Carl Levin

Mr. LEVIN

Mr. LEVIN. Mr. President, day after day record-high oil and gasoline prices are causing immense harm to millions of American consumers and businesses. Unless something is done to make energy more affordable, these record-high prices will continue to damage our economy, increasing the prices of transportation, food, manufacturing, and everything in between. Skyrocketing energy prices are a threat to our economic and national security, and the time is long past for action. My Senate Permanent Subcommittee on Investigations has conducted four separate investigations into how our energy markets can be made to work better. Most recently, last December, we had a joint hearing with the Senate Energy Subcommittee on the role of speculation in rising energy prices. As a result of these investigations and hearings, I have been advocating a variety of measures to address the rampant speculation and lack of regulation of energy markets which have contributed to sky high energy prices: First, put a cop--a regulatory agency--back on the beat in the energy markets to prevent excessive speculation and manipulation. That includes closing the Enron loophole and the London loophole and taking other steps to strengthen market oversight. Second, develop alternatives to fossil fuels to reduce our dependence on oil. Third, impose a windfall profits tax on oil companies that have profited from the massive price runup and use the money to help consumers, boost domestic energy supplies, improve energy technologies, and strengthen our energy markets. One of the major causes of our energy crisis is the failed policies of the current administration. The chickens have come home to roost on 7 years of a business-as-usual energy policy, paired with fiscal and foreign policies that have pushed our growing energy problem close to a breaking point. Because the administration has proved itself unable and unwilling to take the necessary steps to provide affordable energy supplies to the American people, it is up to the Congress to try to jump-start a comprehensive solution to skyrocketing energy prices. Congress already has taken two important steps this year--we have closed the Enron loophole and we have stopped the administration's misguided program to keep on filling the SPR despite record-high prices--but more can and should be done. That is why I support enactment of the Consumer-First Energy Act now before us and will be voting for cloture on this bill. Last week the price of crude oil reached a record high price of about $139 per barrel. Sky-high crude oil prices have led to record highs in the price of other fuels produced from crude oil, including gasoline, heating oil, diesel fuel, and jet fuel. The national average price of gasoline is at a record high of just over $4 per gallon. The price of diesel fuel, which is normally less expensive than gasoline, has soared to a record high of nearly $4.60 per gallon. Rising energy prices increase the cost of getting to work and taking our children to school, traveling by car, truck, air and rail, and growing the food we eat and transporting it to market. Rising energy prices increase the cost of producing the medicines we need for our health, heating our homes and offices, generating electricity, and manufacturing countless industrial and consumer products. The relentless increase in jet fuel prices, which have added nearly $75 billion to our airlines' annual fuel costs, has contributed to airline bankruptcies, mergers, fare increases, and service cuts. ``If fuel continues to go up, this industry cannot survive in current form,'' the president of the Air Transport Association said recently. Rising diesel prices have placed a crushing burden upon our Nation's truckers, farmers, manufacturers, and other industries. To make matters worse, our energy costs are rising much more quickly than energy costs in other countries, directly threatening our global competitiveness. In January 2001, when President Bush took office, the price of oil was about $30 per barrel. The average price for a gallon of gasoline was about $1.50. Since President Bush took office, crude oil prices have more than quadrupled, natural gas prices to heat our homes have almost doubled, gasoline prices have nearly tripled, and diesel fuel prices have more than tripled. It doesn't have to be this way. Just 7 years ago, at the end of the Clinton Administration, energy supplies were plentiful, and gasoline and other forms of energy were affordable. Once the Bush administration took office, however, it didn't take them long to eliminate the budget surplus by cutting taxes mainly for the wealthiest among us, creating a huge annual budget deficit, and driving up the national debt. This fiscal mismanagement has contributed significantly to a steep decline in the value of the dollar and soaring commodity prices. Because American currency is worth less, it takes more of them to buy the same barrel of oil. American consumers and businesses are forced to spend more and more of their hard-earned dollars to buy the same amount of energy. During the last years of the Clinton administration, the United States ran a budget surplus, totaling nearly $560 billion. But over the past 6 years of the Bush administration the annual deficits have totaled nearly $1.7 trillion, not counting the amount by which the Bush administration has been draining the Social Security and Medicare trust funds. When this is counted, under this administration the total outstanding debt has increased by a whopping $3.2 trillion. When President Clinton left office, the dollar was worth more than the Euro. In January 2001, it took only about 90 cents to buy one Euro. Today, it takes about $1.60 to buy one Euro--a record low for the dollar. The fall in the value of the dollar is a result of a weakened U.S. economy, a high trade deficit and a worldwide lack of confidence in the Bush administration's ability to manage our Nation's economy and foreign policy. As long as this administration continues to insist on irresponsible fiscal practices--including tax cuts for people with the highest income and an open-ended conflict in Iraq that is costing $12 billion a month--the dollar will likely continue to decline in value. The marketplace has rendered a clear ``no confidence'' in this administration's fiscal competence. Besides the weak dollar, there are other factors at work that account for soaring energy prices. Some are beyond our control; others we can do something about. In global markets, for example, the combination of increasing demand from developing countries, coupled with a variety of political problems in supplier countries, has contributed to price increases. Growing demand for oil and gas in China, India, and other developing countries is contributing to an overall increase in global demand for crude oil. On the supply side, many oil producing countries are politically unstable and have not been fully reliable suppliers. For example, in Nigeria, which is a major oil-producing country, for several years tribal gangs have been sabotaging production and pipelines. While we can't do much about growing demand in China and India, other causes of high prices can be addressed. For example, one key factor in energy price spikes is rampant speculation in the energy markets. Traders are trading contracts for future delivery of oil in record amounts, creating a paper demand that is driving up prices and increasing price volatility solely to take a profit. Overall, the amount of trading of futures and options in oil on the New York Mercantile Exchange has risen sixfold in recent years, from 500,000 outstanding contracts in 2001, to about 3 million contracts now. Much of this increase in trading of futures has been due to speculation. Speculators in the oil market do not intend to use crude oil; instead they buy and sell contracts for crude oil just to make a profit from the changing prices. The number of futures and options contracts held by speculators has gone from around 100,000 contracts in 2001, which was 20 percent of the total number of outstanding contracts, to 1.2 million contracts currently held by speculators, which represents almost 40 percent of the outstanding futures and options contracts in oil on NYMEX . There are now 12 times as many speculative holdings as there was in 2001, while holdings of nonspeculative futures and options are up but 3 times. Not surprisingly, this massive speculation that the price of oil will increase has, in fact, helped fuel the actual increase in the price of oil to a level far above the price that is justified by the traditional forces of supply and demand. The president and CEO of Marathon Oil recently said, ``$100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this.'' Mr. Fadel Gheit, oil analyst for Oppenheimer and Company, describes the oil market as ``a farce.'' ``The speculators have seized control and it's basically a free-for-all, a global gambling hall, and it won't shut down unless and until responsible governments step in.'' In January of this year, as oil hit $100 barrel, Mr. Tim Evans, oil analyst for Citigroup, wrote ``the larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels.'' At the joint hearing on the effects of speculation held by my subcommittee last December, Dr. Edward Krapels, a financial market analyst, testified, ``Of course financial trading, speculation affects the price of oil because it affects the price of everything we trade. . . . It would be amazing if oil somehow escaped this effect.'' Dr. Krapels added that as a result of this speculation, ``There is a bubble in oil prices.'' A fair price for a commodity is a price that accurately reflects the forces of supply and demand for the commodity, not the trading strategies of speculators who only are in the market to make a profit by the buying and selling of paper contracts with no intent to actually purchase, deliver, or transfer the commodity. As we have all too often seen in recent years, when speculation grows so large that it has a major impact on the market, prices get distorted and stop reflecting true supply and demand. Last month, Senator Jack Reed and I wrote a letter asking President Bush to appoint a high-level task force to evaluate how speculators are driving up prices through manipulative or deceptive devices. The task force should also evaluate whether there are adequate regulatory tools to control market speculation and prevent manipulation. Hopefully the President will act quickly to convene this task force. Excessive market speculation is a factor that we can and should do a better job of controlling. There are other long overdue actions as well that, if taken as part of a comprehensive plan, can combat rising energy prices. As to reining in speculation, the first step to take is to put a cop back on the beat in all our energy markets to prevent excessive speculation, price manipulation, and trading abuses. In 2001, my Senate Permanent Subcommittee on Investigations began investigating our energy markets. At the time, the price of a gallon of gasoline had spiked upwards by about 25 cents over the course of the Memorial Day holiday. We subpoenaed records from major oil companies and interviewed oil industry experts, gas station dealers, antitrust experts, gasoline wholesalers and distributors, and oil company executives. We examined thousands of prices at gas stations in Michigan, Ohio, California, and other States. In the spring of 2002, I released a 400-page report and held 2 days of hearings on the results of the investigation. The investigation found that increasing concentration in the gasoline refining industry, due to a large number of recent mergers and acquisitions, was one of the causes of the increasing number of gasoline price spikes. Another factor causing price spikes was the increasing tendency of refiners to keep lower inventories of gasoline. We also found a number of instances in which the increasing concentration in the refining industry was also leading to higher prices in general. Limitations on the pipeline that brings gasoline into my home State of Michigan were another cause of price increases and spikes in Michigan. The report recommended that the Federal Trade Commission carefully investigate proposed mergers, particularly with respect to the effect of mergers on inventories of gasoline. The investigation discovered one instance in which a major oil company was considering ways to prevent other refiners from supplying gasoline to the Midwest so that supply would be constricted and prices would increase. In March 2003, my subcommittee released a second report detailing how the operation of crude oil markets affects the price of not only gasoline but also key commodities like home heating oil, jet fuel, and diesel fuel. The report warned that U.S. energy markets were vulnerable to price manipulation due to a lack of comprehensive regulation and market oversight. Following this report, I worked with Senator Feinstein on legislation to put the cop back on the beat in those energy markets that had been exempted from regulation pursuant to an ``Enron loophole'' that was snuck into other legislation in December 2000. For 2 years we attempted to close the Enron loophole, but efforts to put the cop back on the beat in these markets were unsuccessful, due to opposition from the Bush administration, large energy companies, and large financial institutions that trade energy commodities. In June 2006, I released another Subcommittee report, ``The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put a Cop on the Beat.'' This report found that the traditional forces of supply and demand no longer accounted for sustained price increases and price volatility in the oil and gasoline markets. The report determined that, in 2006, that a growing number of energy trades occurred without regulatory oversight and that market speculation had contributed to rising oil and gasoline prices, perhaps accounting for $20 out of a then-priced $70 barrel of oil. The subcommittee report I released in June 2006 again recommended new laws to increase market oversight and stop market manipulation and excessive speculation. I again coauthored legislation with Senator Feinstein to improve oversight of the unregulated energy markets. Once again, opposition from the Bush administration, large energy traders, and the financial industry prevented the full Senate from considering this legislation. In 2007, my Permanent Subcommittee on Investigations addressed the sharp rise in natural gas prices over the previous year and released a fourth report, entitled ``Excessive Speculation in the Natural Gas Market.'' Our investigation showed that speculation by a single hedge fund named Amaranth had distorted natural gas prices during the summer of 2006 and drove up prices for average consumers. The report also demonstrated how Amaranth had traded in unregulated markets to avoid the restrictions and oversight in the regulated markets and how the price increases caused by Amaranth could have been prevented if there had been the same type of oversight in the unregulated markets as in the regulated markets. Following this investigation, I introduced a new bill, S. 2058, to close the Enron loophole and regulate the unregulated electronic energy markets. Working again with Senators Feinstein and Snowe and with the members of the Agriculture Committee in a bipartisan effort, we finally managed to include an amendment to close the Enron loophole in the farm bill that was then being considered by the Senate. The Senate unanimously passed this amendment to close the Enron loophole last December. The final farm bill that was passed by the House and Senate last month included language nearly identical to what the Senate had passed. Although President Bush vetoed the entire farm bill, both the House and Senate have overridden his veto. Our 5-year quest to close the Enron Loophole has finally been successful. The CFTC is now in the process of implementing the close-the-Enron- loophole law. Among other steps, it is charged with reviewing the contracts on previously unregulated energy markets, like the Intercontinental Exchange or ICE, to determine which contracts have a significant effect on energy prices and must undergo daily oversight. Once that process is complete, the cop will be back on the beat in those markets for the first time since 2000. Closing the Enron loophole is vitally important for energy market oversight as a whole, and for our natural gas markets in particular, but it is not enough. Because over the last 2 years, energy traders have moved a significant amount of U.S. crude oil and gasoline trading to the United Kingdom, beyond the direct reach of U.S. regulators, we have to address that second loophole too. I call it closing the London loophole. There are currently two key energy commodity markets for U.S. crude oil and gasoline trading. The first is the New York Mercantile Exchange or NYMEX, located in New York City. The second is the ICE Futures Europe exchange, located in London and regulated by the British agency called the Financial Services Authority. The British regulators, however, do not oversee their energy markets the same way we do; they don't place limits on speculation like we do, and they don't make public the same type of trading data that we do. That means that traders can avoid the limits on speculation in crude oil imposed on the New York exchange by trading on the London exchange. It also makes the London exchange less transparent than the New York exchange. My original legislation to close the Enron loophole would have required U.S. traders on the London exchange to provide U.S. regulators with the same type of trading information that they are already required to provide when they trade on the New York Mercantile Exchange. Unfortunately, this provision was dropped from the close-the- Enron-loophole legislation in the farm bill. The Consumer-First Energy Act, S. 3044, which the majority leader and others introduced recently to address high prices and reduce speculation, includes at my request a provision to curb rampant speculation, increase our access to foreign exchange trading data, and strengthen oversight of the trading of U.S. energy commodities no matter where that trading occurs. This provision would require the Commodity Futures Trading Commission, CFTC, prior to allowing a foreign exchange to establish direct trading terminals located in this country, to obtain an agreement from the that foreign exchange, such as the London exchange, to impose speculative limits and reporting requirements on traders of U.S. energy commodities that are comparable to the requirements imposed by the CFTC on U.S. exchanges. I believe this issue is so important that I have introduced this section of the package as a separate bill, which is numbered S. 2995. Senator Feinstein is a cosponsor of that bill. Following the introduction of our legislation, the CFTC finally moved to address some of the gaps in its ability to oversee foreign exchanges operating in the United States. Specifically, the CFTC, working with the United Kingdom Financial Services Authority and the ICE Futures Europe exchange, announced that it will now obtain the following information about the trading of U.S. crude oil contracts on the London exchange: Daily large trader reports on positions in West Texas Intermediate or WTI contracts traded on the London exchange; information on those large trader positions for all futures contracts, not just a limited set of contracts due to expire in the near future; enhanced trader information to permit more detailed identification of end users; improved data formatting to facilitate integration of the data with other CFTC data systems; and notification to the CFTC of when a trader on ICE Futures Europe exceeds the position accountability levels established by NYMEX for the trading of WTI crude oil contracts. These new steps will strengthen the CFTC's ability to detect and prevent manipulation and excessive speculation in the oil and gasoline markets. It will ensure that the CFTC has the same type of information it receives from U.S. exchanges in order to detect and prevent manipulation and excessive speculation. However, in order to fully close the London loophole, better information is not enough. The CFTC must also have clear authority to act upon this information to stop manipulation and excessive speculation. That is why I have been working with the sponsors of the Consumer- First Energy Act to include additional language to ensure that the CFTC has the authority to act upon the information it will obtain from the London exchange, in order to prevent price manipulation and excessive speculation. This new provision, which I helped author, would make it clear that the CFTC has the authority to prosecute and punish manipulation of the price of a commodity, regardless of whether the trader within the United States is trading on a U.S. or on a foreign exchange. It would also make it clear that the CFTC has the authority to require traders in the United States to reduce their positions, no matter where the trading occurs--on a U.S. or foreign exchange--to prevent price manipulation or excessive speculation. Finally, it would clarify that the CFTC has the authority to require all U.S. traders to keep records of their trades, regardless of which exchange the trader is using. It is my understanding that this new provision will be included in a substitute amendment that will be offered today or in a future debate on this bill, if cloture is not invoked today. I thank the bill sponsors for accepting this language to ensure that the CFTC has full enforcement authority over traders within the United States who are trading on a foreign exchange, just as the CFTC has over traders who are trading on a U.S. exchange. This clarification of the CFTC's enforcement authority over traders in the United States, together with the earlier provision setting standards for foreign boards of trade wishing to place trading terminals in the United States, will fully close the London loophole. There is another problem with our energy markets that Congress has finally acted on. In 2003, a report issued by my Subcommittee staff found that the Bush administration's large deposits of oil into the Strategic Petroleum Reserve, SPR, were increasing crude oil prices without improving overall U.S. energy security. We found that in 2002, the Bush administration, over the repeated objections of its own experts in the Department of Energy, had changed its policy and decided to put oil into the SPR regardless of the price of oil or market conditions. By placing oil into the SPR while oil prices were high and oil supplies were tight, the administration's deposits into the SPR were reducing market supplies and boosting prices, with almost no benefit to national security, given the fact that the SPR is more than 95 percent filled. The DOE experts believed that in a tight market, we are better off with keeping the oil on the market rather than putting it into the ground where it cannot be used. Following the issuance of this report, in early 2003, I asked the Department of Energy to suspend its filling of the SPR until prices had abated and supplies were more plentiful. DOE refused to change course and continued the SPR fill without regard to market supplies or prices. After DOE denied my request, I offered a bipartisan amendment with Senator Collins to the Interior appropriations bill, which provides funding for the Strategic Petroleum Reserve program, to require DOE to minimize the costs to the taxpayers and market impacts when placing oil into the SPR. The Senate unanimously adopted our amendment, but it was dropped from the conference report due to the Bush Administration's continued opposition. The next spring, I offered another amendment, also with Senator Collins, to the budget resolution, expressing the sense of the Senate that the administration should postpone deliveries into the SPR and use the savings from the postponement to increase funding for national security programs. The amendment passed the Senate by a vote of 52 to 43. That fall, we attempted to attach a similar amendment to the homeland security appropriations bill that would have postponed the SPR fill and used the savings for homeland security programs, but the amendment was defeated by a procedural vote, even though the majority of Senators voted in favor of the amendment, 48 to 47. The next year, the Senate passed the Levin-Collins amendment to the Energy Policy Act of 2005 to require the DOE to consider price impacts and minimize the costs to the taxpayers and market impacts when placing oil into the SPR. The Levin-Collins amendment was agreed to by the conferees and is now law. Unfortunately, passage of this provision has had no effect upon DOE's actions. DOE continued to fill the SPR regardless of the market effects of buying oil, thereby taking oil off the market and reducing supply by placing it into the SPR. In the past year, no matter what the price of oil or market conditions, DOE consistently found that the market effects are negligible and no reason to delay filling the SPR. Most recently, at the same time the President was urging OPEC to put more oil on the market to reduce supplies, the administration was continuing to take oil off the market and place it into the SPR. Until recently, the DOE was depositing about 70,000 barrels of crude oil per day into the SPR, much of it high-quality crude oil ideal for refining into gasoline. It defies common sense for the U.S. Government to be acquiring oil at $120 or $130 per barrel, in a time of tight supply, taking that oil off the market, and putting it in the SPR. That is why I cosponsored Senator Dorgan's bill to suspend the SPR fill, as well as a similar provision in the Consumer-First Energy Act. Finally, Congress had had enough of this senseless policy. The provision to stop the continuous filing of the SPR was pulled from the Consumer-First Energy Act and offered in the House and Senate as a stand alone bill. Congress enacted into law by an overwhelming vote. In response, the President finally called a halt to his policy and stopped filling the SPR. It is about time. The SPR fill policy, by the way, exacerbated yet another problem in our oil markets--the fact that the standard NYMEX futures contract that sets the benchmark price for U.S. crude oil requires a particular type of high quality crude oil known as West Texas Intermediate, WTI, to be delivered at a particular location, Cushing, OK. The standard NYMEX contract price, in turn, has a major influence on the price of fuels refined from crude oil such as gasoline, heating oil, and diesel. Because the price of the standard contract depends upon the supply of WTI at Cushing, OK, the supply and demand conditions in Oklahoma have a disproportionate influence on the price of NYMEX futures contracts. That means when the WTI price is no longer representative of the price of U.S. crude oil in general, the prices of other energy commodities are also thrown out of whack. In other words, we have an oil futures market that reflects the supply and demand conditions in Cushing, OK, but not necessarily the overall supply and demand situation in the United States as a whole. I have long called for reform of this outdated feature of the standard NYMEX crude oil contract. In 2003, the PSI report recommended the CFTC and NYMEX to work together to revise the standard NYMEX crude oil futures contract to reduce its susceptibility to local imbalances in the market for WTI crude oil. The subcommittee report suggested that allowing for delivery at other locations could reduce the volatility of the contract. It is truly disappointing that since our report was issued no progress has been made for allowing for delivery at other places than Cushing, OK. As the price of oil has increased, the distortions and imbalances caused by the atypical nature of the standard contract have gotten worse. It is essential NYMEX repair its crude oil contract. Putting the cop on the beat in our energy markets, strengthening oversight of U.S. energy commodities traded on foreign exchanges, stopping the SPR fill, and fixing the NYMEX crude oil contract all focus on problems caused by rising energy prices. These consistently rising gas prices also underscore the need to develop advanced vehicle technologies and alternative energy sources that will significantly reduce our dependence on foreign oil. I have long advocated advanced automotive technologies such as hybrid electric, advanced batteries, hydrogen and fuel cells and promoted development of these technologies through Federal research and development and through joint government-industry partnerships. We need a significant infusion of Federal dollars into these efforts to make revolutionary breakthroughs in automotive technologies. Such an investment will make technologies such as plug-in hybrid vehicles affordable to the American public and reduce our dependence on oil and reduce prices at the pump. We need an equally strong investment in development of alternative fuels that can replace gasoline. I have strongly supported efforts to increase our production of renewable fuels and to do that in a way that will also reduce our greenhouse gas emissions. We need a strong push toward biofuels produced from cellulosic materials, which requires a significantly greater Federal investment in biofuels technologies. Cellulosic ethanol has enormous potential for significant reductions in greenhouse gas emissions, but additional Federal support is required to make this technology financially viable. We need expanded Federal research and development grants as well as increased tax incentives and Federal loan guarantees to make cellulosic ethanol a viable replacement for gasoline. The Federal Government must do its part first to develop these technologies so that they will then in turn be within reach of the American public. One more point. The burden of higher energy prices is not being shared equally. To the contrary, it is falling hardest upon those who can least afford it. Large oil companies are reaping record profits at the expense of the average American who ultimately bears the full burden of these price increases. At the same time that average Americans are having to devote a greater and greater portion of their income to pay for basic necessities, such as gasoline, household utilities, and food, the major oil companies are reporting record profits and their executives are taking home annual paychecks of hundreds of millions of dollars. Many of these profits have been generated without any additional investments into energy production. Rather, these companies have seen their profits rise with the flood of speculation. What is a high tide of profits for the oil companies, though, is a tsunami that is overwhelming millions of Americans. And what are these oil companies doing with these record profits? Are they investing in new technologies? The answer is that the oil companies are not increasing their exploration and development investments by nearly as much as their profits are increasing. Instead, they are devoting large amounts of their profits to acquiring other companies and buying back their own shares. On May 1 of this year, the Wall Street Journal reported that in the first quarter of 2008 ExxonMobil spent $8 billion to buy back company shares, which ``boosted per-share earnings to stratospheric levels,'' whereas it spent less on exploration and actually reduced oil production. For these reasons, we need to institute a windfall profits tax on the oil companies. We should incentivize big oil companies to invest their windfall profits into things that will increase our own domestic energy production by reducing the amount of the tax for such investments. If they don't make these investments, a portion of that profit should be recouped by the public to help offset the outrageous prices they are facing at the pump. I have supported a windfall profits tax numerous times when we have voted on it in the Senate. The Consumer-First Energy Act, imposes a 25 percent tax on windfall profits of the major oil companies. Windfall profits invested to boost domestic energy supplies would be exempt from the tax, which would encourage investments in renewable facilities and the production of renewable fuels such as ethanol and biodiesel. It would also encourage oil companies to increase their domestic refinery capacity. Proceeds from the tax would be put toward measures to reduce the burdens of rising energy costs and increase our energy independence and security. Sky-high energy prices are causing immense financial pain to working families and businesses throughout this country and tying our already weak economy in knots. Congress cannot just stand by; we must act now to stop the pain. Immediate steps include putting the cop on the beat in all of our energy markets to prevent price manipulation and excessive speculation, strengthening oversight of U.S. energy commodities traded in London, fixing the key NYMEX crude oil contract, investing in advanced vehicle technologies and alternative energy sources, and imposing a windfall profits tax on the oil companies. Longer range steps include fixing the fiscal policies undermining the strength of the U.S. dollar, including by eliminating tax cuts for the wealthiest among us, reducing the $12 billion a month spending bill in Iraq, and closing outrageous tax loopholes than enable tax dodgers to use offshore tax havens to avoid payment of taxes in the range of $100 billion each year. We can fight back against exorbitantly high energy prices. But it will take all our energy--and determination--to do it.

Mr. LEVIN

Mr. LEVIN. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. LEVIN

Mr. LEVIN. Mr. President, I, along with my Michigan colleague, Senator Stabenow, would like to congratulate Ron Mason on a long and distinguished career at Michigan State University. He has been integral to the success of Michigan State's hockey program for more than 29 years and has positively impacted the lives of many young people throughout his tenure at MSU. Ron Mason enjoys the distinction of being the winningest coach in college hockey history. That is an impressive feat, one of which he, his family and the MSU community are proud. Ron spent 36 years as a college hockey head coach, 23 of which were behind the bench at Michigan State University. During his stellar career, he amassed 924 total wins and a record of 635-270-69 as head coach of the Spartans. Ron guided the Spartans to 17 CCHA regular season and playoff titles, and 23 appearances in the NCAA tournament, which stands as an all-time record. In 1986, he led the Spartans to their second NCAA Hockey National Championship in the school's history, and in 1972, he won a NAIA Championship as head coach of Lake Superior State University. After retiring as head coach of the Spartans, Ron accepted the job of athletic director at Michigan State, where he would continue to make important contributions to the success of the 25-sport athletic department. Under his watch, the university won 11 conference championships and one national championship. Fittingly, the national championship was won by the ice hockey team, the program's third NCAA national championship. Ron's legacy as athletic director also includes the many contributions he has made in the lives of student-athletes at MSU off the field. These efforts include the PACT initiative which has enabled more than 300 student-athletes to participate in community outreach efforts, the establishment of the Student-Athlete Multicultural Center which provides leadership training to student- athletes, and his highly successful fundraising efforts for the athletic department. One of the great privileges of coaching and working on the collegiate level is the impact an individual can have in shaping the lives of young men and women. Ron Mason accepted this responsibility and flourished. In the process, he has become an important figure in MSU's rich athletic tradition. Ron's retirement will be aptly marked by a celebration on Thursday, June 12 at MSU. We know our Senate colleagues join us in paying tribute to Ron Mason on his many accomplishments over the years and wish him and his family the very best in their future endeavors.

Mr. LEVIN

Mr. LEVIN. Mr. President, I would like to take this opportunity to pay tribute to Alfred Wagoner Loveless, a tireless and dedicated community leader. Alfred was committed to serving the needs of his community and served in various positions throughout his adult life in Saginaw. His contributions were many, and he will be missed by those whose lives he touched. Alfred Wagoner Loveless was born in Detroit, MI, on March 9, 1931, to Claude and Jesse Starr Loveless and moved shortly thereafter to Saginaw. He is a graduate of Saginaw High School. During his years at Saginaw High, he excelled athletically and would ultimately set several school record in track and field. After his high school years, Alfred attended Bay City Junior College and Bishop College. Alfred Wagoner Loveless was a man of great faith who was devoted to his family and to his community, and he received numerous awards and recognitions throughout his life as a result of his work. His community efforts focused on eradicating poverty, sickle cell prevention, along with promoting self-determination and self-sufficiency. Alfred is mourned by his family, the members of Zion Baptist Church, and many in the greater Saginaw community. Alfred is survived by his wife Gloria Hill Loveless and his son, Wagoner T. Loveless, in addition to a large extended family. This is, indeed, a great loss to all who knew him or for those who have benefited from his work. I know my colleagues will join me in paying tribute to the life and work of Alfred Wagoner Loveless. I am sure his family takes comfort in knowing that his legacy will be remembered.

Mr. LEVIN

Mr. LEVIN. Mr. President, I invoke cloture in order to move forward with the debate and break the Republican filibuster so that we can amend and improve the bill in order to begin to address the problem of global climate change. I oppose it in its current form and would have voted no if the vote were on whether to pass the bill. For this reason, I joined with other Senate colleagues in a letter identifying many of my concerns and outlining a way to move forward. A copy of this letter is printed at the end of this statement. Chairman Boxer and Senators Lieberman and Warner have taken on a matter of global significance, which will impact both present and future generations. We are in agreement on the fundamentals: Global warming is occurring, and human activity is causing it. Scientists tell us that we need to act with urgency to attain the levels of global greenhouse gas concentrations in the atmosphere that will prevent catastrophic impacts from occurring. The impacts of global climate change are being realized already. We have already been experiencing more heat waves, shorter winters, and more frequent severe weather events. In the future, the EPA estimates that an acceleration in heavy rainfall events will cause more runoff, stressing the sewer infrastructure and harming water quality. Other projected future impacts are even more alarming: Portions of countries and entire islands could be lost to rising sea levels, crop yields could significantly decline, water shortages are expected, and droughts, hurricanes, and floods will likely increase. Most experts agree that these phenomena will have a huge impact on people living in less developed countries and could result in the mass dislocation of millions throughout the world. Along with dire environmental and economic consequences, climate change could also impact our national security. Heightened domestic and international tensions caused by competition for scarce resources such as fresh water or agricultural land may result in armed conflict in and between nations. While we agree on the fundamentals of the problem, I have some differences with the approach of this bill regarding how to confront the immense and complex problem of global climate change. I have consistently argued that the best way of addressing global warming is through an effective and enforceable international agreement that binds all nations to reductions in greenhouse gases, including developing nations such as China and India. Proponents of this bill have argued that U.S. action through this cap-and-trade bill will prompt action by other countries to reduce their emissions. The international provision in this bill that attempts to level the playing field may put some pressure on other countries to act, but it will not automatically get these countries on board with us to reduce greenhouse gas emissions at levels comparable to ours. Unfortunately, if we do not get these other countries on board, what we do in the United States as a result of this bill will only have a marginal impact on controlling global greenhouse gas emissions and could create a severe economic disadvantage to us. This bill does not adequately assure American manufacturing a level playing field. A recent Energy Information Administration analysis, EIA, projected manufacturing job losses in the hundreds of thousands each year if the Lieberman-Warner bill were signed into law. Cumulative job impacts in the manufacturing sector through 2030 are estimated at between 2 to 14 million manufacturing jobs. We have already lost 3.3 million manufacturing jobs since 2001, about 250,000 in Michigan alone. We cannot afford to lose any more because of an unlevel playing field. Significantly, EIA's projected manufacturing job losses can be attributed to manufacturers moving to countries with less stringent environmental standards. Without the proper protections, our actions may ship manufacturing facilities and the greenhouse gas emissions that go with them overseas, providing no environmental benefit while needlessly hurting our economy. The substitute amendment offered by Senator Boxer makes few improvements to the Lieberman-Warner bill that was reported from the Environment and Public Works Committee. The cost containment auction will help to moderate emission allowance prices and help contain compliance costs, which will ultimately help control prices that hard- working consumers face. More assistance is provided to energy-intensive manufacturers to transition to a carbon-constrained world, and more allowances are provided to reward early action. The substitute amendment provides additional flexibility for covered sources to use EPA-verified offsets, which will also help control the costs of this bill. The substitute also includes some carbon market oversight mechanisms that will help monitor the new emission allowance trading market created by this bill. However, one of the changes in the substitute could have damaging impacts to our domestic auto industry because it could lead to potentially conflicting State regulations for greenhouse gas emissions from mobile sources and potentially highly unfair discriminatory impacts on U.S. manufacturers as a result of those state regulations. I have filed a number of amendments and have cosponsored others that will strengthen the bill to protect American jobs, reduce the burdens on working families and consumers, and also protect the environment. One of my amendments would provide Americans with protection from economic disruptions in case the costs of the bill exceed a certain level. Specifically, my amendment would suspend the compliance requirements of the cap-and-trade program if the emission allowance price reaches a prohibitively expensive amount. This amendment would provide an effective backstop if the various cost containment mechanisms included in the bill turn out to be less effective than expected and would prevent harm to the US economy. Another amendment I filed would protect the competitiveness of U.S. manufacturers in international markets. While I am pleased that the bill sponsors included an important provision that would help level the international playing field between U.S. manufacturers and international competitors not facing similar greenhouse gas limits, if this provision does not survive a WTO challenge, the bill provides no recourse to correct the situation. My amendment would suspend this program and compliance obligations of manufacturers that face global competition if a foreign country retaliates against the international allowance requirement that would be imposed by this bill. Also, additional allowances would be provided to these manufacturers to compensate for their higher production costs that would result from this bill. This amendment would help keep manufacturers and jobs in the United States if the international reserve allowance program in title XIII results in retaliation by other countries. I also joined Senators Specter and Brown in filing an amendment that would strengthen the international reserve allowance program to ensure that importers bear the same responsibility as American manufacturers with respect to limiting greenhouse gas emissions. The bill attempts to do this by requiring certain importers to submit emissions allowances to account for the greenhouse gas emissions of their products if the product comes from a foreign country that has not taken comparable action to limit greenhouse gas emissions. However, the bill defines ``comparable action'' in such broad terms that it would likely exclude many countries that in fact have not taken similar actions. The bill gives discretion to the International Climate Change Commission that would be established by the bill to determine that a foreign country has taken comparable action if they are using state-of-the-art technologies to limit greenhouse gas emissions, without considering the magnitude of the reductions achieved by these technologies. The Specter-Brown amendment would determine that a foreign country is taking comparable action only if actual greenhouse gas reductions are comparable to those achieved in the United States. The amendment would also broaden the types of imports that would be required to submit emission allowances by including both direct and indirect emissions generated in the course of manufacturing the product. The substitute amendment only includes direct emissions and emissions associated with the electricity used to manufacture the product, which fails to account for emissions associated with other inputs used to make downstream products. The Brown-Specter amendment corrects the competitive problem that would be faced by U.S. manufacturers. I also filed an amendment that would provide more allowances to fossil fuel-fired electric utilities whose prices are regulated. A coal-fired powerplant is limited in its ability to reduce its greenhouse gas emissions because this depends entirely on the efficiency of the generating plant. A Congressional Research Service analysis found that efficiency improvements on the order of 4-to-6 percent could be achieved by improving an existing unit, which would in turn have a 4-to-6 percent reduction in carbon emissions. The only way to further reduce emissions from a powerplant would be to install carbon capture and sequestration technology, which is not expected to be commercially available until sometime after 2030. Because the electric utilities can do very little to address greenhouse gas emissions at existing plants, it is only fair to provide emission allowances to these facilities that power homes, retail establishments, and industry with vital electric power. Limiting additional allowances to utilities whose prices are regulated will prevent companies from realizing windfall profits, which occurred in the European Union. I continue to be concerned about provisions of this bill that could result in both conflicting cap-and-trade systems and conflicting underlying regulations for greenhouse gas emissions. I believe that Congress should adopt a mandatory Federal economywide cap-and-trade program that will be the single regulatory regime for overall control of greenhouse gas emissions. Existing State laws and initiatives should be integrated into the Federal cap-and-trade program where the policies do not conflict, but in areas where the regulations or programs conflict or overlap, there must be a single clear national authority. Federal authority in this area should be made clear in the statutory language to prevent conflicts in regulation, preserve overall efficiency, and ensure harmonization of regulations. I am also concerned about other provisions of the Boxer substitute. These provisions, taken together, seek to preserve state authority and to reward States that have been leaders in the effort to reduce greenhouse gas emissions and increase energy efficiency. I applaud efforts to encourage energy efficiency, and I have no concerns about that aspect of these provisions. I am very concerned, however, that rewarding States for leadership in greenhouse gas emission reduction efforts in the way laid out in this bill may have the effect of setting up an unworkable system that will result in confusion, at best, and regulatory chaos, at worst. Section 614 would provide additional allowances to States that are ``leaders'' in the effort to reduce greenhouse gas emissions and increase energy efficiency. A leader is not defined by the act, however, and the EPA Administrator is given the task to establish a system, by regulation, for ``scoring historical State investments and achievements in reducing greenhouse gas emissions and increasing energy efficiency.'' To qualify as a leader under the terms of the bill, it appears that a State must have set more stringent standards than the Federal Government. To receive the reward of additional allowances, however, a State must either have never established a cap-and-trade system or have terminated its cap-and-trade program. In other words, on the one hand, the bill is encouraging States to set their own standards in order to qualify for additional allowances, but then, on the other hand, the States are told to terminate their programs in order to receive the additional allowances. That sounds to me like regulatory chaos. Worse still, the bill does not actually require States to terminate separate cap-and-trade programs it simply provides a financial incentive to do so. Therefore, if the financial incentive is not sufficient for the State to decide to terminate its program, there is too great a likelihood there will be conflicting and confusing Federal and State cap-and-trade systems. It simply does not make sense to have competing Federal and State cap-and-trade programs. It simply will not work. If a State were to implement a more stringent cap-and-trade program that allowed regulated entities to purchase Federal emissions allowances to satisfy State compliance requirements, this would in turn increase demand for the Federal allowances, which would increase the price of Federal allowances. Thus, such an action by a State would affect entities in other States because the Federal allowance trading market is nationwide. Another provision of this bill that gives me cause for concern is section 1731, entitled ``Retention of State Authority'', which purports to be a savings clause that simply preserves authority under existing provisions of law. I am concerned, however, about language in Senate Report 110-337, the report accompanying S. 2191, which states in part, ``The purpose of this section is to make it absolutely clear that this bill does not affect the validity of these State and local greenhouse gas emissions laws and regulations (and any related laws or regulations), so long as these laws require state and local reductions of greenhouse gas emissions at least as stringent as those required by federal law. There will be no express, implied, field, or conflict preemption of these regional, state, or local efforts.'' The report language concludes by saying, ``In interpreting the scope of this savings clause, the courts should follow the applicable precedent that calls for a narrow reading of federal preemption of state and local authority and a broad reading of this savings clause.'' Because of that concern, I have filed an amendment that would make clear that nothing in this act confers authority on either the Federal Government or State government to establish new standards in this area. Lastly, I want to speak to why I am so concerned about the potential for conflicting State and Federal regulations in this area, particularly as it relates to greenhouse gas emissions from vehicles. The State of California has already issued regulations to limit greenhouse gas emissions from vehicles by establishing fuel economy standards that would apply to vehicles sold in that State. A number of other States have either adopted similar regulations or indicated that they intend to do so. The net effect of these regulations adopted in many States across the country--if allowed to go into force--would be a patchwork of potentially conflicting regulations because the average fuel economy standard required in each State would be driven by the sales mix of vehicles in that particular State. Moreover, the regulations adopted by the State of California--the model regulations that other States would adopt--include a provision that is highly discriminatory against our domestic manufacturers. The California regulations have an exemption for manufacturers who sell less than 60,000 vehicles in the State. The effect of this exemption is that the California law would only regulate vehicles made by Ford, GM, Chrysler, Toyota, Honda, and Nissan. Other manufactures, such as Volkswagen, which is the fourth largest automaker in the world, would be exempt from the California law. In addition, automakers from Korea, India, and China and their vehicles would be exempt from the California constraints. Surely, we do not want to perpetuate such a discriminatory State law around the country. However, if the provisions of this bill confer new authority on State governments to set separate standards, we may do just that. In response to questions I posed to Senator Boxer, the manager of the bill for the majority, concerning the scope of State and Federal authority in this bill, I have obtained from Senator Boxer answers to my questions to her, which clarify her intent as the author of the language in question. I will ask that the text of the questions and her answers be printed at the end of my statement. I have highlighted a number of ways this legislation could be repaired. I filed amendments and cosponsored other filed amendments, which would do that. I agree with many provisions in this bill. The bill attempts to provide the necessary funding and technical resources so that we can successfully transition to a low carbon economy and recognizes at least in part the burdens of this transition. I am pleased that the substitute amendment provides more funding for manufacturing States to implement a variety of programs and measures that would help mitigate any negative impacts from global warming or the regulatory requirements of this bill. I am also pleased that the bill funds advancements in technology that could provide jobs and also reduce greenhouse gas emissions. The bill establishes a national wildlife adaptation fund with mandatory funding that could be used for a very broad range of activities including Great Lakes restoration projects. In developing a plan for wildlife adaptation, the bill specifically requires the President to consider the Great Lakes Regional Collaboration Strategy which was developed with extensive public involvement. I have long supported the Great Lakes Regional Collaboration Strategy, but the lack of funding has presented a serious impediment to implementing it. The President's plan must include measures to protect, maintain, and restore coastal ecosystems to ensure that the ecosystems are more resilient to withstand the additional stresses associated with climate change, including water level and temperature changes in Great Lakes. The National Wildlife Adaptation Fund would be distributed to federal agencies for a series of wildlife programs, and the Great Lakes are eligible to receive funds through many of these programs. Each agency has the discretion to allocate funds to its various programs so it is unknown how much money the Great Lakes would receive. To be sure, far-ranging action is needed to confront the daunting challenges of global climate change. While we are just now beginning to see the preliminary impacts of global warming, most scientists agree that the problems of climate change will only worsen in the future. I am hopeful that this debate has laid a foundation for us to move forward and for the United States to lead in what may be the defining issue of our planet's future environment. The potential costs of global climate change are tremendous, and these costs will only mount if we wait too long to address this critical problem. Clearly, we need to act to avert a global catastrophe. However, this action must be taken in a way that does not needlessly sacrifice additional American manufacturing jobs and further burden the working men and women of our country with higher gas, food, and energy prices. We need to invest in advanced technology that will help create jobs and spur our economy as well. With significant investment in research and development, public- private partnerships and incentives for manufacturers to invest in new technologies, we can make great technological leaps to reduce greenhouse gas emissions not only here but around the world. I ask unanimous consent that the materials to which I referred be printed in the Record.

Mr. LEVIN

Mr. LEVIN. Mr. President, I am pleased an agreement has been reached on a budget resolution conference report. It is the duty of Congress to approve the Nation's fiscal blueprint, and this year's budget report presents a responsible plan that rightfully prioritizes job creation and programs to support the safety, health, and education of America's children. Our economy has long been suffering and is in need of a boost. This budget will help start to undo the damage caused by the administration's misguided fiscal policies and stave off additional cuts proposed by the administration that would affect important programs that are especially needed in this time of economic distress. This budget rejects the President's failed policy of paying for tax cuts by adding to the debt burden of our children and grandchildren. The fiscal year 2009 budget that President Bush sent to Congress in February would have us pursue the same failed priorities and policies that have proven so woefully wrong for Michigan and for our Nation. The President's proposal would dig us even deeper into the massive deficit ditch we are already facing. The President's proposal would provide even more tax cuts to the wealthiest among us, while at the same time it would cut funding for critical programs important to my State's economy and the well-being of the State of Michigan. This includes cuts to, among other things, health care funding, including Medicare and Medicaid; decreased funding for important investments in education; and the elimination of the Technology Innovation Program, formerly called the Advanced Technology Program, and the Manufacturing Extension Partnership, which helps small and mid-sized manufacturers compete in a global economy. We need to break from those failed policies by forgoing irresponsible tax cuts for the wealthiest among us and making important investments in America's future; we must work to put our country back on track and begin the long process of climbing out of this deficit ditch. That is why I am glad this resolution provides for a balanced budget by 2012. It also furthers our strong pay-go rules, which require that all mandatory spending and revenue provisions be deficit-neutral. It sets the course to fully offset a repair of the alternative minimum tax, which would otherwise cause nearly 20 million middle class taxpayers to be subject to a tax they were never intended to be subjected to. It also assumes middle income tax relief, including marriage penalty relief, the child tax credit, and the persistence of the 10 percent bracket. I am pleased that this resolution includes my proposal to establish a deficit-neutral reserve fund to promote American manufacturing. Congress needs to act to revitalize our domestic manufacturing sector. The administration has stood by passively while 3 million manufacturing jobs were lost to America. This resolution also seeks to close the tax loopholes costing the Treasury large amounts of revenue and which have shifted an unfair burden to middle income taxpayers. Shutting down abusive tax shelters and offshore tax havens are two of the major tax gap initiatives assumed in the budget resolution. Additionally, this budget would reject many of the cuts in funding proposed by the President for essential health care and education programs. I believe this budget resolution, while only a blueprint for future action, sets us on a course of fiscal responsibility and paves the way for important investments in America's future. I am also pleased that this conference report retains an amendment I co-authored which, taken together with the underlying clean energy reserve fund, will support extension of the current production tax credits for renewable electricity and biodiesel fuel, the small- producer biodiesel tax credit, and clean renewable energy bond authority. It also proposes new tax credits for cellulosic ethanol and plug-in hybrid vehicles. I will continue to work to enact these necessary incentives. Major bipartisan efforts will be needed to make true progress on the long-term fiscal problems we face. But this resolution represents a good start by proposing an end to the financing of unaffordable tax cuts for the wealthiest among us, as well as funding prudent investments to promote the health and well-being of our children.

Mr. LEVIN

Mr. LEVIN. Madam President, while I am willing to proceed to the climate security bill so that the Senate can debate and amend it, I am opposed to this bill in its present form. I am hopeful that the Senate will amend this bill and significantly improve it as we move forward.

Mr. LEVIN

Mr. LEVIN. Mr. President, I speak today to lend my support to S. 22, the Post 9/11 Veterans Educational Assistance Act of 2008. S. 22 establishes a new GI bill for our servicemembers who have served after 9/11 and represents a comprehensive readjustment benefit for our brave men and women, one they richly deserve, just as members of an earlier generation benefited from a GI bill following World War II, with a huge gain for our Nation from the more educated work force and leaders that resulted. Senators Webb, Hagel, and Warner have talked at length about the virtues, and need, for this landmark legislation. I want to speak today on the impact on retention, the transferability provisions recently added, and recruiting. Much has been said about the effect on retention this legislation may have. Some are afraid servicemembers may leave the military in unacceptable numbers in order to take advantage of these benefits. Our need to focus on retention is clear. The military we have today is vastly different from the military we had in 1945. Since 1973 we have enjoyed the benefits of the All-Volunteer Force. Rather than drafting servicemembers, we encourage them to join. Over the past 35 years of the All-Volunteer Force, we have seen military basic pay rise significantly. As an employer, the military departments are competing with the private sector. This has led to a system of increasing benefits, bonuses, special and incentive pays. In analyzing the impact of S. 22 on retention and recruiting costs, the CBO recently estimated that the Department would have to spend $6.7 billion over the next 5 years in additional retention bonuses to maintain retention at current levels, to a large extent offset by a $5.6 billion savings in recruitment bonuses and other recruitment costs. The challenge then is to provide a comprehensive reform of readjustment educational benefits while ensuring the continued viability of the All-Volunteer Force. These are and must be the twin goals of any legislation. I think this legislation achieves these goals. This legislation retains and supplements retention incentives. In the first place, S. 22 retains the system of ``kickers'' in additional incentives that exists under the current GI bill. Under this program, the services may provide up to an additional $950 per month of educational benefit to retain personnel with critical military skills or to retain any individual in a critical unit. For someone who qualifies for the full 36 months of educational benefits, that comes out to an additional $34,000, a significant retention incentive. Moreover, under this program, servicemembers who serve for at least 5 consecutive years on Active Duty may receive an additional $300 per month of educational benefit. Over 36 months, that comes to over $10,000. That is also a significant retention incentive. Our bill goes further in terms of retention. S. 22 has been amended to add a pilot program to provide transferability of education benefits. The CBO cost estimate I mentioned earlier did not consider this additional retention tool. I have long been a supporter of the transferability of GI bill benefits. There is an old maxim in the military that while you recruit the servicemember, you retain the family. These transferability provisions provide additional incentive for servicemembers to stay on Active Duty by tying continued service to varying levels of transferability of the benefit to immediate family members, with 100 percent transferability coming after the servicemember has served 10 years. Ten years is an important milestone. Once a service member hits midcareer, the military retirement benefit, an extremely generous benefit that is collectible immediately upon hitting 20 years of service, becomes the strongest retention incentive. Getting servicemembers to midcareer is critical, and this transferability provision will help do that. Not only does transferability help to address the retention issue, it is the right thing to do. This war has been fought not just by our brave servicemembers but by their families as well. Children may have missed one or both parents for as much as 4 years out of the past 5 or 6. That is a steep toll to pay. But by providing transferability, we can help ensure a quality education for a spouse or child of a servicemember who has served so bravely since 9/11. I believe it makes this bill stronger and addresses a concern that has been raised against its provisions. This legislation should actually incentivize recruiting. What better promise can we make to a recruit or his parents than the promise that we will provide a more fully funded college education after fulfillment of the Active Duty commitment? Many in this body have raised the issue of recruiting--whether the Army in particular is granting too many waivers in order to meet recruiting goals. This legislation will help significantly in this regard. You have to recruit people before you can retain them, and this legislation will help recruiting, I believe significantly, over time. Recruiting young men and women into the military is more than half the battle; I have faith the services can retain the servicemembers they need, and Congress stands ready to provide additional authority if necessary. Regarding recruiting, I want to make another point that I do not believe has been raised, and that is on the subject of the ``influencers.'' As many in this body know, support for military service among the influencers, including coaches, teachers, and school counselors, of the 17- and 18-year-olds who are our prime recruiting- age demographic, is critically important. Aside from the immediate benefits of this legislation, my hope is that over time military service becomes in the minds of these influencers synonymous with a free, quality college education. After you serve us, we will serve you. We will pay for your college education. What better way to influence the influencers than this? As we know, the costs of education continue to soar. In these difficult economic times, paying for a college education is at the top of many parents' list of worries, a list that is already too long. We have read the stories of returning veterans having to work at night so that they can attend school during the day--even with their current GI bill benefits. I believe this bill will go a long way to increasing the support for military service among that critical segment of society, the people who influence our youth's choice of career. Finally, this readjustment benefit is an investment in our future as a nation. Indeed, seven members of this body were educated on the post- World War II GI bill. As an editorial from last week's LA Times observed: College is the essential ticket to upward mobility, and who more deserves a chance at that than the young men and women who volunteered for military service in wartime? The post- World War II experience shows that educating them is good public policy. . . . First, it would boost military morale and the quality of recruits--even though the military worries that it could hurt retention. Second, the investment in education is likely to pay for itself many times over as veterans join the workforce at higher pay rates. The brave men and women of our Armed Forces today will produce many future leaders of this Nation, and we owe them and their families this comprehensive readjustment educational benefit. I am proud to cosponsor this landmark legislation, and I urge my Senate colleagues to pass it expeditiously. We must do everything possible to assist our servicemembers, and their families, in the transition back into civilian life, to provide the tools that allow them to thrive and prosper in their postservice lives, and to become the next generation of leaders that this Nation needs them to be. I thank Senator Webb for his dogged pursuit of this legislation from his very first days in office. It will help our servicemembers and their families for generations to come.

Mr. LEVIN

Mr. LEVIN. Mr. President, often when we talk about combating gun violence, we discuss preventing criminal access to dangerous firearms. However, we must also focus our attention on the unsupervised access to firearms by our children and teenagers. While firearms in the hand of criminals pose a significant threat to society, many of the fatal firearm incidences in our country occur when children and teens discover loaded and unsecured firearms in their own homes. Over the years, suicides and accidental shootings have claimed the lives of thousands of young people. Sadly, many of these tragedies could have been prevented through commonsense gun legislation. The Center for Disease Control and Prevention estimates that 1.69 million children in the United States live in households with unlocked and loaded firearms. Tragically, firearms kill an average of nearly eight children and teenagers a day. What's more, the Children's Defense Fund estimates that at least four times this number are injured in nonfatal shootings. Many parents believe that simply educating their children about the dangers firearms can pose is enough to keep them safe. Unfortunately, this is simply not the case. A study conducted by the Harvard School of Public Health, involving 201 families who have guns in their homes, found that 39 percent of the parents who stated their children did not know the storage location of their firearms were contradicted by their children. In addition, 22 percent of the parents who believed their children had not handled their guns were contradicted by their children. The study concluded that although many parents had warned their children about gun safety, there was still a significant possibility that they were misinformed about their children's actions with their guns. Common sense tells us that when guns are secured, the risk of children injuring or killing themselves or others with a gun is significantly reduced. By passing legislation that would require that all handguns sold by a dealer come with a child safety device, such as a lock, a lock box, or technology built into the gun itself, we could significantly decrease the possibility of a child misusing a firearm. I urge my colleagues to take up and pass such sensible gun safety legislation.

Mr. LEVIN

Mr. LEVIN. Mr. President, for the Committee on Armed Services I report favorably the following nomination lists which were printed in the Records on the dates indicated, and ask unanimous consent, to save the expense of reprinting on the Executive Calendar that these nominations lie at the Secretary's desk for the information of Senators.

Mr. LEVIN

Mr. LEVIN. Madam President, this year's farm bill includes many important programs that will benefit Michigan and the Nation as a whole. Few States have Michigan's diversity of agricultural crops, and I am pleased that this farm bill contains a range of measures that will benefit farmers throughout my State. Agriculture is Michigan's second largest industry and this bill will help support this industry at a time when Michigan's economy is struggling. This bill will provide significant additional assistance to specialty crop growers that has been severely lacking in past farm legislation. Specialty crops are an important part of the agriculture industry and a healthy part of our Nation's food supply. While Michigan is a leading producer of traditional crops, such as corn, wheat, and soybeans, our State is also a leader in the production of specialty crops, such as apples, asparagus, beans, blueberries, and cherries. This farm bill will provide much needed support for the specialty crop community throughout Michigan and that means a more assured supply of U.S. grown fruits and vegetables so important to Americans nutritional needs. Nutrition programs, such as the Food Stamp Program, provide assistance to children, low-income working families, seniors, and persons with disabilities. This bill includes a significant increase in funding for our Nation's critical food and nutrition programs on which our Nation's least fortunate and most vulnerable rely. In my State of Michigan, over 500,000 households will benefit from increased nutrition assistance, and the bill will also help to alleviate some of the stress local food banks all across Michigan are experiencing at this time. The farm bill includes measures to improve conservation. These programs, which are aimed at both working lands and lands taken out of production, are intended to protect and improve soil quality, prevent erosion, benefit water quality, and preserve and restore habitats. This legislation expands the Conservation Stewardship Program, CSP, increases funding for the Environmental Quality Incentives Program, EQIP, and reauthorizes the Conservation Reserve Program, CRP, and Wetlands Reserve Program, WRP, to protect environmentally sensitive lands. I am pleased that this bill also includes incentives that will encourage continued development of biofuels and increased production of renewable fuels. I have long supported incentives for new technologies that can move us away from our significant reliance on foreign oil, and this bill makes critical investments in alternative energy that will help move us toward that goal. While this bill includes modest reforms to our current producer protection programs, these reforms do not go far enough. It would have been my hope that this bill would have included more innovative measures, such as farm savings accounts, and additional reforms to our agricultural subsidy programs. I am hopeful that we can work to enact further reforms when Congress next considers farm legislation. There is another important reason to support the farm bill. It contains a key provision which would finally close the Enron loophole that has contributed for so many years to the problem of rampant speculation in our energy markets. It would close the Enron loophole by requiring government oversight of electronic trading of energy commodities by large traders to prevent price manipulation and excessive speculation. In 2000, at the behest of Enron and others, a provision was slipped into law--section 2(h)(3) of the Commodity Exchange Act--that exempted from oversight and regulation the electronic trading of energy and metal commodities by large traders. This loophole took the cop off the beat in those electronic markets and allowed traders to operate with less supervision and fewer controls than regulated commodity markets like the New York Mercantile Exchange, NYMEX. Beginning in 2003, my Permanent Subcommittee on Investigations, PSI, issued a series of reports exposing how these unregulated markets and their unregulated trades had opened the door to energy price manipulation and excessive speculation. A 2006 subcommittee report, for example, presented evidence that excessive speculation was adding substantially to energy prices, including as much as $20 out of a $70 barrel of crude oil. In 2007, the subcommittee issued a report and held 2 days of hearings showing how excessive speculation in futures contracts by a single hedge fund named ``Amaranth'' on the unregulated markets had increased consumer prices for natural gas. The report showed how Amaranth deliberately avoided trading limits on NYMEX by moving its trades to an unregulated electronic exchange. Our reports repeatedly recommended legislation to close the Enron loophole, and over several Congresses, I introduced or cosponsored legislation to do just that. In 2007, for example, I introduced S. 2058, the Close the Enron Loophole Act which was endorsed by a wide range of consumer, business, and agricultural groups. In response to this legislation, our reports and hearings, the Commodity Futures Trading Commission, CFTC, suggested its own legislative approach to close the Enron loophole. I then worked with my colleagues, Senators Feinstein, Snowe, and others to come up with legislation that was acceptable to both sides of the aisle as well as the administration. That legislation was offered as an amendment to the Senate farm bill, and a closely related version of that amendment is now part of the conference report before us today. The farm bill provisions are designed to put the cop back on the beat in all U.S. commodity markets to protect against price manipulation and excessive speculation. Specifically, the bill provides that any contract that is traded on an electronic trading facility and serves a significant price discovery function is subject to CFTC oversight to prevent price manipulation and excessive speculation, just as it is subject to that oversight on regulated markets such as NYMEX. For each such contract, an electronic trading facility is required to comply with the same key standards--called ``core principles''--that apply to regulated exchanges, like NYMEX, to prevent price manipulation and excessive speculation. For example, electronic exchanges are required to list only contracts which are not readily susceptible to manipulation; monitor trading to prevent manipulation and price distortion; establish rules to obtain information from traders and provide it to the CFTC upon request; establish position limits or accountability levels that trigger review of a trader's positions in order to reduce the potential threat of manipulation; possess emergency authority to require traders to reduce positions; publish daily trading information; and enforce trader compliance with its rules. Essentially, an electronic trading facility will now have to function as a self-regulatory organization under CFTC oversight in the same manner as a regulated futures exchange like NYMEX. The bill gives the CFTC the same oversight and enforcement authority over the electronic exchange with respect to these contracts as it has with respect to a futures exchange. The days of unregulated electronic energy markets are over. Passage of this critically important legislation is the culmination of many years of work by Senator Feinstein, myself, Senator Snowe, and others, and I thank them for their sustained effort to close the Enron loophole. I also would like to thank Senators Harkin and Chambliss for working with us to include this legislation in the farm bill. In addition, I would like to thank our many friends in the other body who worked diligently to get this legislation done. The legislation to close the Enron loophole is a bipartisan, bicameral success story and the winners are the American people who will gain greater protection against price manipulation and excessive speculation. This farm bill is a bipartisan piece of legislation which includes many programs that are beneficial to Michigan. While this bill is not perfect, I believe the combination of improved assistance for specialty crops, enhanced conservation spending, increased funding for nutrition programs, investment in renewable energy programs, and the provisions closing the Enron loophole which are included in this bill are worthy of support. I am pleased we are finally able to send a farm bill to the President's desk that will benefit our Nation's farmers and rural communities, and I urge the President to sign this bill into law.

Mr. LEVIN

Mr. LEVIN. Mr. President, today I am introducing with Senator Stabenow the Beaver Basin Wilderness Act, which would permanently protect 11,740 acres within the Pictured Rocks National Park located in Michigan's Upper Peninsula along the south shore of Lake Superior. Also known as the Beaver Basin area, this area comprises about 16 percent of the national lakeshore. The Wilderness designation would ensure that opportunities to appreciate and enjoy nature in a relatively undisturbed state at this national lakeshore are preserved for future generations. The bill responds to many of the concerns expressed during the 5-year development of the General Management Plan for Pictured Rocks, which included a wilderness study, and involved extensive public involvement. Boats powered by electric motors would be allowed on Little Beaver and Beaver Lakes within the Wilderness area. All motor boats would be allowed to access the miles of the Lake Superior shoreline, as the wilderness area does not include the Lake Superior surface water. Also, the access road to Beaver Lakes and Little Beaver campground is not included in the wilderness area, so vehicles would still have access to this popular area. Importantly, the Wilderness designation would not change the fundamental way this land has been managed since 1981, ensuring continued public access, use, and enjoyment of this land. It is critical that the highly valued, pristine natural features of the Beaver Basin area remain the treasure they are today. This area provides a unique and distinct landscape that highlights one of the most beautiful backdrops of the Great Lakes, and it is vital that we do all we can to protect it. Significantly, several miles of the North Country National Scenic Trail, also known as the Lakeshore Trail, run through this wilderness area. This bill would help preserve the serene quality of this segment of the trail, and protect the outstanding scenery along the shoreline. The wilderness designation will benefit current and future generations by protecting this natural and undisturbed landscape for the enjoyment of thousands of people in Michigan and across the Nation. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. LEVIN

Mr. LEVIN. Mr. President, today I am introducing with Senator Stabenow the Beaver Basin Wilderness Act, which would permanently protect 11,740 acres within the Pictured Rocks National Park located in Michigan's Upper Peninsula along the south shore of Lake Superior. Also known as the Beaver Basin area, this area comprises about 16 percent of the national lakeshore. The Wilderness designation would ensure that opportunities to appreciate and enjoy nature in a relatively undisturbed state at this national lakeshore are preserved for future generations. The bill responds to many of the concerns expressed during the 5-year development of the General Management Plan for Pictured Rocks, which included a wilderness study, and involved extensive public involvement. Boats powered by electric motors would be allowed on Little Beaver and Beaver Lakes within the Wilderness area. All motor boats would be allowed to access the miles of the Lake Superior shoreline, as the wilderness area does not include the Lake Superior surface water. Also, the access road to Beaver Lakes and Little Beaver campground is not included in the wilderness area, so vehicles would still have access to this popular area. Importantly, the Wilderness designation would not change the fundamental way this land has been managed since 1981, ensuring continued public access, use, and enjoyment of this land. It is critical that the highly valued, pristine natural features of the Beaver Basin area remain the treasure they are today. This area provides a unique and distinct landscape that highlights one of the most beautiful backdrops of the Great Lakes, and it is vital that we do all we can to protect it. Significantly, several miles of the North Country National Scenic Trail, also known as the Lakeshore Trail, run through this wilderness area. This bill would help preserve the serene quality of this segment of the trail, and protect the outstanding scenery along the shoreline. The wilderness designation will benefit current and future generations by protecting this natural and undisturbed landscape for the enjoyment of thousands of people in Michigan and across the Nation. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.

Mr. LEVIN

Mr. LEVIN. Mr. President, I support the amendment to stop deliveries of oil into the Strategic Petroleum Reserve, SPR. Crude oil prices reached a record high recently of $126 per barrel, leading to record highs in the price of other fuels produced from crude oil, including gasoline, heating oil, diesel fuel, and jet fuel. With prices going through the roof, it is the wrong time for the Department of Energy, DOE, to take millions of barrels of high-priced oil off the market and put it into the SPR. Instead of reducing supplies by taking oil off the market and increasing the price of oil, the DOE should be looking for ways to decrease the price of oil. One step is a moratorium on filling the SPR until oil prices are lower. Unfortunately, the DOE is contributing to the current price spike by filling the SPR regardless of the cost of crude oil or the petroleum products that are refined from crude oil. There are three major problems with the DOE's insistence on putting high-priced oil into the SPR. First, by placing oil into the SPR the DOE is reducing the supply of crude oil and putting upward pressure on the price of oil. Second, by placing very expensive crude oil into the SPR, the DOE is significantly increasing the cost of the SPR program to the taxpayers. Third, the DOE's approach runs counter to the direction provided by the Congress in the Energy Policy Act of 2005, which requires the DOE to fill in the SPR in a manner that minimizes the impact upon prices and the costs to the taxpayers. The DOE is currently taking about 70,000 barrels per day of crude oil off the market and putting it into the SPR. For the first half of 2008, this will total to about 10 million barrels of crude oil. This is reducing our inventories of crude oil and refined products, such as gasoline, just at a time when our refineries need to be running at maximum to make gasoline for the spring and summer driving seasons. The DOE also has asked for bids for another 6-month program to fill the SPR, beginning later this year. If the DOE is permitted to continue with this program, it will take millions more barrels of oil off the market beginning sometime later this year. Under the basic economic principle of supply and demand, reducing the supply of crude oil available to U.S. refineries will increase the price of oil and gasoline. Even the DOE agrees with this basic economic principle. Mr. Guy Caruso, the head of the DOE's Energy Information Administration, testified to the Congress earlier this year that an SPR fill of 100,000 barrels per day would add about $2 per barrel to the price of oil. Last December, Dr. Philip Verleger testified that the SPR fill was adding about $10 per barrel to the price of crude oil. Economists may disagree on the amount of the increase, but now there should be no doubt that the DOE is increasing the price of oil by filling the SPR at this time. The DOE acknowledges this. The DOE should be working to lower oil prices, not helping to boost them to record highs. DOE says the amount of oil it is putting into the SPR is insignificant compared to total global supply. This is the wrong comparison. The amount of oil DOE is putting into the SPR represents a significant marginal increase in the demand for oil. When supply and demand are closely balanced, a marginal increase in demand can have a very large impact on price. This is precisely the situation we are in today. Supply and demand are very closely balanced. Adding a demand of millions of barrels of oil over a period of several months can have a very significant impact on the amount of oil on the market or in inventories. In a tight market, taking millions of barrels off the market can indeed have a major impact upon oil prices. When the DOE fills the SPR it does not have to actually purchase any crude oil. Instead, the DOE takes oil that is paid to the Federal Government as royalties for oil produced by private oil companies on offshore oil leases in the Gulf of Mexico and trades it back to private oil companies for oil that is then placed into the SPR. Thus, the DOE's program to acquire oil for the SPR does not require any Federal appropriations. But that doesn't mean the program doesn't cost the taxpayers any money. In fact, the opposite is true--the SPR program costs the taxpayers a lot of money. The higher the price of oil, the more it costs the taxpayers. This is because instead of selling the royalty oil on the open market at whatever the market price of oil is, recently as much as $126 a barrel, the DOE is taking that oil off the market, trading it for oil that meets the specifications of oil for the SPR, and leaving taxpayers without the revenue that would be created by selling tens of millions of barrels of oil. In essence, the taxpayers are paying the market price of oil for each barrel of oil placed into the SPR. A moratorium on filling the SPR until prices are lower would save the taxpayers money. If the DOE were to acquire SPR oil at $75 per barrel instead of $125 per barrel, it would save $50 per barrel. For 10 million barrels, that would add up to $500 million. Delaying the filling of the SPR would not affect or harm our national security or our energy security. The SPR is currently about 97 percent full, with slightly more than 700 million barrels of oil. This amount of oil is large enough to ensure that we are prepared for any contingencies that the SPR is designed to cover. To date, over the entire life of the SPR the largest withdrawal of oil from the SPR has been for about 30 million barrels. The amount of oil in the SPR today already is far more than has ever been needed to cover market disruptions. The DOE's policy to fill the SPR at the same rate regardless of the effect on oil prices or taxpayer costs runs counter to the intent of Congress in section 301 of the Energy Policy Act of 2005, which directs DOE to consider and minimize the effects on oil prices and costs to the taxpayers when acquiring oil for the SPR. I sponsored the amendment, along with Senator Collins, that became this provision in the law. We did not intend this to simply be a formality, whereby in every case DOE would simply conclude that the effect on price was insignificant. Yet that seems to be how DOE is applying this provision. In 2003, the Permanent Subcommittee on Investigations, which I chair, completed a detailed investigation of the SPR fill program. The subcommittee's 2003 report is titled ``U.S. Strategic Petroleum Reserve: Recent Policy Has Increased Costs to Consumers But Not Overall U.S. Energy Security.'' It can be found on the Subcommittee's Web site. The investigation found that in 2002 the Bush administration changed the DOE's policy on how it would fill the SPR, and that this change in policy increased the price of oil but not our overall energy security. Before the Bush administration changed the DOE's policy on filling the SPR, the DOE sought to put more crude oil into the SPR when supplies were plentiful and prices low and less crude oil into the SPR when supplies were scarce and prices high. The DOE also would allow oil companies to defer deliveries for up to a year when supplies were tight, provided that the oil companies would deposit more oil into the SPR at the end of the deferral period. Through this deferral policy, the DOE was able to obtain additional SPR oil for no additional cost to the taxpayer. This policy made good sense. As my subcommittee's report documented, in 2002 the White House directed DOE to change its policy. Instead of allowing the DOE to continue with its sensible policy, the White House directed the DOE to fill the SPR at the same rate, regardless of market conditions. The new policy also prohibited the DOE from accepting any deferrals, regardless of market conditions. The career DOE staff vigorously protested the changes ordered by the White House. The career staff pointed out that filling the SPR in times of tight supplies and high prices would push prices up and that not allowing any deferrals would cost the taxpayers more money. The career staff also argued that the old policy followed good business judgment and the new policy would be difficult to defend under sound business principles. These memos are included as exhibits to the subcommittee's 2003 report. The DOE career staff's recommendations were rejected, however, and the current policy was adopted. Following the issuance of this report, in early 2003, I asked the Department of Energy to suspend its filling of the SPR until prices had abated and supplies were more plentiful. The DOE refused to change course and continued the SPR fill without regard to market supplies or prices. In response, I offered a bipartisan amendment, with Senator Collins, to the Interior appropriations bill--which provides funding for the Strategic Petroleum Reserve program--to require the DOE to minimize the costs to the taxpayers and market impacts when placing oil into the SPR. The Senate unanimously adopted our amendment, but it was dropped from the conference report due to the Bush administration's continued opposition. The next spring, I offered another bipartisan amendment, also with Senator Collins, to the budget resolution expressing the sense of the Senate that the administration should postpone deliveries into the SPR and use the savings from the postponement to increase funding for national security programs. The amendment passed the Senate by a vote of 52 to 43. That fall, we attempted to attach a similar amendment to the Homeland Security appropriations bill that would have postponed the SPR fill and used the savings for homeland security programs, but the amendment was defeated by a procedural vote, even though the majority of Senators voted in favor of the amendment, 48 to 47. The next year, the Senate passed the Levin-Collins amendment to the Energy Policy Act of 2005 to require the DOE to consider price impacts and minimize the costs to the taxpayers and market impacts when placing oil into the SPR. The Levin-Collins amendment was agreed to by the conferees and signed into law as section 301 of the Energy Policy Act of 2005. But, unfortunately, passage of this provision has had no effect upon the DOE's actions. The DOE continues to fill the SPR regardless of the market effects of buying oil, thereby taking oil off the market and reducing supply by placing it into the SPR. In the past year, no matter what the price of oil or market conditions, the DOE has consistently said that the market effects are negligible and claimed that there is no reason to delay filling the SPR, effectively ignoring the section 301 requirements of the Energy Policy Act. The result is that we have the current contradiction of DOE depositing oil into the SPR at the same time the President is urging OPEC to put more oil on to the market. Now is not the time to be filling the SPR. When oil prices are at record highs, we should be looking for ways to increase oil supplies and reduce prices. The Department of Energy is doing just the opposite. It is taking oil off the market and increasing prices, doing so at great costs to taxpayers and despite enacted law requiring that they do otherwise. There is now a strong bipartisan consensus to put a halt to the administration's misguided SPR policy. I urge my colleagues to vote for this amendment to postpone the filling of the SPR until oil prices have fallen to lower levels.

Mr. LEVIN. Mr. President, I will vote for the Flood Insurance Reform and Modernization Act because it would help place the National Flood Insurance Program, NFIP, back on solid financial footing. It is not a perfect bill, but I hope that some of my concerns can be addressed in the House Senate conference process. When Congress established the NFIP in 1968, flood insurance was not available at an affordable price, resulting in frequent and costly Federal disaster aid payments. The new program created a method to share the risk of flood losses through a national insurance program and required preventive and protective measures to mitigate the risk. Currently, Michigan has over 27,000 flood insurance policies, and since the program's inception, over $42.6 million in flood claims have been paid to Michigan policyholders. This bipartisan reform bill extends this important program through 2013, and enhances the long-term viability of the program, helping to provide self-sustaining, critical insurance coverage for millions of home and business owners throughout the country. Historically, the flood insurance program has covered most claims through the premiums it has collected. However, recent losses from the 2004 floods and 2005 catastrophic hurricanes have left the program over $17 billion in debt to the U.S. Treasury. This reform bill takes the painful but necessary step of forgiving that debt. At the same time, this legislation makes changes to the program to help ensure its continued long-term financial solvency. The aim is to ensure that each time a hurricane, deluge or other natural disaster hits, flood claims can be paid without relying on taxpayer funds from across the country. There are a number of measures in this bill aimed at restoring the program's financial stability. These include requiring certain at-risk properties to pay phased-in actuarial rates, extending the Severe Repetitive Loss Mitigation program to mitigate losses on the most at- risk properties, and requiring the program to build up reserves. These and other new requirements reflect difficult choices because they are not without cost to property owners, many of whom are already stretched by staggering gas and grocery prices, falling home values and a dismal economy. This bill attempts to recognize that reality by maintaining some subsidized rates for Federal flood insurance where buildings were built before the existence of a federal flood map, and phasing-in new actuarial rates. The bill also expands and encourages the purchase of flood insurance for properties in areas with flood risks. Property owners in a 500-year floodplain would be notified about the risks they face, but would not be required to purchase flood insurance. To better define areas of flood risk, the bill would require FEMA to establish an ongoing map modernization program using the most accurate data and consistent standards for mapping. These changes will help generate the necessary premium income for the program while striving to maintain affordability for homeowners. The bill also expands and encourages the purchase of flood insurance for properties in areas located behind levees, dams, and other man-made structures, recognizing that these structures could be breached. While recent history has shown us that levees can and do fail and that no properties are entirely risk-free, I am concerned that imposing this mandatory requirement in a uniform fashion may not accurately reflect the risks these communities face. Michigan has 2,500 dams and numerous levees scattered across the State; properties behind these structures would be required to purchase federal flood insurance regardless of the risks they face. We need to better understand the implications of requiring mandatory insurance for all of these areas before we impose a blanket requirement on all of them. For this reason, I voted in support of an amendment offered by Senator Landrieu that would have lifted this new mandatory requirement and would have instead required a study to be conducted to assess the impact, effectiveness, and feasibility of extending mandatory flood coverage to these areas. I believe Senator Landrieu's more thoughtful approach is warranted. Unfortunately, the amendment failed 30-62. While I recognize that making the NFIP more financially sound requires making some tough decisions, I believe some of the choices reflected in this bill lead to unfair results. For example, I am concerned about what will happen to property owners currently not mapped into a floodplain should a new map require them to purchase flood insurance. Currently, these property owners would receive subsidized policies, because the buildings were built before the flood risk was known. However, this bill removes the subsidized rate for properties that get remapped into a floodplain. While the bill provides a 2-year phase-in for these unsubsidized rates, it is not fair to demand higher rates from those who, through no fault of their own, had no idea they had exposure to flood damage, especially at a time when so many families are struggling to meet their monthly expenses. This inequity is one that I hope can be addressed when this bill is conferenced with the House version passed last year. There are also inequities in existing approaches of FEMA's mapping of flood risk which need to be corrected in conference. For instance, revised flood maps are being developed by FEMA for the city of Grand Rapids in such a way that does not incorporate the existing flood protection provided by the city's recently completed $12.4 million floodwall improvement project. The revised flood maps would put over 6,000 additional properties into the 100-year floodplain, at a cost of over $6 million per year. This is an area that has not flooded at that level since 1905, and that occurred when the city did not have structural flood protection. FEMA's action appears arbitrary, ignores the participation of its State partner, and would likely decrease property values and the tax base of the community, hampers economic development, and imposes unfair costs on thousands of people in the city of Grand Rapids. FEMA should more thoroughly and accurately reassess flood risks using a risk-based analysis to account for local conditions and incorporate protection by the city's improved floodwalls, rather than ignoring their presence. I am hopeful that the managers will work with us in conference to address this unconscionable and unnecessary burden the city of Grand Rapids and its citizens are facing. I wish that no American had to worry about suffering damage from a natural disaster, but it is a fact of nature that such damage can happen. That is why it is important to do what we can to help property owners have adequate insurance. The goals of the National Flood Insurance Program are important, and reauthorizing and revamping this program is necessary. This bill represents a necessary step to ensure that more at-risk property owners are protected while the cost of disaster relief and adequate insurance is less of a burden to the average taxpayer. Flooding is a risk that many communities face, and the availability of flood insurance is important for ensuring that our citizens can recover from any losses suffered. However, this must be done in a way that does not unduly and unfairly burden our communities. I will continue to work to strengthen the National Flood Insurance Program in a fair and responsible manner as it proceeds to conference.

Mr. LEVIN

Mr. LEVIN. In addition to finding that the energy markets needed better regulation and oversight, the report issued by my subcommittee in 2003 also found that the Bush administration's large deposits of oil into the Strategic Petroleum Reserve--SPR--were increasing prices but not overall U.S. energy security. We found that in 2002, the Bush administration, over the repeated objections of its own experts in the Department of Energy, had changed its policy and decided to put oil into the SPR regardless of the price of oil or market conditions. By placing oil into the SPR while oil prices were high and oil supplies were tight, the administration's deposits into the SPR were reducing market supplies and boosting prices, with almost no benefit to national security, given the fact that the SPR is more than 95 percent filled. The DOE experts believed that in a tight market, we are better off with keeping the oil on the market rather than putting it into the ground where it cannot be used. Following the issuance of this report, in early 2003 I asked the Department of Energy to suspend its filling of the SPR until prices had abated and supplies were more plentiful. DOE refused to change course and continued the SPR fill without regard to market supplies or prices. After DOE denied my request, I offered a bipartisan amendment with my colleague Senator Collins to the Interior Appropriations bill, which provides funding for the Strategic Petroleum Reserve program, to require DOE to minimize the costs to the taxpayers and market impacts when placing oil into the SPR. The Senate unanimously adopted our amendment, but it was dropped from the conference report due to the Bush administration's continued opposition. The next spring, I offered another amendment, also with Senator Collins, to the budget resolution, expressing the sense of the Senate that the administration should postpone deliveries into the SPR and use the savings from the postponement to increase funding for national security programs. The amendment passed the Senate by a vote of 52-43. That fall, we attempted to attach a similar amendment to the homeland security appropriations bill that would have postponed the SPR fill and used the savings for homeland security programs, but the amendment was defeated by a procedural vote, even though the majority of Senators voted in favor of the amendment, 48-47. The next year, the Senate passed the Levin-Collins amendment to the Energy Policy Act of 2005 to require the DOE to consider price impacts and minimize the costs to the taxpayers and market impacts when placing oil into the SPR. The Levin-Collins amendment was agreed to by the conferees and is now law. Unfortunately, passage of this provision has had no effect upon DOE's actions. DOE continues to fill the SPR regardless of the market effects of buying oil, thereby taking oil off the market and reducing supply by placing it into the SPR. In the past year, no matter what the price of oil or market conditions, DOE has consistently found that the market effects are negligible and no reason to delay filling the SPR. Currently, at the same time the President has urged OPEC to put more oil on the market to reduce supplies, the administration is continuing to take oil off the market and place it into the SPR. The DOE is currently depositing about 70,000 barrels of crude oil per day into the SPR, much of it high-quality crude oil that is ideal for refining into gasoline. It simply defies common sense for the U.S. government to be acquiring oil at $120 barrel, in a time of tight supply, just before the peak driving season, and put it into the SPR. That is why I have co-sponsored Senator Dorgan's bill to suspend the SPR fill for 1 year, or until prices fall to more acceptable levels, whichever comes first. Passing this legislation will save the taxpayers money and relieve some of the pressure on the oil markets that is driving prices relentlessly higher. A similar provision is also included in the Democrats' Consumer-First Energy Act. The recent SPR fill has exacerbated yet another problem in our oil markets--the fact that the standard NYMEX futures contract that sets the benchmark price for U.S. crude oil requires a particular type of high quality crude oil known as West Texas Intermediate, WTI, to be delivered at a particular location--Cushing, OK. The standard NYMEX contract price, in turn, has a major influence on the price of fuels refined from crude oil such as gasoline, heating oil, and diesel. Because the price of the standard contract depends upon the supply of WTI at Cushing, OK, the supply and demand conditions in Oklahoma have a disproportionate influence on the price of NYMEX futures contracts. That means when the WTI price is no longer representative of the price of U.S. crude oil in general, the prices of other energy commodities are also thrown out of whack. In other words, we have an oil futures market that reflects the supply and demand conditions in Cushing, OK, but not necessarily the overall supply and demand situation in the United States as a whole. I have long called for reform of this outdated feature of the standard NYMEX crude oil contract. In 2003, the PSI report recommended the CFTC and NYMEX to work together to revise the standard NYMEX crude oil futures contract to reduce its susceptibility to local imbalances in the market for WTI crude oil. The subcommittee report suggested that allowing for delivery at other locations could reduce the volatility of the contract. It is truly disappointing that since our report was issued, no progress has been made for allowing for delivery at other places than Cushing, OK. As the price of oil has increased, the distortions and imbalances caused by the atypical nature of the standard contract have gotten worse. It is essential NYMEX repair its crude oil contract. Putting the cop on the beat in our energy markets, strengthening access to key oil trading information, stopping the SPR fill, and fixing the NYMEX crude oil contract all focus on problems caused by rising energy prices. These consistently rising gas prices also underscore the need to develop advanced vehicle technologies and alternative energy sources that will significantly reduce our dependence on foreign oil. I have long advocated advanced automotive technologies such as hybrid electric, advanced batteries, hydrogen and fuel cells and promoted development of these technologies through Federal research and development and through joint government-industry partnerships. We need a significant infusion of Federal dollars into these efforts to make revolutionary breakthroughs in automotive technologies. Such an investment will make technologies such as plug-in hybrid vehicles affordable to the American public, and reduce our dependence on oil and reduce prices at the pump. We need an equally strong investment in development of alternative fuels that can replace gasoline. I have strongly supported efforts to increase our production of renewable fuels and to do that in a way that will also reduce our greenhouse gas emissions. We need a strong push toward biofuels produced from cellulosic materials, which requires a significantly greater Federal investment in biofuels technologies. Cellulosic ethanol has enormous potential for significant reductions in greenhouse gas emissions but additional Federal support is required to make this technology financially viable. We need expanded Federal research and development grants as well as increased tax incentives and Federal loan guarantees to make cellulosic ethanol a viable replacement for gasoline. The Federal Government must do its part first to develop these technologies so that they will then in turn be within reach of the American public. One more point. The burden of higher energy prices is not being shared equally. To the contrary, it is falling hardest upon those who can least afford it. Large oil companies are reaping record profits at the expense of the average American who ultimately bears the full burden of these price increases. At the same time that average Americans are having to devote a greater and greater portion of their income to pay for basic necessities, such as gasoline, household utilities, and food, the major oil companies are reporting record profits, and their executives are taking home annual paychecks of hundreds of millions of dollars. Many of these profits have been generated without any additional investments into energy production. Rather, these companies have seen their profits rise with the flood of speculation. What is a high tide of profits for the oil companies, though, is a tsunami that is overwhelming millions of Americans. And what are these oil companies doing with these record profits? Are they investing in new technologies? The answer is that the oil companies are not increasing their exploration and development investments by nearly as much as their profits are increasing. Instead, they are devoting large amounts of their profits to acquiring other companies and buying back their own shares. On May 1 of this year, the Wall Street Journal reported that in the first quarter of 2008 ExxonMobil spent $8 billion to buy back company shares, which ``boosted per-share earnings to stratospheric levels,'' whereas it spent less on exploration and actually reduced oil production. For these reasons, we need to institute a windfall profits tax on the oil companies. We should incentivize big oil companies to invest their windfall profits into things that will increase our own domestic energy production by reducing the amount of the tax for such investments. If they don't make these investments, a portion of that profit should be recouped by the public to help offset the outrageous prices they are facing at the pump. I have supported a windfall profits tax numerous times when we have voted on it in the Senate. The Consumer-First Energy Act imposes a 25 percent tax on windfall profits of the major oil companies. Windfall profits invested to boost domestic energy supplies would be exempt from the tax, which would encourage investments in renewable facilities and the production of renewable fuels such as ethanol and biodiesel. It would also encourage oil companies to increase their domestic refinery capacity. Proceeds from the tax would be put toward measures to reduce the burdens of rising energy costs and increase our energy independence and security. Mr. President, let me summarize. Skyrocketing energy prices are tying our already weak economy in knots and causing financial pain to working families throughout this country. Congress cannot just stand by. We should act now to stop the pain. Immediate steps include putting the cop back on the beat in our energy markets, strengthening our access to key oil trading data in London, fixing the key NYMEX crude oil contract, stopping the senseless filling of the Strategic Petroleum Reserve, investing in advanced vehicle technologies and alternative energy sources, and imposing a windfall profits tax on the oil companies. Longer range steps include fixing the fiscal policies undermining the strength of the U.S. dollar, including by eliminating tax cuts for the wealthiest among us, reducing the $12 billion a month spending that is taking place in Iraq, closing the tax loopholes such as the use of tax havens to avoid payment of taxes to Uncle Sam. Those tax havens and that loophole that allows the use of those havens is costing the Treasury in the range of $100 billion a year. We can fight back against exorbitantly high energy prices, but it will take all of our energy and determination to do it. Summary of Oil Trading Transparency Act Summary The Levin-Feinstein Oil Trading Transparency Act would direct the Commodity Futures Trading Commission (CFTC) to ensure that any foreign exchange operating a trading terminal in the United States for the trading of a U.S. energy commodity meets two regulatory requirements that already apply to U.S. exchanges: (1) imposition of speculative trading limits to prevent price manipulation and excessive speculation, and (2) the mandatory daily publication of trading information from the exchange to ensure market transparency. The bill would also require the CFTC to obtain information from the foreign exchange to enable it to determine how much trading in U.S. energy commodities is due to speculation. Background Currently, a key foreign exchange (ICE Futures Europe) that recently began trading trades futures contracts for crude oil produced in the United States is allowed by the CTFC to operate trading terminals in the United States. ICE Futures Europe is owned by the Intercontinental Exchange (ICE), a U.S. company based in Atlanta, Georgia, which also operates the largest electronic energy trading platform in the United States outside of the NYMEX exchange in New York. ICE Futures Europe trades two types of crude oil, Brent crude oil produced in the North Sea, and West Texas Intermediate (WTI) crude oil produced in the United States. It is the only foreign exchange that trades U.S. crude oil. ICE Futures Europe bases the settlement price of its WTI contract price on the settlement price of the WTI contract traded on the NYMEX exchange, so the price of both WTI futures contracts are virtually identical. For a number of years the CFTC has allowed ICE Futures Europe to operate trading terminals in the United States. At first, only Brent contracts could be traded on U.S. terminals, but in 2006 ICE began trading WTI contracts in London. This 2006 development allowed U.S. traders to trade WTI futures contracts in London as well as in New York. This means that crude oil produced and used in the United States can be traded by U.S. traders on an exchange that is beyond the reach of U.S. regulators. Approximately 30 to 40% of WTI futures trades--which are key to setting U.S. oil prices--now occur in London, beyond U.S. oversight. Although the CFTC has a data sharing agreement with the U.K. regulatory authority, the Financial Services Authority (FSA), to obtain trading data from the London exchange, the FSA does not collect or provide data that would enable the CFTC to determine how much WTI futures trading is due to speculation. Absent this information, CFTC weekly reports on speculation in U.S. crude oil futures are incomplete and inaccurate. The FSA also does not impose position limits on traders to limit speculative trading. The absence of these position limits means that a U.S. trader can avoid U.S. oil speculation limits on U.S. exchanges simply by routing its trades through London. The bill would correct these market deficiencies by disallowing the operation of foreign exchange terminals in the United States, unless the foreign exchange meets comparable requirements for market transparency and speculative limits as now apply in the United States.

Mr. LEVIN. Mr. President, I yield the floor.

Mr. LEVIN. Mr. President, have I been assigned a specific amount of time?

Mr. LEVIN. I thank the Presiding Officer. Mr. President, day after day, record-high oil and gasoline prices are hurting millions of American consumers and businesses. Unless something is done to make energy more affordable, the record-high prices will continue to reverberate throughout our economy, increasing the prices of transportation and food and manufacturing and everything in between. Skyrocketing energy prices are a threat to our economic and national security, and the time is long past for action. My Senate Permanent Subcommittee on Investigations has conducted four separate investigations into how our energy markets can be made to work better. Most recently, last December, we had a joint hearing with the Senate Energy Subcommittee on the role of speculation in rising energy prices. As a result of these investigations and hearings, I have been advocating a variety of measures to address the rampant speculation and lack of regulation of energy markets which have contributed to sky-high energy prices. Some of those measures are: First, put a cop back on the beat in the energy markets to ensure these markets are free from excessive speculation and manipulation, and that cop has to be a regulatory agency; stop filling the Strategic Petroleum Reserve until prices are lower; develop alternatives to fossil fuels to lessen our dependence on oil; and impose a windfall profits tax on oil companies that have profited from the massive price increases. Now, there is not much we can do about some causes of these sky-high gas prices, but there are a number of causes that can be addressed. One key factor in the price spikes of energy is rampant speculation in the energy markets. Traders are trading contracts for future delivery of oil in record amounts, creating a paper demand that is driving up prices and increasing price volatility, solely to take a profit. Overall, the amount of trading of futures in oil on the New York Mercantile Exchange has risen sixfold in recent years. As this chart shows, from 500,000 contracts for future delivery of oil to 3 million contracts just since 2001. Now, much of this increase in the trading of futures has been due to speculation. Speculators in the oil market do not intend to use crude oil. Instead, they buy and sell contracts for crude oil just to make a profit from changing prices. The number of futures and options contracts held by speculators has gone from around 100,000 contracts in 2001--which at that time was 20 percent of the outstanding futures and options contracts--and has risen to 1.2 million futures contracts currently held by speculators. That represents now about 40 percent of the outstanding futures contracts in oil on the New York Mercantile Exchange. That increase can be seen on this chart: the doubling in the percentage of futures contracts, which is represented by purchases by speculators on the New York Mercantile Exchange, from this level--15 to 20 percent in January of 2001--to almost double that amount currently. That is a massive increase in speculation. As a matter of fact, as this next chart shows, there is now 12 times as much speculation as there was in 2001, while the purchase of nonspeculative futures is up but three times. This chart shows the difference. As shown on this chart, these are the purchases of contracts for future delivery of oil bought by speculators versus nonspeculators. As shown on the chart, the speculator increase in purchases is that white line, with that dramatic increase, starting in 2003, going all the way up to where it is currently; and the relatively flatter yellow line represents the purchases of future delivery of oil by the nonspeculators since 2001. Now, not surprisingly, this massive speculation the price of oil will increase has, in fact, helped increase the price of oil to a level far above that justified by traditional forces of supply and demand. Let me quote some experts about the role of speculation. Some people say: Well, speculation does not have much of an effect. Well, listen to some of the experts. The president and CEO of Marathon Oil said recently: $100 oil isn't justified by the physical demand in the market. It has to be speculation on the futures market that is fueling this. Mr. Fadel Gheit, oil analyst for Oppenheimer & Company, describes the oil market as ``a farce.'' The speculators have seized control and it's basically a free-for-all, a global gambling hall, and it won't shut down unless and until responsible governments step in. In January of this year, as oil hit $100 a barrel, Tim Evans, oil analyst for Citigroup, wrote the following: [T]he larger supply and demand fundamentals do not support a further rise and are, in fact, more consistent with lower price levels. At the joint hearing I made reference to on the effects of speculation we held last December, Edward Krapels, a financial market analyst, said the following: Of course financial trading, speculation affects the price of oil because it affects the price of everything we trade. . . . It would be amazing if oil somehow escaped this effect. Dr. Krapels added that as a result of this speculation, ``there is a bubble in oil prices.'' A fair price for a commodity is a price that accurately reflects the forces of supply and demand for the commodity, not the trading strategies of speculators who only are in the market to make a profit by the buying and selling of paper contracts, with no intent to actually purchase, deliver, or transfer the commodity. As we all too often have seen in recent years, when speculation grows so large that it has a major impact on the market, prices get distorted and stop reflecting true supply and demand. Excessive market speculation is a factor that we can and should do a better job of controlling. There are other long overdue actions as well that, if taken as part of a comprehensive plan, can combat rising energy prices. But as to reining in the speculators, the first step is to put a cop back on the beat in all of our energy markets to prevent excessive speculation, price manipulation, and trading abuses. In 2001, my Senate Permanent Subcommittee on Investigations began investigating our energy markets. At the time, the price of a gallon of gasoline had spiked upwards by about 25 cents over the course of the Memorial Day holiday. We subpoenaed records from major oil companies and interviewed oil industry experts, gas station dealers, antitrust experts, gasoline wholesalers and distributors, and oil company executives. We examined thousands of prices at gas stations in Michigan, Ohio, California, and other States. In the spring of 2002, I released a 400-page report and held 2 days of hearings on the results of the investigation. The investigation found that increasing concentration in the gasoline refining industry, due to a large number of recent mergers and acquisitions, was one of the causes of the increasing number of gasoline price spikes. Another factor causing those spikes was the increasing tendency of refiners to keep lower inventories of gasoline. We also found a number of instances in which the increasing concentration in the refining industry was also leading to higher prices in general. Limitations on the pipeline that brings gasoline to my home State of Michigan was another cause of price increases and spikes in Michigan. The report recommended that the Federal Trade Commission carefully investigate proposed mergers, particularly with respect to the effect of mergers on inventories of gasoline. In March of 2003, my subcommittee released a second report detailing how the operation of crude oil markets affects the price of not only gasoline but also key commodities such as home heating oil and diesel fuel. The report warned that U.S. energy markets were vulnerable to price manipulation due to a lack of comprehensive regulation and market oversight. Following this report, I worked with Senator Feinstein on legislation to put the cop back on the beat in the energy markets that had been exempted from regulation pursuant to an ``Enron loophole'' that was snuck into other commodities legislation in December of 2000. For 2 years, we attempted to close that ``Enron loophole,'' but efforts to put the cop back on the beat in these markets were unsuccessful, due to opposition from the Bush administration, large energy companies, and financial institutions that trade energy commodities. In June of 2006, I released another subcommittee report called ``The Role of Market Speculation in Rising Oil and Gas Prices: A Need to Put a Cop on the Beat.'' This report found that the traditional forces of supply and demand no longer accounted for sustained price increases and price volatility in the oil and gas markets. The report determined that in 2006 a growing number of energy trades occurred without regulatory oversight and that market speculation had contributed to rising oil and gasoline prices, perhaps accounting for $20 out of a then-priced $70 barrel of oil. The subcommittee report I released in June of 2006 again recommended new laws to increase market oversight and stop market manipulation and excessive speculation. I again coauthored legislation with Senator Feinstein to improve oversight of the unregulated energy markets. Once again, opposition from the Bush administration, large energy traders, and the financial industry prevented the full Senate from considering that legislation. In 2007, my subcommittee addressed the sharp rise in natural gas prices over the previous year and released a fourth report, entitled: ``Excessive Speculation in the Natural Gas Market.'' Our investigation showed that speculation by a single hedge fund named Amaranth had distorted natural gas prices during the summer of 2006 and drove up prices for average consumers. The report also demonstrated how Amaranth had traded in unregulated markets to avoid the restrictions and oversight in the regulated markets, and how the price increases caused by Amaranth could have been prevented if there had been the same type of oversight in the unregulated markets as in the regulated markets. Following that investigation, I introduced a bill, S. 2058, to close the Enron loophole and regulate the unregulated electronic energy markets. Working again with Senators Feinstein and Snowe and with members of the Agriculture Committee in a bipartisan effort, we finally managed to include an amendment to close the Enron loophole in the farm bill that was then being considered by the Senate. The Senate unanimously passed this amendment to close the Enron loophole last December. Last week, the House and Senate conferees on the farm bill reached agreement to include our legislation in the final farm bill, and we hope the Congress will finally pass that important legislation soon. Although our legislation to close the Enron loophole is vitally important for the energy market oversight as a whole, and for our natural gas markets in particular, because energy traders have recently moved a significant amount of United States crude oil and gasoline trading to the United Kingdom, beyond the direct reach of United States regulators, we have to address that second loophole now as well. The key energy commodity market for United States crude oil and gasoline trading is now located in London, regulated by the British agency called the Financial Services Authority. However, the British regulators do not have any limits on speculation as we do here in the United States, and the British do not make public the same type of trading data we do. That means traders can avoid the limits on speculation in crude oil imposed on the New York exchanges by trading on the London exchange. It also makes the London exchange less transparent than the New York exchange. The legislation I introduced in 2007 would have required United States traders on the London exchange to provide United States regulators with the same type of trading information they are already required to provide when they trade on the New York Mercantile Exchange. Unfortunately, this provision was dropped from the ``close the Enron loophole'' legislation in the farm bill. The Consumer First Energy Act, which the majority leader and others introduced last week to address high gas prices and reduce speculation, includes a provision to stop speculation and to increase our access to timely and important trading information and to ensure there is adequate market oversight of the trading of U.S. energy commodities no matter where the trading occurs. This legislation that was introduced last week, and which I am proud to cosponsor, would require the Commodity Futures Trading Commission--the CFTC--to ensure a foreign exchange imposes comparable speculative limits and comparable reporting requirements on speculators that the CFTC imposes on U.S. exchanges prior to allowing traders in the U.S. trading U.S. energy commodities direct access to that exchange through a terminal located in this country. So the bill introduced last week will close that second loophole which I have identified. I believe this issue is so important that I have also introduced that section to close that second loophole as a separate bill. Senator Feinstein is a cosponsor of that bill. I ask unanimous consent that a summary of the bill be printed in the Record after my statement.

Mr. LEVIN

Mr. LEVIN. Mr. President, last week, my colleagues from the Great Lakes and I introduced the Great Lakes Legacy Act of 2008. This bill will reauthorize the Great Lakes Legacy Act of 2002, which significantly benefited efforts to clean up contaminated areas of the Great Lakes. The focus of the Legacy program is to clean up ``Areas of Concern'' in the Great Lakes. These are sites that do not meet the water quality goals established by the United States and Canada in the Great Lakes Water Quality Agreement. The primary reason that these areas fail to meet water quality goals is the result of contaminated sediments from industrial activity. This contamination results in fish advisories, degradation of fish and wildlife populations, taste and odor problems with drinking water, beach closures, and bird and animal deformities or reproductive problems. The existing Legacy program has funded several projects throughout the region to remove contaminated sediments in Areas of Concern. In fact, almost 800,000 cubic yards of contaminated sediments have been removed since the program was created in 2002. This is material that has been safely removed from riverbeds so that it no longer poses a threat to human health or the wildlife. Still, there are 13 Areas of Concern in the State of Michigan alone. The environmental problems are far too grave considering the fact that the Great Lakes holds one-fifth of the world's freshwater, supplies drinking water to tens of million people, and provides a $5 billion fishery. They threaten the Great Lakes as a source of potable water, as a recreational resource, as a commercial asset, and as a natural habitat. The bill that we have introduced would build on the existing Legacy program in several ways. It would increase the authorization of appropriations from $54 million to $150 million annually in order to clean up the Areas of Concern within 10 years. The bill would give the EPA greater flexibility to manage funds by allowing the EPA to distribute funds directly to contractors and would not require States to maintain previous year's funding levels at a site. Under this bill, eligible projects would be expanded to include habitat restoration. Many Areas of Concern cannot be delisted until habitat restoration work is done. Also, the bill would give the EPA the discretion to provide Legacy Act funds to demonstration and pilot projects. Finally, the bill would clarify the role of polluters in participating in future projects. We have been working for decades to try to clean up the Areas of Concern. This bill was drafted based on recommendations from a coalition of environmental and industry groups that are working to protect and restore the Great Lakes, and I want to thank them for their dedication. I hope that my colleagues will support this legislation to continue progress on cleaning up these sites and protecting our precious Great LakA for the use and benefit of citizens throughout the Midwest and across Nation.

Mr. LEVIN

Mr. LEVIN. I move to lay that motion on the table. The motion to lay on the table was agreed to.

Mr. LEVIN

Mr. LEVIN. Mr. President, the 2000 year search for a Jewish homeland concluded on May 14, 1948, with the declaration of an independent State of Israel. But, the birth of Israel on that day was far from easy. Prime Minister David Ben-Gurion made his first radio broadcast the following day from an air raid shelter as the precarious new nation came under attack. Even as a war was being launched against their young nation, Israel's founding father took the time to remind the first citizens of Israel what had been accomplished and what it would take to defend their dream. Ben-Gurion said, ``whatever we have achieved is the result of the efforts of earlier generations no less than our own. It is also the result of an unwavering fidelity to our precious heritage, the heritage of a small nation that has suffered much, but at the same time has won for itself a special place in the history of mankind because of its spirit, faith, and vision.'' The United States has played a critical role in the development of Israel over the past 60 years. President Harry S. Truman, the first head of state to grant Israel diplomatic recognition, expressed its special place in the hearts of Americans as he declared, ``I had faith in Israel before it was established, and I have faith in it now. I believe it has a glorious future before it--not just another sovereign nation, but as an embodiment of the great ideals of our civilization.'' This special partnership which began with Israel's creation has been repeatedly tested since 1948. The United States has been steadfast in our commitment to helping the people of Israel develop their own economy and secure their own peace. We have helped give them the time that their founding fathers knew was needed to secure their future. A decade ago, in celebration of Israel's 50th anniversary, I traveled there for an international conference of Jewish legislators from around the world. In our discussions, I saw then that the philosophy that was embraced by Ben-Gurion and other visionary leaders helped Israel become a dynamic democracy with a thriving economy. In the decade since that conference, Israel has come within a few breaths of a peace agreement and also experienced episode after episode of violence carried out against its civilians. Still, Israel's faith and fortitude remain as strong today as they were when the dream was realized six decades ago. In recognition of Israel's remarkable history, I was pleased to be a cosponsor of S. Res. 522, which the Senate unanimously passed late last month. The resolution acknowledges the 60th anniversary of the founding of the State of Israel and reaffirms the bonds of friendship and cooperation between the United States and Israel. This is a fitting tribute to Israel's past, and we all hope that our nations' mutual goodwill augurs well for future positive and peaceful developments in Israel, in the Middle East and around the world.

Mr. LEVIN

Mr. LEVIN. Mr. President, I am joined by my colleague from Michigan, Senator Stabenow, in introducing a resolution today honoring the 40th anniversary of Focus: HOPE. This resolution was initiated in the House by Representative John Conyers and cosponsored by the entire Michigan Congressional delegation. Focus: HOPE, a civil and human rights organization, was founded by the late Father William T. Cunningham and Eleanor Josaitis in the aftermath of the 1967 Detroit riots in one of Detroit's most economically depressed areas. This outstanding organization has established itself as an integral part of the history and fabric of southeast Michigan. The mission of Focus: HOPE is ``to use intelligent and practical action to fight racism, poverty and injustice'' and that mission is as important today as it was when the organization was founded in 1968. Over the ensuing 40 years, Focus: HOPE has sought to effect positive change in southeast Michigan. I have been honored to witness and take part in the evolution of this fine organization. Education and job training has been at the core of these efforts. By bringing together businesses, foundations, government and individuals in the community, Focus: HOPE has truly made a difference in Detroit and across the state of Michigan and has grown into one of the largest nonprofits in the State. Focus: HOPE has sought to meet the needs of southeast Michigan in a comprehensive fashion through a number of highly successful programs, including the Machinist Training Institute, the Center for Advanced Technology, the Fast Track program, the Center for Children and the Commodity Supplemental Food Program. Real and meaningful change comes from sustained and committed service. Over the past 40 years, Focus: HOPE has embodied this principle and, along the way, has touched many lives in Southeast Michigan in a profound way. Equipping individuals with the ability to compete and thrive in workplaces that are increasingly technologically advanced is central to its mission. The reward has been thousands of heartwarming success stories from those who have benefitted from the many services Focus: HOPE provides. This momentous occasion will be marked by several celebrations, including one in the Mansfield Room of the Capitol later today. I know my colleagues join me in congratulating each individual that has contributed to the success of Focus: HOPE from its inception. I wish the organization many more years of successful and committed service to the community.

Mr. LEVIN

Mr. LEVIN. Mr. President, I am introducing today, with my colleagues Senator Coleman and Senator Obama, the Incorporation Transparency and Law Enforcement Assistance Act. This bill tackles a longstanding homeland security problem involving inadequate State incorporation practices that leave this country unnecessarily vulnerable to terrorists, criminals, and other wrongdoers, hinder law enforcement, and damage the international stature of the U.S. The problem is straightforward. Each year, the States allow persons to form nearly 2 million corporations and limited liability companies in this country without knowing--or even asking--who the beneficial owners are behind those corporations. Right now, a person forming a U.S. corporation or limited liability company, LLC, provides less information to the State than is required to open a bank account or obtain a driver's license. Instead, States routinely permit persons to form corporations and LLCs under State laws without disclosing the names of any of the people who will control or benefit from them. It is a fact that criminals are exploiting this weakness in our State incorporation practices. They are forming new U.S. corporations and LLCs, and using these entities to commit crimes ranging from terrorism to drug trafficking, money laundering, tax evasion, financial fraud, and corruption. Law enforcement authorities investigating these crimes have complained loudly for years about the lack of beneficial ownership information. Last year, for example, the U.S. Department of the Treasury sent a letter to the States stating: ``the lack of transparency with respect to the individuals who control privately held for-profit legal entities created in the U.S. continues to represent a substantial vulnerability in the U.S. anti-money laundering/counter terrorist financing, AML/CFT, regime. . . . [T]he use of U.S. companies to mask the identity of criminals presents an ongoing and substantial problem . . . for U.S. and global law enforcement authorities.'' Last month, Secretary Michael Chertoff, head of the U.S. Department of Homeland Security, wrote the following: ``In countless investigations, where the criminal targets utilize shell corporations, the lack of law enforcement's ability to gain access to true beneficial ownership information slows, confuses or impedes the efforts by investigators to follow criminal proceeds. This is the case in financial fraud, terrorist financing and money laundering investigations. . . . It is imperative that States maintain beneficial ownership information while the company is active and to have a set time frame for preserving those records. . . . Shell companies can be sold and resold to several beneficial owners in the course of a year or less. . . . By maintaining records not only of the initial beneficial ownership but of the subsequent beneficial owners, States will provide law enforcement the tools necessary to clearly identify the individuals who utilized the company at any given period of time.'' These types of complaints by U.S. law enforcement, their pleas for assistance, and their warnings about the dangers of anonymous U.S. corporations operating here and abroad are catalogued in a stack of reports and hearing testimony from the Department of Justice, the Department of Homeland Security, the Financial Crimes Enforcement Network of the Department of the Treasury, the Internal Revenue Service, and others. To add insult to injury, our law enforcement officials have too often had to stand silent when asked by their counterparts in other countries for information about who owns a U.S. corporation committing crimes in their jurisdictions. The reality is that the United States is as bad as any offshore jurisdiction when it comes to responding to those requests--we can't answer them because we don't have the information. In 2006, the leading international anti-money laundering body in the world, the Financial Action Task Force on Money Laundering--known as FATF--issued a report criticizing the U.S. for its failure to comply with a FATF standard requiring countries to obtain beneficial ownership information for the corporations formed under their laws. This standard is one of 40 FATF standards that this country has publicly committed itself to implementing as part of its efforts to promote strong anti- money laundering laws around the world. FATF gave the U.S. 2 years, until July 2008, to make progress toward coming into compliance with the FATF standard on beneficial ownership information. That deadline is right around the comer, but we have yet to make any real progress. That is another reason why we are introducing this bill today. Enacting the bill would bring the U.S. into compliance with the FATF standard by requiring the States to obtain beneficial ownership information for the corporations formed under their laws. It would ensure that the U.S. met its international commitment to comply with FATF anti-money laundering standards. The bill being introduced today is the product of years of work by the U.S. Senate Permanent Subcommittee on Investigations, on which I, Senator Coleman, and Senator Obama serve together. As long ago as 2000, the Government Accountability Office, GAO, at my request, conducted an investigation and released a report entitled, Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed for Russian Entities. This report revealed that one person was able to set up more than 2,000 Delaware shell corporations and, without disclosing the identity of the beneficial owners, open U.S. bank accounts for those corporations, which then collectively moved about $1.4 billion through the accounts. It is one of the earliest Government reports to give some sense of the law enforcement problems caused by U.S. corporations with unknown owners. It sounded the alarm sounded 8 years ago, but to little effect. In April 2006, in response to a Levin-Coleman request, GAO released a report entitled, Company Formations: Minimal Ownership Information Is Collected and Available, which reviewed the corporate formation laws in all 50 States. GAO disclosed that the vast majority of the States don't collect any information at all on the beneficial owners of the corporations and LLCs formed under their laws. The report also found that many States have established automated procedures that allow a person to form a new corporation or LLC within the State within 24 hours of filing an online application without any prior review of that application by a State official. In exchange for a substantial fee, two States will even form a corporation or LLC within one hour of a request. After examining these State incorporation practices, the GAO report described the problems that the lack of beneficial ownership information has caused for a range of law enforcement investigations. In November 2006, our Subcommittee held a hearing further exploring this issue. At that hearing, representatives of the U.S. Department of Justice, DOJ, the Internal Revenue Service, and the Department of Treasury's Financial Crimes Enforcement Network, FinCEN, testified that the failure of States to collect adequate information on the beneficial owners of the legal entities they form has impeded Federal efforts to investigate and prosecute criminal acts such as terrorism, money laundering, securities fraud, and tax evasion. At the hearing, DOJ testified: ``We had allegations of corrupt foreign officials using these [U.S.] shell accounts to launder money, but were unable--due to lack of identifying information in the corporate records--to fully investigate this area.'' The IRS testified: ``Within our own borders, the laws of some states regarding the formation of legal entities have significant transparency gaps which may even rival the secrecy afforded in the most attractive tax havens.'' FinCEN identified 768 incidents of suspicious international wire transfer activity involving U.S. shell companies. In addition, last year, when listing the ``Dirty Dozen'' tax scams for 2007, the IRS highlighted shell companies with unknown owners as number four on the list, as follows: ``4. Disguised Corporate Ownership: Domestic shell corporations and other entities are being formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity. Once formed, these anonymous entities can be, and are being, used to facilitate underreporting of income, non-filing of tax returns, listed transactions, money laundering, financial crimes and possibly terrorist financing. The IRS is working with state authorities to identify these entities and to bring their owners into compliance.'' That is not all. Dozens of Internet websites advertising corporate formation services highlight the fact that some of our States allow corporations to be formed under their laws without asking for the identity of the beneficial owners. These websites explicitly point to anonymous ownership as a reason to incorporate within the U.S., and often list certain States alongside notorious offshore jurisdictions as preferred locations for the formation of new corporations, essentially providing an open invitation for wrongdoers to form entities within the U.S. One website, for example, set up by an international incorporation firm, advocates setting up companies in Delaware by saying: ``DELAWARE--An Offshore Tax Haven for Non US Residents.'' It cites as one of Delaware's advantages that: ``Owners' names are not disclosed to the state.'' Another website, from a U.K. firm called ``formacompany- offshore.com,'' lists the advantages to incorporating in Nevada. Those advantages include: ``No I.R.S. Information Sharing Agreement'' and ``Stockholders are not on Public Record allowing complete anonymity.'' Despite this type of advertising, years of law enforcement complaints, and mounting evidence of abuse, many of our States are reluctant to admit there is a problem with establishing U.S. corporations and LLCs with unknown owners. Too many of our States are eager to explain how quick and easy it is to set up corporations within their borders, without acknowledging that those same quick and easy procedures enable wrongdoers to utilize U.S. corporations in a variety of crimes and tax dodges both here and abroad. Since 2006, the Subcommittee has worked with the States to encourage them to recognize the homeland security problem they've created and to come up with their own solution. After the Subcommittee's hearing on this issue, for example, the National Association of Secretaries of State, NASS, convened a 2007 task force to examine State incorporation practices. At the request of NASS and several States, I delayed introducing legislation while they worked on a proposal to require the collection of beneficial ownership information. My Subcommittee staff participated in multiple conferences, telephone calls, and meetings; suggested key principles; and provided comments to the Task Force. In July 2007, the NASS task force issued a proposal. Rather than cure the problem, however, the proposal was full of deficiencies, leading the Treasury Department to state in a letter that the NASS proposal ``falls short'' and ``does not fully address the problem of legal entities masking the identity of criminals.'' Among other shortcomings, the NASS proposal does not require States to obtain the names of the natural individuals who would be the beneficial owners of a U.S. corporation or LLC. Instead, it would allow States to obtain a list of a company's ``owners of record'' who can be, and often are, offshore corporations or trusts. The NASS proposal also doesn't require the States themselves to maintain the beneficial ownership information, or to supply it to law enforcement upon receipt of a subpoena or summons. The proposal also fails to require the beneficial ownership information to be updated over time. These and other flaws in the proposal have been identified by the Treasury Department, the Department of Justice, myself, and others, but NASS has given no indication that the flaws will be corrected. It is deeply disappointing that the States, despite the passage of more than one year, have been unable to devise an effective proposal. Part of the difficulty is that the States have a wide range of practices, differ on the extent to which they rely on incorporation fees as a major source of revenue, and differ on the extent to which they attract non-U.S. persons as incorporators. In addition, the States are competing against each other to attract persons who want to set up U.S. corporations, and that competition creates pressure for each individual State to favor procedures that allow quick and easy incorporations. It is a classic case of competition causing a race to the bottom, making it difficult for any one State to do the right thing and request the names of the beneficial owners. That is why we are introducing Federal legislation today. Federal legislation is needed to level the playing field among the States, set minimum standards for obtaining beneficial ownership information, put an end to the practice of States forming millions of legal entities each year without knowing who is behind them, and bring the U.S. into compliance with its international commitments. The bill's provisions would require the States to obtain a list of the beneficial owners of each corporation or LLC formed under their laws, to maintain this information for 5 years after the corporation is terminated, and to provide the information to law enforcement upon receipt of a subpoena or summons. If enacted, this bill would ensure, for the first time, that law enforcement seeking beneficial ownership information from a State about one of its corporations or LLCs would not be turned away empty-handed. The bill would also require corporations and LLCs to update their beneficial ownership information in an annual filing with the State of incorporation. If a State did not require an annual filing, the information would have to be updated each time the beneficial ownership changed. In the special case of U.S. corporations formed by non-U.S. persons, the bill would go farther. Following the lead of the Patriot Act which imposed additional due diligence requirements on certain financial accounts opened by non-U.S. persons, our bill would require additional due diligence for corporations beneficially owned by non-U.S. persons. This added due diligence would have to be performed--not by the States--but by the persons seeking to establish the corporations. These incorporators would have to file with the State a written certification from a corporate formation agent residing within the State attesting to the fact that the agent had verified the identity of the non-U.S. beneficial owners of the corporation by obtaining their names, addresses, and passport photographs. The formation agent would be required to retain this information for a specified period of time and produce it upon request. The bill would not require the States to verify the ownership information provided to them by a formation agent, corporation, LLC, or other person filing an incorporation application. Instead, the bill would establish Federal civil and criminal penalties for anyone who knowingly provided a State with false beneficial ownership information or intentionally failed to provide the State with the information requested. The bill would also exempt certain corporations from the disclosure obligation. For example, it would exempt all publicly-traded corporations and the entities they form, since these corporations are already overseen by the Security and Exchange Commission SEC. It would also allow the States, with the written concurrence of the Homeland Security Secretary and the U.S. Attorney General, to identify certain corporations, either individually or as a class, that would not have to list their beneficial owners, if requiring such ownership information would not serve the public interest or assist law enforcement in their investigations. These exemptions are expected to be narrowly drafted and rarely granted, but are intended to provide the States and Federal law enforcement added flexibility to fine-tune the disclosure obligation and focus it where it is most needed to stop crime, tax evasion, and other wrongdoing. Another area of flexibility in the bill involves privacy issues. The bill deliberately does not take a position on the issue of whether the States should make the beneficial ownership information they receive available to the public. Instead, the bill leaves it entirely up to the States to decide whether and under what circumstances to make beneficial ownership information available to the public. The bill explicitly permits the States to place restrictions on providing beneficial ownership information to persons other than government officials. The bill focuses instead only on ensuring that law enforcement and Congress, when equipped with a subpoena or summons, are given ready access to the beneficial ownership information collected by the States. To ensure that the States have the funds needed to meet the new beneficial ownership information requirements, the bill makes it clear that States can use their DHS State grant funds for this purpose. Every State is guaranteed a minimum amount of DHS grant funds every year and may receive funds substantially above that minimum. Every State will be able to use all or a portion of these funds to modify their incorporation practices to meet the requirements in the Act. The bill also authorizes DHS to use appropriated funds to carry out its responsibilities under the Act. These provisions will ensure that the States have the funds needed for the modest compliance costs involved with amending their incorporation forms to request the names of beneficial owners. It is common for bills establishing Federal standards to seek to ensure State action by making some Federal funding dependent upon a State's meeting the specified standards. This bill, however, states explicitly that nothing in the bill authorizes DHS to withhold funds from a State for failing to modify its incorporation practices to meet the beneficial ownership information requirements in the Act. Instead, the bill simply calls for a GAO report in 2012 to identify which States, if any, have failed to strengthen their incorporation practices as required by the Act. After getting this status report, a future Congress can decide what steps to take, including whether to reduce any DHS funding going to the noncompliant States. Finally, the bill would require the U.S. Department of the Treasury to issue a rule requiring formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or LLCs for criminals or other wrongdoers. GAO would also be asked to conduct a study of existing State formation procedures for partnerships and trusts. We have worked hard to craft a bill that would address, in a fair and reasonable way, the homeland security problem created by States allowing the formation of millions of U.S. corporations and LLCs with unknown owners. What the bill comes down to is a simple requirement that States change their incorporation applications to add a question requesting the names and addresses of the prospective beneficial owners. That is not too much to ask to protect this country and the international community from U.S. corporations engaged in wrongdoing and to help law enforcement track down the wrongdoers. For those who say that, if the United States tightens its incorporation rules, new companies will be formed elsewhere, it is appropriate to ask exactly where they will go? Every country in the European Union is already required to get beneficial information for the corporations formed under their laws. Most offshore jurisdictions already request this information as well, including the Bahamas, Cayman Islands, Jersey, and the Island of Man. Our States should be asking for the same ownership information, but they don't, and there is no indication that they will any time in the near future, unless required to do so. I wish Federal legislation weren't necessary. I wish the States could solve this homeland security problem on their own, but ongoing competitive pressures make it unlikely that the States will reach agreement. We have waited more than a year already with no real progress to show for it, despite repeated pleas from law enforcement. Federal legislation is necessary to reduce the vulnerability of the United States to wrongdoing by U.S. corporations with unknown owners, to protect interstate and international commerce from criminals misusing U.S. corporations, to strengthen the ability of law enforcement to investigate suspect U.S. corporations, to level the playing field among the States, and to bring the U.S. into compliance with its international anti-money laundering obligations. There is also an issue of consistency. For years, I have been fighting offshore corporate secrecy laws and practices that enable wrongdoers to secretly control offshore corporations involved in money laundering, tax evasion, and other misconduct. I have pointed out on more than one occasion that corporations were not created to hide ownership, but to shield owners from personal liability for corporate acts. Unfortunately, today, the corporate form has too often been corrupted into serving those wishing to conceal their identities and commit crimes or dodge taxes without alerting authorities. It is past time to stop this misuse of the corporate form. But if we want to stop inappropriate corporate secrecy offshore, we need to stop it here at home as well. For these reasons, I urge my colleagues to support this legislation and put an end to incorporation practices that promote corporate secrecy and render the United States and other countries vulnerable to abuse by U.S. corporations with unknown owners. Mr. President, I ask unanimous consent that the text of the bill and a bill summary be printed in the Record.

Mr. LEVIN

Mr. LEVIN. Mr. President, I am introducing today, with my colleagues Senator Coleman and Senator Obama, the Incorporation Transparency and Law Enforcement Assistance Act. This bill tackles a longstanding homeland security problem involving inadequate State incorporation practices that leave this country unnecessarily vulnerable to terrorists, criminals, and other wrongdoers, hinder law enforcement, and damage the international stature of the U.S. The problem is straightforward. Each year, the States allow persons to form nearly 2 million corporations and limited liability companies in this country without knowing--or even asking--who the beneficial owners are behind those corporations. Right now, a person forming a U.S. corporation or limited liability company, LLC, provides less information to the State than is required to open a bank account or obtain a driver's license. Instead, States routinely permit persons to form corporations and LLCs under State laws without disclosing the names of any of the people who will control or benefit from them. It is a fact that criminals are exploiting this weakness in our State incorporation practices. They are forming new U.S. corporations and LLCs, and using these entities to commit crimes ranging from terrorism to drug trafficking, money laundering, tax evasion, financial fraud, and corruption. Law enforcement authorities investigating these crimes have complained loudly for years about the lack of beneficial ownership information. Last year, for example, the U.S. Department of the Treasury sent a letter to the States stating: ``the lack of transparency with respect to the individuals who control privately held for-profit legal entities created in the U.S. continues to represent a substantial vulnerability in the U.S. anti-money laundering/counter terrorist financing, AML/CFT, regime. . . . [T]he use of U.S. companies to mask the identity of criminals presents an ongoing and substantial problem . . . for U.S. and global law enforcement authorities.'' Last month, Secretary Michael Chertoff, head of the U.S. Department of Homeland Security, wrote the following: ``In countless investigations, where the criminal targets utilize shell corporations, the lack of law enforcement's ability to gain access to true beneficial ownership information slows, confuses or impedes the efforts by investigators to follow criminal proceeds. This is the case in financial fraud, terrorist financing and money laundering investigations. . . . It is imperative that States maintain beneficial ownership information while the company is active and to have a set time frame for preserving those records. . . . Shell companies can be sold and resold to several beneficial owners in the course of a year or less. . . . By maintaining records not only of the initial beneficial ownership but of the subsequent beneficial owners, States will provide law enforcement the tools necessary to clearly identify the individuals who utilized the company at any given period of time.'' These types of complaints by U.S. law enforcement, their pleas for assistance, and their warnings about the dangers of anonymous U.S. corporations operating here and abroad are catalogued in a stack of reports and hearing testimony from the Department of Justice, the Department of Homeland Security, the Financial Crimes Enforcement Network of the Department of the Treasury, the Internal Revenue Service, and others. To add insult to injury, our law enforcement officials have too often had to stand silent when asked by their counterparts in other countries for information about who owns a U.S. corporation committing crimes in their jurisdictions. The reality is that the United States is as bad as any offshore jurisdiction when it comes to responding to those requests--we can't answer them because we don't have the information. In 2006, the leading international anti-money laundering body in the world, the Financial Action Task Force on Money Laundering--known as FATF--issued a report criticizing the U.S. for its failure to comply with a FATF standard requiring countries to obtain beneficial ownership information for the corporations formed under their laws. This standard is one of 40 FATF standards that this country has publicly committed itself to implementing as part of its efforts to promote strong anti- money laundering laws around the world. FATF gave the U.S. 2 years, until July 2008, to make progress toward coming into compliance with the FATF standard on beneficial ownership information. That deadline is right around the comer, but we have yet to make any real progress. That is another reason why we are introducing this bill today. Enacting the bill would bring the U.S. into compliance with the FATF standard by requiring the States to obtain beneficial ownership information for the corporations formed under their laws. It would ensure that the U.S. met its international commitment to comply with FATF anti-money laundering standards. The bill being introduced today is the product of years of work by the U.S. Senate Permanent Subcommittee on Investigations, on which I, Senator Coleman, and Senator Obama serve together. As long ago as 2000, the Government Accountability Office, GAO, at my request, conducted an investigation and released a report entitled, Suspicious Banking Activities: Possible Money Laundering by U.S. Corporations Formed for Russian Entities. This report revealed that one person was able to set up more than 2,000 Delaware shell corporations and, without disclosing the identity of the beneficial owners, open U.S. bank accounts for those corporations, which then collectively moved about $1.4 billion through the accounts. It is one of the earliest Government reports to give some sense of the law enforcement problems caused by U.S. corporations with unknown owners. It sounded the alarm sounded 8 years ago, but to little effect. In April 2006, in response to a Levin-Coleman request, GAO released a report entitled, Company Formations: Minimal Ownership Information Is Collected and Available, which reviewed the corporate formation laws in all 50 States. GAO disclosed that the vast majority of the States don't collect any information at all on the beneficial owners of the corporations and LLCs formed under their laws. The report also found that many States have established automated procedures that allow a person to form a new corporation or LLC within the State within 24 hours of filing an online application without any prior review of that application by a State official. In exchange for a substantial fee, two States will even form a corporation or LLC within one hour of a request. After examining these State incorporation practices, the GAO report described the problems that the lack of beneficial ownership information has caused for a range of law enforcement investigations. In November 2006, our Subcommittee held a hearing further exploring this issue. At that hearing, representatives of the U.S. Department of Justice, DOJ, the Internal Revenue Service, and the Department of Treasury's Financial Crimes Enforcement Network, FinCEN, testified that the failure of States to collect adequate information on the beneficial owners of the legal entities they form has impeded Federal efforts to investigate and prosecute criminal acts such as terrorism, money laundering, securities fraud, and tax evasion. At the hearing, DOJ testified: ``We had allegations of corrupt foreign officials using these [U.S.] shell accounts to launder money, but were unable--due to lack of identifying information in the corporate records--to fully investigate this area.'' The IRS testified: ``Within our own borders, the laws of some states regarding the formation of legal entities have significant transparency gaps which may even rival the secrecy afforded in the most attractive tax havens.'' FinCEN identified 768 incidents of suspicious international wire transfer activity involving U.S. shell companies. In addition, last year, when listing the ``Dirty Dozen'' tax scams for 2007, the IRS highlighted shell companies with unknown owners as number four on the list, as follows: ``4. Disguised Corporate Ownership: Domestic shell corporations and other entities are being formed and operated in certain states for the purpose of disguising the ownership of the business or financial activity. Once formed, these anonymous entities can be, and are being, used to facilitate underreporting of income, non-filing of tax returns, listed transactions, money laundering, financial crimes and possibly terrorist financing. The IRS is working with state authorities to identify these entities and to bring their owners into compliance.'' That is not all. Dozens of Internet websites advertising corporate formation services highlight the fact that some of our States allow corporations to be formed under their laws without asking for the identity of the beneficial owners. These websites explicitly point to anonymous ownership as a reason to incorporate within the U.S., and often list certain States alongside notorious offshore jurisdictions as preferred locations for the formation of new corporations, essentially providing an open invitation for wrongdoers to form entities within the U.S. One website, for example, set up by an international incorporation firm, advocates setting up companies in Delaware by saying: ``DELAWARE--An Offshore Tax Haven for Non US Residents.'' It cites as one of Delaware's advantages that: ``Owners' names are not disclosed to the state.'' Another website, from a U.K. firm called ``formacompany- offshore.com,'' lists the advantages to incorporating in Nevada. Those advantages include: ``No I.R.S. Information Sharing Agreement'' and ``Stockholders are not on Public Record allowing complete anonymity.'' Despite this type of advertising, years of law enforcement complaints, and mounting evidence of abuse, many of our States are reluctant to admit there is a problem with establishing U.S. corporations and LLCs with unknown owners. Too many of our States are eager to explain how quick and easy it is to set up corporations within their borders, without acknowledging that those same quick and easy procedures enable wrongdoers to utilize U.S. corporations in a variety of crimes and tax dodges both here and abroad. Since 2006, the Subcommittee has worked with the States to encourage them to recognize the homeland security problem they've created and to come up with their own solution. After the Subcommittee's hearing on this issue, for example, the National Association of Secretaries of State, NASS, convened a 2007 task force to examine State incorporation practices. At the request of NASS and several States, I delayed introducing legislation while they worked on a proposal to require the collection of beneficial ownership information. My Subcommittee staff participated in multiple conferences, telephone calls, and meetings; suggested key principles; and provided comments to the Task Force. In July 2007, the NASS task force issued a proposal. Rather than cure the problem, however, the proposal was full of deficiencies, leading the Treasury Department to state in a letter that the NASS proposal ``falls short'' and ``does not fully address the problem of legal entities masking the identity of criminals.'' Among other shortcomings, the NASS proposal does not require States to obtain the names of the natural individuals who would be the beneficial owners of a U.S. corporation or LLC. Instead, it would allow States to obtain a list of a company's ``owners of record'' who can be, and often are, offshore corporations or trusts. The NASS proposal also doesn't require the States themselves to maintain the beneficial ownership information, or to supply it to law enforcement upon receipt of a subpoena or summons. The proposal also fails to require the beneficial ownership information to be updated over time. These and other flaws in the proposal have been identified by the Treasury Department, the Department of Justice, myself, and others, but NASS has given no indication that the flaws will be corrected. It is deeply disappointing that the States, despite the passage of more than one year, have been unable to devise an effective proposal. Part of the difficulty is that the States have a wide range of practices, differ on the extent to which they rely on incorporation fees as a major source of revenue, and differ on the extent to which they attract non-U.S. persons as incorporators. In addition, the States are competing against each other to attract persons who want to set up U.S. corporations, and that competition creates pressure for each individual State to favor procedures that allow quick and easy incorporations. It is a classic case of competition causing a race to the bottom, making it difficult for any one State to do the right thing and request the names of the beneficial owners. That is why we are introducing Federal legislation today. Federal legislation is needed to level the playing field among the States, set minimum standards for obtaining beneficial ownership information, put an end to the practice of States forming millions of legal entities each year without knowing who is behind them, and bring the U.S. into compliance with its international commitments. The bill's provisions would require the States to obtain a list of the beneficial owners of each corporation or LLC formed under their laws, to maintain this information for 5 years after the corporation is terminated, and to provide the information to law enforcement upon receipt of a subpoena or summons. If enacted, this bill would ensure, for the first time, that law enforcement seeking beneficial ownership information from a State about one of its corporations or LLCs would not be turned away empty-handed. The bill would also require corporations and LLCs to update their beneficial ownership information in an annual filing with the State of incorporation. If a State did not require an annual filing, the information would have to be updated each time the beneficial ownership changed. In the special case of U.S. corporations formed by non-U.S. persons, the bill would go farther. Following the lead of the Patriot Act which imposed additional due diligence requirements on certain financial accounts opened by non-U.S. persons, our bill would require additional due diligence for corporations beneficially owned by non-U.S. persons. This added due diligence would have to be performed--not by the States--but by the persons seeking to establish the corporations. These incorporators would have to file with the State a written certification from a corporate formation agent residing within the State attesting to the fact that the agent had verified the identity of the non-U.S. beneficial owners of the corporation by obtaining their names, addresses, and passport photographs. The formation agent would be required to retain this information for a specified period of time and produce it upon request. The bill would not require the States to verify the ownership information provided to them by a formation agent, corporation, LLC, or other person filing an incorporation application. Instead, the bill would establish Federal civil and criminal penalties for anyone who knowingly provided a State with false beneficial ownership information or intentionally failed to provide the State with the information requested. The bill would also exempt certain corporations from the disclosure obligation. For example, it would exempt all publicly-traded corporations and the entities they form, since these corporations are already overseen by the Security and Exchange Commission SEC. It would also allow the States, with the written concurrence of the Homeland Security Secretary and the U.S. Attorney General, to identify certain corporations, either individually or as a class, that would not have to list their beneficial owners, if requiring such ownership information would not serve the public interest or assist law enforcement in their investigations. These exemptions are expected to be narrowly drafted and rarely granted, but are intended to provide the States and Federal law enforcement added flexibility to fine-tune the disclosure obligation and focus it where it is most needed to stop crime, tax evasion, and other wrongdoing. Another area of flexibility in the bill involves privacy issues. The bill deliberately does not take a position on the issue of whether the States should make the beneficial ownership information they receive available to the public. Instead, the bill leaves it entirely up to the States to decide whether and under what circumstances to make beneficial ownership information available to the public. The bill explicitly permits the States to place restrictions on providing beneficial ownership information to persons other than government officials. The bill focuses instead only on ensuring that law enforcement and Congress, when equipped with a subpoena or summons, are given ready access to the beneficial ownership information collected by the States. To ensure that the States have the funds needed to meet the new beneficial ownership information requirements, the bill makes it clear that States can use their DHS State grant funds for this purpose. Every State is guaranteed a minimum amount of DHS grant funds every year and may receive funds substantially above that minimum. Every State will be able to use all or a portion of these funds to modify their incorporation practices to meet the requirements in the Act. The bill also authorizes DHS to use appropriated funds to carry out its responsibilities under the Act. These provisions will ensure that the States have the funds needed for the modest compliance costs involved with amending their incorporation forms to request the names of beneficial owners. It is common for bills establishing Federal standards to seek to ensure State action by making some Federal funding dependent upon a State's meeting the specified standards. This bill, however, states explicitly that nothing in the bill authorizes DHS to withhold funds from a State for failing to modify its incorporation practices to meet the beneficial ownership information requirements in the Act. Instead, the bill simply calls for a GAO report in 2012 to identify which States, if any, have failed to strengthen their incorporation practices as required by the Act. After getting this status report, a future Congress can decide what steps to take, including whether to reduce any DHS funding going to the noncompliant States. Finally, the bill would require the U.S. Department of the Treasury to issue a rule requiring formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or LLCs for criminals or other wrongdoers. GAO would also be asked to conduct a study of existing State formation procedures for partnerships and trusts. We have worked hard to craft a bill that would address, in a fair and reasonable way, the homeland security problem created by States allowing the formation of millions of U.S. corporations and LLCs with unknown owners. What the bill comes down to is a simple requirement that States change their incorporation applications to add a question requesting the names and addresses of the prospective beneficial owners. That is not too much to ask to protect this country and the international community from U.S. corporations engaged in wrongdoing and to help law enforcement track down the wrongdoers. For those who say that, if the United States tightens its incorporation rules, new companies will be formed elsewhere, it is appropriate to ask exactly where they will go? Every country in the European Union is already required to get beneficial information for the corporations formed under their laws. Most offshore jurisdictions already request this information as well, including the Bahamas, Cayman Islands, Jersey, and the Island of Man. Our States should be asking for the same ownership information, but they don't, and there is no indication that they will any time in the near future, unless required to do so. I wish Federal legislation weren't necessary. I wish the States could solve this homeland security problem on their own, but ongoing competitive pressures make it unlikely that the States will reach agreement. We have waited more than a year already with no real progress to show for it, despite repeated pleas from law enforcement. Federal legislation is necessary to reduce the vulnerability of the United States to wrongdoing by U.S. corporations with unknown owners, to protect interstate and international commerce from criminals misusing U.S. corporations, to strengthen the ability of law enforcement to investigate suspect U.S. corporations, to level the playing field among the States, and to bring the U.S. into compliance with its international anti-money laundering obligations. There is also an issue of consistency. For years, I have been fighting offshore corporate secrecy laws and practices that enable wrongdoers to secretly control offshore corporations involved in money laundering, tax evasion, and other misconduct. I have pointed out on more than one occasion that corporations were not created to hide ownership, but to shield owners from personal liability for corporate acts. Unfortunately, today, the corporate form has too often been corrupted into serving those wishing to conceal their identities and commit crimes or dodge taxes without alerting authorities. It is past time to stop this misuse of the corporate form. But if we want to stop inappropriate corporate secrecy offshore, we need to stop it here at home as well. For these reasons, I urge my colleagues to support this legislation and put an end to incorporation practices that promote corporate secrecy and render the United States and other countries vulnerable to abuse by U.S. corporations with unknown owners. Mr. President, I ask unanimous consent that the text of the bill and a bill summary be printed in the Record.