[Congressional Record Volume 153, Number 137 (Monday, September 17, 2007)]
[Senate]
[Pages S11588-S11603]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mrs. FEINSTEIN (for herself, Mr. Specter, and Mr. Feingold):
  S. 2052. A bill to allow for certiorari review of certain cases 
denied relief or review by the United States Court of Appeals for the 
Armed Forces; to the Committee on the Judiciary.
  Mrs. FEINSTEIN. Mr. President, today I am pleased to join with 
Senators Specter and Feingold in introducing the Equal Justice for U.S. 
Service Members Act. The act would eliminate an inequity in current law 
by allowing all court-martialed U.S. service-members who face 
dismissal, discharge or confinement for a year or more to petition the 
U.S. Supreme Court for discretionary review through a writ of 
certiorari.
  The bill is a simple one, and would do the following: It would allow 
a writ of certiorari to be filed in any case in which the U.S. Court of 
Appeals for the Armed Forces has denied review; and it would allow a 
writ of certiorari to be filed in any case in which the U.S. Court of 
Appeals for the Armed Forces has denied a petition for extraordinary 
relief.
  All persons convicted of a crime in U.S. civilian courts today, 
including illegal aliens, and regardless of the crime they may have 
committed, have an absolute right to petition the U.S. Supreme Court 
for discretionary review if they lose in the court of appeals. By 
contrast, however, our men and women in uniform do not share this same 
right as their civilian counterparts. Our military personnel can apply 
to our highest court on direct appeal for a writ of certiorari only if 
the U.S. Court of Appeals for the Armed Forces actually conducts a 
review of their case, or grants a petition for extraordinary relief. 
That happens only about 10 percent of the time.
  In other words, the other 90 percent of the time, our U.S. 
servicemembers are precluded from ever seeking or obtaining direct 
review from the highest court of the country that they fight and die 
for.
  A disparity not only exists between our civilian and military court 
systems. A similar disparity exists even within our military court 
system itself. The Government routinely has

[[Page S11589]]

the opportunity to petition the Supreme Court for review of adverse 
court-martial rulings in any case where the charges are severe enough 
to make a punitive discharge possible. But our military personnel do 
not share these same rights to petition the Supreme Court as their 
opponents, even on the other side of the same case.
  That is wrong, and this inequity was recently noted by the American 
Bar Association. At its annual meeting in August 2006, the ABA House of 
Delegates passed a resolution calling on Congress to fix this long-
standing ``disparity in our laws governing procedural due process.''
  That is perhaps reason enough to fix this problem, but I also must 
note that this existing disparity has only become more acute now that 
Congress has enacted the Military Commission Act. Section 950g(d) of 
that law, which Congress passed last September, gives the Supreme Court 
the ability to review by writ of certiorari any final judgment issued 
by the U.S. Court of Appeals for the D.C. Circuit, in an appeal filed 
by terrorists and war criminals who get convicted by U.S. military 
commissions.
  So the worst of the worst at Guantanamo will have a right to petition 
our Supreme Court to hear their case. Yet unless we act, those same 
Supreme Court doors will continue to be closed to almost all of our 
U.S. service personnel who would seek direct review in their own 
highest Court. Even service-members who apprehended those same 
terrorists, or served in judgment on their military commissions, or who 
guard them at Guantanamo, will continue to be treated as second-class 
citizens, deprived of the opportunity to seek Supreme Court review if 
they ever need it themselves.
  Our U.S. service personnel regularly place their lives on the line in 
defense of American rights. It is simply unacceptable for us to 
continue to routinely deprive our men and women in uniform of one of 
those basic rights, the ability to petition their Nation's highest 
court for direct relief, that is given to all convicted persons in our 
civilian courts, that is given to their prosecutorial adversaries in 
our military courts, and that we have now given even to the terrorists 
we expect to prosecute as war criminals in our upcoming military 
commission process.
  It is time to give equal justice to our U.S. servicemembers. That is 
what this act does.
  I urge my colleagues to support this legislation.
  I ask unanimous consent the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2052

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Equal Justice for United 
     States Military Personnel Act of 2007''.

     SEC. 2. CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR 
                   THE ARMED FORCES.

       (a) In General.--Section 1259 of title 28, United States 
     Code, is amended--
       (1) in paragraph (3), by inserting ``or denied'' after 
     ``granted''; and
       (2) in paragraph (4), by inserting ``or denied'' after 
     ``granted''.
       (b) Technical and Conforming Amendment.--Section 867a(a) of 
     title 10, United States Code, is amended by striking ``The 
     Supreme Court may not review by a writ of certiorari under 
     this section any action of the Court of Appeals for the Armed 
     Forces in refusing to grant a petition for review.''.
                                 ______
                                 
      By Mr. FEINGOLD (for himself and Mr. Leahy):
  S. 2053. A bill to amend part A of title I of the Elementary and 
Secondary Education Act of 1965 to improve elementary and secondary 
education; to the Committee on Health, Education, Labor, and Pensions.
  Mr. FEINGOLD. Mr. President, this month millions of American 
schoolchildren are returning to classrooms to begin the new school 
year, making this a time of hope and possibilities. Students in my 
State of Wisconsin and around the country are meeting new teachers, 
getting reacquainted with old friends, joining clubs or athletic teams, 
and embarking on the next step in their educational careers. Teachers 
and administrators around the country are starting a new school year 
with fresh lesson plans and high goals for all the students in their 
schools. And many educators, parents, and school officials are 
continuing to work diligently toward the goal of closing the 
achievement gap that continues to exist throughout many communities 
across the country.
  These students, teachers, and administrators will also face their 
sixth year under the Federal No Child Left Behind Act, NCLB, the 
centerpiece of President Bush's domestic agenda. NCLB, which is 2001-
2002 reauthorization of the Elementary and Secondary Education Act, 
ESEA, requires that students be tested annually in reading and math, 
and starting this school year, in science. The law is up for 
reauthorization this year and it remains unknown how much change 
students, teachers, parents, and administrators can expect as Congress 
works to reauthorize the law.
  I voted against No Child Left Behind in 2001 in large part because of 
the law's new Federal testing mandate. The comments that I heard from 
Wisconsinites during the 2001 debate and that I continue to hear 6 
years later have been almost universally negative. While Wisconsinites 
support holding their schools accountable for results and closing the 
achievement gap, they are concerned about the Federal law's primary 
focus on standardized testing.
  Let me make clear at the outset that this country has a long way to 
go toward ensuring that all students, regardless of their backgrounds, 
have a chance to get a good education. I remain troubled by the 
inequality in funding and resources provided to our Nation's schools 
and by the persistent segregation that schools around the country, 
including those in Wisconsin, continue to face. Moreover, I am deeply 
concerned that NCLB's testing and sanctions approach has forced some 
schools, particularly those in our inner cities and rural areas, to 
become places where students are not taught, but are drilled with 
workbooks and test-taking strategies, while in wealthy suburban 
schools, these tests do not greatly impact school curriculums rich in 
social studies, civics, arts, music, and other important subjects.
  All levels of government--local, State, and Federal--need to act to 
ensure that equal educational opportunities are afforded to every 
student in our country.
  I do not necessarily oppose the use of standardized testing in our 
Nation's schools. I agree that some tests are needed to ensure that our 
children are keeping pace and that schools, districts, and States are 
held accountable for closing the persistent achievement gap that 
continues to exist among different groups of students, including among 
students in Wisconsin. But the Federal one-size-fits-all testing-and-
punishment approach that NCLB takes is not providing an equal education 
for all, eradicating the achievement gap that exists in our country or 
ensuring that each student reaches his or her full potential.
  Rather, the reauthorized ESEA needs to recognize that States and 
local communities have the primary responsibility for providing a good 
public education to our students. The reauthorized ESEA should also 
encourage States and local districts to pursue innovative reform 
efforts including utilizing more robust accountability systems that can 
measure student academic growth from year to year and measure student 
academic growth using multiple forms of assessment, rather than just 
standardized tests.
  Today, I am introducing the Improving Student Testing Act to overhaul 
the Federal testing mandate and provide States and local districts 
flexibility to determine the frequency and use of standardized testing 
in their accountability systems. My legislation is fully offset, while 
providing approximately $200 million in deficit reduction over the next 
5 years.
  Nothing in my legislation would force States to alter their 
accountability systems in recognition of the fact that different States 
are at different stages of their education reform efforts and may wish 
to maintain their current assessment systems. However, my legislation 
says that for Federal accountability purposes, States can choose to 
test once in grades 3 to 5, 6 to 9, and 10 to 12 rather than the 
current Federal requirement for annual testing in grades 3 through 8 
and once in high school.
  For States that choose to test in grade spans instead of annually, my

[[Page S11590]]

legislation encourages them to use more than high-stakes standardized 
tests in their accountability systems. By removing the Federal 
requirement to test annually, Congress can encourage States and local 
districts to lead innovative school reform efforts, including 
developing more robust assessment systems that use a range of academic 
assessments, such as valid and reliable performance-based assessments, 
formative assessments that provide meaningful and timely feedback to 
both students and teachers, and portfolio assessments that allow 
students to accumulate a broad range of student work and assess their 
own learning as they progress through school.
  I have heard from a number of teachers and administrators who are 
concerned about the testing burden NCLB imposed on our Nation's 
educational system. The Federal mandate to test annually has strapped 
State and local districts' financial resources. Congress promised 
States specific funding levels for Title I, part A in NCLB, but 
Congress has failed to live up to those promised resources every year 
since NCLB was enacted. Despite the lack of adequate resources, our 
schools continue to be forced to test and to ratchet up the 
consequences associated with these tests.
  NCLB's testing mandates have also led to a substantial demand for 
increased numbers of standardized tests and I have heard from some 
Wisconsinites concerned that the testing industry cannot keep up with 
this demand. There have been stories coming in from around the country 
documenting the burden faced by the testing industry, including 
incorrectly scored tests, test scores arriving much later than 
expected, and schools given incorrect testing booklets and supplies by 
the testing companies.
  My legislation would help alleviate this testing burden by providing 
States with the option to reduce the number of grades tested for 
Federal accountability purposes. Eighteen States would then be able to 
dedicate more of their critical Title I dollars toward efforts that 
will help close the achievement including improving teacher quality 
through professional development and providing more targeted 
instruction to disadvantaged students in critical subject areas.
  Some may say that with a Federal requirement to test in grade spans 
and not every year, the students in the nontested years will be 
ignored. I have more faith in Wisconsin's teachers and other dedicated 
teachers around the country than to assume that because there is no 
external, federally required test, teachers will not teach their kids 
or ensure that their students make academic progress. Effective schools 
contain teachers who work collaboratively within grade levels and 
across grades to raise the academic achievement of every student. Good 
teachers know that they are responsible for ensuring all their students 
make substantial academic progress in a given year regardless of 
whether those students must take a federally imposed standardized test.
  My legislation also provides States with the flexibility and 
resources to develop high-quality assessments that can be used to give 
a more accurate picture of student achievement. I have heard a number 
of criticisms of the standardized tests used in Wisconsin and around 
the country--namely, that they may not measure higher-order thinking 
skills and that the results are returned to teachers too late in the 
school year, preventing teachers from receiving feedback that could 
help inform their instructional techniques to increase student 
learning. It is important that Congress listen to the feedback provided 
by teachers and administrators from around the country and provide 
States and local districts with the flexibility to develop and use 
other types of assessments in their accountability systems.

  My bill authorizes a competitive grant program to help States and 
local districts develop multiple forms of high-quality assessments, 
including formative assessments, performance-based assessments, and 
portfolio assessments. These assessments can give a more accurate and 
detailed picture of student achievement than a single standardized 
test. These assessments can also be designed to provide more immediate 
feedback to teachers and students than the statewide standardized tests 
used for Federal accountability purposes. By incorporating these richer 
assessments, teachers can better assess student learning throughout the 
school year and continuously modify their instruction to ensure all 
students continue to learn.
  These high-quality, multiple measures can be more expensive for 
States to develop and my bill recognizes that cost by authorizing a 
competitive grant program to assist States in developing these 
assessments. States and local districts can use these funds for a 
variety of purposes, including training teachers in how to use these 
assessments, creating the assessments, aligning the assessments with 
State standards, and collaborating with other States to share 
information about assessment creation.
  My legislation makes clear that these funds are not to be used for 
the purchase of additional test preparation materials. I have long been 
concerned that NCLB could result in a generation of students who know 
how to take tests, but who do not have the skills necessary to become 
successful adults. This grant program will help innovative States 
develop higher quality assessments to better ensure that the students 
in their State are prepared for careers in the 21st century, including 
the ability to think critically, analyze new situations, and work 
collaboratively with others.
  My legislation also makes clear that these multiple forms of 
assessment are not a loophole for States and local districts to avoid 
accountability. Rather, my legislation recognizes that these multiple 
measures can provide a more accurate and more complete picture of 
student achievement. My legislation makes clear that these assessments 
must: be aligned with States' academic and content standards, be peer 
reviewed by the Federal Department of Education, produce timely 
evidence about student learning and achievement, and provide teachers 
with meaningful feedback so that teachers can modify and improve their 
classroom instruction to address specific student needs.
  Congress also needs to reform NCLB's accountability provisions during 
the reauthorization process, including providing credit to schools that 
demonstrate their students have made substantial growth from year to 
year. Right now, NCLB measures students' achievement based primarily on 
reading and math tests, and students either achieve the cut score on 
the NCLB tests or they do not. A number of teachers and parents in 
Wisconsin have expressed concerned that NCLB's current approach leads 
schools to focus on students who are closest to achieving the cut score 
on tests so as to continue to boost the number of kids passing the test 
each year. As a result, parents and teachers are concern that the 
lowest achieving students who are not yet proficient and the highest 
performing students who are already proficient may be ignored in the 
effort to meet AYP each year.
  My legislation seeks to address this concern by providing flexibility 
for States that maintain annual testing to develop accountability 
models capable of tracking student growth from year to year to better 
ensure that every student, regardless of his or her current academic 
level, continues to make academic progress. States seeking to use 
growth models in their accountability systems would have to prove that 
such growth models meet a number of minimum technical requirements, 
including ensuring the growth model: is of sufficient technical 
capacity to function fairly and accurately for all students, uses 
valid, reliable, and accurate measures, has a statewide privacy-
protected data system capable of tracking student growth, does not set 
performance measures based on a student's background, and is capable of 
tracking student progress in at least reading and math. I am pleased 
there is substantial agreement in Congress that growth models should be 
part of a reauthorized ESEA, and I will work with my colleagues to 
ensure that any growth models included in the ESEA can be fairly 
implemented and are flexible enough for States and local districts to 
utilize in their accountability systems.
  NCLB set the ambitious goal that all children will be proficient on 
State reading and math tests by the year 2014. I have heard from a 
number of

[[Page S11591]]

educators and administrators in Wisconsin and around the country who 
are concerned that very few States will be able to meet NCLB's 2014 
deadline. I understand their concern, particularly in light of the fact 
that Congress has failed to provide the promised financial resources to 
meet NCLB's mandates. Our Nation needs to have high academic 
expectations for all of our students, but if Congress is going to set 
such ambitious goals for our schools to meet, we need to provide our 
schools with the resources to meet those goals.
  So far, the Federal Government has not lived up to the funding 
promises it made when Congess passed NCLB in late 2001. The 
appropriated levels for title I, part A have failed to match the 
authorized levels for title I, part A every year from 2002 to 2007, 
resulting in an underfunding of title I, part A by over $40 billion 
since 2002. It is one thing to set ambitious targets for our Nation's 
schools with adequate resources provided to reach those targets. It is 
something entirely different to hold our schools accountable for 
ensuring all students are proficient by 2014 and providing our schools 
with less resources than were promised to them when NCLB passed. My 
legislation includes a funding trigger that will waive the 2014 
deadline unless Congress fully funds title I, part A from now until 
2014. If Congress maintains the 2014 deadline and does not provide 
additional resources to our Nation's schools, we are only setting our 
schools up for further failure as we approach 2014.
  My legislation also reforms the peer-review provisions of NCLB to 
ensure that there is more transparency and consistency in the peer-
review process. States are currently required to submit their State 
plans for approval by the Department of Education, and I have heard a 
number of concerns from my State and others that States do not receive 
consistent or timely information from the Department of Education 
during peer review. States have also voiced concern about their 
inability to speak directly with peer reviewers during the peer-review 
process in order to clarify reviewers' comments made about their State 
plans.
  My bill would amend the peer-review language to ensure that the peer-
review teams contain balanced representation from State education 
agencies, local education agencies, and practicing educators. My 
legislation also includes language that requires the Secretary to 
provide consistency in peer-review decisions among the States and 
requires the Department's inspector general to conduct independent 
evaluations every 2 years to ensure consistency of approval and denial 
decisions by the Department of Education from State to State. My bill 
would also require the Secretary to ensure that States are given the 
opportunity to receive timely feedback from peer-review teams as well 
as directly interact with peer-review panels on issues that need 
clarification during the peer-review process.
  Despite my concerns regarding the testing provisions of NCLB, there 
are other provisions of the law that I continue to support. I have 
consistently heard from educators and other interested parties in my 
State of Wisconsin in favor of NCLB's requirement to disaggregate data 
by specific groups of children, including students from major racial 
and ethnic groups, students with disabilities, economically 
disadvantaged students, and English language learners. Teachers have 
told me that these provisions have added more transparency to school 
data and help to ensure that schools continue to remain focused on 
closing the achievement gap among these various groups of students and 
remain attentive to the academic needs of all students. My legislation 
builds on the requirement to disaggregate data by also requiring States 
to disaggregate high school graduation rates on the State report cards 
required under NCLB.
  Justice Louis Brandeis once said, ``sunlight is said to be the best 
of disinfectants,'' and I think his statement can be properly applied 
to NCLB's requirement to disaggregate and report academic data by 
student subgroups. Information about the achievement gaps that exist 
throughout our Nation's schools, whether they are gaps in academic 
achievement or graduation rates, can help parents, educators, local 
school board members, and others continue to advocate for education 
reform at the local level. Some States already have the ability to 
disaggregate graduation rates by NCLB's subgroups, and my legislation 
provides funding to all States to comply with this public reporting 
requirement.
  Tracking students' achievement and disaggregating student data are 
fundamental components of No Child Left Behind and require States to 
maintain large data systems containing detailed information about 
students. The bill that I am introducing will also ensure that these 
data systems are maintained in a way that safeguards individual 
privacy. Use of the data by educational entities, as well as 
disclosures of student-level data to third parties, will be carefully 
limited, and individuals will have a right to know who is inspecting 
their information and for what purpose.
  My legislation also provides additional funding for States to build 
additional infrastructure at the State and local level in order to 
improve their educational accountability systems. States and local 
districts will have to secure additional resources in order to 
implement growth models or utilize multiple forms of assessment in 
their accountability systems. My bill creates a competitive and 
flexible grant program to help ensure the Federal Government does its 
part in assisting States in accessing these resourses.
  States have varying capacity needs and funds under this program can 
help States build their privacy-protected educational databases, train 
individuals in how to use multiple measures of student achievement in 
State accountability systems, and provide additional professional 
development opportunities for both state education agency and local 
education agency staff members. I have heard from a number of State and 
local administrators who are trying diligently to reconcile increased 
Federal and State mandates with less financial resources. Providing 
additional resources will help build State and local educational 
infrastructure and will help encourage States to move to accountability 
systems that can measure student growth and use more than standardized 
test scores when making decisions about students and schools.
  There are a number of other issues that we need to address in the 
NCLB reauthorization. My bill seeks to address some of the top concerns 
I have heard about from constituents around the State related to 
testing. During the reauthorization process, we need to examine and 
modify NCLB sanctions structure to address implementation problems that 
rural and large urban districts have faced. We also need to recognize 
that every school and every school district is different and the rigid 
sanctions of NCLB may not allow States and local districts the 
opportunity to implement a variety of other innvative school reform 
efforts.
  We also need to address the diverse learning needs of students with 
disabilities and English language learners. We need to ensure that NCLB 
works in concert with the Individuals with Disabilities Education Act, 
IDEA, and that students with disabilities are provided with proper 
modifications on assessments without holding lower academic 
expectations for these students. I have long supported full funding for 
IDEA and strongly support high academic expectations for students with 
disabilities. I was disappointed the final NCLB conference report in 
2001 dropped the Senate language on full funding of the Federal share 
of IDEA, and I hope we can be successful during this reauthorization 
process in efforts to fully fund IDEA.
  The number of English language learners is growing around the 
country, including in my State of Wisconsin. I have heard concerns from 
educators around Wisconsin that NCLB does not properly address the 
unique learning needs of English language learners. Teachers are 
concerned about the lack of valid and reliable assessments for English 
language learners and the unfairness of testing these students when 
they may not yet have learned English well enough to take standardized 
tests in English. During the reauthorization, we need to ensure that 
additional resources are provided to develop valid and reliable 
assessments for English language learners so that these students are 
fairly assessed while learning the English language.

[[Page S11592]]

  There are many issues that need to be addressed during the 
reauthorization process, and my bill seeks to address some of the 
issues related to testing under NCLB. I am pleased this bill is 
cosponsored by my friend and colleague, Senator Patrick Leahy, and that 
it has the support of the American Association of School 
Administrators, the National Education Association, the National 
Association of Elementary School Principals, the School Social Work 
Association of America, the Wisconsin Department of Public Instruction, 
the Wisconsin Education Association Council, the Milwaukee Teachers 
Education Association, the Wisconsin National Board Network of 
Wisconsin National Board Certified Teachers, and the Wisconsin School 
Administrator's Alliance, which includes the Association of Wisconsin 
School Administrators, the Wisconsin Association of School District 
Administrators, the Wisconsin Association of School Business Officials, 
and the Wisconsin Council of Administrators of Special Services.
  The Elementary and Secondary Education Act of 1965 is the key Federal 
law impacting our nation's schools, and I have long supported the law's 
commitment to improving the quality of education provided to our 
Nation's most disadvantaged students. I strongly support holding 
schools accountable for both providing equal educational opportunities 
to all our students and for continuing to work to close the achievement 
gaps that exist in our Nation's schools.
  I also strongly support ensuring that classroom teachers, local 
school districts, and States have the primary responsibility for making 
decisions regarding day-to-day classroom instruction. Unfortunately, 
under NCLB, too much of the activity in classrooms is being dictated by 
the Federal one-size- fits-all testing mandates and accountability 
provisions. The Federal Government should leave decisions about the 
frequency of standardized testing up to the States and local school 
districts that a bear the responsibility for educating our children. 
While standardized testing does have a role to play in measuring and 
improving student achievement, one high-stakes test alone cannot 
accurately or responsibly measure our students or our schools.
  NCLB was based on a flawed premise--that the way to hold schools 
accountable and close the achievement gap was for the Federal 
Government to pile on more tests and use the tests as the primary tool 
to evaluate schools. Now, 5 years into the law's implementation, we 
have evidence showing the need to reduce NCLB's burden on schools, by 
providing real support for students and teachers and by providing 
flexibility to Sates to use more than standardized tests to measure the 
achievement of students. This country has a long way to go before the 
opportunity for an equal education is afforded to all of America's 
students and Congress can take a step toward helping to ensure that 
opportunity by substantially reforming the mandates of NCLB. It is time 
to fix No Child Left Behind, and to get back to learning--not just 
testing--in all of our Nation's public schools.
                                 ______
                                 
      By Mr. DODD:
  S. 2055. A bill for the relief of Alejandro Gomez and Juan Sebastian 
Gomez; to the Committee on the Judiciary.
  Mr. DODD. Mr. President, today I send to the desk a private relief 
bill to provide permanent resident status to Juan and Alejandro Gomez, 
and ask that it be appropriately referred.
  Juan, 18, and Alejandro, 20, are natives of Colombia who came to the 
U.S. with their parents in August 1990 on B-2 visitors visas. They 
currently reside in Miami, FL with their parents. They are now the 
subjects of an October 14, 2007, voluntary departure date under an 
order of deportation. The date of their departure has been extended 
from September 14, 2007. Juan and Alejandro have lived continuously in 
the U.S. for the last 17 years. They have both graduated from Miami 
Killian High School and are currently enrolled in Miami Dade Community 
College. They have the strong support of their community. It would be 
an extreme hardship to uproot Juan and Alejandro from their community, 
which has wholeheartedly embraced them, to send them back to Colombia 
where there lives could be in serious danger.
  We all know that the circumstances of Juan and Alejandro aren't 
unique. Just like many other children here illegally, they had no 
control over their parents' decision to overstay their visas a number 
of years ago. Most of these young people work hard to complete school 
and contribute to their communities. Cases like Juan's and Alejandro's 
are the reason why the so called DREAM Act was attached to the 
comprehensive immigration reform legislation that the Senate attempted 
to pass earlier this year, only to face a filibuster from opponents of 
any comprehensive immigration reform proposal.
  The DREAM Act has broad partisan support and is not the reason that 
the immigration bill has stalled in the Senate. I would hope that 
consideration could be given to de-linking the DREAM Act from the 
larger bill so that we can put in place a legal framework for dealing 
with young people who are caught in this unfortunate immigration 
status. But that is not likely to happen soon enough to address the 
problems confronting Juan and Alejandro.
  That is why I have decided to introduce a private bill on their 
behalf. I will also be writing to Senator Edward Kennedy, Chairman of 
the Subcommittee on Immigration to request, pursuant to the 
Subcommittee's Rules of Procedure, that the Subcommittee formally 
request an expedited departmental report from the Bureau of Citizenship 
and Immigration Services regarding the Gomez brothers so that the 
Subcommittee can then move forward to give consideration to this bill 
as soon as possible.
  I had an opportunity to meet Juan and Alejandro recently. They 
believe that America is their home. They love our country and want to 
have an opportunity to fulfill their dreams of becoming full 
participants in this country. Passage of the private bill would give 
them that opportunity. I look forward to working with the Subcommittee 
to facilitate its passage.
                                 ______
                                 
      By Mr. ROCKEFELLER (for himself, Mr. Kyl, Mrs. McCaskill, Mr. 
        Vitter, Ms. Snowe, Mr. Coburn, Mrs. Dole, Mr. Domenici, Mr. 
        Inhofe, Mr. Coleman, Mr. Cornyn, Mr. Martinez, Mr. Hagel, Mr. 
        Cochran, and Mr. Lott):
  S. 2056. A bill to amend title XVIII of the Social Security Act to 
restore financial stability to Medicare anesthesiology teaching 
programs for resident physicians; to the Committee on Finance.
  Mr. ROCKEFELLER. Mr. President, I rise today with Senators Kyl and 
McCaskill, as well as 12 original cosponsors, to introduce an important 
piece of legislation, the Medicare Teaching Anesthesiology Funding 
Restoration Act of 2007. This legislation would restore equitable 
Medicare reimbursement for teaching anesthesiologists and address our 
nation's growing shortage of trained anesthesiologists.
  As many of my colleagues are aware, in 1991, the Centers for Medicare 
& Medicaid Services, CMS, rolled out a new rule that singled out 
academic anesthesiology programs for a 50 percent reduction in Medicare 
reimbursement when teaching anesthesiologists supervise residents in 
two concurrent cases. The rule took effect in 1994. No other medical 
specialties or nonphysician providers were affected by this policy 
change. In fact, payments to nonanesthesiology teaching physicians 
continue to be paid using the conventional Medicare Physician Fee 
Schedule. All teaching physicians, except anesthesiologists, can 
collect the full Medicare fee for working with one resident and also 
collect an additional full Medicare fee for working with a second 
resident on an overlapping case as long as the teaching physician is 
present during the ``critical and key'' portions of each procedure and 
is immediately available to return to a case when not physically 
present.
  This arbitrary and unfair payment reduction has had a devastating 
impact on the training of anesthesiologists across the country, 
anesthesiologists who we rely on daily for safe surgical procedures, 
cesarean deliveries during childbirth, emergency and critical care 
procedures, pain management, and care of our wounded warriors. Because 
of this policy change, teaching hospitals

[[Page S11593]]

receive only half the cost of anesthesiology treatment for Medicare 
patients. This shortchanges academic anesthesiology programs an average 
of $400,000 annually, with some programs losing more than $1 million 
per year. As a result, academic anesthesiology programs have 
experienced increased difficulty filling faculty appointments and 
sustaining vital research and development programs. But even more 
disturbing is the fact that this inconsistent and arbitrary payment 
policy has forced 28 academic anesthesiology programs to close since 
1994, leaving only 129 programs nationwide.
  In my home State, we have only one academic anesthesiology program, 
at the West Virginia University in Morgantown. This program is losing 
nearly $700,000 per year because of this unfair Medicare payment 
policy. When you take into account the fact that many private insurance 
companies follow Medicare's lead on reimbursement, the final dollar 
impact is even greater. Other departments within the medical school are 
being called upon to subsidize these losses instead of using their 
resources to advance important research initiatives or recruit highly 
qualified faculty.
  West Virginia students interested in studying anesthesiology are also 
at risk. Because this is the only academic anesthesiology program in 
the State, far fewer West Virginians will have the opportunity to enter 
the specialty of anesthesiology if this program is forced to close. 
This will have a direct impact on our State's health care 
infrastructure because the majority of graduates from West Virginia 
University's anesthesiology residency program stay in West Virginia. If 
this program closes, the number of qualified anesthesiologists in West 
Virginia could plummet, leaving residents with severe access problems 
for surgery, emergency care, and other high risk procedures.
  This is not just a West Virginia problem. This is a national problem 
with severe implications in every community. Academic anesthesiology 
programs treat the sickest of the sick, patients with multiple 
diagnoses, unusual conditions and/or in need of highly complex and 
sophisticated surgeries. The arbitrary Medicare payment reductions for 
teaching anesthesiologists could mean that patients of all ages and in 
all communities could see increased anesthesiology shortages in 
operating rooms, pain clinics, the military, critical care units, labor 
and delivery rooms, and emergency rooms.
  In order to address this problem, the Medicare Anesthesiology 
Teaching Funding Restoration Act eliminates the Medicare payment 
inequity for physicians who teach anesthesiology. It restores Medicare 
reimbursement for academic anesthesiology programs to the level in 
existence before 1994 and subjects teaching anesthesiologists to the 
same ``critical and key'' portion rule as other physicians under 
Medicare. This payment restoration will provide physician residents 
with sufficient opportunities to pursue the specialty of 
anesthesiology. It will also provide patients, especially high risk 
patients, with continued access to quality anesthesia care when they 
need it. And, finally, this vital legislation will allow academic 
anesthesiology programs to continue making advances in patient safety 
through research and development.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2056

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Medicare Anesthesiology 
     Teaching Funding Restoration Act of 2007''.

     SEC. 2. SPECIAL PAYMENT RULE FOR TEACHING ANESTHESIOLOGISTS.

       Section 1848(a) of the Social Security Act (42 U.S.C. 
     1395w-4(a)) is amended--
       (1) in paragraph (4)(A), by inserting ``except as provided 
     in paragraph (5),'' after ``anesthesia cases,''; and
       (2) by adding at the end the following new paragraph:
       ``(5) Special rule for teaching anesthesiologists.--With 
     respect to physicians' services furnished on or after January 
     1, 2008, in the case of teaching anesthesiologists involved 
     in the training of physician residents in a single anesthesia 
     case or two concurrent anesthesia cases, the fee schedule 
     amount to be applied shall be 100 percent of the fee schedule 
     amount otherwise applicable under this section if the 
     anesthesia services were personally performed by the teaching 
     anesthesiologist alone and paragraph (4) shall not apply if--
       ``(A) the teaching anesthesiologist is present during all 
     critical or key portions of the anesthesia service or 
     procedure involved; and
       ``(B) the teaching anesthesiologist (or another 
     anesthesiologist with whom the teaching anesthesiologist has 
     entered into an arrangement) is immediately available to 
     furnish anesthesia services during the entire procedure.''.

  Mr. KYL. Mr. President, today Senator Rockefeller and I introduce the 
Medicare Anesthesiology Teaching Funding Restoration Act of 2007.
  I want to thank Senator Rockefeller for his leadership, as well as 
Senator Vitter who introduced a similar bill last Congress.
  As my colleagues may be aware, Arizona is the Nation's fastest 
growing State, and as its population grows, so does the demand for 
health care services. Yet Arizona suffers from a critical shortage of 
health care professionals.
  Inadequate Medicare reimbursement exacerbates physician shortages and 
disrupts patient access to care. In fact, each year Medicare 
shortchanges academic anesthesiology programs nearly $40 million.
  Currently, a teaching physician may receive the full Medicare fee 
schedule if he or she is involved in two concurrent cases with 
residents.
  In 1994 the Centers for Medicare and Medicaid Services, CMS, singled 
out anesthesiology teaching programs and implemented a payment change. 
The payment change required that teaching anesthesiologists receive 
only 50 percent of the Medicare fee schedule if he or she is involved 
in two concurrent cases with residents.
  As a result, 28 academic anesthesiology programs have closed, leaving 
129 academic anesthesiology programs in existence today.
  As one of the remaining teaching programs, the University of Arizona 
loses over $300,000 each year.
  This is likely a conservative estimate as private payers are 
increasingly adopting Medicare's payment policy, compounding a teaching 
program's total financial loss. Medicare's policy challenges a teaching 
program's ability to fill vacant faculty positions, retain expert 
faculty, and train residents, particularly in rural and underserved 
communities.
  Additionally, and perhaps most importantly, as training I programs 
close, patients will increasingly encounter anesthesiologist shortages.
  In Arizona alone, the Health Resources and Services Administration, 
HRSA, projects that between 2000 and 2020 the State's population will 
grow 18 percent and the population 65 and older will grow 72 percent.
  The Medicare Anesthesiology Teaching Funding Restoration Act of 2007 
repeals the 1994 payment change and restores Medicare payment to 
teaching anesthesiologists.
  Under this bill, the clear winners are patients. Restoring funding 
helps preserve patient access to safe, quality health care and 
alleviate growing health professional shortages.
  I urge my colleagues to cosponsor this critical legislation.
                                 ______
                                 
      By Mr. AKAKA:
  S. 2057. A bill to reauthorize the Merit Sytems Protection Board and 
the Office of Special Counsel, to modify the procedures of the Merit 
Systems Protection Board and the Office of Special Counsel, and for 
other purposes; to the Committee on Homeland Security and Governmental 
Affairs.
   Mr. AKAKA. Mr. President, today I rise to introduce the 
Federal Merit System Reauthorization Act of 2007 to reauthorize the 
Office of Special Counsel, OSC, and the Merit Systems Protection Board, 
MSPB, and make other changes to improve the performance of both 
agencies. I am pleased to note that Representative Danny Davis, 
Chairman of the House Federal Workforce Subcommittee, is introducing 
companion legislation today as well.
  Both MSPB and OSC were created by the Civil Service Reform Act of 
1978 to safeguard the merit system principles and to help ensure that 
federal employees are free from discriminatory, arbitrary, and 
retaliatory actions, especially against those who step forward to 
disclose government waste, fraud,

[[Page S11594]]

and abuse. These protections are essential so that employees can 
perform their duties in the best interests of the American public, 
which, in turn, helps ensure that the federal government is an employer 
of choice.
  MSPB is charged with monitoring the Federal Government's merit-based 
system of employment by hearing and deciding appeals from Federal 
employees regarding job removal and other major personnel actions. The 
board also reviews regulations of the Office of Personnel Management, 
OPM, and conducts studies of the merit systems.
  OSC is charged with protecting Federal employees and job applicants 
from reprisal for whistleblowing and other prohibited personnel 
practices. OSC is to serve as a safe and secure channel for Federal 
workers who wish to disclose violations of law, gross mismanagement or 
waste of funds, abuse of authority, and a specific danger to the public 
health and safety. In addition, OSC enforces the Hatch Act, which 
restricts the political activities of Federal employees, and the 
Uniformed Services Employment and Reemployment Rights Act of 1994.
  OSC and MSPB are to be the stalwarts of the merit system. However, 
both agencies have been criticized for failing to live up to their 
mission.
  For example, as the author of the Federal Employee Protection of 
Disclosures Act, S. 274, I am deeply concerned by the fact that no 
Federal whistleblower has won on the merits of their claim before the 
Board since 2003. At the Federal Circuit Court of Appeals, 
whistleblowers have won on the merits twice since October 1994, when 
Congress last strengthened the Whistleblower Protection Act.
  In addition, testimony provided at the House and Senate 
reauthorization hearings earlier this year raised several concerns 
about the structure of the MPSB and the rights and responsibilities of 
the Chairman of the MSPB compared to the other Members. This raises 
concerns about the structure of the MSPB and warrants a closer review.
  At OSC, the most recent Federal employee satisfaction survey shows 
that less than five percent of the respondents reported any degree of 
satisfaction with the results obtained by OSC while over 92 percent 
were dissatisfied. Moreover, in the past few years, OSC has become 
subject to numerous allegations by employees, good government groups, 
and employee unions who allege that OSC is acting counter to its 
mission by: ignoring whistleblower complaints, failing to protect 
employees subjected to sexual orientation discrimination, and 
retaliating against whistleblowers at OSC.
  If true, these practices violate OSC's legal responsibility to be the 
protector of civil service employees. Given the fact that OSC employees 
could not make their disclosure to the Special Counsel, the alleged 
individual who engaged in the wrongdoing and retaliated against them, 
the employees and stakeholders filed a complaint with the President's 
Council on Integrity and Efficiency, PCIE. Unfortunately, the 
investigation is still ongoing.
  As such, the Federal Merit System Reauthorization Act would 
reauthorize OSC and MSPB for a period of three years instead of the 5 
years requested by both agencies in order to give Congress a chance to 
take a closer review of the two agencies. The bill would also 
legislatively establish a process for OSC employees to bring 
allegations of retaliation against the Special Counsel or the Deputy 
Special Counsel to the PCIE and clarify that Federal employees are 
protected from discrimination based on their sexual orientation. 
Finally the bill would make procedural changes at OSC and MSPB to 
improve agency operations and customer service and impose new reporting 
requirements on both agencies.
  Both OSC and MSPB must be free from allegations of wrongdoing and the 
appearance of any activity that would question their independence. I 
believe that the provisions in this bill will make needed improvements 
in both agencies to build trust in the Federal workforce and the 
American people. I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                S. 2057

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

     SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Federal 
     Merit System Reauthorization Act of 2007''.
       (b) Table of Contents.--The table of contents is as 
     follows:

Sec. 1. Short title; table of contents.
Sec. 2. Authorization of appropriations.
Sec. 3. Allegations of wrongdoing against Special Counsel or Deputy 
              Special Counsel.
Sec. 4. Discrimination on the basis of sexual orientation prohibited.
Sec. 5. Procedures of the Merit Systems Protection Board.
Sec. 6. Procedures of the Office of Special Counsel.
Sec. 7. Reporting requirements.

     SEC. 2. AUTHORIZATION OF APPROPRIATIONS.

       (a) Merit Systems Protection Board.--Section 8(a)(1) of the 
     Whistleblower Protection Act of 1989 (5 U.S.C. 5509 note) is 
     amended by striking ``2003, 2004, 2005, 2006, and 2007'' and 
     inserting ``2008, 2009, and 2010''.
       (b) Office of Special Counsel.--Section 8(a)(2) of the 
     Whistleblower Protection Act of 1989 (5 U.S.C. 5509 note) is 
     amended by striking ``2003, 2004, 2005, 2006, and 2007'' and 
     inserting ``2008, 2009, and 2010''.
       (c) Effective Date.--This section shall take effect as of 
     October 1, 2007.

     SEC. 3. ALLEGATIONS OF WRONGDOING AGAINST SPECIAL COUNSEL OR 
                   DEPUTY SPECIAL COUNSEL.

       (a) Definitions.--In this section--
       (1) the term ``Special Counsel'' refers to the Special 
     Counsel appointed under section 1211(b) of title 5, United 
     States Code;
       (2) the term ``Integrity Committee'' refers to the 
     Integrity Committee described in Executive Order 12993 
     (relating to administrative allegations against inspectors 
     general) or its successor in function (as identified by the 
     President); and
       (3) the terms ``wrongdoing'' and ``Inspector General'' have 
     the same respective meanings as under the Executive order 
     cited in paragraph (2).
       (b) Authority of Integrity Committee.--
       (1) In general.--An allegation of wrongdoing against the 
     Special Counsel (or the Deputy Special Counsel) may be 
     received, reviewed, and referred for investigation by the 
     Integrity Committee to the same extent and in the same manner 
     as in the case of an allegation against an Inspector General 
     (or a member of the staff of an Office of Inspector General), 
     subject to the requirement that the Special Counsel recuse 
     himself or herself from the consideration of any allegation 
     brought under this subsection.
       (2) Coordination with existing provisions of law.--This 
     section does not eliminate access to the Merit Systems 
     Protection Board for review under section 7701 of title 5, 
     United States Code. To the extent that an allegation brought 
     under this subsection involves section 2302(b)(8) of such 
     title, a failure to obtain corrective action within 120 days 
     after the date on which that allegation is received by the 
     Integrity Committee shall, for purposes of section 1221 of 
     such title, be considered to satisfy section 1214(a)(3)(B) of 
     such title.
       (c) Regulations.--The Integrity Committee may prescribe any 
     rules or regulations necessary to carry out this section, 
     subject to such consultation or other requirements as might 
     otherwise apply.

     SEC. 4. DISCRIMINATION ON THE BASIS OF SEXUAL ORIENTATION 
                   PROHIBITED.

       (a) Repudiation.--In order to dispel any public confusion, 
     Congress repudiates any assertion that Federal employees are 
     not protected from discrimination on the basis of sexual 
     orientation.
       (b) Affirmation.--It is the sense of Congress that, in the 
     absence of the amendment made by subsection (c), 
     discrimination against Federal employees and applicants for 
     Federal employment on the basis of sexual orientation is 
     prohibited by section 2302(b)(10) of title 5, United States 
     Code.
       (c) Discrimination Based on Sexual Orientation 
     Prohibited.--Section 2302(b)(1) of title 5, United States 
     Code, is amended--
       (1) in subparagraph (D), by striking ``or'' at the end;
       (2) in subparagraph (E), by inserting ``or'' at the end; 
     and
       (3) by adding at the end the following:
       ``(F) on the basis of sexual orientation;''.

     SEC. 5. PROCEDURES OF THE MERIT SYSTEMS PROTECTION BOARD.

       (a) Proof of Exhaustion for Individual Right of Action.--
     Section 1221(a) of title 5, United States Code, is amended--
       (1) by striking ``(a)'' and inserting ``(a)(1)''; and
       (2) by adding at the end the following:
       ``(2) For purposes of paragraph (1), an employee, former 
     employee, or applicant for employment may demonstrate 
     compliance with section 1214(a)(3)(B) by--
       ``(A) submitting a copy of the complaint or other pleading 
     pursuant to which such employee, former employee, or 
     applicant sought corrective action from the Special Counsel 
     with respect to the personnel action involved; and
       ``(B) certifying that the Special Counsel did not provide 
     notice of intent to seek such corrective action to such 
     employee, former employee, or applicant within the 120-day 
     period described in such section 1214(a)(3)(B).''.
       (b) Individual Requests for Stays.--Section 1221(c) of 
     title 5, United States Code, is amended by striking paragraph 
     (2) and inserting the following:

[[Page S11595]]

       ``(2) Any stay requested under paragraph (1) shall be 
     granted within 10 calendar days (excluding Saturdays, 
     Sundays, and legal holidays) after the date the request is 
     made, if the Board determines that the employee, former 
     employee, or applicant has demonstrated that protected 
     activity described under section 2302(b)(8) was a 
     contributing factor to the personnel action involved. If the 
     stay request is denied, the employee, former employee, or 
     applicant may submit an interlocutory appeal for expedited 
     review by the Board.''.
       (c) Joining Subsequent and Related Claims With Pending 
     Litigation.--
       (1) In general.--Section 1221 of title 5, United States 
     Code, is amended--
       (A) by redesignating subsections (h), (i), and (j) as 
     subsections (i), (j), and (k), respectively; and
       (B) inserting after subsection (g) the following:
       ``(h) During a pending proceeding, subsequent personnel 
     actions may be joined if the employee, former employee, or 
     applicant for employment demonstrates that retaliation for 
     protected activity at issue in the pending proceeding was a 
     contributing factor to subsequent alleged prohibited 
     personnel practices.''.
       (2) Conforming amendment.--Section 1222 of title 5, United 
     States Code, is amended by striking ``section 1221(i)'' and 
     inserting ``section 1221(j)''.
       (d) Procedural Due Process.--Section 1204(b)(1) of title 5, 
     United States Code, is amended by inserting ``in accordance 
     with regulations consistent with the Federal Rules of Civil 
     Procedure, so far as practicable'' before the period.
       (e) Attorney Fees.--Section 7701(g)(1) of title 5, United 
     States Code, is amended by striking ``if the employee or 
     applicant is the prevailing party and'' and inserting ``if 
     the claim or claims raised by the employee or applicant were 
     not frivolous, unreasonable, or groundless; the case was a 
     substantial or significant factor in the agency's action 
     providing some relief or benefit to the employee or 
     applicant; and''.

     SEC. 6. PROCEDURES OF THE OFFICE OF SPECIAL COUNSEL.

       (a) Investigations of Alleged Prohibited Personnel 
     Practices.--Section 1212(e) of title 5, United States Code, 
     is amended by striking ``may prescribe such regulations as 
     may be necessary to perform the functions'' and inserting 
     ``shall prescribe such regulations as may be necessary to 
     carry out subsection (a)(2) and may prescribe any regulations 
     necessary to carry out any of the other functions''.
       (b) Mandatory Communications With Complainants.--
       (1) Contact information.--Section 1214(a)(1)(B) of title 5, 
     United States Code, is amended by striking clause (ii) and 
     inserting the following:
       ``(ii) shall include the name and contact information of a 
     person at the Office of Special Counsel who--
       ``(I) shall be responsible for interviewing the complainant 
     and making recommendations to the Special Counsel regarding 
     the allegations of the complainant; and
       ``(II) shall be available to respond to reasonable 
     questions from the complainant regarding the investigation or 
     review conducted by the Special Counsel, the relevant facts 
     ascertained by the Special Counsel, and the law applicable to 
     the allegations of the complainant.''.
       (2) Statement after termination of investigation.--Section 
     1214(a)(2)(A)(iv) of title 5, United States Code, is amended 
     by striking ``a response'' and inserting ``specific 
     responses''.
       (c) Qualifications of Special Counsel.--The third sentence 
     of section 1211(b) of title 5, United States Code, is amended 
     by striking ``position.'' and inserting ``position and has 
     professional experience that demonstrates an understanding of 
     and a commitment to protecting the merit based civil 
     service.''.
       (d) Alternative Dispute Resolution Program of the Office of 
     Special Counsel.--Section 1212 of title 5, United States 
     Code, is amended by adding at the end the following:
       ``(h) The Office of Special Counsel shall by regulation 
     provide for one or more alternative methods for settling 
     matters subject to the jurisdiction of the Office which shall 
     be applicable at the election of an employee, former 
     employee, or applicant for employment or at the direction of 
     the Special Counsel with the consent of the employee, former 
     employee, or applicant concerned. In order to carry out this 
     subsection, the Special Counsel shall provide for appropriate 
     offices in the District of Columbia and other appropriate 
     locations.''.
       (e) Substantial Likelihood Determinations.--Section 1213 of 
     title 5, United States Code, is amended--
       (1) in subsection (b), by striking ``15 days'' and 
     inserting ``45 days''; and
       (2) in subsection (c)(1), by inserting ``, after consulting 
     with the person who made the disclosure on how to 
     characterize the issues,'' after ``appropriate agency head''.
       (f) Determination of Statutory Requirements Met.--Section 
     1213(e) of title 5, United States Code, is amended--
       (1) in paragraph (3), by striking ``subsection (e)(1)'' and 
     inserting ``paragraph (1)'';
       (2) by redesignating paragraphs (3) and (4) as paragraphs 
     (4) and (5), respectively; and
       (3) by inserting after paragraph (2) the following:
       ``(3) Upon receipt of any report of the head of an agency 
     required under subsection (c), if the Special Counsel is 
     unable to make a determination under paragraph (2)(A) or (B), 
     the Special Counsel shall require the agency head to submit 
     any additional information necessary for the Special Counsel 
     to make such determinations before any information is 
     transmitted under paragraph (4).''.
       (g) Public and Internet Access for Agency Investigations.--
     Section 1219 of title 5, United States Code, is amended by 
     striking subsections (a) and (b) and inserting the following:
       ``(a) The Special Counsel shall maintain and make available 
     to the public (including on the website of the Office of 
     Special Counsel)--
       ``(1) a list of noncriminal matters referred to heads of 
     agencies under subsection (c) of section 1213, together 
     with--
       ``(A) reports from heads of agencies under subsection 
     (c)(1)(B) of such section relating to such matters;
       ``(B) comments submitted under subsection (e)(1) of such 
     section relating to such matters, if the person making the 
     disclosure consents; and
       ``(C) comments or recommendations by the Special Counsel 
     under subsection (e)(4) of such section relating to such 
     matters;
       ``(2) a list of matters referred to heads of agencies under 
     section 1215(c)(2);
       ``(3) a list of matters referred to heads of agencies under 
     subsection (e) of section 1214, together with certifications 
     from heads of agencies under such subsection; and
       ``(4) reports from heads of agencies under section 
     1213(g)(1).
       ``(b) The Special Counsel shall take steps to ensure that 
     any list or report made available to the public or placed on 
     the website of the Office of Special Counsel under this 
     section does not contain any information the disclosure of 
     which is prohibited by law or by Executive order requiring 
     that information be kept secret in the interest of national 
     defense or the conduct of foreign affairs.''.

     SEC. 7. REPORTING REQUIREMENTS.

       (a) Merit Systems Protection Board.--Each annual report 
     submitted by the Merit Systems Protection Board under section 
     1206 of title 5, United States Code, shall, with respect to 
     the period covered by such report, include--
       (1) the number of cases and alleged violations of section 
     2302 of such title 5 filed with the Board for each agency, 
     itemized for each prohibited personnel practice;
       (2) the number of cases and alleged violations of section 
     2302 of such title 5 that the Board determines for each 
     agency, itemized for each prohibited personnel practice and 
     compared to the total number of cases and allegations filed 
     with the Board for each, both with respect to the initial 
     decisions by administrative judges and final Board decisions;
       (3) the number of cases and allegations in which corrective 
     action was provided, compared to the total number of cases 
     and allegations filed with the Board for each, itemized 
     separately for settlements and final Board decisions; and
       (4) with respect to paragraphs (8) and (9) of section 2302 
     (b) of such title 5, the number of cases in which the Board 
     has ruled in favor of the employee on the merits of the claim 
     compared to the total number of cases and allegations filed 
     with the Board for each, where findings of fact and 
     conclusions of law were issued on whether those provisions 
     were violated, independent from cases disposed by procedural 
     determinations, including a separate itemization of both 
     initial decisions by administrative judges and final Board 
     decisions for each category.
       (b) Office of Special Counsel.--Each annual report 
     submitted under section 1218 of title 5, United States Code, 
     by the Special Counsel or an employee designated by the 
     Special Counsel shall, with respect to the period covered by 
     such report, include--
       (1) the number of cases and allegations for each prohibited 
     personnel practice, delineated by type of prohibited 
     personnel practice;
       (2) for each type of prohibited personnel practice, the 
     number of cases and allegations as to which the Office of 
     Special Counsel found reasonable grounds to believe section 
     2302 of such title 5 had been violated;
       (3) for each type of prohibited personnel practice, the 
     number of cases and allegations as to which the Office of 
     Special Counsel referred the complaint for full field 
     investigation;
       (4) for each prohibited personnel practice, the number of 
     cases and allegations as to which the Office of Special 
     Counsel recommended corrective action;
       (5) for each prohibited personnel practice, the number of 
     cases and allegations as to which the Office of Special 
     Counsel conducted a mediation or other form of alternative 
     dispute resolution, with statistics and illustrative examples 
     describing the results with particularity;
       (6) the number of instances in which the Office of Special 
     Counsel referred disclosures submitted under section 1213 of 
     such title 5 to an agency head, without any finding under 
     subsection (c) or (g) of such section;
       (7) a statistical tabulation of results for each customer 
     satisfaction survey question, both with respect to 
     allegations of prohibited personnel practice submitted under 
     section 1214 of such title 5 and disclosures submitted under 
     section 1213 of such title; and
       (8) for each provision under section 1216(a) (1) through 
     (5) and (c) of such title 5, the number of cases and 
     allegations, the number of field investigations opened, the 
     number of instances in which corrective action was sought, 
     and the number of instances in which corrective action was 
     obtained.

[[Page S11596]]

       (c) Annual Survey.--Section 13(a) of the Act entitled ``An 
     Act to reauthorize the Office of Special Counsel, and for 
     other purposes'', approved October 29, 1994 (5 U.S.C. 1212 
     note; Public Law 103-424) is amended in the first sentence by 
     inserting ``, including individuals who disclose information 
     to the Office of Special Counsel under section 1213'' before 
     the period.
                                 ______
                                 
      By Mr. LEVIN:
  S. 2058. A bill to amend the Commodity Exchange Act to close the 
Enron loophole, prevent price manipulation and excessive speculation in 
the trading of energy commodities, and for other purposes; to the 
Committee on Agriculture, Nutrition, and Forestry.
  Mr. LEVIN. Mr. President, today I am introducing the Close the Enron 
Loophole Act to help prevent price manipulation and dampen the 
excessive speculation that have unfairly increased the cost of energy 
in the U.S.
  This legislation is the product of more than 4 years of work 
examining U.S. energy commodity markets by the Senate Permanent 
Subcommittee on Investigations, which I chair. That work has shown that 
U.S. market prices for crude oil, natural gas, jet fuel, diesel fuel 
and other energy commodities are more unpredictable and variable than 
ever before, and too often are imposing huge cost increases on the 
backs of working American families and businesses. The legislation I am 
introducing today is essential to help ensure that our energy markets 
provide prices that reflect the fundamentals of supply and demand for 
energy instead of prices boosted by manipulation or excessive 
speculation. It is also essential to close an egregious loophole in the 
law that was championed by Enron and other large energy traders in the 
heyday of deregulation and that continues to haunt our energy markets 
and harm American consumers through inflated and distorted energy 
prices.
  The ``Enron loophole'' is a provision that was inserted at the last-
minute, without opportunity for debate, into commodity legislation that 
was attached to an omnibus appropriations bill and passed by Congress 
in late December 2000, in the waning hours of the 106 Congress. This 
loophole exempted from U.S. Government regulation the electronic 
trading of energy commodities by large traders. The loophole has helped 
foster the explosive growth of trading on unregulated electronic energy 
exchanges. It has also rendered U.S. energy markets more vulnerable to 
price manipulation and excessive speculation with resulting price 
distortions. This legislation is necessary to close the Enron loophole 
and reduce our vulnerability to manipulation and excessive speculation 
by providing for regulation of the electronic trading of energy 
commodities by large traders.
  A stable and affordable supply of energy is vital to the national and 
economic security of the United States. We need energy to heat and cool 
our homes and offices, to generate electricity for lighting, 
manufacturing, and vital services, and to power our transportation 
sector--automobiles, trucks, boats, and airplanes.
  Over 80 percent of our energy comes from fossil fuels--oil, natural 
gas, and coal. About 50 percent is from oil and natural gas. The U.S. 
consumes around 20 million barrels of crude oil each day, over half of 
which is imported. About 90 percent of this oil is refined into 
products such as gasoline, home heating oil, jet fuel, and diesel fuel.
  The crude oil market is the largest commodity market in the world, 
and hundreds of millions of barrels are traded daily in the various 
crude oil futures, over-the-counter, and spot markets. The world's 
leading exchanges for crude oil futures contracts are the New York 
Mercantile Exchange, NYMEX, and the Intercontinental Exchange, known as 
ICE Futures in London. Futures contracts for gasoline, heating oil, and 
diesel fuel are also traded on these exchanges. Presently, regulatory 
authority over the U.S. crude oil market is split between British and 
U.S. regulators.
  Natural gas heats the majority of American homes, is used to harvest 
crops, powers 20 percent of our electrical plants, and plays a critical 
role in many industries, including manufacturers of fertilizers, 
paints, medicines, and chemicals. It is one of the cleanest fuels we 
have, and we produce most of it ourselves with only 15 percent being 
imported, primarily from Canada. In 2005 alone, U.S. consumers and 
businesses spent about $200 billion on natural gas.
  Only part of the natural gas futures market is regulated. Natural gas 
produced in the United States is traded on NYMEX and on an unregulated 
ICE electronic trading platform located in Georgia. The price of 
natural gas in both the futures market and in the spot or physical 
market depends on the prices on both of these U.S. exchanges.
  Trading abuses plague existing energy markets. The key federal 
regulator, the Commodity Futures Trading Commission, CFTC, reports that 
overall in recent years it has issued several hundred million dollars 
in fines for trading abuses in the energy markets. Several major 
enforcement actions are pending.
  Since 2001, the Senate Permanent Subcommittee on Investigations has 
been examining the vulnerability of U.S. energy markets to price 
manipulation and excessive speculation due to the lack of regulation of 
electronic energy exchanges under the so called ``Enron loophole.'' 
Although the CFTC and Federal Energy Regulatory Commission have brought 
a number of enforcement cases against energy traders, the CFTC's 
ability to prevent abuses before they occur is severely hampered by its 
lack of regulatory authority over key energy markets.
  The Subcommittee first documented the weaknesses in the regulation of 
our energy markets in a 2003 staff report I initiated called, ``U.S. 
Strategic Petroleum Reserve: Recent Policy Has Increased Costs to 
Consumers But Not Overall U.S. Energy Security.'' The report found that 
crude oil prices were ``affected by trading not only regulated 
exchanges like the NYMEX, but also on unregulated `over-the-counter', 
OTC, markets which have become major trading centers for energy 
contracts and derivatives. The lack of information on prices and large 
positions in these OTC markets makes it difficult in many instances, if 
not impossible in practice, to determine whether traders have 
manipulated crude oil prices.''
  In June 2006, the Subcommittee issued a staff report entitled, ``The 
Role of Market Speculation in Rising Oil and Gas Prices: A Need To Put 
the Cop Back on the Beat.'' This bipartisan staff report analyzed the 
extent to which the increasing amount of financial speculation in 
energy markets had contributed to the steep rise in energy prices over 
the past few years. The report concluded that ``[s]peculation has 
contributed to rising U.S. energy prices,'' and endorsed the estimate 
of various analysts that the influx of speculative investments into 
crude oil futures accounted for approximately $20 of the then-
prevailing crude oil price of approximately $70 per barrel.

  The 2006 report recommended that the CFTC be provided with the same 
authority to regulate and monitor electronic energy exchanges, such as 
ICE, as it has with respect to the fully regulated futures markets, 
such as NYMEX, to ensure that excessive speculation in the energy 
markets did not adversely effect the availability and affordability of 
vital energy commodities through unwarranted price increases.
  In June 2007, the Subcommittee released another report, ``Excessive 
Speculation in the Natural Gas Market.'' Our report found that a single 
hedge fund named Amaranth dominated the natural gas market during the 
spring and summer of 2006, and Amaranth's large-scale trading 
significantly distorted natural gas prices from their fundamental 
values based on supply and demand.
  The report concluded that the current regulatory system was unable to 
prevent these distortions because much of Amaranth's trading took place 
on an unregulated electronic market. The report recommended that 
Congress close the ``Enron loophole'' that exempted such markets from 
regulation.
  The Subcommittee's Report describes how Amaranth used the major 
unregulated electronic market, ICE, to amass huge positions in natural 
gas contracts, outside regulatory scrutiny, and beyond any regulatory 
authority. During the spring and summer of 2006, Amaranth held by far 
the largest positions of any trader in the natural gas market. 
According to traders interviewed by the Subcommittee, during this 
period natural gas prices for the following winter were ``clearly out 
of whack,'' at ``ridiculous levels,'' and unrelated to supply and 
demand. At the

[[Page S11597]]

Subcommittee's hearing in June of this year, natural gas purchasers, 
such as the American Public Gas Association and the Industrial Energy 
Consumers of America, explained how these price distortions increased 
the cost of hedging for natural gas consumers, which ultimately led to 
increased costs for American industries and households. The Municipal 
Gas Authority of Georgia calculated that Amaranth's excesses increased 
the cost of their winter gas purchases by $18 million.
  Finally, when Amaranth's positions on the regulated futures market, 
NYMEX, became so large that NYMEX directed Amaranth to reduce the size 
of its positions on NYMEX, Amaranth simply switched those positions to 
ICE, an unregulated market that is beyond the reach of the CFTC. In 
other words, in response to NYMEX's order, Amaranth did not reduce its 
size; it merely moved it from a regulated market to an unregulated 
market.

  This regulatory system makes no sense. It is as if a cop on the beat 
tells a liquor store owner that he must obey the law and stop selling 
liquor to minors, yet the store owner is allowed to move his store 
across the street and sell to whomever he wants because the cop has no 
jurisdiction on the other side of the street and none of the same laws 
apply. The Amaranth case history shows it is clearly time to put the 
cop on the beat in all of our energy exchanges.
  The Subcommittee held two days of hearings relating to issues covered 
in its 2007 report. Both of the major energy exchanges, NYMEX and ICE, 
testified that they would support a change in the law that would 
eliminate the current exemption from regulation for electronic energy 
markets, in order to reduce the potential for manipulation and 
excessive speculation. Consumers and users of natural gas and other 
energy commodities--the American Public Gas Association, the New 
England Fuel Institute, the Petroleum Marketers Association of America, 
and the Industrial Energy Consumers of America--also testified in favor 
of closing the Enron loophole.
  The legislation I am introducing today is intended to end the 
exemption from regulation that electronic energy trading facilities now 
have. The bill includes suggestions made by the exchanges, the CFTC, 
and natural gas users, and I will continue to seek their input as the 
legislative process moves forward.
  Essentially, this bill would restore the CFTC's ability to police all 
U.S. energy exchanges to prevent price manipulation and excessive 
speculation from hiking energy prices. In particular, it would restore 
CFTC oversight of large-trader energy exchanges that were exempted from 
regulation in the 2000 Commodity Futures Modernization Act by means of 
the Enron loophole. The bill would require the CFTC to oversee these 
facilities in the same manner and according to the same standards that 
currently apply to futures exchanges like NYMEX. Because these energy 
exchanges currently restrict trading to large traders, however, the 
bill would not require them to comply with rules applicable to retail 
trading or trading by brokers on behalf of smaller traders. In all 
other respects, however, including the rules that create position 
limits and accountability levels to stop price manipulation and 
excessive speculation, the bill would apply the same rules to energy 
exchanges like ICE as currently apply to futures exchanges like NYMEX.
  The bill also would require large trades in U.S. energy commodities 
conducted from within the United States on a foreign board of trade to 
be reported to the CFTC. This provision is intended to ensure that the 
CFTC has a more complete view of the positions of U.S. energy traders 
buying or selling energy commodities for delivery in the United States. 
This provision could be waived by the CFTC if the CFTC reaches 
agreement with the foreign board of trade to obtain the same 
information.
  Preventing price manipulation and excessive speculation in U.S. 
energy markets is not an easy undertaking. I welcome good-faith 
comments on how this bill can be improved. I want to make it clear, 
however, that in my opinion the Enron loophole has got to be closed. 
Recent cases have shown us that market abuses and failures did not stop 
with the fall of Enron. They are still with us. We cannot afford to let 
the current situation continue, allowing energy traders to use 
unregulated markets to avoid regulated markets. It's time to put the 
cop back on the beat in all U.S. energy markets. The stakes for our 
energy security and for competition in the market place are too high to 
do otherwise.
  I ask unanimous consent that the text of the bill, a bill summary, 
and a section-by-section analysis be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                S. 2058

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

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Close the Enron Loophole 
     Act''.

     SEC. 2. ENERGY TRADING FACILITIES.

       (a) Definitions.--Section 1a of the Commodity Exchange Act 
     (7 U.S.C. 1a) is amended by redesignating paragraphs (13) 
     through (33) as paragraphs (15) through (35), respectively, 
     and by inserting after paragraph (12) the following:
       ``(13) Energy commodity.--The term `energy commodity' means 
     a commodity (other than an excluded commodity, a metal, or an 
     agricultural commodity) that is--
       ``(A) used as a source of energy, including but not limited 
     to--
       ``(i) crude oil;
       ``(ii) gasoline, diesel fuel, heating oil, and any other 
     product derived or refined from crude oil;
       ``(iii) natural gas, including methane, propane, and any 
     other gas or liquid derived from natural gas; and
       ``(iv) electricity; or
       ``(B) results from the burning of fossil fuels to produce 
     energy, including but not limited to carbon dioxide and 
     sulfur dioxide.
       ``(14) Energy trading facility.--The term `energy trading 
     facility' means a trading facility that--
       ``(A) is not a designated contract market; and
       ``(B) facilitates the execution or trading of agreements, 
     contracts, or transactions in an energy commodity that are 
     not spot sales of a cash commodity or sales of a cash 
     commodity for deferred shipment or delivery, and that are 
     entered into on a principal-to-principal basis solely between 
     persons that are eligible commercial entities at the time the 
     persons enter into the agreement, contract, or transaction; 
     and
       ``(i) facilitates the clearance and settlement of such 
     agreements, contracts, or transactions; or
       ``(ii) the Commission determines performs a significant 
     price discovery function in relation to an energy commodity 
     listed for trading on a trading facility or in the cash 
     market for the energy commodity. In making a determination 
     whether a trading facility performs a significant price 
     discovery function the Commission may consider, as 
     appropriate--

       ``(I) the extent to which the price of an agreement, 
     contract, or transaction traded or executed on the trading 
     facility is derived from or linked to the price of a contract 
     in an energy commodity listed for trading on a designated 
     contract market;
       ``(II) the extent to which cash market bids, offers, or 
     transactions in an energy commodity are directly based on, or 
     quoted at a differential to, the prices generated by 
     agreements, contracts, or transactions in the same energy 
     commodity being traded or executed on the trading facility;
       ``(III) the volume of agreements, contracts, or 
     transactions in the energy commodity being traded on the 
     trading facility;
       ``(IV) the extent to which data regarding completed 
     transactions are posted, disseminated, or made available 
     immediately after completion of such transactions, with or 
     without a fee, to other market participants and other 
     persons;
       ``(V) the extent to which an arbitrage market exists 
     between the agreements, contracts, or transactions traded or 
     executed on the trading facility and a contract in an energy 
     commodity listed for trading on a designated contract market; 
     and
       ``(VI) such other factors as the Commission determines 
     appropriate.''.

       (b) Commission Oversight of Energy Trading Facilities.--
     Section 2(h) of the Commodity Exchange Act (7 U.S.C. 2(h)) is 
     amended--
       (1) in paragraph (3)(B) after ``an electronic trading 
     facility'' by inserting ``that is not an energy trading 
     facility''; and
       (2) by adding at the end the following:
       ``(7) Energy trading facilities.--Notwithstanding any other 
     provision of this Act, an energy trading facility shall be 
     subject to the provisions of section 2(j) of this Act.''.
       (c) Standards Applicable to Energy Trading Facilities.--
     Section 2 of the Commodity Exchange Act (7 U.S.C. 2) is 
     amended by adding the following new subsection:
       ``(j) Registration of Energy Trading Facilities.--
       ``(1) In general.--It shall be unlawful for any person to 
     enter into an agreement, contract, or transaction for future 
     delivery of an energy commodity that is not a spot sale of a 
     cash commodity or a sale of a cash commodity for deferred 
     shipment or delivery, on

[[Page S11598]]

     or through an energy trading facility unless such facility is 
     registered with the Commission as an energy trading facility.
       ``(2) Applications.--Any trading facility applying to the 
     Commission for registration as an energy trading facility 
     shall submit an application to the Commission that includes 
     any relevant materials and records, consistent with the Act, 
     that the Commission may require.
       ``(3) Commission action.--The Commission shall make a 
     determination whether to approve an application for 
     registration as an energy trading facility within 120 days 
     after such application is submitted.
       ``(4) Criteria for registration.--To be registered as an 
     energy trading facility, the applicant shall demonstrate to 
     the Commission that the trading facility meets the criteria 
     specified in this paragraph.
       ``(A) Prevention of price manipulation and excessive 
     speculation.--The trading facility shall have the capacity to 
     prevent price manipulation, excessive speculation, price 
     distortion, and disruption of the delivery or cash-settlement 
     process through market surveillance, compliance, and 
     enforcement practices and procedures, including methods for 
     conducting real-time monitoring of trading and comprehensive 
     and accurate trade reconstructions.
       ``(B) Monitoring of trading.--The trading facility shall 
     monitor trading to prevent price manipulation, excessive 
     speculation, price distortion, and disruption of the delivery 
     or cash-settlement process.
       ``(C) Contracts not readily susceptible to manipulation.--
     The trading facility shall list for trading only contracts 
     that are not readily susceptible to manipulation.
       ``(D) Financial integrity of transactions.--A trading 
     facility that facilitates the clearance and settlement of 
     agreements, contracts, or transactions by a derivatives 
     clearing organization shall establish and enforce rules and 
     procedures for ensuring the financial integrity of such 
     agreements, contracts, and transactions.
       ``(E) Ability to obtain information.--The trading facility 
     shall establish and enforce rules that will allow the trading 
     facility to obtain any necessary information to perform any 
     of the functions described in this subsection, including the 
     capacity to carry out such international information-sharing 
     agreements as the Commission may require.
       ``(F) Position limits or accountability levels.--To reduce 
     the threat of price manipulation, excessive speculation, 
     price distortion, or disruption of the delivery or cash-
     settlement process, the trading facility shall adopt position 
     limits or position accountability levels for speculators, 
     where necessary and appropriate.
       ``(G) Emergency authority.--The trading facility shall 
     adopt rules to provide for the exercise of emergency 
     authority, in consultation and cooperation with the 
     Commission, where necessary and appropriate, including the 
     authority to--
       ``(i) liquidate open positions in any contract;
       ``(ii) suspend or curtail trading in any contract; and
       ``(iii) require market participants in any contract to meet 
     special margin requirements.
       ``(H) Daily publication of trading information.--The 
     trading facility shall make public daily information on 
     settlement prices, volume, open interest, and opening and 
     closing ranges for actively traded contracts on the facility.
       ``(I) Deterrence of abuses.--The trading facility shall 
     establish and enforce trading and participation rules that 
     will deter abuses and shall have the capacity to detect, 
     investigate violations of, and enforce those rules, including 
     means to--
       ``(i) obtain information necessary to perform the functions 
     required under this section; or
       ``(ii) use technological means to capture information that 
     may be used in establishing whether rule violations have 
     occurred.
       ``(J) Trade information.--The trading facility shall 
     maintain rules and procedures to provide for the recording 
     and safe storage of all identifying trade information in a 
     manner that enables the facility to use the information for 
     the purposes of assisting in the prevention of price 
     manipulation, excessive speculation, price distortion, or 
     disruption of the delivery or cash-settlement process, and 
     providing evidence of any violations of the rules of the 
     facility.
       ``(K) Trading procedures.--The trading facility shall 
     establish and enforce rules or terms and conditions defining, 
     or specifications detailing, trading procedures to be used in 
     entering and executing orders traded on the facility, 
     including procedures to provide participants with impartial 
     access to the trading facility.
       ``(L) Compliance with rules.--The trading facility shall 
     monitor and enforce the rules of the facility, including any 
     terms and conditions of any contracts traded on or through 
     the facility and any limitations on access to the facility.
       ``(M) Disclosure of general information.--The trading 
     facility shall disclose publicly and to the Commission 
     information concerning--
       ``(i) contract terms and conditions;
       ``(ii) trading conventions, mechanisms, and practices;
       ``(iii) financial integrity protections; and
       ``(iv) other information relevant to participation in 
     trading on the facility.
       ``(N) Fitness standards.--The trading facility shall 
     establish and enforce appropriate fitness standards for 
     directors, members of any disciplinary committee, and any 
     other persons with direct access to the facility, including 
     any parties affiliated with any of the persons described in 
     this paragraph.
       ``(O) Conflicts of interest.--The trading facility shall 
     establish and enforce rules to minimize conflicts of interest 
     in the decision making process of the facility and establish 
     a process for resolving such conflicts of interest.
       ``(P) Recordkeeping.--The trading facility shall maintain 
     records of all activities related to the business of the 
     facility in a form and manner acceptable to the Commission 
     for a period of 5 years.
       ``(Q) Antitrust considerations.--Unless necessary or 
     appropriate to achieve the purposes of this Act, the trading 
     facility shall endeavor to avoid--
       ``(i) adopting any rules or taking any actions that result 
     in any unreasonable restraint of trade; or
       ``(ii) imposing any material anticompetitive burden on 
     trading on the facility.
       ``(5) Criteria for energy trading facilities.--To maintain 
     the registration as an energy trading facility, the trading 
     facility shall comply with all of the criteria in paragraph 
     (4). Failure to comply with any of these criteria shall 
     constitute a violation of this Act. The trading facility 
     shall have reasonable discretion in establishing the manner 
     in which it complies with the criteria in paragraph (4).
       ``(6) Position limits and accountability levels.--
       ``(A) Duty of commission.--The Commission shall ensure that 
     the position limits and accountability levels applicable to 
     contracts in an energy commodity listed for trading on a 
     designated contract market and the position limits and 
     accountability levels applicable to similar contracts in the 
     same energy commodity listed for trading on an energy trading 
     facility--
       ``(i) appropriately prevent price manipulation, excessive 
     speculation, price distortion, and disruption of the delivery 
     or cash-settlement process; and
       ``(ii) are on a parity with each other and applied in a 
     functionally equivalent manner.
       ``(B) Commission review.--Upon learning that a person has 
     exceeded an applicable position limit or accountability level 
     in an energy commodity, the Commission shall obtain such 
     information as it determines to be necessary and appropriate 
     regarding all of the positions held by such person in such 
     energy commodity and take such action as may be necessary and 
     appropriate, in addition to any action taken by an energy 
     trading facility or a designated contract market, to require, 
     or direct an energy trading facility or a designated contract 
     market to require, such person to limit, reduce, or liquidate 
     any position to prevent or reduce the threat of price 
     manipulation, excessive speculation, price distortion, or 
     disruption of the delivery or cash-settlement process.
       ``(C) Information to commission.--In order to make any 
     determination required under this section, the Commission may 
     request all relevant information regarding all of the 
     positions held by any person in the energy commodity for 
     which the person has exceeded a position limit or 
     accountability level, including positions held or controlled 
     or transactions executed on or through a designated contract 
     market, an energy trading facility, an exempt commercial 
     markets operating pursuant to sections 2(h)(3) through 
     paragraph (5) of this Act, an exempt board of trade operating 
     pursuant to section 5d of this Act, a derivative transaction 
     execution facility, a foreign board of trade, over-the-
     counter pursuant to sections 2(g), or 2(h)(1) and (2) of this 
     Act, and in the cash market for the commodity. Any person 
     entering into or executing an agreement, contract, or 
     transaction with respect to an energy commodity on a 
     designated contract market or on an energy trading facility 
     shall retain such books and records as the Commission may 
     require in order to provide such information upon request, 
     and upon request shall promptly provide such information to 
     the Commission or the Department of Justice. Notwithstanding 
     this requirement to retain and provide position information, 
     the Commission may alternatively choose to obtain any of the 
     position information specified in this paragraph from the 
     trading facility at which such positions are maintained.
       ``(D) Criteria for commission determination.--In making any 
     determination to require a limitation, reduction, or 
     liquidation of any position with respect to an energy 
     commodity, the Commission may consider, as appropriate--
       ``(i) the person's open interest in a contract, agreement, 
     or transaction involving an energy commodity relative to the 
     total open interest in such contracts, agreements, or 
     transactions;
       ``(ii) the daily volume of trading in such contracts, 
     agreements or transactions;
       ``(iii) the person's overall position in related contracts, 
     including options, and the overall open interest or liquidity 
     in such related contracts and options;
       ``(iv) the potential for such positions to cause or allow 
     price manipulation, excessive speculation, price distortion, 
     or disruption of the delivery or cash-settlement process;
       ``(v) the person's record of compliance with rules, 
     regulations, and orders of the Commission, a designated 
     contract market, or an energy trading facility, as 
     appropriate;
       ``(vi) the person's financial ability to support such 
     positions on an ongoing basis;

[[Page S11599]]

       ``(vii) any justification provided by the person for such 
     positions; and
       ``(viii) other such factors determined to be appropriate by 
     the Commission.''.
       (d) Information for Price Discovery Determination.--
       (1) Section 2(h)(5)(B) of the Commodity Exchange Act (7 
     U.S.C. 2(h)(5)(B)) is amended by adding the following new 
     clause:
       ``(iv) to the extent that the electronic trading facility 
     provides for the trading of agreements, contracts, or 
     transactions in an energy commodity, provide the Commission 
     with such information as the Commission determines necessary 
     to evaluate whether the energy trading facility performs a 
     significant price discovery function in relation to a 
     contract in an energy commodity listed for trading on a 
     trading facility or in the cash market for the energy 
     commodity, including the provision of such requested 
     information on a continuous basis.''.
       (2) Section 5a(b) of the Commodity Exchange Act (7 U.S.C. 
     7a(b)) is amended by adding the following new paragraph:
       ``(5) Price discovery for energy commodity.--A registered 
     derivatives transaction execution facility shall, to the 
     extent that it provides for the trading of any contract of 
     sale of a commodity for future delivery (or option on such 
     contract) based on an energy commodity, provide the 
     Commission with such information as the Commission determines 
     necessary to evaluate whether the registered derivatives 
     transaction execution facility performs a significant price 
     discovery function in relation to a contract in an energy 
     commodity listed for trading on a trading facility or in the 
     cash market for the energy commodity, including the provision 
     of such requested information on a continuous basis.''.
       (e) Conforming Amendments.--The Commodity Exchange Act is 
     amended--
       (1) in paragraph 29 of section 1a (7 U.S.C. 1a)--
       (A) in subparagraph (C) by deleting ``and'';
       (B) in subparagraph (D) by deleting the period and 
     inserting ``; and'';
       (C) by adding at the end the following:
       ``(E) an energy trading facility registered under section 
     2(j).'';
       (2) in subsection (a) of section 4 (7 U.S.C. 6(a))--
       (A) in paragraph (1) by inserting ``registered energy 
     trading facility or a'' after ``subject to the rules of a''; 
     and
       (B) in paragraph (2) by inserting ``or energy trading 
     facility'' after ``derivatives transaction execution 
     facility'';
       (3) in subsection (c) of section 4 (7 U.S.C. 6(c)), by 
     inserting ``registered energy trading facility or'' in the 
     parenthetical after ``including any'';
       (4) in subsection (a) of section 4a (7 U.S.C. 6a)--
       (A) in the first sentence by inserting ``or energy trading 
     facilities'' after ``derivatives transaction execution 
     facilities''; and
       (B) in the second sentence by inserting ``or energy trading 
     facility'' after ``derivatives transaction execution 
     facility'';
       (5) in subsection (b) of section 4a (7 U.S.C. 6a), by 
     inserting ``or energy trading facility'' after ``derivatives 
     transaction execution facility'' wherever it appears;
       (6) in subsection (e) of section 4a (7 U.S.C. 6a)--
       (A) in the first sentence--
       (i) by inserting ``or by any energy trading facility'' 
     after ``registered by the Commission'';
       (ii) by inserting ``or energy trading facility'' after 
     ``derivatives transaction execution facility'' the second 
     time it appears;
       (iii) by inserting ``energy trading facility'' before ``or 
     such board of trade'' each time it appears; and
       (B) in the second sentence, by inserting ``or energy 
     trading facility'' after ``registered by the Commission'';
       (7) in section 4e (7 U.S.C. 6e), by inserting ``or energy 
     trading facility'' after ``or derivatives transaction 
     execution facility'';
       (8) in section 4i (7 U.S.C. 6i), by inserting ``or energy 
     trading facility'' after ``derivatives transaction execution 
     facility'';
       (9) in section 4l (7 U.S.C. 6l), by inserting ``or energy 
     trading facilities'' after ``derivatives transaction 
     execution facilities'' wherever it appears in paragraphs (2) 
     and (3);
       (10) in section 5c(b) (7 U.S.C. 7a-2(b)), by inserting ``or 
     energy trading facility'' after ``derivatives transaction 
     execution facility'' wherever it appears in paragraphs (1), 
     (2), and (3);
       (11) in section 6(b) (7 U.S.C. 8(b))--
       (A) by inserting ``or energy trading facility'' after 
     ``derivatives transaction execution facility'' wherever it 
     appears; and
       (B) by inserting ``section 2(j) or'' before ``sections 5 
     through 5b''; and
       (12) in section 6d(1) (7 U.S.C. 13a-2(1)), by inserting 
     ``energy trading facility'' after ``derivatives transaction 
     execution facility''.

     SEC. 3. REPORTING OF U.S. ENERGY TRADES.

       Section 2 of the Commodity Exchange Act (7 U.S.C. 1a) is 
     amended by adding at the end the following:
       ``(k) Domestic Energy Trades on a Foreign Board of Trade.--
       ``(1) Definitions.--In this subsection:
       ``(A) Domestic terminal.--The term `domestic terminal' 
     means a technology, software, or other means of providing 
     electronic access within the United States to a contract, 
     agreement, or transaction traded on a foreign board of trade.
       ``(B) Reportable contract.--The term `reportable contract' 
     means a contract, agreement, or transaction for future 
     delivery of an energy commodity (or option thereon), or an 
     option on an energy commodity, for which the underlying 
     commodity has a physical delivery point within the United 
     States and that is executed through a domestic terminal.
       ``(2) Record keeping.--The Commission, by rule, shall 
     require any person holding, maintaining, or controlling any 
     position in any reportable contract under this section--
       ``(A) to maintain such records as directed by the 
     Commission for a period of 5 years, or longer, if directed by 
     the Commission; and
       ``(B) to provide such records upon request to the 
     Commission or the Department of Justice.
       ``(3) Reporting.--The Commission shall prescribe rules 
     requiring such regular or continuous reporting of positions 
     in a reportable contract in accordance with such requirements 
     regarding size limits for reportable contracts and the form, 
     timing, and manner of filing such reports under this 
     paragraph, as the Commission shall determine.
       ``(4) Equivalent means of obtaining information.--The 
     Commission may waive the requirement under paragraph (3) if 
     the Commission determines that the foreign board of trade is 
     providing the Commission with equivalent information in a 
     usable format pursuant to an agreement between the Commission 
     and the foreign board of trade or a foreign futures 
     authority, department or agency of a foreign government, or 
     political subdivision thereof.
       ``(5) Other rules not affected.--
       ``(A) In general.--Except as provided in clause (ii), this 
     paragraph does not prohibit or impair the adoption by any 
     board of trade or energy trading facility licensed, 
     designated, or registered by the Commission of any bylaw, 
     rule, regulation, or resolution requiring reports of 
     positions in any agreement, contract, or transaction for 
     future delivery of an energy commodity (or option thereon), 
     or option on an energy commodity, including any bylaw, rule, 
     regulation, or resolution pertaining to filing or 
     recordkeeping, which may be held by any person subject to the 
     rules of the board of trade or energy trading facility.
       ``(B) Exception.--Any bylaw, rule, regulation, or 
     resolution established by a board of trade or energy trading 
     facility described in clause (i) shall not be inconsistent 
     with any requirement prescribed by the Commission under this 
     paragraph.''.

     SEC. 4. ANTIFRAUD AUTHORITY.

       Section 4b of the Commodity Exchange Act (7 U.S.C. 6b) is 
     amended--
       (1) by redesignating subsections (b) and (c) as subsections 
     (c) and (d), respectively; and
       (2) by striking ``SEC. 4b.'' and all that follows through 
     the end of subsection (a) and inserting the following:

     ``SEC. 4B. CONTRACTS DESIGNED TO DEFRAUD OR MISLEAD.

       ``(a) Unlawful Actions.--It shall be unlawful--
       ``(1) for any person, in or in connection with any order to 
     make, or the making of, any contract of sale of any commodity 
     in interstate commerce or for future delivery that is made, 
     or to be made, on or subject to the rules of a designated 
     contract market, for or on behalf of any other person; or
       ``(2) for any person, in or in connection with any order to 
     make, or the making of, any contract of sale of any commodity 
     for future delivery, or other agreement, contract, or 
     transaction subject to paragraphs (1) and (2) of section 
     5a(g), that is made, or to be made, for or on behalf of, or 
     with, any other person, other than on or subject to the rules 
     of a designated contract market--
       ``(A) to cheat or defraud or attempt to cheat or defraud 
     the other person;
       ``(B) willfully to make or cause to be made to the other 
     person any false report or statement or willfully to enter or 
     cause to be entered for the other person any false record;
       ``(C) willfully to deceive or attempt to deceive the other 
     person by any means whatsoever in regard to any order or 
     contract or the disposition or execution of any order or 
     contract, or in regard to any act of agency performed, with 
     respect to any order or contract for or, in the case of 
     paragraph (2), with the other person; or
       ``(D)(i) to bucket an order if the order is represented by 
     the person as an order to be executed, or is required to be 
     executed, on or subject to the rules of a designated contract 
     market; or
       ``(ii) to fill an order by offset against the order or 
     orders of any other person, or willfully and knowingly and 
     without the prior consent of the other person to become the 
     buyer in respect to any selling order of the other person, or 
     become the seller in respect to any buying order of the other 
     person, if the order is represented by the person as an order 
     to be executed, or is required to be executed, on or subject 
     to the rules of a designated contract market unless the order 
     is executed in accordance with the rules of the designated 
     contract market.
       ``(b) Clarification.--Subsection (a)(2) of this section 
     shall not obligate any person, in or in connection with a 
     transaction in a contract of sale of a commodity for future 
     delivery, or other agreement, contract or transaction subject 
     to paragraphs (1) and (2) of section 5a(g), with another 
     person, to disclose to the other person nonpublic information 
     that may be material to the market price, rate, or level of 
     the commodity or transaction, except as necessary to make any 
     statement made to the other person in or in connection with 
     the transaction, not misleading in any material respect.''.

[[Page S11600]]

     SEC. 5. COMMISSION RULEMAKING.

       Not later than 180 days after the date of enactment of this 
     Act, the Commission shall issue a proposed rule regarding the 
     requirements for an application for registration for an 
     energy trading facility, and not later than 270 days after 
     the date of enactment of this Act, shall issue a final rule.

     SEC. 6. EFFECTIVE DATE.

       (a) In General.--Except as provided in this section, this 
     Act shall become effective immediately upon enactment.
       (b) Trading Facilities.--With respect to any trading 
     facility operating on the date of enactment of this Act in 
     reliance upon the exemption set forth in section 2(h)(3) of 
     the Commodity Exchange Act with respect to an energy 
     commodity, the prohibition in section 2(j)(1) of the 
     Commodity Exchange Act, as added by this Act, shall not 
     apply, if the trading facility submits an application to the 
     Commission for registration as an energy trading facility 
     within 180 days after the Commission promulgates a final rule 
     regarding the requirements for an application for 
     registration for an energy trading facility, prior to a 
     determination by the Commission on whether to approve such 
     application.
       (c) Extensions.--(1) At the time the Commission approves an 
     application by a trading facility operating on the date of 
     enactment of this Act in reliance on the exemption set forth 
     in section 2(h)(3) of the Commodity Exchange Act for 
     registration as an energy trading facility, the Commission 
     shall, upon the written request of the facility, grant an 
     extension of up to 180 days to fully implement a requirement 
     applicable under this Act to an energy trading facility.
       (2) The Commission may in its discretion, upon the written 
     request of the facility and for good cause, grant an 
     additional extension of up to 6 months to fully implement a 
     requirement for which an initial extension has been granted 
     under paragraph (1).
       (3) The Commission may not grant any extension under 
     paragraphs (1) or (2) for any information reporting or 
     recordkeeping requirement.
       (d) Domestic Trading on Foreign Boards of Trade.--Section 3 
     of this Act shall take effect 180 days after the date of the 
     enactment of this Act.
                                  ____


              Summary of the Close the Enron Loophole Act

       Closes the ``Enron Loophole.'' The bill would close the 
     Enron loophole and require government oversight of the 
     trading of energy commodities by large traders to prevent 
     price manipulation and excessive speculation.
       Since 2000, the ``Enron loophole'' in Sec. 2(h)(3) of the 
     Commodity Exchange Act has exempted from oversight the 
     electronic trading of energy commodities by large traders. As 
     a hedge fund known as Amaranth Advisors demonstrated in the 
     natural gas market in 2006, the Enron loophole makes it 
     impossible to prevent traders from distorting energy prices 
     through large trades on these unregulated exchanges. Under 
     this bill, a trading facility that functions as an energy 
     exchange would be subject to Commodity Futures Trading 
     Commission (CFTC) oversight to prevent price manipulation and 
     excessive speculation. The bill would:
       Require oversight of Energy Trading Facilities (ETFs). ETFs 
     would have to comply with the same standards that apply to 
     futures exchanges, like NYMEX, to prevent price manipulation 
     and excessive speculation. The only difference would be that 
     regulatory provisions governing retail trading and brokers on 
     a futures exchange would not apply because trading on an ETF 
     is restricted to large traders trading amongst themselves. 
     ETFs would function as self-regulatory organizations under 
     CFTC oversight in the same manner as futures exchanges.
       Require ETFs to establish trading limits on traders, such 
     as position limits or accountability levels, to prevent price 
     manipulation and excessive speculation, subject to CFTC 
     approval, in the same manner as futures exchanges. Position 
     limits set a ceiling on the number of contracts that a trader 
     can hold at one time on a trading facility; accountability 
     levels, when exceeded, trigger a review by regulators of a 
     trader's holdings in order to prevent price manipulation and 
     excessive speculation. The CFTC would ensure that position 
     limits and accountability levels for similar contracts on 
     different exchanges are on parity with each other and applied 
     in a functionally equivalent manner. The CFTC would also 
     ensure that a trader's positions on multiple exchanges and 
     other markets, when combined, are not excessive.
       Define ``energy commodity'' as a commodity used as a source 
     of energy, including crude oil, gasoline, heating oil, diesel 
     fuel, natural gas, and electricity, or results from the 
     burning of fossil fuels, including carbon dioxide and sulfur 
     dioxide.
       Define ``energy trading facility'' as a trading facility 
     that trades contracts in an energy commodity (other than in 
     the cash or spot market) between large traders (``eligible 
     commercial entities''), and provides either for the clearing 
     of those contracts or a price discovery function in the 
     futures or cash market for that energy commodity. Clearing 
     services, which are already subject to CFTC oversight, 
     generally guarantee the performance of a contract, and 
     facilitate the trading of those contracts. A trading facility 
     performs a price discovery function when the price of 
     transactions are publicly disseminated and can affect the 
     prices of subsequent transactions.
       Require large-trader reporting for domestic trades on 
     foreign exchanges. Large trades of U.S. energy commodities 
     taking place from the United States on foreign exchanges 
     would have to be reported to the CFTC. Traders would be 
     relieved of this reporting requirement if the CFTC reached 
     agreement with a foreign board of trade to obtain the same 
     information.
                                  ____


        Close the Enron Loophole Act Section-by-Section Analysis

     Section 1. Short Title
       The title of this bill is the ``Close the Enron Loophole 
     Act''.
     Sec. 2. Energy trading facilities
       This section amends the Commodity Exchange Act (CEA) to 
     regulate energy trading facilities that are currently exempt 
     from Commodity Futures Trading Commission (CFTC) oversight 
     under section 2(h)(3) of the CEA. After defining the terms 
     ``energy commodity'' and ``energy trading facility,'' this 
     section delineates the criteria required for an energy 
     trading facility to be registered with the CFTC. The 
     specified criteria are based upon existing criteria in the 
     CEA for futures markets (designated contract markets) and 
     derivatives transaction execution facilities so that energy 
     trading facilities will operate under a comparable degree of 
     self-regulation and CFTC oversight as current facilities, 
     taking into account certain differences between the types of 
     markets.
       Section 2(a). Definitions. This section defines the terms 
     ``energy commodity'' and ``energy trading facility.''
       The term ``energy commodity'' means a commodity (other than 
     an excluded commodity, a metal, or an agricultural commodity) 
     that is used as a source of energy or that results from the 
     burning of fossil fuels to produce energy. Examples of energy 
     commodities that are used as a source of energy include crude 
     oil; gasoline, heating oil and other products refined from 
     crude oil; natural gas; and electricity. Examples of energy 
     commodities that result from the burning of fossil fuels to 
     produce energy include carbon dioxide and sulfur dioxide.
       The term ``energy trading facility'' means a trading 
     facility (as defined in section la(33) of the CEA) that: (A) 
     is not a designated contract market (DCM); and (B) 
     facilitates the trading of energy commodities between 
     eligible commercial entities (essentially large, 
     sophisticated traders); and either (i) provides a clearing 
     service for products traded on the facility or (ii) the CFTC 
     determines that trading on the facility provides a price 
     discovery function on a trading facility or in the cash 
     market for an energy commodity.
       The definition of ``energy trading facility'' represents a 
     subset of trading facilities that would otherwise qualify as 
     ``exempt commercial markets'' under current law. In essence, 
     it requires the regulation of energy trading facilities that 
     exhibit the key attributes of a futures exchange--the trading 
     of standardized and cleared contracts for future delivery of 
     a commodity having a finite supply.
       The definition of ``energy trading facility'' excludes the 
     trading of energy commodities that are ``spot sales of a cash 
     commodity or sales of a cash commodity for deferred shipment 
     or delivery,'' since the bill is not intended to apply to the 
     cash market for energy commodities. This exclusion, however, 
     does not encompass contracts that are commonly referred to as 
     ``swaps,'' since swaps are not spot sales of a cash commodity 
     or sales of a cash commodity for deferred shipment or 
     delivery. Because swaps in the energy market are economically 
     and functionally equivalent to futures contracts for energy 
     commodities, this bill ensures that they will be regulated in 
     a functionally equivalent manner.
       The definition restricts the bill's application to energy 
     trading facilities that allow only ``exempt commercial 
     entities'' (ECEs) to participate, meaning large sophisticated 
     traders who trade with each other on a principal-to-principal 
     basis. This restriction is identical to the restriction in 
     current law for trading facilities that qualify as exempt 
     commercial markets under section 2(h)(3). A trading facility 
     that permits brokered or intermediated transactions or 
     participation by persons other than ECEs would not qualify as 
     an energy trading facility subject to the type of regulation 
     provided under this bill. Instead, as is the case under 
     current law, a facility that allows the trading of futures 
     contracts by persons other than ECEs must register with and 
     be designated by the CFTC as a contract market subject to the 
     regulations that apply to a DCM.
       The definition also addresses the concern that, despite the 
     advantages and widespread use of clearing services to 
     facilitate trading, if the presence of a clearing function 
     triggers regulatory oversight, then alternative trading 
     platforms may develop that do not provide clearing services 
     in order to avoid the reporting and monitoring requirements 
     essential to an effective regulatory system. To address this 
     concern, the bill provides that a trading facility that does 
     not provide clearing services still may qualify as an energy 
     trading facility subject to regulation if the CFTC determines 
     the facility ``performs a significant price discovery 
     function in relation to an energy commodity listed for 
     trading on a trading facility or in the cash market for the 
     energy commodity.'' Factors for the CFTC to consider in 
     determining whether a trading facility performs such a 
     significant price discovery function include the extent to 
     which the prices of contracts traded on the facility are 
     linked to or derived from

[[Page S11601]]

     the prices of futures contracts traded on a DCM, the volume 
     of trading on the facility, whether prices of completed 
     transactions are immediately posted or disseminated, and the 
     extent to which traders engage in arbitrage trading between 
     the contracts traded on the facility and those traded on a 
     regulated market.
       Section 2(b). Oversight of Energy Trading Facilities. This 
     section specifies that an energy trading facility, and any 
     agreement, contract, or transaction traded on that facility, 
     shall be subject to the regulatory requirements established 
     in a new CEA section 2(j).
       Section 2(b)(1) amends CEA section 2(h)(3) to exclude 
     energy trading facilities from qualifying as an exempt 
     commercial market in order to make it clear that those 
     facilities must instead comply with the new CEA section 2(j).
       Section 2(b)(2) adds a new section 2(h)(7) to the CEA. This 
     new section provides that notwithstanding any other provision 
     of the CEA, an energy trading facility and persons trading on 
     an energy trading facility are subject to the new CEA section 
     2(j). This clarifying provision means, for example, that a 
     trading facility that meets the criteria for an energy 
     trading facility could not operate as a derivatives 
     transaction execution facility (DTEF) under another provision 
     of the CEA.
       Section 2(c). Standards Applicable to Energy Trading 
     Facilities. This section adds a new section 2(j) to the CEA, 
     specifying the standards that an applicant must meet to 
     register with the CFTC as an energy trading facility.
       Commission Approval of Energy Trading Facilities. A new 
     section 2(j)(1) makes it illegal for any person to enter into 
     an agreement, contract, or transaction on an energy trading 
     facility unless such facility has been registered with the 
     Commission as an energy trading facility. Section 6 of this 
     bill provides a timeline for facilities in operation on the 
     date of enactment of this Act under CEA section 2(h)(3) to 
     submit an application, obtain registration, and comply with 
     these requirements.
       Applications for Operation as Energy Trading Facility. New 
     section 2(j)(2) provides that a facility must submit an 
     application to the Commission for operation as an energy 
     trading facility in order to register as an energy trading 
     facility. The Commission is authorized to establish such 
     application requirements as it deems appropriate. New section 
     2(j)(3) provides that the Commission shall make a 
     determination on any such application within 120 days after 
     receiving it.
       Criteria for Approval of Applications. New section 2(j)(4) 
     specifies the criteria that an applicant must meet for 
     registration as an energy trading facility. Because an energy 
     trading facility may trade instruments that possess the same 
     characteristics as futures contracts traded on a designated 
     contract market, several of the criteria, particularly those 
     regarding prevention of price manipulation, excessive 
     speculation, and price distortion, are identical to the 
     criteria applicable to a designated contract market (DCM). 
     Other DCM criteria are not used, such as those applicable to 
     intermediated or brokered transactions, since those types of 
     transactions are not permitted on an energy trading facility. 
     In addition, because energy trading facilities conduct all 
     trading on a principal-to-principal basis, a number of the 
     criteria applicable to a derivatives transaction execution 
     facility are included in the section. The criteria are as 
     follows.
       New section 2(j)(4)(A): Prevention of Price Manipulation 
     and Excessive Speculation.--This section requires the 
     facility to have the capacity to prevent price manipulation, 
     excessive speculation, price distortion, and disruption 
     through market surveillance, compliance, and enforcement 
     practices and procedures, including methods for conducting 
     real-time monitoring of trading and comprehensive and 
     accurate trade reconstructions. The term ``excessive 
     speculation'' as used in this bill has the same meaning as 
     the term ``excessive speculation'' in section 4a(a) of the 
     Act as ``causing sudden or unreasonable fluctuations or 
     unwarranted changes in the price of such commodity.'' 
     [Equivalent to DCM Criteria: Prevention of Market 
     Manipulation, CEA Sec. 5(b)(2)].
       New Section 2(j)(4)(B): Monitoring of Trading.--This 
     section requires the facility to monitor trading to prevent 
     price manipulation, excessive speculation, price distortion, 
     and disruption of the delivery or cash-settlement process. 
     [Equivalent to DCM Core Principles: Monitoring of Trading, 
     CEA Sec. 5(d)(4); see also DTEF Core Principles: Monitoring 
     of Trading, CEA Sec. 5a(d)(3)].
       New Section 2(j)(4)(C): Contracts Not Readily Susceptible 
     to Manipulation.--This section requires the facility to list 
     for trading only contracts that are not readily susceptible 
     to manipulation. [Equivalent to DCM Core Principles: 
     Contracts Not Readily Susceptible to Manipulation, CEA 
     Sec. 5(d)(3)].
       New Section 2(j)(4)(D): Financial Integrity of 
     Transactions.--This section requires the facility to 
     establish and enforce rules and procedures for ensuring the 
     financial integrity of transactions cleared and settled 
     through the facilities of the energy trading facility. [Based 
     on DCM Criteria: Financial Integrity of Transactions, CEA 
     Sec. 5(b)(5); and DTEF Registration Criteria: Transactional 
     Financial Integrity, CEA Sec. 5a(c)(4)].
       New Section 2(j)(4)(E): Ability To Obtain Information.--
     This section requires the facility to establish and enforce 
     rules that will allow the facility to obtain any necessary 
     information to perform any of the functions described in this 
     subsection, including the capacity to carry out such 
     international information-sharing agreements as the 
     Commission may require. [Equivalent to DCM Criteria: Ability 
     to Obtain Information, CEA Sec. 5(b)(8)].
       New Section 2(j)(4)(F): Position Limits or Accountability 
     Levels.--This section requires the facility to reduce the 
     potential threat of price manipulation, excessive 
     speculation, price distortion, or disruption of the delivery 
     or cash-settlement process, by adopting position limits or 
     position accountability levels for speculators, where 
     necessary and appropriate. [Equivalent to DCM Core 
     Principles: Position Limitation or Accountability, CEA 
     Sec. 5(d)(5)].
       New Section 2(j)(4)(G): Emergency Authority.--This section 
     requires the facility to adopt rules to provide for the 
     exercise of emergency authority to liquidate or transfer open 
     positions in any contract, suspend or curtail trading in any 
     contract, and require market participants in any contract to 
     meet special margin requirements. [Equivalent to DCM Core 
     Principles: Emergency Authority, CEA Sec. 5(d)(6)].
       New Section 2(j)(4)(H): Daily Publication of Trading 
     Information.--This section requires the facility to make 
     public daily information on settlement prices, volume, open 
     interest, and opening and closing ranges for actively traded 
     contracts on the facility. [Equivalent to DCM Core Principle: 
     Daily Publication of Trading Information; CEA Sec. 5(d)(8); 
     see also DTEF Core Principles: Daily Publication of Trading 
     Information, CEA Sec. 5a(d)(5)].
       New Section 2(j)(4)(I): Deterrence of Abuses.--This section 
     requires the facility to establish and enforce trading and 
     participation rules that will deter abuses and to maintain 
     the capacity to detect, investigate, and enforce those rules. 
     [Based on DTEF Registration Criteria: Deterrence of Abuses, 
     CEA Sec. 5a(c)(2)].
       New Section 2(j)(4)(J): Trade Information.--This section 
     requires the facility to maintain rules and procedures to 
     provide for the recording and safe storage of all identifying 
     trade information in a manner that enables the facility to 
     use the information for the purposes of assisting in the 
     prevention of price manipulation, excessive speculation, 
     price distortion, or disruption of the delivery or cash-
     settlement process, and providing evidence of any violations 
     of the rules of the facility. [Based on DCM Core Principles: 
     Trade Information, CEA Sec. 5(d)(10)].
       New Section 2(j)( 4)(K): Trading Procedures.--This section 
     requires the facility to establish and enforce rules or terms 
     and conditions defining, or specifications detailing, trading 
     procedures to be used in entering and executing orders traded 
     on the facility. [Based on DTEF Registration Criteria: 
     Trading Procedures, CEA Sec. 5a(c)(3); see also DCM Criteria: 
     Trade Execution Facility, CEA Sec. 5(b)(4)].
       New Section 2(j)(4)(L): Compliance With Rules.--This 
     section requires the facility to monitor and enforce the 
     rules of the facility, including any terms and conditions of 
     any contracts traded on or through the facility and any 
     limitations on access to the facility. [Equivalent to DTEF 
     Core Principles: Compliance with Rules, CEA Sec. 5a(d)(2); 
     see also DCM Core Principles: Compliance with Rules, CEA 
     Sec. 5(d)(2)].
       New Section 2(j)(4)(M): Disclosure of General 
     Information.--This section requires the facility to disclose 
     publicly and to the Commission information concerning: (i) 
     contract terms and conditions; (ii) trading conventions, 
     mechanisms, and practices; (iii) financial integrity 
     protections; and (iv) other information relevant to 
     participation in trading on the facility. [Equivalent to DTEF 
     Core Principles: Disclosure of General Information, CEA 
     Sec. 5a(d)( 4); see also DCM Core Principles: Availability of 
     General Information, CEA Sec. 5(d)(7)].
       New Section 2(j)(4)(N): Fitness Standards.--This section 
     requires the facility to establish and enforce appropriate 
     fitness standards for directors, members of any disciplinary 
     committee, and any other persons with direct access to the 
     facility, including any parties affiliated with any of the 
     persons described in this paragraph. [Equivalent to DTEF Core 
     Principles: Fitness Standards, CEA Sec. 5a(d)(6); see also 
     DCM Core Principles: Governance Fitness Standards, CEA 
     Sec. 5(d)(14)].
       New Section 2(j)(4)(O): Conflicts of Interest.--This 
     section requires the facility to establish and enforce rules 
     to minimize conflicts of interest in the decision making 
     process of the facility and establish a process for resolving 
     such conflicts of interest. [Equivalent to DTEF Core 
     Principles: Conflicts of Interest, CEA Sec. 5a(d)(7); and DCM 
     Core Principles: Conflicts of Interest, CEA Sec. 5(d)(15)].
       New Section 2(j)(4)(P): Recordkeeping.--This section 
     requires the facility to maintain business records for a 
     period of 5 years. [Equivalent to DTEF Core Principles: 
     Recordkeeping, CEA Sec. 5a(d)(8); and DCM Core Principles: 
     Recordkeeping, CEA Sec. 5(d)(17)].
       New Section 2(j)(4)(Q): Antitrust Considerations.--This 
     section requires the facility to endeavor to avoid: (i) 
     adopting rules or taking any actions that result in any 
     unreasonable restraint of trade; or (ii) imposing any 
     material anticompetitive burden on trading on the facility. 
     [Equivalent to DTEF Core Principles: Antitrust 
     Considerations, CEA Sec. 5a(d)(9); and DCM Core Principles: 
     Antitrust Considerations, CEA Sec. 5(d)(18)].

[[Page S11602]]

       Compliance with Criteria. New section 2(j)(5) provides that 
     an energy trading facility must continue to comply with all 
     of the criteria in section 2(j)(4) to continue operation, and 
     that violation of any of the criteria shall constitute a 
     violation of the Commodity Exchange Act. The trading facility 
     shall have reasonable discretion in establishing the manner 
     in which it complies with these criteria.
       Position Limits and Accountability Levels. New section 
     2(j)(6) directs the Commission to ensure that the position 
     limits and accountability levels that are established for 
     energy trading facilities are on a parity with the position 
     limits and accountability levels established for similar 
     contracts traded on a designated contract market and applied 
     in a functionally equivalent manner. This provision is 
     designed to ensure that there is no regulatory advantage to 
     trading on an energy trading facility compared to a 
     designated contract market, or vice versa.
       Additionally, once a trader's position exceeds a position 
     limit or an accountability level on a particular trading 
     facility, this section directs the Commission to take such 
     action as may be necessary and appropriate, in light of the 
     trader's overall positions in that commodity, to reduce the 
     potential threat of price manipulation, excessive 
     speculation, price distortion, or disruption of the delivery 
     or cash-settlement process.
       Such a comprehensive approach may have to be undertaken by 
     the CFTC, since it may be beyond the authority of a 
     particular trading facility to obtain information about or 
     limit a trader's relevant positions when those positions are 
     outside of the exchange itself. The Commission may direct a 
     trader, or direct a trading facility to direct a trader, to 
     limit, reduce or liquidate any position in any market, as the 
     Commission determines necessary to reduce the potential 
     threat of price manipulation, excessive speculation, price 
     distortion or disruption of the delivery or cash-settlement 
     process.
       In order to make a determination on the appropriate action 
     to take, the Commission is authorized to obtain from a trader 
     information regarding all of the trader's exchange and off-
     exchange positions in that commodity. The Commission will be 
     receiving on a regular basis, through its large trader 
     reporting system, information regarding any trader's 
     positions on a designated contract market or an energy 
     trading facility that exceed the levels for reportable 
     positions; the Commission may choose to request additional 
     information on other positions in the commodity held by the 
     trader if the Commission determines this additional 
     information is necessary to make any determinations required 
     by this section. The authority to obtain this position 
     information parallels the Commission's existing authority 
     under CEA sections 3(b), 4i, and 8a(5) to require traders to 
     retain transaction records for commodities traded on CFTC-
     regulated facilities and provide them to the Commission upon 
     request. The Commission recently described this authority in 
     its proposed rulemaking ``Maintenance of Books, Records and 
     Reports by Traders,'' 72 Fed. Reg. 34413 (June 22, 2007). The 
     information specified to be provided to the Commission under 
     the new section 2(j)(5)(C) is identical to the information 
     specified to be provided to the Commission in that proposed 
     rulemaking.
       The Commission's review of a trader's entire position does 
     not relieve an individual exchange of the authority and 
     responsibility to review a trader's position on that exchange 
     once a position limit or accountability level on that 
     exchange has been exceeded. Rather, it is anticipated that 
     the Commission's comprehensive review of the trader's entire 
     position in a commodity will be undertaken in addition to the 
     review conducted by the individual exchange on which the 
     trader has taken a position in excess of an accountability 
     level or position limit. Based on this comprehensive review, 
     the Commission will then determine whether any additional 
     action, beyond that initially taken by the exchange, is 
     necessary to limit, reduce or liquidate the trader's position 
     to reduce the potential threat of price manipulation, 
     excessive speculation, price distortion, or disruption of the 
     delivery or cash-settlement process. In making or 
     implementing any such determinations, the Commission should 
     continue to work in consultation and cooperation with the 
     affected exchanges.
       New section 2(j)(6)(D) specifies criteria the Commission or 
     an exchange may consider when determining whether to require 
     a trader to limit, reduce, or liquidate a position in an 
     energy commodity in excess of an accountability level. In 
     making any such determination with respect to an energy 
     commodity, the Commission, a designated contract market, or 
     an energy trading facility should consider, as appropriate: 
     (i) the person's open interest in a contract, agreement, or 
     transaction involving an energy commodity relative to the 
     total open interest in such contracts, agreements or 
     transactions; (ii) the daily volume of trading such 
     contracts, agreements or transactions; (iii) the person's 
     overall position in related contracts, including options, and 
     the overall open interest or liquidity in such related 
     contracts and options; (iv) the potential for such positions 
     to cause or allow price manipulation, excessive speculation, 
     price distortion, or disruption of the delivery or cash-
     settlement process; (v) the person's record of compliance 
     with rules, regulations, and orders of the Commission, a 
     designated contract market, or an energy trading facility, as 
     appropriate; (vi) any justification provided by the person 
     for such positions; and (vii) other such factors determined 
     to be appropriate by the Commission.
       The criteria specified in this section are not intended to 
     be the exclusive criteria that may be applied, but are set 
     forth to provide additional guidance to the Commission, the 
     exchanges, and persons trading on the exchanges in addition 
     to the general language pertaining to ``excessive 
     speculation'' in section 4 of the CEA.
       Section 2(d). Information for Price Discovery 
     Determination. This section provides the Commission with the 
     authority to obtain from an electronic trading facility or a 
     derivatives transaction execution facility any information 
     the Commission determines is necessary for the Commission to 
     evaluate whether such a facility performs a price discovery 
     function in relation to a contract in an energy commodity 
     under the definition of energy trading facility.
       Section 2(e). Conforming Amendments. This section amends 
     the CEA in a variety of sections to provide the Commission 
     with a comparable degree of authority over the operation of 
     an energy trading facility that it possesses with respect to 
     a designated contract market or a derivatives transaction 
     execution facility.
     Sec. 3. Reporting of Energy Trades
       Section 3 of the bill adds a new CEA section 2(k) to 
     require persons that trade from within the United States on a 
     foreign board of trade a contract for future delivery of an 
     energy commodity that has a physical delivery point within 
     the United States to keep records of such trades and to 
     report large trades in such contracts to the Commission. The 
     Commission is authorized to waive the reporting requirement 
     if the Commission determines that a foreign board of trade is 
     providing the Commission with equivalent information in a 
     usable format pursuant to an agreement between the Commission 
     and the foreign board of trade. The purpose of this provision 
     is to ensure that U.S. commodity regulators have full access 
     to trading information from U.S. traders conducting 
     transactions from U.S. locations involving U.S. energy 
     commodities such as crude oil and gasoline.
     Sec. 4. Antifraud authority
       Section 4 of the bill amends Section 4b of the CEA, the 
     CFTC's main anti-fraud authority. Section 4b is revised to 
     clarify the CFTC's authority to bring fraud actions in off-
     exchange principal-to-principal futures transactions. In 
     November 2000, the Seventh Circuit Court of Appeals ruled 
     that the CFTC could only use Section 4b in intermediated 
     transactions--those involving a broker. Commodity Trend 
     Service, Inc. v. CFTC, 233 F.3d 981, 991-992 (7th Cir. 2000). 
     As subsequently amended by the CFMA, the CEA now permits off-
     exchange futures and options transactions that are done on a 
     principal-to-principal basis, such as energy transactions 
     pursuant to CEA Sections 2(h)(1) and 2(h)(3).
       Subsection 4b(a)(2) is amended by adding the words `or 
     with' to address the principal-to-principal transactions. 
     This new language clarifies that the CFTC has the authority 
     to bring anti-fraud actions in off-exchange principal-to-
     principal futures transactions, including exempt commodity 
     transactions in energy under Section 2(h) as well as all 
     transactions conducted on derivatives transaction execution 
     facilities. The new Section 4b clarifies that market 
     participants in these transactions are not required to 
     disclose information that may be material to the market 
     price, rate or level of the commodity in such off-exchange 
     transactions. It also codifies existing law that prohibits 
     market participants from using half-truths in negotiations 
     and solicitations by requiring a person to disclose all 
     necessary information to make any statement they have made 
     not misleading in any material respect. The prohibitions in 
     subparagraphs (A) through (D) of the new Section 4b(a) would 
     apply to all transactions covered by paragraphs (1) and (2). 
     Derivatives clearing organizations (DCOs) are not subject to 
     fraud actions under Section 4b in connection with their 
     clearing activities.
       The amendments to Section 4b(a) of the CEA regarding 
     transactions currently prohibited under subparagraph (iv) 
     (found in paragraph 2(D) of this bill) are not intended to 
     affect in any way the CFTC's historical ability to prosecute 
     cases of indirect bucketing of orders executed on designated 
     contract markets. See, e.g., Reddy v. CFTC, 191 F.3d 109 (2nd 
     Cir. 1999); In re DeFrancesco, et al., CFTC Docket No. 02-09 
     (CFTC May 22, 2003) (Order Making Findings and Imposing 
     Remedial Sanctions as to Respondent Brian Thornton).
       This language clarifying the Commission's anti-fraud 
     authority was included in bills in the previous Congress to 
     reauthorize the Commodity Exchange Act, one of which was 
     passed by the House of Representatives (H.R. 4473, passed by 
     the House on Dec. 14, 2005) and the other of which was 
     reported to the full Senate by the Senate Committee on 
     Agriculture, Nutrition, and Forestry (S. 1566, S. Rpt. No. 
     109-119; 109th Cong., 1st Sess.).
     Sec. 5. Commission rulemaking
       Section 5 of the bill requires the CFTC, within 180 days 
     after enactment of this Act, to issue a proposed rule setting 
     forth the process for submitting an application for 
     registration as an energy trading facility. The section 
     requires the CFTC, within 270 days after the date of 
     enactment, to finalize this rule.

[[Page S11603]]

     Sec. 6. Effective date
       Section 6(a) of the bill provides that it shall be 
     immediately effective upon enactment, with several 
     exceptions.
       Existing trading facilities. The first exception applies to 
     existing trading facilities. Section 6(b) provides that a 
     trading facility operating under the exemption in CEA section 
     2(h)(3) on the date of enactment shall have 180 days after 
     the Commission issues a final rule on registration 
     applications to submit such an application. Section 5 of the 
     bill authorizes the Commission to take 270 days to issue this 
     rule. During this period (270 days plus 180 days), the 
     prohibition on trading in the new section 2(j)(1) shall not 
     apply. For any such facility in operation on the date of 
     enactment of this Act that submits an application to the 
     Commission for operation as an energy trading facility within 
     the 180-day period, the suspension of the prohibition in 
     section 2(j)(1) is extended until the Commission makes a 
     determination on whether to approve that application.
       Subsection (c) provides that if the Commission approves the 
     registration as an energy trading facility of a facility 
     operating under the exemption under CEA section 2(h)(3) on 
     the date of enactment of this Act, the facility may submit a 
     written request to the Commission for a 6-month extension to 
     fully implement any requirement made applicable by this Act--
     other than an information reporting or recordkeeping 
     requirement--and that the Commission shall grant any such 
     request. The Commission, in its discretion, may grant an 
     additional 6-month extension. The Commission may not grant 
     any extension for any information reporting or recordkeeping 
     requirement. This section is intended to ensure that 
     facilities currently in operation that must register as an 
     energy trading facility will have sufficient time to come 
     into compliance with the new requirements of this Act, and 
     that the operations of those facilities will not be disrupted 
     during the transition period. Altogether, this section 
     effectively provides existing trading facilities with over 
     two years to come into compliance with the Act.
       Requirements applicable to domestic use of a foreign board 
     of trade. Section 6(d) of the bill states that the reporting 
     requirements applicable to trades from domestic terminals on 
     a foreign board of trade are effective 180 days after 
     enactment.

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