       The versions of the Energy Bill circulating around Capital 
     Hill may indeed mitigate enough of the risks that would 
     otherwise dissuade investors from financing new nuclear 
     capacity. The key drivers will be not so much in the broad 
     generalities of the authorizing legislation, but the details 
     of the enabling regulations promulgated by the Department of 
     Energy. That could take some time to draft. However, the 
     Senate markup of the bill appears to recognize the issues. 
     Absent an affordable alternative, if Price-Anderson is not 
     re-authorized, existing nuclear power plants could be forced 
     to close because of the potential liability of an accident 
     that could run into the billions of dollars. Beyond Price-
     Anderson, however, considerable government financial support 
     will like be needed to attract capital, given the perceived 
     credit risks.
       The proposed Energy Act's subtitle section, the ``Nuclear 
     Energy Finance Act of 2003.'' provides support for ``advanced 
     reactor designs'' that covers reactors that enhance safety, 
     efficiency, proliferation resistance, or waste reduction 
     compared with existing commercial nuclear reactors in the 
     U.S. In addition, financial support would consider ``eligible 
     costs'' that would cover costs incurred by a project 
     developer to develop and construct a nuclear plant, including 
     costs arising from regulatory and licensing delays. Financial 
     assistance may take the form of a loan guarantee of principal 
     and interest, a power purchase agreement, or some combination 
     of both.
       The government's proposed support of new nuclear 
     construction will come with limits.

[[Page S7580]]

     The objective is to cover the risks of new nuclear general 
     technology and construction until capital providers gain 
     confidence that a new generation of nuclear power plants is 
     commercially sustainable. The act would limit support to 50% 
     of eligible project costs and to the first 8,400 MW of new 
     nuclear generation. The 50% limit would certainly control the 
     government's exposure, as well as mitigate the risks of moral 
     hazard that a complete guarantee would invite. However, as 
     the industry has learned, some of the costs that could 
     undermine new nuclear power are not those of construction and 
     design, but are the operational ones that could arise after 
     government assistance has ended. In addition, given the risk 
     of cost growth and the likely high capital costs of a new 
     nuclear plant, a 50% level of financial assistance may not be 
     enough to entice a developer comparing uncertain estimates of 
     $1,500-$2,000 per kW capital cost of a new generation nuclear 
     plant with more certain $500 per kW combined-cycle gas 
     turbine or $1,000 per kW coal capital costs.
       Whether or not the nuclear energy provisions of the 
     Senate's version of the Energy Bill are good ecomonic or 
     energy policy is beyond the scope or intent of this article. 
     New nuclear energy has compelling attributes, such as 
     supporting energy diversity, replacing an aging U.S. nuclear 
     fleet, offsetting rising natural gas prices, and reducing 
     greenhouse gases and NOX, SOX, and 
     particulate airborne pollutants. Once the capital costs are 
     sunk, the variable operating cost can indeed be quite low. 
     However, nuclear power tends to raise credit risk concerns 
     during construction and well after construction. Investors, 
     particularly lenders who rarely see any upside potential in 
     cutting-edge technology investments, including energy, will 
     likely find the potential downside credit risk of an 
     advanced, nuclear power plan too much to bear unless a third 
     party can cover some of the risks. An Energy Bill that covers 
     advanced design nuclear plant construction risk may go a long 
     way toward allaying those concerns, but if operational and 
     decommissioning risks remain uncovered, look for lenders to 
     sit this opportunity out.

  Mr. REID. I will only read one sentence:

       But the industry's legacy of cost growth, technology 
     problems, cumbersome political and regulatory oversight, and 
     the newer risks brought about by competition and terrorism 
     concerns may keep credit risk too high for even the Senate to 
     overcome.

  In addition, we have the Economist magazine of May 19 which says, 
among other things:

       That is why the real argument over nuclear's future should 
     rest on economics. Given the industry's history of cost 
     overruns and wasted billions, the claim of dramatically 
     improved economics would, if true, support a revival. Alas, 
     as our special report makes clear . . . the claim is dubious.
       Why in the world should a mature, well-capitalized industry 
     receive subsidies, such as government liability insurance or 
     help the costs of waste disposal and decommissioning?

  The article closes by saying:

       If the private sector wishes to build new nuclear plants in 
     an open and competitive energy market, more power to it. As 
     subsidies are withdrawn, however, that possibility will 
     become ever less likely. Nuclear power, which early advocates 
     thought would be ``too cheap to meter'', is more likely to be 
     remembered as too costly to matter.

  These statements hardly sound like a sound investment for the Federal 
Government to make at this time. The simple truth is if investors on 
Wall Street won't invest in new nuclear powerplants, we should not 
force the families on Main Street to back them with their hard-earned 
income. We have an obligation to protect the American taxpayer from 
having his or her money guarantee investments by the Federal Government 
in these risky programs. This amendment is not about whether you 
support or oppose nuclear power; it is about keeping the Federal 
Government from making risky investments.
  A wide range of national taxpayer, environmental, and public interest 
groups understand these risks. That is why more than a dozen of these 
groups signed a letter supporting the Wyden-Sununu amendment. The 
groups include the National Taxpayers Union, Taxpayers for Common 
Sense, Council for Citizens Against Government Waste, the U.S. Public 
Interest Research Group, and the National Resources Defense Counsel.
  I ask unanimous consent that a letter from these organizations be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

   Support Wyden-Sununu-Bingaman-Ensign amendment To Strike Taxpayer 
                   Financing for New Nuclear Reactors

                                                     June 5, 2003.
       Dear Senator: As national taxpayer, public interest, and 
     environmental organizations, we are writing in support of the 
     Wyden-Sununu-Bingaman-Ensign amendment to strike Title IV, 
     Subtitle B from S. 14, the ``Energy Policy Act of 2003.'' 
     This irresponsible provision makes taxpayers liable for up to 
     half the cost of constructing new reactors, a new and 
     unprecedented extreme in the long history of subsidizing the 
     mature nuclear industry. We urge you to support the Wyden-
     Sununu-Bingaman-Ensign amendment to strike Title IV, Subtitle 
     B of S. 14.
       Subtitle B authorizes the Department of Energy to provide 
     federal loan guarantees to finance half the cost of bringing 
     on line an additional 8,400 megawatts of nuclear energy) 
     amounting to an estimated taxpayer subsidy of $14 to $16 
     billion. There are no guidelines regarding interest rates and 
     repayment for the loan guarantees, and the Congressional 
     Budget Office considers the risk of default on such a loan 
     guarantee to be ``very high--well above 50 percent.''
       Additionally, this provision authorizes the federal 
     government to enter into purchase agreements to buy power 
     back from these new reactors. The legislation does not state 
     how much energy the federal government will purchase and at 
     what rate, but Department of Energy documents recommend that 
     the federal government contract to purchase nuclear power at 
     above market rates. Offering these subsidies to a mature 
     industry would further distort electricity markets by 
     granting nuclear power an unfair and undesirable advantage 
     over other energy alternatives.
       Even the first nuclear reactors did not require this level 
     of taxpayer financing. Since then, federal taxpayers have 
     already provided $66 billion in research and development 
     subsidies to the nuclear power industry. Nearly five decades 
     and more than 100 reactors later, it is time for the industry 
     to support itself. If proposed new reactors are as economical 
     as the industry claims, they should be able to finance them 
     privately.
       There is no justification for providing the mature nuclear 
     industry with these massive subsidies. Again, we strongly 
     urge you to vote for the Wyden-Sununu-Bingaman-Ensign 
     amendment to strike Title IV Subtitle B of S. 14.
           Sincerely,
       Anna Aurillio, Legislative Director, U.S. Public Interest 
     Research Group.
       Alden Meyer, Director of Government Relations, Union of 
     Concerned Scientists.
       Jill Lancelot, President, Taxpayers for Common Sense.
       Debbie Boger, Senior Washington DC Representative, Sierra 
     Club.
       Wenonah Hauter, Director, Public Citizen's Critical Mass.
       Michael Mariotte, Executive Director, Nuclear Information 
     and Resource Service.
       Alyssondra Campaigne, Legislative Director, Natural 
     Resources Defense Council.
       Pete Sepp, Vice President of Communications, National 
     Taxpayers Union.
       Betsy Loyless, Political director, League of Conservation 
     Voters.
       Leslie Seff, Esq., Project Director, Sustainable Energy, 
     GRACE Public Fund.
       Erich Pica, Green Scissors Director, Friends of the Earth.
       Tom Schatz, President, Council for Citizens Against 
     Government Waste.
       Susan Gordon, Director, Alliance for Nuclear 
     Accountability.

  Mr. REID. Mr. President, I also have a letter signed by the League of 
Conservation Voters indicating they will consider including the vote on 
this amendment in their yearly environmental scorecard. I ask unanimous 
consent that that letter be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                League of Conservation Voters,

                                                    June 10, 2003.
     Re Wyden-Sununu-Bingaman-Engsign Amendment To Strike Taxpayer 
         Financing For New Nuclear Reactors.

     Hon. Harry Reid,
     U.S. Senate,
     Washington, DC.
       Dear Senator Reid: In response to an inquiry from your 
     staff, this letter will confirm that the League of 
     Conservation Voters (LCV) supports an amendment that will be 
     offered by Senators Wyden (D-OR), Sununu (R-NH), Bingaman (D-
     NM) and Ensign (R-NV) to the Senate Energy bill (S. 14) 
     striking a provision that would make taxpayers liable for up 
     to half the costs of constructing new reactors, a new and 
     unprecedented extreme in the long history of subsidizing the 
     mature nuclear industry.
       S. 14 would provide federal loan guarantees to finance half 
     the cost of bringing on line an additional 8,400 megawatts of 
     nuclear energy, and estimated taxpayer subsidy of $14 to $16 
     billion. There are no guidelines regarding interest rates and 
     repayment for the loan guarantees. In addition, this 
     provision authorizes the federal government to enter into 
     purchase agreements to buy power back from these new 
     reactors. The legislation does not state how much energy the 
     federal government will purchase and at what rate, but 
     Department of Energy documents recommend that the federal 
     government contract to purchase nuclear power at above market 
     rates. Offering these subsidies to a mature industry would 
     further distort electricity markets by granting nuclear power 
     an unfair and undesirable advantage over other energy 
     alternatives.

[[Page S7581]]

       Even the first nuclear reactors did not require this level 
     of taxpayer financing. Since then, federal taxpayers have 
     already provided $66 billion in research and development 
     subsidies to the nuclear power industry. Nearly five decades 
     and more than 100 reactors later, it is time for the industry 
     to support itself. If proposed new reactors are as economical 
     as the industry claims, they should be able to finance them 
     privately.
       There is no justification for providing the mature nuclear 
     industry with these massive subsidies. For this reason, we 
     strongly support the Wyden-Sununu-Bingaman-Ensign amendment 
     to strike the nuclear construction subsidy from S. 14. LCV's 
     Political Advisory Committee will strongly consider including 
     votes on this issue in compiling LVC's 2003 Scorecard. If you 
     need more information, please call me or Mary Minette, LVC's 
     legislative director, at (202) 785-8683.
           Sincerely,
                                                    Betsy Loyless,
                                Vice President, Policy & Lobbying.

  Mr. REID. The nuclear power industry is a mature, developed industry. 
It has had more than 30 years to convince the wizards on Wall Street of 
its financial merit. The truth is Wall Street is not convinced, and 
until Wall Street is convinced, Congress should stay out of the risky 
financial deals.
  The New York Times today had an article about the empty energy bill. 
One of the paragraphs from the New York Times article reads:

       The biggest addition to this dreary lineup [of matters in 
     this bill] is a huge $30 billion subsidy for nuclear power.

  It goes on to say that this is simply bad. Even pronuclear allies 
regard this package as being excessive.
  The Washington Post today says:

       . . . taxpayers should not be asked to provide subsidies 
     for new nuclear power plants either. As it stands, Senate 
     legislation would provide loan guarantees for up to half of 
     the construction costs of new nuclear plants.
       If the Senate wants to encourage nuclear power plant 
     construction, it should find means to do so that don't risk 
     such a high price to the [American] taxpayer.

  I don't believe my colleagues should guarantee these loans, and that 
is what we are doing. They wouldn't do it with their own money, so we 
should not allow the Federal Government to do it with taxpayer money.
  I commend and applaud the sponsors of the amendment, the Senator from 
Oregon and the Senator from New Hampshire. I hope their amendment will 
pass.
  The PRESIDING OFFICER. The Senator from New Mexico.
  Mr. BINGAMAN. Mr. President, let me speak briefly also in support of 
the amendment by Senator Wyden and Senator Sununu. This is an amendment 
I offered in the committee markup with Senator Wyden. We were not 
successful at that time, obviously. I congratulate both sponsors of the 
amendment for offering it again here.
  Clearly, I am not opposed to the building of new nuclear powerplants. 
I believe nuclear power makes a very major contribution to our energy 
needs. It supplies about 20 percent of our Nation's electricity today. 
It does so safely. It does so reliably. It does not generate greenhouse 
gases. And it does so at prices that are competitive with coal and 
natural gas.
  I hope in the future we will see additional nuclear power production 
in this country and worldwide. I think it is a technology that provides 
many benefits to us.
  There are provisions in the bill that are strongly in support of the 
nuclear power industry and its future: The renewal of the Price-
Anderson Act, for example, that protects the nuclear industry against 
liability from accidents. There are provisions in there to carry out 
research and development to help with the training of a workforce. 
There are many provisions in this bill that are very strongly in 
support of the nuclear power industry.
  The provision this amendment goes to would authorize the Secretary of 
Energy to guarantee up to half the cost of 8,400 megawatts of nuclear 
capacity. That translates into at least six large nuclear powerplants. 
We do not know with any precision how much these loan guarantees would 
wind up costing taxpayers. That depends on many variables, such as how 
many plants are actually built under the program, how much they cost, 
whether in fact there is a default, what the interest rates might be on 
the defaulted loans, whether the plants would still be able to operate 
if there were default.

  There is a lot of uncertainty in the provision that is the subject of 
this debate. The Congressional Budget Office has made a number of 
assumptions that are favorable to the industry in coming up with its 
estimate. It assumes, for example, that the Government would only 
guarantee one, not six, plants during the next 10 years. It also 
assumes that it would cost about half as much as Seabrook and Shoreham 
did two decades ago and that it would still be able to operate after a 
default. Under these assumptions, CBO has concluded that the loan 
guarantees would cost in the range of $275 million for the one plant.
  The Nuclear Energy Institute takes strong exception to these 
Congressional Budget Office conclusions. NEI doubts the industry will 
default on its loans. It believes CBO's estimate is based on 
noncredible, illogical assumptions and that the CBO estimate is 
unrealistically high.
  So we have experts on all sides of this issue. The debate is 
important, but I do think it glosses over some of the fundamental 
questions: Does this nuclear power industry need these loan guarantees 
at this point? Is guaranteeing the nuclear power industry's loans sound 
public policy? On both of those issues, I believe the preponderance of 
the argument is on the side of the Wyden-Sununu amendment. I do not 
believe loan guarantees are necessary in this magnitude at this time.
  This is a mature industry. We have been building nuclear powerplants 
in this country for nearly half a century. We have over 100 nuclear 
powerplants now operating. The nuclear industry did not need loan 
guarantees to get off the ground 50 years ago, and I do not believe 
those guarantees are required at this point.
  Moreover, the companies that are most likely to build these new 
nuclear powerplants are the ones that have built them before and the 
ones that are operating them now. These are not small businesses.
  As a result of the recent wave of mergers and acquisitions, there are 
a dozen utilities that now own 75 percent of the Nation's nuclear 
capacity and two-thirds of its nuclear reactors. Each of these 
utilities generates billions of dollars in revenues each year. Many 
generate tens of billions of dollars in revenue each year. 
Collectively, these 12 utilities had nearly $12 billion in revenues in 
2001.
  There is no evidence of which I am aware in the record before us that 
the nuclear industry needs loan guarantees of this magnitude to build 
new nuclear powerplants. The Energy and Natural Resources Committee 
held hearings on the state of the nuclear industry in the past 
Congress. We heard from both the utility industry and the financial 
community, and neither one suggested that loan guarantees were 
appropriate or required.
  The utility representative said that the state of the nuclear 
industry is ``very sound'' and that new plants would be ``economically 
competitive'' and acceptable to investors. The Wall Street 
representative at our committee hearing testified that a large 
successful utility could finance the construction of a new nuclear 
powerplant, and nobody mentioned the need for a Federal loan program of 
this type or a loan guarantee program of this type.
  Second, I do not believe that shifting the financial risk of 
constructing these plants from industry to the Federal Government or to 
the taxpayers is sound public policy.
  For most of the last century, utilities built powerplants in this 
country, whether nuclear or non-nuclear plants, under what is called 
the regulatory compact. Utilities were State-regulated monopolies. They 
accepted an obligation to serve everyone in their service territories 
at State-set rates. In return, they were shielded from competition. 
They were guaranteed recovery of their prudently incurred costs plus a 
reasonable profit.
  The regulatory compact has largely been abandoned in this country 
during the last couple of decades. It has been replaced by deregulated, 
competitive, wholesale electricity markets. So instead of wholesale 
electricity prices being set based on the utility's cost of production, 
they are now being set more by the market, and title XI of the bill 
before us is intended to further these developments.
  Giving Government loan guarantees of this magnitude to one segment of 
the utility industry--indeed one of the better financed segments of the 
industry--I think unduly interferes with the

[[Page S7582]]

free market. It runs counter to efforts to establish competitive 
electricity markets in this country.
  In a competitive market, utilities are supposed to decide whether to 
build new powerplants by weighing the economic risk involved against 
the economic reward they might receive. Loan guarantees skew the market 
by shifting the risk to the taxpayers while keeping the rewards for the 
utility shareholders.

  We have had this debate before, 50 years ago, at the dawn of the 
nuclear era. The House and Senate debated whether nuclear powerplants 
should be built and operated by the private sector or by the 
Government. The decision was made to leave the construction and 
operation of nuclear powerplants to the utilities, to the private 
sector.
  The Federal Government encouraged support of the utilities through 
nuclear research programs, through fuel subsidies, and through 
indemnification against accidents. It did not use loans or grants or 
loan guarantees.
  The Federal Government's faith in the utilities 50 years ago was 
justified as the more than 100 nuclear powerplants operating today 
attest, and we should continue to have faith in the free market today 
and not subsidize the next generation of nuclear powerplants to this 
extent by shifting economic risks from utility shareholders to the 
taxpayers.
  I urge colleagues to support the amendment. I yield the floor.
  The PRESIDING OFFICER (Mr. Voinovich). Who yields time? The Senator 
from New Hampshire.
  Mr. SUNUNU. Mr. President, I thank my colleague, the Senator from New 
Mexico, Mr. Bingaman, for his comments and his very well-reasoned 
argument on behalf of our amendment.
  As I indicated in my earlier comments, this is part and parcel of a 
debate as to what an energy policy really should be in our country. I 
support a number of initiatives that I think would help ensure access 
to stable, reliable sources of energy for our country's economy so it 
can continue to grow. That means conservation, and we just had an 
amendment that sets a target of conserving some 1 billion gallons of 
gasoline in our automotive industries over the next decade.
  We also need to make sure we have good, sound infrastructure for 
transporting electricity or natural gas across State lines and around 
the country. We want a good strong electricity title. That has been the 
effort and the work of the Energy Committee. We need to make sure we 
streamline and reduce unnecessary regulations. I will come back to this 
point shortly, but that is one of the real problems the nuclear 
industry faces right now: uncertainty due to complexity in the 
regulatory environment where the process of building or licensing a 
plant can be halted multiple times throughout the licensing process.
  Of course, I believe, as I hope most Americans do, that we need 
access to new energy sources and new energy reserves, and that is why I 
supported exploration in the northern slope of Alaska.
  At the same time, we need to be careful that our energy policy is not 
about trying to pick winners and losers in the energy markets; that we 
not digress toward a subsidy ``arms race.'' We heard people argue if we 
give a subsidy to this industry, we should give it to another, tax 
credits there or how about a subsidy here. We should not have a subsidy 
``arms race'' where we burden the taxpayers because that is who is 
paying for all of this policy, giving out subsidies to industries that 
are favored at a particular point in time. And we certainly should not 
single out an industry, as unfortunately a portion of this bill does, 
for an unprecedented loan guarantee, unprecedented taxpayer guarantees 
for the construction of new powerplants. Whether this is targeted at 
the coal-fired electricity industry or natural gas-fired plants or, as 
in this case, nuclear plants, I think it is questionable public policy 
to provide such loan guarantees.

  We are putting the taxpayer at risk, and we can call five different 
economists to try to estimate the size and scope of that risk, but the 
provision of the bill we seek to strike allows the Secretary of Energy 
to provide loan guarantees for up to half the cost of up to six plants. 
That is 50 percent of the cost for six plants, each perhaps costing 
between $2 billion and $4 billion. That is a $10 billion to $15 billion 
subsidy.
  The Congressional Research Service, which is about as nonpartisan as 
you can get, states that the maximum Federal cost will be in the range 
of $14 billion to $16 billion in 2002 dollars. The Congressional Budget 
Office states that the risk of default on these guarantees would be 
quite high, well above 50 percent.
  It is difficult to forecast risk. It is difficult to forecast cost. 
Whether these were guarantees for 25 percent of the cost or 50 or 100 
percent or for one plant or for 71 plants, my concerns and I think the 
concerns of the Senator from Oregon would still be the same: this sets 
a bad precedent in singling out one industry for this type of a 
construction loan guarantee. It sets a bad precedent because in all 
likelihood other areas of private industry would, in the long run, seek 
to be treated in the same way. Of course, it sets a bad precedent in 
that it is an unprecedented sum, an unprecedented guarantee.
  I would very much like to see a strong and revitalized nuclear 
industry, and I credit the chairman of the Energy Committee for 
focusing on this issue in his bill, extending Price-Anderson, investing 
in basic research, physics and nuclear technologies, and pushing 
forward scientific and research initiatives that he has included in the 
bill.
  I disagree on some of the slight nuances of those provisions, whether 
they are exactly the right size or targeted to the right areas, but I 
give him a lot of credit for focusing on strengthening our nuclear 
power industry. I simply do not believe this kind of a guarantee is 
right for any industry. Equally important, perhaps more important, I do 
not believe this kind of a taxpayer subsidy is right for the men and 
women of our nation who are working long and hard, sending their taxes 
to Washington, and expecting them to be used fairly and equitably.
  There is a lot of uncertainty in the energy markets and in the 
nuclear power industry in particular, and we can ask the question why 
are not more plants being built, why have we not had a new plant 
licensed in over 20 years? I think the answer can be found in the 
uncertainty and the risk created by the regulatory markets, created by 
the litigious society that we live in and the fact that the licensing 
process can be brought to a dead halt time and again. Whether or not we 
have the technology that would allow us to build a nuclear powerplant 
for $100 million or $500 million versus $2 billion, this uncertainty is 
enough to discourage capital markets from lending to the large private 
companies that are engaged in the nuclear power industry.
  I think we will not find private resources being attracted to the 
nuclear industry, and we should not find taxpayer resources subsidizing 
the industry, until something is done about that uncertainty and that 
regulatory complexity.
  We have an interest rate environment right now that benefits anyone 
building anything just about anywhere in our country, the lowest 
interest rates in 40 years. That is about as big as an incentive as one 
could possibly have for undertaking new construction projects. I 
certainly do not believe we need to put the taxpayers on the hook in 
order to provide even more incentive.
  We are reaching out trying to protect the taxpayers, trying to do the 
right thing, I think trying to make this bill better and trying to set 
a good precedent. Again, I thank Ron Wyden, the Senator from Oregon, 
for his work. We have bipartisan support for this amendment, three 
Republican and three Democrat cosponsors. As we move toward a vote, I 
think we will see bipartisan support for the amendment.
  Again, I thank the chairman of the committee for being thoughtful 
enough to work with us so we could get a consent agreement to bring 
this amendment up today, to have a fair and thoughtful debate, and to 
be able to have a straight up-or-down vote on the amendment at the 
conclusion of the debate. I reserve the remainder of our time.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Crapo). The Senator from New Mexico.
  Mr. DOMENICI. Mr. President, I wonder if I might speak with the 
distinguished Senator from Oregon about the

[[Page S7583]]

final vote. We are wondering, from our side, for no reasons other than 
time--the more time we have left, the more we might get done--whether 
we might be able to vote at 3:45 instead of 4:15, saving half an hour. 
We would be delighted to not ask the Senator to give up very much of 
that time but I wonder if he would consider a consent agreement for 
3:45, which will give us, instead of our hour, 40 minutes, and what is 
left would belong to the Senator, or 35 minutes. Would that be fair 
enough for the Senator?
  Mr. WYDEN. I want to be accommodating to the distinguished chairman 
of the committee. Let me spend a couple of minutes looking into it.
  Mr. DOMENICI. Sure.
  Mr. WYDEN. I will try to ascertain how many Senators on our side of 
the proposition would like to speak, but the Senator has always been 
fair.
  Mr. DOMENICI. Let's not agree. Let's put that before them as a 
possibility. Right now we are exploring the notion of voting at 3:45 
instead of 4:15. If we did that, we would allocate the time away from 
each hour in order to get there. In the meantime, we will both ask our 
cloakrooms if there is any problems with any Senators. The Senator from 
Oregon will do it on his side and I will do it on mine.
  Mr. President, I assume I can speak at this point; I have the floor?
  The PRESIDING OFFICER. That is correct.
  Mr. WYDEN. Would the distinguished Senator yield?
  Mr. DOMENICI. I would be pleased to yield.
  Mr. WYDEN. I think we may need to go to 4 rather than 3:45, but I 
will try to accommodate the distinguished chairman. We will spend some 
time checking his desire to move the legislation, which has transcended 
any particular amendment, and we are anxious to accommodate.
  Mr. DOMENICI. For the benefit of the Senators who would like to 
speak, Senator Alexander has indicated a desire to speak for a few 
moments. He is here. Senator Voinovich, who occupies the chair, desires 
to speak; Senator Landrieu, from the other side of the aisle, desires 
to speak. Senator Inhofe and Senator Larry Craig.
  I say to all of them, if they would let us know through the 
cloakroom, we will try to put some times opposite their names. We will 
be using 4 as kind of our scheduling time to see what we can do about 
setting up a time.
  Would the Senator from Tennessee like to speak at this time or would 
he rather that the Senator from New Mexico speak for a few moments?
  Mr. ALEXANDER. I will listen to the Senator from New Mexico.
  Mr. DOMENICI. I thank the Senator. I will try to be brief.
  My colleagues know I have been in the Senate 31 years and that for 
the better part of that time I spent my time on energy matters but 
principally, from the standpoint of the floor of the Senate, I was 
known as the person who handled the budget for the Senate. That is 
where I had the luxury and privilege of meeting the distinguished 
Senator, who opposes me on the floor, Mr. Wyden, and many others who 
serve with me. In fact, that is where I became a very good friend of 
the distinguished majority leader of the Senate, who served, as the 
Senator might recall, on that Budget Committee way down at the end of 
the Republican side. One of the Senators who served for most of that 
time, that the Senator from Oregon will recognize and remember, was 
probably one of the most astute and knowledgeable Senators who we have 
both had the luxury of knowing. We might both put some other attributes 
along with those but he was that, and that was Senator Gramm of Texas.

  One day I was exploring a matter with the Senator from Texas. I said: 
Senator, you know I have been on this Budget Committee for so long, and 
I am thinking about moving over to the Energy Committee where I have 
been in the second position for all of these years. You are from Texas 
and I noticed you never did bother to even get on the Energy Committee.
  He said: Yes, that is right.
  I said: Why is that?
  Listen carefully. He said: Senator Pete, energy is one of the most 
difficult things to do anything about, nigh on impossible to effect by 
law any real policy regarding energy, if you are talking about advanced 
policy that has any impact.
  I said: Well, Senator Gramm, I might agree with you but--and before I 
could finish he said: However, I would like to correct that and say one 
thing to you.
  Now, this was 5 years ago.
  Senator Domenici, there is indeed a probability that you can do 
something if you take over the Energy Committee, and I tell you for 
sure there is only one thing and that is to reestablish nuclear power 
as an option for these United States and the world.
  I wish he were here. I am not quoting him exactly so do not put it in 
quotes, but he would remember that.
  When I decided to take this job and give up the Budget Committee, I 
remembered that and I even told my wife, when discussing at home my 
next few years in the Senate, that some pretty good people think I am 
taking on a committee that does not have a lot of potential because 
energy is too tough to legislate and make policy about. It just sort of 
happens, except for that rascal nuclear power.
  Well, he said it. He may not be right but I am trying to prove him 
right in this debate today and in this Energy bill that we are going to 
try to finish this week, perhaps with 1 additional week.
  On May 21 of this year, Alan Greenspan, speaking to the House Energy 
Committee, said: If we're going to continue to expand our energy base, 
we're going to have to be starting to look at nuclear power as a 
potential reservoir of new sources of energy which are not available by 
other means.
  He continues: I think that we ought to be spending more money and 
more time looking and contemplating the issue of nuclear power since 
natural gas is a serious problem.
  This morning I happened to hear a talk show with typical Americans 
calling talking about energy. It was rather nice to hear people from 
Oklahoma City, from somewhere in Tennessee, California, Oregon, 
obviously average citizens who were calling in on a radio show asking 
questions. Most questions had to do with, why don't we have more 
natural gas? Finally someone asked, aren't there other things we can 
use? What about nuclear power? Of course, as one might suspect, the 
answers were rather muddled.
  The real question now before this institution is, can nuclear power, 
held in abeyance for about 14 to 16 years in the United States while 
Japan built new facilities, the country of France is 80 percent 
dependent upon nuclear power, a little country like Taiwan, which is 
booming, is currently constructing two facilities with General Electric 
engineering and design--I cannot recall the name of the contractor. And 
the United States sits with everybody saying it is almost impossible. 
With the exponential growth in electricity needs, where we all expect 
to use natural gas in the burners, to create the heat and electricity, 
it is nearly impossible that we will have enough natural gas. It is not 
a question of whether we have a lot of it. It is a question that we do 
not use anything else because we are frightened to death of using 
anything else.
  Some in this country, a small group, have scared us to death about 
nuclear power. When we add up all the energy produced by nuclear power 
in the world, including the terrible accident in Russia, which was 
attributable to a very old-fashioned nuclear powerplant that we would 
not dare license in America, add these together and nuclear power has 
been safer than any of the other power sources combined--be it coal or 
any other--save and except for energy produced by dams. I am speaking 
of large quantities. Certainly, if we speak of windmills, we speak of 
solar, we can produce clean energy.
  Having said that, the issue before the Senate today is, do we want to 
support a committee that put together a bill that said, fellow 
Americans, the time has come to quit playing around with energy and do 
something about a myriad of sources. And to say, wherever you can, we 
are going to produce more energy.
  We have tried to produce or cause to be produced every natural gas 
source we know of that had impediments. If it was too deep, we gave it 
a benefit of some sort so it could get taken out, anyway. If it was too 
far away in the ice lands of Alaska, we gave those companies something 
so they could get it down here. If it is coal, we said subsidize.

[[Page S7584]]

  They are talking that we should not be granting a loan guarantee, 
presumably at market value, to a first-class company that might want to 
take a risk at building a powerplant. They are saying we should not do 
that. But when it comes to coal, we are going to spend over $2 billion 
on pure research to try to get to that miracle place of clean coal.
  We did not say, my, you just should not put your tax dollars in a big 
waste.
  Last but not least, while our opponents will find this is not 
relevant, we already have a subsidy for wind energy, those 50-foot-tall 
windmills. Without the new one contemplated to be added to this bill, 
that has the potential of producing 245,000 windmills, equivalent 
source of energy. The powerplants we contemplate lending money to, or 
offering a loan guarantee, the same amount. Guess how much the taxpayer 
will have given if that occurs. Thirty-one billion is the direct source 
for those windmills.
  Now, the opposition to ours might say, but you are going to get 
windmills. When you say to the American power industry, if you want to 
come along and try to build a new nuclear powerplant, modern type, you 
have to go get your money, you have to take all the risks, and we will 
underwrite half of it with a loan, they would have us say that is a 
terrible risk even if it is only $2 billion to $5 billion. But that $31 
billion that might occur for windmills is not? Of course, the windmill 
is not a risk, but it certainly is throwing your money at something 
that most Americans would wonder seriously about.
  Having said that, this Senator is not against any of the sources. I 
think we will win today. When we win, we will go to conference 
eventually and come out with a major new impetus for nuclear power in 
this country. For the first time somebody is going to say, let us build 
one or two new nuclear powerplants. And the greenhouse gas issue that 
has been raised will not be there because there is no pollution from 
those two plants that I have just described, if they come into being--
none. Zero. Absolutely clean.
  We are going to have to find some way to take care of the waste 
someday. If we want to have a debate here today, or next week, on the 
waste, suffice it to say that the United States has scared herself 
silly about waste. Waste is nothing but a technical problem. If you 
want to go see all the waste in France, get a ticket and go to a city, 
ask them where it is, and they will take you to a building, and you can 
go see it all.
  You might say: Who would want to see it?
  They will just take you to a building that looks like a schoolhouse. 
You walk in and say: Can I see the waste? And they will say: You are 
walking on it. They will say: Just take a look down.
  You look down. It looks like glass, and there sits the waste, 
encapsulated, and it will be there for as long as 50 years, if that is 
what is needed by the French scientists to find out how to put it away 
or how to reuse it.
  Here we sit fooling around because somebody convinced us we ought to 
become immobilized, when it comes to an alternative, until we have a 
hole in the ground so deep, so big, in such hard rock that we can 
figure out, way in advance, a way to put the waste in it and monitor it 
with calculators and say to America and the world: We just monitored 
it, and we can tell you there will be no radiation for 10,000 years.
  That is the test because we want to be so careful we don't hurt 
anybody ever. The test of the technology that is going to have to 
monitor that--and you can hardly draw the plans, it is such an 
absurdity--is 10,000 years.
  Having said all that, we are back to a simple proposition: Do you or 
do you not want to let the Energy Committee go to a conference with the 
House and to take with it a bill that says: All the rest of these 
energies get their help: Biomass gets its assistance, coal gets its 
help, the renewables are helped immeasurably with tax assistance, every 
single thing we know how to do to produce more oil and gas is done--
right?
  Ms. LANDRIEU. Right.
  Mr. DOMENICI. I could go on and on. That is all going to be there. 
But also in the event--and I am looking for the language in the statute 
as to when the Secretary can issue these--we have statutory language 
that says, very simply--and I will read it and close:

       Subject to the requirements of the Federal Credit Reform 
     Act [et cetera, et cetera, et cetera], the Secretary may, 
     subject to appropriations, make available to project 
     developers for eligible project costs such financial 
     assistance as the Secretary determines is necessary to 
     supplement private-sector financing for projects if he 
     determines that such projects are needed to contribute to 
     energy security, fuel or technology diversity, or clean air 
     attainment goals. The Secretary shall prescribe such terms or 
     conditions for financial assistance as the Secretary deems 
     necessary. . . .

  That then is provided as up to 50 percent of the cost, by way of a 
loan.
  Frankly, it is all a question of risks. It is not a question of 
philosophy. It is not a question of whose party wants to get on what 
slope, a slope of entrepreneurship or a slope of guaranteeship. All of 
that is meaningless. What this is about is: Is it worth this little 
risk we are speaking of--to get what I just described going again 
for America?

  I say, overwhelmingly, absolutely, positively, yes. I do hope, come 
that vote time, there will not be 50 Senators, or half of those who 
vote today, who will say we want to strike this and kill this 
opportunity for America.
  With that, I will yield the floor to Senator Alexander for his time.
  Senator Landrieu, are you on some time frame that is urgent?
  Ms. LANDRIEU. I can yield to the Senator from Tennessee. He was here, 
of course, prior to my arrival. How much time would he like?
  Mr. DOMENICI. I yield to him and then to the Senator from Louisiana.
  Mr. ALEXANDER. I would like about 5 minutes.
  Ms. LANDRIEU. Fine.
  The PRESIDING OFFICER. The Senator from Tennessee.
  Mr. ALEXANDER. Mr. President, I rise in support of the chairman in 
opposition to the amendment.
  In 1987 our family, which included three teenagers and a 7-year-old, 
visited the Peace Park in Hiroshima, Japan. We thought twice before we 
took our children there because it is such a staggering experience to 
see what happened on that August day in World War II when the atomic 
bomb was dropped.
  I marvel even more that today Japan, because it knows of the 
importance of energy, now relies on nuclear energy--the same process 
that wiped out half the lives in Hiroshima--for peace, for the peaceful 
production of electricity for homes and jobs for about 80 percent of 
their electric needs. They are producing about one new reactor a year.
  In France, as the chairman said, about 80 percent of the electricity, 
I believe, is produced by nuclear power. We have about 100 ships in our 
Navy that operate with little nuclear reactors. Yet, for some reason, 
over the last 30 years we became afraid to start a new nuclear 
powerplant. I guess we became so accustomed to abundant supplies of 
coal and oil and relatively cheap gasoline that we thought it would 
last forever. But I think we have gotten over that. At least it is time 
for us to get over that and to break away from this national attitude 
that, since the 1970s, has kept us from starting a new nuclear 
powerplant.
  Why not nuclear? That is the question we should be asking. We have 
heard the testimony of the terrible price increases in natural gas and 
the projections that we have a really serious problem with continuing 
natural gas prices.
  This Senate voted not to go explore for more oil in Alaska.
  Windmills are promising, but the promise of 245,000 of them to 
produce 2 percent of our energy and to see them all over our deserts 
and ridgetops--there is some limit to what windmills will be able to do 
for us. Coal produces half of our electricity, but it produces carbon 
and it produces pollution and we have not yet quite developed the clean 
coal technology we all want.
  Nuclear power more and more seems to be imperative. So what are we 
doing about it in this bill? We are basically adding nuclear to the 
arsenal of weapons we want to use to make ourselves less dependent on 
foreign oil and more likely to have clean air and a cheap and abundant 
supply of electricity.
  It is said that we are subsidizing the idea of nuclear power. In a 
way we are: A new type of advanced nuclear powerplant that has the 
promise of building plants for $1.5 billion--much cheaper,

[[Page S7585]]

much more efficient, safer, to start up that industry, to stimulate it. 
But we are doing exactly the same thing as the chairman said with wind 
power. We are doing exactly the same kind of thing with clean coal 
technology to the tune of $2.2 billion. We are doing exactly the same 
thing with oil and gas, and $2.5 billion is in the bill for that.
  This morning, we talked about putting a Presidential emphasis, thanks 
to the Senator from Louisiana, on conservation. We need to add nuclear 
to our list. The larger question would be, Why would we keep it out? 
Why would we encourage every other form of energy and not nuclear 
energy?
  I strongly urge that we keep in this bill nuclear power as an option 
for our future. There will be great discussions in this body about 
carbon and the concern of greenhouse gases. Nuclear power is carbon 
free. It is carbon free. There will be a lot of talk about our 
dependence on oil. The most reliable and largest opportunity to replace 
oil in the next 20 years is nuclear power.
  There is a lot of talk about the worry of natural gas prices. The 
best way to keep natural gas prices under control is to have an 
alternative. That would be nuclear power. I strongly urge my colleagues 
to vote no on the amendment.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from New Mexico is recognized.
  Mr. DOMENICI. Mr. President, I ask unanimous consent that the vote in 
relation to the pending amendment occur at 3:50 with the remaining time 
to be divided with 20 minutes for the proponents and 10 minutes under 
the control of the opponents.
  The PRESIDING OFFICER. Is there objection?
  Without objection, it is so ordered.
  The Senator from Louisiana.
  Ms. LANDRIEU. Mr. President, I thank the Senator from New Mexico. I 
will take 3 or 4 minutes. I understand that the Senator from Alabama 
would like to speak in opposition to the amendment as well.
  In all due respect to my colleagues who are offering this amendment 
to strike this very important provision from the bill, I wanted to come 
to the floor to strongly disagree and to add my voice at the outset of 
the debate and on the points which the chairman of the committee 
brought to the fore on this very important part of the Energy bill.
  I wish to begin by saying that our Nation has 103 nuclear 
powerplants. The nuclear industry provides 20 percent of our 
electricity. I don't believe we will strip the Energy bill of this 
provision, but if we did, we would jeopardize the reliable and 
affordable source of electricity that this Nation needs to stay 
competitive in this world economy.
  It will cost jobs and cause hardship. People would lose their jobs 
with this amendment.
  I am not sure my colleagues are aware that over the next 20 years the 
United States doesn't need to move backwards as this amendment would 
suggest. We need to move very quickly in the other direction. We need 
to build 1,300 new powerplants in this Nation, which is the equivalent 
of 60 to 90 new powerplants per year to keep up with the increased 
demand of electricity. Why? Because our economy is more productive; 
because technology is demanding it; because good, old Yankee know-how 
makes it crucial that we provide our businesses with electricity and 
with power. If we don't give them power, they can't operate. If we 
don't give them power that is reliable and affordable, then we will 
lose jobs to our international competitors. It is as simple as that. We 
need everything and more, everything we thought of and more than we 
thought of.
  Nuclear is a very important component of that. The amendment's 
authors argue that this is a subsidy. It is not a subsidy. It is a loan 
guarantee. It is our intention that these loans be fully paid with 
interest. We do this. There are 100 examples in the Federal rule book 
where we do this. We want to encourage the development and movement in 
a certain way. We can give loan guarantees, and we have done it time 
and again. It is time we do it for the nuclear industry to keep them 
moving in the right direction.
  Let me say to the chairman that I went down to Louisiana. We have two 
nuclear powerplants. Seventeen percent of Louisiana's fuel is nuclear. 
As the chairman knows, one out of five has the clean benefit of nuclear 
power.
  My producers of natural gas said to me, Senator, please go and fight 
for nuclear energy. If we don't get more energy into the marketplace, 
the demands on natural gas will become so high that we cannot pay our 
gas bills, and it is driving our industry to its knees. They said, 
Senator, please go and fight for an increase in all sources, including 
nuclear.
  Nuclear energy currently generates electricity for one in every five 
homes and businesses.
  It is important not only in Louisiana, where two nuclear plants 
produce nearly 17 percent of my State's electricity, but also in States 
such as Connecticut, Illinois, New Hampshire, New Jersey, South 
Carolina, and Vermont where nuclear generates more electricity than any 
other source.
  Nationwide, 103 reactors provide 20 percent of our electricity--the 
largest source of U.S. emission-free power provided 24-7.
  Nuclear energy is one of the most competitive sources of energy on an 
operational cost basis.
  While I strongly support the use of natural gas for our energy needs, 
we cannot rely, as we have in recent years, on any one source of energy 
to meet our Nation's increasing electricity demand.
  Over the next 20 years, U.S. natural gas consumption is projected to 
grow by over 50 percent while U.S. natural gas production will grow by 
only 14 percent.
  The CEO of Dow Chemical recently wrote that the chemical industry--
the Nation's largest industrial user of natural gas--is particularly 
vulnerable to high natural gas prices.
  To remain an economic leader we must promote a diversified and robust 
energy mix, including the full range of traditional and alternative 
energy sources.
  Nuclear energy is also vitally important for our environment and our 
Nation's clean air goals.
  Nuclear energy is the Nation's largest clean air source of 
electricity, generating three-fourths of all emission-free electricity.
  Nuclear energy will be an essential partner for future generations of 
Americans, whose reliance on electricity will increase and who 
rightfully will demand a cleaner environment.
  Just this past Sunday, the Washington Post highlighted the problems 
that the Shenandoah National Forest now faces with pollution. Think how 
much worse our Nation's air pollution would be if nuclear energy did 
not generate one fifth of our electricity.
  To preserve our current levels of emission-free electricity 
generation, we must build 50,000 megawatts of new nuclear energy 
production by 2020.
  In addition to providing the largest source of emission-free 
electricity, nuclear energy possesses the most viable solution to our 
over reliance on foreign oil, i.e., the potential to someday cogenerate 
hydrogen as a clean transportation substitute to oil.
  The Wyden amendment will hurt our Nation's long-term economic, 
environmental and security goals if passed.
  Building a windmill that has a generating capacity of 2 megawatts 
should not be compared to building a nuclear power plant that produces 
1,000 megawatts or more.
  I agree with my ranking member that the nuclear industry is mature in 
the sense that it has been safely, efficiently, and effectively 
producing electricity for several decades. But we have not brought a 
new nuclear plant on line in this country for over a decade and a new 
project will face some uncertainties.
  The costs of the first few plants will be higher than those that are 
built later. Because the business risks will be greater for the initial 
few projects, financing will be more difficult to obtain. That is why 
the Federal Government needs to step in and provide an incentive to 
allow the industry to get over that hurdle.
  Some rather large numbers have been thrown around as to the costs of 
this provision. Were theses numbers accurate, I would share the 
concerns voiced by my colleagues.
  The construction costs as derived by CBO would be $2,300 per kilowatt 
of capacity is inconsistent with current cost incurred by other nations 
building similar types of advanced nuclear reactors.

[[Page S7586]]

  According to a detailed cost analysis developed by industry the first 
few plants will cost less than $1,400 per kilowatt hour and will later 
fall to less than $1,000 per kilowatt hour, making nuclear plants very 
competitive with the costs of other technologies.
  My colleagues who are opposed to these loan guarantees are assuming 
that a new nuclear plant could rise to costs over $3,800 per killowatt, 
based on questionable CBO projections.
  In addition my colleagues also fail to mention that the Secretary of 
Energy will be required to use stringent criteria to provide loan 
guarantees.
  I concede that we probably don't know what the exact cost will be, 
but the economic, environmental, and security benefits of investing in 
new nuclear plants for our future generations are many and great while 
the financial risk to the public sector is by comparison rather small. 
Let's give this idea a chance.
  In conclusion, I urge my colleagues to vote against the Wyden 
amendment. And I thank the chairman for all his efforts in helping to 
promote a vital source of energy and for helping to pave the way 
towards improving our Nation's energy security.
  I strongly oppose the amendment on the floor to strip the provision 
in this bill, and I support the chairman's mark.
  Mr. DOMENICI. Mr. President, how much time does the Senator from New 
Mexico have?
  The PRESIDING OFFICER. Six minutes.
  Mr. DOMENICI. I yield 3 minutes to the Senator from Alabama.
  The PRESIDING OFFICER. The Senator from Alabama is recognized for 3 
minutes.
  Mr. SESSIONS. Mr. President, I wish to express my deep appreciation 
to Senator Domenici. He, more than any other person in this body, 
understands what role nuclear power must play in America and in the 
world if we are to maintain a clean environment and a healthy energy 
source. In nations that have readily available electricity in the 
world, compared to those that do not, the lifespan is twice as long.
  This is a matter of extreme importance. We are trying to 
simultaneously increase our power sources in America and improve the 
cleanliness of our air and protect our environment. The only way that 
can be done is with nuclear power.
  I feel very strongly about this. It is important for America's 
economy. Alan Greenspan testified at the Joint Economic Committee last 
week and raised again the crisis that we are facing in natural gas. 
Natural gas is a source for all new electric plants in America today. 
We are driving up this tremendous demand on natural gas. If we drive up 
the cost for natural gas, as we certainly will at the rate we are 
going, homeowners are going to pay so much more for their heating. 
Businesses that use natural gas are going to have to pay twice as much. 
We can meet that demand without any air pollution by expanding nuclear 
power.
  There are 29 nuclear plants being built around the world. France gets 
80 percent of its power from nuclear power. Nearly 50 percent of 
Japan's power comes from nuclear power.
  We have not built a nuclear plant in America in 20 years. It is time 
for that to change. Twenty percent of our electricity comes from 
nuclear power producing no adverse environmental impacts to the 
atmosphere.
  I would like to read what we save for the atmosphere by having 
nuclear power. A recent study showed that nuclear energy has prevented 
the release of 219 million tons of sulfur dioxide, 98 million tons of 
nitrogen oxide polluted in the atmosphere, and prevented the emission 
into the air of 2 billion tons of carbon dioxide. That is considered by 
some to be a global-warming gas. We can stop that. We may have offset 
the effects of carbon dioxide already by producing 20 percent of our 
energy with nuclear power.

  We have to include a provision like this in the bill. Last year, I 
introduced a bill that would provide a tax credit, similar to that for 
renewable energy, for the production of nuclear energy. The tax credit 
would have cost only one-fifth the amount of tax credits that other 
forms of clean energy receive, and it would have encouraged the 
production of a steady, reliable source of energy. The provision in 
this bill likewise encourages nuclear energy, and I support it. I 
reject the notion that there would be a high rate of default on these 
loans. I have studied nuclear energy and I have visited plants. These 
loans are needed to provide the nuclear industry a small incentive to 
take a big step towards constructing a plant. We need to go to 
conference with it. If we do, I would be willing to work with Senators 
who oppose this. But I think we have to have something in this bill 
that will allow us to encourage nuclear power. Not to do so would be a 
failure of incredible proportions.
  I thank the chairman. I feel very strongly about it. I thank Senator 
Domenici again for his historic leadership that can lead us into a new 
way to produce large sources of energy without pollution costs to the 
environment.
  I yield the floor.
  The PRESIDING OFFICER. Who yields time?
  Mr. SUNUNU. Mr. President, I ask if the Senator from Oregon would 
yield 2 minutes to the distinguished Senator from Arizona.
  Mr. WYDEN. Yes.
  The PRESIDING OFFICER. The Senator from Arizona.
  Mr. KYL. Mr. President, first, I agree with the comments of the 
Senator from Alabama that we ought to be promoting nuclear power. I am 
a strong advocate of that. I compliment the chairman of committee, 
Senator Domenici, for being very strong in his support for nuclear 
energy and for being totally consistent in the positions he has taken.
  I want to argue against hypocrisy. An environmental group handed me a 
sheet of paper a while ago. They are very much against subsidies. As it 
turns out, a subsidy for nuclear energy would be very bad. They are 
right about arguing against subsidies. That is why I am going to 
support this amendment.
  But all of the environmental arguments I have seen have been for 
subsidies when it comes to ethanol, solar power, biomass, wind energy, 
and you name it. The point here is that we ought to be consistent. If 
you think subsidies are a wonderful idea for these other things, then 
maybe you ought to support the loan guarantee for this additional 
method of producing power. But if you think subsidies are wrong, then 
you shouldn't support them for anything.
  As the chairman of the committee knows, I opposed all of these 
subsidies in the Finance Committee. I will offer amendments again to 
try to strip them out of the finance part of the bill when it is added 
to the Energy bill on the floor.
  I wish to make the point that if you want to be hypocritical--I am 
talking about these organizations and not Members of the Senate--then 
fine. Oppose this subsidy for nuclear and continue to support it for 
all of the rest. But if you want to be honest about it, like the 
chairman and I, though we have come to a different conclusion, but at 
least the chairman has been consistent and I hope I have been 
consistent.
  I oppose these subsidies, even for those sources of energy which I 
think are critical for this country to continue to develop, and that 
includes nuclear energy.
  I support the amendment in order to remain consistent in opposing 
subsidies.
  The PRESIDING OFFICER. Who yields time?
  Mr. SUNUNU. Mr. President, I thank the Senator from Arizona for his 
support for our amendment. I will pick up a little bit where he left 
off talking about the issue of subsidies across a range of areas.
  The distinguished chairman of the committee spoke earlier about the 
clean coal subsidy, the $2 billion in clean coal subsidy. He suggested 
that supporters of this amendment also supported that subsidy.

  I just want to be clear. I do not support $2 billion for clean coal. 
I have, in my service in the House of Representatives, opposed the 
clean coal technology program. In addition to that, I oppose the fossil 
fuel research and development fund that is in this bill because they 
effectively provide a subsidy for research and development in the areas 
of fossil fuel, areas where private companies operate in a very 
profitable and successful way.

[[Page S7587]]

  It is not to hold anything against those fossil fuel firms or those 
coal firms, but it is to stand up for some of the concerns expressed by 
the Senator from Arizona that we should try to be as consistent as 
possible in striking these unnecessary subsidies.
  The suggestion was made earlier on the floor--in fact, the statement 
was made specifically--that this loan guarantee program is ``not a 
subsidy.'' I reject that out of hand. If this was not a subsidy, then 
it would convey no benefit to those who sought the loan guarantee. And 
if there were no benefit, then people should have no objection to 
removing it from the bill. But, of course, there is a lot of objection 
to removing this from the bill because there is a big benefit to be 
gained by having a federally subsidized loan guarantee for the 
construction of new nuclear plants.
  It was also suggested that perhaps this is an attack on nuclear 
power. Let me close by reemphasizing that is simply not the case. I 
support the Price-Anderson provisions in the bill. I supported the 
effort to establish a long-term storage facility for nuclear waste at 
Yucca Mountain that could be operated for the long-term, safely for our 
utilities and energy industries.
  In an effort to suggest this is an attack on nuclear power, the big 
guns have also been rolled out: there's been a suggestion that Alan 
Greenspan, of all people, might somehow harbor some support for this 
loan guarantee program. Let me say, clearly, like Alan Greenspan, I am 
a proponent and supporter of the concept of using nuclear power to help 
meet our energy needs, but I do not believe, for a moment, that means 
Alan Greenspan is a supporter of federally guaranteed loans to private 
industry. And if someone can produce testimony from Alan Greenspan 
supporting a Federal loan guarantee program for private industry to 
build nuclear powerplants, I will quite literally eat my hat. I simply 
do not believe that to be the case.
  I join with the Senator from Oregon in support of this amendment to 
strike one provision from this very large Energy bill; and that will 
protect taxpayers by preventing them from being exposed to $14 or $16 
billion in loan guarantees to private industry. I do not think we need 
it.
  I look forward to a vote on this amendment. I certainly ask my 
colleagues to support the amendment.
  I yield the floor.
  Mr. INHOFE. Mr. President, I rise to oppose this amendment. Nuclear 
power is a clean, reliable, stable, affordable, and domestic source of 
energy. It is an essential part of this Nation's energy mix. And if we 
care about energy stability and the environment, then nuclear power 
must play an important role in our energy future.
  I am a strong supporter of nuclear power and I want to commend 
Senator Domenici for his commitment to nuclear energy in this bill. His 
legislation provides incentives to enhance and expand our energy base 
and usher new advanced-design nuclear power technologies. It has been 
nearly 20 years since a new nuclear plant has been built. The safety 
and efficiency record of the industry over that time has been 
astounding. Through increased efficiency, nuclear plants have increased 
their clean generation of energy. The increased electricity generation 
from nuclear powerplants in the past 10 years was the equivalent of 
adding 22 new 1,000-megawatt plants in our Nation's electricity grid. 
But with energy demand increasing by at least 30 percent over the next 
15 years, more generation will be necessary to meet our needs. As we 
look to the future, if we are to meet those needs, provide stability in 
the marketplace, and ensure clean air, then we will have to continue to 
expand our nuclear base load. Nuclear energy is America's only 
expandable large-scale source of emission-free electricity.
  The Environment & Public Works Committee--the committee of which I 
have the honor to serve as chairman--has jurisdiction over the Nuclear 
Regulatory Agency and I have been active in overseeing that agency, 
both as the nuclear subcommittee chairman, and now as chairman of the 
full committee. In 1998 I began a series of NRC oversight hearings. I 
did so with the goal of changing the bureaucratic atmosphere that had 
infected the NRC. By 1998, the NRC had become an agency of process, not 
results. I knew that if we were to have a robust nuclear energy sector, 
we needed a regulatory body that was both efficient and effective--and 
one in which the public could be sure that safety is the top priority. 
If the agency was to improve it had to employ a more results-oriented 
approach--one that was risk-based and science-based, not one mired in 
unnecessary process and paperwork. I am pleased that in the last 5 
years, we have seen tremendous strides at the NRC. It has become a lean 
and more effective regulatory agency. I have the utmost confidence in 
the NRC ability to ensure that nuclear energy in this country is safe 
and reliable.
  We have all of the pieces in place to move to the next generation of 
nuclear power. If we are to meet the energy demands of the future and 
we are serious about reducing utility emissions, then we should get 
serious about the zero emissions energy production that nuclear power 
provides. And that means that we should not be discouraging the 
development of new, safe nuclear technologies. Quite the opposite, we 
should provide the incentives and the assurances in order to meet the 
energy needs of this country.
  The bill before us provides a sensible incentive for future nuclear 
power projects. Unfortunately, the Wyden/Sununu amendment will remove 
those incentives--it is a step backward--away from long-term stable and 
clean energy supplies.
  Mr. FEINGOLD. Mr. President, I am pleased to be a cosponsor of this 
amendment and want to detail the reasons for my support. The amendment 
strikes subtitle B of title IV of the bill, the section on deployment 
of new nuclear plants. This section would provide new loan guarantees 
for the construction of new nuclear plants. In addition to providing 
the nuclear industry loan guarantees, the Senate Energy Bill appears to 
also authorize the Federal Government to enter into power purchase 
agreements to buy power back from new reactors--potentially at rates 
above market prices.
  I think subtitle B goes too far and the amendment to strike is 
necessary for several reasons. First, the bill places no ceiling on 
these loans, making the Federal Government liable, according to the 
Congressional Research Service, for between $14-$16 billion in loan 
guarantees.
  Second, I feel strongly that if private investors are not willing to 
put their own money on the line to support new nuclear plants, then the 
Federal Government should not put taxpayers' money at risk either. Yet, 
under the provisions currently included in the Senate bill, taxpayers 
would be required to subsidize up to 50 percent of the cost of 
constructing and operating 8,400 megawatts of power. The Congressional 
Budget Office has estimated the risk of default would be ``well above 
50 percent.'' I feel that $14-$16 billion is a lot of money to gamble 
on an investment that has a 50/50 risk of failure.
  Finally, as I have expressed in the past, I am concerned that our 
current nuclear waste storage program is of insufficient size to handle 
our current nuclear waste problem. I do not think it is wise to build 
more plants, when we do not have enough storage for our current waste. 
Yucca Mountain is not authorized at a size that is big enough to take 
all of the current nuclear waste. Among the reasons that I opposed the 
Yucca Mountain resolution was its insufficient size. I was concerned 
that my home state of Wisconsin would go back on the list as a possible 
site for a large-scale nuclear repository. Constructing new nuclear 
plants does nothing to relieve those concerns, and instead makes it 
more likely that we will have a growing nuclear waste problem for which 
we will need a permanent storage solution, putting Wisconsin back at 
risk.
  I think this amendment makes fiscal and policy sense, and deserves 
the support of the Senate.
  Mr. VOINOVICH. Mr. President, I rise in support of nuclear energy and 
in support of the provisions in S. 14 that promote the use of this 
vital component of our energy portfolio.
  Nuclear energy accounts for 20 percent of our electricity 
generation--one in five American homes and businesses are powered by 
nuclear energy. It is an important energy source now, and will

[[Page S7588]]

become even more important in the future--as we strive to meet growing 
energy demands while protecting our environment.
  As many of my colleagues know, nuclear energy provides emissions-free 
electricity--no emission of airborne pollutants, no emission of carbon 
dioxide or other greenhouse gases. In fact, nuclear energy provides 
three-fourths of the emissions-free electricity generated in the United 
States--more than hydro, wind, solar and geothermal energy combined.
  President Bush has said many times that energy security is a 
cornerstone of national security. He is right--and nuclear energy is a 
vital component of our energy supply.
  Uranium--the fuel for our nuclear fleet--is mined domestically and by 
many of our allies.
  Unlike oil, nuclear energy is not subject to foreign manipulation.
  Unlike natural gas, nuclear energy does not have domestic shortages 
and importation problems.
  Unlike wind, solar and geothermal energy, nuclear energy provides 
highly affordable and reliable power.
  Production costs of nuclear energy were 1.76 cents per kilowatt-hour 
versus 1.79 cents for coal and 5.69 cents for natural gas in 2000.
  Plant capacity utilization exceeded 90 percent in 2002--the fourth 
year in a row that the industry set a record for output without 
building any new plants.
  Nuclear energy is safe. Our nuclear plants are the most hardened of 
any commercial structures in the country and have a superb safety 
record and few, if any, industries have oversight comparable to that 
provided by the NRC for nuclear plants.
  Our nuclear Navy is a great example of the safety of nuclear energy--
  The U.S. Navy has safely traveled over 126 million miles without a 
single reactor incident and with no measurable impact on the world's 
environment.
  Sailors on a nuclear submarine, working within yards of a reactor, 
receive less radiation while on active duty than they would at home 
from natural radiation background.
  However, we must act now if we want to preserve the benefits of 
nuclear energy.
  The last license for a domestic reactor was issued in 1978--and the 
technologies used to power our nuclear plants are over 30 years old.
  Our industry has developed advanced nuclear technologies--and the NRC 
has licensed them--but new plants have only been built overseas, not in 
America.
  Our nuclear plants were built in a highly regulated market--where 
returns on these investments were guaranteed--not in today's highly 
competitive energy markets.
  Nuclear plants present unusual risks to the financial community due 
to the significant up-front capital investments that are required years 
before they generate any returns--as opposed to natural gas generators 
that are relatively inexpensive and easy to build.
  Without new interest in nuclear power, our pool of qualified nuclear 
workers is drying up.
  From 1990-95, the number of students in nuclear engineering dropped 
by 30 percent.
  In 1975, there were 76 research reactors on American college 
campuses--today there are 32.
  Current estimates project that domestic energy demand will increase 
by almost 50 percent by 2030. Without a significant effort to increase 
our nuclear capacity--which must include construction of new nuclear 
facilities--we will have no other choice than reliance on natural gas 
to meet that demand, which will drive up the costs for both electricity 
and natural gas through the roof.
  The nuclear energy provisions in S. 14 are essential to assure that 
nuclear energy continues to thrive and provide its benefits to our 
Nation:
  Price-Anderson reauthorization: The bill permanently reauthorizes the 
Price-Anderson liability protection that is so crucial to all nuclear 
facilities.
  Advanced reactor construction: The bill will authorize construction 
of a new advanced reactor as a research test-bed using the very latest 
ideas developed in the Generation IV reactor program.
  Advanced fuel cycle initiative: Authorizes funding for development of 
technologies to reduce the volume and toxicity of final waste projects, 
simplify siting for future repositories and recover fuel from spent 
fuel.
  Federal loan guarantees: The bill provides loan guarantees for new 
plant construction in order to offset the problems with new development 
that I mentioned earlier.
  I want to spend just a minute on the Federal loan guarantees that are 
the subject of an amendment by Senator Wyden and Senator Sununu.
  These loan guarantees are necessary to jumpstart construction on new 
nuclear plants. In order to begin construction of a new facility, the 
nuclear industry needs to move into uncharted waters--they need to go 
to investment bankers and say ``I know that this is a huge capital 
outlay, and that we haven't built one of these facilities in 30 years, 
but we need to do this.'' These loan guarantees will ensure that 
private-sector financing will be available for utilities that make the 
decision to move forward.
  My distinguished colleague from Oregon has stated that we are 
throwing away good money on these ``subsidies.'' I must respectfully 
disagree. As Chairman Domenici pointed out earlier, this is not a 
handout program.
  These are loan guarantees--for up to 50 percent of the construction 
costs for a new facility--which means that the utilities will have to 
make payments on the loans, and that there will likely be no expenses 
to the Government.
  I applaud the work that Chairman Domenici has done on these 
provisions--all of these provisions--and I will oppose any efforts to 
strip them from the energy bill.
  I urge my colleagues to oppose the Wyden-Sununu amendment.
  Mrs. FEINSTEIN. Mr. President, I rise to support the amendment 
offered by Senators Wyden, Bingaman, Sununu, and Enzi to strike the 
section of the energy bill providing Federal subsidies for the 
construction of new nuclear plants.
  Title IV of the energy bill includes loans, loan guarantees, and 
other forms of financial assistance to subsidize the construction of 
new nuclear powerplants.
  In the past 50 years, California has built 5 commercial nuclear 
powerplants and one experimental reactor. Today, just two of these 
nuclear powerplants are still operating in the State. The plants at San 
Onofre and Diablo Canyon are running at diminished capacity but still 
provide 4,400 megawatts of power in California--close to a fifth of 
California's energy supply.
  Impressive as these numbers may be in terms of the power-generating 
capacity of nuclear energy, they tell only part of the story of 
California's experiment with nuclear power. Of six nuclear powerplants 
built in California, four have been decommissioned due to high 
operating costs and excessive risk.
  In the late 1950s, an experimental reactor at the Rocketdyne site in 
Ventura County was shut down after a severe meltdown.
  In 1967, the Vallecitos plant closed its doors after 20 years of 
operating because its owner, General Electric, was unable to obtain 
accident insurance due to the high risk of operating a nuclear power 
plant.
  In 1976, the Plant at Humboldt Bay shut its doors after 13 years of 
operation as a result of the discovery of a fault line near the plant 
that would have required millions of dollars in seismic retrofits.
  And in 1989, the Rancho Seco plant near Sacramento was closed by 
public referendum after 14 years of operation plagued by mismanagement 
that resulted in cost overruns.
  Nuclear power is expensive and risky. Yet I believe that if private 
investors are not willing to put their own money on the line to support 
new nuclear plants, then the Federal Government should not put 
taxpayers' money at risk either. However, under the nuclear subsidy 
provision in this energy bill, taxpayers would be required to subsidize 
up to 50 percent of construction costs of new nuclear plants--costs 
that CRS estimates to be in the range of $14-16 billion. CRS also 
estimates the risk of default on these loan guarantees to be ``very 
high--well above 50 percent.''
  I strongly believe it is not in the public interest for our Nation to 
subsidize

[[Page S7589]]

costly nuclear plants. Instead we should devote more resources to the 
development of renewable energy.
  I strongly believe we should be doing more to encourage the 
development of renewable power such as, wind, geothermal, and biomass, 
instead of providing subsidies to an industry that has not built a new 
powerplant since the 1970s.
  Unfortunately, this Energy bill currently has an over-reliance on 
promoting traditional energy resources, such as nuclear power.
  The U.S. nuclear power industry, while currently generating about 20 
percent of the Nation's electricity, faces an uncertain long-term 
future. No nuclear plants have been ordered since 1978 and more than 
100 reactors have been canceled, including all those ordered after 
1973. No units are currently under construction.
  The nuclear power industry's troubles include high nuclear powerplant 
construction costs, public concern about nuclear safety and waste 
disposal, and regulatory compliance costs.
  Controversies over safety have dogged nuclear power throughout its 
development, particularly following the March 1979 Three Mile Island 
accident in Pennsylvania and the April 1986 Chernobyl disaster in the 
former Soviet Union. These events shaped much of our opinions about 
nuclear power.
  Safety continues to raise concerns today. In a recent example, it was 
discovered in March 2002 that leaking boric acid had eaten a large 
cavity in the top of the reactor vessel in Ohio's Davis-Besse nuclear 
plant. The corrosion left only the vessel's quarter-inch-thick 
stainless steel inner liner to prevent a potentially catastrophic 
release of reactor cooling water.
  Furthermore, nuclear powerplants have long been recognized as 
potential targets of terrorist attacks, and I remain skeptical that 
there are enough safeguards in place to defend against potential 
terrorist attacks on our nuclear plants.
  Concern about nuclear safety and waste disposal makes Californians 
apprehensive about nuclear power. California has shifted away from 
nuclear power over the years and activists in the communities 
surrounding the Diablo Canyon and San Onofre plants continue to express 
concerns about the safety of the remaining reactors in California.
  The construction of new nuclear reactors would also exacerbate the 
nuclear waste problem. Since the volume of nuclear waste in the United 
States is expected to exceed capacity at the controversial Yucca 
Mountain repository by 2010, any new plants will create even more waste 
storage problems.
  I voted with Senator Bingaman to strike these nuclear subsidies in 
committee and today I will vote with Senator Wyden to do the same.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, how much time remains for each side?
  The PRESIDING OFFICER. The proponents of the amendment have 14 
minutes 18 seconds; the opponents of the amendment have 2 minutes 35 
seconds.
  Mr. WYDEN. Mr. President, if I could engage the distinguished 
chairman of the committee, I would like to close the debate. At this 
point, I believe the Presiding Officer said I have in the vicinity of 
14 minutes. I say to the Senator, you have in the vicinity of 2 
minutes. Would you like to speak now?
  Mr. DOMENICI. No, I would not.
  Mr. WYDEN. Then I will take 5 minutes of our time at this point.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, at that point we have 9 minutes remaining?
  The PRESIDING OFFICER. About 8\1/2\.
  Mr. WYDEN. Thank you, Mr. President.
  Mr. President, a couple of arguments need to be addressed at this 
point. The Senator from Louisiana, Ms. Landrieu, just recently said the 
Wyden-Sununu provision would, in some way, jeopardize the reliability 
of power and cost jobs today. That is simply not correct. No plant that 
is operating today--not one--would be affected by this amendment, and 
not a single job in America would be lost. Now, with respect to jobs of 
the future--and I think this is important to note--if you look at the 
official figures of the Federal Government--these are supplied by the 
Energy Information Agency--the fact is, you can build four or five gas-
fired plants for the cost of one nuclear facility. That is, again, not 
something just made up. Those are the official figures of the Federal 
Government with respect to the comparative costs of this amendment.
  I think we ought to note, for example, just how unprecedented this 
is. When people began to debate nuclear power decades ago--50 years 
ago--when the commercial nuclear industry was first getting started, 
there were not any loan guarantees. In fact, even during the early 
days, there was no subsidy along these lines. People would say, let's 
support research, let's support various opportunities to assist with 
the nuclear reactors but not even in the early days was there a 
construction subsidy. In fact, in the Atomic Energy Act of 1954 there 
was an explicit prohibition on subsidizing any of these facilities.
  So what we are talking about is something where a nonpartisan 
analysis from the Congressional Budget Office has made it clear it is 
risky. They said there is upwards of a 50-percent likelihood of 
default. The Congressional Research Service has said it is going to be 
costly. Mr. President, $14 to $16 billion is the appraisal of the 
Congressional Research Service.
  I have made it clear it is unprecedented both with respect to this 
bill and the history. Finally, it is simply unfair when you compare it 
to other sources of power.
  I wrap up this part of the discussion by making sure Senators are 
clear on the distinction between nuclear power and various other 
sources of power under this proposal.
  Under the way the Domenici legislation is written, if you do not 
produce any wind, you get no direct subsidy. But under the legislation 
as it stands today, if you do not produce any nuclear power, you get a 
subsidy. That is as clear a distinction as we could possibly make. For 
all the other sources of power, if you produce nothing, no subsidy; for 
nuclear, if you produce nothing, you get a big subsidy. The 
difference--what it all comes down to--is whether Senators believe that 
one particular source of power deserves cash up front and, in effect, 
putting taxpayers on the hook at the outset before anything is 
produced.
  On a bipartisan basis--three Democratic Senators, three Republican 
Senators, and an Independent--we think that is unwise.
  Mr. President, I reserve the remainder of my time.
  The PRESIDING OFFICER. Who yields time?
  Mr. DOMENICI. Mr. President, I have been asked because of other 
people--not me--that we commence this vote at 3:45. I ask unanimous 
consent that be the case.
  Several Senators addressed the Chair.
  The PRESIDING OFFICER. The unanimous consent request has been made. 
Is there objection?
  Mr. WYDEN. Mr. President, reserving the right to object.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. WYDEN. Mr. President, if we could just take a second to make sure 
we are fair, I note that the Senator from Nevada would like to have 
several minutes, and we would like the opportunity to close. So if we 
can work out the opportunity----
  Mr. DOMENICI. I say to the Senator, they want a vote at 3:45, so we 
don't need any time. He can have 3 minutes and you can close.
  Mr. WYDEN. I withdraw my reservation.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from Nevada is recognized for 3 minutes.
  Mr. ENSIGN. Mr. President, I just want to make a couple points and 
keep it fairly brief.
  The nuclear power industry has been around for a long time. We hear 
about other new sources of energy that this country is trying to 
develop, and it seems to make sense we would subsidize some of that new 
research. It is basic research that the Government is involved in. 
Whether it is health care, whether it is energy, that seems to be an 
appropriate role for the Federal Government.
  But nuclear energy has been around for a long time, and it is 
commercially viable in many other countries in the

[[Page S7590]]

world. To this Senator, it does not seem to be the right thing to do to 
be subsidizing nuclear power because it should have already proven its 
merit in the marketplace and been able to stand on its own.
  Unfortunately, we have a situation where we had a vote last year on 
the Yucca Mountain project, which is the Nation's nuclear waste 
repository, and this Senate decided to continue to build Yucca 
Mountain. What that indicates is that the Senate is already subsidizing 
nuclear power. People say, no, Yucca Mountain is being built by the 
ratepayers, the people who receive the benefits of nuclear energy. They 
pay a tax on that or a rate on that and, therefore, they pay into the 
nuclear fund that will build on Yucca Mountain.
  According to the General Accounting Office, that is not going to be 
enough. So we are going to be subsidizing nuclear power as it is. To 
add another subsidy would be wrong at this time. Whether you look at 
Japan or Germany, these other countries, they are building them 
commercially; they are operating them viably.
  If nuclear power is so good commercially, then it should stand on its 
own. We have several other provisions in the bill that Senators Sununu 
and Wyden have not touched on nuclear power. But to actually have 
Federal loan guarantees that will leave the taxpayer holding the bill 
would be wrong at this time. If nuclear power is going to stand, let it 
stand on its own.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Oregon.
  Mr. DOMENICI. Mr. President, I wonder if the Senator could do me one 
favor. Let Senator Graham have 1 minute. Then you wind up with the time 
you have, the same time you have.
  Mr. WYDEN. I am happy to accommodate the Senator from South Carolina. 
How much additional time do I have?
  The PRESIDING OFFICER. Under the unanimous consent agreement, the 
vote was to occur at a quarter to 4. You have the time between now and 
then.
  Mr. DOMENICI. We don't need to have the Senator speak. Go ahead.
  Mr. WYDEN. Mr. President, I ask unanimous consent that the Senator 
from South Carolina have 2 additional minutes and if I could have 3 
additional minutes after he is done speaking.
  Mr. DOMENICI. We cannot do that.
  The PRESIDING OFFICER. Objection is heard.
  Mr. DOMENICI. It is not me. I have just been told, after instructions 
from the leadership.
  Mr. WYDEN. Mr. President, then I would like to accommodate the 
Senator from South Carolina. I have a couple of minutes to go.
  Mr. DOMENICI. You don't have a couple minutes.
  The PRESIDING OFFICER. You have 2 minutes at this point. The Senator 
from Oregon.
  Mr. WYDEN. Mr. President, as we move to the vote, basically all the 
arguments made against the
Wyden-Sununu-Snowe-Ensign-Binga-
man amendment, all of the arguments made against us were made for the 
WPPSS facilities which resulted in the biggest municipal bond failure 
in history. Back then they said it wouldn't be unduly risky. They said 
there wouldn't be any questions with respect to exposure to those who 
were financing it. Look at what happened. Four out of those five 
facilities did not get built.
  I say to my colleagues, those who are pronuclear, those who are 
antinuclear, this is not about your position with respect to nuclear 
power pro or con. It is about whether or not you are going to be 
protaxpayer. The Congressional Research Service says the taxpayers are 
on the hook for $14 to $16 billion. The Congressional Budget Office 
says there is upwards of a 50-percent likelihood of default. Under this 
provision, the loan guarantees provide opportunities to construct 
nuclear facilities that no one else is getting. Other people don't get 
the break unless they produce something. Here you get the break even if 
you produce no nuclear power whatsoever and you get it directly out of 
the taxpayer's pocket.
  It is unwise. I hope my colleagues will vote with three Democratic 
Senators, three Republican Senators, and an Independent for this 
amendment.
  I yield the floor.
  The PRESIDING OFFICER. The question is on agreeing to amendment No. 
875.
  Mr. DOMENICI. Mr. President, I ask for the yeas and nays.
  The PRESIDING OFFICER. Is there a sufficient second?
  There appears to be a sufficient second. The clerk will call the 
roll.
  The legislative clerk called the roll.
  Mr. ALLEN (when his name was called). Present.
  Mr. REID. I announce that the Senator from Connecticut (Mr. 
Lieberman) is necessarily absent.
  The PRESIDING OFFICER (Mr. Chafee). Are there any other Senators in 
the Chamber desiring to vote?
  The result was announced--yeas 48, nays 50, as follows:

                      [Rollcall Vote No. 214 Leg.]

                                YEAS--49

     Akaka
     Baucus
     Bayh
     Biden
     Bingaman
     Boxer
     Byrd
     Campbell
     Cantwell
     Chafee
     Clinton
     Collins
     Conrad
     Corzine
     Daschle
     Dayton
     Dodd
     Dorgan
     Durbin
     Edwards
     Ensign
     Feingold
     Feinstein
     Graham (FL)
     Gregg
     Harkin
     Jeffords
     Johnson
     Kennedy
     Kerry
     Kohl
     Kyl
     Lautenberg
     Leahy
     Levin
     McCain
     Mikulski
     Murray
     Reed
     Reid
     Rockefeller
     Sarbanes
     Schumer
     Smith
     Snowe
     Stabenow
     Sununu
     Wyden

                                NAYS--50

     Alexander
     Allard
     Bennett
     Bond
     Breaux
     Brownback
     Bunning
     Burns
     Carper
     Chambliss
     Cochran
     Coleman
     Cornyn
     Craig
     Crapo
     DeWine
     Dole
     Domenici
     Enzi
     Fitzgerald
     Frist
     Graham (SC)
     Grassley
     Hagel
     Hatch
     Hollings
     Hutchison
     Inhofe
     Inouye
     Landrieu
     Lincoln
     Lott
     Lugar
     McConnell
     Miller
     Murkowski
     Nelson (FL)
     Nelson (NE)
     Nickles
     Pryor
     Roberts
     Santorum
     Sessions
     Shelby
     Specter
     Stevens
     Talent
     Thomas
     Voinovich
     Warner

                        ANSWERED ``Present''--1

       
     Allen
       

                             NOT VOTING--1

       
     Lieberman
       
  The amendment (No. 875) was rejected.
  Mr. CARPER. I move to reconsider the vote.
  Mr. CRAIG. I move to lay that motion on the table.
  The motion to lay on the table was agreed to.
  Mr. DOMENICI. I thank all Members for debate and votes.
  I believe the Indian amendment of the Senator from Colorado is next.


                      Amendment No. 864 Withdrawn

  Mr. CAMPBELL. Mr. President, as the author of amendment No. 864, the 
Indian provision to the Energy Bill, I ask unanimous consent to 
withdraw the amendment.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The Senator from California.
  Mrs. FEINSTEIN. Mr. President, I inquire as to what the order is.
  The PRESIDING OFFICER. There is no unanimous consent agreement at 
this time.


                           Amendment No. 876

           (Purpose: To Tighten Oversight of Energy Markets)

  Mrs. FEINSTEIN. Mr. President, I send an amendment to the desk on 
behalf of Senators Fitzgerald, Harkin, Lugar, Cantwell, Wyden, Boxer, 
and Leahy.
  The PRESIDING OFFICER. The clerk will report.
  The legislative clerk read as follows:

       The Senator from California [Mrs. FEINSTEIN], for herself, 
     Mr. Fitzgerald, Mr. Harkin, Mr. Lugar, Ms. Cantwell, Mr. 
     Wyden, Mrs. Boxer, and Mr. Leahy, proposes an amendment 
     numbered 876.

  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent that the 
reading of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (The amendment is printed in today's Record under ``Text of 
Amendments.'')
  Mrs. FEINSTEIN. Mr. President, I heard the comments of the 
distinguished ranking member that they had not had an opportunity to 
see the amendment. Of course, we will allow that opportunity to take 
place. This amendment closes a major loophole which allows energy 
trades to take place electronically, in private, with no transparency, 
no record, no audit trail, or any oversight to guard against fraud and 
manipulation.

[[Page S7591]]

  This amendment will close a loophole created in 2000 when Congress 
passed the Commodity Futures Modernization Act which exempted energy 
and metals trading from regulatory oversight and excluded them 
completely if the trade was done electronically.
  This amendment was presented by me before. Senator Fitzgerald spoke, 
Senator Wyden spoke, Senator Cantwell spoke. We got just about a 
majority. Senator Gramm of Texas argued against it. It did go back to 
the Agriculture Committee. The Agriculture Committee held hearings and 
both Senators Harkin and Lugar participated in making changes, which I 
think has made this a better amendment.
  We were hoping for a markup, but the Congress ended without that 
markup having taken place. Now the Energy bill is before us, and it 
seems to me this is the time to present this.
  This bill has had floor discussion. It has had a committee hearing. 
It has been modified by the chairman and the ranking member of the 
Agriculture Committee and is now before us.
  Today, if there is no delivery of physical energy, there is no price 
transparency. By that I mean, if I buy natural gas from you and you 
deliver it to me, the Federal Energy Regulatory Commission has the 
authority to ensure that the transaction is transparent--meaning it is 
available to look at--and that it is reasonably priced. However, many 
energy transactions no longer result in delivery. In other words, if I 
sell to you and you sell to Senator Craig who sells to Senator Domenici 
who sells to somebody else who then delivers it, none of these trades 
is covered if done electronically. That means there is no record; there 
is no audit trail; there are no capital requirements; there is no 
transparency; there is no antifraud or antimanipulation oversight 
today. It is a huge loophole permitted in the Commodity Futures 
Modernization Act of 2000.
  This lack of transparency and oversight applies to energy and metals 
trading. It does not apply if you are selling wheat or pork bellies or 
any other tangible commodity. Why do we include metals? Fraud and 
manipulation have not been confined to the energy trading sector. For 
example, in 1996 U.S. consumers were overcharged $2.5 billion from 
Sumitomo's manipulation of the copper markets.
  Furthermore, in 1999 the President's Working Group on Financial 
Markets recommended excluding only financial derivatives, not energy 
and metals derivatives, from the CFTC's jurisdiction.
  After intense lobbying by, of all people, Enron, a change was made to 
the Commodity Futures Modernization Act to exempt energy and metals 
trading from CFTC oversight in 2000. It did not take long for 
EnronOnline and others in the energy sector to take advantage of this 
new freedom by trading energy derivatives absent any transparency and 
regulatory oversight. In other words, a whole new niche was found where 
you could avoid any scrutiny and do this trading.
  After the 2000 legislation was enacted, EnronOnline began to trade 
energy derivatives bilaterally, without being subject to proper 
regulatory oversight. It should not surprise anyone that without the 
transparency, prices soared and games were played.
  Three years ago this summer, California's energy market began to 
spiral out of control. In May of 2000, families and businesses in San 
Diego saw their energy bills soar. The western energy crisis forced 
every family and business in California and many of the other States to 
pay more for energy. The crisis forced the State of California into a 
severe budget shortfall. It forced the State's largest utility into 
bankruptcy and nearly bankrupted the second largest publicly owned 
utility.
  Now, 3 years and $45 billion in costs later, we have learned how the 
energy markets in California were gamed and abused. Originally everyone 
around here said: Oh, it's the problem of the 1996 deregulation law. I 
will admit that law is a faulty law. However, you cannot have the price 
of energy 1 year being $7 billion throughout the whole State and the 
next year it is $28 billion and say that is supply and demand. You 
cannot have a 400 percent increase just based on supply and demand. 
Clearly, you do not have a 400 percent increase in demand in a 1-year 
period of time. Nor did that happen in a 1-year period of time.

  In March of this year, the Federal Energy Regulatory Commission 
issued a report titled ``Price Manipulation In Western Markets,'' which 
confirmed that there was widespread and pervasive fraud and 
manipulation during the western energy crisis. According to the FERC 
report, the abuse in our energy markets was pervasive and unlawful. Yet 
this Energy bill does not prevent another energy crisis from occurring 
nor does it curb illegal Enron-type manipulation.
  Just last week, the FBI arrested former Enron trader John M. Forney, 
saying he was a key architect of Enron's well-known trading schemes 
blamed for worsening California's energy crisis in 2000 and 2001.
  Mr. Forney was charged with a single count each of wire fraud and 
conspiracy. He is the third Enron trader accused by the Justice 
Department of criminal manipulation of western energy markets but the 
first who did not reach a plea agreement, leading to his arrest last 
Tuesday. According to the criminal complaint, Forney is allegedly the 
architect of the Enron trading strategies with the now infamous names 
of Ricochet, Death Star, Get Shorty, Fat Boy, and others.
  These Enron strategies were first revealed on Monday, May 6, 2002, 
when the Federal Energy Regulatory Commission posted a series of 
documents on their Web site that revealed Enron manipulated the western 
energy market by engaging in these suspect trading strategies.
  Under one such trading strategy called Death Star, which was also 
called Forney's Perpetual Loop, for John Forney, Enron would ``get paid 
for moving energy to relieve congestion without actually moving energy 
or relieving any congestion,'' according to an internal memo. It was a 
fraud.
  It was a fraud. A was a trading strategy which was clearly and simply 
fraudulent and manipulative.
  In another strategy detailed in these memos, Enron would ``create the 
appearance of congestion through the deliberate overstatement of 
loads'' to drive up prices.
  The above-mentioned strategies reveal an intentional and coordinated 
attempt to manipulate the Western energy market for profit.
  This is an important piece of the puzzle that has been uncovered. 
Some former Enron traders helped fill in the blanks.
  CBS News reported in May 2002 that former Enron traders admitted the 
company was directly responsible for local blackouts in California. 
Yet, interestingly enough, no one has followed up on this report.
  According to CBS News reporter Jason Leopold, the traders said 
Enron's former president Jeff Skilling pushed them to trade 
aggressively in California and told them, ``If you can't do that, then 
you need to find a job at another company or go trade pork bellies.''
  The CBS article mentions that Enron traders played a disturbing role 
in blackouts that hit California. The report mentions specific 
manipulative behavior by Enron on June 14 and 15 in the summer of 2000 
when traders said they intentionally clogged Path 26--a key 
transmission path connecting Northern and Central California.
  Here is what one trader said about the event:

       What we did was overbook the line we had the rights on 
     during a shortage or in a heat wave. We did this in June 2000 
     when the Bay Area was going through a heat wave and the ISO 
     couldn't send power to the North. The ISO has to pay Enron to 
     free up the line in order to send power to San Francisco to 
     keep the lights on. But by the time they agreed to pay us, 
     rolling blackouts had already hit California and the price 
     for electricity went through the roof.

  In other words, they waited for the weather. They calculatedly 
overbooked the line to clog the lines so that power could not be 
transmitted to the north. Therefore, what power was transmitted went 
sky high in terms of price. Second, a blackout resulted.
  California lost billions. Yet according to the traders, Enron made 
millions of dollars by employing this strategy alone.
  On top of all this, traders disclosed that Enron's manipulative 
trading strategies helped force California to sign expensive long-term 
contracts. It is no surprise that Enron and others were able to profit 
so handsomely during the crisis.
  Now, after 3 years, the FBI and the Justice Department are beginning 
to

[[Page S7592]]

bring these traders to justice. In February, Jeffrey Richter, the 
former head of Enron's Short-Term California energy trading desk, pled 
guilty to conspiracy to commit fraud as part of Enron's well known 
schemes to manipulate Western energy markets.
  Richter's plea followed that of head Enron trader Tim Belden in the 
fall of 2002. Belden admitted that he schemed to defraud California 
during the Western energy crisis and also plead guilty to conspiracy to 
commit wire fraud.
  Nobody can believe this didn't happen, because it did. Two people 
have pled guilty, and a third was just arrested for doing just what we 
hope to prevent happening with this amendment.
  The plea by Jeff Richter came on the heels of FERC's release of 
transcripts from Reliant Energy in January of this year that reveal how 
their traders intentionally withheld power from the California market 
in an attempt to increase prices. This is one of the most egregious 
examples of manipulation and it is clear and convincing evidence of 
coordinated schemes to defraud consumers.
  Let me read just one part of the transcript to demonstrate the greed 
behind the market abuse by Reliant and its traders.
  On June 20, 2000 two Reliant employees had the following conversation 
that reveals the company withheld power from the California market to 
drive prices up:

       Reliant Operations Manager 1. I don't necessarily foresee 
     those units being run the remainder of this week. In fact you 
     will probably see, in fact I know, tomorrow we have all the 
     units at Coolwater off.

  The Coolwater plant is a 526 Megawatt plant.

       Reliant Plant Operator 2. Really?
       Reliant Operations Manager 1. Potentially. Even number 
     four. More due to some market manipulation attempts on our 
     part. And so, on number four it probably wouldn't last long. 
     It would probably be back on the next day, if not the day 
     after that. Trying to uh . . .
       Reliant Plant Operator 2. Trying to shorten supply, uh? 
     That way the price on demand goes up.
       Reliant Operations Manager 1. Well, we'll see.
       Reliant Plant Operator 2. I can understand. That's cool.
       Reliant Operations Manager 1. ``We've got some term 
     positions that, you know, that would benefit.

  That is what existed. That is the kind of thing that went on, and it 
has to stop. It has to be made illegal and it has to have heavy 
penalties.
  Let's turn to some other examples.
  On January 27, 2003, Michelle Marie Valencia, a 32-year-old former 
senior energy trader for Dynegy, was arrested on charges that she 
reported fictitious natural gas transactions to an industry 
publication.
  On December 5, 2002, Todd Geiger, a former vice president on the 
Canadian natural gas trading desk for El Paso Merchant Energy, was 
charged with wire fraud and filing a false report after allegedly 
telling a trade publication about the prices for 48 natural gas trades 
that he never made in an effort to boost prices and company profit.
  In other words, he is telling an energy trade publication about 48 
gas trades that were never made. It was bogus information which was 
given out. Why? Simply to boost the market.
  These indictments are just a few examples of how energy firms 
reported inaccurate prices to trade publications to drive energy prices 
higher.
  Industry publications claimed they could not be fooled by false 
prices because deviant prices are rejected, but this claim was 
predicated on the fact that everyone was reporting honestly which we 
now know they weren't doing.
  CMS Energy, Williams, American Electric Power Company, and Dynegy 
have each acknowledged that its employees gave inaccurate price data to 
industry participants. On December 19 Dynegy agreed to pay a $5 million 
fine for its actions.
  Let us turn to other types of fraudulent trades that many energy 
firms have admitted to.
  Dynegy, Duke Energy, El Paso, Reliant Resources Inc., CMS Energy 
Corp., and Williams Cos. all admitted engaging in false ``round-trip'' 
or ``wash trades.''
  What is a ``round-trip'' trade, one might ask?
  ``Round-trip'' trades occur when one firm sells energy to another and 
then the second firm simultaneously sells the same amount of energy 
back to the first company at exactly the same price. No commodity ever 
actually changes hands, but when done on an exchange, these 
transactions send a price signal to the market and they artificially 
boost revenue for the company.
  How widespread are ``round-trip'' trades? Well, the Congressional 
Research Service looked at trading patterns in the energy sector over 
the last few years and reported, ``this pattern of trading suggests a 
market environment in which a significant volume of fictitious trading 
could have taken place.''
  Yet since most of the energy trading market is unregulated by the 
government, we have only a slim idea of the illusions being perpetrated 
in the energy sector.
  Consider the following confessions from energy firms about ``round-
trip'' trades:
  Reliant admitted 10 percent of its trading revenues came from 
``round-trip'' trades. The announcement forced the company's President 
and head of wholesale trading to both step down.
  These are bogus traders.
  CMS Energy announced 80 percent of its trades in 2001 were ``round-
trip'' trades.
  Eighty percent of all of the trading this company did was bogus.
  Remember, these trades are sham deals where nothing was exchanged, 
yet the company booked revenues from the trades. This is exactly what 
our legislation aims to stop.
  Duke Energy disclosed that $1.1 billion worth of trades were ``round-
trip'' since 1999. Roughly two-thirds of these were done on the 
InterContinental Exchange owned by banks that oppose this legislation.

  Let me repeat that. Duke Energy disclosed that $1.1 billion worth of 
trades were bogus ``round-trip'' trades since 1991. And two-thirds of 
those were done on the InterContinental Exchange, which is an 
electronic exchange. That means that thousands of subscribers would 
have seen false price signals.
  A lawyer for J.P. Morgan Chase admitted the bank engineered a series 
of ``round-trip'' trades with Enron. Dynegy and Williams have also 
admitted to this ``round-trip'' trading. And although those trades 
mostly occurred with electricity, there is evidence to suggest that 
``round-trip'' trades were made in natural gas and even broadband.
  By exchanging the same amount of a commodity at the same price, these 
companies have not engaged in meaningful transactions but in deceptive 
practices to fool investors and drive up energy prices for consumers. 
It is, therefore, imperative that the Department of Justice, the 
Federal Energy Regulatory Commission, the Securities and Exchange 
Commission, the Commodity Futures Trading Commission, and every other 
oversight agency conduct an aggressive and vigorous investigation into 
all of the energy companies that may have committed fraud and abuse in 
the western energy market.
  Beyond that, I believe strongly that Congress must reexamine what 
tools the Government needs to keep a better watch over these volatile 
markets that, frankly, are little understood. In the absence of 
vigilant Government oversight of the energy sector, firms have the 
incentive to create the appearance of a mature liquid and well 
functioning market, but it is unclear whether such a market exists. And 
I don't believe, for a minute, that such a market exists.
  The ``round-trip'' trades, the Enron memos, the FERC report on 
``Price Manipulation in the Western Markets'' raise questions about the 
energy markets of our country. To this end, I believe it is critical 
for the Senate to approve this amendment, which would provide more 
regulatory oversight of online energy trading.
  When the Senate Energy Committee marked up the Energy bill in April, 
there was a consensus to include some provisions of the Energy Market 
Oversight Act, S. 509, I introduced earlier this year. The Energy bill, 
S. 14, does include higher criminal and civil penalties for violations 
of the Federal Power Act and the Natural Gas Act.
  Under section 1173 of the bill now on the floor, fines will be $1 
million instead of the current $5,000 for a one-time violation of the 
statutes. I thank

[[Page S7593]]

the chairman of the committee for this. Jail time will be raised to 5 
years instead of the current 2 years. And I thank the chairman of the 
committee for this. Fines will be $50,000 per violation per day instead 
of the current $500 per violation per day for violations of the 
statutes. And I thank the chairman of the committee for this.
  Furthermore, section 1174 of the Energy bill will eliminate the 
unnecessary 60-day waiting period for FERC to grant refunds. I thank 
both Senator Domenici and Senator Bingaman, the chairman and the 
ranking member of the Energy Committee, for their efforts to include 
provisions of S. 509, the Energy Market Oversight Act, in this Energy 
bill.
  Now let me turn to the specifics of the amendment.
  I am offering this amendment--and I am hopeful that Senator 
Fitzgerald will come to the floor; I know he intends to speak on this 
amendment, and I hope he does--I am offering this amendment to subject 
electronic exchanges, such as EnronOnline, the InterContinental 
Exchange, and any other electronic exchange, to the same oversight, 
reporting, and capital requirements of other commodity exchanges, such 
as the Chicago Mercantile Exchange, the New York Mercantile Exchange, 
and the Chicago Board of Trade.

  Why should there be one secret trading venue where fraud and 
manipulation can take place abbondanza? I do not think there should be. 
I do not think it is in the interests of our citizens to have that 
happen. And the western energy market should be a major case in point.
  I am very pleased that Senators Fitzgerald, Harkin, Lugar, Cantwell, 
Wyden, Leahy, Durbin, and Boxer have again signed on to this amendment. 
I was very proud of the work we did in the 107th Congress, and I hope 
we can adopt this amendment on this Energy bill because without this 
type of legislation, there is insufficient authority to investigate and 
prevent fraud and price manipulation since parties making the trades 
are not required to keep a record. That is the problem.
  The CFTC will say: Oh, we are already doing that. But in the law 
there is no requirement to keep a record. There is a specific exemption 
in the law. So I do not see how the CFTC has the adequate tools to do 
what they need to do without this amendment because this amendment 
closes that loophole which exists just for energy and just for metals 
and, because of its existence, has allowed EnronOnline and a number of 
other exchanges--Dynegy had one; InterContinental Exchange had one as 
well--to do all these things in secret with no audit trail, no record, 
no capital requirements. Nobody has a responsibility to set any capital 
requirements. There is no audit trail and no antifraud and 
antimanipulation oversight. Clear and simple, it is a travesty.
  Right now, energy transactions are regulated by FERC. When there is 
actual delivery, that is taken care of. If Senator Reid sells me energy 
and I deliver it, that is covered by FERC. But interim trades are not 
covered by anybody. They are on their own in secret.
  Many energy transactions no longer result in delivery, so this giant 
loophole where there is no government oversight--when these 
transactions are done on electronic exchanges--is major. I think it is 
mega. I think a number of companies have jumped into this void simply 
because they thought they could make a quick buck by gaming the system, 
and in fact they have done just that.
  As I mentioned, in 2000 Congress passed the Commodity Futures 
Modernization Act, which exempted energy and metals from regulatory 
oversight, and excluded it completely if the trade was done 
electronically. So today, as long as there is no delivery, there is no 
price transparency, there is no record, there is no audit trail, there 
is no capital requirement, there is no antifraud, antimanipulation 
oversight.
  This lack of transparency and oversight only applies to energy. It 
does not apply if you are selling wheat or pork bellies or any other 
tangible commodity. And financial derivatives are not included in this 
amendment.
  It did not take long for Enron and others to take advantage of this 
new freedom by trading derivatives absent any regulatory oversight. 
Thus, after the 2000 legislation was enacted, EnronOnline, as I said, 
began to trade energy derivatives bilaterally without being subject to 
regulatory oversight. It should not be a surprise to anyone that prices 
soared.
  In March, Warren Buffett published a warning in Fortune magazine 
saying:

       Derivatives are financial weapons of mass destruction.

  In his annual warning letter to shareholders about what worries him 
about the financial markets, Warren Buffett called derivatives and the 
trading activities that go with them ``time bombs.''
  In the letter, Mr. Buffett states:

       In recent years some huge-scale frauds and near-frauds have 
     been facilitated by derivatives trades. In the energy and 
     electric utility sectors, for example, companies used 
     derivatives and trading activities to report great 
     ``earnings''--until the roof fell in when they actually 
     tried to convert the derivatives-related receivables on 
     their balance sheets into cash.

  We clearly saw this with Enron. Was Enron and its energy derivative 
trading arm, Enron Online, the sole reason California and the West had 
an energy crisis? No. Was it a contributing factor to the crisis? I 
believe it was.
  Unfortunately, because of the energy exemptions in the 2000 
Commodities Futures Modernization Act, which took away the CFTC's 
authority to investigate, we may never know for sure. In the 107th 
Congress, this legislation was debated during consideration of the 
Senate Energy bill, and it was a subject of a hearing in the Senate 
Agriculture Committee. As I said, time ran out before it could be 
marked up and passed. Since that time, both Senators Lugar and Harkin 
have made significant improvements to the legislation.
  So today I am pleased to note that the following companies and 
organizations are supporting this legislation: the National Rural 
Electric Cooperative Association; the Derivatives Study Center; the 
American Public Gas Association; the American Public Power Association; 
the California Municipal Utilities Association; Southern California 
Public Power Authority; the Transmission Access Policy Study Group; 
U.S. Public Interest Research Group; the Consumers Union; the Consumers 
Federation of America; Calpine; Southern California Edison; Pacific Gas 
and Electric; and the FERC Chairman Pat Wood.
  Here is a quick explanation of what this amendment does. It applies 
antifraud and antimanipulation authority to all exempt commodity 
transactions. An exempt commodity is a commodity which is not financial 
and not agricultural and mainly includes energy and metals. The bill 
sets up two classes of swaps for those made between sophisticated 
persons, basically institutions and wealthy individuals, that are not 
entered into on a trading facility, for example, an exchange. Antifraud 
and antimanipulation provisions apply and wash trades are prohibited. 
The following regulations would apply to all swaps made on an 
electronic trading facility and a ``dealer market'' which includes 
dealers who buy and sell swaps in exempt commodities and the entity on 
which the swap takes place. Antifraud and antimanipulation provisions 
and the prohibition of wash trades apply.
  If the entity on which the swap takes place serves a pricing or price 
discovery function, increased notice, reporting, bookkeeping, and other 
transparency requirements are provided. The requirement to maintain 
sufficient capital is commensurate with the risk associated with the 
swap. We don't determine that in this legislation. The Commodities 
Futures Trading Commission would determine that. In other words, they 
would determine what kind of net capital requirement there will be, and 
that would be commensurate with the degree of risk involved in the 
transaction.
  Except for the antifraud and antimanipulation provisions, the CFTC 
has the discretion to tailor the above requirements to fit the 
character and financial risk involved with the swap or entity. While 
the CFTC could require daily public disclosure of trading data, such as 
opening and closing prices, similar to the requirement of futures 
exchanges, it could not require real-time publication of proprietary 
trading information or prohibit an entity from selling their data. So 
proprietary information is protected.

[[Page S7594]]

  The CFTC may allow entities to meet certain self-regulatory 
responsibilities as provided in a list of core principles. If an entity 
chooses to become a self regulator, these core principles would 
obligate the entity to monitor trading to prevent fraud and 
manipulation, as well as assure that its other regulatory obligations 
are met.
  The penalties for manipulation are greatly increased. The civil 
monetary penalty for manipulation is increased from $100,000 to $1 
million. Wash trades are subject to the monetary civil penalty for each 
violation and imprisonment of up to 10 years.
  The FERC is required to improve communications with other Federal 
regulatory agencies. A shortcoming in the main antifraud provision of 
the CEA is also corrected by allowing CFTC enforcement of fraud to 
apply to instances of either defrauding a person for oneself or on 
behalf of others.
  This would also require the FERC and the CFTC to meet quarterly and 
discuss how energy derivative markets are functioning and affecting 
energy deliveries. So they are required to look at this, to monitor it 
closely, and to sit quarterly and see how these markets are, in fact, 
functioning.
  This would grant the FERC the authority to use monetary penalties on 
companies that don't comply with requests for information. This is 
essentially the same authority the SEC has today.
  It would make it easier for FERC to hire the necessary outside help 
they need, including accountants, lawyers, and investigators for 
investigative purposes. And it would eliminate the requirement that 
FERC receive approval from the Office of Management and Budget before 
launching an investigation or price discovery of electricity or natural 
gas markets involving more than 10 companies.
  This amendment is not going to do anything to change what happened in 
California and the West. But it does provide the necessary authority 
for the CFTC and the FERC which will help protect against another 
energy crisis. No one is immune from this kind of thing. The gaming, 
the fraud, the manipulation has been extraordinary.
  Just the chutzpah to do Death Star, Get Shorty, Ricochet, just the 
chutzpah to do these kinds of trades in secret, it is a bunco 
operation. It is nothing else but. And who is buncoed? The consumer is 
buncoed. That is why consumer organizations feel strongly about this.
  When regulatory agencies have the will but not the authority to 
regulate, Congress must step in and ensure that our regulators have the 
necessary tools. Unfortunately, sometimes an agency has neither. In 
this case, I am glad to have the support of FERC, and I hope the CFTC 
will reconsider its position and support this amendment.
  I note that Senator Fitzgerald is on the floor. I would like to yield 
to him. But before I do, may I just say one quick thing.
  Mr. REID. You are not yielding to Senator Fitzgerald.
  Mrs. FEINSTEIN. Pardon me?
  Mr. REID. You are not yielding to Senator Fitzgerald.
  Mrs. FEINSTEIN. I am not?
  The PRESIDING OFFICER (Mrs. Dole). Senators are not permitted to 
yield the floor to one another.
  Mrs. FEINSTEIN. I thank the Chair for the clarification.
  I wish to make one comment about this amendment. This amendment has 
been in the Agriculture Committee. It has had a hearing. It has been 
reviewed by both staffs, Republican and Democratic. The Democratic 
chairman of the committee, Senator Harkin, worked on this. The ranking 
member at the time, Senator Lugar, worked on this. They have both 
concurred. They are supporting this legislation. The staffs have 
reviewed it.
  We believe it is bona fide, that it is solid, and that it will stand 
the test of time.
  I thank the Chair. I yield the floor.
  The PRESIDING OFFICER. The Senator from Nevada.


                 Amendment No. 877 to Amendment No. 876

  Mr. REID. Madam President, I send an amendment to the desk.
  The PRESIDING OFFICER. The clerk will report the amendment.
  The assistant legislative clerk read as follows:

       The Senator from Nevada [Mr. Reid] proposes an amendment 
     numbered 877 to amendment No. 876.

  Mr. REID. Madam President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

(Purpose: To exclude metals from regulatory oversight by the Commodity 
                      Futures Trading Commission)

       On page 17 after line 25:
       ``(10) Applicability.--This subsection does not apply to 
     any agreement, contract, or transaction in metals.''

  Mr. REID. Madam President, first, I commend the senior Senator from 
California and her cosponsor, the junior Senator from Illinois, for 
their amendment and their work on this very difficult issue dealing 
with derivatives and how to regulate them.
  To critics of the amendment, I suggest you put yourself in Senator 
Feinstein's shoes. She represents the largest State in the United 
States and one of the largest governments in the world. The State of 
California's GDP is larger than most countries' of the world.
  In the West, we are still feeling shock waves from the energy crisis 
that threatened California's and Nevada's prosperity and brought home 
to all of us that we are in uncharted territory with energy 
deregulation.
  Senator Feinstein inadvertently included metal derivatives with the 
energy derivatives that are the intended target of her amendment. 
Unlike energy derivatives which raise questions because of the recent 
energy crisis, metal derivatives have been sold over the counter for 
decades. The amendments in 2000 to the Commodities Exchange Act did not 
change this, and that was proper. They only clarified and confirmed the 
legality of these markets.
  Lumping metal derivatives together with energy derivatives would 
impose regulatory burdens that never existed even before the 2000 
amendments and, of course, without justification; therefore, I offer 
this second-degree amendment to restore metal derivatives trading to 
exempt commodity status. Metals would be treated as if they were under 
the Commodity Futures Modernization Act of 2000.
  Like other derivatives, metal derivatives markets help companies 
manage the risk of sudden and large price changes.
  In recent years, derivatives and so-called hedging transactions 
helped the mining companies in the State of Nevada, which is the third 
largest producer of gold in the world, second only to Australia and 
South Africa, with a steadily declining gold price by selling mining 
production forward.
  A large mining company in Nevada, Barrick Gold, had no layoffs during 
this period of time as a result of these forward selling programs. The 
last couple of years illustrate the function and value in the 
marketplace of such transactions. Some companies decided not to hedge, 
betting the gold price would rise and hedging contracts would lock them 
into below-market prices. Most of those companies are no longer around 
because the gold price has stayed relatively low.
  In contrast, other companies hedged some or most of their production. 
These companies have survived or even thrived, for the most part. By 
choosing to manage their risk, they accepted the risk that the gold 
price could rise, but they stabilized company performance, continued to 
provide jobs and contribute to communities in rural Nevada where they 
are so important.
  The gold mining business in America is so important. It is important 
because it is one of the few areas where we are a net exporter, and 
that is the way it has always been. The Feinstein amendment includes 
metal derivatives citing fraud in the metals markets, but there is no 
example of fraud on any occasion regarding the metals markets in the 
past decade.
  Examples of such fraud that did take place a long time ago are cases 
such as the Hunt brothers in silver and Sumitomo in copper. These were 
regulated markets and over the counter trades did not exist at that 
time. The Hunt brothers just went out and bought silver on the free 
market. Neither of these fraud cases are addressed by the Feinstein 
amendment.

  The attempt, as I indicated, by the Hunt brothers in 1979 to ``corner 
the silver market'' involved manipulation of the physical silver 
market. The

[[Page S7595]]

Hunt silver scandal involved trading on regulated exchanges, not in the 
over-the-counter derivatives markets. The trading abuses involved the 
physical accumulation of 200 million ounces of silver. It did not 
involve over-the-counter derivatives.
  I say in passing, I had a great friend. His name was Forrest Mars, 
one of the richest men in the world. He lived in Las Vegas in a very 
small apartment above his candy store. But as you know, this giant of 
commerce was a multi-multibillionaire. After the Hunt brothers had 
manipulated the market, he told me: These guys are so dumb. They should 
have come to me. I could have told them you cannot have monopolies. 
They do not work. I tried it a couple times.
  He said: For example, once I went out and tried to corner the market 
on black pepper. Black pepper has been part of commerce for so many 
centuries, and he figured he could corner the market on all black 
pepper, and he did. He owned every producing facility, farm, and 
manufacturing facilities related to black pepper in the world. But he 
said: They outfoxed me because all they did was dye white pepper and 
ruined my monopoly.
  I say this because the Hunt brothers fiasco in 1979 was an effort to 
have a monopoly, and it did not work for a lot of reasons.
  The Sumitomo situation involved the alleged manipulation of the 
copper market by a Japanese company acting through a rogue trader 
acting in London and Tokyo. The trading abuses occurred on a fully 
regulated exchange, not in the over-the-counter derivatives market. The 
trading abuses involved manipulation of the price of copper on the 
London Metal Exchange, a futures exchange which is fully regulated by 
the UK's Financial Services Authority. Further, the manipulation took 
place overseas, not in United States markets.
  I repeat, we owe Senator Feinstein and Senator Fitzgerald a debt of 
gratitude for their interest in this issue and their work in proposing 
changes to the Commodity Exchange Act that will ensure trading in 
energy derivatives when it is done over the counter with transparency, 
in a way that inspires public confidence in the markets.
  I urge my colleagues to eliminate metals from this amendment. I think 
it would help the adoption of their amendment. If they decide not to do 
that, I urge my colleagues to support my amendment which strikes metal 
derivatives from the Feinstein amendment. My amendment would not allow 
metal derivatives markets and participants to trade derivatives without 
accountability and transparency. Adequate recordkeeping needs to be in 
place. The Commodity Exchange Act already requires some recordkeeping 
for these otherwise ``exempt'' transactions.
  Derivatives are essential to the health of the metals market, and 
fraud in metals markets did not involve over-the-counter derivatives.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. FITZGERALD. Madam President, I ask unanimous consent that the 
order for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. FITZGERALD. Madam President, I rise today to support my colleague 
from California, Senator Feinstein, and her amendment, which I have 
cosponsored, which would very simply close the so-called Enron loophole 
in the commodity futures trading laws of this country.
  This really is not that complex an issue. A few years ago, we passed 
a reauthorization of the Commodity Futures Trading Commission. I am 
very familiar with the commodities industry because we are the heart of 
it in my State of Illinois, particularly the city of Chicago, where 
they have the largest derivative exchanges in the country in the Board 
of Trade, in the Mercantile Exchange in Chicago. Those exchanges trade 
all sorts of commodities from pork bellies to Treasury bonds. They 
trade financial commodities as well as agricultural commodities, corn 
and soybeans.
  The Board of Trade and the Mercantile Exchange, like the NYMEX, the 
New York Mercantile Exchange in New York, or the New York Board of 
Trade, are fully regulated exchanges. The reauthorization of the 
Commodity Futures Trading Commission, which we passed a few years ago, 
continued that regulation that we have had in this country over our 
boards of trades and our other derivatives or futures transaction 
trading facilities in this country.
  Somehow, when we were working on that legislation in the House and 
the Senate--it is funny how little codicils, little paragraphs and 
sentences get added when the bills go to conference committees between 
the House and the Senate. I believe what happened is when that bill was 
over in the House, a couple of congressmen added some language that 
exempted from all regulation by the CFTC--and there is no regulation by 
the SEC in this area--online facilities that trade energy, metals, and 
broadband derivatives contracts or futures contracts. Online exchanges 
that trade those kinds of contracts are completely exempt from 
regulation. This is the so-called Enron loophole.
  At the time, Enron owned EnronOnline and they had an online platform 
for trading energy contracts, which when Enron went bankrupt later they 
sold.
  Now that EnronOnline was totally exempted from regulation--as Senator 
Feinstein very eloquently and very thoroughly described for us all of 
the bogus trades that were done on online derivative exchanges that 
trade metals and energy contracts, and she described the wash trades 
that were discovered when Enron fell apart. In fact, many energy 
companies were simply engaging in round trip trades with trading 
partners. A round trip trade, as Senator Feinstein noted, is when one 
party sells a commodity to another party at a certain price, and the 
other party sells that same commodity back at the very same price. 
Nothing really transpired in that transaction except that the other 
party books revenue from a sale and this party books revenue from a 
sale, but nothing really happened from an economic point of view.
  If party A sells a barrel of oil to party B for $30, and party B 
simultaneously sells a barrel of oil back to party A for $30, nothing 
has really happened. Everybody is still the same. What we saw in the 
energy industry with a whole bunch of energy companies, not just Enron, 
is they were artificially boosting their revenues by engaging in wash 
trades, round trip trades with other energy partners.
  I recall one energy company after this came to light had to restate 
its revenues downward by $7 billion when new auditors came in and made 
them cancel out all these wash trades.
  Senator Feinstein's amendment simply closes this Enron loophole. It 
says the CFTC will be able to ban wash trades on these online 
derivatives transaction facilities. That is all we are trying to do. 
She does not impose full-scale regulation by the CFTC like we have at 
the Board of Trade or Mercantile Exchange in Illinois or the New York 
Mercantile Exchange in New York. They have far more regulation. 
However, we will put a light level of regulation on online derivative 
transactions facilities that trade energy, metals, and broadband 
online. Do not forget, Enron was a big trader of broadband, as well. In 
fact, that is why the Enron loophole as it got written in the House 
created a special carve-out for energy, metals, broadband, and also 
weather contracts.
  The question is--why are we picking out energy, metal, broadband, and 
weather contracts and saying these contracts when traded online cannot 
be regulated by anyone? What is the public policy rationale for this 
special carve-out? Why didn't they also include corn and soybeans in 
this carve-out? Or other commodities? The fact is, this was a special 
interest carve-out for a hand full of companies.
  Now, there is a company owned by a number of banks and energy 
companies called the InterContinental Exchange. I believe it is opposed 
to our amendment. Why they are opposed--I gather some of their owners 
are, in fact, for this--but the majority of the owners of this exchange 
are opposed. They do not want to be regulated. Our obligation is not to 
those banks that own the InterContinental Exchange or to the energy 
companies that own the InterContinental Exchange. Our obligations here

[[Page S7596]]

are to investors around the country and to consumers around the 
country.
  We saw what kind of wool can be pulled over people's eyes when online 
exchanges are allowed to go on without any regulation. Not only were a 
bunch of energy companies such as Enron doing round-trip trades to 
artificially boost their own revenues but they were also doing 
fictitious round-trip trades to set artificial prices.
  Indeed, although I was very skeptical at first whether that was 
happening in California but, in fact, it was. The online exchanges 
would tell California that this is the price that has been trading on 
our online exchange, so that is the price you have to pay for the 
energy. But, in fact, it was a fictitious market and most of the trades 
were fictitious and no one could regulate it.
  All we are trying to do is have a light level of regulation to ban 
wash trades, round-trip trades, ban fraud and abuse, and protect 
consumers and investors, have some price discovery so people can know 
what the prices are for the commodities that are traded on these online 
exchanges, a very light level of regulation to protect the integrity of 
our derivatives market.
  My good friend and colleague from the State of Nevada, the senior 
Senator from Nevada, Mr. Reid, has proposed exempting metals contracts 
from the amendment Senator Feinstein and I have put together. In other 
words, he would go along with closing the Enron loophole with respect 
to energy and broadband but he wants to keep a carve-out for metals. I 
don't think that is a good idea. We should not have to wait until we 
have fraudulent transactions involving a metals contract, say, of gold, 
silver, or platinum, before we act. We have already had fraudulent 
transactions in energy markets on the online exchanges and we need to 
stop that. But certainly we can foresee the same problem could occur in 
an online contract of metals that is traded on one of these online 
exchanges. All commodities of which there is a finite supply should be 
treated equally. We should not have a special carve-out either for 
energy or for metals or for broadband.

  In 1999, a working group was put together on the financial markets 
and the working group was put together ahead of our rewrite of the 
Commodity Futures Modernization Act. The panel comprised in the working 
group was made up of Federal Reserve Chairman Alan Greenspan, the 
Treasury Secretary, the Chairman of the SEC, and the Chairman of the 
CFTC at the time. In their report, the President's Working Group on 
Financial Markets, as it was called, that group concluded:

       Due to the characteristics of markets for nonfinancial 
     commodities with finite supplies [energy, metals broadband 
     all fit that category; they are nonfinancial commodities and 
     there are finite supplies of energy and of metals] the 
     working group is unanimously recommending that the exclusion 
     not be extended to agreements involving such commodities. The 
     exclusion should not extend to any swap agreement that 
     involves a nonfinancial commodity with a finite supply.

  In other words, the President's working group was saying there should 
be oversight, there should be regulation of swap agreements, of futures 
contracts, of derivatives contracts, involving nonfinancial commodities 
with finite supplies. They separated that category of commodities from 
financial commodities that have an infinite supply, say, interest rates 
futures, or futures contracts or derivative contracts based on 
currencies. With those types of financial commodities, it is very 
difficult for someone to corner the market in interest rates, for 
example. I don't think it is possible. There is not a finite supply of 
interest rates. No one could corner the market there. So they wanted to 
provide legal certainty for derivatives involving financial commodities 
with infinite supplies and they have done that. We did not touch 
financial derivatives. We allow that legal certainty to remain for the 
financial commodities. We do not upset that. Instead, we simply treat 
energy, metals, and broadband, as the other finite commodities such as 
corn and soybeans and other agricultural commodities are treated.
  The President's working group made this recommendation that all 
nonfinancial commodities with finite supplies be treated the same. I 
have to ask my colleagues, what possible public policy rationale could 
explain the carve-out in the commodity futures reauthorization bill for 
energy and metals transactions? If it is proper to exempt these finite 
physical commodities from CFTC regulation, why not exempt agricultural 
commodities such as corn, soybeans, and pork bellies? It does not make 
any sense and we should close this loophole.
  Some have argued that we shouldn't have regulation in this area. I 
know, particularly on my side of the aisle, there are a lot of 
conservative Republicans, and I am certainly a conservative Republican, 
and very pro-free markets. I am always reluctant to see Government 
regulation and I always question the need for it. However, I point out 
that a light level of Government regulation can actually be healthy in 
promoting markets.
  There is no finer example than our security markets in the United 
States. Prior to the adoption of the Securities and Exchange Commission 
Act in the early 1930s, average people remained very leery of ever 
investing in the stock market. They thought it was a fool's game that 
was rigged for the insiders on Wall Street and it was very risky. In 
fact, by regulating the securities markets and making it safe for 
average people to invest in the markets by having some laws against the 
insider dealing and so forth, and requiring a thorough dissemination of 
information so it could be widely shared, we have gotten to the point 
where over 50 percent of Americans in this country invest in the stock 
market.
  I point to that example as an area where we have pretty light 
regulations in our security laws. They are simply disclosure laws. 
Publicly traded companies have to file disclosure and there is not much 
more regulation than that, but that disclosure is very important in 
maintaining the integrity of our markets.
  I believe Senator Feinstein and I have an amendment that is very 
light regulation, that simply will help restore the faith of people who 
may want to trade, of institutions that may want to trade in an online 
derivatives facility. It will restore their faith in that market, give 
them more trust in that market and make them more likely to use that 
market.
  Since we have had this scandal in the energy industry, the 
InterContinental Exchange's volume has just plummeted and people who 
wanted to hedge their positions in energy and metals have been flocking 
back to the fully regulated exchange in New York, the New York 
Mercantile Exchange.
  So the point here, the moral of this story, I think, is by opposing 
this regulation, the InterContinental Exchange has, in fact, hurt their 
own cause because people are staying away from their market. They do 
not trust it, they know there is no price discovery, they know there is 
no regulator there who is going to prevent them from being defrauded. 
There is no cop there so nobody wants to trade there.
  So if the InterContinental Exchange and the banks that own it want to 
encourage all the Senators here to vote against this, I think they are 
actually working against their own self-interest in the long run, just 
as Wall Street would have been working against its own self-interest 
back in the 1930s if they had come to Washington and tried to block the 
implementation of the Securities Exchange Commission Act.
  All the bill does, and Senator Feinstein has gone through it very 
thoroughly--but specifically it requires reporting, notification, and 
recordkeeping. In addition, it requires these energy and metal trading 
venues to keep books and records and maintain sufficient capital to 
operate soundly. Those are just commonsense requirements. Why anybody 
would be against this, I don't know.
  Finally, on a somewhat more parochial basis, as someone who 
represents the exchanges in Chicago, the Board of Trade and the 
Mercantile Exchange, they have a much heavier degree of regulation than 
we are asking of these online exchanges that trade in energy and 
metals. I, frankly, think it is unfair to impose super-regulations on 
one type of trading facility and then no regulation at all on another 
type of facility. I think that unfairness in the disparate treatment 
between different derivatives transaction facilities is a disparity and 
disparate treatment that should be eliminated in the name of fairness.
  The bottom line is, while there has been a lot of hype surrounding 
this

[[Page S7597]]

issue, I think those who study it closely will realize, will recognize 
it is good public policy. It is in the public's interest.
  I urge my colleagues to support this amendment. It is very well 
drafted. Senator Lugar and Senator Harkin have both signed on as 
cosponsors. It was the subject of a hearing in the Agriculture 
Committee, as Senator Feinstein pointed out, and the Agriculture 
Committee, of course, is where legislation dealing with the Commodity 
Futures Trading Commission goes. The Agriculture Committee has worked 
on this, and they produced very good legislation that will prevent, if 
we adopt it, the kind of abuses we have seen in online derivatives 
transactions in the last couple of years. It is a commonsense 
amendment. It simply will make it easier to act against fraudulent or 
bogus energy or metals or broadband trades. It is common sense. I urge 
my colleagues to adopt it.
  Unless anyone further wishes to talk, I suggest the absence of a 
quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mrs. FEINSTEIN. Mr. President, I ask unanimous consent the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mrs. FEINSTEIN. Madam President, I rise to thank the Senator from 
Illinois. We have worked on this now through two Congresses. It was 
very clear to me that he has a great deal of knowledge in this area. 
His advice, his support, his efforts have been very helpful. I think he 
has very clearly stated the facts of this legislation.
  There are those who, for purposes I do not understand, want to make 
this legislation out to be much more than it is, some heavy requirement 
of Government. Really, all we are saying is, if you are going to trade 
online, energy and metals and broadband, those trades are subject to 
recordkeeping, to an audit trail, and to antifraud and antimanipulation 
oversight.
  That is the same as any other finite commodity. Anywhere else does 
this same thing. But this loophole, at the request, as the Senator from 
Illinois said, of Enron--by the House, and then in a conference in 2000 
they dropped the requirement for coverage from the Commodity Futures 
Modernization Act. Therefore, this loophole was created into which 
these companies jumped and began to set up these online trading 
exchanges.
  I couldn't believe my eyes when I saw that one company announced that 
80 percent of the trades they did in 2001 were round trip or wash 
trades.
  Senator Fitzgerald just explained that very clearly, what a round 
trip or a wash trade is.
  Mr. FITZGERALD. Will the Senator yield for a question?
  Mrs. FEINSTEIN. I certainly will.
  Mr. FITZGERALD. I ask Senator Feinstein, I was wondering, you said 
one company said 80 percent of its trades had been wash trades, just 
round trip trades. Was that an energy firm?
  Mrs. FEINSTEIN. Yes, it was CMS Energy. The year was 2001. They 
announced that.
  Additionally, Duke Energy disclosed that $1.1 billion worth of trades 
were round trip, wash trades, since 1999; roughly two-thirds of these 
were done on the InterContinental Exchange, which means that thousands 
of subscribers would have seen these false price signals.
  I could finish this, if you like? A class action suit accused the El 
Paso Corporation of engaging in dozens of round trip energy wash trades 
that artificially bolstered its revenues and trading volumes over the 
last 2 years.
  CMS Energy Corp. has admitted conducting wash energy trades that 
artificially inflated its revenue by more than $4.4 billion.
  So this is important. I have a hard time, I think, as you do, that if 
I sell something to you and you just sell it back to me and we both 
boost sales and yet nothing is really sold, that that is a legitimate 
way of doing business.
  Mr. FITZGERALD. Madam President, I ask Senator Feinstein if it is 
true that under the current law no one can do anything about these wash 
trades because of this Enron loophole that is in the law. We are trying 
to take that out, so somebody could actually ban this kind of 
fraudulent trading practice. Isn't that correct?
  Mrs. FEINSTEIN. That is absolutely correct. That is what we are 
trying to do. For the life of me, I don't understand why people are 
against it.
  Mr. FITZGERALD. Does the Senator know why people would oppose the 
authority of regulators to ban wash trades? Has anybody explained that 
to the Senator?
  Mrs. FEINSTEIN. The only thing I can figure is they want to do it. 
They want the unabashed ability to conduct the bogus trades. That would 
be the only reason they would want this little, dark, hidden place 
through electronic trading because there is no oversight for fraud or 
manipulation. There is no record kept. There is no audit trail.
  Mr. FITZGERALD. And no one can find out what prices they were trading 
at, either. There is no price discovered.
  Mrs. FEINSTEIN. That is right.
  Mr. FITZGERALD. They do not do these wash trades at the exchange in 
New York because all of that would be transparent to the public.
  Mrs. FEINSTEIN. That is exactly right. That is why we suspect it. It 
is hard to prove.
  Again, there have been three arrests of Enron traders who devised 
these schemes. Actually two were plea-bargained. There was a recent 
arrest last week of this fellow who apparently set these trading 
schemes up for Enron.
  To have a transparent marketplace, I think, gives confidence to the 
50 percent of the people who are small investors who would want to 
participate in the market. You have to show there is oversight. You 
have to show it is up and up, that it is a legitimate bona fide 
marketplace with trades that mean something.
  In my heart of hearts, I believe that a lot of this kind of activity 
is what amounted to a 400-percent increase in the cost of power in 1 
year in California alone.
  Mr. FITZGERALD. Because they were simply trading back and forth 
amongst themselves at a price that really was not determined on an 
arms' length basis. They were just engaging in bogus trades back and 
forth to artificially set a price or to artificially increase revenues 
for the companies on both sides of the trade. Some of these 
transactions were done on the InterContinental Exchange.
  As I recall, when we had the hearing before the Senate Agriculture 
Committee, either early this winter or maybe even last fall, some 
shareholder on the InterContinental Exchange came before the committee 
and testified that notwithstanding the official position of the 
exchange they, as an owner of the exchange, disagreed with the policy 
of the InterContinental Exchange on this, and they favored our 
elimination of this Enron online loophole in the commodities laws; they 
thought that the company in which they were a shareholder would be 
better off if there were some regulation of their business.
  Does the Senator recall that?
  Mrs. FEINSTEIN. I was not at the hearing. I do not recall that. But I 
think whomever that was, they are certainly correct because that would 
give confidence to their company and to people to invest in that 
company which is on the up and up, which is regulated and which has 
transparency.
  I think particularly now after what we know has transpired over the 
past that this is one of the reasons why our economy has had problems 
in that people have lost confidence. They have seen these companies go 
down.
  The Senator mentioned some of the big companies that have gone down 
that have done just this kind of thing. At some point, Peter has to pay 
Paul. If they don't have the capital to handle it, there is a problem.
  Mr. FITZGERALD. If we had the same problem somewhere in the stock 
market and people couldn't figure out the price of a stock by looking 
in the newspaper or looking on the Internet to see what the published 
price of a stock was on the exchange, if instead you had a similar 
situation with a stock as you have with these online energy derivatives 
exchanges, and a customer had to call the exchange and ask what the 
price of oil is trading at, but you just had somebody telling you the 
price of oil is such and such but you had no way of verifying that, I 
think no one would want to invest in the stock market if you couldn't 
discover the price, or if there was no price discovery.

[[Page S7598]]

  Why does the Senator think anybody would even want to trade on an 
online exchange in which there is no price discovery, or where there is 
no regulator protecting the customers from fraud, manipulation, or 
abuse? Why is it that someone would even want to trade on such an 
exchange? Isn't it true that, in fact, the InterContinental Exchange 
volume, the last I heard, was dropping and their legitimate customers 
were going back to trading on a fully regulated exchange in New York, 
the NYNEX?
  Mrs. FEINSTEIN. The Senator is asking me to hypothesize. I sure 
wouldn't do it. I can only assume that some sophisticated trader has 
worked out some scheme and was utilizing it in this venue and knew that 
he or she was safe because there was no way to pin it on them. There 
were no records kept.
  Mr. FITZGERALD. If someone is operating a corrupt exchange and there 
is no price discovery and no regulation, isn't it true that a customer 
could call into that exchange and say, I want to trade oil at $30 a 
barrel, and the broker could tell them he could get some oil at $35 a 
barrel and just require the customer to pay more than that customer 
really should have had to pay because the market wasn't that high, 
there is no way for the customer to know what the real market price is? 
The broker could make up a price and then keep the difference for 
himself or for the exchange. Isn't that correct, if there is no price 
discovery?
  Mrs. FEINSTEIN. That is correct.
  Mr. FITZGERALD. It seems to me that this is an absolute no-brainer to 
close this indefensible loophole. I can't imagine that anybody is going 
to want to defend the concept that we can have an online exchange that 
is open for business with the public, although not retail customers, I 
gather, but institutional customers, where it is just a black hole 
which no one can regulate and can't ban wash trades where there is no 
price discovery. What in the world would be the objection to closing 
this loophole and having some modicum of oversight to protect the 
people who may want to use this exchange and to protect the integrity 
of the market?
  Mrs. FEINSTEIN. The Senator is absolutely correct. When we had this 
vote in the last Congress, if I recall correctly, we got 48 votes. It 
wasn't really crystal clear what the excesses were at that time. Now we 
have documentation of the excesses. We have literally billions of 
dollars of fraudulent trades, wash trades, round-trip trades, whatever 
you call them, but fraudulent trades. So we know. We also know that Mr. 
Fortney was arrested and two others have plead guilty to creating these 
schemes. To continue to allow that kind of thing to exist would be a 
real dereliction of this Congress.
  Mr. FITZGERALD. There really is a difference between this year's vote 
and last year's. Last year when the Senator and I had this amendment on 
the floor, it was in the immediate aftermath of all those energy 
companies collapsing. There were some initial reports out there about 
possibly bogus trades but we didn't have that proof yet. We had 48 
votes, 2 votes shy of passing it.
  Since that time, and in the intervening year, we have had all the 
hard evidence come out proving everything the Senator and I were saying 
last year on the floor of this body--that there were, in fact, bogus 
wash trades not only in the millions of dollars but in the billions of 
dollars. How big were some of those?
  Mrs. FEINSTEIN. CMS Energy admitted to conducting wash energy trades 
that artificially inflated its revenue by $4.4 billion.
  Mr. FITZGERALD. That was probably a huge percentage of their 
revenues--all fictitious--from doing wash trades on an online exchange 
with no economic purpose. But that fictitious revenue was fooling the 
investing public, making people think that company had more revenue 
than it actually did. They were all just ``wash'' trades.

  Mrs. FEINSTEIN. Right. May I ask the Senator a question? Some, I 
understand, may come to the floor and want a study. The study has 
already been done, and it is the ``Final Report On Price Manipulation 
in Western Energy Markets, Fact-Finding Investigation of Potential 
Manipulation of Electric and Natural Gas Prices.'' It was prepared by 
the staff of the Federal Energy Regulatory Commission. It was put out 
in March of this year.
  I would like to read one section of it to the Senator and see if he 
is aware of this. It reads:

       Recommend that Congress consider giving direct authority to 
     a Federal agency to ensure that electronic trading platforms 
     for wholesale sales of electric energy and natural gas in 
     interstate commerce are monitored and provide market 
     information that is necessary for price discovery in 
     competitive energy markets.

  Mr. FITZGERALD. So you are saying the FERC has done a study in which 
they have already concluded that we basically need to close this 
loophole so there can be some price discovery and some monitoring of 
these energy markets?
  Mrs. FEINSTEIN. That is correct. This is the report. It is a final 
report. It was done in March 2003, so it has been circulated for a few 
months.
  Additionally, our legislation has the support of the chairman of the 
Federal Energy Regulatory Commission. We have kept in touch with him so 
he is aware of what is in the report, and, of course, the former 
chairman of the Agriculture Committee, Senator Harkin, and former 
ranking member of the Agriculture Committee, Senator Lugar.
  Mr. FITZGERALD. Madam President, and my dear colleague from 
California, I think this is simply commonsense legislation and long 
overdue. I think it is unfortunate that we made the mistake when 
passing the Commodity Futures Modernization Act back a few years ago, 
which created that special carve-out for energy and metals and 
broadband contracts that were traded in an online exchange, that they 
could be exempt from regulation by anybody. Because had we not made 
that mistake, had Congress not made that mistake, it might have 
prevented the manipulation and fraud and abuse that was done at the 
hands of a whole bunch of energy companies. We might have prevented 
that, if we had not allowed this loophole to be included in that 
Commodity Futures Modernization Act. And I think it is high time we 
simply close that loophole.
  Madam President, I will be interested to see who comes to the floor 
to make an argument that we should still have this loophole so that 
energy and metals contracts can be traded without any oversight by any 
regulator, so no one can discover the price, so that there is no 
protection for the customers of these exchanges.
  I will be interested to see who comes to the floor and what their 
argument is in favor of this because, I have to tell you, on most 
pieces of legislation that come before this body, it is pretty easy to 
see what the arguments will be on the other side. There is normally at 
least a plausible public policy rationale on both sides of the issue. 
But in this case, I have to say that, looked at very objectively, it is 
hard to understand how anybody could oppose this commonsense measure to 
protect the integrity of our energy and metals trading markets in this 
country. It seems like a very commonsense piece of legislation.
  I compliment Senator Feinstein. She has been tenacious in bringing 
this up, and she has been persistent to make sure that we had the 
opportunity to offer the amendment on the floor.
  Madam President, I yield the floor.
  The PRESIDING OFFICER. The Senator from California.
  Mrs. FEINSTEIN. Madam President, I would also like to point out 
another study that has been done in a CRS report for Congress, and that 
was dated January 28 of this year, pointing out that this bill was 
presented in the last Congress and probably would be presented in this 
Congress. One of the points it makes is that if over-the-counter 
derivatives dealers were required to keep and make available for 
inspection records of all trades and to disclose information about 
trading volume and prices, abuses like the ones we have been talking 
about would be easier to detect and, thus, presumably less likely to 
occur.
  That is really the purpose of this: not to allow sort of a secret 
niche in the trading arena where people could go to hide and trade, but 
to bring the sunshine into that niche and to provide--and it is very 
conservative--regulation of what they must do.
  I know my friend and senior Senator from Nevada has proposed an 
amendment. Regrettably, I have to vote against the amendment. This bill 
had been worked out with Senator Harkin

[[Page S7599]]

and Senator Lugar. My understanding is they believe we should close the 
loophole entirely, not leave one area sort of in the dark, so to speak.
  I am troubled by the amendment because our reading of the amendment 
indicates that it effectively exempts metals entirely without any 
oversight or regulation by the CFTC, even less than under current law. 
In good conscience, I cannot do that.
  So I think we made the arguments, Madam President. And with what has 
happened--and now that we know the extent of the fraud that has taken 
place online--not to close that loophole, I think, would be a terrible 
blot on this Congress.
  So I am hopeful we will have a positive vote.
  I thank the Chair for your indulgence and yield the floor.
  Mr. REID. I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER (Mr. Alexander). Without objection, it is so 
ordered.
  Mr. REID. Mr. President, I have been working with the two sponsors of 
this legislation. They have agreed to take my amendment. I have spoken 
with the majority and they say, no, they didn't want it to be done 
tonight, maybe tomorrow. I would simply say that we in good faith have 
worked, as I told the majority leader I would do, to try to move this 
bill along. Moving this bill along does not mean they are only going to 
be happy if we offer amendments that they like. The Senator from 
California in good faith offered this amendment. Whether people like it 
or not, if we are going to move this Energy bill along, we have to vote 
on it in some way. But it is my understanding that tonight nothing is 
going to happen.
  It is pretty obvious nothing is going to happen. There has been 
nobody here. There has been nobody here to oppose her amendment. Of 
course, no other amendments can be offered until this one is set aside.
  I just want the record to so reflect at a later time, when people 
come and say, we should try to move this bill along, and there have 
been statements on the floor made by the manager and the majority 
leader that they wanted to finish this bill this week.
  I was asked at lunchtime, how did I feel about finishing the bill 
this week. I said to the reporters asking me: When you step back a 
little bit, there is about as much chance of our finishing this bill 
this week as my turning a back flip here in front of the two of you.
  The record should reflect, I can't turn a back flip and never have 
been able to.
  My point, I repeat, is that I am doing my very best to cooperate as I 
have been advised by the Democratic leader we should do everything we 
can to help with this bill. But help is a two-way street. When an 
amendment is offered that people don't like, you just can't have them 
leave rather than a single word being spoken against the amendment of 
the Senator from California other than my amendment which they have 
agreed to accept.
  Having said that, wanting to continue to move this important piece of 
legislation, I note the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. REID. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. EDWARDS. Mr. President, I was unavoidably absent for rollcall 
vote No. 212 on the Dorgan amendment. Were I present for that vote, I 
would have voted in favor of the amendment.

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