Jon Kyl

Mr. KYL

Mr. KYL. I think I know the answer to this, but it would certainly be possible for us to have a hearing on one nominee. As a member of the committee, I think it is doable, I can tell you. I think it is only fair that Senator Leahy pick out one of these people and have a hearing for him or her 12 months after their nomination. So, out of desperation, I ask unanimous consent that no later than May 9, 2002, the Judiciary Committee shall conclude hearings on at least one of those nominations remaining of those made by President Bush on May 9, 2001, to the U.S. Circuit Courts of Appeals.

Mr. KYL. Mr. President, in deference to the Senator from Michigan who is here, I gather, to speak, instead of going through the numbers of 5, 4, 3, let me just see if I could get my colleague to agree to this because we do have a full week left. I am a member of the Judiciary Committee, and I can tell you, we have not been that busy. We have had plenty of opportunities for hearings. These eight nominees have been sitting around for a year, and none of them has had a hearing. We could easily have a hearing for two of these nominees before the anniversary date of 1 year from their nomination by the President. I ask unanimous consent that no later than May 9, 2002, the Judiciary Committee shall conclude hearings on at least two of the eight nominations remaining of those made by President Bush on May 9, 2001, to the U.S. Circuit Courts of Appeals.

Mr. KYL. Mr. President, I appreciate the objection. We have voted on several judges. I am talking about holding hearings on judges nominated over a year ago, not voting on them; just holding a hearing and trying to hold the hearings before the anniversary day. In view of that objection, let me propound this request: That no later than May 9, 2002, the Judiciary Committee shall conclude hearings on at least six of the eight nominations remaining of those made by President Bush on May 9, 2001, to the U.S. Circuit Courts of Appeals?

Mr. KYL. Mr. President, I very much appreciate the kind remarks that the Senator from Nevada made about my law career, and I do appreciate that sincerely. He knows of my affection for him. Before I make my next request, I point one thing out with respect to what the Senator from Nevada said about my opposition to filling the 12th position on the D.C. Circuit Court of Appeals. At that time, there were two vacancies. He correctly read my remarks. I said I didn't think we needed to fill the 12th, and I had questions about the 11th. But there are now 4 vacancies, and I don't think there is any doubt we need to fill numbers 9 and 10. When we get up to No. 11, maybe I will have a question still, and I might even not support filling the 12th. But that was a totally different situation because we were talking about the 12th and final vacancy. Here we have four vacancies, and I have advocated that we fill two of them. In view of the objection that was heard, let me ask my colleague if he would agree to the following, and I propound this request: I ask unanimous consent no later than May 9, 2002, the Judiciary Committee will conclude hearings on at least seven of the eight remaining of those nominations made by President Bush on May 9, 2001, to the D.C. Circuit Courts of Appeals.

Mr. KYL. I am. But if the Senator wants to close, that is okay.

Mr. KYL

Mr. KYL. I close by advising my colleagues I would be pleased to have a vote by voice.

Mr. KYL. It is my intention to use the remainder of the time on the second amendment, numbered 3332, after which I presume a Member on the other side will move to table amendment No. 3333, to get the yeas and nays, and I would be happy to accept a voice vote on 3332, which I will describe at this point. This is an amendment that eliminates the credits for wind energy. According to the industry itself, they are now competitive and they no longer need the subsidy we provide to them. As a matter of fact, quoting from their own material from the American Wind Energy Association: The state-of-the-art wind power plants are generating electricity at costs as low as 4 cents per kilowatt hour, a price competitive with many conventional energy technologies. This is without the production tax credit that would be extended under this legislation. The AWEA further projects by the year 2005 the costs will be in the area of 2.5 to 3.5 cents per kilowatt hour, just about exactly the range of the cost of production by coal or nuclear or other generation, or natural gas. This is a tax credit that is simply no longer needed. Since the Department of Energy Information Administration has analyzed that the RPS mandate in this legislation will only be fulfilled through additional wind energy capacity, we are just basically giving a huge gift to the producers of wind energy that would have essentially a monopoly on this new renewable power we are mandating. I will not name the particular companies, but the companies that are going to benefit from this are some of the largest production companies in the country, all good companies, but certainly companies that are multibillion-dollar companies and hardly need this particular kind of a credit. I ask unanimous consent to have printed in the Record brochures from the industry itself.

Mr. KYL. What we can see is, like the system that is being proposed by the Senate, there was no cost-benefit analysis. There was not a very clear idea of what the ultimate costs were going to be, and the experience with the program not only showed fraud or potential fraud but runaway expenses. Under the program that has come out of the committee, one of the concerns is that nonprofits will be able to utilize credits by selling them, which, of course, opens up the possibility that there could be a secondary market or abuses could occur in selling these large tax credits. There has been very little evaluation of whether or not the vehicles could be altered after their purchase, after the tax credit has been received, so that they could run in fact on gasoline or diesel. There is no data whatsoever to show that we would have a better environment as a result. In fact, there has been no cost-benefit analysis. Pursuant to an amendment I offered in the committee, there will be a study after the fact that will tell us how successful the program has been, but there has been no study in advance of that. In fact, the committee report language does not cite a single study or report justifying the credits under the reason for change. The report says, and I am quoting: The committee believes further investments in alternative fuel and advanced technology vehicles are necessary to transform automotive transportation in the United States to be cleaner, more efficient and less reliant on petroleum fuels. The committee language also prognosticates, and I am quoting again: That it expects hybrid motor vehicles and dedicated alternative fuel vehicles are the near-term technological advancement that will replace gasoline- and diesel-burning engines with alternative powered engines. The revenue estimates are $1.1 billion, but since many of the credits expire after 2006, I think it vastly understates the true cost. I suspect this will be extended before they expire, so that the cost is more likely going to be maybe $3 billion or so over a 10-year period. Obviously, the automobile industry is the primary beneficiary of these credits since they can simply increase the cost of the vehicles, and then the credits obviously go to the taxpayer to offset that increase in cost. I make this point--and I don't expect members of the committee are going to agree with this proposition--I wish we could go a little slower. I advised the committee of the experience in Arizona. To the credit of the committee and the chairman of the committee, his staff was very careful to talk to people in Arizona and do their best to remove the kinds of problems we experienced in Arizona. I commend the chairman of the Finance Committee for that effort. It was a useful effort. I am concerned we are going to find a lot of problems in this program after it begins. It will be too late then. We will find it will cost a whole lot more than we predicted and the benefits will not pan out in terms of cost-benefit analysis. I reserve the remainder of my time on this amendment. If anyone wishes to respond, I will briefly discuss the other amendment.

Mr. KYL. Madam President, this first amendment is a very simple amendment that would save a little over a billion dollars, according to the calculations of the committee, but probably would save closer to $3 billion by striking that section of the Finance Committee portion of the bill that is called the clear act provisions; more specifically, those provisions that provide tax credits for Americans who purchase four specific kinds of motor vehicles; specifically, a new qualified alternative fuel motor vehicle, a new qualified fuel cell motor vehicle, a new hybrid motor vehicle, and then it extends the present law which provides a credit for electric vehicles. I know this provision was inserted in the Finance Committee with the best of intentions, but for the reason I will point out, I think this has not been as carefully thought out and prepared as it should be. Based on the experience of my home State of Arizona trying to do the same thing, it would be premature for us to move forward with this particular program at this time. I will illustrate specifically what is involved and then get to the Arizona experience. Under the bill pending before us, there would be provided a maximum income tax credit of $40,000 per taxpayer for the purchase of these kinds of motor vehicles, the fuel cells, the alternative fuel, and the electric vehicles. The fact is that is for a very large vehicle; the average for the usual passenger car type of vehicle would be in the neighborhood of from $3,500 to $6,000. The part I am particularly interested in is the alternative fuel vehicle. According to the committee staff, the average tax credit in this case would be about $5,000. It is determined by a very complicated formula based upon the weight of the vehicle and some other factors, but it is about a $5,000 subsidy per taxpayer buying this particular kind of vehicle. I am concerned about this because Arizona decided to try to do this same thing, provide a taxpayer subsidy for the purchase of these alternative fuel vehicles as a way of trying to clean up our environment and to reduce reliance upon pure oil or gasoline. It provided a subsidy, calculated a little bit differently, for the purchase of these vehicles; in fact, for the retrofitting of the alternative fuel system for a vehicle that had already been manufactured. I will read some headlines, or excerpts, from some of the Arizona newspapers after this program was put into effect. I might begin by saying this has been a fiasco in Arizona. The program has since been terminated. Politicians' careers have been destroyed because of it. They did not think it through carefully enough before they implemented it. It was about to bankrupt the State, so the State decided to terminate the program prematurely before it ended up costing them as much as it was going to cost. These are a few quotations: The rebate program was originally projected to cost the State about $3 million but has since spiraled to a dizzying $483 million. That is from the Arizona Daily Star. Bad legislation, bad policy and no benefit to air quality. That is a quotation from the Arizona Republic. That is October 30, 2000. From that same editorial: There has been no environmental study of the alternative- fuel program by any State agency, just as no one ever completed an incisive cost analysis of the legislation. Another quotation from the Arizona Republic: The law allowed thousands of people to buy expensive sport- utility vehicles with the State picking up nearly half the costs of the trucks and their bifuel conversions to either propane or compressed natural gas. One final quotation from the Arizona Daily Star says: The Arizona Republic shows that 13 percent of the applications for cleaner-running vehicles came from rural areas without a pollution problem. I ask unanimous consent that the remainder of these statements be printed in the Record at this point.

Mr. KYL. Madam President, I will first discuss amendment No. 3333. As a member of the Senate Finance and Energy Committees, I have had the opportunity to witness first-hand the contradictions in Federal energy and tax policy, specifically policy for the electricity industry. One glaring example is the Energy Policy Act of 1992 and the private use rules of the Internal Revenue Code, which pre-date the Energy Policy Act and are applicable, as you know, to public power utilities. While our Federal energy policy since 1992 has been to open electric markets to wholesale and even retail competition, our Tax Code contains restrictions dating back to the Tax Reform Act of 1986 that make it difficult, and in some cases impossible, for publicly-owned utilities to comply with that deregulation policy. In an attempt to remove the tax-code impediments to participation in the newly restructured electric industry, the publicly-owned and investor-owned utilities labored for several years to develop a package of tax-law changes that would provide the necessary flexibility to comply with the new energy policies being implemented by the Federal and State governments while, at the same time, not fundamentally changing the competitive balance between the private and public sectors of the energy industry. The fruit of those efforts was S. 972, introduced last year by Senators Murkowski, Thompson, Breaux, and Jeffords. I joined as a cosponsor of this bipartisan bill. In the House, H.R. 1459 was introduced by Congressman J.D. Hayworth and was cosponsored by 16 other members of the Ways and Means Committee. These bills were successful in accommodating widely divergent views of public-power and investor-owned utilities on a whole score of Federal tax issues. They represent years of negotiations between the private and public sectors of the industry, and as such, reflect a delicate, equitable balancing of interests. There are four provisions in these companion bills that are designed to help modernize our Tax Code for investor-owned utilities. I want to address these provisions in light of the subsequent House-passed bill, H.R. 4, and the bill marked out of the Senate Finance Committee that we are now considering. Both of these latest incarnations represent a significant departure from the original texts of H.R. 1459 and S. 972. The first provision addresses the transmission tax problem that has occurred as the result of FERC Order 2000. This order strongly encourages, some would say ``directs,'' all transmission-owning electric companies, subject to FERC jurisdiction, to join a regional transmission organization, RTO. However, many proposals to form RTOs would force these utilities to sell or spin off their transmission assets to form independent transmission companies, Transcos, resulting in a substantial Federal income-tax liability. The solution to this problem, as stated in S. 972 and H.R. 1459, is to amend section 1033 of the Tax Code to permit sales of transmission assets on a tax-deferred basis if these sales occur in conformity with Order 2000, and the proceeds of the sale are reinvested in certain utility assets. Section 355(e) would also be amended to permit a non- taxable spin-off of transmission assets even if they are combined with neighboring transmission assets in conformity with Order 2000. Amending the Federal Tax Code to allow formation of Transcos will further diminish tax barriers to wholesale and retail competition by creating truly independent transmission organizations. H.R. 4 includes this provision, but unfortunately, the bill reported out of the Senate Finance Committee does not. Before this bill is signed by the President, I hope that the transmission-relief provision will be included in the legislation. The second provision concerns the equitable tax treatment of nuclear decommissioning funds, and it is the only provision of the four that is addressed in all of the aforementioned bills. Under current law, owners of nuclear power plants must make mandatory contributions to external trust funds to ensure that monies are available to decommission plants when they are retired. Congress added section 468A to the tax code in 1984 to permit owners of nuclear plants to deduct a portion of the contributions made to these external funds. Section 468A, when enacted, was designed to operate within the existing structure of regulated rates. The ability to deduct the contributions as permitted in section 468A is currently dependent on the local public service commission's formal approval of the decommissioning expenses that an electric utility can charge its customers. Both the House and the Finance Committee have adopted changes to section 468A to adapt to the structure of competitive markets while preserving the Section's original intent. These changes will facilitate the transfer of nuclear facilities to new owners in compliance with State and Federal directives. A third provision, included in S. 972, H.R., 1459, and H.R. 4, but not in the Finance Committee bill, has to do with the reimbursement of utilities for construction costs. Under current law, the costs of building new transmission and distribution lines for new generating plants, homes, commercial properties, and industrial sites, indeed, any kind of property where construction costs are paid by a developer or interconnecting party to a utility, are treated as contributions in aid of construction--CIACs--and are considered as taxable income to the utility. The result is that developers or interconnecting third parties must reimburse a utility for construction costs plus a Federal tax of over 30 percent. The proposed solution is to treat the reimbursement of these costs as non-taxable, therefore facilitating new generation, transmission, and distribution facilities by making it less costly to provide these services. This would certainly help increase the supply of power and improve electric reliability, and I am hopeful that Congress will resolve this issue in conference. The fourth provision concerns the public power utilities only. This provision effectively relaxes the private use restrictions on existing bonds if the issuing municipal or State utility elected to terminate permanently its ability to issue tax-exempt debt to build new generation facilities. Publicly-owned utilities, as entities of State and local governments, have used tax-exempt debt to finance their utility infrastructure in much the same way as cities finance schools, roads, and bridges. Without this provision, public power systems cannot issue stock to raise capital and have no alternative source of financing for these large capital projects other than municipal bonds. In exchange for the use of tax-exempt debt, public power systems are required to adhere to a strict set of Federal tax rules and regulations designed to limit the amount of power they can sell to private entities. These rules limit a public power entity's ability to negotiate contracts with exiting customers, to resell excess power resulting from competition, ``lost load'', and to discourage the opening of transmission lines that were financed with tax-exempt debt. The truth is, the current private use laws and regulations are no longer suitable for today's energy market. S. 972 and H.R. 1459 successfully incorporated what both the investor-owned and the publicly-owned utilities agree would constitute an effective modernization of the current Tax Code. The Finance Committee bill did not meet that test, and H.R. 4, although it attempted to do so, failed that test as well. What happened was that H.R. 1459 sustained damage during the process of House passage. The bill, as approved by the Committee on Ways and Means--H.R. 2511, ``The Energy Policy Act of 2001''--and as subsequently passed by the House--H.R. 4, ``Securing America's Future Energy Act of 2001''--contains substantial, material modifications to the original legislation that make it impossible to vote for. In fact, certain modifications are even more restrictive than existing law and IRS regulations. As a result, H.R. 4, overall, works absolutely counter to national energy policy and the efficient operation of our country's electric infrastructure. The various conditions set forth in the bill will unfortunately discourage utilities from taking the necessary steps to advance open access. Examples of the most problematic provisions: Provisions that eliminate public power's ability to elect to forego issuance of future tax-exempt bonds for generation from refunding outstanding tax-exempt generation bonds, even though this can result in savings to the utilities' customers and the U.S. Treasury. The bill also prohibits these electing utilities from utilizing tax-exempt financing to fund limited repairs and environmental improvements, including those which may be government-mandated. In the context of sales of energy, there are provisions that restrict or eliminate public power's ability to use long-standing statutory and regulatory exceptions to the private use rules, and provisions that constrain new rules designed to enable public power to participate in a deregulated environment. As an example, language in the bill effectively precludes sales to rural electric cooperatives that were one of the exceptions to the private use rules. The bill seems to provide that the expansion of an existing generation facility can result in loss of eligibility of the entire facility for permitted exception treatment for long-term take or pay requirement contracts, even if the cost of the expansion was financed with taxable debt or equity. Furthermore, a public power company that owns no transmission will qualify for the bill's clarifications to the private use rules only if all transmission providers who provide transmission to that municipal utility's customers provide open access to all of their transmission facilities. These types of restrictions reduce or eliminate many of the benefits intended in the bill. There are new restrictions on tax exempt bonds for transmission facilities that will prevent municipal utilities from using tax-exempt bonds to finance new transmission facilities to connect new power plants to their service areas. In addition, new restrictions in the bill require that, to qualify for private use relief, public power transmission facilities must be owned, directly connected to customers, and necessary to serve those customers. Thus, the bill ignores the need for investment in new transmission for maintenance of grid reliability, the multiple legal forms of ownership and use of transmission (including the different forms of RTOs and related organizations, leasehold and operational arrangements), and the fundamental physics involved in transmission network operation. The new exception to the private use rules for sales of certain lost load is revised so as to require proof that the load loss was ``attributable to open access'' in order to take advantage of this exception, which was designed to ensure that our nation's energy capacity is fully utilized. I had hoped that these problems could have been resolved in the Finance Committee by my colleagues and myself, but the revenue constraints imposed on us have prevented us from rectifying these problems. So the Finance Committee, rather than correcting the errors as reported in the final version of H.R. 4, chose not to provide any private use relief at all. Instead, we directed the Treasury to conduct a study to examine the problem and propose a solution. That said, I think more immediate assistance can and should be provided by the Treasury Department. During the Finance Committee's mark-up of the tax title of the pending energy bill, I asked the Treasury Department to look into an allocation proposal related to the private use restrictions of the Internal Revenue Code. The proposal would provide a limited safe harbor under which issuers of tax-exempt bonds could allocate private use first and foremost to the portion of an output facility that is not financed with outstanding tax-exempt bonds. For certain bonds, the proposal would permit issuers to use reasonable methods to allocate various funding sources among their assets. The Treasury Department has examined this proposal and believes that many of the issues raised therein could be addressed under current law. Treasury officials say we could, under a different time frame than the pending energy bill, issue regulations to that effect. In the meantime, however, I would strongly support a provision in the tax title of the bill incorporating this proposal. In addition, various members of the Finance Committee, including the chairman of the Energy and Natural Resources Committee, have asked that the Treasury Department finalize various temporary output regulations that relate to the use of tax-exempt financing by public power as quickly as possible. I expect that the Treasury Department will make finalizing these regulations a top priority and will endeavor to be responsive to the many public comments that it has received. I look forward to their findings. I ask unanimous consent to have printed in the Record letters dated March 8, 2002 and March 20, 2002.

Mr. KYL. As I understand it, it is now in order for me to bring up amendment No. 3333. Is that correct?

Mr. KYL. How much time remains for me?

Mr. KYL. Will the Senator from California yield?

Mr. KYL

Mr. KYL. Mr. President, on April 22, I submitted amendment No. 3185 which addresses service obligations of load-serving entities. This amendment gives specific direction to FERC in exercising that authority. It amends title II of S. 517 to require FERC to ensure that utilities with service obligations are able to retain existing firm transmission rights in order to meet those obligations. This amendment allows FERC to go forward with its program to establish a standard market design for wholesale electric markets while at the same time ensuring that transmission owners and holders of firm transmission rights under long-term contracts are able to retain sufficient transmission rights to meet their service obligations under Federal, State, or local law, and thereby to protect retail customers. This amendment has been reviewed by the Administration, FERC and a number of key participants in the electric restructuring debate. I believe we have some agreement on the concept, but need more time to work out the language. Accordingly, I am not offering the amendment now but would like to work with the managers of the bill to come up with an acceptable version.

Mr. KYL. I would like to engage in a colloquy with the chairman of the Senate Finance Committee in order to discuss an issue that I know the chairman, the ranking member of the committee and their staffs have been attempting to address for some time. Specifically, we all know that the electric industry is undergoing significant change However, certain tax provisions, drafted long ago, appear to obstruct the current restructuring of the industry. The Senate Finance Committee has attempted to better understand these tax and non-tax conflicts in the rapidly changing national energy environment by directing the Department of the Treasury to conduct an ongoing study of the issue and report back to the tax-writing committees on an annual basis with legislative recommendations. In addition, the manager's amendment to the tax title to the energy bill before us on the floor has provisions that will facilitate restructuring for cooperatives and investor-owned utilities. Public power utilities need to know how they can operate in this new environment. This guidance is especially critical given the lack of a legislative solution to modernize Federal ``private use'' tax laws passed in the mid-1980s. I rise today to suggest two mechanisms that will provide very limited, but necessary, guidance for public power utilities. I believe both of these mechanisms can be addressed either through administrative guidance or legislation. First, the report of the Senate Finance Committee urges the Department of the Treasury to finalize as quickly as possible regulations relating to the definition of private activity bond for public power entities. In adopting these regulations, the committee hopes that the Treasury will use its regulatory authority to provide flexibility to foster the participation of public power in a restructured electric industry. I believe that finalization of the regulations is important. I further believe that flexibility may be provided in the regulations by, among other measures, lengthening the term of the short-term output contract exception to 5 years; providing specific, more flexible guidelines for utilities to replace load lost from participating in the open access of their transmission facilities; and allowing the advance refunding of bonds used to finance transmission facilities used in open access or regional transmission organizations. I would hope that the legislative history to the tax title to the energy bill would urge the Treasury Department to consider adopting these items to the greatest extent possible when the private activity regulations are finalized. Second, public power utilities historically finance aggregate generation, transmission and distribution needs with tax-exempt debt and electric system revenues, equity. Moreover, these construction needs are often financed on a system, versus a project, basis. This means that each dollar of borrowing is not tied to a dollar investment in specific projects. This is a common utility practice, but one that complicates the ability to manage private use limitations in the current environment. Current law does not provide specific guidance in this area, though the Internal Revenue Service has issued individual private letter rulings to entities other than utilities that have sought clarification on the ability to allocate private business use to equity. Unfortunately, the private letter ruling process can be lengthy, administratively cumbersome and not viable were a large number of utilities to pursue this remedy. A modest solution to this issue would be to provide that the portion of a public power utility's system that is financed with amounts other than tax exempt-debt can be used without regard to private use limitations. Public power systems then have a strong incentive to finance projects with equity or taxable debt rather than tax-exempt bonds. Specifically, language to provide broad guidance in this area could state: If, after first allocating private business use contractual sales to the portion of electric output facilities financed with equity or taxable debt, the remaining amount of such contracts, if any, when allocated to the tax exempt bond- financed portion of the facilities would not cause the private business use test to be exceeded, then the private business use limitations are deemed not to have been exceeded. I have been informed by the Treasury Department that they believe that they have the authority to address this issue and are working on published guidance in this area. Unfortunately, the Treasury and the Internal Revenue Service have been working on comprehensive allocation regulations for some time and guidance is needed now. Therefore, I would again hope that whatever legislative history that emerges with respect to the tax title to the energy recognize the ability of a public power system to allocate its equity to investments in as flexible a manner as possible. I hasten to add that these two suggestions do not provide a comprehensive fix to the numerous technical private use problems that require the attention of this body. However, it will provide necessary guidance to public power utilities at a time when managing private use has become increasingly challenging due to industry events. Moreover, they will not upset the competitive balance in the industry. I ask the distinguished Chairman of the Committee on Finance if I can count on him to support language with respect to these two items in any report that this body or the conference may issue.

Mr. KYL. Mr. President, I will take my 1 minute to speak in favor of my amendment first. Then Senator Hatch will speak in favor of the motion to table. This amendment strikes the alternative fuels tax credit portion of the bill. The savings would be at least $1 billion, probably closer to about $3 billion. That is not my reason for doing it. Arizona had a somewhat similar program in our State government that would have bankrupted the State and ruin political careers. It was a fiasco and it was finally terminated. It was full of loopholes and problems and costs that were never thought through. My reason for offering the amendment is, frankly, to send a warning to all of my colleagues that we really should have thought it better through in our own Federal version. To their credit, the staff of the Finance Committee did take the advice of a lot of people at the department of transportation in Arizona and fixed a lot of the problems. My concern is they didn't fix enough and we will rue the day we voted for this provision--at least without the care that I think should have gone into it. My motion strikes the provision from the bill.

Mr. KYL

Mr. KYL. Mr. President, if none of my colleagues are prepared to take the floor, let me spend a couple of minutes in support of the Nickles amendment. As you know, the Nickles amendment, which is the pending business, would reduce the amount of penalty in effect that a public utility would bear if it did not produce the required amount of electricity for retail sales with so-called renewable energy resources. This has to do, again, with the portfolio that we call the renewable resources that would be required to account for 10 percent of the retail sales of all the investor-owned utilities in the country. Bear in mind that the publicly owned utilities are exempted only because a point of order would have been effective against the inclusion of the public utilities in the amendment due to the unfunded mandate nature of the underlying provision. Ultimately, this probably will apply both to investor-owned and public utilities, but for the moment it applies only to the investor-owned utilities. When I talk about a penalty on the utilities, of course, I am really talking about a penalty on the utility customers because utilities are not in the business of losing money--at least not very long. As a result, their expenses are charged back to their customers. What we are really talking about in the underlying bill is a requirement that these utilities produce 10 percent of their retail power from so-called renewable resources, such as wind, solar, or biomass energy. Then, if they don't do so, they have to buy that amount from other available resources or, if they can't do that, pay an amount equal to 3 cents per kilowatt hour to make up the difference. Let us say that the requirement when the bill is fully effective is 10 percent and they are able to generate 1 percent from the renewable resources; let us say they are able to buy another 1 percent from somewhere else. That means they would have 8 percent that would have to be accounted for by a penalty of 3 cents per kilowatt hour of that retail sale. How much would that cost the utility customers around the country? That is the question. The Nickles amendment would cut the cost in half. The Nickles amendment would say, instead of 3 cents per kilowatt hour, it would be 1\1/2\ cents per kilowatt hour. I am informed by Senator Nickles that is the amount the Clinton administration had proposed when it had a similar proposal. We would be talking about cutting in half the penalty that otherwise would pertain. I cited earlier in this debate the statistics by utility and by State. I have these statistics again. I will recite a few of them and insert in the Record at the appropriate point and make available for all of my colleagues exactly how the customers in each State would be required to pay, again just for the penalties of the public utilities; that is to say, the investor-owned utilities. Let me cite some examples. In the State of Alabama, the cost to the customers is $156-plus million or, under the Nickles amendment, these customers in Alabama would save $78 million per year. Since I see my colleague from Vermont in the Chamber, let me look at Vermont. In Vermont, the utility customers of the investor-owned utilities would save over $7 million per year under the amendment of the Senator from Oklahoma. Let me look at Florida, the State from which the Presiding Officer comes. Florida is a big State with a lot of utility customers--a mix of both public and private utilities--but the private utilities annually would suffer an expense of over $451 million, so that the savings from the Nickles amendment for the utility customers in Florida, the investor-owned utilities, would be more than $225 million. In my own State of Arizona, the cost is almost $100 million. So the savings per year would be just under $50 million. Let me pick a couple of other States. For the State of Nevada, the State of the distinguished majority whip, the savings would be over $37 million because the expense there is over $75 million. Let me pick another couple States at random. For New York State, the savings would be almost $132 million. Let me take my neighboring State of California, another large State. Californians, obviously, are going to get clobbered by this renewable portfolio requirement. The estimate is, therefore, that for the State of California, just cutting this penalty in half, reducing it to 1\1/2\ cents per kilowatt hour, would save the customers in California over $243 million per year. These savings illustrate that there is a cost to what we are imposing in the Senate. We come up with a lot of good ideas. In fact, our ideas are so good we want to impose them on everybody else. I offered amendments to make this voluntary, but my proposals were rejected. So this is a mandatory requirement. This is required of all of the electric customers in this country, so I thought it would be important to know how much it is going to cost--in other words, by our action, what costs are we imposing on the electric customers of our country?--so that we can then make a judgment of whether it is worth it. What we are doing here has significant consequences to people. We pass bills all the time to try to help people in need. People need help with their housing, so we provide them assistance for housing. People need help with their heating bills, so we provide them assistance under a program called LIHEAP. And there are any number of other programs. So why, then, would we be imposing this kind of a big cost on them? Of course, the bigger the family, the more your expenses are going to be; therefore, the more this is going to cost you. What sense does it make for us to impose this kind of cost on consumers with this legislation and then turn right around under the LIHEAP bill and say: Well, we know you are having to pay a lot for your electric bill, so we are going to help you make up for part of that. This just does not make any sense. It is incoherent policy, and it damages real people. That is why I am citing these statistics. In a relatively small State--let me just take the State of the honorable chairman of the Energy Committee--the State of New Mexico, by passing the Nickles amendment, the people of New Mexico would save over $19 million a year because they are going to have to pay almost $40 million as a penalty because New Mexico cannot generate the requisite 10 percent that we are going to mandate under this bill. These are not my figures. This comes from the Department of Energy, from the Energy Information Administration, which is a branch of the U.S. Department of Energy. These are up-to-date figures. I had figures in this Chamber before when we were debating this issue. These are even more updated figures than that. So it seems to me that we in this body have to think about the consequences of our mandates. If we are going to make Americans pay more, we better have a darn good excuse or a good reason for making them do that. Doesn't it make sense that we would say to people--let's just take the State of California, for example--Look, Californians, you are going to have to pay $243 million under the Nickles amendment, but if the Nickles amendment does not pass, you are going to have to pay $487 million a year in penalties. You may think it is worth it in order to encourage the development of wind energy or solar energy. If you do think it is worth it, would you be willing to pay that cost on an individual basis? My guess is, you would have, out of, say, 100 people, probably 5 or 10 who would say: We feel like we are in a contributing mood, and we would like to pay for our share of what it will really cost us--the real cost to generate more of this energy from these so-called renewable resources--so we will pay a higher electric bill. I have not broken this down per customer, but, obviously, each customer is going to pay a fairly significant amount. But if you say to the people of California, Are you willing to pay almost $500 million a year more--if you put that to a vote--most of them would say: No, we don't think so. Why don't you figure out another way to make this happen. This represents a substantial increase in our power bill, and we don't want to do it. What we are doing in this body--I am going to call it arrogant because I think it is a certain degree of arrogance that must affect our willingness to impose these kinds of financial burdens on the American people for the sake of, what, to generate more energy with wind, to do what, save some oil or gas or coal maybe that we would otherwise use to produce power. Of course, we are not willing to expand our energy production, but we are going to require this use of renewable resources. And the incentive is going to be: If you don't do it, then you all are going to have to pay a big penalty. I think that is arrogance on our part. The reason I use that harsh word is because I think if you put that question to your constituents--I know if I put that question to the constituents that I represent, I am very certain most of them would say: No, thank you. We would just as soon you not impose that additional tax on us. This is a tax on energy. It is a tax on energy use for individual retail customers. But most of our constituents will not know that is what we have done. That is why I am going to make it a point to let them know. We are going to publicize this in every way that I know, in every State that I know, to make sure that the constituents of all of my colleagues understand what their Senator imposed upon them in the way of a new tax and what it is going to cost them. These figures are going to be in every State in the country so that there will be no question that it is understood what the costs are, on our constituents, that we are imposing upon them in the name of good, to produce more wind energy and more solar energy. I just want the folks in California to know it is going to cost them almost $500 million a year--$487 million to be exact--and the same thing for every other State. The figures are actually understated because, as I said, this only represents what the investor-owned utilities will have to pay in penalties. We know there will be additional penalties, assuming the publicly owned utilities are also added to this at a later time. So I think it is important for the American people who buy energy to understand what we are imposing on them by way of cost. The best way to do that is by bringing it out, with the amendment of the Senator from Oklahoma, by demonstrating what we can save them by simply cutting this penalty in half, from 3 cents per kilowatt hour to 1\1/2\ cents per kilowatt hour. It is still a lot of money. I have not added it all up, but it adds up to an awful lot of money. It is clearly in the multiples of billions of dollars. But we have these statistics by State so we will at least be able to show people what they will save by State as a result of the adoption of the Nickles amendment. We will have a copy of this at the party desks at the time that the vote is called on the Nickles amendment. Any Member wishing to see how much he or she is willing to save his or her constituents, if you would like to see how much you will save your constituents by voting for the Nickles amendment, we will have that here for you. Conversely, if you would like to see how much of a tax you will impose upon your constituents, we have that column as well. I hope my colleagues will take advantage of the information we have. This is information from the Department of Energy on how much this electric tax is going to cost the ratepayers all over this country. We could at least do them a favor by cutting the penalty in half. And if you want to know how much you will save your constituents by doing that, by supporting the Nickles amendment, we have all the figures right here. I see the Senator from Oklahoma is here. I have been referring to his amendment. Let me see if the State of Oklahoma would save any money here. It turns out we are going to tax the utility customers there over $112 million a year. So at least he is going to save his constituents over $56 million a year. That ain't peanuts. That is real savings. Equivalent numbers apply to all of the rest of the States. I hope my colleagues will support the Nickles amendment and do their constituents a favor.

Mr. KYL. Mr. President, I ask unanimous consent to print in the Record the table to which I referred.

Mr. KYL

Mr. KYL. I thank the Senator.

Mr. KYL. Since there was not an amendment pending at the desk.

Mr. KYL. The reason I ask is, there was some confusion at the desk as to which version the Senator was offering.

Mr. KYL. Madam President, might I inquire of the Senator from Montana, it is the Senator's intention that the Finance Committee version--not a modified version of that--be offered for inclusion in the underlying bill; is that correct?

Mr. KYL

Mr. KYL. Mr. President, I appreciate the remarks of the Senator from Texas and would reiterate that this is really a propitious time for us to deal with this issue, for the following reasons: The House of Representatives, as we speak, is taking action to pass a bill that would make permanent all of the tax reform we enacted less than a year ago. That includes the death tax repeal. Second, we all recall what we did 4 days ago, on April 15, and I know at that time there were a lot of calls by friends on both sides of the aisle in both bodies talking about how the tax burden was too great for most Americans and we wished we could do something about it. We now have an opportunity to do something about it, as Senator Gramm said. Third, in his Saturday radio message--and I know there are still a lot of Americans who listen to the President's radio message on Saturday morning; I know I do--he explicitly called for us to do what Senator Gramm and I are suggesting. I read briefly from the remarks of President Bush in his radio address on Saturday morning: One thing that is pretty interesting to note is that some of these tax reforms are going to expire at the end of ten years, or in 2011. It is a quirk in the law. I think that doesn't make much sense. It is going to be hard to plan your future. If you think all of a sudden these things get kicked in full time and then go away, they need to make these tax cuts permanent. For the good of the working people of America, for the good of families, for the good of small businesses, for the good of farmers and ranchers, we need to make the tax relief plan permanent in the Tax Code. President Bush was saying the reform the Congress passed, and he signed about 10 months ago, is going to expire now in 9 years, and if we really meant it when we passed those reforms, we should make those reforms permanent, especially the death tax. The reason I say ``especially the death tax'' is because people have to plan to deal with the death tax. They have to think ahead. If they don't know what the Tax Code is going to be when, say, the head of the household dies, they don't know what to do to plan for it. The tax relief we voted on gradually reduces the death tax burden until the 10th year when it goes away altogether. When the sunset expires, the entire Tax Code, the way it was before, comes back into play, and people are then paying the death tax at a rate of up to 55 percent, with an exemption of only $675,000. How do they plan? Are they going to die in the year 2009, 2010, or 2011? It makes a big difference in which year they die. The irony is that one of the major reasons for eliminating the death tax was that they wouldn't have to spend the enormous amounts of money they spend each year--to plan, to buy the insurance, do the estate planning, and all that goes with planning--to preserve as much of their estate as possible. We have found, and I have quoted the statistics in the past, Americans spend about the same amount of money each year on lawyers and insurance companies planning their estates as other Americans do in actually paying the estate tax, just about the same amount of money. It turns out to be a double tax, except each year, every single year, Americans spend $20 to $30 billion on estate planning. The President is saying: Since you can't plan because you don't know what the law is going to be, we have to figure out what that is, and make it permanent so that everybody knows what the rules are and what they need to plan against. Obviously, we believe what the rules should be is what the Congress decides and what the President signed into law, which is that the death tax should be repealed, as it is in the year 2010. That is what everybody was gearing toward. That was the whole idea, get to final repeal. That is what we voted for. We want to give our colleagues the opportunity to make that repeal permanent so people can plan for the future, so they will know what the rules of the road and the Tax Code are at the time of death. We could probably have picked some other way to bring this to our colleagues, but the distinguished Presiding Officer will recall the only way we have had an opportunity so far to bring this question before our colleagues is through a sense of the Senate. The distinguished Presiding Officer and many others were supportive of that sense of the Senate, saying we need to get on about the business of doing this. We all agreed--not all, but most Members agreed--with that. There are very limited opportunities to do that in the Senate. We have to have a bill that has revenue factors involved. This bill before the Senate now has a feature from the Finance Committee that deals with revenue and therefore it is one of the few opportunities--maybe the only opportunity, quite possibly the only opportunity--we will have all year long to bring this issue to the floor when it is germane to the legislation pending. There is some talk that on down the road we may or may not have a pension bill. If we did, and it got to the floor, the issue would be germane to that, as well, but that is very uncertain. Therefore, Senator Gramm and I believed the best way to bring this issue before the body in a way we could express ourselves on this once and for all was through the only vehicle that existed, which is the vehicle of the Finance Committee work on the energy bill. That is why we do it at this time. As I said before, there is a secondary reason, and that is because most Americans are focused this week on having paid their taxes, and at least for those who are listening to what the President had to say, we are well aware of the fact that the President wants to make the tax cuts permanent. He especially mentioned the death tax. Now, it is one thing to do this because the House of Representatives is doing it this week and the President has called for it, the other reason to do it obviously is it is the right thing to do. I will spend a few minutes talking about that. We knew when we debated a few weeks ago, when we had the sense of the Senate before the Senate, which was, of course, adopted, that one of the things on people's minds at that time was stimulating the economy, getting the economy going, and making sure the economic growth we were beginning to see signs of--it is almost like the flowers of spring coming up out of the soil; we can see economic recovery coming. But there is a question whether we can sustain that with oil prices that are now probably going to increase substantially. That could knock out the economic recovery. For our families back home thinking about what they can afford this year and whether it will be a good year economically and whether they will save their job, we need to do everything we can to let them know we will work as hard as we can to make sure the economic recovery is sustained, they keep their job, we keep oil prices as low as possible, and all the rest. We found during the previous debate that pumping money back into the economy, which occurs as a result of the capital formation from repeal of the death tax, is one of the surest ways of creating jobs and maintaining this economic expansion. There were several experts who made that point in one way or another. There are studies that make the point. One study talked about a $40 billion stimulus to the economy from the repeal of the death tax. Let me refer to some of these in order. What Alan Greenspan said on this issue is instructive. He was asked a question during a hearing at the House of Representatives: What's your thought on what we ought to be doing here with regard to permanency-- meaning making the tax cuts permanent? Chairman Greenspan's reply stresses the need for certainty in the Tax Code, which is what I was talking about. It is the key. He said: Whatever you do, Congresswoman, I think it has to be clear where the longer term tax structure in this area is. You cannot do estate planning, as you point out, unless you have a judgment as to what these numbers are. And wherever the Congress comes out, I think it is far more important that it come out clearly and unequivocally and not have an issue pending as to an issue which would create a degree of uncertainty which could make estate planning very difficult to implement. Those are almost the exact words I used before. I had forgotten Chairman Greenspan expressed it in exactly this way. However, that is the point. When there is certainty, people know how to plan, they know how to invest. As a result, the capital formation that our economic recovery requires is available for investment. What Mr. Greenspan is saying is, this is an area where this is most important, where planning is most critical, the area of the estate tax. We have to have clarity. We have to have, as Mr. Greenspan said, the code ``come out clearly and unequivocally,'' with a degree of certainty so that estate planning is not difficult to implement. Mr. Greenspan testified in another forum in response to a question from one of our colleagues in the Senate. He very clearly rejected the notion that making the tax cut permanent would complicate efforts to meet the Federal Government's long-term financial obligations to Social Security and Medicare. I read: I don't know of any economist who does long-term forecasting and presumes that the tax cuts will fall off a cliff at the end of the period in which they are statutorily in place. I don't think it is an economic issue because I don't know anyone who seriously believes the world works the way legislation stipulates. That is the end of the quote by Chairman Greenspan. He is absolutely right. Nobody would imagine that at the end of 10 years all the work toward eliminating the estate tax simply disappears and we go back to the way it was in the year 2000. Who would think that? My friends back home, with whom I talked, to whom I kind of came home and bragged about repealing the estate tax, were very surprised when I said: You understand when I said repeal it, what it meant was it was phased down to the 10th year and then on the 11th year it comes back again. They said: How could it be? I had to explain to them the arcane--I should not say arcane--the rule under which the Senate operated to get this adopted was the reconciliation procedure. That has a 10-year limit to it. That means whatever you do can only have an effect of 10 years. That means if you reform taxes and repeal a section, at the end of 10 years, the 11th year it goes right back the way it was before. That is not the way we should have to do it. Unfortunately, it was the only way to get the matter before the Senate at the time it was brought forward, and it was the only way to get the number of votes necessary to effect all the reforms we wanted to adopt. So there we are with a procedure that Alan Greenspan says nobody would understand--but it is the reality, so at the end of 10 years we are faced with this absurd situation that the repeal that we effected disappears and we are right back where we started. Mr. Greenspan is saying that is unacceptable. We are saying that is unacceptable. The President is saying it is unacceptable. The House of Representatives today is going to invoke saying it is unacceptable. We have now an opportunity in this body to make sure that unacceptable result does not continue, that we have an opportunity to finally, once and for all, repeal the death tax so people can get about their planning, get about their business, and we do not have this immoral tax hanging around our heads. Both the President and I have spoken about this, and the Senator from Texas has made the point as well, that not only is this a bad tax in terms of what it does to capital formation and economics, but it is an unfair tax. I know some of my colleagues on the other side have made the point that we have to find a way that rich people can pay a tax on the unrealized gain. In other words, if an asset is purchased, there are a lot of folks who want to make sure a tax is paid when that asset is finally disposed. In the real world we call it a capital gains tax. We say when you buy something, buy it at $100 and sell it at $500 and you do not do any improving on it, then you have a gain of $400 and the capital gains tax rate is going to apply against that $400 gain when you decide to sell the asset. So you stop and think, I have this piece of property that is worth $500. I know if I sell it I am going to have to pay a capital gains tax because I did not pay that much for it at the beginning; it has really appreciated in value. Do I want to do that? And you make a judgment in your mind to either sell it or not sell it. You know what the tax liability will be. You make an economic decision. With the death tax, it is totally different. There are two or three other examples in our Tax Code. You didn't decide to die or you didn't decide for your father to die. It happens. It is an unfortunate circumstance, but it is not or should not be a taxable circumstance. The Tax Code should tax behavior. It should tax action. It should tax decision. In other words, when Americans decide to do a certain thing that we have said is taxable, we do it knowing what the tax consequences are. The Tax Code should not penalize you for dying. It should not tax you for the act of having died or, to be more precise, it should not tax your heirs because you died. You didn't intend it; they didn't intend it. But people say you should still pay a tax or your heirs should pay a tax on the unrealized gain from the assets. So what we did in constructing this estate tax repeal was to say: You are right. That unrealized gain will be taxed. To be fair, we are not going to let anybody off the hook. No asset is going to be untaxed-- even though, by the way, in most cases this is the second tax. The first tax was the income tax that was paid and then this will be the second tax on the investment income, in effect. But in any event, in order to make sure nobody would go untaxed with the unrealized gains, in effect we have not just repealed the estate tax, we have substituted for the estate tax a capital gains tax on those assets, saying that if and when the heirs ever decide to sell that property, then and only then will they pay the tax. It will not be the estate tax of 55 percent; it will be a capital gains tax on the gains at the appropriate capital gains rate, whatever that applicable rate may be at that time. We did one other thing. Today under the Tax Code the minute you die your property has a new value attributed to it. It is not the value at the time you purchased it but the value now at the time you die, so the value is much higher. If you were to sell that--let me use an example. Let's say a billionaire in our country today dies and his widow inherits all the assets. The very next day that widow decides to sell those assets. How much capital gains tax does the widow pay? The answer is none. The reason is that the value of the estate is now the value at the day of death. Technically, if she sold it immediately it would be none. There might be a little appreciation of a few hours. But the point is, if she sold it the next day there would be no capital gains tax due because the value would be increased to the value at the time of the death rather than at the time acquired. What we say is it is going to be a capital gains tax based on the appreciation of the original value of the property. If it had been acquired 10 years earlier and had a value of $100 and the value at the time of death is $500, A, when the property is sold, it is sold by the lawyers, it is going to have a gain of $400, but again the tax rate is the estate tax rate, which is in some cases less than half of the estate tax rate and, B, the tax is only due if the heirs make an affirmative decision to sell the property knowing what the tax consequences will be. That is fair. I certainly do not attribute this to any of my colleagues, but there are those on the outside who like to demagog this issue. They like to say this is just a rich man's tax and we are going to let all the rich people in the world off because we are going to repeal the tax that applies to them. They are not telling you the truth. The truth is, a tax will be due on those estates, but it will be a tax due at the time the assets are sold. It is the same rule in the Tax Code that applies to other situations in which, by fate, in effect, something happened to you and then you got income as a result and you should not have to pay income tax on that immediately. It is the same thing that applies when something is stolen from you and you are recompensed for the theft. It is the same thing that applies when you have property condemned and the State pays you money. It wasn't your choice to have the property condemned so you should not have to pay tax on the money at that time. As a result, there are few provisions of the Tax Code that recognize, where there is involuntary behavior that resulted in gain, or income, that people ought to have the ability to defer the tax on that until they want to sell the asset and at that point in time the capital gains tax is the appropriate tax. I hope my colleagues appreciate when we talk about the repeal of the death tax here, what we voted for and what was signed into law is not a provision that says those assets are never taxed. It is a provision that says they are taxed when the assets are sold by the heirs at the capital gains tax rate. I want my colleagues to understand this because I think when we explain to our constituents back home how we voted on this, whether we voted to make this tax cut permanent or not, we also need to appreciate that we can demonstrate what we have done is eminently fair; that people shouldn't have to pay a tax at the involuntary time of death. That is a most unfair thing to do at the worst time in a family's life, that they should have to pay a tax on the unrealized gains. But they should do that as we do in the other parts of the Tax Code when an economic decision is made based upon, among other things, the tax consequences that pertain. When we have an opportunity to vote on this amendment, I hope my colleagues will consider the economic improvement that would result; the fact that we will be following what the President and House of Representatives have in effect asked the Senate to do; that we will be keeping faith with our constituents whom we told we repealed the tax and who now would want to know that we did in fact do it permanently; and that it wasn't just a charade for a 1-year period of time in the year 2001 and then go back to the way it was before. If my colleagues can appreciate those points, I hope they will join us when we have an opportunity to make this permanent, and join Senator Gramm and me in accomplishing that result.

Mr. KYL

Mr. KYL. Madam President, this is a good day for the security of the United States. The terrorist attacks that so changed our nation occurred over seven months ago. Seven months is too long to wait to pass a measure as important, as potentially life-saving, as this one is. After months of meetings about these issues, it is time to do what is right--to fix our immigration and via-processing systems so that terrorists cannot enter or remain in the United States in violation of our laws. Congress took an important first step shortly after the terrorist attacks. The USCA PATRIOT Act, signed into law on October 26, 2001, provided us with better tools to fight terrorism. Among other provisions, that bill changed the definition of a terrorist--and, therefore, changed who is inadmissible to the United States. It clarified that the FBI can share information on its terrorist watch- list with other relevant Federal agencies. It provided the Attorney General with additional limited authority to detain would-be terrorists for a limited amount of time. Our Nation, however, continues to face overwhelming infrastructure and personnel needs at our consular offices aboard, along both our southern and northern borders, in our immigration offices, and throughout other Federal law and intelligence offices throughout the United States. The Border Security and Visa Entry Reform Act will provide for such resources, for such changes to existing law and infrastructure, the right way. As a result of this bill, resources will be efficiently targeted--funds, for example, will not be sent to the INS without a clear directive that explains to the agency exactly what it is responsible for producing. We have learned that it is only through direct instructions that we will see loopholes closed in our immigration system, our borders secured, intelligence shared appropriately and infrastructure modernized to achieve stated goals. If we do not provide this infrastructure and guidance, I fear that other unthinkable incidents will occur. Sadly, the real-life terrorist incidents that we suffered gave us too many real-life reasons why this bill is so desperately needed. In a hearing before the Senate Judiciary Committee's Subcommittee on Terrorism and Technology, Senator Feinstein and I heard some very trenchant testimony from Mary Ryan, Assistant Secretary of State for Consular Affairs, about the gaping holes in the system. Secretary Ryan's statement points to the dire need for better intelligence- gathering and significantly improved intelligence-sharing among all relevant agencies. The Border Security Visa Reform Act will provide for better information-sharing among appropriate agencies. Surprisingly to some, 18 of the 19 terrorists entered the country using B1/B2 tourist visas. According to State Department statistics, 47 foreign-born individuals, including the 19 terrorists, have been charged, have pled guilty, or have been convicted of involvement in terrorism over the past decade. All 47 had contact with an INS inspector. This, of course, points to the need for more inspectors, as the Border Security bill authorizes, and for better informed inspectors through the sharing of information, which the bill will facilitate as well. Madam President, the Mohammed Atta case perhaps illustrates what is wrong with the system better than any other. Atta entered the country on a B1/B2 visa that expired at the end of 2000. According to several sources, he was placed on the FBI's watch list 6 weeks before the terrorist attacks but his name was not entered into INS's system. The border-security bill will help by facilitating the real-time sharing of this type of information to relevant Federal law-enforcement and intelligence agencies, including all Federal agents who are responsible for determining the admissibility of aliens to the U.S., and all officers investigating and identifying aliens. An entry-exit system at our Nation's ports of entry, using biometric identifiers, linked to an interoperable data-sharing system, will go a long way toward ensuring that people like Mohammed Atta are never allowed to enter the country. This system, coupled with the significant increase in interior investigative personnel that this bill makes possible, will better enable authorities to find terrorists if they infiltrate our borders. Information about Atta would have been tapped at a port of entry's entry-exit system. And, three other terrorists among the 19 who overstayed their visas would have been identified at ports of entry as well. Before his visa expired on December 2, 2000, Atta asked the INS to change his status to that of ``student.'' After that expiration, and even without the information that showed his placement on a watch list, he should not have been allowed to reenter the country. Yet, in January 2001, he arrived back in Miami and, after he was questioned by the INS for an hour, he was admitted back into the United States. Another terrorist, Hani Hanjour, entered the country in December 2000 on an F1 student visa to study English but he never attended class. The school did not notify authorities that Hanjour never attended class. He overstayed his visa and melted into obscurity in the United States. The Border Security and Visa Reform Act will address both of the loopholes that allowed Hanjour to stay in the country undetected by requiring strict reforms in our student-visa system and, again, by requiring that our entry-exit system employ biometric passports and other travel documents to protect against fraud and to find visa overstayers such as Hanjour. Madam President, Senators Kennedy, Brownback, Feinstein, and I have worked hard to craft this bill. The staff of each of those members, Esther Olavarria, Lavita Strickland, and David Neal, should also be personally commended. After Senators Kennedy and Brownback, and separately Senator Feinstein and I, developed separate counter- terrorism bills, during a difficult time, while offices were closed on Capitol Hill, we all came together to produce the final product we now anticipate will be sent shortly to the President for signature. This bipartisan, streamlined product, cosponsored by both the chairman and ranking Republican of the Senate Judiciary Committee, and the ranking Republican of the Senate Appropriations Committee, will significantly enhance our ability to keep terrorists out of the United States and find terrorists who are here. Under the Border Security and Visa Entry Reform Act of 2001, at the direction of the President, all Federal law-enforcement and intelligence communities, the Departments of Transportation, State, Treasury, and all other relevant agencies will develop and implement a comprehensive, interoperable electronic data system for these governmental agencies to find and keep out terrorists. That system should be up and running by October 26, 2003, 2 years after the signing into law of the USA PATRIOT Act. Under our bill, terrorists will be deprived of the ability to present fake or altered international documents in order to gain entrance, or stay here. Foreign nationals will be provided with new travel documents, using new technology that will include a person's fingerprint(s) or other form of ``biometric'' identification. These cards will be used by visitors upon entry into and exit from the United States, and will alert authorities immediately if a visa has expired or a red flag is raised by a Federal agency. Under our bill, any foreign passport or other travel document issued after October 26, 2004, will have to contain a biometric component. The deadline for providing a way to compare biometric information presented at the border is also October 26, 2004. Another provision of the bill will further strengthen the ability of the U.S. Government to prevent terrorists from using our ``Visa Waiver Program'' to enter the country. Under our bill, the 29 participating Visa Waiver nations will, in addition to the USA PATRIOT Act Visa Waiver reforms, be required to report stolen passport numbers to the State Department; otherwise, a nation is prohibited from participating in the program. In addition, our bill clarifies that the Attorney General must enter stolen passport numbers into the interoperable data system within 72 hours of notification of loss or theft. Until that system is established, the Attorney General must enter that information into any existing data system. Another section of our bill will make a significant difference in our efforts to stop terrorists from ever entering our country. Passenger manifests on all flights scheduled to come to the United States must be forwarded in real time, and then cleared, by the Immigration and Naturalization Service before the flight's arrival. Our bill also removes a current U.S. requirement that all passengers on flights to the United States be cleared by the INS within 45 minutes of arrival. Clearly, in some circumstances, the INS will need more time to clear all prospective entrants to the U.S. These simple steps will give appropriate officials advance notice of foreigners coming into the country, particularly visitors or immigrants who pose a security threat to the United States. The Border Security and Visa Entry Reform Act will also improve our lax U.S. foreign student visa program, which has allowed numerous foreigners to enter the country without ever attending classes and, for those who do attend class, with little or no oversight of such students by the Federal Government. Our bill will change that, and will require that the State Department within 4 months, with the concurrence of the INS, maintain a computer database with all relevant information about foreign students. America is a nation that welcomes international visitors--and should remain so. But terrorists have taken advantage of our system and its openness. Now that we face new threats to our homeland, it is time we restore some balance to our consular and immigration policies. As former chairman and now ranking Republican of the Judiciary Committee's Terrorism Subcommittee, I have long suggested, and strongly supported, many of the antiterrorism and immigration initiatives now being advocated by Republicans and Democrats alike. In my sadness about the overwhelming and tragic events that took thousands of precious lives, I am resolved to push forward on all fronts to fight against terrorism. That means delivering justice to those who are responsible for the lives lost on September 11, and reorganizing the institutions of government so that the law-abiding can continue to live their lives in freedom. Madam President, as I said, 7 months is too long a period of time for the American people to wait for action on legislation that will make it tougher for terrorists to infiltrate the United States. I, therefore, urge my colleagues to act quickly to pass this bill. It really could mean the difference between a secure nation and one that continues to be vulnerable to infiltration by those who mean us no good. Time is absolutely of the essence.

Mr. KYL. I have a different take on it. I urge my colleagues to support this amendment, but I think we need to send a message to the INS that it can't be business as usual any longer and that instead of a ``can't do'' attitude, they have to have a ``can do'' attitude. I personally spoke with Governor Ridge about this deadline and asked him what he thought. He said: Let me get back to you. When he did get back to me, he said: We have to move forward as quickly as possible. I support the date that Senators Kennedy, Brownback, and Feinstein and I agreed upon. We have to show the American people we will get on with this and the delay will no longer be acceptable. Senator Brownback is correct when he says that this will make some people a lot happier. There were people who were saying: We are not sure we can meet this deadline in the bill. To that extent, the amendment of the Senator from West Virginia will be well received. I want to make it clear, we are not sending a signal by agreeing with the Senator from West Virginia tonight--and I know he doesn't mean to, either, as I understand this amendment--because we have decided it is OK to sit back and relax because we have extra time. It is simply a reflection of the fact that it will not be easy. It will take time. Nobody knows for sure exactly how much. However, all five of us, I am sure I can say, are strongly of the view that we have to get on with this. Business as usual is not going to cut it. The good news is that while technology may be a little more difficult to implement in the very beginning, and a little costly, in the long run it will be both cheaper and much more efficient in enabling analysis of the data in this huge country of ours with all of the millions of people who come into it by visas and other means. The technology will help enforce the provisions of this bill and other legislation on the books. Technology will be the answer eventually. It will take time to get going. But by agreeing to the amendment of the Senator from West Virginia, I can speak for everyone by saying to those folks who have to implement it, we do not mean for you to relax; we mean for you to get on with it. We have to do our part by giving you the resources to do it. I urge my colleagues to support the amendment.