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ongressional Record 


PROCEEDINGS AND DEBATES OF THE 99” CONGRESS 
SECOND SESSION 


VOLUME 132—PART 22 


OCTOBER 15, 1986 TO OCTOBER 16, 1986 
(PAGES 31239 TO 32705) 


UNITED STATES GOVERNMENT PRINTING OFFICE, WASHINGTON, 1986 





For sale by the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402 





Congressional Record 


PROCEEDINGS AND DEBATES OF THE 99 th CONGRESS, SECOND SESSION 


United States 
of America 


SENATE— Wednesday, October 15, 1986 


The Senate met at 10 a.m., on the 
expiration of the recess, and was 
called to order by the President pro 
tempore (Mr. THuRMOND]. 


PRAYER 


The Chaplain, the Reverend Rich- 
ard C. Halverson, D.D., offered the fol- 
lowing prayer: 

Let us pray: 

Trust in the Lord with all thine 
heart; and lean not unto thine own un- 
derstanding. In all thy ways acknowl- 
edge Him, and He shall direct thy 
paths.—Proverbs 3:5-6. 

Almighty God, eternal Father, per- 
fect in all virtue whose truth lights 
our way—we know that ultimate issues 
are in Your hands—that all authority 
comes from You. We pray for Your 
special guidance in these swift yet 
strangely slow-moving hours. We know 
the nearer we get to November 4, the 
greater the pressure and inward strug- 
gle, and the greater the possibility for 
partisanship. We accept this as a reali- 
ty in our political process, Gracious 
God, but we ask You to prevent urgent 
and important issues from being sub- 
ordinate to political considerations 
alone. Strengthen Your servants—give 
them courage to take risks when nec- 
essary for the sake of the common 
good. Help them to entrust themselves 
to You with confidence in Your over- 
sight and ample provision. In the 
name of the Prince of Peace, we pray. 
Amen. 


RECOGNITION OF THE 
MAJORITY LEADER 


The PRESIDENT pro tempore. The 
able and _ distinguished majority 
leader, Senator Rosert Dore of 
Kansas, is now recognized. 

Mr. DOLE. I thank the distin- 
guished Presiding Officer, the Presi- 
dent pro tempore, Senator THURMOND 
from South Carolina. 


SCHEDULE 


Mr. DOLE. Under the standing 
order, the leaders have 10 minutes 


(Legislative day of Tuesday, October 14, 1986) 


each, followed by routine morning 
business not to extend beyond 11 a.m., 
with Senators permitted to speak 
therein for not more than 5 minutes 
each. 

At 11 o’clock, unless we have some 
agreement to change it, under the pro- 
vision of rule XXII, a live quorum will 
begin, to be followed by a cloture vote 
on the drug bill. If cloture is invoked, 
it will be the intention of the majority 
leader to continue consideration of the 
drug bill. 

Regardless of the outcome of the 
cloture vote, it will be the intention of 
the majority leader to turn to the con- 
sideration of a number of items. I do 
believe now we are finally seeing a 
little daylight. It is my understanding 
the House will consider the continuing 
resolution early this evening, some- 
where around 6 o’clock. Since the Gov- 
ernment will shut down tomorrow, 
unless we complete action, it would be 
my intention to stay in late tonight 
and try to finish the continuing reso- 
lution, and it could be rather late, say, 
10, 11, midnight, or after. 

The reconciliation conference report 
is hung up on provisions affecting the 
Finance Committee and the House 
Ways and Means Committee. Every- 
thing else, as I understand it, is set- 
tled. 

On the debt limit, I have met with 
the distinguished chairman of the 
Ways and Means Committee, Chair- 
man ROSTENKOWSKI, just this morn- 
ing. We think we have made some 
progress on that. 

On the drug bill, it is still my hope 
that we can resolve the one big issue, 
the death penalty. I know there were 
discussions going on yesterday. It was 
my understanding that I was to have 
met with Senator Brpen yesterday, but 
I do not believe Senator BIDEN was 
available yesterday. In any event, the 
Senator from Delaware requested to 
delay the filing of cloture, so we would 
have cloture voted tcday, to give us 
yesterday to negotiate. I still hope 
that if there is some way to resolve 
the major problem, it can be done so 
that we can continue our bipartisan ef- 


forts to have a drug bill passed and 
signed by the President this year. 

That would leave the immigration 
conference report. I am not certain 
when the House is going to take that 
up—lI think sometime tomorrow morn- 
ing. 

I believe we may be in a position to 
take care of all the nominations on 
the Executive Calendar. Yesterday, I 
submitted a unanimous-consent re- 
quest. I did not propound that request, 
but I now believe, with the Malone 
nomination withdrawn in effect, we 
may be able to get an agreement on all 
the other names on the Executive Cal- 
endar, including Helen Marie Taylor, 
Edwin Corr, Eleanor Constable, plus a 
number of others on the Executive 
Calendar. I will submit this request to 
the distinguished minority leader and, 
if we can clear it, that is something we 
can do during the day if we have some 
free time. 

So I alert my colleagues this could 
be one of those stop-and-go days, with 
no certainty when we might complete 
our work. On the other hand, we have 
reached the point where the present 
continuing resolution will expire at 
midnight. If the House completes 
action on the CR and sends it to us 
this evening, of course we will be 
around to act on it. 


SENATOR TOM EAGLETON 


Mr. DOLE. Mr. President, I have 
taken the opportunity to make com- 
ments about a number of our col- 
leagues who are retiring, and today I 
would like to speak a moment about a 
friend and a neighbor, Tom EaGc.Leton. 

Tom EAGLeTON is a legislator’s legis- 
lator. During his three terms in the 
Senate, he has established a reputa- 
tion as a man you can talk to and a 
man you can work with, and that is 
what legislating and making policy is 
all about. 

Tom has dozens of friends, on both 
sides of the aisle, and they are his 
friends because they admire him and 
respect him. A man of strong feelings 


@ This “bullet” symbol identifies statements or insertions which are not spoken by the Member on the floor. 





31240 


and deep commitments, he has always 
shown the flexibility and the willing- 
ness to change but he has fought hard 
and often  successfully—and more 
often than not, I might add—for the 
causes in which he believes. 

As a result, Tom has accumulated 
some very significant legislative ac- 
complishments: He was a key architect 
in the war powers resolution; a prime 
mover in establishing the National In- 
stitute for the Aging, as well as many 
programs under the Older Americans 
Act. Tom was also instrumental in re- 
quiring health warning labels on ciga- 
rette packages. 

Whatever the issue, Tom EaGLETON 
has always been sensitive to the needs 
and interests of the average citizen. 

I know the people of Missouri were 
disappointed when Tom announced he 
would not seek reelection. He has 
served them in one capacity or an- 
other for 30 years, since being first 
elected to public office at the age of 27 
as a circuit attorney in St. Louis. But 
he will leave behind a record of 
achievement in the Senate, and le- 
gions of friends in the Senate and 
throughout the Capitol, and he can 
therefore be justly proud, as I know 
his Missouri constituents are, of his ef- 
forts. 

Again, I indicate that he is a close 
friend and a valued friend, and we will 
continue to work with him long after 
his has left the U.S. Senate. 


SIX RETIRING SENATORS 


Mr. DOLE. Mr. President, I ask 
unanimous consent to include in the 
Recorp an article which appeared in 
USA Today today, comments about 
who the retiring Senators are. I think 
it is of some interest. 

There being no objection, the article 


was ordered to be printed in the 


REcorpD, as follows: 
(From USA Today, Oct. 15, 1986] 
WHo’s RETIRING IN THE SENATE 


SENATOR RUSSELLL LONG, 67 


Background: Louisiana Democrat elected 
in 1948, Longtime chairman of tax-writng 
Senate Finance Committee until GOP took 
control of the Senate. 

Top Achievement: “Employee stock own- 
ership. There are about 16 provisions in the 
(1973) law I passed to make it more attrac- 
tive for more companies to make sharehold- 
ers out of their employees. What is impor- 
tant is that they should have a piece of the 
action and a share of the prosperity in the 
firm.” 

Biggest disappointment: “I am sorry I 
didn’t start it (employee stock ownership) 
sooner.” 

Plans: “I don’t know if I will be running 
for office again (he’s viewed as a potential 
gubernatorial candidate in Louisiana), prac- 
ticing law or serving on a corporate board or 
two.” 

Advice for successor: ‘Tell the truth to 
these senators because they will come to 
know you for what you are. If you do make 
(a commitment), keep it.” 


CONGRESSIONAL RECORD—SENATE 


SENATOR BARRY GOLDWATER, 77 


Background: Arizona Republican elected 
1952 and 1968. Chairman, Senate Armed 
Services Committee. GOP presidential 
nominee in 1964. 

Top Achievement: “The Grand Canyon 
Enlargement Act and the Defense Reorgani- 
zation Bill ... but for me the crowning 
achievement has been (representing) Arizo- 
na.” 

Biggest disappointment: The way the 
Senate as a whole has changed. . . . There 
are as many as 20,000 staff people assisting 
congressmen in ways that make me wonder 
who is really running the show. .. . In es- 
sence, you have a body that works a three- 
day week considering a convoluted calendar 
of bills that few people understand.” 

Plans: I have four children and 10 grand- 
children, and I look forward to spending 
time with them.” 

Advice for successor: “You need to be 
honest with yourself first, then always 
shoot straight with the people.” 

SENATOR CHARLES MC C. MATHIAS, 64 

Background: Liberal Maryland Republi- 
can elected in 1968. Had seniority to become 
chairman of Judiciary Committee but con- 
servative Republicans blocked his path to 
the chairmanship in 1977. 

Top achievement: “Winning my last elec- 
tion by a larger margin than my first.” (In 
his first election, he won with 48 percent of 
the vote; in his last election, he got 66 per- 
cent of the vote.) 

Biggest disappointment: ‘‘The loss in mo- 
mentum in the civil rights efforts.” (He 
cited a moribund Civil Rights Commission 
and the loss of interest in affirmative 
action.) On the lighter side: “Not getting 
Maryland crab cakes on the menu of the 
Senate Dining Room.” 

Plans: “Practice law, lecture at Johns 
Hopkins and pull long-overdue weeds at my 
farm,” 30 miles from Frederick, Md. 

Advice to Successor: ‘‘Don’t let your desire 
to get re-elected get in the way of your judg- 
ment.” 

SENATOR THOMAS EAGLETON, 57 


Background: Missouri Democrat elected in 
1968. Foreign Relations Committee member 
Vice presidential candidate (withdrew) in 
1972). 

Top achievement: ‘“‘The 1973 amendment 
to the appropriations bill that prohibited 
any further expenditures for bombing in 
Cambodia” that he sponsored. 

Biggest disappointment: “Eagleton has 
seen “billions and billions of dollars poured 
into innumerable education programs while 
the quality of education in this country has 
not increased, but declined.” 

Plans: “University professor at Washing- 
ton University in St. Louis, also practice law 
there.” 

Advice to Successor: “Get on the Finance 
Committee; it is becoming the pre-eminent 
committee in Congress. It’s the center of so 
much activity. Issues of trade, health, the 
environment, taxes and Social Security are 
settled there.” 

SENATOR GARY HART, 49 


Background: Colorado Democrat elected 
in 1974. Third-ranking Democrat on Senate 
Armed Services Committee. Presidential 
candidate 1984; expected to run again in 
1988. 

Top achievement: ‘What stands out is the 
Senate itself. I've served with some great 
American leaders. The great contributions 
they have made are well documented.” 

Biggest disappointment: “I and others 
were not able to bring about some serious 


October 15, 1986 


movement on arms control, which is still the 
most serious issue of our day.” 

Plans: “Well, I've had some inquiries from 
law firms, universities and businesses about 
what I can do after January of 1987. But 
whatever I do, Colorado will continue to be 
my home.” 

Advice for successor: ““No advice is neces- 
sary. I'm confident Rep. Tim Wirth (run- 
ning against Republican Ken Kramer) will 
manage just fine in the Senate.” 


SENATOR PAUL LAXALT, 64 


Background: Nevada Republican elected 
in 1974. Close friend of President Reagan. 
Sent to the Philippines by Reagan adminis- 
tration earlier this year to persuade Presi- 
dent Ferdinand Marcos to step down. 

Top achievement: “The fact that I had 
the opportunity with my relationship with 
the President to serve as a conduit between 
two branches of government while not com- 
promising my position as a U.S. senator 
from Nevada.” 

Biggest disappointment: “Losing 
Panama Canal (treaties) fight.” 

Plans: “Into private law practice in Wash- 
ington, D.C.” 

Advice for successor: “Don’t take yourself 
too seriously because nobody else in Wash- 
ington will.” 


the 


O 1010 


RECOGNITION OF THE 
DEMOCRATIC LEADER 


The PRESIDING OFFICER (Mr. 
Starrorp). Under the previous order, 
the Democratic leader of the Senate, 
Senator Byrp, is recognized. 

Mr. BYRD. I thank the Chair. 


THE REYKJAVIK SUMMIT 


Mr. BYRD. Mr. President, no one re- 
joices in the apparent frustrating 
finale to the Reykjavik meetings. The 
overwhelming sense of disappointment 
that has permeated the atmosphere, 
because agreements were not reached 
on the key arms control issues, is pal- 
pable. But, one must ask, if we look 
back to the week before this meeting, 
what were our expectations? A week 
before the Reykjavik meeting, every- 
one was supposed to refrain from call- 
ing this meeting a “summit.” In retro- 
spect, this was obviously unrealistic. 

My own standards for a successful 
meeting were twofold: First, that on 
arms control matters, progress on the 
whole range of questions on the table 
at Geneva be achieved so that detailed 
instructions for further negotiations 
on those matters would be given to our 
negotiators on both sides; second, that 
the so-called real summit be scheduled 
so that the respective bureaucracies, 
would be galvanized to develop solu- 
tions to outstanding issues. 

Additionally, it was reasonable to 
expect that other agreements could be 
reached in Iceland, such as the propos- 
al for risk reduction centers, progress 
on human rights, and progress on re- 
gional problems such as Afghanistan. 
These agreements would serve to help 
maintain a positive atmosphere within 





October 15, 1986 


which forward movement on arms con- 
trol issues is more possible. 

Democrats in both the Senate and 
the House made concessions on arms 
control matters. 

President Reagan made a major 
point of ‘“‘untying” his hands, and we 
gave our unqualified support, as we 
should have done. He went to Reykja- 
vik with bipartisan and bicameral sup- 
port. 

It was unrealistic, Mr. President, 
that the administration convinced 
itself that this was not really a 
summit, that somehow all the issues 
were not going to be joined. Why, one 
must ask, did Mr. Gorbachev ask for 
this meeting? 

Did the Soviets come ready to nego- 
tiate an “endgame,” to cut through 
the central unresolved problems across 
the board, to completely engage the 
United States? I think the President’s 
advisers did not serve him well, in that 
he was apparently not adequately pre- 
pared for what took place. 

If we but look back 3 weeks ago, Mr. 
President, we recall a story in the 
Washington Post, on September 23, 
with the headline “Quick Accord on 
Missiles Seen Unlikely,” by R. Jeffrey 
Smith and Walter Pincus. I read three 
or four paragraphs therefrom: 

Despite optimistic statements in recent 
days by U.S. and Soviet leaders about 
progress on intermediate-range nuclear 


forces (INF), no agreement is likely until 
several key issues are resolved in the 
Reagan administration and between the su- 
perpowers, according to U.S. and diplomatic 


officials. 

The two sides have not agreed on the al- 
lowable number of Soviet intermediate- 
range SS20 missiles aimed at Asia and short- 
range missiles on both sides based in 
Europe, or on the mix of U.S. intermediate- 
range weapons in Europe. 

The Pentagon and State Department 
remain bitterly divided on several of these 
issues, although neither favors the Soviet 
position. They also disagree about whether 
the United States should be allowed to rede- 
ploy missiles overseas that are removed 
from Western Europe, and about replace- 
ment of the missiles with shorter-range 
weapons. Given these disagreements, no 
treaty is likely without substantial negotia- 
tion and new compromises by all sides, 
sources said. 

So, there were within the adminis- 
tration itself deep divisions, deep divi- 
sions between the Pentagon and the 
State Department, as the President 
was soon to make preparations for 
going to what he described as a base 
camp on the way to the summit. 

The results of the summit and the 
developments of the final hours of the 
summit have some important lessons 
for us. First, it is unwise to attempt to 
bargain with the Soviets on arms con- 
trol without thorough preparation in 
advance. 

Second, summits between heads of 
state should be preserved for the rati- 
fication of ideas carefully thought out 
and hammered out in advance. Third, 


CONGRESSIONAL RECORD—SENATE 


if the opportunity is at hand to strike 
a major arms control deal, one should 
not in anger, frustration, or impa- 
tience let the opportunity slip away. 
The responsibility, it seems, was on 
both leaders not to let it slip away. 
Yet, both unprepared to control the 
crucial moment of decision. 

Mr. President, the Soviet leader is an 
adroit player, articulate, and he obvi- 
ously came to Iceland with a well- 
thought-out game plan. He has the ca- 
pacity to be, at times, too pushy. 
When I visited with him a year ago in 
the Kremlin, along with a bipartisan 
group of seven other Senators, we 
came away with mixed impressions. He 
interrupted my presentation at least 
once in a flare of anger, and was ada- 
mant on several occasions in remind- 
ing us whom we were attempting to 
deal with. In my formal report to the 
Senate, I said, 

Mr. Gorbachev displays irritation when 
confronted with a position that he seems to 
interpret as an intrusion into Soviet inter- 
nal affairs, or that he believes to slight the 
Soviet Union as a superpower unequal to 
the United States. At times, this seems to 
take the form of defensiveness, * * * and he 
accused the United States of attempting to 
“intimidate” the Soviet Union on matters 
such as SDI. 

His initial comment to me, after I 
made a long presentation to him on 
behalf of the entire Senate delegation 
was: 

I heard nothing new and, therefore, I 
don’t see any great reason to discuss any- 
thing. 

He then accused me of asking for 
Soviet “capitulation” on the major 
policies under discussion. Not only was 
this not true; it was also a patently 
unfair interpretation of our presenta- 
tion. 

So, Mr. President, we are dealing 
with a complex man—sometimes hy- 
persensitive and even arrogant, who is 
also highly capable and quick-minded. 
It is entirely understandable how he 
could have rubbed President Reagan 
the wrong way. 

It is important for a President to be 
able to walk away from a bad deal. 
There is a difference between willing- 
ness to walk away from a bad deal and 
unpreparedness to engage creatively 
on those issues which we well know 
are crucial to both nations. There is no 
doubt that active pursuit of the SDI 
Program, in the long run, involves a 
tremendous dedication of national re- 
sources to military purposes. There is 
no doubt that the Soviets would have 
to counter it with a renewed massive 
infusion of their own previous re- 
sources. 

This prospect has the Soviets on 
edge. 

American technology is probably 
better positioned to break through in 
many areas of military space technolo- 
gy. I am for the SDI Program—I have 
supported a vigorous research effort, 
and I will continue to support a vigor- 


31241 


ous research effort. As a supporter of 
SDI, I agree with the President that 
SDI was the beacon that attracted the 
Soviets to the negotiating table, but I 
do not believe SDI should become the 
rock upon which arms control found- 
ers. If the President and General Sec- 
retary Gorbachev were as close to a 
major arms control deal as it appears 
they were, it is unfortunate that pa- 
tience and tenacity did not counsel de- 
ferring final judgment to another day 
and another place while experts 
worked out the technicalities. 


0 1020 


There is apparently some question 
about whether the United States 
should accept a 10-year ban on deploy- 
ment and testing of space weapons sys- 
tems of a defensive nature. 

It is my impression that the techni- 
cal ground for acceptable compromise 
on component testing outside the labo- 
ratory exists, but that the two sides 
have not yet adequately explored that 
ground. 

SDI's Director, Lt. Gen. James 
Abrahamson, has said that deploy- 
ment of SDI systems could not occur 
until after the mid-1990’s. Thus, one 
must ask whether the quest for Soviet 
acceptance of a broader interpretation 
of the ABM Treaty would yield as 
much in increased U.S. security as 
would achieving the offensive arms re- 
ductions proposed in Iceland. 

Mr. President, the Senate is going to 
have to give its advice and consent 
prior to ratification of any treaty that 
this administration comes up with. 
From all reports, we are told that 
major progress was made on a variety 
of issues, including euromissiles, stra- 
tegic weapons, verification questions, 
nuclear testing, and perhaps other 
matters, but that the futuristic SDI 
possibilities that are the apple of 
President Reagan’s eye could not be 
constrained, and so the entire fabric of 
issues is in limbo. 

Nevertheless, the progress on many 
matters that was reported can be 
taken up again if both sides are willing 
to start over. It seems to me that an 
acceptable resolution of the ABM 
Treaty-SDI Program can be achieved. 

It remains an open question whether 
the summit advanced, or retarded, our 
efforts to build a safer world. I urge 
the leaders of both nations to renew 
their quest for peace, without permit- 
ting the disappointments of the 
moment to obscure this goal. Both 
leaders have stated their continued 
committment to continue doing busi- 
ness. To demonstrate this commit- 
ment, both governments should pick 
up the pieces and instruct their negoti- 
ations in Geneva to pursue those ave- 
nues which appeared most promising 
in Iceland. 

Mr. President, I yield the floor. 





31242 


ROUTINE MORNING BUSINESS 


The PRESIDING OFFICER. Under 
the previous order there will now be a 
period for the transaction of routine 
morning business for not to extend 
beyond the hour of 11 a.m., with state- 
ments therein limited to 5 minutes 
each. 

The Senator from Wisconsin. 

Mr. PROXMIRE. Mr. President, I 
ask unanimous consent that I may 
yield briefly to the Senator from 
Maryland without being charged with 
the time. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

Mr. MATHIAS. Mr. President, I 
thank the Senator from Wisconsin. 


ORDER FOR PRINTING OF 
IMPEACHMENT DOCUMENTS 


Mr. MATHIAS. Mr. President, I ask 
unanimous consent that the proceed- 
ings of the Senate, sitting in open ses- 
sion as a court of impeachment to con- 
sider the articles of impeachment 
against United States District Judge 
Harry E. Claiborne of the District of 
Nevada; together with statements sub- 
mitted for the record; briefs, memo- 
randa, and motions submitted by the 
parties to the Senate following the 
completion of the Senate Impeach- 
ment Trial Committee's hearings on 
September 23, 1986; legislative pro- 
ceedings relating to this matter; and 
briefs filed in the Federal courts by 
both Judge Claiborne and the Senate 
and relevant judicial orders; be sepa- 
rately printed for the use of the 
Senate. I further ask that 300 copies 
be printed for the use of the Senate 
Impeachment Trial Committee and 
300 copies be printed for the use of 
the Secretary of the Senate. 

Mr. BYRD. Mr. President, reserving 
the right to object, and I will not 
object, the distinguished Senator is 
asking these matters be printed and 
gathered together as a Senate docu- 
ment? 

Mr. MATHIAS. Yes. 

Mr. BYRD. I think this is very wise 
and appropriate. It seems to me it 
would be of service to the Senate in 
the future when such cases may again 
come before the Senate for trial. Our 
experiences in this event can consti- 
tute a guiding light to those Members 
in the future. 

The Senator is rendering a service 
by making the request. 

I remove my reservation. 

Mr. MATHIAS. I thank the distin- 
guished minority leader. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

Mr. MATHIAS. Mr. President, I fur- 
ther ask unanimous consent that the 
time not be subtracted from the time 
of the Senator from Wisconsin. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


CONGRESSIONAL RECORD—SENATE 


The Senator from Wisconsin is rec- 
ognized. 


Is GORBACHEV PUSHING 
UNITED STATES TO GO AHEAD 
WITH STAR WARS? 


Mr. PROXMIRE. Mr. President, the 
one, far and away most persuasive ar- 
gument for the strategic defense initi- 
ative [SDI], or star wars, is that the 
Soviet Union, specifically Secretary 
Gorbachev, so vehemently opposes it. 
Now, suppose the fact is Gorbachev 
does not oppose SDI, just suppose he 
favors the United States proceeding 
with it? Consider, there is solid logic in 
Gorbachev concluding that the Soviets 
will gain clear military advantage if 
the United States pours a trillion dol- 
lars into SDI. So Gorbachev should 
logically pursue a course of conduct 
that would push our country ahead 
with star wars. Is Gorbachev doing 
this? I believe he is doing exactly this. 
But how can that be? Didn’t Secretary 
Gorbachev make restraint on SDI the 
absolute condition for his agreement 
to arms control at the Iceland 
summit? He did, indeed. And hasn't 
Secretary Gorbachev vigorously and 
consistently denounced SDI as a stum- 
bling block to arms control? He has. 
Now doesn’t all this prove that howev- 
er American critics may demean SDI 
as an effective defense against Soviet 
nuclear attack, Gorbachev himself rec- 
ognizes the serious threat the Ameri- 
can SDI poses to the credibility of the 
Soviet’s nuclear deterrent? 

Mr. President the answer to these 
questions is evident to anyone who 
will put himself in the position of Mr. 
Gorbachev. So what action by the 
United States would you view as most 
likely to serve the military purposes of 
the Soviet Union if you were Gorba- 
chev? Answer: for the United States to 
squander its great technological and 
economic military advantages on a 
massive $1 trillion project that you be- 
lieve is bound to fail. If he United 
States pulls tens of thousands of its 
best scientists and technicians away 
from improving its planes and tanks 
and warships, if it pours hundreds of 
billions of dollars of its military ex- 
penditures into a strategic defense ini- 
tiative which the Soviets can easily 
and for far less money overwhelm, 
penetrate, spoof, underfly, won’t that 
serve the interest of the Soviet Union? 
Of course, it will. So how does Mr. 
Gorbachev persuade the United States 
to proceed with SDI? Easy. He makes 
the biggest possible fuss about SDI. 
He denounces it. He calls it a terrible 
threat to world peace. And then comes 
the masterstroke. Gorbachev walks 
right up to a massive arms control 
agreement that would cut the missile 
forces of each superpower by 50 per- 
cent, and says—we want oh so much to 
cut our nuclear missile force but we 


can’t do this if the United States con- 


October 15, 1986 


tinues its SDI project. Is Secretary 
Gorbachev smart enough to under- 
stand that this is precisely the kind of 
performance that is likely to give SDI 
its best and biggest chance? You 
betcha. Certainly Gorbachev under- 
stands that it will be much easier for 
President Reagan to move ahead with 
SDI inspite of the strong public and 
congressional opposition to the pro- 
gram if he—Gorbachev—the Commu- 
nist Leader—persists as its leading 
critic. There is nothng easier in Ameri- 
can politics than to champion a U.S. 
military security project that has the 
all-out opposition of the Soviet Union 
and its top boss. Does Secretary Gor- 
bachev know this? Does he realize that 
when he opposes a U.S. military 
project he gives it the strongest possi- 
ble political support in this country. 
Of course, he does. And when this 
leader of the Soviet Union makes the 
SDI project the one and only reason 
he won't accept a massive nuclear 
arms reduction program he achieves 
other ends too. Gorbachev wins points 
with peace movements in Europe and 
even in America. He focuses blame on 
what he calls stubborn American in- 
transigence with much of the Europe- 
an and American public. At the same 
time he encourages America to impose 
an enormously heavy burden on its 
economy and to divert its military re- 
sources to a project that he must know 
will not and cannot eliminate the 
credibility of the Soviet’s massive nu- 
clear deterrent. 

Ah, but suppose SDI or star wars 
works. Isn’t Secretary Gorbachev 
taking a reckless gamble? No, indeed, 
the record of hearings before the De- 
fense Appropriations Subcommittee is 
replete with testimony from former 
Secretaries of Defense—Republican 
and Democratic—and from scientific 
experts who have told the committee 
that SDI cannot provide an effective 
shield over our cities. They have testi- 
fied that the SDI defense can never be 
fully or adequately tested and repeat- 
ed testing is absolutely essential to 
build such a system. They have testi- 
fied to its immense cost. Secretary 
Gorbachev knows all this. He also un- 
derstands enough about American pol- 
itics to know for a sure and certain 
fact that he has the power to greatly 
advance any U.S. military project with 
the American public and the Congress 
by simply opposing it. This is precisely 
what he is doing with SDI. We 
shouldn’t fall for it. 


MYTH OF THE DAY: NUCLEAR 
TERRORISM CAN’T HAPPEN 
HERE 
Mr. PROXMIRE. Mr. President, the 

myth of the day is the often heard 


proposition that nuclear terrorism, 
while an interesting theoretical con- 


cept, just can’t happen here. 





October 15, 1986 


After all, the argument goes, the 
United States has suffered little in the 
way of any terrorist activity. We safe- 
guard our military facilities. We guard 
our nuclear powerplants. Nuclear ma- 
terials are always under close control. 
So a nuclear terrorist incident here is 
just not likely. 

Mr. President, this is a comforting 
conclusion. Nuclear terrorism just 
can’t happen here. But it is a myth 
and the kind of complacency we 
cannot afford. 

According to the International Task 
Force on the Prevention of Nuclear 
Terrorism, the probability of nuclear 
terrorism is increasing. They cite the 
growing incidence, sophistication and 
lethality of conventional terrorist ac- 
tivity—giving rise to the perception 
among terrorists that a nuclear event 
might be the biggest victory of all. 

In addition, there is increasing State 
support for international terrorism. 
Iran, Iraq, Libya, Yemen, are all coun- 
tries who have demonstrated a willing- 
ness to support the most violent ter- 
rorist organizations. 

In the last 20 years there have been 
some 155 bombings, attacks or violent 
demonstrations at civil nuclear instal- 
lations around the world. Most have 
not been serious but they demonstrate 
that nuclear reactors are prime tar- 
gets. 

Building a nuclear device is within 
reach of terrorists having resources to 
recruit a team of three or four techni- 
cally qualified specialists according to 
the task force. Reactor grade plutoni- 
um or highly enriched uranium would 
be required. 

For all these reasons, Mr. President, 
we must begin now to guard against 
these possibilities. To continue to say 
that it can’t happen here is a deadly 
myth—one that strikes at our national 
security. 

I suggest the absence of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. . 

The assistant legislative clerk pro- 
ceeded to call the roll. 

Mr. EVANS. Mr. President, I ask 
unanimous consent that the order for 
the quorum call be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


THE FEDERALISM ACT OF 1986 
([FACT] 


Mr. EVANS. Mr. President, I rise to 
introduce the Federalism Act of 1986 
or Fact for short. Senator DuUREN- 
BERGER and I believe that Fact offers a 
working draft or blueprint to thor- 
oughly overhaul our Federal, State, 
and local governmental relationships. 
Fact is a proposal that would: 

First. Achieve sweeping federalism 
reform and a major reordering of Fed- 
eral domestic priorities on which Re- 
publicans and Democrats; conserv- 


CONGRESSIONAL RECORD—SENATE 


atives and liberals; and Federal, State, 
and local governments can agree; 

Second. Provide a _ responsible, 
achievable middie ground for the 
coming debate over welfare reform 
and family policy; 

Third. Offer taxpayers a more effec- 
tive and efficient government for each 
of their tax dollars paid; and 

Fourth. Present a structural change 
to government that better defines the 
future budget decisions that must be 
addressed. 

And, most importantly, the elements 
of this proposal would be implemented 
gradually on a fiscally neutral basis—a 
concept that we inherited from 
Gramm-Rudman and tax reform. 

Mr. President, the effort to develop 
this legislation begam in December 
1985, when the Committee on Federal- 
ism and National Purpose—established 
under the auspices of the project on 
the Federal social role—released its 
report, “To Form a More Perfect 
Union.” It was the culmination of the 
work by the committee, cochaired by 
former Gov. Charles Robb of Virginia 
and myself. We were joined by a group 
of 23 other Republican and Democrat- 
ic representatives from all levels of 
government, academicians, and well- 
respected professionals. The legisla- 
tion we introduce today reflects the 
consensus achieved by this diverse 
group. 

Mr. President, I ask unanimous con- 
sent that a list of those who were 
members of that committee be printed 
in the REcorD. 

There being no objection, the list 
was ordered to be printed in the 
REcorpD, as follows: 

COMMITTEE ON FEDERALISM AND NATIONAL 

PURPOSE 
CHAIRMEN 
Daniel J. Evans, U.S. Senator from Wash- 


n. 
Charles S. Robb, Governor of Virginia. 
MEMBERS 


Bruce Babbitt, Governor of Arizona. 

Samuel H. Beer, Eaton Professor of the 
Science of Government, Emeritus, Harvard 
University. 

Benjamin L. Cardin, Speaker, Maryland 
House of Delegates. 

Barber B. Conable, Distinguished Profes- 
sor of the University of Rochester. 

Dave Durenberger, U.S. Senator from 
Minnesota. 

Stuart E. Eizenstat, 
Frazer & Murphy. 

Richard A. Gephardt, U.S. Representative 
from Missouri. 

Charles W. Gilchrist, Montgomery 
County, Maryland, Executive. 

W. Wilson Goode, Mayor of Philadelphia. 

Frank Horton, U.S. Representative from 
New York. 

A.E. Dick Howard, White Burkett Miller 
Professor of Law and Public Affairs, Univer- 
sity of Virginia; and Counselor to the Gov- 
ernor of Virginia. 

Richard P. Nathan, Professor of Public 
and International Affairs, Princeton Univer- 
sity. 

Leon E. Panetta, U.S. Representative from 
California. 


Powell, Goldstein, 


31243 


Jane Smith Patterson, Director of Con- 
tracts Administration, ITT Telecom, N/A. 

Neal R. Peirce, Contributing Editor, Na- 
tional Journal. 

Alan Pifer, President Emeritus, Carnegie 
Corporation of New York. 

Lois D. Rice, Senior Vice President for 
Governmental Affairs, Control Data Corpo- 
ration. 

Alice M. Rivlin, Director, Economic Stud- 
ies Program, The Brookings Institute. 

Robert J. Rubin, M.D., Executive Vice 
President, ICF, Inc. 

Richard S. Schweiker, President, Ameri- 
can Council of Life Insurance. 

Alair A. Townsend, Deputy Major for Fi- 
nance and Economic Development, City of 
New York. 

Eddie N. Williams, President, Joint Center 
for Political Studies. 

Richard S. Williamson, Senior Vice Presi- 
dent for Corporate and International Af- 
fairs, Beatrice Companies, Inc. 

DIRECTORS 

Forrest P. Chisman. 

Stephen B. Farber. 

Judith Golub, Project Associate. 

Mr. EVANS. Our report, ‘““To Form a 
More Perfect Union,” sets the frame- 
work for the legislative drafters. In 
crafting this legislation we drew on 
the talents of many experts as well as 
officials from former Democratic and 
Republican administrations. 

The legislative package we devised 
takes into account the fact that sweep- 
ing change can probably best be ac- 
complished—if it can be accomplished 
at all—incrementally. Fact presents a 
straightforward plan for phasing in a 
comprehensive restructuring of Feder- 
al and State governmental relation- 
ships. We are introducing the legisla- 
tion today so that Members can have 
an opportunity to study our proposals 
during the long recess. Hopefully, 
when we convene the 100th Congress, 
Members will be sufficiently familiar 
with the legislation so that we can 
move promptly to hold hearings, to in- 
corporate the best suggestions of 
Members and other analysts, and then 
pass this legislation. 

Mr. President, let me briefly describe 
the legislative components of Fact. As 
I indicated, the changes would be 
phased in over a number of years, and 
would be fiscally neutral. Under Med- 
icaid, we would establish more uni- 
form eligibility and benefits standards. 
We would expand coverage to all chil- 
dren 5 years of age and under as well 
as pregnant women living in families 
with incomes below the poverty line. 
The Federal commitment would be in- 
creased to a 90-percent match. By pro- 
viding medical coverage to all poor 
children under 5 years of age, we can 
keep an additional 1.3 million children 
healthy. This proposal is consistent 
with this year’s reconciliation bill 
which seeks Medicaid coverage for 
poor children. Other elements of our 
proposal would establish more uni- 
form Medicaid standards. 

Under AFDC, we would establish a 
national minimum benefit level for 





31244 


AFDC benefits and increase the Fed- 
eral commitment to a 90-percent 
match. The program would continue 
to be administered at the State level. 
In a wealthy nation like ours, it is a 
disgrace that a poor family of four in 
one region of the country can receive 
assistance up to five times as great as 
a poor family in another region. After 
all, to be poor and hungry in New 
York or California is not much differ- 
ent than being poor and hungry in 
Mississippi, Maine, or Missouri. 

In addition, Fact would require all 
States to join the 26 States that al- 
ready participate in the AFDC-Unem- 
ployed Parent Program. Without the 
AFDC-UP Program, the current AFDC 
system encourages the separation of 
parents in order to qualify for bene- 
fits—a policy that is antifamily and 
must be changed. 

It is important to note, Mr. Presi- 
dent, that before these AFDC reforms 
are implemented, Fact requires States 
to undertake aggressive efforts to de- 
velop and operate a program to en- 
courage and assist AFDC recipients to 
prepare for, seek, and accept work. 

To fund these increased Federal 
commitments, most local community 
development, infrastructure and many 
personal social service programs would 
be terminated at the Federal level. 
State and local governments could re- 
place Federal spending for programs 
that are more cost-effective and re- 
sponsive to local priorities. 

Mr. President, when the Federal pro- 
gram terminations included in Fact 
are balanced against the increased 
Federal role in Medicaid and AFDC, 
the result is a fiscally neutral legisla- 
tive package. But it is not carved in 
stone. Alternative combinations of 
program terminations have been ex- 
plored and can be developed. With fur- 
ther coalition building and additional 
Member support other options will 
emerge. 

While terminating programs has 
proven to be difficult for Congress, it 
becomes much more palatable when it 
represents a reordering of responsibil- 
ities between Federal, State, and local 
governments. Even with the bold ef- 
forts of Senators Domenicr and 
CuiLes, Congress has been restricted 
to offering status quo budgets that are 
responsive to this year’s needs but not 
next. By allowing continued program 
freezes or spending reductions of 5 or 
10 percent, the Congress and the 
President are not doing an effective 
job and are slowly strangling many im- 
portant programs. 

If all States and localities were iden- 
tical, an intergovernmental exchange 
could be simple. But with the wide 
fiscal disparities among States and lo- 
calities, the Federal Government 
should help meet targeted needs. 

Integral to this federalism proposal 
are fiscal capacity grants targeted to 
those States and localities with very 


CONGRESSIONAL RECORD—SENATE 


low tax capacity. Those States with 
low fiscal capacity would receive 
grants that would help them provide 
an adequate level of public services. 
Furthermore, localities would be allo- 
cated grants to cushion the impact of 
program terminations on communities 
with limited resources. Such a target- 
ed program is 300 percent more effi- 
cient in reducing fiscal disparities than 
general revenue sharing, at one-half of 
the cost. 

The final component of Fact con- 
verts the current Federal spending on 
the nonmedical aspects of long-term 
care into block grants to the States, 
thereby removing the present pro- 
grammatic bias toward institutional 
solutions and enabling States to exper- 
iment with more efficient and humane 
forms of service. In addition, Federal 
funding will rise slowly to help narrow 
the gap between resources available in 
different States. 

While a comprehensive solution ap- 
pears to be a decade away, this propos- 
al provides a first step in that direc- 
tion and goes a long way toward meet- 
ing some of the costs and care con- 
cerns generated by the current system. 

In conclusion, the Federalism Act of 
1986 supports a diverse combination of 
interests. 

First, it terminates a number of Fed- 
eral programs and allows States and 
localities to determine their own prior- 
ities. 

Second, it creates greater nationwide 
uniformity in the benefits provided by 
Federal safety net programs and it 
promises to place welfare recipients in 
jobs. 

Third, it removes the tangled web of 
regulation between Federal and State/ 
local governments. 

Fourth, it mitigates the effect of 
fiscal disparities between the poorest 
and wealthiest States. 

Fifth, it reforms our intergovern- 
mental structure—helping us better 
define our future budget decisions. 

With our Nation celebrating the bi- 
centennial of the Constitution next 
year, there is no better time to return 
to the basics—‘“‘to form a more perfect 
Union.” 

Mr. President, I ask unanimous con- 
sent that the summary and a section- 
by-section analysis be printed in the 
RECORD. 

There being no objection, the mate- 
rial was ordered to be printed in the 
REeEcorD, as follows: 

SUMMARY 

The Federalism Act of 1986 (FACT) offers 
a plan to thoroughly overhaul our intergov- 
ernmental relationships—a proposal that 
would: 

Achieve sweeping federalism reform and a 
major reordering of federal domestic prior- 
ities on which Republicans and Democrats; 
conservatives and liberals; and federal, state 
and local governments can agree; 


Provide a responsible, achievable middle 
ground for the coming debate over welfare 


reform and family policy; and 


October 15, 1986 


Present a structural change to govern- 
ment that better defines the future budget 
decisions that must be addressed. 

And, most importantly, the elements of 
this proposal would be implemented gradu- 
ally on a fiscally-neutral basis. 


BACKGROUND 


In December, 1985, the Committee on 
Federalism and National Purpose released 
its report, To Form a More Perfect Union. It 
was the culmination of the work by the 
Committee, co-chaired by Senator Daniel J. 
Evans (R-WA) and former Governor 
Charles Robb (D-VA), along with a group of 
23 other representatives from all levels of 
government, Republicans and Democrats, 
academicians and well-respected profession- 
als. Truly, the strength of the Committee 
was the consensus found from such diverse 
members. 

Experts in the field were enlisted as well 
as former Democratic and Republican Ad- 
ministration officials, to draw up the FACT 
of 1986 using To Form a More Perfect 
Union as a guide. 


IMPLEMENTATION PLAN 


The proposals offered by FACT can be im- 
plemented in a fiscally-neutral way by seek- 
ing leadership and member endorsement, 
building a diverse coalition of support and 
using the reconciliation process during 1987. 
As a starting point, however, omnibus legis- 
lation was introduced in October which will 
serve to initiate discussion and to develop al- 
ternative options. 


INITIAL PROPOSALS 


The following outlines a combination of 
proposals and options that could be pursued 
gradually in a fiscally-neutral fashion: 

Medicaid Reform: In year 1, provide Med- 
icaid coverage for all children 5 years of age 
and under and pregnant women living in 
families with income below the poverty line. 
The federal government will pay 80, percent 
of the Medicaid program cost for these two 
groups in year one and 90 percent thereaf- 
ter. The age of eligibility for children will 
increase by 1 year through 1994, when chil- 
dren under 12 will be covered. In the first 
year, this proposal will cover an estimated 
additional 1.3 million children from poor 
families, and an additional 1.8 million chil- 
dren through 1994. Furthermore, an addi- 
tional estimated 286,000 poor pregnant 
women will be covered in each year of the 
program. 

In year 2, eligibility for the medical com- 
ponents of Medicaid would be made more 
uniform and broader nationwide. Also be- 
ginning in year 2, the federal government 
will increase its reimbursement rate for 
state Medicaid costs by 2 percentage points 
per year. Federal payments to states would 
be capped at 90 percent. 

AFDC Reform: In year 2, all states would 
be required to join the 26 states that al- 
ready participate in the AFDC—Unem- 
ployed Parent Program. Without the 
AFDC-UP program, the current AFDC 
system encourages the separation of parents 
in order to quality for benefits—a policy 
that is anti-family and must be changed. 

Also in the second year, the federal fund- 
ing match would increase to 90 percent from 
the current average of 54 percent, and a 
minimum AFDC benefit floor would be set 
for all states which, when combined with 
the cash value of Food Stamps, would equal 
50 percent of poverty level income. The 
value of this minimum grant would increase 
by 2 percent of poverty per year each year 
thereafter. By 1994, the federal minimum 





October 15, 1986 


would be 62 percent of poverty, at or above 
the maximum combined AFDC and Food 
Stamp benefit currently in effect in 34 
states. 

A poor family of 4 in one region of the 
country will receive assistance up to 5 times 
as great as a similar family elsewhere. After- 
all, to be poor and hungry in New York or 
California is little different from being poor 
and hungry in Mississippi, Maine or Missou- 
ri. 

Work-Welfare: Along with providing more 
uniform and adequate welfare benefits, it is 
important to pursue initiatives aimed at en- 
hancing the employment prospects of 
AFDC recipients. The suggested general 
characteristics of such a program are: 

A federal mandate that states develop and 
operate a program to encourage and assist 
AFDC recipients to prepare for, seek and 
accept work, combined with broad state 
flexibility as to the specific design of that 
program. 

Authorization for the states to require 
that AFDC recipients participate in offered 
programs and accept work, subject to cer- 
tain minimum federal standards (e.g., ex- 
emption of the disabled, etc.). 

Consolidation of existing federal work/ 
welfare initiatives (with a 10 percent state 
match), which is administered by the De- 
partment of HHS. 

Expanded funding for state programs in 
future years with a portion of the increase 
tied to the effectiveness of state programs. 

It is important to note that AFDC em- 
ployment requirements begin one year prior 
to the increasing federal role proposed 
under AFDC. 

Long-term care: In year 3, create a block 
grant based on the current federal contribu- 
tion to long term care. Funding levels will 
rise so as to combine an increased federal 
presence with additional funds to deal with 
case load and cost changes. While a compre- 
hensive solution appears to be a decade 
away, this proposal provides a first step in 
that direction and goes a long way toward 
meeting some of the cost and care concerns 
generated by the current system. 

Targeted assistance grants: Integral to 
this federalism proposal are “fiscal capacity 
grants” targeted to those states and local- 
ities with very low tax capacity. Those 
states with low fiscal capacity would receive 
grants that would help them provide an 
adequate level of public services. Further- 
more, localities would be allocated grants to 
cushion the impact of program terminations 
on communities with limited resources. A 
preliminary framework for these two grants 
is described as follows: 

Grants to Localities: These grants are tar- 
geted at those localities most in need. Need 
is to be measured by Total Tax Revenue 
(TTR), a standard developed by the Depart- 
ment of Treasury. The Department also will 
administer the funds on the national level. 
Grants will begin in Year 1 and continue 
each year thereafter. Funding is set at ap- 
proximately $2.0 billion per year. Commis- 
sions in each state will have the option to 
develop an alternate formula by which to 
disburse fund within each state. 

Fiscal Capacity Grants to States: These 
grants will be targeted at those states whose 
fiscal capacity is below 90 percent of the na- 
tional average of total taxable resources, as 
determined by a formula developed by the 
General Accounting Office. Available funds 
will be allocated to states falling below 90 
percent of the average in proportion to the 
extent to which these state’s capacities fall 
below that mark. This measurement will be 


CONGRESSIONAL RECORD—SENATE 


reestimated annually. The Treasury Depart- 
ment will administer these funds nationally. 
Grants to selected states will be authorized 
at $2.0 billion annually and will begin in 
year 3, continuing thereafter. 

Program terminations: In year 1, most 
local community development, infrastruc- 
ture and many personal social service pro- 
grams would be terminated. State and local 
governments could replace federal spending 
for programs that are more cost-effective 
and responsive to local priorities. 

A combination of program terminations 
that would provide for a fiscally-neutral 
proposal include: EDA; Appalachian Region- 
al Commission; CSBG; UDAG: CDBG; 
UMTA—Research, Training & Human Re- 
sources, Interstate Transfer, and Section 9; 
EPA Wastewater Grants; Rural Water 
Waste Disposal Grants; Impact Aid; Chap- 
ter 2; Vocational Education; Title XX; and 
low-income housing (new commitments). 

Alternative combinations of program ter- 
minations have been explored and can be 
developed. With further coalition building 
and additional member support other op- 
tions will emerge. 

SECTION-BY-SECTION ANALYSIS 


A bill to establish more uniform eligibility 
and benefit levels under the Aid to Families 
with Dependent Children program and the 
Medicaid program, to provide for greater 
Federal financial responsibility for such 
programs, to enhance the employment pros- 
pects of recipients of Aid to Families with 
Dependent Children, to provide for a re- 
duced Federal role with respect to certain 
activities, to provide fiscal capacity grants 
to States, and for other purposes. 

SUMMARY OF TITLE I: AID TO FAMILIES WITH 

DEPENDENT CHILDREN 


To establish more uniform eligibility and 
benefit levels for the Aid to Families with 
Dependent Children Program and greater 
federal responsibility for program costs, and 
to enhance the employment prospects of re- 
cipients so that they may become self-suffi- 
cient through a federal mandate that states 
develop and operate a program to encourage 
and assist recipients of Aid to Families with 
Dependent Children to prepare for, seek 
and accept work, combined with broad state 
flexibility as to the specific design of that 
program. 

Subtitie A—Benefits and Federal 
participation 

Section 101—AFDC Minimum Benefit 
Amount: Effective October 1, 1988, a federal 
minimum monthly benefit is set for all 
states. This federal minimum is a cash grant 
which, when combined with the cash value 
of food stamps, equals 50 percent of the 
nonfarm income official poverty line estab- 
lished by the Office of Management and 
Budget and revised annually. The value of 
the minimum grant increases 2 percent of 
poverty per year each year until FY95 when 
it reaches 62 percent of poverty level 
income. The federal government pays 90 
percent of the value of this grant, with 
states continuing to be reimbursed by the 
federal government for amounts above this 
minimum at current reimbursement rates. 

Section 102—Mandatory Provision of Aid 
with Respect to Dependent Children in Two- 
Parent Families: As of October 1, 1988, all 
states are required to adopt the AFDC-UP 
program. The costs of this program would 
be reimbursed at the same rate as the regu- 
lar AFDC program. 

Subtitle B— Work-related requirements 


Section 111—State Plan Requirements; 
Registration of AFDC Applicants and Re- 


31245 


cipients for Work-Related Counseling, As- 
sessment, and Assignment: AFDC recipients 
are required to register for work-related 
counseling and assessment, and assignment 
to employment, training, education, and 
other employment related activities desig- 
nated by a state agency in each state that 
would consolidate the administration of 
each state’s work-related functions. Current 
WIN regulations exempting certain popula- 
tions would be continued, except that states 
may require individuals with children under 
the age of six to register, but only if child- 
care and transportation arrangements are 
available. States also may exempt recipients 
if participation in the program would not 
improve their employment prospects or if 
accepting work would lead to a net loss of 
income. Non-exempted recipients who with- 
out good cause do not register or participate 
in the program if offered to them will lose 
benefits. 

Section 112—Consolidated Administration 
of Work-Related Programs: The Governor of 
each state designates the state agency 
which will administer work-related pro- 
grams for Title IV-A_ recipienets. This 
agency registers all recipients and deter- 
mines the appropriate kind and level of ac- 
tivity and, to the maximum extent possible, 
provides for increased coordination between 
the AFDC agency and other employment, 
training and education programs offering 
services to AFDC recipients. Such programs 
include the work incentive program, the 
work incentive demonstration program, the 
state’s community work experience and sup- 
plementation programs, a work demonstra- 
tion program (under section 1115), any pro- 
gram under the Job Training Partnership 
Act, any program of job search and related 
services, and any other program which 
could be made available to this population. 
Childcare, transportation and other neces- 
sary assistance is funded at a 90/10 rate. 

The federal government authorizes funds 
of $500 million for FY88. This grant is in- 
creased $100 million annually and is capped 
at $1 billion for each of the fiscal years 
1993-1995. First year funding is matched at 
a 90/10 rate, distributed to states on the 
basis of caseload. One half of the annual in- 
creases is distributed also on the basis of 
caseload and is matched at a 70/30 rate. The 
remaining half is matched at a 70 to 90 per- 
cent variable based on performance. The 
federal government contributes 50 percent 
to cover administrative costs. 

In consultation with other officials, the 
Secretary of Health and Human Services 
will develop performance standards, giving 
special weight to the number of AFDC 
beneficiaries with limited prior work history 
that each state has placed in employment. 

Section 113—Optional Coverage of Em- 
ployment-Related Support Services for Cer- 
tain Individuals: States have the option to 
continue payments for childcare, transpor- 
tation and other employment-related sup- 
port services for up to 12 months for fami- 
lies whose eligibility for AFDC has ended 
due to increased levels of income. States 
may opt to develop a fee schedule for these 
recipients. 

Section 114—Technical, Conforming and 
Miscellaneous Amendments; The responsi- 
bility for administering the WIN program 
on the national level is transferred from the 
Department of Labor to the Department of 
Health and Human Services. Federal assist- 
ance is made equal to the applicable per- 
centage of the costs of carrying out the ac- 
tivities determined by the designated state 
agency. 





31246 


Section 115: Except as indicated other- 
wise, work-related requirements take effect 
October 1, 1987. 

Subtitle C—Hold harmless 


Section 121—Hold Harmless; The federal 
government will reimburse states at a 100% 
rate for amounts expended by them for 
AFDC in FY89 that are in excess of the 
amounts expended by them in FY88 for 
such aid and activities. This provision man- 
dates federal reimbursement to states for 
the difference between the additional 
spending attributable to the AFDC amend- 
ments in FY89 and the additional federal 
reimbursements that occur that same year. 

SUMMARY OF TITLE II: MEDICAID 


To establish more uniform eligibility and 
benefit levels for Medicaid, along with 
greater federal responsibility for program 
costs. 

Section 201—Medicaid Eligibility for Poor 
Children and Pregnant Women: Starting 
October 1, 1987, all children under 5 years 
of age living in families with income below 
the poverty line and all pregnant women 
(and during the 60-day period following 
pregnancy) living in such families would be 
eligible for Medicaid. The age of eligibility 
for children will be raised 1 year in each 
succeeding year, reaching 11 years of age. 
Secretary of Health and Human Services 
will set minimum nationwide uniform stand- 
ards of service coverage and reimbursement. 

Section 202—Medicaid Eligibility for Cer- 
tain Other Individuals: Starting October 1, 
1988, the following groups would be made 
eligible for the medical component of Med- 
icaid: All persons eligible for but not receiv- 
ing SSI; All institutionalized persons who 
are not categorically eligible for Medicaid 
solely by virtue of the more restrictive 
income eligibility requirements for this pop- 
ulation; persons residing in states that do 
not provide Medicaid to all SSI recipients. 

Section 203—Medically Needy Program 
Required: Starting October 1, 1988, all 
states are required to institute Medically 
Needy programs. 

Section 204—Federal Medical Assistance 
Percentage: The federal government will 
pay 80 percent of the Medicaid costs for 
poor children and pregnant women in FY88. 
In FY89, the federal government will pay 
90% of the costs. The state medical assist- 
ance percentage to cover Medicaid costs for 
groups other than poor children and preg- 
nant women will be reduced by 2 percentage 
points beginning on October 1, 1988. By and 
after October 1, 1994 the state percentage 
will be reduced by 14 percent. 

Section 205—Hold Harmless Provision: 
The federal government will reimburse 
states at a 100 percent rate for the costs at- 
tributable to the amendments detailed in 
Title II that a state expends in FY88 and 
FY89 that are in excess of the amounts 
states expended in FY87. This provision 
mandates federal reimbursement for the 
difference between the additional spending 
attributable to the Medicaid amendments in 
FY88 and FY89 and the additional federal 
reimbursements that occur in those years. 

SUMMARY OF TITLE III: TERMINATION OR 

REDUCTION OF CERTAIN FEDERAL PROGRAMS 


To provide for a reduced federal role with 
respect to certain activities. 

Section 301—Repeal of Certain Statutes: 
The following provisions of the law are re- 
pealed: Appalachian Regional Commission; 
Economic Development Administration; 
Urban Mass Transit Interstate Transfer; 
Urban Development Action Grants (UDAG) 
and Community Development Block Grants 


CONGRESSIONAL RECORD—SENATE 


(CDBG); Impact Aid; Chapter 2 of the Edu- 
cation Consolidation and Improvement Act 
of 1981; Vocational Education; Community 
Services Block Grant; Wastewater—Federal 
Water Pollution Control Act; Rural Waste 
Water 

Section 302—Reduction in Housing Assist- 
ance Program Outiays: Federal outlays are 
reduced for the following programs: Hous- 
ing Assistance Payments under Section 8; 
Public Housing Assistance and Loans; 
Rental Housing Assistance; Section 202 
Housing Loans for the Elderly and Handi- 
capped; Congregate Services Assistance; Op- 
erating Assistance under Section 201. Con- 
gress will reduce aggregate outlays for these 
programs from the aggregate baseline 
outlay amount, as determined by the Direc- 
tor of the Congressional Budget Office by 
the following cumulative amounts: For 
FY88, $800 million; FY89, $900 million; 
FY90, $1 billion; FY 91, $1 billion; FY92, $1.2 
billion; FY93, $1.3 billion; FY94, $1.4 billion; 
FY95, $1.5 billion. 

Section 303—Reduction and Termination 
of the Social Services Block Grant. The 
Social Services Block Grant will be reduced 
in FY88 by $1.6 billion. The program is re- 
pealed in FY90. 

SUMMARY OF TITLE IV: FISCAL CAPACITY GRANTS 
TO STATE AND LOCAL GOVERNMENTS 

To establish targeted grant programs to 
reduce fiscal among state and local govern- 
ments, and ensure that all communities can 
provide their citizens with a safety net of 
basic public services, by providing general 
purpose fiscal assistance to needy communi- 
ties. 

Section 401—Findings and Purposes. 

Section 402—Definitions and Special 
Rules of Application; Defines county, town- 
ship, city, Indian tribes and Alaskan Native 
Villages that are eligible to receive funds, 
defines data factors to be used in calculating 
grant allotments, and other terms required 
in the civil rights provisions. 

Section 403—Payments to State and Local 
Governments: Contains technical/adminis- 
trative provisions related to the timing of 
payments and making adjustments to pay- 
ments as may be required. 

Section 404—General Fiscal Assistance 
Trust Fund: Establishes a General Fiscal As- 
sistance Trust Fund to be administered by 
the Secretary of the Treasury. $2.0 billion 
are authorized for payment to State govern- 
ments and $2.0 billion for payments to units 
of local government. In addition, $500,000 is 
authorized to be appropriated to the De- 
partment of Commerce for collecting and 
tabulating data om fees and charges and 
Total Taxable Resources, used in calculat- 
ing grant payments. 

Section 405—Qualifications: Imposes cer- 
tain requirements on grantees, including: (1) 
they pay prevailing wages to public employ- 
ees whose salaries are in part paid with 
grant funds, and (2) imposes Davis-Bacon 
provisions on construction projects financed 
with grant funds. 

Section 406—Special Entitlements for 
Indian Tribes, Alaskan Native Villages, and 
the District of Columbia: Provides per 
capita payments to the District of Colum- 
bia, each Indian tribe and Alaskan Native 
village equal to 150 percent of the per capita 
amount appropriated for all units of local 
government. 

Section 407—State Area Allocations for 
Units of General Local Government; Funds 
for units of local government are allocated 
among state areas according to a 3-factor 
formula based on population multiplied by 
tax effort multiplied by relative fiscal capac- 


October 15, 1986 


ity using the total taxable resources (TTR) 
measure of fiscal capacity. The details of 
the interstate formula are as follows: (1) no 
state area receives a payment less than 20 
percent of the U.S. average per capita pay- 
ment, (2) a state’s tax effort is revenues 
(taxes plus fees and charges) divided by its 
TTR, (3) the total taxable resources of all 
states is adjusted to reflect the higher cost 
of living in higher income states, and (4) 
funds are allocated in proportion to the 
extent to which a state’s TTR is less than 
150 percent of the TTR of all states. 

Section 408—Allocations to Units of Gen- 
eral Local Government in the Same State: 
Allocates each state area allotment to units 
of general local government using a formula 
based on the population, tax effort and per 
capita income of each unit of local govern- 
ment. 

Paragraph (b)(1) defines the tax effort of 
each unit of local government as revenues 
collected (taxes plus fees and charges) divid- 
ed by resident’s total income. However, the 
revenues of a unit of local government are 
limited to no more than twice the state av- 
erage. This provision is intended to prevent 
extraordinarily large payments to localities 
that can export a large proportion of local 
taxes to non-residents because of large 
shopping centers or industrial parks that 
yield large revenues relative to population. 
The income factor is defined so that local 
governments whose per capita incomes 
exceed 120 percent of the U.S. per capital 
income (adjusted for cost-of-living differ- 
ences) are ineligible. Per capital payments 
for the remaining eligible governments in- 
creases in proportion to the extent their per 
capital income is below the 120 percent 
income eligibility standard. 

Section 409—Adjustments of Local Gov- 
ernment Allocations Made Under Section 
408: Provides adjustments to payments es- 
tablished in Section 408—(1) no local gov- 
ernment may receive a per capita payment 
more than 3 times the national average pay- 
ment, and (2) if the payment determined in 
section 408 is less than $1,000 the payment 
is automatically waived and reallocated to 
remaining eligible governments. 

Section 410—Alternative Distribution of 
Funds to Local Governments: Establishes a 
Commission in each state composed of elect- 
ed local government officials to investigate 
alternative formulas that may better target 
aid to local governments with high costs of 
providing for their public service needs and 
low revenue raising capacity. If the Commis- 
sion finds that a better method of allocating 
funds can be devised then it may recom- 
mend an alternative formula, which if ap- 
proved by the Governor and State Legisla- 
ture, will replace the allocation provisions 
contained in sections 408 and 409. 

Section 411—Allocations to State Govern- 
ments: Allocates funds to state governments 
using the same interstate formula as de- 
scribed in section 407 except that eligibility 
is limited to only those states whose total 
taxable resources are below 90 percent of 
the average taxable resources of all states. 
However, no minimum per capita payment 
is provided. In addition, if the formula 
would allot less than $1.0 million to any 
state government their allotment would be 
waived and reallocated to remaining eligible 
State governments. 

Section 412—Information Used in Alloca- 
tion Formulas: Requires that the latest 
available data be used for calculating grant 
allotments, that population data be adjust- 
ed to reflect under counts from the 1980 
census and provides hold-harmless provi- 





October 15, 1986 


sions for areas designated as major disaster 
areas. 

Section 413—Accountability: Contains the 
same public hearing provisions that has 
been required under general revenue shar- 
ing. 

Sections 414 through 420—Discrimination: 
Contains the same anti-discriminatory pro- 
visions as has been required under general 
revenue sharing. 

Section 421—Audits, Investigations and 
Reviews: Invokes requirements of the Single 
Audit Act of 1984 for governments receiving 
$25,000 or more. 

Section 422—Reports: Imposes the same 
reporting requirements on the Treasury 
Secretary and grant recipients as was re- 
quired under general revenue sharing. 
SUMMARY OF TITLE V: BLOCK GRANTS TO STATES 

FOR LONG-TERM HEALTH CARE SERVICES 


To establish a block grant program with 

respect to the nonmedical aspects of long- 
term care, thereby removing the present 
programmatic bias toward institutional solu- 
tions to the problem and enabling the states 
to experiment with more efficient and 
humane forms of service. In addition, pro- 
vide federal funds for the block grants at a 
level that would help narrow the gap be- 
tween resources available in different states 
for the nonmedical aspects of long-term 
care. 
Section 501—Establishment of Block 
Grant Program with Respect to Long-Term 
Health Care: Federal spending on long-term 
care is converted into a block grant to states 
to cover services supplied by skilled nursing 
facilities; intermediate care facilities for 
mentally retarded individuals or individuals 
with related conditions; intermediate care 
facilities for other populations; inpatient 
psychiatric hospitals; and by home health 
care. The program will take effect beginning 
the third year after the enactment of the 
Federalism Act of 1986. 


The size of the grant to each state will be 
based on qualifying expenditures for long- 
term care in the year prior to the program’s 


implementation. Qualifying expenditures 
are: the funds required to provide institu- 
tional-based services up to the national av- 
erage in terms of average care days per re- 
cipient for each type of service and funds 
spent in providing home health care serv- 
ices. 

The federal block grant to each state will 
increase according to the primary adjusted 
federal medical assistance percentage on 
qualifying expenditures, 5 percent in the 
first year and for each subsequent fiscal 
year, the sum of 3 percent and the primary 
adjustment percentage for the immediately 
preceding fiscal year. The federal block 
grant amount to each state also will reflect 
the secondary adjusted federal medical as- 
sistance percentage on expenditures above 
the qualifying amount, a 2.5 percent reduc- 
tion in the matching rate in the first year 
and for each subsequent fiscal year, the sum 
of 1.5 percent and the secondary adjustment 
percentage for the immediately preceding 
fiscal year. 

Furthermore, the Secretary of Health and 
Human Services will increase the qualifying 
expenditures used in the grant formula to 
reflect growth in the target population and 
in unit costs. Except for this percentage in- 
crease mandated by the Secretary, long- 
term care federalization generally is com- 
plete when the cumulative annual incre- 
ments bring the match rate to 90 percent. 

Section 502—Report by Secretary with Re- 
spect to Technical and Conforming 
Changes: Within 180 days after enactment, 


CONGRESSIONAL RECORD—SENATE 


the Secretary of Health and Human Serv- 
ices shall submit to Congress a report de- 
scribing the necessary technical and con- 
forming changes. 

Mr. DURENBERGER. Mr. Presi- 
dent, the goal of this legislation can be 
described in a single word: “‘responsi- 
bility.” For two decades, we’ve known 
what's wrong with the Federal system. 
For a decade, at least, we’ve had a 
pretty good idea about how to fix it. 

But, knowing what we ought to do, 
and getting it done, are two different 
matters. Federalism reform is not 
going to happen until we take the re- 
sponsibility to make some very tough 
decisions. By we I mean the Federal 
Government, State and local govern- 
ments, and the American people. All 
of us and each of us. 

For the Federal Government, this 
means finally admitting our responsi- 
bility to the poor, establishing a real 
safety net that supports people on an 
equal basis—in Mississippi as well as in 
Minnesota. 

For State and local governments, 
this means abandoning the old illu- 
sions that we can have it all—and that 
we can have it both ways—Federal aid 
for every purpose under the Sun, ev- 
erywhere on an equal basis, whether 
you're Bedford-Stuyvesant or Beverly 
Hills. 

And, finally, responsible federalism 
makes demands on people as well as 
governments. Take the case of welfare. 
Government has a responsibility to 
provide a minimum level of resources. 
But, the individual and the family 
have responsibilities as well, both to 
themselves and to society. 

The legislation that Dan Evans and 
I are introducing in the Senate, and 
that Tom Downey is introducing in 
the House, is about ‘responsible feder- 
alism.” 

While this legislation took over a 
year to develop, it does not mark an 
end to our discussion and debate on 
this subject. Instead, this legislation, 
and the hearing we held on federalism 
reform last week before the Senate 
Subcommittee on Intergovernmental 
Relations, will launch the beginning of 
a dialog which is well-suited for 1987— 
a year in which we will celebrate the 
bicentennial of our Constitution and 
begin the 100th Congress of the 
United States. 

This dialog, in turn, is not about 
arcane administrative arrangements of 
governmental activities. Rather it is 
about the future direction of our 
system of government. And it is about 
the most fundamental questions con- 
cerning the role of government in our 
society—questions like: 

Which levels of government should 
be responsible for delivering which 
services? 

What should be the responsibility of 
government—and of society as a 
whole—to assist individuals who have 
difficulty caring for themselves? 


31247 


Should there be a uniform, mini- 
mum level of income and services, 
below which no American citizen 
should be permitted to fall? 

What responsibilities do recipients 
of public assistance owe to society at 
large? 

Can States be trusted to administer 
devolved programs, given their dra- 
matic advances in State institutional 
capacity, revenue raising ability, and 
fairness in electoral participation? 

And finally, in a period of retrench- 
ment and record Federal deficits, how 
can we afford to meet competing de- 
mands for services in a fiscally respon- 
sible manner? 

No issues could be more appropriate 
for our discussion as we stand on the 
verge of the 100th Congress and pre- 
pare to celebrate the bicentennial of 
our Constitution. But our interest in 
comprehensive federalism reform is 
not an intellectual exercise prompted 
by mere historical curiosity. Three 
very real and contemporary problems 
have combined to place these funda- 
mental issues of governance on the 
forefront of our national policy 
agenda. 

The first is welfare reform. If 1986 
was the year of tax reform, 1987 will 
likely be the year of welfare reform. 
As the extremes of family income 
grow wider in our society, the paradox 
of poverty in the midst of plenty 
grows more acute. As the so-called un- 
derclass grows and seemingly resists 
more than two decades of antipoverty 
programs, the calls mount for a redefi- 
nition of society’s obligations to the 
poor—as well as a redefinition of indi- 
viduals’ and families’ responsibilities 
to society as a whole. For all of these 
reasons, the President has indicated 
that welfare reform may become an 
important item on his agenda next 
year, and this hearing demonstrates 
that welfare reform will be a major 
item on the congressional agenda. 

The second stimulus for this legisla- 
tion is a set of longstanding problems 
in our system of cooperative federal- 
ism that demand comprehensive 
reform. Despite all the budget cuts 
and block grants, there has been no 
systematic sorting out of Federal, 
State, and local responsibilities since 
1980, when the Advisory Commission 
on Intergovernmental Relations con- 
cluded that our intergovernmental re- 
lations had become both “less” and 
“more.” Less manageable, less effec- 
tive, and less accountable * * * but 
more costly, more pervasive, and more 
intrusive. The intergovernmental aid 
system remains overloaded, over-regu- 
lated, and overly complex. 

This intergovernmental confusion 
has been increased rather than re- 
duced by the third factor shaping fed- 
eralism today—fiscal retrenchment. 
During the past 6 years, we have 
indeed begun to reshape our Federal 





31248 


aid system. Since 1980, Federal aid ad- 
justed for inflation is down 24 per- 
cent—with virtually no area un- 
touched. In health services, real 
spending is down 14 percent. Child nu- 
trition grants are down another 14 
percent. Mass transit—down 19 per- 
cent. Economic development—down 39 
percent. Social services—down 25 per- 
cent. Training and employment—down 
69 percent. In short, we in Washington 
have been busy restructuring fiscal 
federalism; but we have been doing it 
almost by accident, without rhyme or 
reasons, without any set of guiding 
principles. 

Except for cuts and a few block 
grants created back in 1981, most pro- 
grams remain unchanged. EDA and 
UDAG are still there. So is CDBG, 
family planning grants, the commu- 
nity services block grant, impact aid, 
mass transit grants, and the Job 
Corps. The programs are still there, 
but each year we whittle off 10 per- 
cent here and 20 percent there—or we 
just freeze their budgets and let infla- 
tion do the cutting for us. All the 
while, these programs become worth 
less and less, the deficit continues to 
mount, and we do nothing to establish 
a sense of national priorities. 

The problem is not the programs. 
Each of them has value. The problem 
has been our unwillingness to make 
hard choices. By trying to still do ev- 
erything we did in the past, though we 
can no longer afford it, we risk doing 
nothing well. And we risk ignoring 
new problems or trying new approach- 
es simply because they are locked into 
today’s budget. 

That is why we are here today. Be- 
cause the need for welfare reform, 
intergovernmental management, and 
fiscal retrenchment demand that we 
reexamine Federal, State, and local 
roles in delivering governmental serv- 
ices, and that we do it in a principled 
way. 

The last time we addressed the issue 
of sorting out responsibilities in a seri- 
ous way—back in 1982—I identified 
three sets of principles that I believe 
can help define the scope of legitimate 
national purpose and thus help us 
make the difficult choices we face. 

The first set of principles are consti- 
tutional in nature. They have helped 
us assign responsibilities in our Feder- 
al system since 1787; and because they 
are embodied in our founding docu- 
ment, they continue to shape our pol- 
licies today. By virtue of the Constitu- 
tion, the National Government has 
the responsibility: First, to secure the 
individual rights and liberties guaran- 
teed to all Americans; second, to 
defend American interests and con- 
duct foreign relations in the communi- 
ty of nations; and third, to promote 
economic growth and regulate inter- 
state commerce. 

Over the past 200 years, these broad 
constitutional dictates have been rein- 


CONGRESSIONAL RECORD—SENATE 


forced by a set of five time-tested ad- 
ministrative principles which enhance 
efficiency and effectiveness in the con- 
duct of Government. These principles 
address problems that are widely expe- 
rienced and cannot be easily resolved 
by State and local action. Thus, the 
National Government has a responsi- 
bility to address problems where: 

Significant savings can be realized 
by operating a central program, as in 
research and development; 

Where States cannot be effective by 
operating alone, as with combating or- 
ganized crime; 

Where benefits spill over to citizens 
of other States, as in protecting wil- 
derness areas; 

Where single States encounter ex- 
traordinary costs beyond their means, 
as in disaster relief and refugee assist- 
ance; and finally, 

Where competition among the 
States prevents them from acting in 
the public good, as in regulating mini- 
mum wages and hours and insuring 
against unemployment. 

Finally, there are two principles of 
fairness that reflect the needs of a 
changing America as we approach the 
2ist century. These are principles 
that, while acknowledging the degree 
to which we remain a diverse nation, 
reflect the greater sense of national 
community that has evolved over the 
past 50 years. These principles of na- 
tional fairness establish, first, that the 
National Government has a responsi- 
bility to provide for the income securi- 
ty of all Americans. This includes the 
regulation of banking and pensions for 
the employed; social insurance for the 
retired, sick, and unemployed; and 
income maintenance for the poor. 

The second principle of fairness rec- 
ognizes a national responsibility to 
ease disparities in fiscal capacity 
among States and communities. This 
is the public-sector counterpart of the 
principle above. Just as the principle 
of income security establishes a safety 
net of private goods—food, housing, 
medical care—so the narrowing of 
fiscal disparities establishes a safety 
net of public goods, to provide a mini- 
mum level of basic public services in 
those States and communities that 
simply lack the tax base to provide 
these services alone. 

Above all, it is these two national re- 
sponsibilities—to fill the gaps in our 
system of income security and to 
reduce fiscal disparities—that the leg- 
islation we are introducing seeks to ad- 
dress. It is these two principles of na- 
tional community which create a solid 
foundation on which a true “‘responsi- 
ble federalism’’ can be built. 

The legislation before us is only a 
beginning, not the final word. As we 
take up this debate in the 100th Con- 
gress, let us be guided toward “form- 
ing a more perfect Union” by embrac- 
ing fairness across our national com- 
munity, building on the firm founda- 


October 15, 1986 


tion of constitutional principles and 
administrative practices that have sus- 
tained us for 200 years. 

Thank you Mr. President. 


ORDER OF PROCEDURE 


(The following occurred during the 
foregoing remarks of Mr. Evans:) 

The PRESIDING OFFICER. The 
time of the Senator has expired. 

Mr. EVANS. Mr. President, I ask 
unanimous consent for an additional 2 
minutes. 

Mr. CHAFEE. Mr. President, we are 
running out of time. 

The PRESIDING OFFICER. Is 
there objection? 

Mr. CHAFEE. Mr. President, I 
wonder if the Senator could make it 1 
minute. We have several backed up. 
We have to go to the vote at 11. 

Mr. EVANS. I understand, I shall 
try. Does the Senator want 2 minutes? 

The PRESIDING OFFICER. The 
Senator has a pending unanimous-con- 
sent request for 2 minutes. Is there ob- 
jection? 

Mr. LEVIN. Mr. President, I would 
like to amend the unanimous-consent 
request that I have 4 minutes, that 
the Senator from Rhode Island be 
given 4 minutes, and then that the 
Senator from Illinois be given 3 min- 
utes. 

The PRESIDING OFFICER. Is 
there objection to the amended re- 
quest? If not, without objection, it is 
so ordered. 

The Chair now recognizes the Sena- 
tor from Michigan. 

Mr. LEVIN. I thank the Chair. 


THE DEATH PENALTY PROVI- 
SION IN THE PENDING DRUG 
BILL 


Mr. LEVIN. Mr. President, the issues 
before us are very simple as we pre- 
pare to vote on cloture. Do we want 
“to bring to an end” debate on a major 
piece of legislation which we have not 
yet begun to debate and which has 
never been the subject of hearings? 
Are we really ready to foreclose the 
possibility of amending this bill under 
the strict germaneness rules which clo- 
ture will bring? 

Mr. President, it is no secret that I 
oppose the death penalty in general 
nor is it a surprise that I oppose the 
particular form of the death penalty 
contained in this bill. This is not the 
time to give you my reasons for oppos- 
ing the death penalty—though there 
should have been time for that—but it 
is the time to say that cloture, and its 
rules of strict germaneness, will pre- 
vent the Senate from considering this 
bill in a rational manner. No matter 


what your position on the death pen- 


alty or the drug bill, you should 
oppose cloture now for three reasons. 





October 15, 1986 


First, this bill and the new substi- 
tute amendment needs to be consid- 
ered very carefully. It is a major piece 
of legislation which was drafted under 
very real time constraints. People have 
not had an opportunity to carefully 
study it. Just in terms of the death 
penalty provision, please recognize 
that this provision has never been in 
another death penalty bill considered 
by the Senate, it has never been the 
subject of hearings, it is flawed in a 
number of ways—yet we have never 
really debated it on the floor in a way 
which would expose—and perhaps cor- 
rect—those flaws. We had about 20 
minutes of debate on this subject 
when we considered the drug bill a 
week or so ago. And that really wasn’t 
debate—only the proponents spoke 
and then a motion to table was made 
and then the amendment was with- 
drawn. Yesterday we had another 20 
minutes or so of debate. Not much 
time, but we did discover a few facts 
which my colleagues ought to keep in 
mind. There is no data available to us 
which indicates how many drug-relat- 
ed deaths might be covered by this 
provision. And, in reality, there is no 
agreement as to which drugs related 
deaths would be covered by this provi- 
sion. 

Yesterday, I believe my friend from 
Utah was suggesting that this bill 
would let us sentence to death the 
drug dealers in the street who sell 
dope to people who subsequently die 
of, for example, an overdose. But that 


is not my understanding of the way 
the bill operates. And when my staff 
talked with the staff of the principal 
sponsor in the House, that was not 


their understanding either. Since 
intent must be found before a death 
sentence can be imposed, the dealer 
who, for example, sold drugs to a 
Lennie Bias is probably beyond the 
reach of this provision unless he or 
she intended to kill or intended to in- 
flict serious bodily injury or intended 
to use lethal force. If the Bias case is 
an example of what we call an acciden- 
tal overdose, could not be sentenced to 
death under the provisions of the law. 

While the bill arguably deters drug 
traffickers from killing one another, it 
does nothing relative to users since 
pushers don’t intend to kill users— 
they want to keep them alive to buy 
more drugs. The only people really 
subject to the death penalty under 
this bill are major drug traffickers—as 
the chief of police of the city of De- 
troit wrote in a letter to me of October 
14, 

A survey of drug-related homicides in the 
city of Detroit indicates that the over- 
whelming majority of these victims are drug 
traffickers. 

So, if you believe that the death 
penalty deters, it will deter drug traf- 
fickers from killing other drug traf- 
fickers. And in that sense this is, in 


CONGRESSIONAL RECORD—SENATE 


effect, the Drug Trafficker Protection 
Act. 

Hearings would have helped clear up 
this confusion and perhaps eliminate 
these problems. But we have had no 
hearings—and if we invoke cloture, we 
will have no real debate. 

There is something else we will not 
have if cloture is invoked, Mr. Presi- 
dent. We will not have a real opportu- 
nity to amend this bill. 

While I oppose the death penalty, I 
suspect that some of the amendments 
I have prepared and filed at the desk 
might be supported by those who 
favor the death panalty. Who would 
oppose an amendment designed to ex- 
clude consideration of the race of the 
victim as well as the defendant? Who 
would oppose an amendment designed 
to allow for Government disclosure of 
evidence in its files on mitigating cir- 
cumstances? And who would oppose an 
amendment clarifying the bill by 
making intent an element of the 
crime, as apparently intended by the 
floor manager, rather than just an ag- 
gravating factor? We may never know 
who would oppose—or who would sup- 
port—such amendments because all of 
them, under the technical rules of clo- 
ture, could be ruled nongermane even 
though they are very relevant. While 
we can, of course, appeal a ruling of 
the Chair on germaneness, I know 
how that clouds the issue and makes it 
difficult to get to the substance of the 
arguments. And, of course, our ability 
to debate those issues would be re- 
stricted by the 1 hour allocated to 
each Senator under cloture rules. My 
point, Mr. President, is simply that 
cloture is designed to bring debate to a 
close—but this debate has not even 
started. If we close debate now, we will 
foreclose the right of Members to 
offer constructive and perhaps even 
acceptable amendments. 

And it is not just my amendments 
which could not be considered if clo- 
ture is invoked. Those who have other 
concerns, concerns which go to other 
areas of the bill, might also find them- 
selves closed out. The Senator from 
Louisiana has mentioned one such 
major concern to me relative to creat- 
ing a new checkoff on our tax forms 
right after we have simplified those 
forms—he might well be prohibited 
from raising it. Others may find them- 
selves in the same situation if we act 
prematurely and invoke cloture now. 

Let there be no mistake: cloture here 
is premature. The death penalty provi- 
sion before us has never been a part of 
any broader death penalty bill, never 
been the subject of hearings, and is 
flawed in many respects. While it is 
true that I oppose the death penalty, I 
also have some serious amendments I 
want to offer and some constructive 
suggestions to make. There has been 
no time to do that. The bill was called 
up on Friday night, very late, and a 
cloture petition was filed at once. On 


31249 


Tuesday we spent perhaps 20 minutes 
debating the bill. And here we are 
today trying to see if we should bring 
debate to a close? Mr. President, with 
all due respect, one reason we have 
postcloture filibusters is because we 
don’t have precloture debate. And, I 
submit, there is a difference between 
the two at least in this case. Preclo- 
ture we could deal with the issue; post- 
cloture we deal with tactics. 

I ask my colleagues to give us some 
time to work on this bill before they 
vote to close debate and foreclose the 
opportunity to offer relevant amend- 
ments. 

The PRESIDING OFFICER. The 
Senator from Rhode Island is now rec- 
ognized for 4 minutes. 

Mr. CHAFEE. I thank the Chair. 


THE COMMUNITY AND FAMILY 
LIVING AMENDMENTS OF 1985 


Mr. CHAFEE. Mr. President, this 
has been a banner year for individuals 
with developmental disabilities. We 
celebrated the 10th anniversary of the 
Education for all Handicapped Chil- 
dren’s Act—Public Law 94-142 and just 
last week the President signed the re- 
authorization of that act into law. The 
reauthorization of the Rehabilitation 
Act has been passed by the Congress. 
The Tax Reform Act contains a 
number of provisions which clarify the 
status of disability-related expenses. 
Finally, the reconciliation bill we are 
currently considering will allow dis- 
abled individuals to continue to re- 
ceive Medicaid assistance after they 
begin to work, until their wages are 
sufficient to purchase assistance. 

All of these actions are aimed at the 
same goal: To help disabled individuals 
achieve their fullest potential by 
giving them an opportunity they have 
long been denied—to participate in the 
American dream. 


O 1050 


However, unfortunately, when the 
99th Congress finishes its work this 
week or next week and adjourns, it 
will do so without having enacted S. 
873, the Community and Family 
Living Amendments of 1985, legisla- 
tion which I introduced to reform one 
of the major problems those with 
disabilities and their families face; 
namely, the Medicaid problem. 

Why begin with changes in the Med- 
icaid? What is the matter with the 
Medicaid system? 

For all practical purposes, Mr. Presi- 
dent, Medicaid is the sole Federal pro- 
gram which provides States with fund- 
ing for long-term care for the disabled. 
That is where the money comes from 
to help the disabled. Currently, those 
funds flow primarily toward large fa- 
cilities. Why do they go to large facili- 
ties? The Medicaid Program began as 
a medical assistance program for low- 





31250 


income individuals. That is what the 
term is, medical care for those who are 
low income in the low-income strata. 

In time, the program was used to 
pay for long-term care services for the 
elderly and the disabled. 

Today, more than one-half of all 
Medicaid funds are used for this pur- 
pose. That is, long-term care for the 
disabled or the elderly. 

But the long-term care services the 
program will pay for are still rooted in 
the medical model. S. 873 would pro- 
vide funding for a full range of resi- 
dential options for independent living, 
ranging from independent living to in- 
stitutional placing. Currently, the 
funds all go to institutions. Is that the 
best place for a disabled person to be? 
I do not think so, in many instances. 

S. 873 provides the mechanism to 
move people into the community so 
they can be close to their families, 
close to their relatives, close to those 
that they know, and have the security 
and the support they need to grow and 
thrive and reach their fullest poten- 
tial, something that does not occur 
when they are in an institution. 

Mr. President, S. 873 undoubtedly is 
controversial. It has stimulated discus- 
sions and debates about those who 
have disabilities and what their future 
shall be. We have held three hearings 
in the Finance Committee on this 
matter, and I have held two unofficial 
hearings. I have participated in scores 
of conferences and gatherings on this 
issue. Congress is coming back in Jan- 
uary and I will reintroduce this meas- 
ure. I hope it will pass. 

I would like to take a moment to 
review the history of this legislation 
and share my thoughts about its 
future. 

In 1983, a few forward thinking or- 
ganizations and individuals shared 
their dream of the future with me—a 
future in which the values of freedom, 
work and family association were ex- 
tended to those with physical and 
mental impairments—where each 
person, no matter how disabled, would 
be assisted and cared for in his or her 
own community. 

It was a future I knew could work 
because I had seen a glimpse of it al- 
ready in my own home State of Rhode 
Island. 

In 1983, I made a commitment—to 
pursue this vision in Congress and to 
make it a reality for all individuals 
with severe mental and physical im- 
pairments regardless of the State they 
lived in. In 1983, I introduced the first 
version of that dream, a bill to reform 
the Medicaid system. 

Why begin by changing the Medic- 
aid Program? 

For all practical purposes Medicaid 
is the sole Federal program which pro- 
vides States with funding for long 
term care services for the disabled. 


Currently these funds flow primarily 
toward large facilities. Why? The Med- 


CONGRESSIONAL RECORD—SENATE 


icaid Program began as a medical as- 
sistance program for low-income indi- 
viduals. In time, the program was used 
to pay for long-term care services for 
the elderly and the disabled. Today 
more than one-half of Medicaid funds 
are used for this purpose; but, the 
long-term care services the program 
will pay for are still rooted in the med- 
ical model. 

As our understanding of the capa- 
bilities and needs of individuals with 
disabilities have progressed, however, 
it has become clear that traditional 
medically oriented long-term care serv- 
ices provided through Medicaid are in- 
appropriate. 

S. 873 would provide funding for a 
full range of residential options from 
independent living to institutional 
placements. In addition, it clearly out- 
lines a wide variety of services that 
would be eligible for Medicaid funding 
at the option of individual States. The 
thrust of the bill is to provide services 
based on individual needs. 

S. 873 provides the mechanism to 
move people into community living ar- 
rangements where they can live safely, 
with the security and support they 
need along with the opportunity to 
grow and develop as individuals. Just 
as important, it allows individuals who 
are currently living in the communi- 
ty—at home or in some other arrange- 
ment—to remain there by giving them 
and their families the support and 
services they need. 

Even though the legislation has not 
yet passed the Congress, the simple in- 
troduction of the community and 
family living amendments was a spark 
that ignited a fire in the souls of all of 
us who are concerned about the future 
of those who have developmental dis- 
abilities. Long overdue discussions and 
debates about the future of those with 
disabilities have taken place in every 
State. The Finance Committee has 
held three hearings on this issue. I 
have held two unofficial hearings and 
I have participated in scores of confer- 
ences and gatherings on the issue. 

These discussions have led to agree- 
ment that some change must occur in 
the Medicaid Program; the only re- 
maining question is what shape that 
change should take. 

A new session of Congress will begin 
in January 1987. At that time, I will 
reintroduce the community and family 
living amendments. Over the next 4 
months I will be working to refine and 
revise certain provisions in the legisla- 
tion. The hearings that have been 
held will serve as my base of informa- 
tion for that process. However, the 
basic premise of the proposal—that a 
full range of services and options be 
available and that the funding should 
flow toward individual needs—will 
remain the same. 

The American dream should not 
stop outside the lives of those who are 
disabled. One of the hallmarks of 


October 15, 1986 


America is that we each believe that 
out there in the future is a better life 
for ourselves and our children. Our 
challenge is to ensure that our fellow 
citizens with disabilities share in that 
better future. That’s what this legisla- 
tion is all about. 

The PRESIDING OFFICER. The 
Senator from Illinois. 


H. CON. RES. 395, CORRECTING THE ENROLLMENT 
OF THE TAX REFORM ACT 

Mr. DIXON. Mr. President, I know I 
do not have to tell any of my col- 
leagues that we should have ad- 
journed weeks ago. I know they all 
share the same desire: to leave Wash- 
ington and return to their home 
States. I, too, would like to leave 
Washington and return to my home 
State of Illinois. I am a candidate for 
reelection to the Senate, and election 
day is a mere 3 weeks from today. 

It seems to me, however, that we 
cannot leave until we complete our 
work, and that means that we must 
act on the continuing resolution, 
which embodies the 13 annual appro- 
priations bills that must be enacted to 
keep the Government functioning. It 
means we must act on legislation to in- 
crease the public debt limit, as dis- 
tasteful as that duty is. It means that 
we must pass the reconciliation bill, to 
bring the budget into compliance with 
the Gramm-Rudman-Hollings targets 
for 1987. 

Just as important as these three 
measures, however, is Tax Reform Act 
correction concurrent resolution— 
House Concurrent Resolution 395. 
Passage of this resolution is essential 
to correct numerous technical flaws in 
the Tax Reform Act, and to ensure 
that the tax reform package includes 
everything that the conferees agreed 
that it should. 

I think it is unconscionable that we 
are considering letting the Tax 
Reform Act be signed into law without 
the necessary corrections, and without 
inclusion of the substantive provisions 
that were always intended to be a part 
of the final tax reform bill. 

Now I understand that there are a 
number of my colleagues who would 
like to use the concurrent resolution 
to revisit issues that they believe were 
not satisfactorily resolved by the con- 
ferees, and I have to say that I share 
their unhappiness with the bill in a 
number of areas. I believe Congress 
ought to revisit several matters the 
Tax Reform Act settled wrongly early 
in the next Congress, but I do not be- 
lieve that it is either fair nor reasona- 
ble to expect the Congress to revisit 
them now, in the few days reamining 
in this session. There is virtually no 
Way major issues can be reopened 
without destroying the bill’s revenue 
neutrality or without undermining the 
many compromises in the bill in ways 
that we now are not even in a position 
to be able to foresee. 





October 15, 1986 


I know how important many of 
these issues are to my colleagues. 
They know, however, the practical 
considerations involved with this reso- 
lution even better than I. They know 
this resolution simply will not be 
passed by the other body if any major 
issue were to be changed here in the 
Senate. The truth is, therefore, that 
any significant amendment adopted 
here would not be made a part of the 
bill in any event. The only conse- 
quence would be to ensure that a 
sloppy, technically flawed, and incom- 
plete bill would be sent to the Presi- 
dent. 

I do not believe that is any way to 
legislate, Mr. President. I think we 
ought to do our duty by this landmark 
legislation and send it to the President 
in as mistake-free and complete a form 
as we can. I urge the Senate, there- 
fore, not to forget the policy issues in 
dispute here, but to allow the tax 
reform bill to go to the President in a 
way that makes sense. I promise my 
colleagues I will be the first to work 
with them to see that the Senate re- 
visits tax questions that must be revis- 
ited as early as possible in the next 
Congress. 

Mr. CHAFEE addressed the Chair. 

The PRESIDING OFFICER. The 
Senator from Rhode Island. 


PROMPT PAYMENT 
AMENDMENTS 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Senate 
now turn to the consideration of Cal- 
endar 1071, S. 2479, the Prompt Pay- 
ment Act amendments. 

The PRESIDING OFFICER. The 
bill will be stated by title. 

The assistant legislative clerk read 
as follows: 

A bill (S. 2479) to amend chapter 39 of 
title 31, United States Code, to require the 
Federal Government to pay interest on 
overdue payments, and for other purposes. 

The PRESIDING OFFICER. Is 
there objection to the immediate con- 
sideration of the bill? 

There being no objection, the Senate 
proceeded to consider the bill which 
had been reported from the Commit- 
tee on Governmental Affairs, with an 
amendment to strike all after the en- 
acting clause and insert in lieu thereof 
the following: 


SHORT TITLE 

Section 1. This Act may be cited as the 
“Prompt Payment Amendments of 1986”. 

CONGRESSIONAL FINDINGS 

Sec. 2. The Congress finds that— 

(1) the billpaying practices of most Feder- 
al Government agencies have substantially 
improved, with certain exceptions, after 
three years of experience under the Prompt 
Payment Act (codified in chapter 39 of title 
31, United States Code); 

(2) the improvement in such billpaying 
practices has resulted in fairer treatment of 
contractors who furnish supplies, services, 


CONGRESSIONAL RECORD—SENATE 


or construction to the Federal Government, 
especially small businesses; and 

(3) nonetheless, contractors who deal with 
the Federal Government continue to experi- 
ence many persistent billpaying problems 
which are caused by— 

(A) a failure to modify the Federal Acqui- 
sition Regulation as part of the implementa- 
tion of the provisions of the Prompt Pay- 
ment Act; 

(B) the implementation of the provisions 
of the Prompt Payment Act in a manner 
that denies the Act’s protections in cases of 
certain contract payments; 

(C) the implementation of the provisions 
of such Act in a manner which has permit- 
ted Federal Government agencies to take 
discounts for early payment months after 
the expiration of the discount period speci- 
Sied in the contractor's invoice; 

(D) inadequate implementation of the re- 
quirement that Federal Government agen- 
cies automatically pay interest penalties 
with delinquent payments; 

(E) the use of the unlimited time afforded 
agencies to formally accept a contractor's 
performance for the purpose of avoiding the 
requirement that the agencies pay an inter- 
est penalty with late payments made for 
supplies or services; and 

(F) abusive use of certain payment grace 
periods which afford the Federal Govern- 
ment additional time to pay its bills with- 
out incurring interest penalties otherwise 
due. 

DEFINITIONS AND APPLICATION 

Sec. 3. (a) Section 3901(a)(4) of title 31, 
United States Code, is amended to read as 
follows; 

“(4) the head of the agency is deemed to re- 
ceive an invoice on the later of— 

“(A) the date on which the office or em- 
ployee of the agency designated by the 
agency to first receive such invoice actually 
receives a proper invoice; or 

“(B) on the fifth day after the date on 
which, in accordance with the terms and 
conditions of the contract, the property is 
actually delivered or final performance of 
the services is actually completed, as the 
case may be, unless the contract specifies a 
longer period for agency acceptance of the 
property or services.” 

(b)(1) Section 3901 of such title is further 
amended by adding at the end the following 
new subsection (c): 

“(c) This chapter applies to the United 
States Postal Service. However, the Postmas- 
ter General shall be responsible for issuing 
the implementing procurement regulations, 
solicitation provisions, and contract clauses 
as part of the Postal Contracting Manual”. 

(2) Section 410(b) of title 39, United States 
Code, is amended by inserting after clause 
(8) the following new clause (9): 

“(9) Chapter 39 of title 31.”. 

INTEREST PENALTIES: REDUCTIONS IN GRACE 

PERIOD; INCREASED PENALTIES 

Sec. 4. (a/(1) Section 3902(b) of title 31, 
United States Code, is amended 

(A) by striking out “16th” in clause (3) in 
such sentence and inserting in lieu thereof 
“8th”; and 

(B) by adding at the end the following new 

sentence: 
“Clause (3) of the preceding sentence shall 
not apply to payments under any contract 
Jor which the procurement solicitation is 
issued on or after October 1, 1988.”. 

{b) Section 3902 of such title is further 
amended by redesignating subsections (c/ 
through (e) as subsections (d) through (/), re- 
spectively, and by inserting after subsection 
(b) the following new subsection (c): 


31251 


“(c)(1) Any amount of an interest penalty 
which exceeds $1.00 and is owed a business 
concern under this section shall be paid 
without regard to whether the business con- 
cern has requested payment of such penalty. 

“(2) If a business concern— 

“(A) is owed an interest penalty by an 


agency; 

“(B) is not paid the interest penalty in a 
payment made to the business concern by 
the agency on or after the date on which the 
interest penalty becomes due; and 

“(C) is not paid the interest penalty by the 
agency within 15 days after the date on 
which the interest penalty becomes due, 
such business concern shall be entitled to re- 
ceive an interest penalty equal to twice the 
amount of the interest payment that would 
otherwise be due.” 

INTEREST PENALTIES ON PROGRESS PAYMENTS 
AND RETAINED AMOUNTS UNDER CONSTRUCTION 
CONTRACTS 
Sec. 5. Section 3903 of title 31, United 

States Code, is amended— 

(1) by striking out clause (4); 

(2) by redesignating clause (5) as (6); and 

(3) by inserting after clause (3) the follow- 
ing new clause (4): 

“(4) in the case of a construction contract, 
provide for the payment of interest on— 

“(A) any progress payment due under the 
contract for— 

“(i) a period of more than 7 days; or 

“(ii) a longer period if the contracting of- 
ficer determines that the prevailing practice 
in private construction contracts is to pro- 
vide such longer payment period; and 

“(B) any amount which has been retained 
during the performance of the contract and 
are due to be released to the contractor after 
final acceptance of the construction, if such 
retained amount is not paid to the contrac- 
tor by the required payment date;”. 

PERIODIC PAYMENTS UNDER SUPPLY AND SERVICE 

CONTRACTS 

Sec. 6. Section 3903 of title 31, United 
States Code, as amended by section 5, is fur- 
ther amended by inserting after clause (4) 
the following: 

“(5) provide for periodic payments, in the 
case of a supply or service contract which 
authorizes periodic payments and periodic 
submission of invoices during the contract 
period, upon— 

“(A) submission of an invoice for supplies 
delivered or services performed during the 
contract period; and 

“(B) either— 

“i) acceptance of the supplies or services 
by an employee of an agency authorized to 
accept the supplies or services; or 

“(ii) certification, by such an employee, 
that the performance covered by the invoice 
conforms to the terms and conditions of the 
contract.”. 

PAYMENT CLAUSE FOR SUBCONTRACTS UNDER 

CONSTRUCTION CONTRACTS 

Sec. 7. (a) Chapter 39 of title 31, United 
States Code, is amended— 

(1) by redesignating sections 3905 and 
3906 as 3906 and 3907, respectively; and 

(2) by adding at the end the following new 
section 3905; 

“$3905. Payment clause for subcontracts under 
construction contracts 


“(a) Each construction contract awarded 
by an agency shall include a clause that re- 
quires the prime contractor to include, in 
each subcontract for property or services en- 
tered into by the prime contractor and a 
subcontractor (including a material suppli- 
er) for the purpose of performing such con- 





31252 


struction contract, a payment clause which 
obligates the prime contractor— 

“(1) to pay the subcontractor prompily (as 
determined in accordance with prevailing 
industry standards) out of amounts paid to 
the prime contractor by the agency; and 

“(2) to pay to the subcontractor an inter- 
est penalty on amounts due in the case of 
each payment not made in accordance with 
such payment clause— 

‘“(A) for the period beginning on the day 
after the required payment date and ending 
on the date on which payment of the 
amount due is made; and 

“(B) computed at the most current rate of 
interest that has been determined by the Sec- 
retary of the Treasury for interest payments 
under section 12 of the Contract Disputes 
Act of 1978 (41 U.S.C. 611) and published by 
the Secretary in the Federal Register. 

“(b) A prime contractor’s obligation to 
pay an interest penalty to a subcontractor 
pursuant to the payment clause included in 
a subcontract under subsection (a) may not 
be construed to be an obligation of the 
United States. A contractor may not obtain 
reimbursement from the United States for 
such interest penalty. A contract modifica- 
tion may not be made for the purpose of pro- 
viding reimbursement of such interest pen- 
alty. A cost reimbursement claim may not 
include any amount for reimbursement of 
such interest penaity.”. 

(b) The table of sections at the beginning 
of such chapter is amended by striking out 
the items relating to sections 3905 and 3906 
and inserting in lieu thereof the following: 
“3905. Payment clause for subcontracts 

under construction contracts. 
“3906. Reports. 
“3907. Relationship to other laws.”. 
LIMITATIONS ON DISCOUNT PAYMENTS 

Sec. 8 Section 3904 of title 31, United 
States Code, is amended by inserting after 
the first sentence the following: “For the 
purpose of the preceding sentence, the speci- 
fied time shall be calculated from the date 
the invoice under the contract is received by 
the office or employee of the agency desig- 
nated by the agency to first receive such in- 
voice until the date of payment.”. 

REPORTS 

Sec. 9. Section 3905(a) of title 31, United 
States Code, is amended to read as follows: 

“(a)(1) By the 60th day after the end of the 
fiscal year, the head of each agency shall 
submit to the Director of the Office of Man- 
agement and Budget a report on the agen- 
cy’s payment practices, including a descrip- 
tion of the extent to which those practices 
satisfy the requirements of this chapter. 

(2) In addition to such other information 
as may be required by the Director, the 
report required by paragraph (1) shall in- 
clude— 

“(A) the number, amounts, and frequency 
of interest penalty payments, and the rea- 
sons the interest penalties were not avoided 
by prompt payment; and 

“(B) the number, dollar value, and fre- 
quency of invoices paid after the required 
payment date without payment of an inter- 
est penalty, and the reasons no obligation to 
pay interest penalties was incurred with re- 
spect to such invoices or no amount for in- 
terest penalties were included in the pay- 
ments of such invoices.”. 

IMPLEMENTATION THROUGH THE FEDERAL 
ACQUISITION REGULATION 

Sec. 10. (a) The Federal Acquisition Regu- 
lation shall be modified to provide appropri- 
ate solicitation provisions and contract 
clauses that implement chapter 39 of title 


CONGRESSIONAL RECORD—SENATE 


31, United States Code, and the regulations 
prescribed under section 3903 of such title. 

{b) The solicitation provisions and con- 
tract clauses required by subsection (a) shall 
include the following matters: 

(1) Authority for a contracting officer to 
specify for a contract or class of contracts a 
specific payment period, which— 

(A) in the case of payments for commercial 
items or services, is similar to the payment 
period or periods permitted in prevailing 
private industry contracting practices; 

(B) in the case of payments for noncom- 
mercial items and services, does not erceed 
30 days unless the circumstances of the pro- 
curement action require a longer period for 
payment; and 

(C) in the case of progress payments under 
construction contracts, does not exceed 7 
days, unless the contracting officer deter- 
mines that the prevailing practice in pri- 
vate construction contracts requires a 
longer payment period. 

(2) Requirements to make periodic pay- 
ments, in the case of a supply or service con- 
tract which authorizes periodic payments 
and periodic submission of invoices during 
the contract period, upon— 

(A) submission of an invoice for supplies 
delivered or services performed during the 
contract period; and 

(B) either— 

(i) acceptance of the supplies or services 
by an employee of the contracting agency 
authorized to accept the supplies or services; 
or 

(ii) certification, by such an employee, 
that the performance covered by the invoice 
conforms to the terms and conditions of the 
contract. 

(3) A conclusive presumption that the Fed- 
eral Government has accepted property or 
services by the fifth day after the date on 
which, in accordance with the terms and 
conditions of the contract, the property is 
delivered or final performance of the serv- 
ices is completed, unless the circumstances 
of the procurement require a longer period 
for acceptance by the Federal Government 
and such longer period is specified in the so- 
licitation for such contract. 

(4) The limitation that the Federal Gov- 
ernment may take a discount offered by a 
contractor for early payment by the Federal 
Government only in accordance with the 
time limits specified by the contractor. 

(5) The requirements of section 3902(c) of 
title 31, United States Code. 

(c) The regulations required by subsection 
(a) shall be published as proposed regula- 
tions for public comment as provided in sec- 
tion 22 of the Office of Federal Procurement 
Policy Act (41 U.S.C. 420) within 120 days 
after the date of the enactment of this Act. 


EFFECTIVE DATES 


Sec. 11. (a) Section 3(a)(2) and the amend- 
ments made by sections 3(a/(1), 4, 5, 6, 7, 
and 8 shall apply to payments under con- 
tracts awarded during or after the first 
fiscal quarter which begins more than 90 
days after the date of the enactment of this 
Act. 

(ob) The amendments made by section 3(b/) 
shall apply to payments under contracts 
awarded on or after October 1, 1987. 

(c) The amendment made by section 9 


shall apply to the report required by section 
3905(a) of title 31, United States Code, for 


each fiscal year beginning after September 
30, 1986. 


October 15, 1986 


AMENDMENT NO. 3402 


(Purpose: To make various amendments to 
requirements and procedures for prompt 
payment of Government contractors) 

Mr. CHAFEE. Mr. President, I send 
an amendment to the desk on behalf 
of Senator Rots, which is a committee 
substitute. 

The PRESIDING OFFICER. The 
clerk will report the amendment. 

The assistant legislative clerk read 
as follows: 

The Senator from Rhode Island [Mr. 
Cuaree], for Mr. RoTH, proposes an amend- 
ment numbered 3402. 

Mr. CHAFEE. Mr. President, I ask 
unanimous consent that further read- 
ing of the amendment be dispensed 
with. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The amendment is as follows: 

On page 12, line 6, insert “, except section 
3905 of this title,” after ‘chapter’. 

On page 12, line 9, strike out “as” and all 
that follows through “Manual” on line 10. 

On page 12, line 25, strike out “1988” and 
insert in lieu thereof “1989”. 

On page 13, line 14, strike out “and”. 

On page 13, line 16, strike out “15"' and all 
that follows through line 17, and insert in 
lieu thereof “10 days after the date on 
which such payment is made; and’. 

On page 13, between lines 17 and 18, 
insert the following: 

“(D) makes a written demand, not later 
than 40 days after the date on which such 
payment is made, that the agency shall pay 
such a penalty, 

On page 16, line 8, strike out “agency;” 
and insert in lieu thereof “agency for work 
performed by the subcontractor under that 
contract;”. 


Mr. CHAFEE. Mr. President, I move 
adoption of the amendment. 

The PRESIDING OFFICER. Is 
there further debate on the amend- 
ment? If not the question is on agree- 
ing to the amendment. 

The amendment (No. 3402) was 
agreed to. 

Mr. CHAFEE. Mr. President, I move 
adoption of the committee substitute, 
as amended. 

The PRESIDING OFFICER. Is 
there further debate? Hearing none, 
the question is on agreeing to the com- 
mittee substitute, as amended. 

The committee amendment in the 
nature of a substitute, as amended was 
agreed to. 

Mr. TRIBLE. Mr. President, I am 
pleased that the Senate is considering 
S. 2479, the Prompt Payment Act 
Amendments of 1986. I urge my col- 
leagues to support its passage. 

Forty-two Senators have joined me 
as cosponsors of S. 2479, designed to 
get the Government to pay its bills on 
time. With S. 2479, we take up where 
the Prompt Payment Act of 1982 left 
off—insisting on timeliness rather 
than redtape, efficiency instead of 
delay, and streamlined procedures 
rather than complicated layers of pay- 
ment paperwork. 





October 15, 1986 


Slowly but surely, the Government 
is getting into the habit of paying its 
bills as our citizens must. Either pay- 
ment must be made on time or interest 
penalties must be paid. With the 
Prompt Payment Act of 1982 (Public 
Law 97-177) we created a systematic 
payment procedure: Definite payment 
standards, penalties for failure, and 
annual reporting to Congress on 
progress under the act. 

There remains a gap between what 
we did in 1982 and what the executive 
branch agencies are doing today. To 
close that gap, I sponsored S. 2479 and 
am asking the Senate to approve this 
measure in order to: 

First. Reassert our intention that 
most bills be paid within 30 days. 

Second. Ensure that no payments be 
deliberately held beyond 30 days with- 
out the payment of interest penalties. 

Third. Discourage the withholding 
of interest payments mandated by the 
law. 

Fourth. Ensure that discounts are 
taken fairly. 

Fifth. Extend coverage of the stand- 
ards in the act to late pay by the 
Postal Service. 

Sixth. Include progress payments, 
retainage on construction projects, 
and partial payment for partial deliv- 
ery among those payments covered by 
the act. 

Seventh. Solve the problem of late 
payments to subcontractors. 

Eighth. Insist that the law be imple- 
mented through the Federal Acquisi- 
tion Regulation. 

Ninth. Improve the reports Congress 
gets for oversight purposes. 

Achieving these nine goals will 
enable us to fulfill the promise of the 
1982 act. 

While I am convinced that S. 2479 is 
needed, I want to underscore one 
point: The Federal Government's bill- 
paying practices have greatly im- 
proved under the 1982 act. This was 
documented recently by the General 
Accounting Office: 

Passage of the act and its implementation 
led to substantial improvement in Federal 
bill-paying performance. These initiatives 
resulted in a noticeable reduction in exces- 
sively late payments (over 60 days late) and 
hundreds of millions in savings to the Gov- 
ernment by avoiding early payments. 

The GAO is not alone in this assess- 
ment. When I conducted hearings on 
this subject on December 2, 1985, and 
on June 19, 1986, many witnesses com- 
mented on the progress to date. So, if 
Senators are wondering if the 1982 act 
is working, numerous individuals have 
stated that, in varying degrees, it is. 

With enactment of S. 2479, the 
Prompt Payment Act can work more 
effectively. All the witnesses at those 
hearings described the inadequacies of 
current law, and eliminating those in- 
adequacies is the goal of S. 2479. Take, 
for example, the frustration described 
by William Meuhleib, president, Fed- 


CONGRESSIONAL RECORD—SENATE 


eral Sales Service (Alexandria, VA) 
representing the Coalition for Multi- 
ple Award Contracts: 

Prior to the implementation of the 
Prompt Payment Act, the average paytime 
for Government accounts receivable was in 
the 68-day area. It took us 68 days to collect 
from the Federal Government. After the 
first full year of implementation of the 
Prompt Payment Act, that dropped from 68 
to 66 days, and the following year it 
dropped to 65 days. However, for October 
1985, which would have been the third full 
year, our accounts receivable is now back up 
to 67 days. We currently have in our files 
328 letters that we have written to various 
activities requesting that interest be paid. 

Or, consider the distress of Jack 
Greenhalgh who indicated that agen- 
cies often lose its invoices. When I 
asked him why they lost his invoices, 
he said: 

We don't know exactly. All we know is 
that when we follow up, receipt is not ac- 
knowledged. They respond that they have 
not received the invoice, and this happens 
frequently. 

Donald H. Redman, chief executive 
officer, Federal Marketing (Richmond, 
VA), a division of Virginia Impression 
Products, broke down his billing to 
Federal agencies for the committee 
and said: 

And for a little company like Federal Mar- 
keting to have out $289,000 is pretty tough. 
It’s pretty tough, Senator. That's with total 
receivables with the Federal Government of 
$1,387,000. So that’s a lot of money. 

Ironically, with the Government 
being late on 20 percent of his receiv- 
ables, Mr. Redman is doing better 
than the average because the GAO 
found that, based on dollar volume, 23 
percent of the Government’s outstand- 
ing funds owed are being paid late— 
after the 45th day. 

Mr. President, of the 623 pages of 
testimony compiled as a result of the 
hearings I chaired for the Senate 
Committee on Small Business, 73 
pages contain examples of invoices 
which have been delayed and paid late 
by Federal agencies. Witness after wit- 
ness provided the committee with de- 
tailed breakdowns of their accounts re- 
ceivable indicating long delays in re- 
ceipt of their payments and the poor 
governmental response to vendors who 
complain. Several witnesses said they 
had to hire employees who work full- 
time to get Federal agencies to pay 
their bills. Witnesses outlined the 
daily frustration they face as they 
endure late payment: 

The average number of days to collect is 
in the 60-90-day range. If we are able to 
accept the Government's reason, it is be- 
cause all the parties involved have lost or 
failed to route the paperwork properly. In- 
terestingly, they seem to misplace 75 per- 
cent of our invoices, and as a result need re- 
typed originals. Douglas D. Guernsey, 
Guernsey Office Products (Virginia Beach, 
VA). 

We are practically to the point now where 
we tie in submission of an invoice to a dis- 
pute under the Disputes Act because some 
of them we know that we had just as well 


31253 


start the clock running there, because oth- 
erwise we are not going to ever get paid be- 
cause they take 60 days to make a decision 
on the claim itself. T.L. Richards, director 
of contracts and corporate counsel, Inter 
Systems (Annandale, VA). 

One of the first individuals to sug- 
gest to me that prompt pay reforms 
were needed was R. Alan Fuentes, 
president of Computer Dynamics (Vir- 
ginia Beach, VA), who testified that 
“. . . We paid out last year in interest 
to finance the Federal Government 
amounted to somewhere close to 
$150,000 for the year. If we could get 
paid, if we were paid reasonably quick- 
ly, and I am talking 30 days, we 
wouldn’t have that problem.” Mr. 
Fuentes provided the committee with 
eight pages of documentation, showing 
late payments received by his compa- 
ny under 238 different invoices. Agen- 
cies mentioned in his testimony in- 
cluded the U.S. Navy, General Services 
Administration, Federal Aviation Ad- 
ministration, Federal Highway Admin- 
istration, Department of State, and 
the Health Care Financing Agency. 

Another indication that the problem 
is widespread and not merely isolated 
among a few agencies is the fact that 
at the Virginia State meeting of the 
White House Conference delegates in 
August 1985, improvement of the 
Prompt Payment Act was one of the 
top three procurement issues selected 
by delegates from all over Virginia. In 
the months that followed, delegates in 
many other States made the same rec- 
ommendation. We are being told by 
small firms from all 50 States that 
they want us to find a solution. Mr. 
President, I believe we have the solu- 
tion in S. 2479. 

Let me outline the goals of S. 2479. 

First. It will eliminate the lengthy 
periods agencies take to “receive”, 
“accept,” and “certify” products and 
services. The authors of the 1982 act 
did not anticipate the extraordinary 
delays the executive agencies would 
impose before they admit to having re- 
ceived or accepted a product or service. 
For Federal agencies, 30 days means 
30 days—after processing of paper- 
work begins—which might take 
months. In S. 2479, we establish that 
this process should not take longer 
than 5 days, unless the contract speci- 
fies a longer period. This 5-day rule 
must be established by Congress, as we 
are doing in S. 2479. 

Second, It will ensure that no pay- 
ments be deliberately held beyond the 
due date without payment of interest 
penalties. The 1982 law clearly states 
that Congress expects payments to be 
made by set statutory standards, 
unless otherwise established by con- 
tract. However, the GAO report and 
witnesses before our committee dem- 
onstrate that incentives are needed to 
press the agencies to reach statutory 
standards. That is why in S. 2479 we 
are phasing out the grace periods 





31254 


which give agencies the technical au- 
thority to pay later than the stand- 
ards without penalty. There has been 
far too much of the grace periods. 

Rather than an option of last resort, 
it has become the loophole of choice. 
Through S. 2479, we are correcting 
this problem and restoring the intent 
of congress in a way that can only be 
achieved through legislation. 

Third. It will discourage the with- 
holding of interest payments mandat- 
ed by the law. Many agencies fail to 
pay the interest penalties which are 
required by law. Therefore, we have 
added an extra penalty in S. 2479 to 
improve the incentive to get the job 
done. 

Fourth. It will ensure that discounts 
are taken fairly. S. 2479 strengthens 
the language to ensure that discounts 
are taken only when payments are 
made within a specified time. This pro- 
vision in S. 2479 will give OMB more 
clout to encourage the agencies to 
comply with the 1982 act. 

Fifth. It will extend the act to cover 
late payments by the postal service. 
Leaving out the Postal Service from 
the 1982 act was an oversight which 
we are correcting in S. 2479. We do not 
intend to impose more reporting re- 
quirements on the Postal Service, but 
we do want to insist on prompt pay. 

Sixth. It will solve the problem of 
late payments to subcontractors. This 
is a sensitive matter which Congress 
should watch carefully in the future 
to ensure that our goals are met. 

Seventh. It will insist that the law 
be implemented by the Federal Acqui- 
sition Regulation. It is interesting to 
note that shortly after we introduced 
S. 2479, the executive branch quickly 
compiled a proposed far provision on 
prompt pay and rushed it into the 
Federal Register. This action was sev- 
eral years late and appears to have 
been encouraged by congressional 
prodding. When we read the proposed 
FAR rules, however, instead of seeing 
a mirror image of the Prompt Pay- 
ment Act of 1982, we saw myriad loop- 
holes and exceptions that will increase 
delay and despair for thousands of 
small businesses. Businesses in Virgin- 
ia were shocked by the FAR proposals. 
by enacting S. 2479, we insist that the 
job be done right. 

Eighth. It will improve the reports 
Congress gets for oversight purposes. 
getting a thorough annual prompt pay 
report is a key to ensuring compliance 
with the 1982 act. Only through S. 
2479 can we insist on getting the data 
we need to obtain proper oversight. 
For 3 years, we have received glowing 
reports from OMB indicating that 99 
percent of the Government’s bills are 
paid on time. It appeared that we were 
achieving outstanding results from the 
1982 act. GAO told us this summer 
however, that only 75 percent of the 
Government’s bills are paid on time. 
Studying the GAO report reveals ex- 


CONGRESSIONAL RECORD—SENATE 


actly how this discrepancy occurred: 
Congress was not getting the right 
data. We correct this in S. 2479. 

Mr. President, before I conclude, I 
would like to express my opposition to 
several recent actions among the exec- 
utive agencies which indicate to me 
they have strayed far from the intent 
of Congress when it comes to prompt 
pay: 

First, the proposed regulations ap- 
pearing in the Federal Register to 
apply prompt pay provisions to the 
Federal Acquisition Regulation has 
badly missed the mark. The Coalition 
for Prompt Pay has identified 19 dif- 
ferent exceptions the FAR proposal 
has made to the Prompt Payment Act. 
One would allow agencies to take up to 
80 days to pay bills that the act and S. 
2479 say should be paid in 30-35 days. 

I know many Senators will join me 
in urging the FAR Secretariat to re- 
write the proposal to make it consist- 
ent with the Prompt Payment Act. 
The FAR Secretariat would do well to 
read the testimony before the Small 
Business Committee on S. 2479 and to 
incorporate into the FAR the propos- 
als made in S. 2479. To do less, would 
be to undermine the 1982 act. 

Second, the decision by the Agricul- 
ture Department to suspend the appli- 
cation of the act to meat purchases 
should be withdrawn. There simply is 
no provision in the act, nor is there in 
S. 2479, to encourage any agency to 
exempt itself from the law. The Agri- 
culture Department petitioned neither 
the Small Business Committee nor the 
Governmental Affairs Committee for 
an exception to the law. Therefore, 
they should obey it. I hope the Office 
of Management and Budget will join 
us in underscoring this point to the 
Agriculture Department. 

Third, the proposal by the Defense 
Department, as described at a Defense 
Appropriation Subcommittee hearing 
August 7 to arbitrarily begin to use 
the 15-day grace period in the act for 
all payments is quite contrary to the 
intent of the law. While DOD is 
moving into the 15-day grace period 
with the enthusiasm of someone who 
has just found a way to beat the bank, 
S. 2479 will limit use of the grace 
period. Most witnesses testified that 
the grace period is being abused. The 
recent GAO study documents this 
point. 

DOD's proposal seems to confirm 
the allegations and convinces me we 
need to eliminate the grace period as 
proposed by S. 2479. 

Mr. President, many people were in- 
volved in the development of this 
measure and I appreciate their fine 
work. Senator CouHEn’s efforts on 
behalf of S. 2479, and the work of his 
Oversight Subcommittee staff, par- 
ticularly Jeff Minsky, were extremely 
helpful in crafting the prompt pay- 
ment amendments. In addition, I want 
to thank Senator Ror for convening 


October 15, 1986 


the Government Affairs Committee to 
win approval of S. 2479 before the end 
of the 99th Congress. Both Senator 
CoHEN and Senator RotrH were cospon- 
sors of the Senate version of the act in 
1982 and are keenly aware of the need 
to close the late-payment gap as pro- 
posed by S. 2479. 

In addition, I want to thank two 
other original cosponsors of this bill, 
Senator WEICKER and Senator Bump- 
ERS for their leadership on this issue 
and their assistance through the 
Small Business Committee. I also want 
to acknowledge the hard work of Bill 
Montalto of the Small Business Com- 
mittee. His knowledge of the prompt 
payment issue greatly aided the devel- 
opment of the prompt payment 
amendments. 

Finally, I want to express my thanks 
to Lori Beth Feld of my staff. Her 
hard work was instrumental in devel- 
opment of this important legislation. 

Mr. President, I ask unanimous con- 
sent that the following be inserted 
into the Recorp: 

A list of cosponsors of S. 2479. 

A letter from Kenton Pattie, direc- 
tor of the Coalition for Prompt Pay 
and senior staff vice president of the 
International Communications Indus- 
tries Association. 

A letter from Yvonne Kidd, execu- 
tive director of the Coalition for 
Common Sense in Government Pro- 
curement. 

There being no objection, the mate- 
rial was ordered to be printed in the 
REcorp, as follows: 


CosPONSORS 


Senators Lowell P. Weicker, Jr., Dale 
Bumpers, John C. Danforth, Lawton Chiles, 
Warren B. Rudman, Carl M. Levin, Thad 
Cochran, James R. Sasser, Mack Mattingly, 
Alan J. Dixon, Don Nickles, Sam Nunn, Al- 
fonse M. D’Amato, Max Baucus. 

Senators Charles E. Grassley, Tom 
Harkin, John F. Kerry, Edward Zorinsky, 
Daniel P. Moynihan, David L. Boren, John 
Melcher, John Heinz, Jeremiah A. Denton, 
Bob Kasten, Jr., David Pryor, Robert T. 
Stafford, Thomas F. Eagleton, Claiborne 
Pell. 

Senators Mark Andrews, Donald W. 
Riegle, Jr., Ernest F. Hollings, Chic Hecht, 
Maicolm Wallop, Quentin N. Burdick, Spark 
M. Matsunaga, Ted Stevens, William S. 
Cohen, David Durenberger, Dan Quayle, 
John H. Gienn, Jr., Albert Gore, Jr., and 
William V. Roth, Jr. 


COALITION FOR 
Prompt Pay, 


October 3, 1986. 
Hon. Pau. TRIBLE, 
Senate Hart Office Building, 
Washington, DC. 

Dear SenaTOR TrIBLE: On behalf of the 
Coalition for Prompt Pay, I am pleased to 
report that the Coalition is in full support 
of the Prompt Payment Act Amendments, 
S. 2479, in the form in which the bill was 
approved by the Senate Governmental Af- 
fairs Committee. 

We have reviewed the changes made by 
the Oversight Subcommittee and by the 
Governmental Affairs Committee during its 





October 15, 1986 


markup October 2nd. We believe the bill 
you introduced, with Senator Weicker and 
Senator Bumpers, has survived intact in 
most respects with some _ important 
strengthening on some points. Here are our 
views on the recent changes to S. 2479. 

THE SUBCONTRACTOR AMENDMENT 


We have carefully reviewed the changes 
that have been approved to the subcontrac- 
tor provision and I believe a fair and long- 
needed solution is now contained in S. 2479. 
Over the years, we have struggled with com- 
plaints from subcontractors who fulfill nu- 
merous Federal requirements while per- 
forming on Federal property under Federal 
contracts which require that much of the 
prime contract be subcontracted. Com- 
plaints about late pay have been frustrating 
because, until S. 2479 there was no reasona- 
ble remedy available. Having tried to work 
out the problem through the prime contrac- 
tor, the subcontractor had no rules to turn 
to and certainly no one in the Federal gov- 
ernment who would lift a hand to solve the 
problem. 

S. 2479, without adding any expense to 
the Federal government, and without giving 
the Federal government new enforcement 
powers, established the rules for passing 
through to subcontractors payments that 
are initially issued to the prime contractor. 
No special privilege is being established here 
because unlike a company which deals di- 
rectly with the Federal government and 
thus expects payment in 30 days, the sub- 
contractor—living with the fact that the 
payment has to be processed by the prime 
contractor—has to adapt to a 37-day stand- 
ard (30 days for the prime contractor to get 
the money and 7 days for the prime to re- 
issue the funds to the subcontractor). 

The subcontractor provision in S. 2479, 
based as it is on the accepted industry 
standard approved by the Associated Gener- 
al Contractors, the American Subcontrac- 
tors Association, and other organizations in 
the construction business, is fair to all par- 
ties and will have the effect of encouraging 
small businesses to participate in Federal 
construction projects knowing they will be 
paid for their work in a prompt and reliable 
fashion. 

INTEREST PENALTIES 


Language in S. 2479 clarifying the method 
of obtaining a penalty due when an agency 
deliberately withholds interest is acceptable 
to the Coalition. The language in S. 2479, 
with the clarification, will discourage any 
agency from deliberately withholding the 
payment and interest penalty in hope that 
the vendor might overlook its absence. As 
long as threat of the double interest penalty 
is there, as proposed by S. 2479, I believe we 
will see more adherence to the 1982 law 
which requires payment of late payment in- 
terest penalties at the same time principal is 
being issued. 

U.S. POSTAL SERVICE 


e clarifying the relationship be- 
tween the U.S. Postal Service and the Office 
of Management and Budget is acceptable to 
the Coalition. We have had numerous com- 
plaints about late pay by the Postal Service 
and are very pleased that S. 2479 extends 
coverage of the 1982 Act to the Postal Serv- 
ice. However, we understand the concern ex- 
pressed by Senator Stevens calling for a 
continued separation of the Postal Service 
from the Federal government, and thus we 
find acceptable Senator Steven’s amend- 
ment to exempt the Postal Service from the 
reporting requirements of the bill. While 
they need not report to OMB they would 


CONGRESSIONAL RECORD—SENATE 


still be required to fulfill the 30-day stand- 
ard and penalties established by the 1982 
Act and S. 2479. This is fair. 


PHASING OUT THE GRACE PERIOD 


The language setting the date for finally 
eliminating the 15-day grace period is ac- 
ceptable to the Coalition. We believe the 
Senate is being extraordinarily generous to 
the executive branch by giving them more 
than adequate time to make the final ad- 
justment to the 30-day standard. By the 
time the provisions of S. 2479 become law, 
the executive branch will have had approxi- 
mately seven years from the date of enact- 
ment in 1982 to get ready for the 30-day 
standard. We are convinced that they could 
in fact make the adjustment far sooner. 
Based on statistics in a recent General Ac- 
counting Office report, 75 percent of all 
payments are already made within the 30- 
day standard which indicates that the exec- 
utive branch has the technical ability to pay 
on time and will be able to comply with the 
requirements in S. 2479 in whatever year 
you set as the deadline. Senator, we are 
pleased to report that the bill was very ably 
presented to the full committee by Senator 
Cohen who worked hard to compose the 
final compromises and adjustments with the 
help of his subcommittee and staff member 
Jeff Minsky. Senator Cohen and the Over- 
sight Subcommittee accepted almost all of 
the provisions you had recommended and 
by the time he brought the bill to the full 
committee it had been strengthened by the 
final agreement on subcontractor language. 

We admire the leadership Senator Roth 
provided by convening the Governmental 
Affairs Committee to mark-up your bill, de- 
spite the busy end-of-the-session workload 
which made attendance for all the senators 
difficult and challenging. To make the 
needed quorum for S. 2479 and to vote for 
the bill, we are grateful to Senator Roth, 
Senator Eagleton, Senator Stevens, Senator 
Cohen, Senator Rudman, Senator Cochran, 
Senator Chiles and Senator Nunn. They 
spoke for the entire committee, almost 
every member of which was a cosponsor of 
S. 2479. 

S. 2479 was approved unanimously by the 
committee having won the cosponsorship of 
41 senators prior to passage. Chairman 
Roth thoughtfully announced he too would 
be a cosponsor of your bill. 

Senator, we are very pleased you are 
taking S. 2479 to the Senate floor. While we 
know this is a busy time for you, we believe 
there are several important reasons Senate 
passage of this bill is extremely important 
and urgent: 

1. 80 days is too much. A proposed change 
in the Federal Acquisition Regulations 
would cull out 19 loopholes in the 1982 Act 
and convert the statutory 30-day payment 
standard into an 80-day standard. In con- 
trast, S. 2479 reaffirms the Senate's commit- 
ment to the 30-day standard and should be 
read by the authors of the proposed FAR 
amendment that 80 days is unacceptable. 

2. An end to the loopholes: The proposed 
FAR amendment, veering far from the 1982 
Act, undermines the intent of Congress in 
19 ways. In contrast S. 2479 is a no-loophole 
bill which underscores the Senate's inten- 
tion that the 1982 Act be a no-loophole law. 
Rather than finding loopholes, we would 
rather see the executive branch finding 
ways to be more efficient and reliable in 
their payment practices. S. 2479 calls for no 
less than an overall improvement and offers 
neither a loophole nor an excuse for making 
late payments. 


31255 


3. No self-proclaimed exemptions: While 
the Agriculture Department has claimed it 
has the power to exempt certain of its pay- 
ment practices from coverage of the 1982 
Act, neither the Act nor S. 2479 offers any 
legal basis for such an exemption. In con- 
trast, public consideration of S. 2479 
throughout 1986 has given any agency any 
opportunity to seek a special exemption 
under the law. No exemption has been 
sought and no exemption is being granted 
by S. 2479. Neither the Office of Manage- 
ment and Budget, empowered to issue regu- 
lations under the 1982 Act, nor Congress 
has granted authority to any agency to arbi- 
trarily suspend the application of the 1982 
Act. Senate passage of S. 2479 should signal 
the Agriculture Department, and any other 
agency contemplating a similar move that 
the Senate is opposed to self-proclaimed ex- 
ceptions but instead is insistent that agen- 
cies comply with the intent of the 1982 Act. 

4. Abusing the grace period doesn’t have a 
prayer. The Department of Defense pro- 
poses to begin making all its payments after 
the 30-day grace deadline set by the 1982 
Act. In an August 7th, 1986 announcement 
before the Senate Defense Appropriations 
Subcommittee, the Department outlined a 
program of being deliberately late on all 
payments. The 1982 Act does allow, under 
very limited and unique circumstances some 
payments to be mailed after the 30-day 
deadline but no later than the 45th day. 
However, the 1982 Act makes it very clear 
that the Federal policy is for all payments 
to be made by the 30th day. This extra 
period, referred to as the “grace period” was 
never in the Senate version of the 1982 Act 
but was added in the House at the request 
fo the Defense Department. At the time the 
Department said they needed some extra 
time as a buffer to take care of situations 
caused by the transition period and by un- 
usual problems that might inadvertently 
cause an occasional slippage past the 30-day 
mark. 

The August 7th 15-day buffer period pro- 
posal indicates that the 1982 provision in 
the law was just a toe hold for a big loop- 
hole in 1986. What was to be the exception 
in 1982 could become the rule in 1986. 

In passing S. 2479, the Senate is offering 
not the slightest encouragement to any 
agency which may view the 15-day buffer 
period as a loophole to justify late pay- 
ments. S. 2479 deals directly with this prob- 
lem in the only sensible way: to gradually 
eliminate the buffer period. 

So, passage of S. 2479 should be received 
at DOD as a signal that delaying payments 
regularly into the buffer period neither has 
a prayer nor is it consistent with the intent 
clearly spelled out by Congress in 1982. 

Senator Trible, I want to say how much 
we admire the determined and sensible way 
in which you have pursued this problem. 
You devoted a whole day to a field hearing 
in Norfolk and generously heard a repre- 
sentative sample of Virginia small business- 
es experiencing late pay. The same hearing 
could have been held in many other parts of 
the country, with similar results. In fact, 
the Virginia businesspeople experienced late 
payments being issued by payment offices 
which serve thousands of companies in 
many other states. 

Then, you held a hearing in Washington 
at which time you generously devoted a day 
to hearing the problems as related by na- 
tional associations and the small businesses 
they present. It was an honor to represent 
the Coalition at these hearings. 





31256 


You listened carefully, and along with 
your staff member, Lori Beth Feld, you de- 
veloped a sensible and responsible answer to 
what you had been hearing. You have 
earned the deepest appreciation of hun- 
dreds of small businesses in Virginia and 
thousands around the country who admire 
your leadership on the prompt pay issue. 

Senator, we appreciate your bringing this 
important legislation to the Senate floor 
and we wish you every success in convincing 
the Senate to adopt S. 2479 over which you 
have labored so long. 

Sincerely, 
KENTON PATTIE, 
Director of the Coalition for Prompt Pay 
and Senior Vice President of the Inter- 
national Communications Industries 
Association. 


MEMBERS OF THE COALITION FOR PROMPT Pay 


International Communications Industries 
Association (ICIA). 

National Moving and Storage Association 
(NMSA). 

Association for Information and Image 
Management (AIIM). 

Door and Hardware Institute (DHI). 

American Subcontractors Association 
(ASA). 

Association of General Contractors, 
Rhode Island Chapter (AGC). 

National Association of Manufacturers 
(NAM). 

Small Business United (SBU). 

Coalition for Common Sense in Govern- 
ment Procurement. 

American Meat Institute (AMI). 

American Consulting Engineers Council 
(ACEC). 

Associated Specialty Contractors (ASC). 

National Electrical Contractors Associa- 
tion (NECA). 

Painting and Decorating Contractors of 
America (PDCA). 

Mechanical Contractors Association of 
America (MCAA). 

Mason Contractors Association of America 
(MCAA). 

Sheet Metal & Air Conditioning Contrac- 
tors National Association (SMACNA). 

National Roofing Contractors Association 
(NRCA). 

National Association of Plumbing-Heat- 
ing-Cooling Contractors (NAPHCC). 

National Association of Retail Druggists 
(NARD), 

National Insulation Contractors Associa- 
tion (NICA). 

National Association of 
(NAW). 

National Association of Credit Manage- 
ment (NACM). 

International Sanitary Supply Association 
(ISSA). 

Association of the Wall & Ceiling Indus- 
tries—International (AWCD. 

American Association of Nurserymen. 

Associated Builders and Contractors. 

American Logistics Association. 


Wholesalers 


OcrToseERr 3, 1986. 

Re: S. 2479, Prompt Payment Amendments 

to the Prompt Payment Act of 1982. 
Hon. Pau. S. Trisxez, Jr., 
Senate Small Business Committee, Russell 

Senate Office Bldg., Washington, DC. 
Attn: Lori Beth Feld 

Dear SENATOR TRIBLE: On behalf of the 

Coalition for Common Sense in Government 
Procurement, I wish to express our full sup- 
port for passage of S. 2479, the Prompt Pay- 
ment Act Amendments bill. 


CONGRESSIONAL RECORD—SENATE 


We have reviewed the bill, including the 
subcontractor provision, as reported by the 
Senate Government Affairs Committee on 
October 2. On balance, we feel that passage 
of the complete bill before Congress recess- 
es in October is urgently needed to warn the 
executive branch against its current efforts 
to gut the 1982 Act. As you know, these ef- 
forts include: 

The July 17 proposed FAR amendment 
that would lengthen the current standard 
for payment from 30 days to 80 days. 

The Department of Agriculture’s refusal 
to pay promptly on meat purchases, with 
the argument that individual agencies are 
free to suspend the Act altogether when it 
suits their purposes to do so. 

A Department of Defense plan to stretch 
all payments 10-14 days beyond the statuto- 
ry 30-day deadline. 

Senator Trible, the Coalition congratu- 
lates you for your role in sponsoring and 
crafting a well-balanced Prompt Pay 


Amendments bill that corrects, to the great- 
est extent feasible, the problems associated 
with the 1982 Act. We urge you to push for 
passage of this bill before Congress ad- 
journs, and stand ready to support your 
effort in any way possible. 

Sincerely, 


Yvonne Kipp, 
Executive Director. 


Attachment. 
COALITION BOARD MEMBERS AND MEMBER 
COMPANIES 
BOARD MEMBERS 


Association for Information and Image 
Management. 

Business and Institutional Furniture Man- 
ufacturers’ Association. 

Computer and Business Equipment Manu- 
facturers Association. 

International Communications Industries 
Association. 

National Association of Manufacturers. 

National Association of Photographic 
Manufacturers. 

National Association of Wholesalers-Dis- 
tributors. 

National Office Products Association. 

Scientific Apparatus Makers Association. 

MEMBER COMPANIES 


Accountor Systems. 

Acoustical Screens Corp. 
Advance Machine Company. 
Allied Enterprises. 

Amerola Sports Inc. 

Anchor Equipment Co. 

Ansley Business Materials, Inc. 
Arndt & Arndt. 

ASC Office Furniture. 

Bernard Franklin Company. 
Broadway Sporting Goods Co., Inc. 
Caddylak Systems, Inc. 

The W.D. Campbell Co. 

Canon, U.S.A., Inc. 

Eli Chappe. 

Charvoz-Carsen Corporation. 
Columbia Diagnostics. 
Commercial Office Environments. 
Bill Conklin Associates. 

Dantec Electronics. 
Datagraphix, Inc. 

Robert DeYoung Associates. 
Dennison Monarch Systems, Inc. 
Digital Equipment Corporation. 
Domore Corporation. 

EG&G Instruments. 

Eastman Kodak Company. 
Economics Laboratory, Inc. 
Electronic Office Concepts, Inc. 
Federal Marketing Co. 


October 15, 1986 


Federal Program Management Assoc. 

Federal Sales Services, Inc. 

Federal Supply Contracts Group, Inc. 

Flex-Y-Plan Industries. 

The Frick—Gallagher Mfg. Co. 

General Binding Corp. 

General Electric—Lighting Group. 

M.S. Ginn & Company. 

GP Technologies, Inc. 

Hamilton Sorter Co., Inc. 

Haworth Inc. 

Herman Miller Inc. 

Hewlett-Packard. 

Hobart Corporation. 

Hoover System. 

Howe Furniture Corp. 

Infolink Corporation. 

Information Handling Services. 

Interface, Inc. 

Jebco, Inc. 

A.J. Lambert. 

Library Bureau, Inc. 

The Maine Manufacturing Company. 

Martech Assoc. Inc. 

Martin Business Machines. 

Merriam-Webster Inc. 

Microdyne Company. 

Micrographic Specialties Inc. 

Military Service Company. 

MODU FORM, Inc. 

National Micrographic Systems. 

NATCO, Inc. 

NEC Information Systems. 

NOMDA. 

NSSEA. 

Olympia USA, Inc. 

OMNI International Incorporated. 

Panasonic Corporation. 

Polaroid Corporation. 

RHC & Associates. 

Ring King Visibles, Inc. 

Savin Corporation. 

Seal Products Incorporated. 

Security Engineered Machinery. 

Shaw/Walker Company. 

Sony Communication Products, Steelcase. 

Chas. G. Scott & Company Inc. 

Super K Sports Corporation. 

Supreme Eq. & System Corp. 

E.P. Swanell. 

Swintec Corporation. 

Systems Manufacturing Corp. 

Tab Products Company. 

3-M Company. 

Uniforms Mfg. Inc. 

US. JVC. 

Virco Mfg. Corporation. 

Walcott-Taylor Co., Inc. 

Wang Laboratories. 

Werres Corporation. 

Whitaker Brothers Business Machines, 
Inc. 

White Power Files, Inc. 

Word Data Systems, Inc. 

Wright Line, Inc. 

W.S. Spotswood & Sons, Inc. 

Xerox Corp. 

Mr. COHEN. Mr. President, today I 
rise in support of S. 2479, the Prompt 
Pay Amendments of 1986, which is de- 
signed to close loopholes in and im- 
prove the implementation of the origi- 
nal Prompt Pay Act. 

S. 2479 was introduced in May of 
this year and approved unanimously, 
with an amendment in the nature of a 
substitute, by the Governmental Af- 
fairs Committee in October. This legis- 
lation currently has over 40 cospon- 
sors and is strongly supported by 





October 15, 1986 


prime contractor and subcontractor 
groups alike. 

I'd like to commend Senator TRIBLE, 
sponsor of the legislation, for taking 
this important initiative, as well as the 
Small Business Committee, which has 
developed an extensive hearing record 
to support the need for the legislation. 

By way of background, Mr. Presi- 
dent, the Prompt Payment Act of 1982 
was enacted to ensure that businesses 
dealing with the Government are paid 
in a timely manner and, if not, are 
paid interest on the overdue amounts. 
The act, for the first time, established 
statutory payment terms that general- 
ly require an agency to pay a prime 
contractor within 30 days after receipt 
of a proper invoice. 

If timely payments are not made, 
the agency is required under the act to 
pay the contractor interest on the late 
payment. The interest rate is set by 
the Department of Treasury twice a 
year and is paid out of the funds for 
the program which incurred the inter- 
est penalty. 

The act also provided a 15-day grace 
period for the Government in paying 
its bills to avoid the potential adminis- 
trative problem of incurring small in- 
terest penalties. Under the act, if pay- 
ment is made during this grace period, 
and interest penalty is not imposed. If, 
however, payment is not made by the 
expiration of the grace period, the in- 
terest penalty accrues from the pay- 
ment due date. 

While this law has unquestionably 
improved the timeliness of the Gov- 
ernment’s bill paying, implementation 
of the act has resulted in several prob- 
lems that require resolution. Wit- 
nesses testifying before both the 
Senate Small Business Committee and 
the House Government Operations 
Committee stated that the following 
problems continue to plague Federal 
pay practices. 

First, agencies still pay nearly 25 
percent of their bills after the due 
date. Second, agencies frequently fail 
to pay the interest penalty on late 
payments. Third, agencies often abuse 
the intent of establishing a grace 
period by routinely paying invoices 
within this extended period. Fourth, 
agencies take discounts offered by con- 
tractors for fast payment, although 
actual payment is made after expira- 
tion of the specified discount period. 
And, finally, agencies inform contrac- 
tors, who inquire about the nonpay- 
ment of interest owed, that a written 
demand for the interest is required. 
Some agencies, in fact, have a policy 
not to pay interest owed unless asked. 

According to the Office of Manage- 
ment and Budget, over 99 percent of 
the Government’s bills are now paid 
on time. Contrary to OMB'’s assess- 
ment, however, the General Account- 
ing Office states unequivocally in an 
August 1986 report that this is not an 
accurate assessment. OMB’s 99 per- 


CONGRESSIONAL RECORD—SENATE 


cent success rate, according to the 
GAO, is premised on the belief that 
any payments that did not include in- 
terest penalties had been paid on time 
regardless of whether payment oc- 
curred by the due date. OMB’s figures, 
therefore, include payments made on 
time, those made during the grace 
period, and late payments in which 
penalties were owed but not paid. 

The GAO concludes in its report 
that OMB’s annual performance re- 
ports under the act have been mislead- 
ing, thereby not highlighting the need 
for corrective action. 

In testimony before the Senate and 
House committees, the OMB acknowl- 
edged that problems exist in the im- 
plementation of the Prompt Payment 
Act, but stated its preference to 
remedy these problems administrative- 
ly rather than through legislation. 
The proposed administrative steps 
taken thus far, however, have been in- 
adequate. In particular, the proposed 
changes to the Federal acquisition reg- 
ulation issued in July stipulate that 
agencies would generally have a maxi- 
mum of 75 days to make payment— 
consisting of a 30-day acceptance term, 
a 30-day payment term, and a 15-day 
grace period—before a contractor 
would be entitled to any later payment 
interest penalty. 

These proposed regulations would 
clearly extend, rather than limit, the 
payment term prescribed under the 
act and consequently exacerbate, 
rather than remedy, the problems 
identified with implementation of the 


act. 

In light of the inadequate adminis- 
trative action taken to date to address 
the implementation problems, I agree 
with Senator TRIBLE that legislation is 
necessary. Even if the proposed ad- 
ministrative action were consistent 
with legislative objectives, legislation 
is nonetheless needed, in my judg- 
ment, to codify this action to ensure 
continued and effective implementa- 
tion. 

As chairman of the Governmental 
Affairs Oversight Subcommittee, 
which has jurisdiction over S. 2479, I 
reviewed the extensive hearing records 
developed by the Small Business Com- 
mittee and worked closely with Sena- 
tor TRIBLE in perfecting his legislation. 
My subcommittee unanimously report- 
ed a substitute to S. 2479 that pre- 
serves the majority of Senator Trr- 
BLE’s original proposal, but revises it to 
address additional problems and rec- 
ommendations brought out in the tes- 
timony. 

The Trible-Cohen substitute, which 
is before us today, proposes the follow- 
ing changes to the Prompt Pay Act. 
First, it revises the receipt of invoice 
trigger to clarify when the prompt 
payment term starts. Second, it re- 
duces the grace period, within which 
agencies are permitted to make pay- 
ment, from 15 to 8 days and subse- 


31257 


quently eliminates it altogether. 
Third, it requires that interest, when 
due, must be paid automatically with- 
out regard to whether the contractor 
has requested payment of such penal- 
ty. Fourth, it entitles a contractor, 
when an interest penalty is due but 
not paid, to double interest payments. 
Fifth, it clarifies that the act applies 
to progress payments and retained 
amounts for construction contracts. 
And, finally, it expands application of 
the act to include subcontracts under 
construction contracts. 

This last provision is of particular 
interest to subcontractors who, like 
prime contractors, want to be paid 
promptly when working on Federal 
contracts. For this reason, the commit- 
tee substitute to S. 2479, which origi- 
nally did not cover subcontractors, re- 
quires that prime contractors must 
pay their subcontractors in accordance 
with prevailing industry standards and 
pay a specified interest penalty when 
prompt payment is not made. 

Mr. TRIBLE. Would the Senator 
yield for a question? This provision, as 
you’ve mentioned, is quite important 
to the subcontractors. I would ask the 


- senior Senator from Maine to clarify 


your intent in requiring prime contrac- 
tors to pay their subcontractors in ac- 
cordance with prevailing industry 
standards. 

Mr. COHEN. The prevailing indus- 
try standards are intended to reflect 
current industry practices—agreed to 
in a joint policy statement by the As- 
sociated General Contractors, the 
American Subcontractors Association, 
and the Associated Specialty Contrac- 
tors—requiring payment to subcon- 
tractors within 7 days after the prime 
contractor has been paid. 

Mr. TRIBLE. I thank my colleague 
for that clarification and again com- 
mend him for his contribution to the 
legislation, particularly in the area of 
subcontractor coverage. 

Mr. COHEN. In closing, Mr. Presi- 
dent, I believe this legislation goes a 
long way toward improving the Gov- 
ernment’s bill-paying practices, and 
urge my colleagues to lend their sup- 
port. 

Mr. ROTH. Mr. President, I rise in 
support of S. 2479, a bill to amend the 
Prompt Payment Act of 1982, Public 
Law 97-177. I am a cosponsor of this 
legislation, which was approved by the 
Governmental Affairs Committee last 
week. I want to commend Senator 
TRIBLE and Senator Conen for the 
work they have done to formulate and 
advance this proposal. I urge the 
Senate to approve this measure which 
is so important to small businesses all 
across the Nation. 

The original Prompt Payment Act 
was reported by the Committee on 
Governmental Affairs and enacted in 
1982 in response to widely recognized 
problems in Federal Government pay 





31258 


practices. The General Accounting 
Office reported in 1978 that the Fed- 
eral Government did not pay its bills 
in a uniform manner. Many bills were 
paid either too early or too late. Some- 
times bills were paid without regard to 
contract terms, the effect on vendors’ 
cash flow, or Government interest 
costs. Before passage of this act, only 
61 percent of the Government’s bills 
were paid within 30 days, a situation 
that created a particular hardship for 
small businesses. 

By all available evidence, the 
Prompt Payment Act has substantially 
improved the bill paying practices of 
Federal departments and agencies. 
The GAO has reported that imple- 
mentation of the act has resulted in a 
noticeable reduction in excessively late 
payments. A GAO report released just 
last week estimated that 24 percent of 
Federal vendor payments were made 
after the due date during a 4-month 
test period. While the Office of Man- 
agement and Budget’s [OMB] recent 
estimate of 99 percent agency compli- 
ance with the provisions of the act is 
overstated, it is indicative of the im- 
provements that the 1982 legislation 
has brought about. 

Mr. President, I think it is interest- 
ing to note that following the passage 
of the Prompt Payment Act of 1982, 
many States have taken similar action 
based on the Federal statute. In fact, 
44 States now have prompt payment 
laws. Many of these State statutes are 
modeled after the 1982 Federal law. 
Clearly prompt pay is a constructive 
approach, applicable throughout our 
intergovernmental system. For exam- 
ple, my home State of Delaware en- 
acted prompt pay legislation in 1983, 
participating in a national movement 
at the State level to implement the 
prompt pay principles encompassed in 
the 1982 Federal law. 

Despite the increase in timely pay- 
ments on the part of the Federal agen- 
cies, however, problems still exist. 
Hearing evidence indicates that Feder- 
al agencies continue to pay nearly 25 
percent of their bills after the due 
date and often fail to pay the interest 
penalty for payments made beyond 
the date required in the contract or in 
the act. Certain agencies also abuse 
the 15-day grace period contained in 
the act by routinely paying invoices 
between the 8th and 14th days of this 
extended period. 

S. 2479 addresses these and other 
problems. It closes several loopholes in 
the provisions of the original act. And 
it sends a clear message to the OMB 
and the agencies that the Senate is ad- 
amant in its desire that the provisions 
of the Prompt Payment Act be com- 
plied with both in letter and in spirit. 
Specifically, the bill revises the receipt 
of invoice” trigger to clarify when the 
30-day payment term starts. It reduces 
the grace period from 15 days to 8 
days, and subsequently eliminates the 


CONGRESSIONAL RECORD—SENATE 


grace period. The legislation requires 
that interest, when due, must be paid 
automatically without regard to 
whether the contractor has requested 
payment of the penalty. It also enti- 
tles a contractor, when an interest 
penalty is due but not paid, to double 
interest payments after a 10-day 
period. 

The bill expands the act to include 
subcontracts on construction projects 
by requiring that contracts between 
prime and subcontractors include a 
prompt payment requirement as well 
as an interest penalty clause. Addition- 
ally, the bill prohibits the government 
from taking early payment discounts 
unless the agency complies with the 
early payment terms. 

Mr. President, a number of technical 
concerns that arose following commit- 
tee action on this proposal need to be 
addressed. I ask that these amend- 
ments be considered in block and be 
accepted by unanimous consent. The 
nature of these amendments is quite 
straightforward. The first amendment 
exempts the Postal Service from the 
reporting requirements of the Prompt 
Payment Act as amended. The pur- 
pose of this change is to preserve the 
independence of the Postal Service 
from direct OMB oversight. Since pas- 
sage of the 1982 act, the Postal Service 
has made a concerted effort to pursue 
the goals of this legislation. 

The second amendment revises the 
date for elimination of the grace 
period for late payments from the 
agencies. That date is moved from Oc- 
tober 1, 1988, to October 1, 1989 to 
provide the agencies at least 2 years to 
adjust their systems for prompt pay- 
ments without the current grace 
period. 

The amendments also address the 
circumstances under which Federal 
agencies must make a double interest 
penalty payment to a contractor by 
stipulating that a double interest pen- 
alty is due when the interest penalty is 
not paid by an agency within 10 days 
after the date on which the payment 
is made. This is a change from the ini- 
tial requirement for the double pay- 
ment 15 days after the date on which 
the interest penalty became due. This 
provision of the bill is changed also to 
State that a business concern, to be el- 
igible for the double interest penalty 
payment, must make a_ written 
demand for such payment not later 
than 40 days after the due date on 
which the payment is made. These 
changes are intended to clarify the 
date on which a business can first 
make a claim for a double interest 
penalty and to ensure that if such 
claim is to be made, it is requested in a 
timely manner. 

The final change amends the section 
dealing with payment for subcontracts 
under construction contracts to stipu- 
late that these funds be taken from 
the amounts paid to the prime con- 


October 15, 1986 


tractor by an agency for work per- 
formed by the subcontractor under 
that contract. 

Consideration also was given to an 
amendment to address the need for a 
minimum interest penalty higher than 
$1 as currently provided in S. 2479. We 
will return to this issue at a later date 
when more complete information is 
available on the number and amount 
of late payments and interest penal- 
ties made under these provisions. Such 
information will better enable us to 
determine the appropriate level for 
such a minimum penalty provision. 

Mr. President, the provisions of the 
Prompt Pay Amendments of 1986 
clearly indicate that the Senate will 
tolerate no administrative actions that 
undercut the Prompt Payment Act. 
This act is very important to business, 
especially small businesses, doing work 
for the Federal Government. Small 
firms typically operate on narrow mar- 
gins and are especially jeopardized 
when any customer does not pay in a 
timely fashion. Time and energy is 
needlessly wasted as these contractors 
attempt to get moneys due them 
under Federal contracts. And when 
payments are finally made, they often 
fail to include interest as required by 
law or use a discount rate no longer 
applicable. The discipline imposed on 
the Federal Government’s pay prac- 
tices by the legislation before us today 
is crucial to the financial well-being of 
our Nation’s small firms. 

As we all know, small businesses are 
a primary source of the innovation, re- 
search, and development that stimu- 
late our economy. Small businesses 
generate millions of new jobs each 
year, employing so many of our fellow 
citizens. By contributing to such char- 
acteristics as independence and entre- 
preneurship, small businesses nurture 
and sustain the most basic American 
values. 

Mr. President, this legislation will 
assure that these firms are treated 
fairly in their dealings with the Feder- 
al Government. It is a step we must 
take, and one I am proud to support. 

Mr. President, I ask unanimous con- 
sent that attached statements be 
printed in the Recorp, and that the 
sectional analysis of the bill and 
amended version of the bill be printed 
in the Recorp in full. 

There being no objection, the mate- 
rial was ordered to be printed in the 
REcorp, as follows: 


SUMMARY OF PROVISIONS AND STATEMENTS OF 
CONGRESSIONAL INTENT 


SECTION 1. SHORT TITLE 


This section establishes the bill’s citation 
as the “Prompt Payment Act Amendments 
of 1986." 


SECTION 2, CONGRESSIONAL FINDINGS 


This section enunciates a series of con- 
gressional findings based upon the three 
fiscal years of experience with Federal 
agency billpaying practices since the 





October 15, 1986 


Prompt Payment Act became effective on 
October 1, 1982. The first congressional 
findings is that the Prompt Payment Act 
has substantially improved the billpaying 
practices of the Federal agencies. This im- 
provement in timely bill paying has resulted 
in fairer treatment of the thousands of con- 
tractors who furnish supplies, services, or 
construction to the Federal Government. 
The general success of the Prompt Payment 
Act has been particularly important to 
small business government contractors who 
are especially sensitive to cash flow from 
their customers. The succeeding paragraph 
of this Section summarizes the specific 
problems that have been identified. Reme- 
dies to these implementation problems are 
set forth in the subsequent sections of the 
bill. 
SECTION 3. DEFINITIONS AND APPLICATION 


Subsection (a) of this Section amends the 
Prompt Payment Act by requiring a clearer 
definition of the starting point for the time 
period during which an agency is required 
to effect payment. The length of time for 
payment is prescribed by either the con- 
tract’s specific payment provision or in ac- 
cordance with the Act’s standards, in the 
absence of such a specific contractual pay- 
ment term. Under the Prompt Payment Act, 
the starting point for the “payment clock” 
is the later of the receipt of a proper invoice 
by the designated payment office or the 
date the supplies, services or construction 
were formally accepted by the Federal 
agency. Acceptance in government contract 
practice is distinct from simple delivery of 
supplies or the completion of the perform- 
ance of a service. Under the Federal Acquisi- 
tion Regulation (FAR), acceptance consti- 
tutes acknowledgement by the Government 
that the supplies or services (including con- 
struction) conform with the requirements of 
the contract; it is the point at which title 
passes to the Government. Given that the 
time of acceptance is solely in the hands of 
the Federal agency, the agencies are also in 
control of the starting point of the payment 
clock. 

For example, a contractor makes a timely 
delivery of supplies specified by its contract 
to the designated delivery point on June Ist, 
concurrently furnishing a proper invoice to 
the designated payment office. The agency 
formally accepts the supplies on July 31st, 
some 60 days later. Payment is made on 
August 30th, within 30 days of acceptance, 
but 90 days after delivery of the required 
supplies and the proper invoice. Under the 
terms of Prompt Payment Act, and current 
agency practice, the contractor would not be 
entitled to any interest penalty. Section 3(a) 
of the bill amends the acceptance provision 
of the Act by specifying that acceptance is 
deemd to have been accomplished 5 days 
after delivery (or final performance of a 
service, including construction), unless the 
contract specifies a longer period for accept- 
ance. This amendment preserves the Gov- 
ernment’s right to assure itself adequate 
time to accomplish acceptance, but also as- 
sures that it will inform the contractor of 
acceptance periods exceeding five days 
when the contractor is seeking to compete 
for the contract rather than when he or she 
is seeking to get paid for work completed. In 
implementing this provision in the FAR, 
contracting officers should be accorded the 
flexibility to prescribe an acceptance period 
that comports with the subject matter of 
the contract. For example, commercial 
items should require a shorter acceptance 
period than items fabricated to a Govern- 
ment design specification not subject to in- 


CONGRESSIONAL RECORD—SENATE 


spection prior to shipment. Since accept- 
ance time periods will now have to be an- 
nounced in the contract solicitation, permit- 
ting competing contractors to adjust their 
prices to account for the financing costs as- 
sociated with exceptionally long acceptance 
periods, the implementing procurement reg- 
ulations should strongly encourage that ac- 
ceptance periods be kept to the minimum 
required based on experience. 

Finally, it is emphasized that the amend- 
ment does not compel the Government to 
pay for supplies or services (including con- 
struction) that it has not had the opportuni- 
ty to inspect and accept. Rather, it merely 
lifts the financial burden of unexpected 
Government delay from the contractor by 
requiring the payment of interest. Payment 
of the contract price, and any accrued inter- 
est penalties, will only be payable after ac- 
ceptance (if a proper invoice has been re- 
ceived). 

During Subcommittee consideration, a 
further amendment to 31 U.S.C. 
3901(a)(4)(A) was made to reflect that the 
“payment clock” is triggered when a proper 
invoice is received by the office or employee 
of the buying agency designated by the 
agency to first receive the invoice. Several 
commentators on the bill noted that under 
the Act’s current language a contract might 
require an invoice to be first sent to a con- 
tracting officer’s technical representative 
(COTR) or auditing activity rather than to 
the designated payment office which will 
subsequently be responsible for actually is- 
suing the payment. Some agencies refuse to 
recognize the start of the “payment clock” 
until the invoice is received by the payment 
office. The time an invoice is in the hands 
of these other designated agency players, is 
not counted for the purpose of establishing 
whether timely payment has been made or 
a late payment interest penalty is due to the 
contractor. The amendment requires the 
agency to start counting from the time it 
first received a proper invoice. 

Subsection (b) of this Section amends the 
Prompt Payment Act to explicitly cover the 
United States Postal Service (USPS). It was 
intent of the sponsors of the legislation that 
became the Prompt Payment Act (S. 1131 
and H.R. 4709 in the 97th Congress) that 
the USPS be covered by the Act’s provi- 
sions. To attain that objective, the board 
definition of “agency” found at Section 
551(1) of Title 5 was used. However, a re- 
quired amendment to the USPS's organic 
statute was not made. This amendment cor- 
rects that oversight. The Committee is in- 
formed that the USPS has generally adjust- 
ed its billpaying procedures and practices to 
comport with the Act’s standards, but the 
proposed amendment would statutorily 
assure USPS contractors the same protec- 
tions accorded to contractors dealing with 
the departments and agencies of the Execu- 
tive Branch. It should be noted that the 
amendment reserves to the Postmaster Gen- 
eral the authority to implement the Act 
through the USPS's own procurement regu- 
lations. 

The Subsection has been further modified 
to exempt the USPS from reporting its com- 
pliance with the Act to the Office of Man- 
agement and Budget, in recognition of its 
independent status. Nevertheless, the USPS 
is still required to maintain its own data 
concerning its bill paying performance in 
furtherance of effective cash management 
and to permit appropriate oversight by 
USPS senior management as well as the 


Congress. 


31259 


SECTION 4. INTEREST PENALTIES: REDUCTIONS 
IN GRACE PERIOD; INCREASED PENALTIES 


Subsection (a) of this Section would 
gradually eliminate the Prompt Payment 
Act's current 15-day “grace period”, during 
which any agency may pay a bill late with- 
out incurring any interest penalty. For ex- 
ample, if payment for a routine commercial 
item is due in 30 days, the buying agency 
can now pay anytime up to the 45th day 
without incurring any interest penalty for 
the late payment. The Act’s “grace periods” 
were included in the Act from the House bill 
(H.R, 4709) at the request of the Adminis- 
tration. The justification for the “grace pe- 
riods"”” was grounded in the argument that 
some mechanism was essential to protect 
the Government from the substantial ad- 
ministrative burden and expense anticipated 
from having to pay tens of thousands of 
small interest penalties while the agencies 
adjusted their billpaying systems to the 
Act’s standards—the anticipated result 
given the Government's dismal billpaying 
record at the time of enactment. Given that 
the Act provided almost six-months for 
agencies to expect an adjustment to their 
billpaying procedures and became effective 
at the beginning of a new fiscal year (Octo- 
ber 1, 1982), agency transition to the Act’s 
requirements was accomplished with sub- 
stantially less trauma than predicted. 
OMB’s first report to the Congress in Feb- 
ruary of 1984 emphasized this effective 
agency implementation. 

Testimony from witnesses representing 
small business government contractors 
called for the immediate elimination of the 
15-day grace period noting that the substan- 
tial improvements in agency billpaying prac- 
tices being reported by OMB during the 
first three fiscal years of experience under 
the Act virtually eliminated the basic ra- 
tionale for the grace period. Rather, these 
witnesses characterized the grace period as 
an interest-free loan taken from the pockets 
of those dealing with the Government that 
is readily and frequently abused by buying 
agencies. Rather than eliminate the 15-day 
grace period immediately, the bill initially 
reduces it to 7 days, deferring elimination 
until October 1, 1988. This was further ex- 
tended to October 1, 1989 during floor con- 
sideration of the bill. This very gradual 
elimination of the 15-day grace period is re- 
sponsive to agency concerns. 

Subsection (b) of this Section amends the 
Act to make explicit that interest penalties 
for late payment are to be paid automatical- 
ly. Further, it seeks to deter agency finance 
center personnel from withholding a late 
payment interest penalty due to a contrac- 
tor by making the agency liable for twice 
the interest penalty due under limited cir- 
cumstances. 

Testimony from witnesses representing 
small business government contractors cite 
experiences in which they had to make a 
formal written demand for late payment in- 
terest penalties due, despite the Act's clear 
intent and the explicit direction to the agen- 
cies in OMB Circular A-125 (Prompt Pay- 
ment) that such penalties are to be paid 
“automatically”. GAO found that some pay- 
ment centers even had “informal” local poli- 
cies of generally requiring a contractor to 
make a demand for interest due on a late 
payment. The likely origin for this reluc- 
tance to pay interest can be found in OMB’s 
measure to agency performance under the 
Act: on the basis of the number of invoices 
upon which the agency paid a late payment 
interest penalty. As noted by GAO, this per- 





31260 


formance measure maintains strong organi- 
zational pressures to both pay invoices on 
time (the objective of the Act) and to avoid 
paying interest even when it is due (an unin- 
tended side-effect of the Act’s current re- 
porting requirement). 

Subsection (c)(2) provides a countervailing 
pressure on payment center personnel who 
might be tempted to withhold payment of 
late payment interest penalties due contrac- 
tors, so as to reduce the number of late in- 
voices reported to OMB. Under the amend- 
ment, the contractor would become entitled 
to double any late payment interest penalty 
(not double the payment due for contract 
performance), if four conditions are met. 
First, the contractor must be entitled to a 
late payment penalty. Second, the agency 
must have actually made a payment to the 
contractor which did not include any late 
payment interest penalty. Third, the agency 
would have ten days from the date of its 
payment to the contractor to catch any in- 
advertant failure to pay the late payment 
interest penalty and to make such payment. 
Agency corrective action during the ten day 
period would eliminate the contractors enti- 
tlement to the double interest penalty. And, 
finally, the contractor must make a written 
demand for the late payment interest penal- 
ty within the forty days of the date of pay- 
ment. 

Given these requirements and the im- 
proved internal management controls in 
most automated payment centers, the 
double late payment interest penalty au- 
thorized by this amendment to the Act 
could only be expected to fall upon those 
who deliberately try to avoid paying a late 
payment interest penalty, so they look 
“good” in their reports to OMB. In the view 
of the Committee, the current incentive to 
withhold late payment interest penalties in 
order to avoid OMB criticism is counteract- 


ed by this provision of the bill. Under the 
proposed amendment such unacceptable be- 
havior will put the payment center or an in- 
dividual payment clerk at risk of looking 
twice as “bad” than if the contractor were 
automatically paid the interest penalty due 
under the Act. 


SECTION 5. INTEREST PENALTIES ON PROGRESS 
PAYMENTS AND RETAINED AMOUNTS UNDER 
CONSTRUCTION CONTRACTS 


This section makes explicit the intent of 
the Prompt Payment Act that progress pay- 
ments under construction contracts are sub- 
ject to the Act’s requirements and protec- 
tions. Despite explicit legislative history in 
the reports accompanying S. 1131 and H.R. 
4709 that progress payments fall within the 
reach of the Act’s provision affording cover- 
age to payments for partial executions if au- 
thorized by the contract (31 U.S.C. (4)), 
most agencies have determined by regula- 
tion that construction progress payments 
are “payments . . . made solely for financ- 
ing purposes”, which are exempt from cov- 
erage under OMB Circular A-125 (Para. 
8(c)). 

The section also extends the Act’s cover- 
age to amounts “retained” from progress 
payments paid to the contractor by the 
agency during the term of a construction 
contract. Contracting officers are author- 
ized by regulation to retain a percentage of 
@ program payment otherwise due a con- 
tractor upon making a specific finding con- 
cerning the timeliness of the contractor’s 
performance, for conformity with the con- 
tract specifications. Once such deficiencies 
have been corrected to the agency’s satisfac- 
tion and the construction project accepted 
by the Government the contractor is enti- 


CONGRESSIONAL RECORD—SENATE 


tled to be paid these retained amounts as 
promptly as the final payment under the 
contract. 


SECTION 6. PERIODIC PAYMENTS UNDER SUPPLY 
AND SERVICE CONTRACTS 


During subcommittee consideration, 31 
U.S.C. 3903 (4) was further clarified with re- 
spect to the Act’s application to various 
periodic payments authorized under some 
supply and many service contracts. Testimo- 
ny received reflected the fact that some 
agency buying personnel maintain that such 
payments are not subject to the Act, and 
hence not entitled to interest penalties for 
late payment. The agency’s assert this posi- 
tion on the basis of two arguments. First, 
they may maintain that such periodic pay- 
ments are not payments for work per- 
formed, but rather “payments solely for fi- 
nancing purposes”, which have been explic- 
itly exempted from the Act’s protection 
under OMB Circular A-125. Or, second, 
they will avoid the Act’s interest penalty on 
the basis that the contract does not include 
the “separate required payment dates” men- 
tioned in the Act. Given that the FAR’s 
menu of contract clauses was never modi- 
fied to implement this among other provi- 
sions in the Prompt Payment Act, contrac- 
tor’s generally do not get paid interest pen- 
alties for late periodic payments. The Sub- 
committee amendments also made a corre- 
sponding modification in Section 10, which 
requires the promulgation of FAR coverage 
to implement the Act. 


SECTION 7. PAYMENT CLAUSE FOR SUBCON - 
TRACTS UNDER CONSTRUCTION CONTRACTS 


This amendment adds a new section to the 
Prompt Payment Act which addresses the 
issue of extending the Act’s coverage to sub- 
contractors under federal construction con- 
tracts. The hearing record contains exten- 
sive and detailed testimony from witnesses 
representing subcontractors urging such 
coverage. They make a strong case that 
such coverage will contribute significantly 
to the timely completion of federal projects 
by eliminating one of the principal causes of 
delay: payment problems. Their testimony 
also made a strong case that such coverage 
is the only way to assure equitable treat- 
ment of subcontractors. 

Subsection (a) of the proposed new sec- 
tion to the Act requires that the prime con- 
tractor include a payment clause in its con- 
tracts with its various subcontractors. It 
adopts “prevailing industry standards” as 
the payment term. The prevailing industry 
standard is currently deemed to be seven 
days, based upon a joint policy statement on 
prompt payment issued by the Associated 
General Contractors of America (AGC), the 
American Subcontractors Association 
(ASA), and the Associated Specialty Con- 
tractors (ASC), as well as an array of stand- 
ard contract documents used extensively in 
the industry for both private and govern- 
mental construction projects. The Joint 
Policy Statement on Prompt Payment es- 
tablishes a seven-day standard for payment 
of subcontractors after receipt of a payment 
by the prime contractor from the Owner 
(the Government). Similarly, the AGC’s rec- 
ommended standard form “Subcontract for 
Building Construction” (AGC Document 
No. 600, August 1984) provides for the pay- 
ment of progress payments to subcontrac- 
tors not later, then seven days after receipt 
of a payment by the prime contractor. Fi- 
nally, the Standard Form of Agreement Be- 
tween Contractor and Subcontractor (Docu- 
ment A-401, 1978) issued by the American 
Institute of Architects (AIA, provides for 


October 15, 1986 


the payment to the subcontractor of each 
progress payment and the final payment 
within three days after the prime contrac- 
tor receives payment from the Owner. 

Subsection (a)(1) provides that a subcon- 
tractor’s entitlement to payment from the 
prime contractor commences when the 
prime contractor has been paid by the Gov- 
ernment, a so-called “pay when paid” rela- 
tionship. As with the Act’s application be- 
tween the prime contractor and the Govern- 
ment, the subcontractor’s entitlement to 
timely payment or interest penalties for late 
payment, only applies when no dispute 
exists as to performance. The subcontractor 
is not entitled to payment if his or her per- 
formance is not in conformity with the 
project schedule or the Government's speci- 
fications (which the prime contractor is re- 
quired by its contract with the Government 
to include in its subcontracts). Similarly, the 
prime contractor may be entitled by its sub- 
contract to withhold a portion of a payment 
for: (1) work that is in dispute; (2) third 
party claims, filed or reasonably expected to 
be filed; (3) alleged damages suffered by the 
prime contractor or another subcontractor; 
or (4) overdue subcontractor payments for 
labor, equipment or materials. However, to 
assure equitable treatment of subcontrac- 
tors, it is essential that a prime contractor 
identify subcontractor performance defi- 
ciencies and other claims in its application 
for payment, and any accompanying certifi- 
cate, to the Government and not request 
payment for amounts in dispute with the 
subcontractor until such dispute is resolved. 

The resolution of any such performance 
dispute or other claim must remain subject 
to resolution between the parties to the sub- 
contract and not be devolved upon the Gov- 
ernment contracting officer for resolution. 
It should be noted, however, that Section 
8(d) of the Small Business Act (15 U.S.C. 
637(d)), as amended by the ‘“‘Small Business 
and Federal Procurement Competition En- 
hancement Act of 1986”, Public Law 98-577, 
would require the contracting officer to 
ensure compliance with the subcontract’s 
payment provisions in the same manner as 
any other material provision of the subcon- 
tract. 

Finally, the provision does not prohibit 
the prime contractor from withholding re- 
tainage from progress payments otherwise 
due the contractor upon a finding of delay 
or other performance not in conformity 
with the performance requirements of their 
contract. The rate of such retainage, (the 
percentage of the progress payment other- 
wise due) should be no higher than the rate 
the Government withheld from the prime 
contractor. 

Subsection (a)(2) entitles the subcontrac- 
tor to the payment of an interest penalty, if 
the prime contractor fails to pay the sub- 
contractor in accordance with the payment 
clause required to be included in the con- 
tract between them. The interest rate speci- 
fied is the same rate as applies to late pay- 
ments by the Government to the prime con- 
tractor. 

Subsection (b) makes clear that the pay- 
ment of any late payment interest penalties 
incurred by the contractor may not be 
passed along to the Government, nor may 
the subcontractor pursue such late payment 
interest penalties with the Government, 

SECTION 8. LIMITATIONS ON DISCOUNT 
PAYMENT 
This section clarifies the time period 


during which an agency may legitimately 
take advantage of a contractor's offer of a 





October 15, 1986 


price discount for early payment. For exam- 
ple, a contractor may offer a 2% discount 
from its contract price in exchange for 
being paid by the Government within 20 
days instead of the 30 days specified in its 
contract. The proposed amendment to the 
Prompt Payment Act makes clear that the 
discount period begins when a proper in- 
voice is received by the first agency office 
designated in the contract. If the agency is 
to avail itself of the discount offered, it 
must make payment before the expiration 
of the period specified in the contractor’s 
“fast pay” offer. The burden of accomplish- 
ing acceptance and other administrative 
matters prior to making payment against 
the contractor’s proper invoice falls on the 
agency seeking to accept the discount price. 
Testimony from small business government 
contractors demonstrated that some agency 
payment centers have taken early payment 
discounts after the expiration of the dis- 
count period by not starting the “discount 
payment clock” until such time as accept- 
ance and other administrative matters have 
been completed, irrespective of the time 
consumed by agency personnel. This amend- 
ment is designed to prevent such abuses. 


SECTION 9. REPORTS 


This section amends the Prompt Payment 
Act’s reporting requirements to assure that 
data will be collected on the number and 
dollar value of invoices paid after the re- 
quired payment date without payment of 
any interest penalty. The provision also re- 
quires the reporting agency to identify the 
reason a late payment interest penalty was 
not incurred. Currently, agencies are only 
reporting late invoices upon which an inter- 
est penalty was paid. GAO found that meas- 
urement of agency performance on the basis 
of this criteria has distorted the reports sub- 
mitted to the Congress. This amendment 
will assure that OMB reports a more accu- 
rate and complete picture of agency compli- 
ance with the Act. The United States Postal 
Service (USPS) is specifically exempted 
from this reporting requirement to the 
Office of Management and Budget by Sec- 
tion 3(b) of the bill. However, as noted in 
the discussion of that provision, it is intend- 
ed that the USPS collect data on its bill 
paying performance to permit senior man- 
agement to monitor compliance and to 
permit congressional oversight. 


SECTION 10. IMPLEMENTATION THROUGH THE 
FEDERAL ACQUISITION REGULATION 


Subsection (a) of this section requires that 
the Prompt Payment Act be implemented in 
the Federal Acquisition Regulation (FAR). 
No coverage is presently included, despite 
the fact that the FAR was issued subse- 
quent to the enactment of the Prompt Pay- 
ment Act. 

Subsection (b) specifically identifies the 
provisions of the Act which require FAR im- 
plementation, principally through the issu- 
ance of appropriate solicitation provisions 
and contract clauses. 

Paragraph (1) establishes parameters for 
the payment terms to be developed. The 
fundamental theme is to conform to prevail- 
ing market practice whenever possible. This 
is especially important when acquiring com- 
mercial items of supply or services (includ- 
ing construction) in which prevailing prac- 
tices are defined principally by private com- 
mercial activity. When the Government 
enters an essentially commercial market, it 
should conform its payment terms to those 
of the market, unless compelling reasons 
dictate otherwise. It is also intended that 
these regulations will afford the contracting 


CONGRESSIONAL RECORD—SENATE 


officer the flexibility to specify a payment 
term for an individual contract or a class of 
contracts that will most effectively tap the 
market. It is favorably noted that the Gen- 
eral Services Administration adopted this 
approach in Temporary Regulation 66 
(Prompt Payment Procedures) to the 
former Federal Procurement Regulations 
(FPR) issued on October 5, 1982 to imple- 
ment the Prompt Payment Act. Unfortu- 
nately, these regulations were not incorpo- 
rated into the FAR, which superceded the 
FPR when the FAR became effective on 
April 1, 1984. Finally, the recently proposed 
FAR implementation of the Prompt Pay- 
ment Act (51 Fed. Reg. 25976; July 17, 1986) 
suggests an unacceptably rigid system that 
would afford the Government at least a 30- 
day acceptance period and a 30-day pay- 
ment period in every case. Such periods, 
when coupled with the currently available 
15-day grace period, would effectively estab- 
lish a minimum 75-day period before a con- 
tractor would be entitled to a late payment 
interest penalty. 

Paragraph (2) provides guidance concern- 
ing the regulations addressing periodic pay- 
ments in response to periodic invoices for 
supplies furnished or services performed 
during the term of a contract. 

Paragraph (3) calls for regulations imple- 
menting the bill’s amendment regarding pe- 
riods for acceptance. The purposes of these 
amendments have been described previously 
in Section 3 (Definitions and Application) of 
this Summary of Provisions. 

Paragraph (4) requires implementation of 
the Act’s provisions relating to the Govern- 
ment’'s taking “early payment” discounts. 

Paragraph (5) requires implementation of 
increased late payment interest penalties 
when the conditions of Section 4(cX2) of 
the bill are met. 

Subsection (c) specifies a time certain for 
issuance of proposed regulations and re- 
quires their publication for public comment. 

SECTION 11. EFFECTIVE DATES 


This section establishes the effective dates 
for the bill’s various provisions. Subsection 
(a) provides the agencies with an implemen- 
tation period of at least 90 days for most of 
the bill’s provisions. Subsection (b) estab- 
lishes the effective date for the Prompt 
Payment Act’s explicit application to the 
United States Postal Service. Subsection (c) 
requires OMB to change the agency report- 
ing requirements under the Act beginning 
with FY 87. 

DISCUSSION OF THE APPLICATION OF THE 
Prompt PAYMENT ACT TO PAYMENTS TO 
PROVIDERS AND SUPPLIERS UNDER THE MEDI- 
CARE PROGRAM FROM THE COMMITTEE ON 
SMALL BUSINESS 
During its hearing on the Implementation 

of the Prompt Payment Act held on June 
19, 1986, the Committee on Small Business 
received testimony about delays in pay- 
ments by the Department of Health and 
Human Services’ (HHS) Health Care Fi- 
nancing Administration (HCFA) under the 
Medicare Program. For some time prior to 
the hearing, the Small Business Committee 
received a steady stream of complaints from 
Medicare Program “providers” (e.g., hospi- 
tals, home health organizations, rehabilita- 
tion facilities, and pharmacists) and “suppli- 
ers" (e.g., durable medical equipment manu- 
facturers and dealers), and the associations 
representing them, due to very lengthy 
delays in payments due to them. 

To explore the full range of issues sur- 
rounding delayed payments under the Medi- 
care Program, witnesses representing Medi- 


31261 


care “providers” and “‘suppliers” were invit- 
ed to testify along with a representative of 
the Blue Cross and Blue Shield Association, 
whose members provide the vast majority of 
“fiscal intermediary” services to HCFA, 
making payments to Medicare Program 
beneficiaries as well as “providers” and 
“suppliers”. During the hearing, the Nation- 
al Association of Rehabilitation Facilities 
(NARF), and association representing one 
group of “providers”, reported that many 
outpatient rehabilitation facilities had expe- 
rienced delays of over 6 months in the pay- 
ment of claims under Medicare. NARF’s wit- 
ness made a strong argument that there is a 
very serious problem with delays in Medi- 
care payments, resulting in very adverse ef- 
fects on Medicare “providers” and that such 
payment problems are exactly the type 
which the Prompt Payment Act was enacted 
to solve. Senator Bumpers, Ranking Minori- 
ty Member of the Small Business Commit- 
tee, noted that a number of “providers” of 
services in Arkansas, particularly pharma- 
cists, had been experiencing severe cash 
flow problems because of the failure of 
HCFA and its agents to make timely pay- 
ments. 

The Committee invited HCFA to testify 
and present its policies regarding the pay- 
ment of claims and to address the question 
of the applicability of the Prompt Payment 
Act to payments due “providers” and “‘sup- 
pliers’ under the Medicare Program. Mr. 
Louis B. Hays, HFCA’s Associate Adminis- 
trator for Operations, appeared for the 
agency. In his testimony, Mr. Hays noted 
that HFCA takes the position that the 
Prompt Payment Act does not apply to pay- 
ments under the Medicare Program, but 
that the agency is nonetheless trying to pay 
its bills promptly. He stated that HCFA’s 
current payment standard is to pay ‘clean 
claims” within 27 days of receipt and to pay 
or otherwise dispose of claims that require 
further information within 60 days of initial 
receipt. In response to a question from Sen- 
ator Trible, Mr. Hays was unable to state 
why HCFA feels that the Prompt Payment 
Act does not apply to payments under the 
Medicare Program. He did offer, however, to 
provide to the Committee an opinion of the 
HHS General Counsel substantiating this 
position. 

This opinion was provided to the Commit- 
tee on Small Business and printed in the ap- 
pendix to the hearing record. The opinion is 
contained in a memorandum prepared by an 
attorney-advisor in HHS's Office of General 
Counsel, Deborah M. Chaskes, and directed 
to the Director of HCFA’s Bureau of Pro- 
gram Operations, John C. Berry. The 
memorandum, dated February 6, 1984, ad- 
dressed a variety of issues relating to pay- 
ments under the Medicare Program under 
the subject “Authority to Determine Pay- 
ment Cycle.”” The paragraphs of the memo- 
randum which address the relationship be- 
tween the Prompt Payment Act and the 
Medicare Program are as follows: 

“4. Does the Prompt Payment Act (P.L. 
No. 97-177) apply to Medicare benefit pay- 
ments? 

In our opinion, the Prompt Payment Act 
does not apply to the Medicare program. 
The Act by its terms applies to “Federal 
agencties) which acquire(s) property or serv- 
ices from a business concern.” § 2(a)(1), 31 
U.S.C. § 1801. Although “business concern” 
is defined broadly in the Act and federal 
policy issuances (see § 6(2) of the Act, 31 
U.S.C. § 1805; OMB Circular A-125, 47 Fed. 
Reg. 37322 (Aug. 25, 1982)) and which en- 
compass Medicare providers, it is not clear 





31262 


that HCFA “acquires” goods and services in 
the sense used in the Act. Beneficiaries, not 
HCFA, “acquire” goods and services under 
the Medicare program; HCFA, through its 
intermediaries and carriers, makes payment 
on behalf of eligible beneficiaries. There- 
fore, the Prompt Payment Act would not 
seem to apply to the Medicare program.” 

“5. Could the Prompt Payment Act be uti- 
lized as an indication of Congressional 
intent for all Federal payment transactions? 

We do not believe it is necessary to look 
outside of title XVIII for indications that 
Congress intended the Medicare program to 
be administered in an efficient manner. For 
example, the requirement in section 1815 
that Part A providers be paid no less often 
than monthly expresses Congress’ intent as 
to the promptness with which Medicare 
payment should be made.” 

Under HHS'’s analysis, HCFA is free from 
the requirements of the Prompt Payment 
Act on the basis that HCFA is not “acquir- 
ing’’ services. This conclusion is reached by 
HHS'’s Office of General Counsel principal- 
ly because HCFA uses commercial insurance 
companies and Blue Cross-Blue Shield orga- 
nizations as “fiscal intermediaries” in the 
administration of the Medicare Program 
and because the various services are ren- 
dered to Medicare beneficiaries rather than 
to the Government. 

In the opinion of the Committee, this 
analysis has proceeded on the proper basis 
to determine if the Prompt Payment Act ap- 
plies, i.e., a transactional basis, not a pro- 
gram basis. If a contract exists with the 
Government, and the contract does not in- 
clude a specific payment term, then the 
payment terms specified in the Act control. 
The question to be answered is whether a 
contract exists between HHS and Medicare 
“providers” and “suppliers”. This is a ques- 
tion of fact. 

The testimony of witnesses appearing 
before the Committee on Small Business 
made a strong case that a contractual rela- 
tionship does in fact exist. For example, 
under 42 U.S.C. 1395cc, an entity must enter 
into an agreement with the Secretary of 
HHS to be a “provider” of services under 
the Medicare Program. If this agreement 
and the laws and regulations incorporated 
into it by reference are found to memorial- 
ize the terms of a contract between the Sec- 
retary and the “provider”, a direct contrac- 
tual relationship would exist between HCFA 
and the “provider” organization. It was also 
persuasively argued that the mere use of 
“fiscal intermediaries” as HCFA’s payment 
agents would not disrupt a finding of a con- 
tractual relationship. Further, the fact that 
the services of the “providers” are rendered 
to Medicare beneficiaries does not necessari- 
ly void the contractual nature of the rela- 
tionship between HHS and the “provider”. 
Medicare beneficiaries may well be found to 
be third party beneficiaries of this relation- 
ship, but the terms of the contract are set 
between the Secretary and the “provider” 
of the services. 

It is noted that on June 17, 1986, Senator 
Durenberger, joined by twelve original co- 
sponsors, introduced S. 2576, the “Medicare 
Timely Payment Amendments of 1986.” 
This bill amends the Social Security Act to 
require that agreements with fiscal interme- 
diaries under Section 1816(c) (42 U.S.C. 
1395(c)) require the payment of “clean 
claims” within 22 calendar days after re- 
ceipt, or the claimant “provider” or suppli- 
er” is entitled to late payment interest pen- 
alty. 

Subsequently, the substance of S. 2576 
was incorporated into S. 2706, the “Sixth 


CONGRESSIONAL RECORD—SENATE 


Omnibus Budget Reconciliation Act, 1986”, 
at Sec. 612 (Payment of Medicare Claims). 
The payment standard was modified to re- 
quire payment within 24 days before an en- 
titlement to a late payment interest penalty 
would arise. In addition, Section 
612(cX3)(B) established a 14—day “grace 
period” which expires at the end of FY 87, 
September 30, 1987. 

Section 10221 of H.R. 5300, the “Omnibus 
Budget Reconciliation Act of 1986", as 
passed by the House of Representatives on 
September 24, 1986, contained a similar pro- 
vision. It required payment of a “clean 
claim” within 22 calendar days, or the 
claimant was entitled to a late payment in- 
terest penalty. The House provision did not 
include any “grace period.” 

Nothing in the legislative history of S. 
2576, or the successor provision in S. 2706, 
suggests that the proposed amendment to 
the Social Security Act was introduced be- 
cause the sponsors had determined that 
payments to “providers” and “suppliers” 
under the Medicare Program were not cov- 
ered by the requirements of the Prompt 
Payment Act. Rather, all indications sug- 
gest that the legislation sponsors wanted to 
bind HCFA’s fiscal intermediaries to a 
stricter payment term than the 30-day pay- 
ment term prescribed by the Prompt Pay- 
ment Act for most supplies and services in 
the absence of a contractually specified pay- 
ment term. The proposed statutory pay- 
ment term appears to be closely akin to the 
stricter payment terms for meat and meat 
food products or perishable agricultural 
commodities presently cited in paragraphs 
(2) and (3) of section 3903, 31 United States 
Code. 

Given the position taken by the Depart- 
ment of Health and Human Services, the 
application of the Prompt Payment Act to 
payments due to “providers” and “suppli- 
ers" under the Medicare Program will re- 
quire a judicial determination. This is un- 
fortunate, since the matter of timely pay- 
ment could have been easily resolved by 
HCFA’'s specification of a payment term. 

Mr. WEICKER. Mr. President, I rise 
in support of S. 2479, the Prompt Pay- 
ment Act Amendments of 1986. I urge 
my colleagues to join Senator TRIBLE, 
and the bill’s 44 cosponsors in voting 
to pass this important legislation now, 
before the adjournment of the 99th 
Congress. 

As chairman of the Committee on 
Small Business, I feel very strongly 
about timely payment for Government 
contractors, since small business firms 
constitute the vast majority of those 
who sell to the Government, and are 
the hardest hit by late Government 
payments. The Prompt Payment Act 
of 1982 had its origins as an important 
initiative of the Small Business Com- 
mittee during the 97th Congress. Sen- 
ator Sasser introduced the Late Pay- 
ment Act of 1981, S. 30, early in the 
first session. Then, Senator DANFORTH 
and Senator CHILES, chairman and 
ranking minority member of the Gov- 
ernmental Affairs Committee’s Sub- 
committee on Federal Expenditures, 
Research and Rules took up the cause 
and introduced S. 1131, the Delin- 
quent Payment Act of 1981 along with 
22 original cosponsors, including 


October 15, 1986 


myself and several other members of 
the Small Business Committee. 

A companion measure, H.R. 4709, 
the Prompt Payment Act was already 
moving steadily through the House 
with the strong support of Represent- 
atives Jack Brooks and FRANK 
Horton, chairman and ranking minor- 
ity member of the Committee on Gov- 
ernment Operations and a broad, bi- 
partisan array of their colleagues. 
Given strong support from the broad- 
based Prompt Pay Coalition, strong 
concurrent House action, and the per- 
sistence of Senators DANFORTH and 
Cues in the face of steadfast opposi- 
tion from OMB and the procuring 
agencies, S. 1131 was finally signed 
into law on May 21, 1982, and became 
effective on October 1 of that year. 

Mr. President, Government contrac- 
tors, small businesses, and large firms, 
have now had 4 complete fiscal years 
of experience with agency billpaying 
practices subject to the Prompt Pay- 
ment Act. This experience has been 
monitored by the Prompt Pay Coali- 
tion and many of its member associa- 
tions. This long-term monitoring 
effort leads to two conclusions: First, 
that the Prompt Payment Act has sub- 
stantially improved the Government’s 
billpaying practices from the dismal 
situation that existed prior to enact- 
ment; and second, that the agencies 
have frustrated full implementation of 
the act as intended by Congress by ex- 
ploiting ambiguities and loopholes in 
the statute. 

Given the years of billpaying experi- 
ence under the act and the problems 
being repeatedly faced by small busi- 
ness Government contractors, the 
Prompt Pay Coalition and its member 
associations began to call for oversight 
hearings and consideration of amend- 
ments to remedy problems identified. 
For example, the Small Business Com- 
mittee’s National Advisory Council 
considered the issue of the implemen- 
tation of the Prompt Payment Act 
during its meeting on October 25, 
1985, and adopted a resolution. 

Mr. President, I ask unanimous con- 
sent that a copy of the October 25, 
1985, resolution of the National Advi- 
sory Council on implementation of the 
Prompt Payment Act be printed in the 
Recorp following my statement. 

The issue of implementational prob- 
lems regarding the Prompt Payment 
Act was also surfaced by many small 
business owners during the State and 
regional meetings that preceded the 
White House Conference on Small 
Business, which was held August 17- 
21, 1986. Implementation of the 
Prompt Payment Act was one of the 
conference’s agenda items, as a result 
of resolutions adopted at these prepar- 
atory State conferences. A resolution 
calling for vigorous enforcement of 
the act and suggesting a series of 
amendments finished among the top 





October 15, 1986 


40 recommendations from a starting 
agenda of over 400 issue items. 

Mr. President, I ask unanimous con- 
sent that a copy of the recommenda- 
tion concerning the Prompt Payment 
Act adopted by the White House Con- 
ference on Small Business on August 
21, 1986, be printed in the Recorp fol- 
lowing my statement. 

Given The Small Business Commit- 
tee’s sustained interest in small busi- 
ness participation in the Federal pro- 
curement market, Senator BUMPERS 
and I decided to act on the resolution 
of the committee’s National Advisory 
Council. Senator TRIBLE took the lead 
in conducting oversight hearings. 

On December 2, 1985, Senator 
TRIBLE chaired a Small Business Com- 
mittee field hearing in Norfolk, VA. 
Representatives of small firms provid- 
ing supplies, an array of services, and 
construction to various Government 
agencies provided testimony. A very 
extensive statement was presented by 
the Prompt Pay Coalition. The testi- 
mony expressed three basic themes. 
First, the Prompt Payment Act has 
substantially improved the billpaying 
practices of those executive agencies 
which are subject to its provisions. 
Second, many agencies have devised 
various stratagems, based on ambigu- 
ities in the act, which have permitted 
them to pay late without incurring 
late payment interest penalties, princi- 
pally by delaying the start of the pay- 
ment clock. Third, agency implement- 
ing regulations have restricted the 
act’s application, and thus its protec- 
tions, with regard to certain types of 
payments due to contractors, most no- 
tably, construction progress payments, 
and partial and periodic payments 
under supply and service contracts. 
Agency testimony was received from 
Navy personnel representing Defense 
agency experience and GSA represent- 
atives on behalf of the civil agencies. 
After a careful consideration of this 
extensive hearing record, additional 
materials submitted to the committee 
by individual contractors and the asso- 
ciations comprising the Prompt Pay 
Coalition, as well as OMB’s reports to 
the Congress on agency performance 
under the Prompt Payment Act for 
fiscal years 1982, 1983, and 1984, Sena- 
tor TRIBLE directed committee staff in 
the preparation of what became the 
Prompt Payment Act Amendments of 
1986. It should be noted that extensive 
informal staff discussions preceded 
the bill. These discussions involved not 
only groups representing small busi- 
ness Government contractors but indi- 
viduals within OMB’s financial man- 
agement division. A discussion draft 
was widely circulated for comment. 
Copies were provided to OMB, as well 
as the General Accounting Office 
[GAO] task force conducting a review 
of the act’s implementation in re- 
sponse to a request from Representa- 
tive Jack Brooks in his capacity as 


CONGRESSIONAL RECORD—SENATE 


chairman of the Legislation and Na- 
tional Security Subcommittee of the 
House Government Operations Com- 
mittee. 

On May 21, 1986, Senator TRIBLE in- 
troduced S. 2479. He was joined by 20 
original cosponsors that included most 
of the members of the Small Business 
Committee and many of the key spon- 
sors of the original Prompt Payment 
Act legislation, including Senators 
DANFORTH and CHILES. 

Senator TRIBLE pressed forward for 
a full committee hearing on the imple- 
mentation of the Prompt Payment 
Act, which was held on June 19, 1986. 
At this all-day hearing extensive testi- 
mony was received from 13 witnesses, 
principally representing small business 
Government contractors. Many addi- 
tional statements were submitted for 
the record. 

Testimony was presented on behalf 
of the Prompt Pay Coalition, the Na- 
tional Federation of Independent 
Business [NFIB], the Small Business 
Legislative Council [SBLC], the Asso- 
ciated General Contractors of America 
[AGC], the American Subcontracting 
Association [ASA], and others. Most 
of their testimony followed the 
themes of the previous field hearing, 
but expanded to a national scope. Es- 
pecially useful testimony comparing 
the objectives of the Prompt Payment 
Act and agency implementation during 
the first 3 years was presented by 
Christopher R. Brewster, who served 
as staff director to the former Sub- 
committee on Federal Expenditures, 
Research and Rules at the time S. 
1131 was considered and enacted. John 
J. Lordan, OMB’s Deputy Associate 
Administrator for Financial Manage- 
ment presented a statement from the 
OMB Director. Althrough not a legis- 
lative hearing, most of the witnesses, 
including the OMB representative, 
commented on S. 2479. All of the pri- 
vate sector witnesses supported Sena- 
tor TRIBLE’s bill. OMB’s testimony ac- 
knowledged that the bill addressed 
valid implementational problems. 
However, as expected, they opposed a 
legislative solution, preferring to make 
the necessary improvements though 
amendments to OMB Circular A-125— 
prompt payment—the issuance of ap- 
propriate implementing procurement 
regulations in the Federal Acquisition 
Regulation [FAR], and other adminis- 
trative actions. These arguments 
failed to persuade me. In fact, as has 
already been noted by others, the pro- 
posed FAR regulations to implement 
the act would operate as a virtual reg- 
ulatory repeal of the Prompt Payment 
Act. 

Our full committee hearing did de- 
velop one new issue of substantial sig- 
nificance: whether the Prompt Pay- 
ment Act should be amended to pro- 
vide protection to subcontractors 
under Federal construction contracts. 
Testimony from the witnesses repre- 


31263 


senting ASA and the Associated Speci- 
ality Contractors [ASC] addressed this 
issue extensively, strongly urging such 
an amendment to the act. Support for 
such an amendment was also included 
in the testimony of the witnesses rep- 
resenting the Prompt Pay Coalition, 
NFIB, and SBLC. AGC’s witness op- 
posed such an amendment on the basis 
that it would be an unwarranted gov- 
ernmental intrusion into what is es- 
sentially a private contractual rela- 
tionship between the prime contractor 
and its subcontractors. As a fundamen- 
tal policy, AGC opposes any govern- 
mental intrusion on the principle of 
privity of contract. 

Based on the extensive testimony 
presented at the committee’s June 19 
hearing, I support such coverage and 
commend Senator CoHEN and his Sub- 
committee on Oversight of Govern- 
ment Management for tackling this 
tough issue. I believe that the lan- 
guage which we are considering today 
does what’s needed. It assures that an 
adequate payment clause is included 
in the agreements negotiated between 
the prime contractor and its subcon- 
tractors. It assures that the payment 
term incorporated in such payment 
clauses will reflect prevailing industry 
standards. Finally, it provides the nec- 
essary enforcement mechanism by en- 
titling the subcontractor to late pay- 
ment interest penalties on the same 
basis, and at the same rate, as the 
prime contractor is now entitled to 
late payment interest penalties from 
the Government. 

After reviewing the extensive array 
of contract clauses currently mandat- 
ed by the FAR for inclusion in the 
subcontracts awarded by a Federal 
construction contractor, I cannot 
accept the argument that this provi- 
sion is an unwarranted intrusion into a 
private contractual relationship. Fur- 
ther, after reviewing the explanation 
of this provision contained in the sum- 
mary of the bill accompanying the 
statement of the chairman of the 
Committee on Governmental Affairs, I 
cannot accept the argument that the 
provision will inevitably embroil the 
Government in disputes between 
prime contractors and their subcon- 
tractors. On the contrary, I believe 
that the bill’s provisions requiring a 
complete and enforceable payment 
provision in construction subcontrac- 
tors will go a long way to avoiding 
prime contractor-subcontractor con- 
flict, to their benefit as well as the 
Government’s. 

Mr. President, it is unnecessary for 
me to comment further on the bill’s 
provisions. The summary of provisions 
which Senator Rot has included with 
his statement provides a comprehen- 
sive analysis of its provisions and their 
intended purpose. 

Nonetheless, in considering this bill 
and the underlying act which it is de- 





31264 


signed to improve, it is important that 
one basic concept remain in clear 
focus: we are talking about moneys 
owed to contractors for work that they 
have performed for the Government 
in conformity with their contractual 
responsibilities. The Government has 
determined that it has gotten what it 
contracted to obtain; the only issue is 
fulfillment of the Government's. obli- 
gation to pay. The Prompt Payment 
Act’s requirements operate, and its 
protections adhere, only if the con- 
tractor has performed. 

Mr. President, this legislation has 
the broad support of the small busi- 
ness community. My colleague from 
Virginia (Mr. Triste) and my col- 
league from Maine (Mr. CoHEN) have 
both noted many of the groups who 
worked hard to get the Prompt Pay- 
ment Act in 1982, who have closely 
monitored its implementation, and 
who have assisted in shaping and 
moving these amendments. I would be 
remiss if I did not cite the help provid- 
ed by them. Special thanks must go to 
the Prompt Pay Coalition under the 
able leadership of Kenton Pattie. A 
listing of the associations that com- 
prise the coalition is included with 
Senator TRIBLe’s remarks. Steadfast 
support ‘as also been provided by 
other members of the coalition includ- 
ing the National Federation of Inde- 
pendent Business, the Small Business 
Legislative Council, the American Sub- 
contractors Association, the National 
Electrical Contractors Association, the 
National Association of Plumbing- 
Heating-Cooling Contractors, and the 
Associated Speciality Contractors. 
Small Business United has also lent its 
strong hand to the advancement of 
this legislation. 

Mr. President, I ask unanimous con- 
sent that letters of support from sev- 
eral of these associations be printed in 
the Recorp following my statement. 

In addition, Mr. President, the 
Prompt Payment Act has enjoyed the 
strong support of the Associated Gen- 
eral Contractors of America. They 
have helped monitor its implementa- 
tion in the construction industry. 
While expressing strong reservations 
concerning the bill’s coverage of con- 
struction subcontractors, a matter on 
which we differ, I must recognize their 
strong support for the other provi- 
sions of the Prompt Payment Act 
Amendments of 1986. 

Finally, Mr. President, I must recog- 
nize and commend my friend from Vir- 
ginia, Mr. TrrBxe, for his leadership on 
this important small business issue. 
From the adoption of the resolution 
by the Small Business Committee’s 
National Advisory Council until 
today’s impending approval by the 
Senate, he has worked with patience 
and determination to shape and move 
this bill, after thoroughly immersing 
himself in the background, purposes, 


CONGRESSIONAL RECORD—SENATE 


and operational details of the Prompt 
Payment Act. 

Mr. President, the small business 
community is also indebted to my col- 
league from Maine (Mr. CoHEN), chair- 
man of the Subcommittee on Over- 
sight of Government Management, 
and my friend from Delaware (Mr. 
RotH), chairman of the full Govern- 
mental Affairs Committee. Although 
their legislative agendas were already 
quite full, they gave this bill their full 
attention, made significant improve- 
ments, and moved it forward promptly 
for consideration today by the full 
Senate. Their cooperation and assist- 
ance was essential, and I know the 
small business community joins me in 
thanking them. 

Mr. President, I urge all my col- 
leagues to join me in voting to adopt 
S. 2479, the Prompt Payment Act 
Amendments of 1986. 

There being no objection, the mate- 
rial was ordered to be printed in the 
Recor», as follows: 


RESOLUTION OF NATIONAL ADVISORY COUNCIL 
ON IMPLEMENTATION OF THE PROMPT Pay- 
MENT AcT 


Whereas, the members of the National 
Advisory Council to the Senate Committee 
on Small Business, having considered the 
Federal agency implementation of the 
Prompt Payment Act, Public Law 97-177, 
during the three years since it became effec- 
tive on October 1, 1982, have found that the 
objectives of the legislation and the intent 
of Congress are not being fully attained; 

Whereas, some Federal agencies continue 
to make payments beyond the payment date 
specified in its contracts or beyond the 
times specified in the Act, without the pay- 
ment of interests; 

Whereas, some Federal agencies are abus- 
ing the fifteen day “grace period” provided 
in the Act by failing to initiate payment 
action on contractors’ invoices until the ex- 
piration of thirty days; 

Whereas, some Federal agencies are delay- 
ing payments to small business contractors 
by rejecting their invoices as “improper” 
after the fifteen days provided by the Act; 

Whereas, some Federal agencies are delay- 
ing payments to small business contractors 
by refusing formal acceptance of supplies, 
services or construction so as to delay the 
start of the payment periods mandated by 
the Act, after which interest must be paid; 

Whereas, some Federal agencies are fail- 
ing to automatically pay interest due to 
small business contractors, rather requiring 
them to make a demand for payment of in- 
terest contrary to the Act’s self-enforcing 
intent; 

Whereas, these problems with agency im- 
plementation of the Act are placing sub- 
stantial financing burdens on small business 
government contractors, and acting as an 
obstacle to small business participation in 
the Federal procurement market, thus de- 
nying the Government the advantages of 
the competition industry, and innovation 
provided by many small businesses; 

Therefore, be it Resolved, That, the Na- 
tional Advisory Council to the Senate Com- 
mittee on Small Business calls upon the 
Congress, especially the Senate and House 
Committees on Small Business, the Senate 
Governmental Affairs Committee, and the 
House Government Operations Committee 


October 15, 1986 


which were instrumental in the passage of 
the Prompt Payment Act, to: 

1. conduct oversight hearings on the im- 
plementation of the Prompt Payment Act 
through OMB Circular A-125, the Federal 
Acquisition Regulation, and the implement- 
ing regulations of individual Federal agen- 
cies; and 

2. to consider modifications to the Prompt 
Payment Act that will address demonstrat- 
ed implementational abuses by some Feder- 
al agencies and assure attainment of Con- 
gressional intent and objectives in passing 
the Act. 


[The White House Conference on Small 
Business—August 17-21, 1986] 


FINAL RECOGNITION PERTAINING TO PROMPT 
PAYMENT AcT oF 1982 


32, Prompt pay legislation should be ex- 
tended to cover postal service and federally 
assisted procurement and strengthened 
through an amendment to the 1982 Prompt 
Payment Act to eliminate the fifteen day 
grace period; require automatic payment of 
interest penalties; more clearly define that 
the entire payment process, including ac- 
ceptance, must occur within 30 days; include 
progress payments and retainage; and re- 
quire prime contractors to pay their sub- 
contractors within seven days after receiv- 
ing payment from the government or incur 
interest payment penalties. In addition, 
when the government pays the prime con- 
tractors late, interest payments shall flow 
through from prime contractors to subcon- 
tractors on a pro-rata basis. The prompt 
payment act shall be vigorously enforced by 
all branches of government. [R.A. 277, Pro- 
curement; 652 votes] 

NATIONAL FEDERATION 
OF INDEPENDENT BUSINEsS, 
Washington, DC, October 3, 1986. 
Hon. LoweLL WEICKER, Jr., 
U.S. Senate, 
Washington, DC. 

Dear LOWELL: On behalf of the more than 
500,000 small business owner members of 
NFIB, I urge your support for S. 2479, the 
Prompt Payment Amendments of 1986, in- 
troduced by Senator Paul Trible. The bill 
was reported out of the Senate Governmen- 
tal Affairs Committee, and we anticipate 
action by the full Senate before adjourn- 
ment. 

NFIB supported passage of the original 
Prompt Pay Act of 1982. We know this is an 
important issue for small business. Main- 
taining a steady cash flow is an important 
issue for small business. Maintaining a 
steady cash flow is a chronic problem for 
many small firms, a problem which is exac- 
erbated if bills owed by the government are 
not paid on time. 

Since enactment of this law, government 
contractors of all sizes report obvious im- 
provements in the payment process. Never- 
theless, we continue to hear from our mem- 
bers on spotty implementation of the Act. 

S. 2479 amends the Prompt Payment Act 
to: 
Clearly define “receipt of invoice’; 

Phase out the 15-day grace period; 

Require interest penalties be paid auto- 
matically; 

Require interest penalties be paid on late 
progress payments and retained amounts 
for construction; 

Extend coverage of the Act to subcontrac- 
tors on Federal construction projects; 





October 15, 1986 


Forbid taking early discounts unless the 
agency actually complies with the payment 
terms; and 

Require that the annual reports on the 
implementation of the Act provide more de- 
tailed information. 

S. 2479 is particularly important now be- 
cause of recent actions proposed by the 
agencies, including: 

(1) Regulations proposed by the Federal 
Acquisition Regulation Council that would 
give federal agencies up to 80 days to pay 
their bills; 

(2) Testimony by Deputy Secretary of De- 
fense William H. Taft, IV, that DOD will 
delay payments for 40 days beginning in 
fiscal 1987; and 

(3) An announcement by the Commodity 
Credit Corporation that it is going to “sus- 
pend” the Prompt Payment Act. 

NFIB believes that this legislation is nec- 
essary not only to protect businesses who 
contract with the federal government, but 
also to send a firm message to the agencies 
that Congress expects them to pay their 
bills on time. 

S. 2479 has 41 cosponsors, and we would 
appreciate your support when this legisla- 
tion reaches the Senate floor. This will be a 
Key Small Business Vote. 

Sincerely, 
Joun J. Mottey III, 
Director of Federal Legislation. 
SMALL BUSINESS 
LEGISLATIVE COUNCIL,® 
Washington, DC, October 3, 1986. 
Hon. Lowe. P. WEICKER, Jr., 
U.S. Senate, Hart Senate Office Building, 
Washington, DC. 

Dear SENATOR WEICKER: On behalf of the 
Small Business Legislative Council I wish to 
express our support for S. 2479, The Prompt 
Payment Amendment Act, as reported by 
the Committee on Governmental Affairs on 
October 2, 1986. 

The Small Business Legislative Council 
(SBLC) is a permanent, independent coali- 
tion of nearly ninety trade associations rep- 
resenting over four million small businesses. 
Our sole mission is to represent the inter- 
ests of small business in national policy mat- 
ters. 

Small business played an important role 
in securing passage of the original prompt 
payment act and at the recent White House 
Conference on Small Business, 1,800 small 
business owners voted to recommend enact- 
ment of the reforms included in this bill as 
one of their final sixty priorities. 

We are pleased with the progress made to 
date as a result of the original law. Howev- 
er, as one might suspect, we could not an- 
ticipate all of the potential loopholes which 
existed in the original law. The bill reported 
by this Committee will result in significant 
improvements in the prompt payment 
system. We also believe it is time to recog- 
nize the importance of prompt payment to 
all businesses such as subcontractors, and 
we are pleased with the provisions of the 
bill which address this aspect of the prob- 
lem. 

We consider this matter most urgent and 
ask you to ensure consideration of this 
measure before adjournment. 

Sincerely, 
Joun S. SataGaJ, 
President. 
MEMBERS OF THE SMALL BUSINESS 
LEGISLATIVE COUNCIL 


Alliance of Independent Store Owners and 
Professionals. 


CONGRESSIONAL RECORD—SENATE 


American Association of MESBICs. 

American Association of Nurserymen. 

American Consulting Engineers Council. 

American Dental Trade Association. 

American Sod Producers Association. 

American Subcontractors Association. 

American Textile Machinery Association. 

American Trucking Associations, Inc. 

Architectural Precase Association. 

Association of Physical Fitness Centers. 

Association of Small Business Develop- 
ment Centers. 

Association of Small Research, Engineer- 
ing and Technical Service Companies. 

Automotive Service Association. 

Automotive Warehouse Distributors Asso- 
ciation. 

Building Service Contractors Association 
International. 

Business Advertising Council. 

Chicago Gift Show Inc. 

Christian Booksellers Association. 

Dental Dealers of America, Inc. 

Direct Selling Association. 

Electronic Representatives Association. 

Florists’ Transworld Delivery Association. 

Helicopter Association International. 

Independent Bakers Association. 

Independent Bankers Association of 
America. 

Independent Insurance Agents of Amer- 
ica, Inc. 

Independent Sewing Machine Dealers As- 
sociation. 

Institute of Certified Business Counselors. 

International Bottled Water Association. 

International Communications Industries 
Association. 

International Franchise Association. 

International Reciprocal Trade Associa- 
tion. 

Jewelers of America. 

Latin American Manufacturers Associa- 
tion. 

Machinery Dealers National Association. 

Manufacturers Agents National Associa- 
tion. 

Marking Device Association. 

Menswear Retailers of America. 

National Association for the Self-Em- 
ployed. 

National Association of Aircraft and Com- 
munication Suppliers. 

National Association of Brick Distributors. 

National Association of Catalog Show- 
room Mechandisers. 

National Association of Chemical Distrib- 
utors. 

National Association of Development 
Companies. 

National Association of Home Builders. 

National Association of Manufacturing 
Opticians. 

National Association of Minority Contrac- 
tors. 

National Association of Plumbing-Heat- 
ing-Cooling Contractors. 

National Association of Realtors. 

National Association of Retail Druggists. 

National Association of Small Business In- 
vestment Companies. 

National Association of the Remodeling 
Industry. 

National Association of Truck Stop Opera- 
tors. 

National Association of Women Business 
Owners. 

National Candy Wholesalers Association. 

National Coffee Service Association. 

National Council for Industrial Innova- 
tion. 

National Electrical Contractors Associa- 
tion. 

National Fastener Distributors Associa- 
tion. 


31265 


National Grocers Association. 

National Independent Dairy-Foods Asso- 
ciation. 

National Moving and Storage Association. 

National Office Products Association. 

National Parking Association. 

National Precast Concrete Association. 

National Shoe Retailers Association. 

National Small Business Association. 

National Society of Public Accountants. 

National Tire Dealers & Retreaders Asso- 
ciation. 

National Tooling and Machining Associa- 
tion. 

National Tour Association. 

National Wine Distributors Association. 

Opticians Association of America. 

Petroleum Marketers Association. 

Power and Communications Contractors 
Association. 

Retail Floorcovering Institute. 

Retail Tobacco Dealers of America. 

Small Business Council of America, Inc. 

Smaller Manufacturers Council. 

Society of American Florists. 

Specialty Advertising Association Interna- 
tional. 

United Bus Owners of America. 

Urethane Foam Contractors Association. 

Web Sling Association. 

WattuamM, MA, October 9, 1986. 

Hon. LOWELL P. WEICKER, 

Chairman, Senate Small Business Commit- 
tee, Russell Senate Office Building, 
Washington, DC. 

Dear Mr. CHAIRMAN: On behalf of the in- 
dividual members of the associations 
making up Small Business United, we wish 
to urge your support of passage of S. 2479, 
the Prompt Pay Amendments Act. Regretta- 
bly, a host of executive branch agencies 
have seen fit to ignore the spirit and intent 
of the 1982 Prompt Payment Act as was 
amply demonstrated in Senate and House 
hearings that were held earlier this year ad- 
dressing the implementation of Public Law 
97-177. 

As you are aware, the Senate Small Busi- 
ness Committee Advisory Council adopted a 
resolution last year pointing out that feder- 
al agencies ignore statutory payment dates, 
consciously wait as long as thirty days to 
begin payment action, purposely wait longer 
than fifteen days to reject incorrectly sub- 
mitted invoices, refuse acceptance of sup- 
plies or services to delay the beginning of 
required payment periods, and fail to rou- 
tinely pay interest dues as stipulated by law. 

S. 2479 addresses and recitifies many of 
these concerns. Its passage now will signal 
OMB and the abusing agencies that the 
above mentioned shortcomings should be 
rectified administratively between now and 
the beginning of the 100th Congress or else 
face the legislative consequences next year. 

In closing, we wish to thank you, the 
Ranking Minority Member, Senator Bump- 
ers, and the other members of the Senate 
Small Business Committee for their support 
and leadership in helping to resolve this 
pernicious problem that threatens to under- 
mine your collective efforts promoting in- 
creased government competition. 

Sincerely, 
SAMUEL N. Hope III, 
President, 

Mr. NICKLES. Mr. President, I take 
great pleasure in supporting S. 2479, 
the Prompt Payment Act Amend- 
ments of 1986. As a cosponsor of this 
legislation, I think S. 2479 represents a 
significant and carefully crafted im- 





31266 


provement of a law which has received 
overwhelming support since its enact- 
ment in 1982. To the Nation’s business 
community and particularly to small 
businesses, the Prompt Payment Act 
represents the Federal Government's 
commitment to adhere to a standard 
of fairness and reliability in its com- 
mercial transactions. 

The Committee on Small Business, 
on which I serve, held hearings on 
prompt pay earlier this year, which 
were chaired by my distinguished col- 
league and the principal author of S. 
2479, Senator Triste. At the hearing 
in June, I expressed my hope that the 
hearing and the interest it generated 
would lead to remedies to the prob- 
lems that have been recounted by my 
constituents and other small business 
owners. I am delighted to see that the 
process has served us so well by bring- 
ing this legislation to the floor quickly 
for a vote. 

The hearings on prompt pay were 
enlightening because they raised a 
number of issues that have either 
been unresolved by existing law or, in 
some cases, have been the subject of 
controversy because of administrative 
interpretation of the act. 

S. 2479 deserves our support. The 
Prompt Payment Act established a 
standard of fairness for the Federal 
Government to follow in doing busi- 
ness with the many firms that we rep- 
resent. S. 2479 renews our commit- 
ment to making that standard work 
not only for the benefit of business 
but for the Government and ultimate- 
ly the taxpayer as well. Mr. President, 
on behalf of small business and good 
government, I urge the Senate to ap- 
prove this bill. 

Mr. WALLOP. Mr. President, I rise 
in support of S. 2479, the Prompt Pay- 
ment Act amendments and I would 
like to share with the Senate some of 
the findings of a new report from the 
General Accounting Office. 

As you know, we passed the Prompt 
Payment Act in 1982. Since then, com- 
plaints have continued and the GAO 
looked into the situation. Here is some 
of what they found: 

Twenty-four percent of federal vendor 
payments, involving $7.7 billion, were made 
after the due date during its 4-month test 
period. Some were extremely late. For ex- 
ample, GAO found that 7 percent of the 
late payments in its sample were between 46 
and 150 days late and about 1.3 percent 
were more than 90 days late. Page 3 

Required interest penalties were seldom 
paid. GAO’s evaluation of its sample pay- 
ments showed that agencies paid only one 
of every six penalties owed. GAO estimated 
that agencies should have paid approxi- 
mately $15 million in late payment penalties 
during the 4 months .. . Page 3 

OMB has reported annually since 1983 
that the government pays over 90 percent of 
its bills on time. This is not an accurate as- 
sessment... Page 5 

The 372 late payments in our adjusted 
universe ranged up to about 5 months late; 


CONGRESSIONAL RECORD—SENATE 


however, the vast majority (96 percent were 
paid within 60 days of the due date. Page 21 

Although payment performance is not yet 
fully satisfactory for either civil or defense 
activities, our analysis showed that civil 
agency payment centers paid invoices late 
more than twice as often as defense centers 
. . - Page 29 

Collectively, however, federal agencies 
still face a major challenge to improve the 
government’s image as a bill payer. Only 
three fourths of the bills are paid by the 
due date and many of these are paid too 
soon. In addition, agencies did not consist- 
ently take discounts only during the offered 
time frame or voluntarily pay any interest 
penalties owed. Page 31. These come from 
GAO's Prompt Payment Act: Agencies Have 
Not Fully Achieved Available Benefits 
(GAO/AFMD-86-69), August, 1986. 

Mr. President, the GAO report is 
enough to convince anyone that the 
goals we set with the 1982 act are not 
being met today. That is why we need 
to pass S. 2479. As a cosponsor of this 
bill, I am convinced that we must con- 
tinue to apply congressional pressure 
on the agencies, to set the rules they 
have to act by, until they achieve 
prompt payment. Without S. 2479, I 
fear we will once again face complaints 
about late pay throughout the 100th 
Congress. 

Mr. WARNER. Mr. President, I am 
pleased to rise in support of S. 2479, 
the Prompt Payment Act Amend- 
ments of 1986. This important meas- 
ure amends and strengthens the 
Prompt Payment Act of 1982 which I 
cosponsored during the 97th Congress. 

I am particularly proud to note that 
S. 2479 was introduced by my col- 
league from Virginia, Senator Pau. 
TRIBLE. Senate action on this measure 
is a tribute to Senator TRIBLE’s deter- 
mination to address a problem facing 
many small businesses, both in Virgin- 
ia and across the Nation. That prob- 
lem involves the timeliness of the U.S. 
Government in the payment of its 
debts. 

Senator TRIBLE has conducted two 
hearings on this matter, first in Nor- 
folk, VA, in December of 1985, and 
then in Washington, DC, on June 19, 
1986. As documented by the many 
small business representatives who tes- 
tified at the hearings, the impact of 
the 1982 law has not lived up to our 
expectations. Executive branch agen- 
cies continue to skirt the law through 
the use of grace periods and suspen- 
sions. Meanwhile, many small busi- 
nesses dealing with the Government 
find themselves living hand to mouth, 
trying to meet expenses while waiting 
for an overdue Government payment. 

Mr. President, we would not have 
the bill before us today without the 
support of Senators CoHEN and Rots, 
the respective chairmen of the Gov- 
ernmental Affairs Subcommittee on 
Oversight of Government Manage- 
ment and the full Governmental Af- 
fairs Committee. While the Small 
Business Committee has exercised its 
oversight powers with the hearings 


October 15, 1986 


and investigation, Governmental Af- 
fairs has been the committee of juris- 
diction. 

What we have had, basically, is a co- 
alition of groups seeking a workable 
solution to the problem of the Govern- 
ment not paying its bills on time. S. 
2479 is the product of that coalition, a 
product cosponsored by more than 40 
Members of this body. 

I strongly encourage its adoption. 

Mr. DURENBERGER. Mr. Presi- 
dent, today we have a simple, but im- 
portant task to complete with the pas- 
sage of S. 2479, the Prompt Payment 
Act Amendments of 1986. It is a task 
that Congress thought had been ac- 
complished with the passage of the 
original Prompt Payment Act of 1982, 
of which I was a cosponsor. 

That task is to get Federal agencies 
to pay their bills on time. Though pay- 
ment policies have improved since the 
1982 act was passed, many agencies 
have exploited serious loopholes in 
that legislation and have strayed far 
away from the intent of the act. 

Several abuses were documented in 
June hearings before the Committee 
on Small Business on implementation 
of the Prompt Payment Act. These 
abuses have not been corrected. 
Indeed, recent policy statement by 
various Federal agencies have intensi- 
fied the concern. 

For example, the Department of De- 
fense has stated its intention of paying 
bills in 45 days rather than in 30 days 
“to save the taxpayer money.” In 
other words, it plans to use the 15-day 
grace period routinely for all pay- 
ments. It has abandoned the 30-day 
standard and has instituted its own 44- 
day standard. This approach is neither 
consistent with the intent of the act, 
nor is it consistent with the state- 
ments in 1982 when the DOD request- 
ed the 15-day grace period to provide 
some latitude in exceptional cases. 

One prominent advocate of Prompt 
Payment Act improvements has 
summed up the implications of this 
DOD policy in an insightful way: 

Not only does their plan undermine the 
intent of the Act, but it misleads the Con- 
gress in a theory that says: late payments 
equal a savings to the taxpayer. As you 
know, this is no savings but merely a delay 
in payment. It is, in effect, borrowing $2.8 
billion in late payments from small and 
large businesses. This is interest-free money 
so that at the end of the fiscal year, some 
payments would be postponed until the 
next fiscal year. 

Rather than saving the taxpayer 
money, it will cost the taxpayer 
dearly. Companies which know that 
the Government is going to pay them 
later will increase prices to cover the 
added cost of doing business with the 
Government. So, in the long run, the 
Government will pay later, but will 
pay much more than it should for the 
same goods and services. 





October 15, 1986 


Mr. President, I join my colleagues 
Senator Trrsie, Senator CoHEN, and 
my fellow members of the Subcommit- 
tee on Oversight of Government Man- 
agement, in supporting the practical 
and commonsense amendments to the 
act contained in S. 2479. 

The amendments would take a most 
significant step in restoring the confi- 
dence of businesses providing our Fed- 
eral Government with goods and serv- 
ices. By conducting contractual rela- 
tionships in a professional and busi- 
ness-like manner, the Federal Govern- 
ment creates an environment where 
high standards of conduct are expect- 
ed and considered the norm. Finding 
loopholes in one piece of legislation 
only encourages that activity in other 
arenas. 

For example, the amendments would 
phase out the 15-day grace period. 
After 4 years, that grace period has 
become an excuse for abuse rather 
than a needed cushion for exceptional 


cases. 

Mr. President, I applaud the efforts 
of those who worked on the original 
legislation and particularly the cur- 
rent efforts to ensure that the Prompt 
Payment Act of 1982 is correctly im- 
plemented. In this way, we send a 
strong and credible message to every- 
one in Government and in the private 
sector that sound business practices 
have a high priority. 

Mr. D’AMATO. Mr. President, I rise 
today to commend my colleagues for 
passing the Prompt Payment Act 
Amendments of 1986. This legislation 
amends the Prompt Payment Act, 
Public Law 97-177, and corrects abu- 
sive practices of some Government 
agencies and to assure the implemen- 
tation of congressional intent and ob- 
jectives. 

The Prompt Payment Act estab- 
lished payment terms for Government 
contractors providing supplies, serv- 
ices, or construction to Federal agen- 
cies if the individual contract did not 
specify a specific payment term. This 
law was necessary to correct the abu- 
sive payment practices of some Feder- 
al Government agencies; long delays in 
paying its contractors is injurious to a 
business enterprise, especially a small 
business. Therefore, it became neces- 
sary to assure that businesses were 
paid in a timely manner or that inter- 
est penalties be paid for late pay- 
ments. 

Mr. President, although the Prompt 
Payment Act has tremendously in- 
creased the timeliness of payments, 
some agencies continue to delay pay- 
ment by exploiting the act’s purposes. 
The Prompt Payment Act Amend- 
ments of 1986 will correct the abuses 
in a reasonable and fair manner. 

Mr. President, I thank my colleagues 
for acting expeditiously on this legisla- 
tion. I especially commend the distin- 
guished chairman, Senator WEICKER, 
and Senators TRIBLE, BUMPERS, and 


CONGRESSIONAL RECORD—SENATE 


Coxuen for their diligence and hard 
work in ensuring passage of this im- 
portant legislation. 

Mr. DANFORTH. Mr. President, I 
am pleased to offer my support for S. 
2479, the Prompt Payment Act 
Amendments of 1986. This legislation 
would effect certain changes in the 
Prompt Payment Act to ensure that 
Government contractors are paid on 
time, and that interest penalties are 
paid in those cases where payment is 
late. Earlier this year, I joined Senator 
TRIBLE as an original cosponsor of S. 
2479, and I commend him and Senator 
Couen for their work on behalf of this 
legislation. 

Mr. President, I was one of the prin- 
cipal authors of the original Prompt 
Payment Act, which was intended to 
bring some order into the Govern- 
ment’s bill paying practices. The histo- 
ry of this legislation was detailed by 
my former counsel, Christopher Brew- 
ster, in testimony before the Senate 
Small Business Committee earlier this 
year. I will ask that a copy of his testi- 
mony be printed in the Recorp follow- 
ing my statement. 

Enactment of the Prompt Payment 
Act followed a report issued by the 
General Accounting Office in 1978, 
which found that some 30 percent of 
Federal invoices were paid late for no 
reason whatsoever, and that still 
others were paid much earlier than re- 
quired. The Government's bill pay- 
ment performance was a plain and 
simple case of sloppy management. It 
was costing the Government money in 
foregone interest on early payments. 
It was costing Government contractors 
money on late payments. And it was 
discouraging contractors from doing 
business with the Government. The 
cost was staggering. The GAO estimat- 
ed that some $9.8 billion in Federal 
contracts were paid late just during 
the 6-month sampling period of the 
GAO study—at a cost to Government 
contractors, many of them small com- 
panies, of some $30 million. To correct 
this problem, the Prompt Payment 
Act requires specific payment terms in 
Government contracts, requires the 
Government to pay bills when due, 
and awards interest penalties to Gov- 
ernment contractors when the Gov- 
ernment pays late. 

I am pleased to say that the 3 years 
since enactment of the Prompt Pay- 
ment Act have seen a measurable im- 
provement in the Government’s bill 
payment performance. Moreover, the 
Prompt Payment Act has proved to be 
a model for similar State legislation. 
Since its enactment in 1982, many 
States have enacted prompt payment 
legislation for State contracts, includ- 
ing my own State of Missouri in 1985. 
Nonetheless, more work must be done. 
Strengthening the Prompt Pay Act 
was a principal recommendation of the 
recently concluded White House Con- 


31267 


ference on Small Business. It is easy to 
understand why. 

Since 1983, the OMB has reported 
that fully 99 percent of Government 
contracts are paid on time, but this 
statistic masks some troubling facts. 
In testimony before the House Gov- 
ernment Operations Committee only 2 
months ago, the GAO reported that 
agencies paid only 75 percent of their 
invoices by the due date. The disparity 
between the GAO and the OMB data 
is accounted for, in large part, by the 
fact that OMB did not consider a pay- 
ment as late unless an interest penalty 
was paid. For example, payments 
made after the due date but before the 
expiration of the 15-day grace period 
provided for in the act would not be 
considered late by OMB. Contractors 
would likely think otherwise. So do I. 
The routine use of the grace period, as 
reported by the GAO, is quite trou- 
bling. Indeed, one of the principal 
changes in the act that would be ef- 
fected by S. 2479 is the gradual elimi- 
nation of the grace period. I think this 
change in the law makes sense. 

When the Prompt Payment Act was 
written, the grace period was not part 
of the original Senate bill. It was 
added by the House, at the urging of 
the executive branch, to avoid pay- 
ment of numerous small interest pen- 
alties during the time it took for the 
executive branch to bring payment 
practices into line with the require- 
ments of the act. It was intended, in 
effect, as a safety valve, and a tempo- 
rary one at that. It was not intended 
to give the Federal Government carte 
blanche to pay its bills in 45 days 
when it was required to pay its bills in 
30 days. Nonetheless, the GAO reports 
that 20 percent of all invoices it re- 
viewed in its recent survey were paid 
during the grace period. 

Unfortunately, it appears that the 
availability of the grace period has 
proved to be an invitation to agencies 
to cut corners. In testimony before the 
Senate Appropriations Committee 
only this past August, Deputy Secre- 
tary of Defense William Howard Taft 
IV testified that the Department of 
Defense was “reviewing the flexibili- 
ties available to us under the Prompt 
Payment Act” as a means of cutting 
costs. Mr. Taft proposed that the De- 
partment pay its bills 10 days into the 
grace period to reduce outlays. 

I am pleased to note that the sub- 
committee has questioned Mr. Taft’s 
proposal, and that the chairman of 
the subcommittee, Senator Srevens, is 
a cosponsor of S. 2479. In my opinion, 
Mr. Taft’s proposal is no way for the 
Federal Government to do business. 
Money the Federal Government saves 
by paying its bills late is money earned 
at the expense of Government con- 
tractors—many of them small compa- 
nies that can ill afford delays in pay- 
ment. If the Federal Government 





31268 


promises payment in 30 days it should 
pay its bills in 30 days—not 45. 

In any event, the cost savings attrib- 
uted to late payment would likely 
prove short-lived. If the Federal Gov- 
ernment is saving money by paying its 
bills late it is only doing so because 
those goods and services were priced 
on the assumption that payment 
would be made in a timely fashion. If 
the Government is going to routinely 
pay its bills late it can and should 
expect to pay more for goods and serv- 
ices. It should also expect to find 
fewer companies interested in doing 
business. Unfortunately, abuse of the 
grace period can be expected for so 
long as the grace period remains avail- 
able. The grace period should be elimi- 
nated. 

Another troubling finding of the 
GAO report is the fact that agencies 
are not paying interest penalties. The 
GAO reports that five out of every six 
vendors in their survey did not receive 
interest penalties to which they were 
entitled. Moreover, some offices were 
flatly refusing to pay interest penal- 
ties unless forced to do so by their con- 
tractors. 

The Prompt Payment Act is intend- 
ed to be self-enforcing. Late payments 
carry an interest penalty. The GAO 
reports, however, that fully 24 of the 
39 payment centers reviewed in their 
study had unpaid penalties—and that 
3 of the 39 centers had local policies 
not to pay interest unless the vendors 
asked for it. Mr. President, this is 
wrong. If the Prompt Payment Act is 
to work as it was intended to work in- 
terest penalties should be paid when- 
ever bills are paid late. This is what 
the law requires now. Nonetheless, 
problems persist. The amendments ef- 
fected by S. 2479 would make it abso- 
lutely clear that interest penalties are 
to be paid to contractors automatical- 
ly. 
In addition to these concerns, it con- 
tinues to be the case that the Federal 
Government is taking discounts for 
prompt payment even when it fails to 
make payment in a timely fashion. 
The GAO reports that 18 percent of 
discounts taken by agencies in their 
sample were taken after the discount 
period had expired. It should not take 
an act of Congress to prevent this sort 
of practice, but apparently it does. S. 
2479 would expressly prohibit agencies 
from taking prompt payment dis- 
counts unless payment is made during 
the discount period. 

Finally, I am pleased to note the bill 
makes it clear that the U.S. Postal 
Service is covered by the requirements 
of the Prompt Payment Act. This has 
been a particularly vexing problem for 
several of my constituents. It was our 
intent to cover the USPS when the act 
was first written; S. 2479 will make 
coverage explicit. 

Mr. President, the recommendations 
made by this bill are nothing more 


CONGRESSIONAL RECORD—SENATE 


than a simple matter of fundamental 
fairness. It is not fair when the Gov- 
ernment promises payment to contrac- 
tors in 30 days and pays its bill in 45 
days—or longer. It is not fair when the 
Government ignores its responsibility 
to pay contractors interest penalties 
when it fails to pay its bills on time. 
And it is manifestly unfair when the 
Government takes prompt payment 
discounts without making prompt pay- 
ment. 

The administration has urged that 
we forgo this legislation in favor of ad- 
ministrative fixes for the problems 
identified by the GAO. I have great 
faith in the sincerity with which this 
proposal is made, but experience dic- 
tates that something stronger than an 
administrative fix is needed. The re- 
forms made by this legislation are 
sadly necessary. I strongly support 
them. 

Mr. President, I ask unanimous con- 
sent that the statement of Christo- 
pher R. Brewster to which I referred 
be printed in the Recorp. 

There being no objection, the state- 
ment was ordered to be printed in the 
ReEcorp, as follows: 


TESTIMONY OF CHRISTOPHER R. BREWSTER 


Mr. Chairman and members of the Com- 
mittee, my name is Christopher Brewster. 
Although I am currently in the private 
practice of law with the firm of Kaye, 
Scholer, Fierman, Hays & Handler, I served 
as Chief Counsel of what was then called 
the Subcommittee on Governmental Affairs 
during consideration of the legislation that 
became the Prompt Payment Act, P.L. 97- 
177, and in that capacity served as one of 
the principal staff drafters of the Senate 
bill. I am pleased to have this opportunity 
to testify before the Committee concerning 
the Prompt Payment Act. I salute you and 
Senator Trible for your leadership in under- 
taking these hearings, and in sponsoring S. 
2479, the Prompt Payment Act Amend- 
ments of 1986. 

The Subcommittee on Federal Expendi- 
tures was charged with oversight responsi- 
bility for the Federal procurement process. 
When Senator Danforth assumed the 
Chairmanship of the Subcommittee in 1981, 
he directed the staff to review the procure- 
ment system to identify opportunities for 
reform. To that end, the staff met with all 
sorts and conditions of government contrac- 
tors, from large multinational corporations 
to small mom and pop companies. In meet- 
ing after meeting—but most often in our 
meetings with small businesses—we repeat- 
edly heard complaints about the problems 
encountered in getting the government to 
pay its bills on time. Contractors recited 
story after story of delays in obtaining pay- 
ment that betrayed a shocking insensitivity 
on the part of the government to the hard- 
ships encountered by businesses, especially 
small businesses, when payments were late. 
To make matters worse, we were told that 
the Government sometimes had the gall to 
take “quick pay” discounts after making 
contractors wait weeks, or even months for 
payment. This anecdotal evidence was bol- 
stered by a 1978 GAO study that found 
some 30% of invoices were paid late for no 
good reason whatsoever. All in all, the GAO 
estimated that $9.8 billion in Federal con- 


October 15, 1986 


tracts were paid late during the six month 
sampling period covered by the study. 

We sought explanations from government 
managers and were met instead with lame 
excuses, At one point it was suggested to us 
that no real problem existed because the 
government's late payments were balanced 
out by many cases where the government 
paid bills a good deal earlier than it had to, 
an argument that reminded us of something 
Gracie Allen might have said to George 
Burns, and that somehow failed to give us 
great faith in the government’s financial 
managers. In short order, we became con- 
vinced that prompt payment simply was not 
a high priority for Federal agencies, and 
that no amount of administrative saber rat- 
tling or GAO studies would do anything to 
change the slipshod way in which the gov- 
ernment paid its bills. Therefore, Senator 
Danforth, together with Chairman Weicker 
and some 21 cosponsors, introduced S. 1131, 
the Delinquent Payments Act, which 
became, in due time, the Prompt Payment 
Act. The legislation, as you know, requires 
the Federal government to write payment 
due dates into its contracts, pay its bills 
when due, and pay interest when it fails to 
pay within 15 days after the payment due 
date. Interest penalties are to be paid out of 
agency budgets. 

I am very pleased, and to be honest, a 
little proud that the years following enact- 
ment of the Prompt Payment Act have seen 
a substantial improvement in the govern- 
ment’s bill paying practices. Nonetheless, 
there is no question that inequities remain, 
and that more can and should be done to 
ensure that government contractors are 
treated fairly by their government. 

I have read the transcript of the hearing 
that was held by Senator Trible in Norfolk 
concerning the implementation of the 
Prompt Payment Act, and I have reviewed 
the legislation that he introduced with 
Chairman Weicker, Senator Bumpers, Sena- 
tor Danforth, and others, to correct abuses 
that persist four years after the Prompt 
Payment Act was signed into law. 

The proposed amendments make good 
sense. Unfortunately, the problems identi- 
fied by the witnesses at the Norfolk hearing 
were not unexpected when the Prompt Pay- 
ment Act was first written. In large measure 
they stem from concessions that were made 
by Congress, at the urging of the Executive 
Branch, or from creative interpretations of 
the Act that simply ignore the plain lan- 
guage of the Act. 

At the outset, I should point out that the 
inclusion of clearly defined payment dates 
in all Federal procurement contracts is abso- 
lutely critical to the success of any effort to 
secure prompt payment. Without payment 
terms in contracts, or some payment stand- 
ards in generally applicable laws or regula- 
tions, the task of evaluating early or late 
payment, while not impossible, takes on cer- 
tain metaphysical properties. As was noted 
in the report of the Governmental Affairs 
Committee on S. 1131, many of the prob- 
lems associated with the government’s cash 
management practices can be traced to non- 
specific payment terms in government con- 
tracts. Indeed, the lack of clearly defined 
payment terms not only cost contractors 
money in late payments—it also costs the 
government money in early payments. By 
paying bills when due, instead of early, the 
GAO estimated in that 1978 study that the 
government could save anywhere from $900 
million to $3.8 billion in foregone interest. 
This was a principal finding of the 1978 
study, and ought not to be forgotten. 





October 15, 1986 


To correct these problems, the Prompt 
Payment Act directed the promulgation of 
regulations providing for payment terms in 
all government procurement contracts. 
Nonetheless, four years later, there are still 
no provisions in the Federal acquisition 
Regulation (FAR) setting forth authority to 
specify payment terms. You are right, 
therefore, to include language in the 
Prompt Payment Act Amendments directing 
the amendment of the FAR to include pro- 
visions for payment terms, and in specifying 
exactly how those provisions should read. 
These regulations are the keystone of the 
effort to ensure prompt payment, 

Another problem that must be addressed 
is the fifteen day grace period. As you know, 
the fifteen day grace period was not created 
by the Senate, but was instead put in the 
legislation by the House to avoid adminis- 
trative problems that might be occasioned 
in calculating minor interest penalties when 
the government missed a payment date by a 
few days. The Executive Branch financial 
managers told us this grace period was es- 
sential to avoid imposing substantial costs 
on the government, especially as the govern- 
ment began to revise its payment practices 
to meet the requirements of the legislation. 
And so, a fifteen day grace period was al- 
lowed under the Act. 

The fifteen day grace period was never in- 
tended to be a license to financial managers 
to pay bills in forty-five days instead of the 
thirty days typically afforded for payment, 
and the House report said as much. We sus- 
pected, however, that the grace period 
would be abused, and your hearings confirm 
that suspicion. Your proposal to phase out 
the fifteen days grace period therefore 
makes very good sense to me. Agencies have 
now had four years of experience under the 
Act. They should be able, on the basis of 
this experience, to pay their bills in the 
time allotted for payment without resort- 
ing to a grace period to tide them over, and 
your proposal to ease them into prompt 
payment with an eight day grace period is 
sufficiently generous to allow for any dislo- 
cations that might occur. 

You are also right to tighten the provi- 
sions of the Act respecting receipt of an in- 
voice, to ensure that contractors are 
promptly informed if an invoice is in error, 
and to ensure that the clock starts running 
against the government on receipt of a 
proper invoice. Since prompt payment is 
keyed to receipt of a proper invoice, agen- 
cies have every incentive in the world to 
delay receipt, or even lose an invoice, to 
avoid prompt payment penalties. Your pro- 
posal to declare an invoice received on the 
later of the actual date of receipt or five 
days from delivery of goods or services 
should deprive agencies of any effective 
means to avoid their responsibilities under 
the Act. I should note that the government 
has the opportunity, under your bill, to 
specify a longer period for acceptance of 
goods or services at the time the contract is 
written, and this is appropriate. When con- 
tractors know, up front, that they can 
expect delays in payment, they can build in 
this cost when they prepare bids, Currently, 
they are at the mercy of the agencies, and 
that is simply wrong. 

You are right in making it clear, through 
this legislation, that payment of interest 
penalties should be automatic. This was the 
intent of the original Act. Requiring con- 
tractors to ask for interest penalties only 
adds insult to injury. It also plays upon the 
reluctance some contractors have to “rock 
the boat” and risk opportunities for future 


71-059 O-87-2 (Pt. 22) 


CONGRESSIONAL RECORD—SENATE 


contracts. Moreover, since interest penalties 
accumulate daily, contractors are hard 
pressed, as a practical matter, to calculate 
interest penalties. 

When a contractor meets the obligations 
of the contract and submits a proper in- 
voice, timely payment is the law, and inter- 
est penalties for late payment are a matter 
of right. You are justified, therefore, not 
only in directing automatic payment of in- 
terest, but also in doubling the interest pen- 
alty in cases where the agency intentionally 
or capriciously holds back interest payments 
and forces the contractor to demand pay- 
ment. 

Finally, I think that you are right in 
making clear that the Act is intended to 
apply to progress payments. This was 
always the intent. The Act provides for 
“separate payment dates for contracts 
under which goods or services are provided 
in a series of partial executions or deliveries 
to the extent the contract provides for sepa- 
rate payments for partial execution or deliv- 
ery.”” Nonetheless, progress payments have 
been said to be outside of the scope of the 
Act. This makes no sense. It is just as impor- 
tant for progress payments to be paid on 
time as it is for any other payments to be 
made on time, and the government should 
expect to suffer penalties when it does not 
live up to the terms of its agreements. 

Mr. Chairman, when the Prompt Payment 
Act was written, Senator Chiles observed 
that “life is full of small victories, and pas- 
sage of this bill will certainly be one of 
them." He was certainly right. In the best of 
all possible worlds, it should not be neces- 
sary for Congress to pass a law in order to 
get the government to pay its bills on time— 
and it certainly should not be necessary to 
come back and amend the law to ensure 
compliance. 

After all, in any procurement system 
there are few things as fundamental as 
paying bills on time. Nonetheless, the Fed- 
eral procurement system being something 
less than the best of all possible worlds, it 
sometimes becomes necessary to write laws 
to accomplish what ought to be fundamen- 
tal business practice, and this is one occa- 
sion when legislation is a necessity. I hope 
and trust that this legislation will find 
smooth passage in Congress and that the 
President will support it. I am willing to 
work with you in that effort, and to assist 
you in your work in every way possible. 

Mr. GRASSLEY. Mr. President, I 
rise in support of S. 2479, the Prompt 
Pay Act Amendments of 1986. 

The purpose of this legislation is 
quite simple: to ensure that the Gov- 
ernment pays its bills on time. It 
should not be necessary to legislate 
prompt pay. Paying bills on time is a 
matter of course for most businesses 
and individuals, but the Federal Gov- 
ernment has a lamentable record in 
this area. 

S. 2479 closes loopholes in the origi- 
nal prompt pay legislation which was 
enacted into law in 1982. The 1982 act 
required that the Goverment pay its 
bills within 30 days and pay interest 
when payments are late. The Govern- 
ment’s record has improved somewhat 
since 1982, but significant problems 
persist. Many Federal agencies do not 
comply with the provisions of the law 
either due to inefficiency or due to de- 
liberate circumvention of the law. 


31269 


The GAO has recently audited the 
Federal Government’s bill paying per- 
formance, and the GAO conclusions 
support the need for the Prompt Pay 
Amendments Act. The GAO estimated 
that agencies paid only about 75 per- 
cent of invoices by the due date and 
that five of every six vendors that 
were entitled by law to interest pay- 
ments did not receive them. 

Several recent executive branch ac- 
tions indicate that agencies are ignor- 
ing the intent of the 1982 law. For ex- 
ample, both the 1982 act and S. 2479 
require that agencies pay their bills 
within 30 days, but regulations pub- 
lished in the July 17 Federal Register 
call for an 80-day payment period. 
This is clearly not the intent of Con- 
gress. 

Deputy Secretary of Defense, Wil- 
liam H. Taft IV told a Senate Appro- 
priations subcommittee on Auguest 7, 
1986 

Further, the Prompt Payment Act pro- 
vides a 15-day grace period after the pay- 
ment due date before incurring interest pen- 
alties. Delaying payments 10 days into this 
grace period will reduce outlays by an addi- 
tional $2.8 billion in FY87. 

Neither the 1982 act nor S. 2479 per- 
mits such a 10-day delay, and I hope 
that DOD will reconsider this policy in 
light of S. 2479. Another example of 
this deliberate noncompliance is that 
the Commodity Credit Corporation 
has suspended application of the 1982 
Prompt Payment Act for all payments 
for purchases of meat. 

Mr. President, passage of S. 2479 is a 
warning to Federal agencies that Con- 
gress expects them to pay their bills 
on time. This is an important issue for 
small businesses in Iowa and I urge 
the Senate to support S. 2479 as a fair 
and well-reasoned solution to the 
problem. 

Mr. DIXON. Mr. President, I rise 
today to join my colleague Senator 
TRIBLE in expressing appreciation to 
the Senate leadership for allotting 
time on the busy schedule for consid- 
eration of the Prompt Payment Act 
Amendments of 1986. 

Small business led the fight for the 
passage of the original Prompt Pay- 
ment Act in 1982. In essence, the law 
Was passed to assure that all contrac- 
tors dealing with the Government are 
paid on time or receive interest penal- 
ties for late payments. Small business 
Government contractors have now 
had 3 fiscal years of experience with 
this legislation. As Senator TrisLe has 
detailed in his eloquent opening state- 
ment, these 3 years of experience re- 
flect that the act has very substantial- 
ly improved the Government’s bill- 
paying practices. However, problems 
still remain. 

The prompt payment coalition has 
been monitoring the act’s implementa- 
tion and collecting examples of how 
agencies have frustrated the act’s pur- 





31270 


poses by exploiting ambiguities during 
their implementation. Receiving pay- 
ment in a timely manner is especially 
important. to small businesses for 
which cash-flow is such a significant 
factor in their success. 

During the 1986 White House con- 
ference on Small Business, the issue of 
prompt payment became one of the 
final 60 recommendations. Permit me 
to quote the report of the final recom- 
mendations in reference to prompt 
payment: 

Prompt pay legislation should be ex- 
tended to cover Postal Service and federally 
assisted procurement and strengthened 
through an amendment to the 1982 Prompt 
Payment Act to eliminate the 15-day grace 
period; require automatic payment of inter- 
est penalties; more clearly define that the 
entire payment process, including accept- 
ance, must occur within 30 days; include 
progress payments and retainage; and re- 
quire prime contractors to pay their subcon- 
tractors within 7 days after receiving pay- 
ment from the Government or incur inter- 
est payment penalties. 

In addition, when the Government pays 
the prime contractors late, interest pay- 
ments shall flow through from prime con- 
tractors to subcontractors on a pro rata 
basis. 

The Prompt Payment Act shall vigorously 
be enforced by all branches of government. 

Mr. President, I believe we are now 
addressing the legislation that cares 
for the concerns of the small business 
community. Indeed, all Government 
contractors will benefit from this bill. 

This legislation closes existing loop- 
holes and insures that our small busi- 
nesses receive contract payments in a 
timely fashion. We have similar provi- 
sions in Illinois law, and I am glad to 
report that these procedures work well 
in my State. We should do the same at 
the Federal level. 

I encourage my colleagues to join me 
in supporting this legislation. 

Mr. BURDICK. Mr. President, I wel- 
come the opportunity to participate 
with Senators TRIBLE, COHEN, and 
many others in cosponsoring and sup- 
porting the call for fast action by this 
body on S. 2479, the Prompt Payment 
Act Amendments of 1986. 

Over the past 4 years, since the pas- 
sage of the Prompt Payment Act of 
1982, many Government bills have 
been paid more promptly. Federal 
agencies have expressed concern about 
paying interest on those invoices that 
are paid late. Unfortunately, however, 
that concern has not always translated 
into paying bills within the time 
period indicated on the invoices. 

The experience of many businesses 
that supply goods and services to the 
Federal Government is that the intent 
of Congress, clearly set forth in the 
1982 act, has not been implemented in 
payment procedures and practices. 

For example, businesses have report- 
ed a sharp increase in the number of 
invoices that have been lost since the 
Prompt Payment Act went into effect. 
Other businesses relate that their in- 


CONGRESSIONAL RECORD—SENATE 


voices travel through several individ- 
uals or offices before the payment 
clock starts. 

An August, 1986 General Accounting 
Office study concludes that, during a 
4-month test period, 24 percent of all 
Federal payments were made after 
their due dates. Some were extremely 
late—being paid as much as 150 days 
later than they were due. Required in- 
terest payments were seldom paid. 
The GAO report concluded further 
that Federal agencies paid only one of 
every six interest penalties that were 
actually owed. 

Mr. President, S. 2479 spells out ex- 
actly when the payment clock begins. 
It states that an invoice is considered 
to have been received when the desig- 
nated person or agency receives a 
proper invoice, or five days after “the 
property is actually delivered or final 
performance of the services is actually 
completed.” 

Another clarification in S. 2479 will 
help remove the burden on businesses 
who work with the Federal Govern- 
ment. The Prompt Payment Act of 
1982 explicitly stated that interest 
automatically should be included with 
late payments. This simply has not 
happened. 

Business after business suffers late 
payments—without interest. Research 
indicates that only when interest is 
specifically demanded, on a case by 
case basis, is it paid. 

I need not tell you, Mr. President, 
that few companies, particularly our 
small and medium size organizations, 
have the staff or resources to carry 
out a lengthy and time consuming 
campaign to get interest on late pay- 
ments. It is difficult enough just to get 
the invoice paid. 

S. 2479 states that businesses are en- 
titled to double interest in the event 
that the Government withholds inter- 
est that is clearly due. Such a penalty 
should stop agencies once and for all 
from making companies come begging 
for the interest penalty that is due 
them. 

The legislation at hand more care- 
fully defines and explains payment 
terms and conditions under the act. I 
believe that this provides the neces- 
sary tools for agencies to carry out the 
very straightforward intent of Con- 
gress—the Government simply must 
pay its bills on time. 

Mr. BUMPERS. Mr. President, it is 
with pleasure that I rise in support of 
S. 2479, the Prompt Payment Act 
Amendments of 1986. When Senator 
TRIBLE, Senator WEICKER and I intro- 
duced this legislation along with 18 
original cosponsors, we recognized the 
need to improve a law that is of major 
importance to the Nation’s small busi- 
ness community. 

At a hearing held by the Senate 
Small Business Committee, where I 
have the privilege of serving as rank- 
ing member, we heard from a number 


October 15, 1986 


of business people about problems 
they continue to encounter in trying 
to get the Federal Government to live 
up to the terms of the original Prompt 
Pay Act. I might add that I’ve been 
working on this problem since I first 
learned that the act did not apply pay- 
ment standards equally to poultry and 
red meat products. This was an issue 
of some importance in the Nation’s 
largest poultry producing State, my 
home State of Arkansas. Congress has 
since changed this requirement to in- 
clude poultry with other meat and 
meat food products, a change that was 
badly needed. 

in addition, my childhood served to 
enlighten me to the importance of 
prompt payment of one’s debts. My fa- 
ther’s small-town business and the 
businesses which I later operated de- 
pended on customers who lived up to 
their obligations in a fair and honest 
manner. Prompt payment of debts is 
among the most basic ethics of busi- 
ness. This same standard of ethics 
should apply whether the purchaser is 
a hardware store in Charleston, AR, or 
an agency of the Federal Government. 
Indeed, it’s the small business owners 
who suffer most when late payments 
by the Government either make it im- 
possible to participate in Government 
markets or cause them harsh econom- 
ic consequences for taking the risk of 
doing business with the Government. 

S. 2479 represents an attempt to 
make a good law better and work the 
way it was intended by Congress. De- 
spite agency protestations to the con- 
trary and indeed contrary to the 
Office of Management and Budget’s 
own published reports, Federal agen- 
cies are still paying about 24 percent 
of vendor payments after the due 
date. This information is contained in 
a report recently issued by the Gener- 
al Accounting Office at the request of 
the House Subcommittee on Legisla- 
tion and National Security. The GAO 
studied, in a 4-month period, 1,520 
randomly selected invoices totaling 
about $17.4 million at 39 statistically 
selected payment centers for 13 de- 
partments and agencies. I recommend 
this report to my colleagues as it high- 
lights the need for legislation to en- 
force the Prompt Payment Act. 

Other findings by GAO include the 
fact that—despite clear congressional 
intent—the supposedly automatic in- 
terest penalties on late payments are 
seldom paid: Only one of every six 
penalties owed in the GAO sample was 
paid. Payments made during the grace 
period allowed by the act constituted 
about 18 percent of the adjusted 
sample invoices; 217 invoices could not 
be studied in this manner because of 
the agencies’ failure to document pre- 
cise due dates. That means 18 percent 
of payments, almost one in five, are 
being made in the grace period when it 
was clearly the intent of Congress that 





October 15, 1986 


the 15 days’ grace be used only for ex- 
traordinary circumstances that would 
prevent timely payment. S. 2479 
phases out the grace period in the law, 
and the results of the GAO study un- 
derscore the need for its elimination. 
In the age of computerized bill-paying 
by Federal agencies, there is little 
excuse for such delays. 

Furthermore, GAO estimates that 
8.6 percent of commercial vendor in- 
voices were paid after any applicable 
grace period. Again, action is needed 
to ensure that agencies comply with 
the law. Frankly, the anecdotal evi- 
dence received by Senators suggests 
this problem is even more widespread 
than 8.6 percent. Some small business 
owners have told me they were reluc- 
tant to ask for an interest payment to 
which they were legally entitled for 
fear of bureaucratic retribution. 

Other startling disclosures by GAO 
are the projections that, for the 4- 
month period in question, agencies 
should have paid vendors about 
278,000 late payment penalties, total- 
ing about $15 million. In addition, 
GAO estimates that during this period 
about 146,000 “early payment” dis- 
counts, totaling approximately $2 mil- 
lion, were wrongfully taken by Gov- 
ernment agencies after the discount 
period had expired, and were not 
repaid. 

OMB’s annual report of compliance 
with the Prompt Payment Act showed 
a total of 281,258 interest penalties for 
a total of $7,121,205 paid during 1985. 
Unhappily, the reporting does not tell 
the entire story, and that is another 
reason why S. 2479 is needed. This leg- 
islation requires OMB to report to 
Congress not only interest penalties 
paid, but also late payments for which 
no interest penalty was paid and the 
reasons why not. Greaier accountabil- 
ity is needed for Congress to exercise 
its oversight responsibilities in this 
area, and S. 2479 provides the needed 
tools. 

Mr. President, S. 2479 also makes 
other important and needed changes 
in the law. This bill will ensure that 
construction progress payments are 
subject to payment requirements, and 
late progress payments will incur in- 
terest penalties as they should. We 
have also extended prompt payment 
to subcontractors, as a considerable 
majority of Federal construction work 
is carried out by subs working under 
the prime contract. 

This bill has broad support among 
the small business community. 

One other point I would like to make 
is that at the time of the Senate Small 
Business Committee hearing in June, I 
was receiving many complaints about 
late payments by the Health Care Fi- 
nancing Administration [HCFA] to 
suppliers under the Medicare Pro- 
gram. The committee was told by offi- 
cials from the administration that 
HCFA considered these payments 


CONGRESSIONAL RECORD—SENATE 


exempt from the Prompt Payment Act 
because they were actually disbursed 
by fiscal intermediaries. That is, the 
payments are actually disbursed by 
contractors such as Arkansas Blue 
Cross and Blue Shield, which work 
under close supervision and direction 
of HCFA. That concerned me greatly 
and I raised that matter at the hear- 
ing. We received testimony by HCFA 
concerning the administration’s pay- 
ment practices and efforts to address 
obvious problems. I was impressed by 
HCFA’s apparent goodfaith efforts to 
address this problem and, consequent- 
ly, this bill does not contain a provi- 
sion dealing directly with Medicare. 
However, if this problem remains un- 
resolved when the 100th Congress con- 
venes, then it may be necessary to 
amend the Prompt Payment Act to 
ensure that these Medicare payments 
are made promptly. 

Mr. President, I urge my colleagues 
to join me in supporting S. 2479. 

Mr. GORE. Mr. President, S. 2479, 
the Prompt Pay Amendments of 1986, 
will go far in addressing the Federal 
Government’s ability to pay its bills. 
In 1982, Congress approved the 
Prompt Payment Act to ensure that 
businesses would be reimbursed in a 
timely manner for providing goods and 
services to the Government. The act 
also required the Government to pay 
interest penalties if the businesses 
were not paid on time. 

While this act has significantly im- 
proved the manner in which the Fed- 
eral Government pays its bills, many 
agencies still continue to pay almost 
25 percent of their bills after the due 
date and fail to pay the interest penal- 
ty due on late payments. S. 2479 would 
address these and other problems in 
the system. It would clarify exactly 
when the 30-day payment term begins 
and require that interest be paid auto- 
matically, without demanding that the 
contractor request the payment. An 
important addition to the act will be 
the inclusion of subcontractors under 
construction contracts by requiring 
that subcontracts include a payment 
clause which necessitates prompt pay- 
ment. 

The 1982 act vastly improved the 
way Federal agencies deal with the 
businesses that provide the goods and 
services necessary to their mission. 
The 1986 prompt pay amendments will 
augment those changes and create a 
better system for the Federal Govern- 
ment to pay its bills promptly and effi- 
ciently. I am pleased to be a cosponsor 
of this legislation and I look forward 
to the quick and speedy implementa- 
tion of its provisions. 

Mr. LEVIN. Mr. President, I am 
pleased that the Senate is considering 
S. 2479, the Prompt Payment Amend- 
ments Act of 1986, and I urge my col- 
leagues to support it. I was an original 
cosponsor of the legislation that cre- 
ated the Prompt Payment Act in the 


31271 


97th Congress, and I am an original 
cosponsor of this legislation which 
makes improvements in the act. 

In 1978, the General Accounting 
Office [GAO] reported to Congress 
that the Federal Government was 
paying its bills too early or too late. 
Congress responded to that report by 
passing the Prompt Payment Act in 
1982. That act requires Federal agen- 
cies to pay their bills within 30 days or 
pay interest on overdue amounts. The 
law even provided a grace period of 15 
days. If bills were not paid by the 45th 
day, interest accrued automatically 
from the 30th day. This was a solid 
step toward assuring that those who 
do business with the Federal Govern- 
ment are treated fairly and paid 
within a reasonable period of time. 

In August of this year, the GAO re- 
ported to Congress that, “Passage of 
the act and its implementation led to 
substantial improvement in Federal 
bill-paying performance.” The GAO 
also reported that, “the full potential 
of the law has not yet been realized,” 
referring to the fact that a significant 
portion of bills are still being paid 
later than they should be. 

The Senate is responding to this 
GAO report by proposing the changes 
in the Prompt Payment Act that we 
are considering today. These changes 
will enable us to realize the full poten- 
tial of the law. The legislation 
strengthens the interest penalty provi- 
sion, phases out the grace period, and 
strengthens the congressional plan 
that progress payments for completed 
work are covered by the act. 

Hearings on the bill indicated that 
Congress should consider extending 
the policy of prompt payment to con- 
struction subcontractors and suppliers. 
After consideration of this matter, the 
Senate included provisions to provide 
such an extension. 

There are hundreds of thousands of 
small businesses that provide goods 
and services to the Federal Govern- 
ment. We have made significant im- 
provements in becoming a better cus- 
tomer for small businesses. As the 
recent GAO report indicates, we still 
have a way to go. This bill is an impor- 
tant step in that direction, and I urge 
its adoption. 

Mr. NUNN. Mr. President, as a co- 
sponsor of the Prompt Payment Act of 
1982, I joined with Senator TRIBLE, 
Senator CoHEN, and many of my col- 
leagues in urging passage of S. 2479, 
legislation providing necessary amend- 
ments to the act. 

Our intent in 1982 was straightfor- 
ward: To establish guidelines for Fed- 
eral agencies to pay their suppliers in 
a timely fashion. The prompt pay leg- 
islation was born out of the fact that 
the Government was in essence bor- 
rowing money free of charge from 
those who supplied goods and services. 
At that time, millions of dollars were 





31272 


months past due. For many small and 
medium-sized businesses, those unpaid 
Government invoices caused severe 
hardships, 

During consideration of the Prompt 
Payment Act, Federal agencies indicat- 
ed that they did not favor the legisla- 
tion. They expressed the opinion that 
fiscal management of the taxpayers’ 
money mandated that invoices be held 
as long as possible. Unfortunately, 
those savings to the Government 
really are nonrecoverable losses to the 
supplier. The reluctance to pay 
promptly did not stop totally with pas- 
sage of the 1982 act, and has been a 
continuing problem in the last 4 years 
since passage. 

Certainly, many invoices are being 
paid much more promptly today than 
4 years ago. There are, however, cer- 
tain disturbing behaviors that these 
amendments can correct. 

First of all, these amendments reit- 
erate the intention of Congress that 
bills will be paid on time, in a manner 
congruent with the standard practices 
of various business sectors. 

Second, the burden that business 
has borne is now listed. The amend- 
ments ensure that the payment clock 
for invoices is not set back and that in- 
terest payments owed on overdue pay- 
ments are made automatically. 

Third, the amendments include a 
provision for the implementation of 
the act to be carried out through the 
Federal acquisition regulation. 

Mr. President, I believe that these 
amendments will provide a clear mes- 
sage to the Federal agencies that 
paying bills on time is clearly consist- 
ent with congressional intent and a 
necessary component of sound fiscal 
management. 

When Congress approved the 
Prompt Payment Act in 1982, we were 
confident that the agencies would 
comply with our intent. Indeed, early 
indications were that payment of in- 
voices had speeded up considerably. I 
am confident that these amendments 
will facilitate the payment of agency 
bills in a more timely fashion. With 
these practical amendments I believe 
we provide the necessary tools to im- 
plement in all agencies the provisions 
of the 1982 Prompt Payment Act. Mr. 
President, I urge adoption of the bill 
by the Senate. 

Mr. SASSER. Mr. President, I am 
pleased to join in today’s effort to pass 
much needed changes to a most 
worthy program, the Prompt Payment 
Act. The Prompt Payment Act Amend- 
ments of 1986, S. 2479, which we offer 
today will greatly enhance the prompt 
pay procedures. As my colleagues will 
recall, we passed the Prompt Payment 
Act back in 1982. The act is designed 


to make the Government pay its bills 
on time to Federal contractors and 


others who supply goods and services 
to the Federal agencies. 


CONGRESSIONAL RECORD—SENATE 


This act brought much needed relief 
to thousands of small businesses 
which did business with the Federal 
Government. When we first looked 
into this issue several years ago, we 
found that the Federal Government 
was not paying its bills on time be- 
tween 30 and 40 percent of the time. 
Nearly $10 billion in Federal payments 
to Government contractors was not 
paid within 30 days. 

We have made great improvements 
since 1982. Indeed, the Prompt Pay- 
ment Act has diminished the number 
of late payments made by agencies. 
But there are several problem areas 
calling out for action. A handful of 
agencies and payment centers are not 
meeting the mandate of this legisla- 
tion. 

Corrective legislation is necessary, 
Mr. President, because quite frankly, 
we can’t count on the administration 
to clear up these problem areas. The 
Office of Management and Budget has 
shown little inclination to make ad- 
ministrative changes necessary to 
eliminate recurring late payment prob- 
lems at various agencies. 

The primary OMB document for im- 
plementing the Prompt Payment Act 
is OMB Circular A-125. That circular 
has not been significantly revised since 
it was first issued by OMB in 1982. We 
hear that some proposed changes to 
the circular will be forthcoming. Well, 
we have heard that tune before. And 
even if true, these changes will be too 
little, too late. We need clear direction 


in this important area and S. 2479 pro- 
vides that direction. 

Since passage of the act in 1982, we 
have continued to receive complaints 
by both large and small contractors of 


repeated late payments by several 
agencies. Yet, policymakers at OMB 
have been unable, and some would 
suggest unwilling, to revise Circular A- 
125 to bring defaulting agencies in 
line. In fact, the so-called cash man- 
agement philosophy which pervades 
the circular appears to encourage 
agencies to make payments as late as 
possible and still be within the time 
limits set by the Prompt Payment Act. 

This policy of cash management 
may improve the Government’s ac- 
count ledgers, but it reeks havoc on 
small firms. These companies are 
forced to borrow money at high inter- 
est rates to finance their operations 
while they wait for a Government 
check. Clearly, OMB’s present policy 
is penalizing small businesses. We need 
to correct that. S. 2479 moves us in 
that direction. 

Let me add, Mr. President, that 
while S. 2479 makes needed changes 
necessary to solve many of the persist- 
ent late payment problems, the bill 
does not do this in a way that unfairly 
or unnecessarily impairs agency oper- 
ations. To the contrary, the legislation 
basically clarifies certain aspects of 
the current law so as to reduce agency 


October 15, 1986 


discretion as to when bills must be 
paid. For example, the legislation re- 
duces the grace period in the act from 
15 to 7 days and imposes time restric- 
tions for acceptance, rejection, and 
certification of goods or services ren- 
dered. 

In short, Mr. President, this bill pre- 
sents a commonsense approach to 
refine a current law that is working to 
the benefit of contractors who do busi- 
ness with the Federal Government. I 
urge my colleagues to support this im- 
portant measure. 

Mr. CHILES. Mr. President, the Sen- 
ate’s consideration of amendments to 
the Prompt Payment Act of 1982 is im- 
portant for many businesses who do 
business with the Federal Govern- 
ment. I am a cosponsor of S. 2479 be- 
cause I see this legislation as an exten- 
sion of the effort that I’ve been in- 
volved with since my membership on 
the Procurement Commission. In 1982, 
I cosponsored the generic prompt pay 
authored by Senator DanrorTH. 

Legislative success in this area has 
been measured in small steps. The idea 
that the Federal Government should 
pay its bills on time is foreign practice 
to many executive branch agencies. It 
is important yet it is a simple, 
straightforward principle that the 
Congress reemphasize that agencies 
cannot deliberately hold back pay- 
ments beyond the 30-day time limit or 
face interest payments—just like any 
other business firm or individual citi- 
zen. 

Hearings by the Small Business 
Committee and Governmental Affairs 
Committee in the past have detailed 
some of the problems facing subcon- 
tractors who work on Government 
projects. We heard graphic details of 
small firms that can almost—and 
sometimes do—go bankrupt because of 
the retainage situation where a per- 
cent of the payments are held in abey- 
ance long after the contract has been 
completed. 

Subcontractors also have the added 
problem of trying to get their pay- 
ments on time from prime contractors. 
The ripple effect is that sometimes 
the prime contractors will not be paid 
promptly and thus will not pay the 
subcontractor on time. Mr. President, 
I think the Government should pay its 
bill on time or pay interest. Let there 
be no mistake about my feelings on 
that situation. However, there are 
large companies that can survive late 
payments and continue to operate. 
Almost all of the small contractors on 
Federal projects operate on such a 
tight cash flow situation that a late 
payment can ruin them altogether. 
It’s happened before and will likely 
happen again. 

Many small firms or subcontractors 
simply don’t have the personnel to 
track down Federal agency personnel 
and get paid. They don’t have enough 





October 15, 1986 


people who can call up and followup 
to be sure that agencies will get tired 
of being reminded of their indebted- 
ness and pay up. Usually a person key 
to the company’s operation must take 
time out of their production duties to 
handle the administrative paperwork 
and phone calls in order to be paid. 
That should not have to happen. I am 
hopeful that when legislation such as 
S. 2479 becomes law it will no longer 
happen. 

Mr. President, I want to compliment 
Senators WEICKER, TRIBLE, COHEN, 
Levin, Ror, and others for the fine 
work that’s been accomplished on this 
bill. 

Mr. EAGLETON. Mr. President, I 
am a cosponsor of S. 2479, the Prompt 
Payment Act Amendments of 1986, 
and I participated in the final approv- 
al of the bill in the Governmental Af- 
fairs Committee. We approved it 
unanimously. 

The need for this bill illustrates how 
far the executive branch agencies can 
stray from the intent of the laws we 
pass. As a cosponsor of the original 
Prompt Payment Act of 1982, I 
thought we had good reason to expect 
that the agencies would make a sin- 
cere effort to follow through on the 
rules we set. Some did and there has 
been some progress. 

But, when we read in the Federal 
Register how they planned to adminis- 
ter the law, it was clear that S. 2479 is 
needed to get them back on the right 
course. The proposed regulations, if 
approved, would create 19 different 
loopholes in the 1982 act. For exam- 
ple, the act calls for payment of bills 
in 30 days, the regulations allow up to 
80 days. These loopholes were very 
well spelled out by Kenton Pattie, di- 
rector of the Coalition for Prompt 
Pay, in his letter to the Federal Acqui- 
sition Regulation Secretariat. 

To strengthen the record in support 
of S. 2479, Mr. President I ask unani- 
mous consent that the September 15, 
1986, letter from Mr. Pattie be insert- 
ed in the Recorp at this point. 

There being no objection, the letter 
was ordered to be printed in the 
REcorp, as follows: 

COALITION FOR PROMPT Pay, 
September 15, 1986. 
Re: FAR Case 84-30. 
GENERAL SERVICES ADMINISTRATION, 
FAR SEcRETARIAT (VRS), 
Washington, DC. 

Deak FAR SEcRETARIAT: On Thursday, 
July 17, 1986, proposed regulations were 
published in the Federal Register to incor- 
porate the provisions of the Federal Prompt 
Payment Act of 1982 into the Federal Ac- 
quisition Regulation (FAR). 

The Coalition for Prompt Pay encourages 
standardized payment practices which are 
consistent with the Prompt Payment Act. 
Inclusion of statutory prompt pay require- 
ments in the FAR would help businesses 
and agencies conduct their transactions ex- 
peditiously. 

However, we are concerned because the 
proposed regulations do not accurately 


CONGRESSIONAL RECORD—SENATE 


follow the requirements of the statute. In 
fact, the proposed FAR language misses the 
intent of Congress by such a wide mark that 
we believe the FAR Secretariat needs to 
launch a thorough and serious study of the 
issue before again attempting to publish on 
this subject. Among the steps the Secretar- 
iat should take: 

1. A public hearing open to industry repre- 
sentatives who could describe the impact of 
the proposed rules on the government and 
the private sector. 

2. A period of reviewing proposals current- 
ly being studied by Congess, including those 
embodied in S. 2479 which is the product of 
two Senate Committees. 

3. A study of the recent General Account- 
ing Office report on implementation of the 
Prompt Payment Act, a study not available 
in July when the Far draft was published. 

Our specific comments on the Federal 
Register item follow and we would appreci- 
ate your making these a part of the record: 

PROPOSED RULE 


Parts 32 and 52 titled “Contract Financing” 
and “Solicitation Provisions and Contract 
Clauses” 


Coalition Comment: We question the de- 
sirability and advisability of having two sec- 
tions of the FAR dealing with prompt pay- 
ment. Why not have one section? How in- 
convenient to ask contract officers and ven- 
dors to refer to more than one place in the 
FAR to determine the rules. Furthermore, 
neither section 32 nor 52 is properly titled 
to accommodate prompt pay. Certainly 
“Contract Financing” is not the proper title 
and nor is “Solicitation Provisions and Con- 
tract Clauses”. Therefore, the Coalition rec- 
ommends that a single FAR part be created 
to encompass all rules and contract clauses 
regarding prompt payment. Further, we rec- 
ommend that that part be named “Part xx 
Prompt Payment”. 

To maintain two separate FAR parts in 
future years will invite possible inconsisten- 
cies and misinterpretations by those who 
speculate on proper procedure while trying 
to put together parallel sets of instructions. 
One part devoted entirely to prompt pay 
will suffice. 

PROPOSED RULE 


32.502-1 Use of customary progress 
payments 

This rule would prohibit progress pay- 
ments from being made for ‘quick turnov- 
er” items for which progress payments are 
not customarily made in commercial trans- 
actions. The rule defines such items as: 
“subsistence, clothing, medical and dental 
supplies, and standard commercial! items not 
requiring a substantial accumulation of pre- 
delivery expenditures by the contractor.” 

Coalition Comments: In this subpart, the 
FAR proposal attempts to define what will 
qualify for “progress payments” by indicat- 
ing what will not qualify. At best this is an 
awkward approach to a straightforward 
problem. Why not just say what will qualify 
for progress payments such as construction, 
remodeling repairs for such requirements as 
electrical, plumbing, heating, computer in- 
stallations, sound and communications sys- 
tems installations, and other mechanical or 
electronic performance that involves ex- 
tended contractor work on site beyond the 
moment of delivery? 

At worst, this provision causes more prob- 
lems than it solves, by saying: “If progress 
payments are granted in circumstances such 
as these, the contracting officer shall certify 
that such financing was in the best interest 
of the Government. The certification shall 


31273 


include full justification and specify the fi- 
nancing cost implications of the Govern- 
ment considered by the contracting officer 


Because the Prompt Payment Act already 
authorizes partial payment for partial com- 
pleted delivery, the above provision deliber- 
ately undermines the Act itself. Under no 
circumstances should a contract officer be 
required to develop a certification for every 
partial payment owed for such things as 
subsistence, clothing, medical and dental 
supplies and standard commercial products. 
The Act calls for no such certification. A- 
125 calls for no such certification. There- 
fore, the FAR has no business calling for 
any such certification. 

We recommend that this paragraph be de- 
leted and replaced with one which simply 
lists areas that would qualify for progress 
payments and makes no mention of certifi- 
cation for periodic payments. 

Further, the replacement paragraph 
should not refer to “financing cost implica- 
tions” because partial payments on partial 
delivery are not considered ‘financing’. 
Partial payments are for completion of spe- 
cific steps in a project, for delivered por- 
tions of a contract, and are in no way a 
means of “financing” vendors. 


PROPOSED RULE 
Subpart 32.9 Prompt Payment 
32.901 Applicability 


This subpart does not apply to purchases 
of utilities (gas, water, electricity) when late 
payment charges are included in the con- 
tract or established by tariff or state regula- 
tory commissions. 

Coalition comment: Nowhere in either the 
Act or the A-125 Circular are payments 
owed to utilities exempt from coverage of 
the Prompt Payment Act. Congress certain- 
ly did not intend to give a blanket exception 
of any class of contracts. 

What the FAR provision does is to hide 
utilities behind the fact that the law allows 
contracts which establish payment terms. 
Since all utilities are procured under con- 
tract and are subject to tariff or regulatory 
commissions, the FAR proposal, if adopted, 
would leave out utility payments from the 
Prompt Payment Act henceforth. 

The Coalition feels this proposed provi- 
sion is entirely unnecessary and implies that 
the FAR writers have the authority to 
exempt certain classes of payments from 
time to time. The Act already takes care of 
the contingency raised by the FAR “‘applica- 
bility” section. 

In lieu of this draft provision, we recom- 
mend an alternative provision be inserted: 

“No purchases or classes of purchases are 
exempt from the provisions of this regula- 
tion.” 

PROPOSED RULE 
Subpart 32.9 Prompt Payment 
32.902 Definitions 

“Designated payment office’ means the 
place designated in the contract for foward- 
ing invoices and requests for contract fi- 
nancing payment (e.g., disbursing office) or, 
in certain instances, for approval,” 

Coalition for Prompt Pay Comments: The 
above definition while it follows the existing 
OMB Circular A-125, has been the subject 
of considerable misunderstanding concern- 
ing the intent of Congress in the law. Be- 
cause of this misunderstanding which has 
resulted in a variety of different practices 
among agencies, proposed legislation in the 
U.S. Senate eliminates the term “designated 
payment office” and for purposes of deter- 





31274 


mining date of receipt of invoice substitutes, 
“office or employee of the agency designat- 
ed by the agency to first review such in- 
voice”. 

This change is intended to clarify the 
problem of delays occurring at the outset of 
the payment process in which invoices are 
shuffled for months among various offices. 
It clearly defines receipt of invoice as the 
date on which the “office . . . first receives 
such invoice,”’ or on the fifth day after the 
date of delivery. 

We would suggest that a similar change be 
made in the FAR. Such a change would not 
be inconsistent with existing law in that the 
change merely clarifies when the 30 days al- 
lowed for payment begins. Without this pro- 
vision agencies can cause long and unneces- 
sary delays which are contrary to the intent 
of the Act, which calls for prompt payment. 

The recordkeeping functions, processing 
of paperwork relating to agency purchases, 
and issuance of a check should not consume 
more than the 30 days allotted by law. This 
change we propose makes that intent clear. 

PROPOSED RULE 
Subpart 32.9 Prompt Payment 
32.902 Definitions 


“Contract financing payment” means a 
disbursement of moneys to a contractor for 
operating capital incidental to contract per- 
formance, such as a progress payment, ad- 
vance payment, and interim cost reimburse- 
ment.” 

Coalition comment: Under no circum- 
stances should a progress payment be con- 
sidered a “contract financing payment”. A 
progress payment is simply a payment for a 
completed stage in a project. A payment at 
this point is fair compensation for the com- 
pany’s completed work. Neither the compa- 
ny nor the government agency considers it 
as “financing” nor is it operating capital in- 
cidental to contract performance. But in- 
stead a progress payment is a payment for 
services rendered. In contrast, we have no 
argument with the concept of including “ad- 
vance payments” as “contract financing”. 
Advanced payments are usually made in a 
series and are not based on the achievement 
of specific stages of work but rather are 
based on the firm's need for a positive cash 
flow (operating capital) during a special 
period in the contract fulfillment. 

Further, the Coalition questions the inclu- 
sion of “interim cost reimbursement” as a 
form of “contract financing”. The term 
“cost reimbursement” implies a finished job 
and as such a payment would not constitute 
“financing” but rather a payment for a serv- 
ice rendered for goods previously purchased. 
We believe that any form of cost reimburse- 
ment is specifically covered by the Prompt 
Payment Act and we recommend that the 
FAR so state. 

Meanwhile, we recommend that in 32.902, 
the words “‘progress payment” and “interim 
cost reimbursement” be deleted from the 
definition of “Contract financing payment”. 

PROPOSED RULE 
32.903 Policy 


... “Prompt payment discounts offered 
by the contractor shall only be taken when 
invoice payments are made within the dis- 
count period.” 

Coalition comments: Because so many 
contractors have reported abuses of early 
payment discounts, we recommend that lan- 
guage be added to clarify that the discount 
period begins at receipt of invoice in the 
office first designated for initial receipt, not 
at some future date when all the receiving 
paperwork has been processed in some 


CONGRESSIONAL RECORD—SENATE 


second, third or fourth office. Again, the 
change recommended by the Coalition is 
consistent with Congressional intent. 


PROPOSED RULE 
32.905 Payment Standards 


“(a) Invoice payments shall be made as 
close as possible to, but not later than, the 
due date established in the Prompt Pay- 
ment clause at 52.232.25." 

Coalition comments: The Prompt Pay- 
ment clause at 52.232.25 incorrectly allows 
an additional 30 days for payment beyond 
the 30 days specified by statute. Our com- 
ments on that section follow in sequential 
order. However, a policy of making pay- 
ments “as close as possible to” the due date 
runs the considerable risk of unintentional 
delays which can and often do carry the 
payment beyond the statutory 30-day terms. 
This phrase ‘as close to as possible to but 
not later than” is not in the Act, but has 
been advanced by OMB as a tool of its Cash 
Management program. Cash Management is 
not a legislated program of the government 
and should OMB wish to enforce this provi- 
sion they should seek a change in the law to 
authorize it. Short of a change in the law, 
agencies should be allowed to pay at any 
time within the 30 days. 

Unfortunately the language you propose 
created the current practice of routine 
misuse of the grace period for issuing pay- 
ment, a misuse of the extra 15 days allotted 
by Congress to help in emergency situa- 
tions, but not for routine use. An example 
of this abuse is the Department of Defense’s 
recent announcement that it wants to begin 
delaying payments to reduce outlays. Since 
current practice calls for issuance of the 
check “as close as possible” to the due date, 
this means the interest-free grace period 
will be used routinely by DoD. 

We recommend that care be taken in 
drafting a FAR requirement that still offers 
the Government the benefit of the statuto- 
ry payment period of up to 30 days but does 
not result in abuses. For example, a sen- 
tence should be added in the FAR that this 
requirement does not in any way authorize 
the routine extension of payments into the 
15-day grace period permitted by statute. 
There are agencies which find they get 
better prices and more competition when 
they promise to pay in under 30 days. These 
agencies should not be precluded from “‘Fast 
Pay” and similar programs because such 
programs are in the interest of the govern- 
ment and encourage participation of small 
firms. Therefore, the FAR language should 
be changed to spell out clearly the circum- 
stances in which the grace period may be 
utilized keeping in mind Congressional 
intent that it be used to provide flexibility 
in instances of major catastrophic events, 
such as phenomenally adverse weather con- 
ditions or major systems failures involving a 
breakdown of several days or weeks, etc. 
Delays should never be allowed in cases of 
routine employee leave, work backlog, and 
lost paperwork. Of course, such delays 
would have far less impact if agencies could 
pay anytime within the 30 days. 

PROPOSED RULE 
32.905 Payment Standards 

“(b) If an invoice is determined by the des- 
ignated payment office to be defective, then 
the contractor must be notified of the 
defect within 15 days after receipt of the in- 
voice at the designated payment office. This 
notification of defects period is 3 days for 
meat and meat food products and 5 days for 
perishable agricultural commodities.” 


October 15, 1986 


Coalition comments: This requirement is 
included in the statute and also in OMB Cir- 
cular A-125. However, we are dismayed at 
reports from contractors and vendors that 
agencies routinely ignore the notification 
requirement. Obviously, the language needs 
to be improved so that more emphasis is 
placed on the fact that notification within 
is days of a defective invoice is required by 
aw. 


PROPOSED RULE 


32.905 Payment Standards 


“(c) The receiving report should be sub- 
mitted to the appropriate office within four 
work days after Government acceptance, 
unless other arrangements have been 
made... .” 

Coalition comments: The statute author- 
izes a total payment period of 30 calendar 
days; not 30 days plus 4 work days for re- 
ceiving reports to be filed. There is no legal 
basis for this additional period to be added. 
All agency functions including acceptance, 
receiving, and payment should be made 
within the 30 calendar days as authorized 
by the statute. Further, it should be noted 
that the Act is entirely written around cal- 
endar days, not work days. There is no 
reason whatsoever why receiving should 
take a week or four days. Receiving should 
be done without fail on the date of delivery. 
Shipping regulations require this. Prompt 
inspection of goods is in the government’s 
best interest and no FAR provision should 
encourage delay in receiving. 


PROPOSED RULE 
32.906 Determining Due Dates 


(a) The due date for invoice payment will 
be the 30th day after receipt of a proper in- 
voice by the designated payment office or 
the 30th day after the supplies or services 
are accepted by the Government, whichever 
is later... .” 

Coalition comments: Because Part 52-So- 
licitation Provisions and Contract Clauses, 
52.232-25 Prompt Payment (as proposed) 
authorizes an acceptance period of 30 days 
following delivery, this provision has the 
effect of doubling the statutory 30-day pay- 
ment period. If 30 days are granted for ac- 
ceptance and an additional 30 for payment 
after acceptance, the sum total called for in 
the FAR provision is 60 days. Add to that 
the previous 4 days for receiving plus the 
15-day grace period permitted by law and 
the agencies would now have a total of 80 
days in which to pay bills. This is an incredi- 
ble distortion of a statute which clearly 
says: “30 days”. 


PROPOSED RULE 
32.906 (a3) and (d) Determining Due 
Dates 


(3) Agency heads are authorized to pre- 
scribe longer periods, if justified.” 

“(d) Agency heads may also adopt longer 
periods as policy (e.g. 30th day after re- 
ceipt).” 

Coalition comments: There is no basis for 
these statements in the statute. Instead, 
under the Act, the agency head is responsi- 
ble for enforcing the provisions of the Act 
and has no authority whatsoever to waive 
the Act. Under the Act, there is no justifica- 
tion for being late. No excuses are accepta- 
ble, whether prescribed by the agency head 
or by anyone else in the agency. Congress 
wanted a “no excuse’, on-time payment 
policy. But, these proposed provisions in the 
FAR open up a new loophole—an excuse 
signed off on by the head of the agency. We 
are opposed to these provisions in the pro- 





October 15, 1986 


posed rule and recommend that you remove 
them. 
PROPOSED RULE 
32.906 Determining Due Dates 


“(b) The Prompt Payment clause at 
§2.232.25 specifies that, unless otherwise es- 
tablished by the contracting officer under a 
special provision in accordance with agency 
procedure, acceptance should occur within 
30 days following contractor delivery of sup- 
plies or services...” 

Coalition comments: As stated previously, 
the statute does not allow an additional 30 
days for acceptance beyond the 30 days for 
payment. Therefore, lacking any statutory 
base, this provision should be deleted and 
the following inserted: 

“The Prompt Payment clause at (52.232- 
25) specifies that, unless otherwise estab- 
lished by the contracting officer under a 
special provision in accordance with agency 
procedure, all acceptance, receiving and pay- 
ment functions should occur within 30 days 
following contractor delivery of supplies of 
services or receipt of proper invoice by the 
office or employee of the agency designated 
by the agency to first review such invoice”. 

PROPOSED RULE 
32.906(b) Determining Due Dates 


... and it does not compel the disbursing 
officer to make payment prior to obtaining 
a receiving report.” 

Coalition comments: In this provision, the 
FAR would give the agency 30 days to 
accept delivery, a period which is outra- 
geously excessive and entirely contrary to 
the Act, as we shall show later in this paper. 
But to make the 30-day acceptance period 
even worse, the FAR adds another loophole: 
if you don’t have the receiving report after 
4 working days and after 30 additional ac- 
ceptance period days you can wait as long as 
you want until you receive the receiving 
report. In contrast, the FAR should require 
that the receiving report be advanced to the 
payment office immediately, with no ex- 
cuses being acceptable. There should be no 
latitude for agency personnel to wait indefi- 
nitely for receiving reports. The FAR 
should establish that it is the responsibility 
of the payment office to obtain the receiv- 
ing report in time to make a prompt pay- 
ment, 

In our opinion, the loophole you have out- 
lined here is at the heart of what is wrong 
with the government's payment practices. 
Agency employees feel that the word 
“prompt” in “Prompt Payment Act” applies 
only to what they do after they get all the 
paperwork together, and paperwork accu- 
mulation can take as long as they wish. 
Even though you appear to say in 32.906 
that under the FAR 30 days should be 
enough to accumulate the paperwork, in 
fact by leaving the receiving report loop- 
hole, you are trying to open up the 30-day 
Act to be an indefinite-period Act in [tin d)] 
which the standard is not set by Congress, 
but by the agency which loses, or misplaces, 
or overlooks receiving reports. 

PROPOSED RULE 


32.907(h) “Interest penalties are not re- 
quired on . . . amounts temporarily with- 
held in accordance with terms of the con- 
tract...” 

Coalition comments: If there is a reasona- 
ble disagreement over performance under a 
contract, there is a basis for temporarily 
holding up part or all of a payment, pending 
resolution of the disagreement. Under those 
circumstances, payment must be made 
promptly on resolution of the disagreement. 


CONGRESSIONAL RECORD—SENATE 


We recommend that the FAR be very clear 
on this point: Every effort should be made 
by both parties to rapidly clear up disputes 
and, on that resolution, the agency must 
pay promptly. The regulation should pro- 
hibit the withholding of payments for an 
additional 30 days following resolution of a 
dispute. 

However, there is a further serious loop- 
hole proposed by the FAR in refusing to 
pay interest penalties on “amounts tempo- 
rarily withheld in accordance with terms of 
the contract”. If the contract calls on the 
government to hold back 5 percent or 10 
percent of a payment for retainage, pending 
completion of the job, then on completion 
the entire 5 percent or 10 percent should be 
released. If that 5 percent or 10 percent is 
not released promptly, it should be subject 
to the Prompt Payment Act and should be 
exposed to late payment interest penalties. 

Yet, the proposed FAR language, in 
effect, exempts retainage under construc- 
tion contracts from coverage by the Act. In 
contrast, the Act exempts no class of pay- 
ments. Therefore, we recommend that, in 
order for the FAR to comply with the Act, 
that the regulation state that retained 
amounts under construction projects, and as 
a result of withholding under progress pay- 
ments, are subject to the Act and would, if 
paid more than 30 days from completion on 
the job be subject to the interest penalties 
called for by the Act. 

PROPOSED RULE 
32.908 Contract Clauses 


“The contracting officer shall insert the 
Prompt Payment clause at 52.232-25 or an 
alternate prompt payment clause into all 
contracts except utility contracts exempted 
by 32.901. Agency heads are authorized to 
prescribe alternate clauses which stipulate 
different standards for determining due 
dates on invoice payments and contract fi- 
nancing payments or establish different 
payment procedures (e.g. lease payments).” 

Coalition comments: Here again the FAR 
writers have veered dramatically from the 
intent of Congress. Faced by the absence of 
an enforced government payment standard, 
and observing that private commerce had 
standards in the 25-30 day range, Congress 
decided to establish the 30-day standard of 
government payments and to call for en- 
forcement of that standard through interest 
penalties. 

The 7-day meat standard, the 10-day agri- 
cultural products standard, and the 30-day 
products and services standard were intend- 
ed by Congress to be the rule, not the ex- 
ception. 

Yet, to our dismay, the proposed rule 
gives contracting officers and agency heads 
authority to thumb their noses at the Con- 
gressionally established standards by setting 
“different standards”. What is so wrong 
with what Congress has done that you feel 
agencies can do better? 

In fact, the proposed rule just culls out 
another in a series of loopholes to encour- 
age the agencies to undermine the intent of 
Congress. When it passed the Act, Congress 
did not say agency heads could re-write the 
“Standards for determining the due dates”. 

Therefore, we recommend that the rule be 
re-written as follows: 

“The contracting officer shall insert the 
Prompt Payment clause at 52.232-25. 
Changes to the clause shall be the exception 
not the rule and shall be the result only of 
mutual consent between contracting parties. 
Changes to the clause shall not be made in 
procuring commercial products and services 
for which there is no genuine contract nego- 


31275 


tiation between vendor and government 
agency. Further, agency heads are not au- 
thorized to establish alternative standards 
except where they find that payment in 
under 30 days is in the best interests of the 
government.” 


PROPOSED RULE 


Part 52—Solicitation Provisions and 
Contract Clauses 


52.232.25 Prompt Payment (a) “. . . Con- 
tract financing payment” means a disburse- 
ment of monies to a contractor for operat- 
ing capital incidental to contract perfore- 
mance, such as a progress payment, advance 
payment, and interim cost reimbursement 
voucher.” 

Coalition comment: As mentioned previ- 
ously in this paper, the FAR draft is incor- 
rect in calling a “progress payment” or a 
“cost-reimbursement” a method of ‘con- 
tract financing”. Neither payment is for fi- 
nancing, but rather for completion of work 
or service, or in compensation for a payment 
already issued by the vendor. Neither pay- 
ment is designed as a loan, a method of capi- 
talization, or a form of Federal assistance. 
Rather both are genuine commercial pay- 
ments. As such, they should be treated as 
payments due under the terms of the 
Prompt Payment Act. A late progress pay- 
ment should be subject to interest penalties, 
just as a late cost-reimbursement should be 
subject to interest penalties. 

There is absolutely no basis in the Act for 
the FAR to create this loophole and we 
recommend that the proposed rule be 
amended accordingly. 


PROPOSED RULE 


52.232-25 (b) “An invoice shall be pre- 
pared and submitted to the designated pay- 
ment office in quadruplicate (one copy shall 
be marked “original”), unless otherwise 
specified.” 

Coalition comments: Quadruplicate? For- 
tunately, the Congress, in passing the 
Prompt Payment Act, had better sense than 
recommending such an absurd regulation. 
Nor was such a recommendation proposed 
in OMB Circular A-125. ‘“Quadruplicate” 
can only be the creation of cynical bureau- 
crats, who knowing that most vendors could 
not meet this requirement, would rejoice in 
the ever mounting backlog of rejected in- 
voices stamped ‘“‘Not Enough Copies—Refer 
to Quadruplicate Requirement”. 

Without question, “quadruplicate” sneers 
at the Paperwork Reduction Act and reveals 
the underside of a government payment 
system still overburdened by excessive pa- 
perwork, and hungering for more paper- 
work. 

If private commerce can survive with a 
single invoice, why can’t a federal agency? 
Must the Federal agencies be four-times 
worse than the businesses they contract 
with? 

The Coalition recommends that the pro- 
posed regulation be re-written as follows: 

“An invoice shall be submitted to the 
office or employee of the agency designated 
by the agency to first review such invoice, 
unless otherwise specified.” 

PROPOSED RULE 
Part 52—Solicitation Provisions and 
Contract Clauses 
52.232-25 Prompt Payment 

“(e4) Unless otherwise specified by the 
contracting officer under a special provision 
in the contract, the acceptance date for pur- 
poses of computing interest penalties owed 
the contractor shall be deemed to have oc- 





31276 


curred on the 30th day following the date of 
eontractor delivery of supplies or serv- 
ices... .” 

Coalition comments: Again, an additional 
30 days for acceptance of supplies or serv- 
ices is authorized here yet there is no basis 
for this extended payment period in the 
statute. Congress specifically authorized 
payment to be made within 30 days. The ad- 
dition of standardized periods of time for all 
of the paperwork functions that take place 
prior to payment is contrary to the intent of 
the statute. We recommend that the 30-day 
payment standard authorized by Congress 
be adhered to and that regulations clearly 
spell out that all paperwork processes lead- 
ing up to issuance of the check be complet- 
ed within that 30-day time frame. 

PROPOSED RULE 
§2.232-25 Prompt Payment 


“(b)(6) Name and address of contractor of- 
ficial or office to which payment is to be 
sent (which must be the same as that in the 
contract or on a proper notice of assign- 
ment)” 

Coalition comment: We question why it is 
essential for the agencies to match place of 
payment on contract with place of payment 
on invoice. Between the date of a contract 
and the completion of the work, if a vendor 
changes a box number or wants a payment 
sent to an office other than the one desig- 
nated by the contract, that should be al- 
lowed. We often get complaints from ven- 
dors who say that their payment is being 
held up because they put one payment ad- 
dress on the invoice and another on the con- 
tract. 

In our opinion, if the agency has a ques- 
tion about a discrepancy between two com- 
pany addresses, such a discrepancy could be 
resolved during the 30 days and need not 
cause the invoice to be rejected on the basis 
of being improper. We find that government 
agencies change addresses during contract 
periods and government managers come and 
go, with no penalty to the government. 
Similar treatment should be accorded com- 
panies. 

Therefore, we recommend that this provi- 
sion be re-written as follows: 

“(6) Name, address and phone number of 
contractor official or office to which pay- 
ment is to be sent.” 

PROPOSED RULE: PART 52 SOLICITATION 
PROVISIONS AND CONTRACT CLAUSES 


5§2.232-25 Prompt Payment 
Alternate I (August, 1986) (End of Clause) 


“(f) Electronic Wire Transfer, Payments 
under this contract will be made by the 
Government either by check or wire trans- 
fer (through the Treasury Financial Com- 
munications System ([TFCS] or the Auto- 
mated Clearing House (ACH), at the option 
of the Government.” 

Coalition comments: This section of the 
proposed regulations describes the circum- 
stances and manner in which electronic wire 
transfer payments can be used. The Coali- 
tion feels very strongly that use of electron- 
ic wire transfer for government payments to 
vendors can solve a number of the late pay 
problems currently existing. It is our hope 
that the proposed regulations will specifical- 
ly attempt to encourage the use of electron- 
ic wire transfer payments as a matter of 
general practice by federal agencies. The 
use of wire transfer should be mentioned in 
each contract to assure the vendor and 
prompt the finance office to act according- 
ly. 

" enedwies we object to the phrase “at the 
option of the government”. 


CONGRESSIONAL RECORD—SENATE 


If the government is willing to make wire 
transfer payments, an agreement to do so 
should be reached at the time the contract 
is signed and there should be no subsequent 
doubt as to how the payment will be made. 
The company has a right to know where to 
expect the payment (in the mail or in the 
bank) and a firm agreement on this subject 
should be reached at the begining of the 
contract. To leave this as an option for the 
government places some unfair uncertainty 
on the contractor. 

While the goal should be more and more 
wire transfers, the goal should be to lessen 
the paperwork and red-tape necessary to get 
a wire transfer initiated. For example, why 
should the vender have to fill out a form for 
each payment over $25,000? This would lead 
to endless duplication of information. Why 
not establish a system in which the vendor 
provides the information once and such in- 
formation applies to each successive pay- 
ment? 

Proposed rule: The proposed FAR regula- 
tions (July 17, 1986) do not address the 
question of prompt payment to subcontrac- 
tors. 

Coalition comments: Many federal con- 
struction contracts require subcontracting 
with a number of small business firms. 
When government payments are paid late to 
the prime contractor, this creates an equal 
burden for subcontractors who must wait to 
receive their payment from the prime. In- 
terest penalties paid by the government to 
prime contractors should therefore be 
passed through to subcontractors within 7 
days. Further, payments should be passed 
on to subcontractors within 7 days, in ac- 
cordance with common commercial practice 
(as established by a published industry 
standard, the Joint Policy statement of 1978 
by Associated General Contractors, Ameri- 
can Subcontractors Association, Associated 
Specialty Contractors) and (2) The Small 
Business and Federal Procurement Compe- 
tition Enhancement Act of 1984 (PL 98-577) 
which states: ‘. . . the policy of the United 
States that its prime contractors establish 
procedures to ensure the timely payment of 
amounts due pursuant to the terms and 
their subcontracts with small business con- 
cerns and small business concerns owned 
and controlled by socially and economically 
disadvantaged individuals.” The FAR 
should spell this out clearly to ensure a gov- 
ernment-wide consistent treatment of con- 
tracts involving subcontractors. 

Proposed Rule: The proposed FAR regula- 
tions (July 17, 1986) do not address the re- 
quirements for federal agencies to report 
their incidences of late payment to the 
Office of Management and Budget. 

Coalition comments: Currently, federal 
agencies are required by the Act and by 
OMB to report annually on the incidence of 
late payments by providing the costs of 
annual interest penalties incurred. Unfortu- 
nately, this reporting system does not pro- 
vide any data on the actual incidence of late 
payments for which no interest penalty was 
paid. OMB is currently reviewing proposed 
revisions to Circular A-125 which would in- 
crease the reporting requirements and we 
urge that contracts and contract offices be 
so administered as to produce the following 
information and that such information be 
required by regulation in the FAR: 

1. Number of interest penalties paid. 

2. Amount of interest penalties paid. 

3. Relatively frequency of interest penalty 
payments to the total number of payments. 

4. Number, amount, and relative frequen- 
cy of payments made 3 days or more before 


October 15, 1986 


the due date, except where cash discounts 
were taken. 

5. Reasons that interest penalties were in- 
curred, 

6. An analysis of the progress made from 
previous years in improving the timeliness 
of payments. 

7. Number, amount and relative frequency 
of invoices paid during the grace period 
(stratified 1-5 days, 6-10 days, 11-15 days). 

8. Number, amount and relative frequency 
of invoices paid more than 15 days after the 
due date that did not include interest penal- 
ties, and the reasons therefore. 

Proposed rule: The proposed FAR regula- 
tions (July 17, 1986) do not address the issue 
of whether payments made by federal agen- 
cies through fiscal intermediaries, and other 
distributors of Federal money, are subject 
to the prompt payment provisions. 

Coalition comments: We believe that for 
the purpose of distributing federal funds, 
contract officers should be granted author- 
ity to require that those funds be made sub- 
ject to the prompt payment provisions of 
the FAR regardless of whether interme- 
diary payment organizations, grantees, state 
or local governments perform the actual dis- 
bursement, 

At the present time, the Prompt Payment 
Act of 1982 is under scrutiny by Committees 
of both the House of Representatives and 
U.S. Senate. A considerable number of ques- 
tions have been raised as to whether inter- 
mediaries or others receiving Federal loans, 
grants and contracts through assistance 
programs are complying with the Act’s 
goals. The FAR draft should be amended to 
require prompt payment by organizations 
distributing Federal funds or making pay- 
ments under Federal loan guarantees. 

Proposed Rule: The proposed FAR regula- 
tions are silent on the authority of an 
agency to suspend application of the Act to 
a class of contract payments. 

We would also like to see the regulations 
address another disturbing problem of 
recent occurence: namely, the announce- 
ment by one federal agency (The Commodi- 
ty Credit Corporation) on June 25, 1986, 
that the Prompt Payment Act’s require- 
ments are suspended in situations where an 
agency’s inability to make payment is due to 
circumstances beyond the agency’s control 
such as occurred with respect to depletion 
of CCC's borrowing authority. It should be 
clearly spelled out in the FAR regulations 
that no agency has the authority to suspend 
application of the law or any provision of 
the law. No such authority was granted by 
Congress. No such authority was even ex- 
tended by A-125. By amending the proposed 
FAR regulation we urge you to take imme- 
diate action to prevent future abuses of this 
nature. 


PROPOSED RULE 


The proposed FAR is silent on the defini- 
tion of agency. 

Coalition comment: While OMB Circular 
A-125 defines “agency” for the purposes of 
the Act, the proposed FAR does not. Be- 
cause there are three important distinctions 
made in A-125, we recommend that these be 
incorporated into the FAR picking up 4.a. 
from A-125. 

(1). Entities acting as instrumentalities of 
a Federal agency to administer that agen- 
cy’s programs are considered agencies under 
the Act. 

(2). Military posts, base exchanges and 
commissaries are included as agencies. This 
is a very important distinction because these 
agencies spend considerable sums and are 





October 15, 1986 


viewed by vendors as part of the U.S. gov- 
ernment even though, at times, they may 
spend non-appropriated funds. 

(3). The Tennessee Valley Authority is 
specifically mentioned in the Act and this 
reference should be repeated in the Act 
until such time if ever, that Congress 
changes this provision. 

Proposed rule: The proposed FAR is silent 
on partial payments for partial deliveries. 

Coalition comment: While the Act and 
OMB Circular A-125 mention partial pay- 
ment for partial deliveries, this important 
provision in the Act has been overlooked by 
the FAR writers. 

We recommend that the following be in- 
serted as a clause in each contract: 

“Partial payments will be made for partial 
completed deliveries.” 

Proposed rule: The proposed FAR is silent 
on when a check should be mailed. 

Coalition comment: While the OMB Cir- 
cular A-125 deals with this, the FAR does 
not. 

To avoid the danger of agencies holding 
checks after they have been cut, we recom- 
mend that the following provision be added 
to the FAR; 

“Checks will be mailed or transmitted on 
the day for which the check or transmission 
is dated.” 

Proposed Rule: The proposed FAR is 
silent on how to handle payments for which 
there is no invoice. 

Coalition comment: A lot of unnecessary 
paperwork is created by the requirement 
that companies submit monthly invoices to 
receive payment under a lease. Just as many 
taxpayers are able to pay mortgage and car 
payments monthly without having to be 
billed, so should the government make 
monthly payments for leased equipment 
and facilities without requiring a separate 
invoice. 

The FAR should deal directly with this by 
permitting periodic payments to be made 
without the periodic invoices being submit- 
ted. Agreements concerning leases should 
specify the payment schedule and should be 
subject to the Prompt Payment Act and its 
interest penalties when such payments are 
late. 

Proposed Rule: The proposed FAR does 
not mention a provision in the act which 
authorizies recipients of Federal assistance 
to pay interest penalties. 

Coalition comment: The Congress agreed 
that this is a serious matter which needed 
to be resolved through the Act, The FAR 
should treat it with equal seriousness. 
Therefore, the FAR should have a provision 
as follows: “Recipients of Federal assistance 
may pay interest penalties if so specified in 
their contracts with business concerns. Obli- 
gations to pay such interest penalties will 
not be obligations of the United States. Fed- 
eral funds may not be used for this purpose, 
nor may interest penalities be used to meet 
matching requirements of federally-assisted 
programs.” 

Proposed Rule: The proposed FAR is 
silent on the matter of where agencies and 
vendors should direct their inquiries. 

Coalition comment: When OMB issued A- 
125, it included in its concluding provision, 
some offices and phone numbers that could 
be used for agencies and companies seeking 
additional information on the Prompt Pay- 
ment Act. 

Including such information in every con- 
tract, as a standard contract provision, 
would be a useful public service and could 
help reduce the number of misunderstand- 
ings and mistakes with respect to compli- 


CONGRESSIONAL RECORD—SENATE 


ance on the part of both agencies and com- 
panies. Therefore, the Coalition recom- 
mends that the FAR be amended to require 
the following: 

In all contracts there shall appear the fol- 
lowing information: 

“Questions or inquiries concerning the 
Prompt Payment Act may be directed to the 
Financial Management Division, Office of 
Management and Budget, Washington, D.C. 
20503, telephone number 202/395-4773. 

“Inquiries concerning the applicable inter- 
est rate may be directed to the Appropria- 
tion and Investment Branch, Department of 
the Treasury, telephone number 202/566- 
5651. 

“Inquiries concerning payment under this 
contract, after all other avenues have been 
exhausted, may be directed to the following, 
who is the chief fiscal officer for this 
agency: ——.” 

In conclusion, The Coalition for Prompt 
Pay is pleased to see that an attempt is 
being made to incorporate the Prompt Pay- 
ment Act into the FAR. This is needed to 
implement the policy provided in the stat- 
ute. However, we are distressed by the pro- 
posals you have drafted because you have 
strayed so far from the intent and spirit of 
the Act. The comments we have made con- 
cerning the inconsistencies in the regula- 
tions as they relate to provisions in the law 
are designed to help you reevaluate your 
draft. Your consideration of our recommen- 
dations, including the proposed public hear- 
ing, the review of the Congressional and 
GAO reports should be done deliberately 
and thoroughly. 

In view of the currrent Congressional 
work on this subject, moreover, we feel you 
are proceeding in a very sensitive area in 
which agencies and companies seek a con- 
sistent, fair, and red-tape free path to 
prompt payment. 

Respectfully submitted on behalf of the 
Coalition, 

KENTON ParIE, 
Director. 


MEMBERS OF THE COALITION FOR PROMPT PAY 


International Communications Industries 
Association [ICIA]. 

National Moving and Storage Association 
[NMSA]. 

Association for Information and Image 
Management [AIIM]. 

Door and Hardware Institute (DHT). 

American Subcontractors Association 
[ASA]. 

Association of General Contractors, 
Rhode Island Chapter [AGC]. 

National Association of Manufacturers 
[NAM]. 

Small Business United [SBU]. 

Coalition for Common Sense in Govern- 
ment Procurement. 

American Meat Institute [AMT]. 

American Consulting Engineers Council 
[ACEC]. 

Associated Specialty Contractors [ASC]. 

National Electrical Contractors Associa- 
tion [NECA]. 

Painting and Decorating Contractors of 
America [PDCA]. 

Mechanical Contractors Association of 
America [MCAA]. 

Mason Contractors Association of America 
[MCAAI]. 

Sheet Metal & Air Conditioning Contrac- 
tors National Association [SMACNA]. 

National Roofing Contractors Association 
[NRCAI. 

National Association of Plumbing-Heat- 
ing-Cooling Contractors [NAPHCC]. 


31277 


National Association of Retail Druggists 
([NARD]. 
National Insulation Contractors Associa- 
tion [NICA]. 
National 
(NAW]. 

National Association of Credit Manage- 
ment [NACM]. 

International Sanitary Supply Association 
CISSA]. 

Association of the Wall & Ceiling Indus- 
tries—International [AWCI]. 

American Association of Nurserymen. 

Associated Builders and Contractors. 

American Logistics Association. 

JOINT Pouicy STATEMENT 1: PROMPT 
PAYMENT 


Undue delays by owners, architects/engi- 
neers, general contractors, subcontractors 
and sub-subcontractors in processing 
amounts due to general contractors, subcon- 
tractors, sub-subcontractors and suppliers, 
or in making timely payments of these 
amounts, impose hardships and improper fi- 
nancing burdens on the contractors and 
suppliers and amount to extensions of credit 
by the contractors and suppliers to their re- 
spective higher tiers. 

Accordingly, it is the policy of the Associ- 
ated General Contractors of America, the 
American Subcontractors Association and 
the Associated Specialty Contractors that 
all payments must be made on all contracts 
promptly. This should include payment for 
all labor, services and materials stored on 
the job site or other approved storage sites 
as of the closing date of requisitions. This 
applies to both progress payments and final 
payments. 

All local chapters of AGC, ASA and ASC 
are urged to make efforts, singly or coopera- 
tively where possible, to persuade all 
owners, architects/engineers, general con- 
tractors, subcontractors and sub-subcontrac- 
tors to adopt and adhere to this policy in 
the conduct of their business. 

The following schedule of billings, certifi- 
cates and payments by various participants 
in the construction process is recommended. 

The schedule assumes normal trade con- 
tract terms allowing monthly progress pay- 
ments for work performed and materials 
suitably stored through the end of the 
month. This schedule does not refer to pay- 
ments to suppliers who are not subcontrac- 
tors. 

It is important to note that along the se- 
quence of events, any recipient of a pay- 
ment request who takes exception to an 
item of billing should immediately contact 
the initiating party by telephone and at- 
tempt to resolve the matter. Failing resolu- 
tion, the party taking exception should 
notify the other party in writing the rea- 
sons for the action. 


DAY OF CALENDAR MONTH AND EVENT 


20th—Sub-subcontractors request 
ment from subcontractors. 

25th—Subcontractors request payment 
from contractor, incorporating the sub-sub- 
contractor's request in the billing. 

lst—Contractor submits to the owner's 
representative an itemized application for 
payment with the necessary supporting 
data, covering the monthly progress of the 
entire contract being performed. 

5th—The owner’s representative issues 
the certificate for payment to the owner for 
the amount requested. 

10th or sooner—The owner makes pay- 
ment to the contractor for the amount certi- 
fied by the owner's representative. 


Association of Wholesales 


pay- 





31278 


No More Than 7 Days After Receipt—The 
contractor pays each subcontractor the 
amount received from the owner on his ac- 
count promptly but not later than seven 
days after receipt. 

No More Than 7 Days After Receipt— 
Each subcontractor pays each subcontractor 
the amount received from the owner on his 
account promptly but not later than seven 
days after receipt. 

The schedule should be adjusted by 

making appropriate billings and payments 
on the last working day prior to any listed 
Saturday, Sunday or holiday. It is also rec- 
ommended that collection efforts be com- 
menced immediately following the day any 
payment due was not paid. 
e@ Mr. PRYOR. Mr. President, today I 
join many of my colleagues in urging 
approval of S. 2479, the Prompt Pay- 
ment Act Amendments of 1986. Iam a 
cosponsor of this legislation, and I was 
a cosponsor of the original 1982 
Prompt Payment Act which this legis- 
lation amends. 

The primary purpose of the 1982 act 
was, quite simply, to make the Gov- 
ernment pay its bills on time, and to 
assess interest penalties for late pay- 
ments and improperly taken discounts. 

The good news is that the act had 
substantially improved the Govern- 
ment’s bill-paying performance over- 
all. The bad news is that there remain 
an excessively high number of late 
payments by agencies, and vendors 
that are paid late do not automatically 
receive the interest penalties owed to 
them under the act. 

In testimony before the Legislation 
and National Security Subcommittee 
of the House Committee on Govern- 
ment Operations on July 29, 1986, Mr. 
Frederick D. Wolf of the General Ac- 
counting Office [GAO] testified that 
governmentwide, agencies still paid a 
quarter of their commercial bills after 
the due date. Close to 5 percent of 
these payments should have included 
penalties. Some of the payments were 
extremely late. 

Mr. Wolf also testified that agencies 
frequently did not pay the penalties 
they owed and did not repay improper- 
ly taken discounts. The GAO identi- 
fied 66 invoice payments in its sample 
which should have included late pay- 
ment penalties. However, agencies had 
paid penalties for only 10 of these. In 
other words, five out of every six ven- 
dors entitled to interest penalties did 
not receive them. 

In private commerce, late payments 
and improperly taken discounts for 
early payment do not occur so fre- 
quently or without some penalty at- 
tached. When a consumer does not 
pay his or her bank credit card bal- 
ance in full within 30 days, interest 
charges are automatically assessed and 
added to the balance due. When the 
consumer pays off the balance, that 
payment includes accrued interest 
penalties. 

The 1982 act explicitly stated that 
agencies should automatically include 
interest penalties in late invoice pay- 


CONGRESSIONAL RECORD—SENATE 


ments. Yet five out of six vendors re- 
ceive their late payment without the 
interest included. Why should agen- 
cies get away with something that an 
ordinary consumer cannot get away 
with? 

S. 2479 addresses this problem by re- 
quring that the interest penalty be 
doubled if the agency does not auto- 
matically include the interest in a late 
payment to the vendor and more than 
15 days elapses after interest first be- 
comes due. This provision adds teeth 
to the Prompt Payment Act without 
unduly interfering with agency oper- 
ations. 

The legislation contains many other 
similar refinements of the Prompt 
Payment Act. Taken together, they 
represent important and needed solu- 
tions to some of the outstanding prob- 
lems that have developed in imple- 
menting the Prompt Payment Act of 
1982. 

Mr. HARKIN. Mr. President, today I 
join several of my colleagues in sup- 
porting S. 2479, the amendments to 
the Prompt Payment Act of 1982. 

The intent of that legislation was 
clearly articulated in the 1982 act. Un- 
fortunately the bright hopes that the 
act offered, when President Reagan 
signed it into law, have not yet been 
realized totally. 

While many invoices are being paid 
diligently by Federal agencies, we have 
a 4-year history that displays patterns 
of policies and behaviors that are far 
afield from our intention of getting 
Government bills paid on time. 

The pattern of late payment of in- 
voices reflects a conflict of priorities. 
There should be no such conflict. In- 
correctly, agencies have felt that 
paying their bills late was good fiscal 
and business practice, because they 
were saving the taxpayers money. In 
fact, small, medium and large busi- 
nesses who supply the Government 
have been providing interest-free 
loans. 

The amendments contained in S. 
2479 will clarify and strengthen the 
Prompt Payment Act. These amend- 
ments also will bring contractual rela- 
tionships between Federal agencies 
and their suppliers to a more profes- 
sional and business-like manner of op- 
erating. 

This particularly is important, Mr. 
President, to our small and medium 
size businesses in Iowa and elsewhere. 
They have borne a heavy burden in 
doing business with the Government. 
This, in spite of the fact that the Gov- 
ernment needs suppliers who are reli- 
able and honest, and who compete to 
supply goods and services at the lowest 
possible cost. 

There is no question that the cost to 
the supplier of late payments (these 
interest-free loans to the Government) 
will be added to the price of the prod- 
uct or service provided. 


October 15, 1986 


To make the most responsible use of 
taxpayer money to provide needed 
Government services, we must be able 
to attract the greatest range of busi- 
nesses to compete for the Govern- 
ment’s business. The great difficulty 
for many small and medium size busi- 
nesses is that they cannot afford to do 
business with the Government. 

Because often Government payment 
is so slow, these businesses cannot in 
turn meet their obligations to employ- 
ees and suppliers. The task of follow- 
ing up on late bills, wading through a 
maze of organization charts trying to 
find the correct individual to talk to, 
and resubmitting invoices often in 
triplicate and quadruplicate is simply 
beyond many organizations’ resources. 
When this happens, all taxpayers lose, 
not just one business. 

Mr. President, while it is discourag- 
ing that we must address this difficul- 
ty of slow payment of invoices when 
we have already done so in a clear and 
straightforward manner, I find it en- 
couraging that we have carefully and 
steadfastly monitored the implementa- 
tion of the act to determine its effect 
on small business and equally impor- 
tant on the efficient working of the 
Government. 

While S. 2479 focuses on the prob- 
lems that still need to be solved, the 
hearings held by the Committee on 
Small Business in June of this year 
provided many examples of the posi- 
tive results that the act has had. 

The Prompt Pay Coalition, directed 
by Kenton Pattie of the International 
Communication Industries Association 
{ICIA], pointed out difficulties that 
have been experienced by businesses. 
He also pointed out, however, the im- 
portant results that the Prompt Pay- 
ment Act of 1982 has had. 

The Prompt Payment Act of 1982 has 
been a success. Our 3 years of experience 
with this law show there has been signifi- 
cant improvement since 1982. I have re- 
ceived many comments from businesspeople 
indicating that interest is being paid on bills 
and far more payments are made on time 
now than before 1982. 

Meanwhile, the Federal Prompt Pay- 
ment Act also has provided an incen- 
tive to 44 States to pass their own 
prompt pay laws. Iowa, I am proud to 
report, is one of the 44 “prompt pay” 
States having adopted its law in 1983. 
Further, in many cases, payment pro- 
cedures have been streamlined so that 
invoices move rapidly. So, we have ac- 
complished much of what we intended 
to with the original legislation. 

Now, with the work of my colleagues 
and their staffs, these current amend- 
ments proposed in S. 2479 can take us 
the final distance to achieving the goal 
of making the Government a strong, 
reliable, business partner. When we do 
this, we will attract the best businesses 
to compete for Government business. 
That will give us true, continuing sav- 
ings without sacrificing quality. Mr. 





October 15, 1986 


President, I am pleased to cosponsor S. 
2479 and I hope the Senate will pass 
this bill to encourage the executive 
branch to live up to the intent of the 
1982 law. 

Mr. CHAFEE. Mr. President, I ask 
for a third reading. 

The PRESIDING OFFICER. The 
bill is before the Senate and open to 
further amendment. If there be no 
further amendment to be proposed, 
the question is on the engrossment 
and third reading of the bill. 

The bill (S. 2479) was ordered to be 
engrossed for a third reading, was read 
the third time, and passed, as follows: 

S. 2479 

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

SHORT TITLE 

SecTion 1. This Act may be cited as the 

“Prompt Payment Amendments of 1986”. 
CONGRESSIONAL FINDINGS 

Sec. 2. The Congress finds that— 

(1) the billpaying practices of most Feder- 
al Government agencies have substantially 
improved, with certain exceptions, after 
three years of experience under the Prompt 
Payment Act (codified in chapter 39 of title 
31, United States Code); 

(2) the improvement in such bdillpaying 
practices has resulted in fairer treatment of 
contractors who furnish supplies, services, 
or construction to the Federal Government, 
especially small businesses; and 

(3) nonetheless, contractors who deal with 
the Federal Government continue to experi- 
ence many persistent billpaying problems 
which are caused by— 

(A) a failure to modify the Federal Acqui- 
sition Regulation as part of the implementa- 
tion of the provisions of the Prompt Pay- 
ment Act; 

(B) the implementation of the provisions 
of the Prompt Payment Act in a manner 
that denies the Act’s protections in cases of 
certain contract payments; 

(C) the implementation of the provisions 
of such Act in a manner which has permit- 
ted Federal Government agencies to take 
discounts for early payment months after 
the expiration of the discount period speci- 
Sied in the contractor's invoice; 

(D) inadequate implementation of the re- 
quirement that Federal Government agen- 
cies automatically pay interest penalties 
with delinquent payments; 

(E) the use of the unlimited time afforded 
agencies to formally accept a contractor’s 
performance for the purpose of avoiding the 
requirement that the agencies pay an inter- 
est penalty with late payments made for 
supplies or services; and 

(F) abusive use of certain payment grace 
periods which afford the Federal Govern- 
ment additional time to pay its bills with- 
out incurring interest penalties otherwise 
due. 

DEFINITIONS AND APPLICATION 

Sec. 3. (a) Section 3901(a)(4) of title 31, 
United States Code, is amended to read as 
Jfollows: 

“(4) the head of the agency is deemed to re- 
ceive an invoice on the later of— 

*“(A) the date on which the office or em- 
ployee of the agency designated by the 
agency to first receive such invoice actually 
receives a proper invoice; or 

“(B) on the fifth day after the date on 
which, in accordance with the terms and 


CONGRESSIONAL RECORD—SENATE 


conditions of the contract, the property is 

actually delivered or final performance of 

the services is actually completed, as the 

case may be, unless the contract specifies a 

longer period for agency acceptance of the 

property or services.”’. 

(6)(1) Section 3901 of such title is further 
amended by adding at the end the following 
new subsection (c); 

“(c) This chapter, except section 3905 of 
this title, applies to the United States Postal 
Service. However, the Postmaster General 
shall be responsible for issuing the imple- 
menting procurement regulations, solicita- 
tion provisions, and contract clauses.” 

(2) Section 410(b) of title 39, United States 
Code, is amended by inserting after clause 
(8) the following new clause (9): 

“(9) Chapter 39 of title 31.”. 

INTEREST PENALTIES: REDUCTIONS IN GRACE 

PERIOD; INCREASED PENALTIES 

Sec. 4. (a) Section 3902(b) of title 31, 
United States Code, is amended— 

(A) by striking out “16th” in clause (3) in 
such sentence and inserting in lieu thereof 
“8th”; and 

(B) by adding at the end the following new 
sentence: 

“Clause (3) of the preceding sentence shall 

not apply to payments under any contract 

for which the procurement solicitation is 

issued on or after October 1, 1989.”. 

(b) Section 3902 of such title is further 
amended by redesignating subsections (c) 
through (e) as subsections (d) through (/), re- 
spectively, and by inserting after subsection 
(b) the following new subsection (c): 

“(c)(1) Any amount of an interest penalty 
which exceeds $1.00 and is owed a business 
concern under this section shall be paid 
without regard to whether the business con- 
cern has requested payment of such penalty. 

“(2) If a business concern— 

“(A) is owed an interest penalty by an 
agency; 

“(B) is not paid the interest penalty in a 
payment made to the business concern by 
the agency on or after the date on which the 
interest penalty becomes due; and 

‘(C) is not paid the interest penalty by the 
agency within 10 days after the date on 
which such payment is made; and 

“(D) makes a written demand, not later 
than 40 days after the date on which such 
payment is made, that the agency pay such 
a penalty, 
such business concern shall be entitled to re- 
ceive an interest penalty equal to twice the 
amount of the interest payment that would 
otherwise be due.””. 

INTEREST PENALTIES ON PROGRESS PAYMENTS 
AND RETAINED AMOUNTS UNDER CONSTRUCTION 
CONTRACTS 
Sec. 5. Section 3903 of title 31, United 

States Code, is amended— 

(1) by striking out clause (4); 

(2) by redesignating clause (5) as (6); and 

(3) by inserting after clause (3) the follow- 
ing new clause (4): 

“¢4) in the case of a construction contract, 
provide for the payment of interest on— 

“(A) any progress payment due under the 
contract for— 

“(i) a period of more than 7 days; or 

“ii) a longer period if the contracting of- 
ficer determines that the prevailing practice 
in private construction contracts is to pro- 
vide such longer payment period; and 

“(B) any amount which has been retained 
during the performance of the contract and 
are due to be released to the contractor after 
final acceptance of the construction, if such 
retained amount is not paid to the contrac- 
tor by the required payment date;”. 


31279 


PERIODIC PAYMENTS UNDER SUPPLY AND SERVICE 
CONTRACTS 

Sec. 6. Section 3903 of title 31, United 
States Code, as amended by section 5, is fur- 
ther amended by inserting after clause (4) 
the following: 

“(5) provide for periodic payments, in the 
case of a supply or service contract which 
authorizes periodic payments and periodic 
submission of invoices during the contract 
period, upon— 

“(A) submission of an invoice for supplies 
delivered or services performed during the 
contract period; and 

“(B) either— 

“(i) acceptance of the supplies or services 
by an employee of an agency authorized to 
accept the supplies or services; or 

“tii) certification, by such an employee, 
that the performance covered by the invoice 
conforms to the terms and conditions of the 
contract.”’. 

PAYMENT CLAUSE FOR SUBCONTRACTS UNDER 

CONSTRUCTION CONTRACTS 

Sec. 7. (a) Chapter 39 of title 31, United 
States Code, is amended— 

(1) by redesignating sections 3905 and 
3906 as 3906 and 3907, respectively; and 

(2) by adding at the end the following new 
section 3905: 


“$3905. Payment clause for subcontracts under 
construction contracts 


“(a) Each construction contract awarded 
by an agency shall include a clause that re- 
quires the prime contractor to include, in 
each subcontract for property or services en- 
tered into by the prime contractor and a 
subcontractor (including a material suppli- 
er) for the purpose of performing such con- 
struction contract, a payment clause which 
obligates the prime contractor— 

“(1) to pay the subcontractor promptly (as 
determined in accordance with prevailing 
industry standards) out of amounts paid to 
the prime contractor by the agency for work 
performed by the subcontractor under that 
contract; and 

“(2) to pay to the subcontractor an inter- 
est penaity on amounts due in the case of 
each payment not made in accordance with 
such payment clause— 

“(A) for the period beginning on the day 
after the required payment date and ending 
on the date on which payment of the 
amount due is made; and 

“(B) computed at the most current rate of 
interest that has been determined by the Sec- 
retary of the Treasury for interest payments 
under section 12 of the Contract Disputes 
Act of 1978 (41 U.S.C. 611) and published by 
the Secretary in the Federal Register. 

‘(b) A prime contractor’s obligation to 
pay an interest penalty to a subcontractor 
pursuant to the payment clause included in 
a subcontract under subsection (a) may not 
be construed to be an obligation of the 
United States. A contractor may not obtain 
reimbursement from the United States for 
such interest penalty. A contract modifica- 
tion may not be made for the purpose of pro- 
viding reimbursement of such interest pen- 
alty. A cost reimbursement claim may not 
include any amount for reimbursement of 
such interest penalty.’’. 

(b) The table of sections at the beginning 
of such chapter is amended by striking out 
the items relating to sections 3905 and 3906 
and inserting in lieu thereof the following: 
“3905. Payment clause for subcontracts 

under construction contracts. 
“3906. Reports. 
“3907. Relationship to other laws.”’. 





31280 


LIMITATIONS ON DISCOUNT PAYMENTS 

Sec. 8. Section 3904 of title 31, United 
States Code, is amended by inserting after 
the first sentence the following: “For the 
purpose of the preceding sentence, the speci- 
fied time shall be calculated from the date 
the invoice under the contract is received by 
the office or employee of the agency desig- 
nated by the agency to first receive such in- 
voice until the date of payment.”. 

REPORTS 

Sec. 9. Section 3905(a) of title 31, United 
States Code, is amended to read as follows: 

“(a)(1) By the 60th day after the end of the 
fiscal year, the head of each agency shall 
submit to the Director of the Office of Man- 
agement and Budget a report on the agen- 
cy’s payment practices, including a descrip- 
tion of the extent to which those practices 
satisfy the requirements of this chapter. 

“(2) In addition to such other information 
as may be required by the Director, the 
report required by paragraph (1) shall in- 
clude— 

“(A) the number, amounts, and frequency 
of interest penalty payments, and the rea- 
sons the interest penalties were not avoided 
by prompt payment; and 

“(B) the number, dollar value, and fre- 
quency of invoices paid after the required 
payment date without payment of an inter- 
est penalty, and the reasons no obligation to 
pay interest penalties was incurred with re- 
spect to such invoices or no amount for in- 
terest penalties were included in the pay- 
ments of such invoices.”. 

IMPLEMENTATION THROUGH THE FEDERAL 
ACQUISITION REGULATION 

Sec. 10. (a) The Federal Acquisition Regu- 
lation shall be modified to provide appropri- 
ate solicitation provisions and contract 
clauses that implement chapter 39 of title 
31, United States Code, and the regulations 
prescribed under section 3903 of such title. 

(b) The solicitation provisions and con- 
tract clauses required by subsection (a) shall 
include the following matters: 

(1) Authority for a contracting officer to 
specify for a contract or class of contracts a 
specific payment period, which— 

(A) in the case of payments for commercial 
items or services, is similar to the payment 
period or periods permitted in prevailing 
private industry contracting practices; 

(B) in the case of payments for noncom- 
mercial items and services, does not exceed 
30 days unless the circumstances of the pro- 
curement action require a longer period for 
payment; and 

(C) in the case of progress payments under 
construction contracts, does not exceed 7 
days, unless the contracting officer deter- 
mines that the prevailing practice in pri- 
vate construction contracts requires a 
longer payment period. 

(2) Requirements to make periodic pay- 
ments, in the case of a supply or service con- 
tract which authorizes periodic payments 
and periodic submission of invoices during 
the contract period, upon— 

(A) submission of an invoice for supplies 
delivered or services performed during the 
contract period; and 

(B) either— 

(i) acceptance of the supplies or services 
by an employee of the contracting agency 
authorized to accept the supplies or services; 
or 

(ii) certification, by such an employee, 
that the performance covered by the invoice 
conforms to the terms and conditions of the 
contract. 

(3) A conclusive presumption that the Fed- 
eral Government has accepted property or 


CONGRESSIONAL RECORD—SENATE 


services by the fifth day after the date on 
which, in accordance with the terms and 
conditions of the contract, the property is 
delivered or final performance of the serv- 
ices is completed, unless the circumstances 
of the procurement require a longer period 
for acceptance by the Federal Government 
and such longer period is specified in the so- 
licitation for such contract. 

(4) The limitation that the Federal Gov- 
ernment may take a discount offered by a 
contractor for early payment by the Federal 
Government only in accordance with the 
time limits specified by the contractor. 

(5) The requirements of section 3902(c) of 
title 31, United States Code. 

(c) The regulations required by subsection 
(a) shall be published as proposed regula- 
tions for public comment as provided in sec- 
tion 22 of the Office of Federal Procurement 
Policy Act (41 U.S.C. 420) within 120 days 
after the date of the enactment of this Act. 

EFFECTIVE DATES 

Sec, 11. (a) Section 3(a/(2) and the amend- 
ments made by sections 3fa/(1), 4, 5, 6, 7, 
and 8 shall apply to payments under con- 
tracts awarded during or after the first 
fiscal quarter which begins more than 90 
days after the date of the enactment of this 
Act. 

(b) The amendments made by section 3(b) 
shall apply to payments under contracts 
awarded on or after October 1, 1987. 

(c) The amendment made by section 9 
shall apply to the report required by section 
3905(a) of title 31, United States Code, for 
each fiscal year beginning after September 
30, 1986. 

Mr. CHAFEE. Mr. President, I move 
to reconsider the vote by which the 
bill, as amended, was passed. 

Mr. BYRD. Mr. President, I move to 
lay that motion on the table. 

The motion to lay on the table is 
agreed to. 


ORDER OF PROCEDURE 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the live 
quorum to occur at 11 a.m. be post- 
poned for 15 minutes. 

The PRESIDING OFFICER. 
there objection? 

Mr. BYRD. There is no objection. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


Is 


NATIONAL CPR AWARENESS 
WEEK 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Commit- 
tee on the Judiciary be discharged 
from further consideration of Senate 
Joint Resolution 426, National CPR 
Awareness Week, and that the Senate 
proceed to its immediate consider- 
ation. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The clerk will report. 

The assistant legislative clerk read 
as follows: 

A joint resolution (S.J. Res. 426) to desig- 
nate the week of October 19 through Octo- 
ber 25, 1986, as “National CPR Awareness 
Week.” 

The Senate proceeded to consider 
the joint resolution. 


October 15, 1986 


Mr. CHAFEE. Mr. President, I move 
adoption of the joint resolution. 

The PRESIDING OFFICER. The 
joint resolution is before the Senate 
and open to amendment. If there be 
no amendment to be proposed, the 
question is on the engrossment and 
third reading of the joint resolution. 

The joint resolution (S.J. Res. 426) 
was ordered to be engrossed for a third 
reading, was read the third time, and 
passed. 

The preamble was agreed to. 

The joint resolution, together with 
the preamble, reads as follows: 

S.J. Res. 426 

Whereas heart attacks are the leading 
cause of death in the United States; 

Whereas as many as one million five hun- 
dred thousand Americans may be stricken 
by a heart attack during 1986; 

Whereas cardio-pulmonary resuscitation 
commonly referred to as CPR, is a first aid 
procedure which significantly reduces the 
incidence of sudden death due to a heart 
attack; and 

Whereas the death rate due to heart at- 
tacks would be reduced if more Americans 
received training in CPR: Now, therefore, be 
it 

Resolved by the Senate and House of Rep- 
resentatives of the United States of America 
in Congress assembled, That the week of 
October 19 through October 25, 1986, is des- 
ignated as “National CPR Awareness 
Week”, and the President is authorized and 
requested to issue a proclamation calling 
upon the people of the United States to ob- 
serve such week with appropriate programs 
and activities. 

Mr. CHAFEE. Mr. President, I move 
to reconsider the vote by which the 
joint resolution was passed. 

Mr. BYRD. Mr. President, I move to 
lay that motion on the table. 

The motion to lay on the table was 
agreed to. 


0 1100 


ORDER FOR CLOTURE VOTE AT 
3 P.M. 


Mr. CHAFEE. I ask unanimous con- 
sent that the cloture vote occur at the 
hour of 3 p.m. today, with mandatory 
quorum under rule XXII being waived. 

The PRESIDING OFFICER. Is 
there objection? 

Mr. BYRD. Mr. President, there is 
no objection on this side. 

The PRESIDING OFFICER. With- 
out objection, the motion is agreed to. 


AMERICAN PHYSIOLOGISTS 
WEEK 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Commit- 
tee on the Judiciary be discharged 
from further consideration of Senate 
Joint Resolution 408, American Physi- 
ologists Week. 

The PRESIDING OFFICER. 
there objection? 

Mr. BYRD. Mr. President, does the 
distinguished acting Republican leader 


Is 





October 15, 1986 


also wish to ask unanimous consent 
that the Senate move to its immediate 
consideration? 

Mr. CHAFEE. Yes, Mr. President. 

Mr. BYRD. If he does, I have no ob- 
jection. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The joint resolution will be stated by 
title. 

The assistant legislative clerk read 
as follows: 

A joint resolution (S.J. Res. 408) designat- 
ing “American Physiologists Week.” 

The PRESIDING OFFICER. The 
joint resolution will be considered as 
having been read the second time at 
length and the Senate will proceed to 
its consideration. 

The joint resolution (S.J. Res. 408) 
was considered, ordered to a third 
reading, read the third time, and 
passed. 

The preamble was agreed to. 

The joint resolution, with its pream- 
ble, is as follows: 

S.J. Res. 408 

Whereas 1987 marks the one-hundredth 
anniversay of the founding of the American 
Physiology Society; 

Whereas physiology is the taproot for all 
of the life sciences; 

Whereas early findings by physiologists 
resulted in the development of blood trans- 
fusions and modern anesthesia, eradication 
of many diseases, and the discovery of anti- 
biotics; 

Whereas physiology continues to be the 
fountainhead from which life science re- 
search enriches the health and longevity of 
humans and animals; and 

Whereas internationally renowned physi- 
ologists from every continent are coming to 
the District of Columbia to engage in scien- 
tific and educational dialogue with the 
American Physiological Society during its 
Centennial Week celebration of a century in 
physiology: Now, therefore, be it 

Resolved by the Senate and House of Rep- 
resentatives of the United States of America 
in Congress assembled, That the week be- 
ginning March 29, 1987, is designated as 
“American Physiologists Week”. The Presi- 
dent is requested to issue a proclamation 
calling on the people of the United States to 
observe such week with appropriate ceremo- 
nies and activities. 

Mr. CHAFEE. I move to reconsider 
the vote by which the joint resolution 
was passed. 

Mr. BYRD. I move to lay that 
motion on the table. 

The motion to lay on the table was 
agreed to. 


NATIONAL BOWLING WEEK 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Commit- 
tee on the Judiciary be discharged 
from consideration of Senate Joint 
Resolution 388, National Bowling 
Week, and that the Senate proceed to 
its immediate consideration. 

Mr. BYRD. Mr. President, there is 
no objection to either request. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


CONGRESSIONAL RECORD—SENATE 


The resolution will be stated by title. 

The assistant legislative clerk read 
as follows: 

A joint resolution (S.J. Res. 388) designat- 
ing the week beginning January 4, 1987, as 
“National Bowling Week.” 


The PRESIDING OFFICER. The 
joint resolution will be considered as 
having been read the second time at 
length, and the Senate will proceed to 
its consideration. 

The joint resolution (S.J. Res. 388) 
was considered, ordered to a third 
reading, read the third time, and 
passed. 

The preamble was agreed to. 

The joint resolution, with its pream- 
ble, is as follows: 

S.J. REs. 388 


Whereas bowling is one of the oldest and 
most popular indoor family sports in the 
world and is played in more than 79 nations; 

Whereas people have competed in some 
form of bowling for thousands of years; 

Whereas many immigrants brought a 
form of bowling from their homeland 
during the birth of America; 

Whereas bowling has contributed to the 
social fabric of the United States with 
8,000,000 people participating as members 
of local bowling organizations in more than 
2,800 cities and towns across our land; 

Whereas bowling is played in 8,300 bowl- 
ing centers, virtually in every community in 
the Nation, and has emerged as the longest 
running, most highly rated individual sport 
television series on Saturday; 

Whereas bowling is the largest indoor par- 
ticipation sport in the United States with 
over 69,000,000 Americans bowling each 
year; and 

Whereas bowling is an excellent form of 
exercise and recreation for all people re- 
gardless of age: Now, therefore be it 

Resolved by the Senate and House of Rep- 
resentalives of the United States of America 
in Congress assembled, That the week be- 
ginning January 4, 1987, is designated ‘“Na- 
tional Bowling Week". The President is re- 
quested to issue a proclamation calling upon 
the people of the United States to observe 
that week with appropriate ceremonies and 
activities. 


FISHERIES ACTIVITIES 
AUTHORIZATION 


Mr. CHAFEE. Mr. President, I ask 
that the Chair lay before the Senate a 
message from the House of Represent- 
atives on S. 991. 

The PRESIDING OFFICER laid 
before the Senate the following mes- 
sage from the House of Representa- 
tives: 

Resolved, That the bill from the Senate 
(S. 991) entitled “An Act to provide authori- 
zation of appropriations for certain fisheries 
activities”, do pass with the following 
amendments: 

Strike out all after the enacting clause 
and insert: 

TITLE I—FISHERIES CONSERVATION AND 

MANAGEMENT 
SECTION 101. REFERENCE. 

Whenever in this title an amendment or 
repeal is expressed in terms of an amend- 
ment to, or repeal of, a title, section, subsec- 
tion, paragraph, or other provision, the ref- 


31281 


erence shall be considered to be made to a 
title, section, subsection, paragraph, or 
other provision of the Act entitled “An Act 
to provide for the conservation and manage- 
ment of the fisheries, and for other pur- 
poses”, approved April 13, 1976 (Public Law 
94-265, 90 Stat. 331 et seq.). 
SEC. 102. UNITED STATES RIGHTS AND AUTHORITY 
REGARDING FISH AND FISHERY RE- 
SOURCES WITHIN THE EXCLUSIVE ECO- 
NOMIC ZONE. 

(a) DEFINITION OF EXCLUSIVE ECONOMIC 
ZoneE.—Section 3 (16 U.S.C 1802) is amend- 
ed— 

(1) by striking out paragraph (8); 

(2) by redesignating paragraphs (6) and 
(7) as paragraphs (7) and (8), respectively; 
and 

(3) by inserting immediately after para- 
graph (5) the following new paragraph: 

“(6) The term ‘exclusive economic zone’ 
means the zone established by Proclamation 
Numbered 5030, dated March 10, 1983. For 
purposes of applying this Act, the inner 
boundary of that zone is a line coterminous 
with the seaward boundary of each of the 
coastal States.”. 

(6) AUTHORITY REGARDING EXCLUSIVE Eco- 
nomic Zone.—Title I (16 U.S.C. 1811-1813) is 
amended to read as follows: 


“TITLE I—UNITED STATES RIGHTS AND 
AUTHORITY REGARDING FISH AND 
FISHERY RESOURCES 

“SEC. 101. UNITED STATES SOVEREIGN RIGHTS TO 

FISH AND FISHERY MANAGEMENT AU- 
THORITY. 

“(a) IN THE EXCLUSIVE ECONOMIC ZONE.— 
Except as provided in section 102, the 
United States claims, and will exercise in 
the manner provided for in this Act, sover- 
eign rights and exclusive fishery manage- 
ment authority over all fish, and all Conti- 
nental Shelf fishery resources, within the ex- 
clusive economic zone. 

“(b) BEYOND THE EXCLUSIVE ECONOMIC 
ZoneE.—The United States claims, and wiil 
exercise in the manner provided for in this 
Act, exclusive fishery management authority 
over the following: 

“(1) All anadromous species throughout 
the migratory range of each such species 
beyond the exclusive economic zone; except 
that that management authority does not 
extend to any such species during the time 
they are found within any foreign nation’s 
territorial sea or exclusive economic zone 
for the equivalent), to the extent that that 
sea or zone is recognized by the United 
States. 

“(2) All Continental Shelf fishery resources 
beyond the exclusive economic zone. 

“SEC. 102. EXCLUSION FOR HIGHLY MIGRATORY SPE- 

CIES. 

“The sovereign rights and exclusive fishery 
management authority asserted by the 
United States under section 101 over fish do 
not include, and may not be construed to 
extend to, highly migratory species of fish.”. 

(c) CONFORMING AMENDMENTS.—The Act re- 
Jerred to in section 101 of this Act is amend- 
ed— 

(1) by amending section 2— 

(A) by amending paragraph (1) of subsec- 
tion (b) to read as follows; 

“(1) to take immediate action to conserve 
and manage the fishery resources found off 
the coasts of the United States, and the 
anadromous species and Continental Shelf 
Fishery resources of the United States, by ex- 
ercising (A) sovereign rights for the purposes 
of exploring, exploiting, conserving, and 
managing all fish except highly migratory 
species, within the exclusive economic zone 





31282 


established by Presidential Proclamation 

5030, dated March 10, 1983, and (B) exclu- 

sive fishery management authority beyond 

the exclusive economic zone over such anad- 
romous species and Continental Shelf fish- 
ery resources;”, and 

(B) by amending paragraph (5) of subsec- 
tion (c) to read as follows; 

“(5) to support and encourage active 
United States efforts to obtain internation- 
ally acceptable agreements which provide 
for effective conservation and management 
of fishery resources.””, 

(2) by striking out “fishery conservation 
zone” each place it appears therein and in- 
serting “exclusive economic zone”; and 

(3) by amending the entry for title I in the 
table of contents to read as follows: 

“TITLE I—UNITED STATES RIGHTS AND 
AUTHORITY REGARDING FISH AND 
FISHERY RESOURCES 

“Sec. 101. United States sovereign rights to 

fish and fishery management 
authority. 

“Sec. 102. Exclusion for highly migratory 

species. ””. 

SEC. 103, BILATERAL AGREEMENTS REGARDING FOR- 

BIGN FISHING. 

Section 20lfe) (16 U.S.C. 
amended— 

(1) by striking out clause (viii) of subsec- 
tion (e)(1)(E) and inserting the following: 

(viii) whether, and to what extent, such 
nation is extending to vessels of the United 
States substantially the same fishing privi- 
leges with respect to fishery resources under 
its authority as the United States extends to 
vessels of that nation with respect to fishery 
resources under United States authority; 
and 

“(ix) such other matters as the Secretary of 
State, in cooperation with the Secretary, 
considers appropriate.”’; 

(2) by inserting “or (3)” after “paragraph 
(1)” in paragraph (2)(B); and 

(3) by adding at the end thereof the follow- 
ing new paragraph: 

“(3)/(A) Subject to subparagraph (C), the 
Secretary of State may initiate and conduct 
negotiations with any foreign nation, with 
which there is in effect a governing interna- 
tional fishery agreement, for the purpose of 
entering into a bilateral agreement that— 

“(i) is effective for all, or any portion, of 
the period in which the governing interna- 
tional fishery agreement is in effect; 

“(ti) requires each party to implement 
during the effective period of the bilateral 
agreement the respective obligations re- 
ferred to in subparagraph (B); 

“(iit) contains such other understandings 
and commitments on the part of the parties 
as may be necessary or appropriate to ac- 
complish the purposes of the bilateral agree- 
ment; and 

“(iv) provides, and specifies the proce- 
dures, for the resolution of disputes that 
may arise with respect to the exercise of the 
rights and obligations of the parties under 
the bilateral agreement. 

“(B) A bilateral agreement entered into 
under the authority of this paragraph— 

“(i) may obligate the United States, during 
the effective period of that agreement— 

“(1) to exempt the foreign nation from the 
provisions of paragraph (1)(C) and (D); 

“(II) to guarantee the foreign nation, for 
each harvesting season within the effective 
period of that agreement, a specified per- 
centage of the total allowable level of foreign 
fishing in one or more United States fisher- 


1821fe)) is 


tes; 

“(IIl) to a reduction or elimination of the 
fees imposed on the vessel of that nation 
under section 204(b)(10); and 


CONGRESSIONAL RECORD—SENATE 


“(ti) may obligate the foreign nation— 

“(I) to specify those actions that it will 
take during the effective period of that 
agreement to benefit the United States in 
regard to the issues referred to in paragraph 
(IMB, Cid, (iii), (vo), (vii), and (viii); and 

“(II) to limit its exports of fish products to 
the United States during that effective 
period. 

“(C) The Secretary of State may initiate 
and conduct negotiations under subpara- 
graph (A) only if the Secretary of State and 
the Secretary, after consultation with the 
appropriate Councils, mutually agree upon 
the objectives to be obtained through the ne- 
gotiations. 

‘(D) A bilateral agreement entered into 
under this paragraph may become effective 
with respect to the United States only as 
provided for under section 203.” 

SEC, 104. CONGRESSIONAL OVERSIGHT. 

Section 203 (16 U.S.C. 1823) is amended— 

(1) by amending the section heading by in- 
serting “AND OTHER BILATERAL AGREE- 
MENTS” before the period; 

(2) by inserting after the first sentence of 
subsection (a) the following new sentence: 
“No bilateral agreement entered into under 
section 201(e/(3) shall become effective with 
respect to the United States before the close 
of the first 30 calendar days of continuous 
session of Congress after the date on which 
the President transmits to the House of Rep- 
resentatives and to the Senate a document 
setting forth the text of that agreement.”; 
and 

(3) by amending subsection (d)(2)(A) to 
read as follows: 

“(A) the effect of which is to prohibit the 
entering into force and effect of any govern- 
ing international fishery agreement, or any 
bilateral agreement entered into under sec- 
tion 201(e)(3), the text of which is transmit- 
ted to the Congress under subsection (a) of 
this section; and”. 

SEC. 105. FOREIGN FISHING PERMITS. 

Section 204(b) (16 U.S.C. 
amended— 

(1) by adding at the end of paragraph (1) 
the following new sentence: “No permit 
issued under this section may be valid for 
longer than a year; and section 558(c) of 
title 5, United States Code, does not apply to 
the renewal of any such permit.”; 

(2) by striking out “, upon its request” in 
paragraph (4)(C); 

(3) by amending paragraph (6) by insert- 
ing “, or he may disapprove all or any por- 
tion of the application” immediately before 
the period at the end of subparagraph (A); 
and 

(4) by amending paragraph (12) to read as 
follows: 

“(12) Sanctions.—(A) If any foreign fish- 
ing vessel has been used in the commission 
of any act prohibited by section 307, or if 
the owner or operator of the vessel has com- 
mitted such an act, the Secretary may, or if 
any civil penalty imposed under section 308 
or any criminal fine imposed under section 
309 has not been paid and is overdue, the 
Secretary shall— 

““i) revoke such permit, if any, issued for 
the vessel under this subsection, with or 
without prejudice to the right of the foreign 
nation involved to obtain a permit for such 
vessel in any subsequent year; 

“(ii) suspend such permit for the period of 
time deemed appropriate; 

“(tii) deny a permit under this subsection 
to the vessel; or 

“(iv) impose additional conditions and re- 
strictions on the approved application of 
the foreign nation involved and on any 
permit issued under that application. 


1824(b)) is 


October 15, 1986 


Any permit which is suspended under this 
subparagraph for nonpayment of a civil 
penalty shall be reinstated by the Secretary 
upon the payment of such civil penalty to- 
gether with interest thereon at the prevail- 
ing rate. 

“(B) The Secretary may temporarily deny 
or suspend the permit of any foreign fishing 
vessel pending the outcome of any adminis- 
trative proceeding respecting a violation of 
section 307 of this Act if the Secretary deter- 
mines that— 

“(i) based upon information available to 
the Secretary, there are reasonable grounds 
to believe that the vessel has been used in 
the commission of such violation; 

“(ti) immediate suspension of fishing 
privileges would serve the purposes of this 
Act; and 

(iti) either— 

“(1) the violation presents a serious threat 
to the public interest, 

“(ID) the violation presents a serious 
threat to the achievement of any purpose or 
policy of this Act, or 

“(III) the owner or operator of the vessel 
has been involved in a prior violation of 
this Act. 

In applying this subparagraph— 

“(D) the Secretary must notify the vessel 
owner of the proposed denial or suspension 
and give the owner a reasonable opportuni- 
ty, not longer than 10 days from service of 
notice, to respond in writing or otherwise; 

“(ID) if a permit is denied or suspended 
under this subparagraph, any administra- 
tive proceeding respecting the violation at 
issue must be held as promptly as possible; 
and 

“(ID if another permit application is 
pending for such vessel on or after the date 
of the violation, the Secretary need not act 
on that application before deciding whether 
or not to deny or suspend temporarily a 
permit under this subparagraph.”. 

SEC. 106. HEALTH AND SAFETY STANDARDS FOR 
FOREIGN FISHING VESSELS, 

(a) STANDARDS FOR UNITED STATES OBSERV- 
ERS.—Subsection (i) of section 201 (19 U.S.C 
1821{t)) is amended— 

(1) by inserting “(A)” after “(1)” in para- 
graph (1); 

(2) by inserting at the end of paragraph 
(1) the following new subparagraph: 

‘(B) The Secretary shall by regulation pre- 
scribe minimum health and safety stand- 
ards that shall be maintained aboard each 
foreign fishing vessel with regard to the fa- 
cilities provided for the quartering of, and 
the carrying out of observer functions by, 
United States observers.” and 

(3) by amending subparagraph (B) of 
paragraph (2) to read as follows; 

“(B) the time during which a foreign fish- 
ing vessel will engage in fishing within the 
exclusive economic zone will be of such 
short duration that the placing of a United 
States observer aboard the vessel would be 
impractical; or”. 

(6) COMPLIANCE WiTH VESSEL SAFETY STAND- 
ARDS OF THE FLAG CountRy.—Paragraph (3) 
of section 204(b) (16 U.S.C. 1824(b)(3)) is 
amended— 

(1) by striking “and” at the end of sub- 
paragraph (E); 

(2) by inserting “and” after the semicolon 
at the end of subparagraph (F); and 

(3) by adding after subparagraph (F) the 
following new subparagraph: 

“(G) all applicable vessel safety standards 
imposed by the foreign country, and shall 
include written certification that the vessel 
is in compliance with those standards;”. 





October 15, 1986 


SEC. 107, REGIONAL FISHERY MANAGEMENT COUN- 
CILS. 


(a) VoTinG MemBers.—(1) Subsection (b/) of 
section 302 (16 U.S.C. 1852(b/) is amended 
as follows; 

(A) Paragraph (2/(A/ is amended to read 
as follows: 

‘(2)(A) The members of each Council re- 
quired to be appointed by the Secretary must 
be individuals who are knowledgeable and 
experienced with regard to the conservation 
and management, or the recreational or 
commercial harvest, of the fishery resources 
of the geographical area concerned. The Sec- 
retary, in making appointments under this 
section, shall ensure a fair apportionment, 
on a rotating or other basis, of the active 
participants (or their representatives) in- 
volved in the fisheries under Council juris- 
diction.” 

(B) Paragraph (2)(B) is amended— 

(i) by adding after the first sentence there- 
of the following new sentence: “A Governor 
may not submit the names of individuals to 
the Secretary for appointment unless the 
Governor has first consulted with represent- 
atives of the commercial and recreational 
fishing interests of the state regarding those 
individuals.” 

(ii) by striking out “knowledge or exrperi- 
ence” in the third sentence thereof and in- 
serting “knowledge and experience”; and 

(iii) by adding at the end thereof the fol- 
lowing new sentence: “An individual is not 
eligible for appointment by the Secretary 
until that individual complies with the ap- 
plicable financial disclosure requirements 
under subsection (k).””. 

(C) Paragraph (3) is amended to read as 
follows: 

“(3) Each voting member appointed to a 
Council by the Secretary in accordance with 
subsection (b)(2) shall serve for a term of 3 
years; except that the Secretary may desig- 
nate a shorter term if necessary to provide 
for balanced expiration to terms of office.”. 

(2) The amendments made by paragraph 
(1) shall apply with respect to voting mem- 
bers of regional fishery management coun- 
cils who are appointed, and to individuals 
who are nominated for appointment as 
voting members, on or after the date of the 
enactment of this Act. 

(b) Councit COMMENT ON FEDERAL AND 
STATE ACTION AFFECTING HasitTaT.—Section 
302 is further amended— 

(1) by redesignating subsection (i) as sub- 
section (j); and 

(2) by adding after subsection (h/ the fol- 
lowing new subsection: 

“(i) FISHERY HaBiTaT CONCERNS.—Each 
Council may comment on, or make recom- 
mendations concerning, any activity under- 
taken, or proposed to be undertaken, by any 
State or Federal agency that, in the view of 
the Council, may affect the habitat of a fish- 
ery resource under its jurisdiction. Within 
45 days after receiving such a comment or 
recommendation from a Council, a Federal 
agency must provide a detailed response, in 
writing, to the Council regarding the 
matter.”. 

(ec) CLosuRE OF MEETINGS.—Paragraph (4) 
of section 302(j) (as redesignated by subsec- 
tion (b/) is amended by striking out “; 
except that” and all that follows thereafter 
and inserting “; except that such procedures, 
in the case of statistics submitted to the 
Council by a State or by the Secretary under 
section 303(d), must be consistent with the 
laws and regulations of that State, or with 
the procedures of the Secretary, as the case 
may be, concerning the confidentiality of 
the statistics.”. 


CONGRESSIONAL RECORD—SENATE 


(d) COMMITTEES AND PANELS,—Subsection 
(j) (as redesignated by subsection (b)) of sec- 
tion 302 is further amended by adding at the 
end thereof the following new paragraph: 

“(5) Each Council shall specify those pro- 
cedures that are necessary or appropriate to 
ensure that the committees and advisory 
panels established under subsection (9g) are 
involved, on a continuing basis, in the de- 
velopment and amendment of fishery man- 
agement plans.”. 

fe) DISCLOSURE OF FINANCIAL INTEREST.—(1) 
Section 302 is further amended by adding at 
the end thereof the following new subsec- 
tion: 

“(k) DISCLOSURE OF FINANCIAL INTEREST.— 
(1) For purposes of this subsection, the term 
“affected individual” means an individual 
who— 

‘(A) is nominated by the Governor of a 
State for appointment as a voting member 
of a Council in accordance with subsection 
(6)(2); 

“(B) is a voting member of a Council ap- 
pointed under subsection (b/(2); or 

“(C) is the executive director of a Council. 

“(2) Each affected individual must dis- 
close any financial interest held by— 

“(A) that individual; 

“(B) the spouse, minor child, or partner of 
that individual; and 

“(C) any organization (other than the 
Council) in which that individual is serving 
as an officer, director, trustee, partner, or 
employee; 
in any harvesting, processing, or marketing 
activity that is being, or will be, undertaken 
within any fishery over which the Council 
concerned has jurisdiction. 

“(3) The disclosure required under para- 
graph (2) shall be made— 

‘(A) in the case of an affected individual 
referred to in paragraph (1/(A/, before ap- 
pointment by the Secretary; and 

“(B) in the case of an affected individual 
referred to in paragraph (1/(B) or (C), 
within 45 days of taking office. 

‘(4) An affected individual referred to in 
paragraph (1)(B) or (C) must update his or 
her disclosure form at any time any such fi- 
nancial interest is acquired, or substantially 
changed, by any person referred to in para- 
graph (2)(A/, (Bi, or (C). 

“(5) The financial interest disclosures re- 
quired by this subsection shall— 

“(A) be made on such forms, in accordance 
with such procedures, and at such times, as 
the Secretary shall by regulation prescribe; 
and 

“(B) be kept on file, and made available 
Jor public inspection at reasonable hours, at 
the Council offices. 

“(6) The participation by an affected indi- 
vidual referred to in paragraph (1)(B) or (C) 
in an action by a Council during any time 
in which that individual is not in compli- 
ance with the regulations prescribed under 
paragraph (5) may not be treated as cause 
Sor the invalidation of that action. 

“(7) Section 208 of title 18, United States 
Code, does not apply to an affected individ- 
ual referred to in paragraph (1)/(B) or (C) 
during any time in which that individual is 
in compliance with the regulations pre- 
scribed under paragraph (5).””. 

(2) For purposes of applying subsection (k) 
of section 302 (as added by paragraph (1)) to 
voting members and executive directors of 
regional fishery management councils who 
are serving in those capacities on the date 
on which the regulations prescribed to carry 
out that subsection first take effect, each 
such member or director must file a disclo- 
sure form under that subsection within 45 
days after that date. 


31283 


108, FISHERY MANAGEMENT PLANS; DISCLO- 
SURE OF CONFIDENTIAL STATISTICS. 

(a) REQUIRED PRovisIons.—(1) Section 
303(a) (16 U.S.C. 1853(a)) is amended— 

(A) by striking out “and” at the end of 
paragraph (4); 

(B) by striking out the period at the end of 
paragraph (5) and inserting a comma; and 

(C) by adding after paragraph (5) the fol- 
lowing new paragraphs: 

“(6) consider, and may provide for, tempo- 
rary adjustments, after consultation with 
the Coast Guard and persons utilizing the 
fishery, regarding access to the fishery for 
vessels otherwise prevented from harvesting 
because of weather or other ocean condi- 
tions affecting the safety of the vessels; and 

“(7) include readily available information 
regarding the significance of habitat to the 
fishery and assessment as to the effects 
which changes to that habitat may have 
upon the fishery.””. 

(2) The amendments made by paragraph 
(1) apply to each fishery management plan 
that— 

(A) is submitted to the Secretary of Com- 
merce for review under section 304(a), or 
that is prepared by the Secretary, after Jan- 
uary 1, 1986; or 

(B) is in effect on that date, but compli- 
ance with those amendments is not required 
except in conjunction with the amendment 
to the plan next occurring after that date. 

(b) DiIscRETIONARY PRoOvisions.—Section 
303(b) (16 U.S.C. 1853(6)) is amended— 

(1) by redesignating subparagraphs (A) 
through (F) of paragraph (6) as clauses (i) 
through (vi), respectively; 

(2) by inserting “(1)” following the sub- 
heading and by redesignating paragraphs 
(1) through (8) as subparagraphs (A) 
through (H), respectively; 

(3) by amending paragraph (F) (as redes- 
ignated by paragraph (2) of this subsection) 
by inserting “subject to paragraph (2),” im- 
mediately after “(F)”’; 

(4) by redesignating subparagraphs (G) 
and (H) (as redesignated by paragraph (2) of 
this subsection) as subparagraphs (H) and 
(1), respectively; 

(5) by inserting after subparagraph (F) the 
following new subparagraph: 

‘(G) if a limited access system is estab- 
lished under subparagraph (F), and subject 
to paragraph (2), establish a fishery compen- 
sation plan subject to subsection (f);"; and 

(6) by adding at the end thereof the follow- 
ing new paragraph: 

“(2)(A) No limited access system or fishery 
compensation plan referred to in paragraph 
(1) (F) and (G/) may be approved or imple- 
mented by the Secretary under section 304 
unless— 

“(i) the system or plan, or both, are ap- 
proved by not less than three-fourths of the 
voting members of the Council having juris- 
diction over the fishery for which the system 
will be implemented; and 

“tii) the establishment of the system or 
plan, or both, is approved by at least two- 
thirds of tie fishermen presently participat- 
ing in that fishery. 

“(B) No limited access system referred to 
in paragraph (1)(F) may be approved or im- 
plemented by the Secretary under section 
304 unless the system prohibits the sale of all 
permits, shares, or rights that may be grant- 
ed to fishermen who participate in the 
system.” 

(c) DISCLOSURE OF CONFIDENTIAL STATIS- 
T1Ccs.—The first sentence of section 303(d) (16 
U.S.C. 1853(d)) is amended to read as fol- 
lows: “Any statistic submitted to the Secre- 
tary by any person in compliance with any 


SEC. 





31284 


requirement under subsection (a)(5) shall be 
confidential and shail not be disclosed; 
except— 

“(1) to National Marine Fisheries Service 
personnel and Council employees who are 
responsible for management pian develop- 
ment and monitoring; or 

“(2) when required by court order.”. 

(d) FISHERY COMPENSATION PLans.—Section 
303 is further amended by adding at the end 
thereof the following new subsection: 

“(f) FISHERY COMPENSATION PLANS.—(1) For 
purposes of this subsection, the term ‘fishery 
compensation plan’ means a plan, whether 
administered by the Secretary or by the 
States represented on the Council that estab- 
lished the plan, for compensating, in whole 
or in part, fishing vessel owners for the loss 
or reduction of livelihood that results from 
the implementation of a limited access 
system (intended to reduce overcapitaliza- 
tion in a particular fishery) under subsec- 
tion (b/(1)(F), including, but not limited to, 
compensation through purchase of their ves- 
sels, financial assistance to modify vessels 
for use in other fisheries, or other financial 
remunerations as established by the Coun- 
cil. A fishery compensation plan shall be 
funded through fees levied under subsection 
(O)(1)(A). 

“(2) In developing a fishery compensation 
plan, the Council and the Secretary shali 
take into account the factors listed in sub- 
section (b/(1)(F) (i) through (vi/ and the 
effect of the plan on the fishermen who will 
be displaced by the system. 

“(3) All fees collected under a fishery com- 
pensation plan shall be deposited into the 
Fishery Compensation Fund established 
under paragraph (4). 

‘(4)(A) There is established in the Treas- 
ury of the United States a revolving fund 
known as the Fishery Compensation Fund 
(hereinafter in this paragraph referred to as 
the ‘Fund’). Each fishery compensation plan 
established under subsection (b)/(1)(G) shall 
have a separate account in the Fund and the 
fees collected under the program that are de- 
posited into the Fund shall be credited to 
that account. 

“(B) The Secretary shall withdraw funds 
credited to any account at such times and 
in such amounts as may be necessary for the 
administration of the fishery compensation 
plan concerned.” 

(e) NORTHERN Paciric HaLispuT CONVEN- 
TIoN.—Section 5(c) of the Northern Pacific 
Halibut Act of 1982 (16 U.S.C. 773c(c)) is 
amended— 

(1) by striking out “, including limited 
access regulations,” and inserting “, includ- 
ing limited access and fishery compensation 
plan regulations,”; and 

(2) by amending the second sentence there- 
of to read as follows: “Such regulations shall 
only be implemented with the approval of 
the Secretary, shall not discriminate be- 
tween residents of different States, and shall 
be consistent with the limited entry system 
and fishery compensation plan criteria, and 
the conditions on the approval thereof, set 
forth in subsections (b) and (f) of section 
303 of the Magnuson Fishery Conservation 
and Management Act.”. 

SEC. 109. ACTION BY SECRETARY REGARDING FISH- 
ERY MANAGEMENT PLANS. 

Section 304 (16 U.S.C. 1854) is amended as 
follows: 

(1) Subsection (a) is amended— 

(A) by striking out “(the date of receipt of 
which is hereafter in this section referred to 
as the ‘receipt date’)” in paragraph (1); 

(B) by redesignating subparagraphs (A), 
(B), and (C) of paragraph (1) as subpara- 
graphs (B), (C), and (D), respectively; 


CONGRESSIONAL RECORD—SENATE 


(C) by inserting immediately before sub- 
paragraph (B), as so redesignated, of para- 
graph (1) the following new subparagraph: 

“(A) immediately make a preliminary 
evaluation of the management plan or 
amendment for purposes of deciding if it is 
consistent with the national standards and 
sufficient in scope and substance to warrant 
review under this subsection and— 

“Wi) if that decision is affirmative, imple- 
ment subparagraphs (B), (C), and (D) with 
respect to the plan or amendment, or 

“(ii) if that decision is negative— 

“(I) disapprove the plan or amendment; 
and 

“(ID) notify the Council, in writing, of the 
disapproval and of those matters specified 
in subsection (b/(2)(A), (B) and (C) as they 
relate to the plan or amendment;”; 

(D) by amending subparagraph (C) fas so 
redesignated) of paragraph (1) by striking 
out “75-day” and inserting “60-day”; 

(E) by amending subparagraph (D/ (as so 
redesignated) of paragraph (1) by striking 
out “30th day” and inserting “15th day”; 

(F) by amending paragraph (2)— 

(i) by striking out “(1)(A)” and inserting 
“(1)(B)"; and 

(ii) by striking out the period at the end of 
subparagraph (C) and inserting “and to 
fishery access adjustments referred to in sec- 
tion 303(a)(6).”; and 

(G) by adding at the end thereof the fol- 
lowing new paragraph: 

“(3/(A) The Secretary shall take action 
under this section on any fishery manage- 
ment plan or amendment to a plan which 
the Council characterizes as being a final 
plan or amendment. 

“(B) For purposes of this section, the term 
‘receipt date’ means the 5th day after the 
day on which a Council transmits to the 
Secretary a fishery management plan, or an 
amendment to a plan, that it characterizes 
as a final plan or amendment.” 

(2) Subsection (b/ is amended— 

(A) by amending paragraph (1/(A) to read 
as follows; 

“(A) the Secretary does not notify the 
Council in writing of— 

“(i) his disapproval 
(QH(IHAii), or 

“(ti) his disapproval, or partial disapprov- 
al, under paragraph (2), of the plan or 
amendment before the close of the 95th day 
after the receipt date; or”; 

(B) by striking out “75th day” in para- 
graph (1/(B) and inserting “60th day”: 

(C) by amending paragraph (2) by striking 
out “paragraph (1)/(A)” and inserting “para- 
graph (1)(B)”; and 

(D) by amending paragraph (3)/— 

(i) by striking out “If the Secretary” in 
subparagraph (A) and inserting “If the Sec- 
retary disapproves a proposed plan or 
amendment under subsection (a)(1)(A/fii), 
or”; and 

(ii) by striking out “(a)(1)(A)” in each of 
subparagraphs (B/(i) and (C/{i) and insert- 
ing “(a)(1)(B)”. 

(3) Subsection (c) is amended— 

(A) by striking out “75-day” in paragraph 
(2)(A/ (ii) and inserting “60-day”; 

(B) by striking out “30th day” in para- 
graph (2)(A})(iii) and inserting “15th day”; 
and 

(C) by striking out “75-day” wherever it 
appears in paragraph (2)(B/) and inserting 
“60-day”. 

(4) Subsection (d) is amended by striking 
out the period at the end thereof and insert- 
ing the following: “; except that if fees are 
also used to fund a fishery compensation 
plan under section 303(b)(1)(G), the level of 


under subsection 


October 15, 1986 


fees shall not exceed the administrative 
costs incurred in issuing the permits and 
the costs of funding that plan.”. 

(5) Subsection (e) is amended— 

(A) by inserting “, in cooperation with the 
Councils,” immediately after “maintain”: 

(B) by striking out “management,” and in- 
serting “management and on the economics 
of the fisheries,”: and 

(C) by adding at the end thereof the follow- 
ing: “The Secretary shall annually review 
and update the comprehensive program and 
make the resuits of the review and update 
available to the Councils.”. 


SEC. 110. STATE JURISDICTION. 


Section 306 (16 U.S.C. 1856) is amended as 
follows: 

(1) Subparagraph (C) of subsection (a)(2) 
is amended by striking out “(for the purpose 
of regulating fishing for other than any spe- 
cies of crab)”. 

(2) Subsection (b/) is amended to read as 
Sollows: 

“(b(1) If the Secretary finds, after notice 
and an opportunity for a hearing under sec- 
tion 554 of title 5, United States Code 
(unless an earlier action is required because 
the Secretary finds that an emergency 
exists), and then after consultation with the 
State that— 

“(A) the fishing in a fishery, which is cov- 
ered by a fishery management plan imple- 
mented under this title, is engaged in pre- 
dominately within the exclusive economic 
zone and beyond such zone; and 

“(B) the State has taken any action, or 
omitted to take any action, the results of 
which will substantially and adversely 
affect the carrying out of such fishery man- 
agement plan; 


the Secretary shall promptly notify the State 
and the appropriate Council of such finding 
and of his intention to regulate the applica- 
ble fishery within the boundaries of the 
State (other than its internal waters), pursu- 
ant to that fishery management plan and 
the regulations promulgated to implement 
that plan. The notification shall also inform 
the State that, at its request if promptly 
made, the Secretary will submit the matters 
involved in the finding to arbitration under 
such procedures as may be mutually agree- 
able to the Secretary and the State. The en- 
tering into arbitration between the Secre- 
tary and the State does not affect the au- 
thority of the Secretary to commence or con- 
tinue regulation of the fishery under the au- 
thority of this paragraph. 

“(2) If the Secretary assumes responsibil- 
ity under paragraph (1) for the regulation of 
a fishery that is within the boundaries of a 
State but regarding which a hearing was not 
held under paragraph (1), the State may— 

“(A) request a hearing in accordance with 
section 554 of title 5, United States Code, re- 
garding the finding of the Secretary under 
paragraph (1), but the authority of the Sec- 
retary to regulate the fishery under para- 
graph (1) shall terminate on the 20th day 
after the date on which the hearing is re- 
quested unless the hearing and the Secre- 
tary’s findings are completed before that 
day; or 

“(B) apply to the Secretary for reinstate- 
ment of its authority over the fishery. 


If after application under subparagraph (B) 
the Secretary finds that the reasons for 
which he assumed regulation of the fishery 
in the State waters no longer prevail, the 
Secretary shall promptly terminate that reg- 
ulation.””. 





October 15, 1986 


SEC. 111, SUBMISSION OF CERTAIN FALSE STATE- 
MENTS A PROHIBITED ACT. 

(a) Paragraph (1) of section 307 (16 U.S.C. 
1857(1)) is amended— 

(1) by striking out “or” at the end of sub- 
paragraph (G); 

(2) by inserting “or” after the semicolon at 
the end of subparagraph (H); and 

(3) by adding at the end thereof the follow- 
ing new subparagraph: 

“(1) to knowingly and willfully submit to a 
Council, the Secretary, or the Governor of a 
State false information (including, but not 
limited to, false information regarding the 
capacity and extent to which a United 
States fish processor, on an annual basis, 
will process a portion of the optimum yield 
of a fishery that will be harvested by fishing 
vessels of the United States) regarding any 
matter that the Council, Secretary, or Gov- 
ernor is considering in the course of carry- 
ing out this Act.”’. 

(b) Section 309(a)(1) (16 U.S.C. 1859(a)(1)) 
is amended by striking out “or (H/” and in- 
serting “(H), or (J)”. 

SEC. 112, CIVIL PENALTIES. 

Section 308 (16 U.S.C. 1858) is amended— 

(1) by amending the first sentence of sub- 
section (b) to read as follows: “Any person 
against whom a civil penalty is assessed 
under subsection (a) may obtain review 
thereof in the United States district court 
for the appropriate district by filing a com- 
plaint in such court within 30 days from the 
date of such order and by simultaneously 
serving a copy of such complaint by certi- 
fied mail on the Secretary, the Attorney Gen- 
eral and the appropriate United States At- 
torney.”; 

(2) by redesignating subsections (d) and 
fe) as subsections (e) and (f), respectively; 
and 

(3) by inserting immediately after subsec- 
tion (c) a new subsection (d) to read as fol- 
lows: 

“(d) IN REM JURISDICTION.—A fishing vessel 
(including its fishing gear, furniture, appur- 
tenances, stores, and cargo) used in the com- 
mission of an act prohibited by section 307 
shall be liable in rem for any civil penalty 
assessed for such violation under section 
308 and may be proceeded against in any 
district court of the United States having ju- 
risdiction thereof. Such penalty shall consti- 
tute a maritime lien on such vessel which 
may be recovered in an action in rem in the 
district court of the United States having ju- 
risdiction over the vessel.” 

SEC. 113. ADMINISTRATIVE FORFEITURES. 

(a) PRocepures.—Section 310 (16 U.S.C. 
1860) is amended— 

(1) by amending the second sentence of 
subsection (c) to read as follows: “The provi- 
sions of the customs laws relating to— 

“(1) the seizure, forfeiture, and condemna- 
tion of property for violation of the customs 
law; 

“(2) the disposition of such property or the 
proceeds from the sale thereof; and 

“(3) the remission or mitigation of any 
such forfeiture; 
shall apply to seizures and forfeitures in- 
curred, or alleged to have been incurred, 
under the provisions of this Act, unless such 
provisions are inconsistent with the pur- 
poses, policy, and provisions of this Act.”; 
and 

(2) by adding at the end of subsection 
(d)(1) the following new sentence; “Nothing 
in this paragraph may be construed to re- 
quire the Secretary, except in the Secretary’s 
discretion or pursuant to the order of a 
court under section 311(d), to release on 
bond any seized fish or other property or the 
proceeds from the sale thereof.” 


CONGRESSIONAL RECORD—SENATE 


(6) JURISDICTION OF CouRTs.—Section 311 
(16 U.S.C. 1861) is amended— 

(1) by redesignating subsection (e) as sub- 
section (f); and 

(2) by inserting after subsection (d) the fol- 
lowing: 

“(e) PAYMENT OF STORAGE, CARE, AND OTHER 
CostTs.—Notwithstanding any other provi- 
sion of law, after September 30, 1986, the 
Secretary or the Secretary of the Treasury 
may pay from sums received as fines, penal- 
ties, or forfeitures of property for violations 
of any provision of this Act— 

“(1) the reasonable and necessary costs in- 
curred in providing temporary storage, care, 
and maintenance or seized fish or other 
property pending disposition of any civil or 
criminal proceeding alleging a violation of 
any provision of this Act with respect to 
that fish or other property; and 

(2) a reward to any person who furnishes 
information which leads to an arrest, con- 
viction, civil penalty assessment, or forfeit- 
ure of property for any violation of any pro- 
vision of this Act. 

Any person assessed a civil penalty for, or 
convicted of, any violation of any provision 
of this Act shall be liable for the cost in- 
curred in storage, care, and maintenance of 
any fish or other property seized in connec- 
tion with the violation concerned.”. 

SEC. 114. REPEAL. 

Section 401 (16 U.S.C. 1881; relating to the 
Law of Sea Treaty), and the entry referring 
to that section in the table of contents of the 
Act, are repealed. 

SEC. 115, AUTHORIZATION OF APPROPRIATIONS. 

(a) AUTHORIZATION.—Section 406 (16 U.S.C. 
1882) is amended by adding at the end there- 
of the following new paragraphs: 

(12) $69,000,000 for fiscal year 1986. 

(13) $70,800,000 for fiscal year 1987.”. 

(6) LIMITATIONS REGARDING CERTAIN NOAA 
FISHERY RESEARCH VESSELS.—During fiscal 
years 1986 and 1987, the Secretary of Com- 
merce may not replace with chartered fish- 
ery survey vessels the fishery research vessels 
of the National Oceanic and Atmospheric 
Administration operated by the Atlantic 
Marine Center, unless a period of 90 days 
has expired after the Secretary has submit- 
ted to Congress a full and complete state- 
ment (including relevant supporting stud- 
ies) concerning the proposed chartering and 
the reasons therefor. 

SEC, 116. CLERICAL AMENDMENTS. 

Section 3/4) (16 U.S.C. 1802(4)) is amend- 
ed— 

(1) by striking out “Artica islandica” in 
the listing of mollusks and inserting in lieu 
thereof “Arctica islandica”; and 

(2) by striking out “Hippiospongia canali- 
culata” in the listing of sponges and insert- 
ing in lieu thereof “Spongia cheiris”. 

SEC. 117. DIRECTIONS REGARDING FISHERY MAN- 
AGEMENT COUNCIL MEMBERSHIP. 

Notwithstanding section 302 of the Mag- 
nuson Fishery Conservation and Manage- 
ment Act (16 U.S.C. 1852) and effective on 
and after the date of the enactment of this 
Act, the Secretary shall take action to 
ensure, to the extent practicable, that those 
persons dependent for their livelihood upon 
the fisheries within the respective jurisdic- 
tions of the Regional Fishery Management 
Councils are fairly represented as voting 
members of the Councils. 

TITLE II—SEAFOOD MARKETING COUNCILS 
SEC. 201. SHORT TITLE. 


This title may be cited as the 
Marketing Councils Act”. 


“Seafood 


31285 


SEC. 202. FINDING. 

The Congress finds that it is in the nation- 
al interest to promote the consumption of 
fish and fish products. 

SEC. 203. PURPOSES. 

The purposes of this title are to— 

(1) strengthen the competitive position of 
the United States seafood industry in the do- 
mestic and international marketplace; 

(2) encourage the development and utiliza- 
tion of all species of fish available for har- 
vest by the United States industry; 

(3) encourage the utilization of domesti- 
cally produced fish and fish products 
through market enhancement, promotion, 
and public relations; 

(4) encourage the United States fishing in- 
dustry to develop methods to improve prod- 
uct quality and efficiency in the market- 
place; 

(5) educate and inform consumers on the 
use of fish and fish products; 

(6) educate and inform the public about 
the nutritional and dietary value of fish and 
fish products; and 

(7) enhance the role of the private sector 
in promoting the consumption of fish and 
fish products. 

SEC. 204, DEFINITIONS. 

As used in this title— 

(1) The term “Administrator” means the 
Administrator of the National Oceanic and 
Atmospheric Administration. 

(2) The term “council” refers to a seafood- 
marketing council established under section 
205. 

(3) The term “consumer education” means 
actions undertaken to inform consumers on 
matters related to the consumption of fish 
and fish products. 

(4) The term “fish” means finfish, mol- 
lusks, crustaceans, and all other forms of 
marine and freshwater life used for human 
consumption. 

(5) The term “fish processing vessel” 
means a vessel that is used for the prepara- 
tion of fish or fish products, other than by 
gutting, decapitating, gilling, skinning, 
shucking, icing, freezing or brine chilling, 
for commercial sale. 

(6) The term “fish product” means a prod- 
uct used for human consumption that con- 
sists, in whole or in part, of fish. 

(7) The term “handle”’ means— 

(A) the sale of fish and fish products by 
harvesters to receivers; 

(B) the purchase of fish and fish products 
by receivers from harvesters; or 

(C) the importation of fish and fish prod- 
ucts by importers. 

(8) The term “marketing and promotion” 
means an activity aimed at encouraging the 
consumption of fish and fish products or ex- 
panding or maintaining commercial mar- 
kets for fish and fish products. 

(9) The term “person” means— 

(A) any individual who is a citizen or na- 
tional of the United States; 

(B) any group of individuals described in 
subparagraph (A); or 

(C) any partnership, corporation, associa- 
tion, cooperative, or other private entity or- 
ganized or existing under the laws of the 
United States or any State, commonwealth, 
territory, or possession of the United States. 

(10) The term “quality standard” means a 
standard reflecting the relative degree or 
level of excellence of a fish or fish product. 

(11) The term “research” means any type 
of research designed to advance the image, 
desirability, usage, marketability, produc- 
tion or quality of fish and fish products. 





31286 


(12) The term “sector” means any of the 
following: 

(A) The harvesting sector consisting of 
persons in the business of catching fish for 
purposes of sale. 

(B) The importing sector consisting of per- 
sons in the business of importing fish or fish 
products into the United States or who act 
as agents, brokers, or consignees for any 
person or nation that produces fish or fish 
products outside of the United States for 
sale in the United States. 

(C) The marketing sector consisting of per- 
sons in the business of selling fish or fish 
products in the wholesale, retail, or restau- 
rant trade, but whose primary business 
function is not the processing or packaging 
of fish or fish products. 

(D) The processing sector consisting of 
persons in the business of preparing or 
packaging fish or fish products for sale and 
who are not receivers. 

(E) The receiving sector consisting of 
owners of fish processing vessels and of per- 
sons in the business of acquiring fish direct- 
ly from harvesters. 

(F) The consumer sector consisting of per- 
sons professionally engaged in the dissemi- 
nation of information pertaining to the nu- 
tritional benefits and preparation of fish 
and fish products. 

(13) The term “United States” means the 
several States, the District of Columbia, 
Puerto Rico, Guam, American Samoa, the 
Virgin Islands, the Northern Mariana Is- 
lands and any other territory, possession, or 
commonwealth of the United States. 

SEC. 205. COUNCIL ESTABLISHMENT. 

(a) IN GENERAL.—An application for a 
charter for a seafood marketing council for 
one or more species of fish and fish products 
of that species may be filed by persons who 
meet the requirements specified in accord- 
ance with subsection (b)(6). 

(6b) APPLICATION.—An application for a 
charter for a council shall be made by filing 
with the Administrator the text of a pro- 
posed charter in such form as shall be pre- 
scribed by regulation by the Administrator. 
The text of a proposed charter must contain 
such information as the Administrator con- 
siders necessary or appropriate for carrying 
out the provisions of this title, including but 
not limited to— 

(1) the name of the council and a provi- 
sion proclaiming its establishment; 

(2) a declaration of the purposes and ob- 
jectives of the council; 

(3) a description of the species of fish and 
the fish products for which the council will 
implement marketing and promotion plans 
under section 206; 

(4) the identification of each sector and 
the number and terms of representatives 
thereof that will be represented as voting 
members of the council; 

(5) the identification of those sectors (in- 
cluding harvesters, receivers and, if subject 
to assessment, importers) subject to a refer- 
endum to establish a council under subsec- 
tion (e); 

(6) a specification for each sector de- 
scribed under paragraph (5) of the mini- 
mum requirements, as measured by income, 
volume, or other relevant factors, that a 
person engaging in business in the sector 
must meet in order to participate in that 


referendum; 

(7)(A) a description of the procedures for 
determining assessment rates under section 
Ps the proposed rate or rates that will be 
imposed by the council on receivers and, if 
subject to assessment, importers during its 
first year of operation; 


CONGRESSIONAL RECORD—SENATE 


(C) the maximum amount an assessment 
rate for any period may be raised above the 
rate applicable for the immediately preced- 
ing period; and 

(D) the maximum rate or rates that can be 
imposed by a council on receivers or import- 
ers during the operation of the council; 

(8) a provision setting forth the definition 
of a quorum and the procedures for selecting 
a@ council chairman; 

(9) a provision setting forth the voting 
procedures applicable to absentee council 
members; and 

(10) such other provisions relating to 
council administration as the Administra- 
tor deems necessary. 


The text of a proposed charter shall be ac- 
companied by a document identifying, to 
the extent practicable by address of place of 
business, the persons (hereinafter referred to 
in this title as “sector participants”) that 
are considered by the applicants to meet the 
requirements specified in paragraph (6). The 
text of a proposed charter shall include pro- 
visions setting forth procedures for provid- 
ing refunds to those sector participants sub- 
ject to assessment under section 208, and 
may also include provisions which establish 
a maximum limit on the amount that any 
one sector participant may be required to 
pay under an assessment for any period. 

(c) CounciL REQUIREMENTS.—The Adminis- 
trator may not approve a proposed charter 
filed under subsection (a) unless the pro- 
posed council meets the following require- 
ments: 

(1) The council must have voting members 
representing the harvesting, receiving and, 
if subject to assessment, the importing sec- 
tors, 

(2) The members of a council shall serve 
without compensation, but shall be reim- 
bursed for their reasonable expenses in- 
curred in performing their duties as council 
members. 

(d) APPROVAL OF PROPOSED CHARTERS BY 
ADMINISTRATOR.—(1) Within 180 days of the 
receipt of an application to establish a 
council, the Administrator shali— 

(A) identify, to the extent practicable, 
those sector participants that meet the re- 
quirements, specified under subsection 
(b/(6), for eligibility to participate in the 
referendum under subsection (e); 

(B) determine, to the extent practicable, if 
the charter is accompanied by a petition 
comprised of the signatures or corporate cer- 
tifications, as the case may be, of no less 
than three sector participants in each sector 
identified in accordance with subsection 
(6)(5) who collectively accounted for, in the 
12-month period immediately preceding the 
month in which the application was filed, 
not less than 10 percent of the value of the 
fish or fish products described in accordance 
with subsection (b/(3) that were handled by 
each sector identified in accordance with 
subsection (6/(5) during that period; and 

(C) determine if the proposed charter is 
consistent with the provisions of this title 
and any other applicable law. 

(2) If negative determinations are made 
under paragraph (1) regarding an applica- 
tion and charter, the Administration shall 
advise in writing the sector participants 
who made the application of the reasons 
therefor. A corrected application may be 
submitted thereafter to the Administrator 
for approval. 

(fe) Rererenpa.—(1) Upon making affirma- 
tive determinations under subsection (d/(1) 
regarding a proposed charter, the Adminis- 
trator, within 90 days after the date of the 
last of those determinations, shall hold a ref- 


October 15, 1986 


erendum on the adoption of the proposed 
charter among all sector participants identi- 
fied in accordance with subparagraph 
(d}(1)(A). If a majority of the voting sector 
participants in each sector who collectively 
accounted for, in the 12-month period imme- 
diately preceding the month in which the 
proposed charter was filed under subsection 
fa), 66 percent or more of the value of the 
fish or fish products described in accordance 
with subsection (b)(3) that were handled by 
that sector during that period approve the 
proposed charter, the Administrator shall by 
order establish the council and the proposed 
charter, as so approved, shall thereafter be 
treated as its charter. 

(2) Not less than 30 days prior to holding a 
referendum under this subsection, the Ad- 
ministrator shall— 

(A) publish (by such means as will result 
in wide publicity in regions affected by the 
proposed charter) the text of the proposed 
charter and a list of those sector partici- 
pants eligible to vote in the referendum; and 

(B) provide for public comment including 
the opportunity for a public meeting. 

(3) The Administrator shall pay all costs 
of the referendum which establishes a coun- 
cil under this subsection; but within 2 years 
after the council is established, the council 
shall reimburse the Administrator for any 
expenses incurred for the conduct of the ref- 
erendum from assessments collected by the 
council. Before holding a referendum under 
this subsection, the Administrator shall re- 
quire sureties to post a bond or other securi- 
ty acceptable to the Administrator, in an 
amount which the Administrator determines 
to be sufficient to pay any expenses incurred 
for the conduct of the referendum, and shall 
immediately recover such amount if a refer- 
endum fails to establish the council. For the 
purpose of this title, the term “expenses in- 
curred for the conduct of the referendum” 
shall not include salaries of Government 
employees or other administrative overhead, 
but shail be limited to those additional 
direct costs incurred in connection there- 
with. 

(f) Counctt. MEMBER APPOINTMENTS.—{1) 
Within 30 days after a council is established 
under subsection (e), the Administrator 
shall solicit from the sectors represented on 
the council nominations for council mem- 
bers. If the harvesters and receivers repre- 
sented on the council are engaged in busi- 
ness in two or more regions of the United 
States, the nominations made under this 
paragraph, and the appointments to the 
council made under paragraph (3), must, to 
the extent practicable, result in representa- 
tion for the constituent regions. 

(2) No individual is eligible for nomina- 
tion or appointment as a council member 
unless that individual is knowledgable and 
experienced with regard to the activities of 
the sector which that individual will repre- 
sent on the council and is or has been ac- 
tively engaged in the business of the sector 
which that individual will represent on the 
council. 

(3) The Administrator, within 60 days 
after the close of the 30-day period in para- 
graph (1), shall appoint the members of the 
council from the nominees. 

(4) A vacancy on a council shall be filled, 
within sizty days after the vacancy occurs, 
in the same manner in which the original 
appointment was made. A council member 
appointed to fill a vacancy occurring before 
the expiration of the term for which the 
member’s predecessor was appointed shall be 
appointed only for the remainder of that 
term. 





October 15, 1986 


(5) The Administrator shall remove any 
council member if the council concerned 
first recommends removal for cause by not 
less than two-thirds of the council members. 
A removal recommendation of a council 
must be in writing and accompanied by a 
statement of the reasons upon which the rec- 
ommendation is based. 

(g) Councit Status.—A council is not an 
instrumentality of the United States Gov- 
ernment. 

SEC. 206. FUNCTIONS AND POWERS OF COUNCILS. 

(a) FUNCTIONS.— 

(1) Each council shall— 

(A) adopt a seal which shall be judicially 
noticed; 

(B) implement all terms of its charter; 

(C) prepare and submit to the Administra- 
tor, for review and approval under section 
207(a)(1), a marketing and promotion plan 
and amendments thereto which contain de- 
scriptions of the projected consumer educa- 
tion, research, and other marketing and pro- 
motion activities of the council; 

(D) implement and administer an ap- 
proved marketing and promotion plan and 
amendments thereto; 

(E) determine the assessments to be made 
under section 208 and administer the collec- 
tion of the assessments to finance council 
expenses described in paragraph (2); 

(F) receive, investigate and report to the 
Administrator accounts of violations of 
rules or orders relating to assessments col- 
lected pursuant to section 208, or quality 
standard requirements established under 
subsection (c); 

(G) prepare and submit to the Administra- 
tor, for review and approval under section 
207(a)}(1), a budget (on a fiscal year basis) of 
the anticipated expenses and disbursements 
of the council including— 

(i) all administrative and contractual ex- 
penses, 

(ii) the probable costs of consumer educa- 
tion, research, and other marketing and pro- 
motion plans or projects, 

(iti) the costs of the collection of assess- 
ments, and 

(iv) the expense of repayment of the costs 
of each referendum conducted in regard to 
the council; 

(H) maintain books and records, prepare 
and submit to the Administrator such re- 
ports from time to time as may be necessary 
for appropriate accounting with respect to 
the receipt and disbursement of funds en- 
trusted to it, and cause a complete audit 
report to be submitted to the Administrator 
at the end of each fiscal year; 

(1) reimburse the Administrator for the ex- 
penses incurred for the conduct of the refer- 
endum to establish the council or a subse- 
quent referendum to terminate the council 
that fails; and 

(J) prepare and submit to the Administra- 
tor from time to time such reports or propos- 
als as a council determines appropriate for 
furthering the purposes of this Act. 

(2) Funds collected by a council under sec- 
tion 208 shall be used by the council for— 

(A) research, promotion and consumer in- 
formation activities regarding the quality 
and marketing of fish and fish products; 

(B) other expenses as described in subsec- 
tion (a}(1)}(G); 

(C) such other expenses for the adminis- 
tration, maintenance, and functioning of 
the council as may be authorized by the Ad- 
ministrator; 

(D) any reserve fund established under 
subsection (6/(5) and any administrative ex- 
penses incurred by the Administrator speci- 
fied as reimbursable under this Act. 


CONGRESSIONAL RECORD—SENATE 


(3) Marketing and promotion plans and 
amendments thereto prepared by a council 
under subsection (a/(1/(C) shall be designed 
to increase the general demand for fish and 
fish products described in accordance with 
section 205(b/(3) by encouraging, exrpand- 
ing, and improving the marketing, promo- 
tion and utilization of the fish and fish 
products, in domestic or foreign markets or 
both, through consumer education, research, 
and other marketing and promotion activi- 
ties. 

(4) Consumer education and other market- 
ing and promotion activities carried out by 
a council under a marketing and promotion 
plan and amendments thereto may not con- 
tain references to any private brand or trade 
name and shall avoid the use of deceptive 
acts or practices in promoting fish or fish 
products or with respect to the quality, 
value, or use of any competing product or 
group of products. 

(6) PowERS.—A council— 

(1) may sue and be sued; 

(2) may enter into contracts; 

(3) may employ and determine the salary 
of an executive director who may, with the 
approval of the council, employ and deter- 
mine the salary of such additional staff as 
may be necessary; 

(4) may collaborate with other councils in 
establishing and implementing a national 
marketing and promotion plan for one or 
more species of fish or fish products; and 

(5) may establish a reserve fund from 
monies collected and received under section 
208 to permit an effective and sustained 
program of research, promotion, and con- 
sumer education regarding the quality and 
marketing of fish and fish products in years 
when production and assessment income 
may be reduced; but the total reserve fund 
may not exceed the amount budgeted for the 
current fiscal year of operation. 

(c) QUALITY STANDARDS.—(1) A council may 
develop and submit to the Administrator for 
approval, or upon the request of a council 
the Administrator shall develop, quality 
standards for a fish or fish product de- 
scribed in accordance with section 
205(b)(3). Any quality standard developed 
under this paragraph shall be consistent 
with the purposes of this title. 

(2) A quality standard developed under 
paragraph (1) may be adopted by a council 
by a majority of the council members if first 
approved, in a referendum conducted by the 
council, by a majority of the voting sector 
participants of the sector concerned who 
collectively accounted for, in the 12-month 
period immediately preceding the month in 
which the referendum is held, not less than 
66 percent of the value of the fish or fish 
products described in accordance with sec- 
tion 205(b/(3) that were handled by that 
sector. 

(3) With respect to a quality standard 
adopted under paragraph (2), the council 
shall develop and file with the Administra- 
tor an official identification in the form of 
a symbol, stamp, label, or seal that will be 
used to indicate that a fish or fish product 
meets the quality standard at the time the 
official identification is affixed to the fish 
or fish product, or is affixed to or printed on 
the packaging material of the fish or fish 
product. 

(4) The Administrator shall establish by 
regulation procedures for the use of an offi- 
cial identification filed with the Adminis- 
trator under paragraph (3). Misuse of an of- 
ficial identification established under this 
section shall constitute a violation of this 
title. 


31287 


(5) Before issuing final regulations under 
paragraph (4) the Administrator shall— 

(A) publish the proposed regulations by 
such means as will result in wide publicity 
in affected regions; and 

(B) provide for public comment and the 
opportunity for a public hearing. 

(6) A council may receive, investigate and 
report to the Administrator accounts of vio- 
lations of regulations issued under para- 
graph (4). 

(7) Any regulation issued under paragraph 
(4) shall be immediately repealed by the Ad- 
ministrator upon the termination under sec- 
tion 211 of the council that developed the of- 
ficial identification to which the regula- 
tions apply. 

(8) The procedures applicable to the adop- 
tion and the taking effect of a quality stand- 
ard developed under this subsection also 
apply to the subsequent amendment or ter- 
mination of the standard. 

(d) CHARTER AMENDMENTS.—A council may 
submit to the Administrator amendments to 
the text of the council’s charter. Any pro- 
posed amendments to a charter shall be ap- 
proved or disapproved in the same manner 
as the original charter was approved under 
section 205(d) and (e) with the exception of 
section 205(d)(1)(B). 

SEC. 207. FUNCTIONS AND POWERS OF THE ADMINIS- 
TRATOR. 

(a) Functions.—In addition to the duties 
prescribed under section 205, the Adminis- 
trator shall— 

(1) review, for consistency with the provi- 
sions of the Act and other applicable law, 
and approve or disapprove, marketing pro- 
motion plans and budgets within sixty days 
after their submission by a council; 

(2) immediately notify a council in writ- 
ing of the disapproval of a marketing and 
promotion plan or budget and reasons there- 
Sor; 

(3) issue orders and amendments thereto 
that are necessary to implement quality 
standards under section 206(c); 

(4) promulgate regulations necessary to 
carry out the purposes of this title; 

(5) enforce the provisions of this title as 
provided under section 212; and 

(6) make all appointments to the councils 
in accordance with section 205(f). 

(6) Powers.—The Administrator may pro- 
vide, on a reimbursable or other basis, such 
administrative or technical assistance as 
the councils may request for purposes of the 
initial organization and subsequent oper- 
ation of the Council. 

SEC. 208. ASSESSMENTS. 

(a) IN GENERAL.—A council shall impose 
and administer the collection of the assess- 
ments that are necessary to pay for all ex- 
penses incurred by the council in carrying 
out its functions under this title. 

(b) NATURE OF ASSESSMENTS.—(1) Assess- 
ments shall be imposed on sector partici- 
pants in the receiving sector or the import- 
ing sector or both as specified in an ap- 
proved council charter. 

(2) An assessment on sector participants 
in the receiving sector is— 

(A) except for owners of fish processing 
vessels, in the form of a percentage of the 
value of the fish described in accordance 
with section 205(b)/(3) when purchased by 
those participants from fish harvesters; and 

(B) for owners of fish processing vessels, in 
the form of a percentage of the value of the 
fish described in accordance with section 
205(b)/(3) and harvested by such vessels that 
is no less than the value of those fish as de- 
termined in subparagraph (A). 





31288 


(3) An assessment on sector participants 
in the importing sector is in the form of a 
percentage of the value, as determined for 
the purposes of the customs laws, of the fish 
or fish products described in accordance 
with section 205(b/(3) when entered, or with- 
drawn from warehouse for consumption, in 
the customs territory of the United States by 
those participants. 

(ec) ExcerTions.—A council may not 
impose an assessment on any person that 
was not eligible to vote in the referendum es- 
tablishing the council under section 205(e) 
by reason of failure to meet the requirements 
specified under section 205(b/(6). 

(d) VOLUNTARY PAYMENTS.—Any person 
may make voluntary payments or in-kind 
contributions to a council for purposes of 
assisting the council in carrying out its 
functions, 

(e) Counci. AccounTs.—All funds collected 
or received by a council under this section 
shall be deposited by the council in an ap- 
propriate account in the name of the coun- 
cil specified in its charter. Funds eligible to 
be collected or received by a council shall be 
limited to those authorized under this sec- 
tion. 

(f) CONFIDENTIALITY OF INFORMATION.—(1) 
Sector participants shall make available to 
the Administrator such information and 
data as is necessary for the effectuation, ad- 
ministration or enforcement of this title or 
any order or regulation issued pursuant to 
this title. Except as provided in paragraphs 
(2) and (3), any information obtained in 
carrying out this subsection shall be kept 
confidential by all officers and employees of 
the National Oceanic and Atmospheric Ad- 
ministration, independent accountants and 
other persons who have access to such infor- 
mation. 

(2) If the Administrator or an employee of 
the United States Government is party to a 
suit or administrative action involving an 
assessment, order, or regulation issued 
under this title, the Administrator may dis- 
close information obtained under paragraph 
(1) to the extent allowed by the judicial or 
administrative officer presiding over such 
suit or action. 

(3) This subsection shall not prohibit— 

(A) the issuance of general or statistical 
statements based upon reports of a number 
of persons subject to the provisions of this 
title which do not identify the information 
furnished by any person; or 

(B) the publication by direction of the Ad- 
ministrator of the name of any person vio- 
lating a requirement relating to the assess- 
ment imposed under section 208(a) or to 
quality standards implemented by the Ad- 
ministrator under section 206(c), and a 
statement of the particular provisions of the 
requirement violated by such person. 

(4) Any individual who is required to keep 
information confidential under this subsec- 
tion and who knowingly violates this sub- 
section shall, upon conviction, be— 

(A) subject to a fine of not more than 
$1,000 or to imprisonment for not more than 
one year, or both; and 

(B) removed from office if an officer or 
employee of a council or the National Oce- 
anic and Atmospheric Administration. 

(g) PROuHTBITION.—It shall be unlawful for 
any person to use the seal under section 
206(a) or the official identification under 
section 206(c) unless such person is paying 
assessments under section 208 or has the ex- 
press written permission of the council to 
use the seal or official identification. The 
Administrator shall issue regulations to im- 
plement this prohibition. 


CONGRESSIONAL RECORD—SENATE 


SEC. 209. PETITIONS, 

(a) IN GENERAL.—Any person subject to as- 
sessment under section 208 may file a writ- 
ten petition with the Administrator alleging 
that— 

(1) the assessment; 

(2) the plan approved under section 
207(a)(1) on which the assessment is based; 
or 

(3) any obligation imposed under the plan; 
is not in accordance with law and request- 
ing the Administrator to modify, or take 
other appropriate action regarding the as- 
sessment or plan. 

(6b) PROCEDURAL REQUIREMENTS.—Petitions 
shall be in writing and filed within the 
period prescribed by the Administrator. A 
person who files a petition under this sec- 
tion shall be given an opportunity for a 
hearing regarding the petition in accord- 
ance with regulations issued by the Admin- 
istrator. After hearing, or if no hearing is re- 
quested, after consideration of all documen- 
tation and other evidence, the Administra- 
tor shall make a ruling upon the petition. 
SEC, 210. REFUNDS. 

Notwithstanding any other provision of 
this title, any person who pays an assess- 
ment shall have the right to demand and 
promptly receive from the council a refund 
of such assessment. A demand for refund 
must be made in accordance with the proce- 
dures and within such time, as shail be pre- 
scribed by the council and as approved by 
the Administrator. 

SEC, 211, COUNCIL TERMINATION. 

(a) PETITION AND REFERENDUM.—(1) A peti- 
tion to terminate a council may be filed 
with the Administrator by no less than three 
sector participants in any one sector. Any 
petition filed under this subsection shall be 
accompanied by a written document ex- 
plaining the reasons for the petition. 

(2) If the Administrator determines that a 
petition filed under paragraph (1) is accom- 
panied by the signatures, or corporate certi- 
fications, as the case may be, of no less than 
three sector participants in a sector referred 
to in paragraph (1) who collectively ac- 
counted for, in the 12-month period immedi- 
ately preceding the month in which the peti- 
tion to terminate was filed, not less than 20 
percent of the value of the fish or fish prod- 
ucts described in accordance with section 
205(b)(3) that were handled by that sector 
during that period, the Administrator, 
within 90 days after that determination, 
shall hold a referendum for termination of 
the council among all sector participants in 
that sector. 

(3) Not less than 30 days before holding a 
referendum under this subsection, the Ad- 
ministrator shall publish a notice of such 
referendum including the document explain- 
ing the reasons for the petition filed under 
paragraph (1) and any other relevant infor- 
mation the Administrator deems appropri- 
ate. 

(4) If a majority of the voting sector par- 
ticipants who, in the period referred to in 
paragraph (2), collectively accounted for not 
less than 66 percent of the value of such fish 
and fish products that were handled during 
that period by a sector referred to in para- 
graph (1) approve a referendum to termi- 
nate a council, the Administrator shall by 
order terminate the council effective as of a 
date by which the affairs of the council may 
be concluded on an orderly basis. 

(5) The Administrator initially shall pay 


all costs of a referendum to terminate a 
council under this subsection. Before hold- 


ing a referendum under this section, the Ad- 
ministrator shall require sureties to post a 


October 15, 1986 


bond or other security acceptable to the Ad- 
ministrator in an amount which the Admin- 
istrator determines to be sufficient to pay 
any expenses incurred for the conduct of the 
referendum. 

(6)(A) If a referendum conducted under 
this section fails to result in the termination 
of the council, the Administrator shall im- 
mediately recover the amount of the bond 
posted by sureties under paragraph (5). 

(B) If a referendum conducted under this 
section results in the termination of the 
council, the Administrator shall recover the 
expenses incurred for the conduct of the ref- 
erendum from the account established by the 
council under section 208(e). If the amount 
remaining in such account is insufficient 
for the Administrator to recover all expenses 
incurred for the conduct of the referendum, 
the Administrator shall recover the balance 
of such expenses from the sureties that 
posted a bond under paragraph (5). 

(6b) RETURN OF ASSESSMENTS.—If a council 
is terminated under subsection (a), the Ad- 
ministrator, after recovering all expenses in- 
curred for the conduct of the referendum 
under subsection (a/, shall take such action 
as is necessary and practicable to ensure 
that moneys remaining in the account es- 
tablished by the council under section 208(e) 
are paid on a prorated basis to the sector 
participants from whom those moneys were 
collected under section 208. 

SEC. 212. ENFORCEMENT. 


(a) IN GENERAL.—(1) The district courts of 
the United States shall have jurisdiction 
specifically to enforce and to prevent and re- 
strain any person from violating any assess- 
ment, order or regulation made or issued 
under this title. 

(2)(A) If the council has reason to believe 
that a person subject to an assessment, order 
or regulation made or issued under this title 
is violating such assessment, order or regu- 
lation, it may refer the matter to the Admin- 
istrator. 

(B) Except as provided in subparagraphs 
(C) or (D), any civil action authorized to be 
brought under this subsection, when referred 
by a council under subparagraph (A), shall 
be referred to the Attorney General for ap- 
propriate action. 

(C) If the Administrator believes that the 
administration and enforcement of the pro- 
visions of the title would be adequately 
served by taking administrative action 
under subsection (b) or providing written 
notice or warning to any person committing 
a violation of this title, the Administrator 
is not required to refer such violation to the 
Attorney General. 

(D) Whenever a matter has been referred 
by a council under subparagraph (A) and 
the Administrator or the Attorney General 
fails within 60 days of such referral to take 
appropriate action, the council may, upon 
filing notice with the Administrator or At- 
torney General, as appropriate, and other 
interested parties, bring an action under its 
own name. 

(6) PEenatTies.—(1)/(A) When a council 
brings an action under subsection (a/(2), it 
shall be entitled to recover costs of litiga- 
tion, and where the action is brought to col- 
lect an unpaid assessment, interest from the 
date the amount became due and payable. 

(B) Any person who violates any provision 
of any order, fincluding a cease and desist 
order previously issued under this para- 
graph) or regulation issued by the Adminis- 
trator under this title, or who fails or refuses 
to pay, collect, or remit any assessment re- 
quired under this title, may be assessed a 





October 15, 1986 


civil penalty by the Administrator of not 
less than $500 nor more than $5,000 for each 
such violation. Each violation shall be a 
separate offense. In addition to, or in lieu 
of, a civil penalty under this subparagraph, 
the Administrator may issue an order re- 
quiring such person to cease and desist from 
continuing such violation. 

(C) No penalty shall be assessed, or cease 
and desist order issued, under this para- 
graph unless the affected person is given 
notice and opportunity for a hearing before 
the Administrator with respect to such vio- 
lation. 

(D) Any order of the Administrator under 
this paragraph assessing a penalty or impos- 
ing a cease and desist order shall be final 
and conclusive, unless the affected person 
files an appeal from the Administrator’s 
order with the appropriate United States 
court of appeals. 

(2)(A) Any person against whom a viola- 
tion is found under paragraph (1) may 
obtain review of such action in the United 
States court of appeals for the circuit in 
which such person resides or has his place of 
business or in the United States Court of Ap- 
peals for the District of Columbia Circuit by 
filing a notice of appeal in such court 
within thirty days after the date of such 
order and by simultaneously sending a copy 
of such notice by certified mail to the Ad- 
ministrator. 

(B) The Administrator shall promptly file 
in the court a certified copy of the record 
upon which such violation was found. 

(C) The findings of the Administrator 
shall be set aside only if found to be unsup- 
ported by substantial evidence or if not in 
accordance with law. 

(3)(A) If any person fails to pay a civil 
penalty after it has become final, the Admin- 
istrator shall refer the matter to the Attorney 
General. 


(B) The Attorney General shall institute 
appropriate action to recover the amount 
assessed under this subsection in a district 
court of the United States. 

(C) If, within 60 days after such referral, 
the Attorney General fails to file a civil 
action, the council to whose programs the 
assessment, order or regulation relates may 
institute an action in its own name. 

SEC. 213. INVESTIGATIONS. 

(a) IN GENERAL.—The Administrator may 
make such investigations as the Administra- 
tor determines necessary to— 

(1) carry out the Administrator's responsi- 
bilities under this title; and 

(2) determine whether any person has en- 
gaged in any act or practice which consti- 
tutes a violation of the provisions of this 
title. 

(6) Powers.—For the purpose of investiga- 
tions under subsection (a), the Administra- 
tor may administer oaths and affirmations, 
subpoena witnesses, compel their attend- 
ance, take evidence, and require the produc- 
tion of any books, papers, and documents 
which are relevant to the inquiry. The at- 
tendance of witnesses and the production of 
any such records may be required from any 
place in the United States. 

(c) ENFORCEMENT.—In case of contumacy 
or refusal to obey a subpoena by any person, 
the Administrator may invoke the aid of 
any court of the United States within the ju- 
risdiction of which such investigation or 
proceeding is carried on, or where such 
person resides or carries on business, to re- 
quire the attendance and testimony of wit- 
nesses and the production of books, papers, 
and documents. Such court may issue an 
order requiring such person to appear before 


CONGRESSIONAL RECORD—SENATE 


the Administrator to produce records or to 
give testimony relating to the matter under 
investigation. 

SEC. 214, APPROPRIATIONS. 

Any authority of the Administrator to 
make payments under this title shall be ef- 
Sective for any fiscal year only to such 
extent or in such amounts as are provided 
in appropriations Acts. 

TITLE I1]—INTERJURISDICTIONAL FISHERIES 
RESEARCH 


SEC. 301. SHORT TITLE. 

This title may be cited as the “Interjuris- 
dictional Fisheries Research Act of 1986”. 
SEC. 302. PURPOSES. 

The purposes of this title are— 

(1) to promote and encourage State re- 
search in support of the management of pri- 
ority interjurisdictional fishery resources; 
and 

(2) to promote and encourage manage- 
ment of priority interjurisdictional fishery 
resources throughout their range. 

SEC. 303. DEFINITIONS. 

For the purposes of this title: 

(1) The term “Federal fishery management 
plan” means a plan developed under “An 
Act to provide for the conservation and 
management of the fisheries, and for other 
purposes”, approved April 13, 1976 (Public 
Law 94-265; 90 Stat. 331 et seq.). 

(2) The term “fishery resource” means fin- 
fish, mollusks, crustaceans, and any other 
form of marine animal or plant life, other 
than marine mammals and birds. 

(3) The term “interjurisdictional fishery 
resource” means— 

(A) a fishery resource for which there 
exists a Federal fishery management plan 
and for which a fishery occurs in waters 
under the jurisdiction of one or more States 
and the exclusive economic zone established 
by Proclamation Numbered 5030, dated 
March 10, 1983; 

(B) a fishery resource for which there 
exists an interstate fishery management 
plan; or 

(C) a fishery resource which migrates be- 

tween the waters under the jurisdiction of 
two or more States bordering on the Great 
Lakes. 
For purposes of applying section 305 during 
fiscal year 1987, a Federal fishery manage- 
ment plan or an interstate fishery manage- 
ment plan for the fishery resource need not 
be in existence, but a plan of either kind for 
that resource must be in the development 
process during that year. 

(4) The term “interstate fishery manage- 
ment plan” means a plan for managing fish- 
eries developed and adopted by an interstate 
commission. 

(5) The term “interstate commission” 
means a commission or other administra- 
tive body established by an interstate com- 
pact. 

(6) The term “interstate compact” means a 
compact that has been entered into by two 
or more States, established for the purposes 
of conserving and managing interjurisdic- 
tional fishery resources throughout their 
range, and consented to and approved by 
Congress. 

(7) The term “project” means a program 
for research in support of the management 
of an interjurisdictional fishery resource. 

(8) The term “Secretary” means the Secre- 
tary of Commerce. 

(9) The term “State” means any of the sev- 
eral States of the United States, the Com- 
monwealth of Puerto Rico, American 
Samoa, the Virgin Islands, Guam, or the 
Northern Mariana Islands. 


31289 


(10) The term “State agency” means any 
department, agency, commission, or official 
of a State authorized under the laws of the 
State to regulate commercial fisheries. 

SEC. 304. APPORTIONMENT. 

(a) IN GENERAL.— 

(1) Funds appropriated under section 
308(a) shall be apportioned by the Secretary 
among the States on October 1 of each fiscal 
year, or as soon thereafter as practicable. 
The amount of funds apportioned to each 
State shall be determined by the Secretary as 
the ratio which the equally weighted average 
of the volume and value of fishery resources 
harvested by domestic commercial fisher- 
men and received within such State during 
the 3 most recent calendar years for which 
data satisfactory to the Secretary are avail- 
able bears to the total equally weighted aver- 
age of the volume and value of all fishery re- 
sources harvested by domestic commercial 
fishermen received within all of the States 
during those calendar years. 

(2) No State may receive an apportion- 
ment under this subsection for any fiscal 
year if the equally weighted average of the 
volume and value of fishery resources har- 
vested by domestic commercial fishermen 
and received within such State during the 
three most recent calendar years for which 
data satisfactory to the Secretary are avail- 
able is less than one-tenth of 1 percent of the 
total equally weighted average of the volume 
and value of all fishery resources harvested 
by domestic commercial fishermen and re- 
ceived within all of the States during those 3 
calendar years unless— 

(A) the State is a signatory to an inter- 
state fishery compact; or 

(B) the State borders one or more of the 
Great Lakes. 

(3) No State which is a signatory to an 
interstate fishery compact, or which borders 
one or more of the Great Lakes, may receive 
an apportionment for any fiscal year under 
this subsection which is less than 1 percent 
of the total amount of funds available for 
apportionment for that fiscal year. 

(4) No State may receive an apportion- 
ment for any fiscal year under this subsec- 
tion which is more than 6 percent of the 
total amount of funds available for appor- 
tionment for such fiscal year. 

(6) UNUSED APPORTIONMENTS.—Any part of 
an apportionment for any fiscal year to any 
State— 

(1) that is not obligated during that year; 

(2) with respect to which the State notifies 
the Secretary that it does not wish to receive 
that part; or 

(3) that is returned to the Secretary by the 
State— 


may not be considered to be apportioned to 
that State and shall be added to such funds 
as are appropriated pursuant to section 
308(a) for the next fiscal year (and shall be 
treated as having been appropriated for 
such next year) for apportionment under 
subsection (a). Any notification or return of 
Sunds referred to in paragraph (2) or (3) bya 
State is irrevocable. 

SEC. 305. STATE PROJECTS. 

(a) IN GENERAL,— 

(1) Any State may, through its State 
agency or an interstate commission, submit 
to the Secretary a proposal for a project 
which includes full plans, specifications, 
and cost estimates for such project. The total 
cost of all items included for engineering, 
planning, inspection, and unforeseen con- 
tingencies in connection with any works to 
be constructed as part of such a proposed 
project shall not exceed 10 percent of the 





31290 


total cost of such works, and shall be paid by 
the State as a part of its contribution to the 
total cost of the works. 

(2) No part of any funds appropriated 
under any authorization contained in sec- 
tion 308 may be obligated with respect to 
any project until the proposal for such 
project has been submitted under paragraph 
(1) and approved by the Secretary. The Sec- 
retary, before approving any proposal for a 
project, must evaluate the proposal as to— 

(A) the soundness of design; 

(B) the possibilities of securing productive 


results; 

(C) the minimization of duplication with 
other research projects in support of the 
management of interjurisdictional fishery 
resources and carried out under this title or 
under any other law or regulation; 

(D) the organization and management of 
the project; 

(E) the methods proposed for monitoring 
and evaluating the success or failure of the 
project; 

(F) the consistency of the project with the 
purposes of this title specified in section 
302; and 

(G) such other criteria as the Secretary 
may prescribe. 

(3) The Federal share of the cost of any 
project conducted under this title shall not 
exceed 75 percent of the total estimated cost 
of the project unless— 

(A) the State has adopted the interstate 
fishery management plan for the resource to 
which the project applies; or 

(B) the State has adopted fishery regula- 
tions which the Secretary has determined 
are consistent with the Federal fishery man- 
agement plan for the species to which the 
project applies; 
in which case the Federal share shall not 
exceed 90 percent of the total estimated cost 
of the project. 

(4)(A) If the Secretary approves or disap- 
proves a proposal for a project, he shall 
promptly give written notification, includ- 
ing, if disapproved, a detailed explanation 
of the reasons for the disapproval, to the 
State agency submitting the proposal or, if 
the proposal is submitted through an inter- 
state commission, such commission and the 
State. 

(B) For the purposes of this title, funds ap- 
portioned under this section to any State 
shall be treated as having been obligated 
with respect to a project during the fiscal 
year in which the written notification of ap- 
proval required under subparagraph (A) for 
the project proposal is made. 

(b) RESTRICTION.—The expenditure of funds 
under this title shall be applied only to 
projects for which a proposal has been ap- 
proved under subsection (a/, and if other- 
wise applied such funds shall be replaced by 
the State before the State may receive any 
additional funds under this title. 

(c) PaymMent.—When the Secretary deter- 
mines that a project carried out under a 
proposal approved by him has been complet- 
ed, or where he otherwise deems it appropri- 
ate, he shall cause to be paid to the proper 
authority of the State, or to the official or 
depository designated by the interstate com- 
mission if the State agency specifies that 
payment is to be made to the interstate com- 
mission, the Federal share of the project. 
Any payment made to an interstate commis- 
sion shall be charged against the apportion- 
ment of the State concerned. 

SEC. 306. PROPERTY. 

(a) APPLICATION OF FEDERAL AND STATE 
Laws.—All work, including the furnishing of 
labor and materials, needed to complete any 


CONGRESSIONAL RECORD—SENATE 


project approved by the Secretary shall be 
performed in accordance with applicable 
Federal and State laws under the direct su- 
pervision of the State agency, and in accord- 
ance with regulations as the Secretary may 
prescribe. 

(b) Trrtz.—Title to all property, real and 
personal, acquired for the purposes of com- 
pleting any project approved by the Secre- 
tary vests in the State. 

(c) DisposaL.—If a State disposes of any 
real or personal property acquired under 
this title, the State shall pay into the Treas- 
ury of the United States the amount of any 
proceeds resulting from the property dis- 
posed to the extent of and in the same ratio 
that funds provided under this title were 
used in the acquisition of the property. In 
no case shall the amount paid into the 
Treasury of the United States under this sec- 
tion exceed the amount of funds pro- vided 
by this chapter for the acquisition of the 
property involved. 

SEC, 307, REPORTS. 

After consultation with the States receiv- 
ing funds under this title and with any 
interstate commission involved in carrying 
out a project under this title, the Secretary 
shall submit to the Committee on Merchant 
Marine and Fisheries of the House of Repre- 
sentatives and the Committee on Commerce, 
Science, and Transportation of the Senate 
not later than 90 days after the end of the 
fiscal year 1988, and each second fiscal year 
occurring after that fiscal year, a report 
which contains— 

(1) a description of each project receiving 
Sunds under this title during the last 2 fiscal 
years ending before such report is submitted; 

(2) a specification of the total amount of 
funds from the Federal Government and the 
total amount of funds from each State spent 
on each project receiving funds under this 
title during the last 2 fiscal years ending 
before such report is submitted; 

(3) an assessment of each project receiving 
funds under this title during the last 2 fiscal 
years ending before such report is submitted 
to determine whether such project is further- 
ing the purposes of this title; and 

(4) a statement specifying all funds which 
have been apportioned pursuant to section 
305(a) and are available for obligation by a 
State or the Secretary but which have not 
been obligated. 

SEC. 308. AUTHORIZATION OF APPROPRIATION. 

(a) GENERAL APPROPRIATIONS.—There are 
authorized to be appropriated to the Depart- 
ment of Commerce for apportionment to 
carry out the purposes of this title $5,000,000 
Sor each of fiscal years 1987, 1988, and 1989. 

(b) ADDITIONAL APPROPRIATIONS.—In addi- 
tion to the amounts authorized in subsec- 
tion (a), there are authorized to be appropri- 
ated to the Department of Commerce 
$2,500,000 for each of fiscal years 1987, 1988, 
and 1989, which shall be available in such 
amounts as the Secretary may determine ap- 
propriate for the purposes of this title; 
except that— 

(1) in providing funds to States under this 
subsection, the Secretary shall give a prefer- 
ence to those States regarding which he de- 
termines there is a commercial fishery fail- 
ure or serious disruption affecting future 
production due to a fishery resource disaster 
arising from natural or undetermined 
causes, and any sums made available under 
this subsection may be used either by the 
States or directly by the Secretary in coop- 
eration with the States for any purpose that 
the Secretary determines is appropriate to 
restore the fishery affected by such a failure 
or to prevent a similar failure in the future; 
and 


October 15, 1986 


(2) the funds authorized to be appropri- 
ated under this subsection shall not be 
available to the Secretary for use as grants 
Jor chartering fishing vessels. 


Amounts appropriated under this subsection 
shall remain available until expended. 

(c) DEVELOPMENT OF MANAGEMENT PLANS.— 
In addition to the amounts authorized 
under subsections (a) and (b)/, there are au- 
thorized to be appropriated to the Depart- 
ment of Commerce $350,000 for each of 
fiscal years 1987, 1988, and 1989 to support 
the efforts of the following interstate com- 
missions to develop interstate fishery man- 
agement plans for interjurisdictional fishery 
resources; 

(1) The commission established by the At- 
lantic States Marine Fisheries Compact, as 
consented to and approved by Public Law 
77-539 (56 Stat. 267), approved May 4, 1942. 

(2) The commission established by the Pa- 
cific Marire Fisheries Compact, as consent- 
ed to and approved by Public Law 80-232 
(61 Stat. 419), approved July 24, 1947. 

(3) The commission established by the 
Gulf States Marine Fisheries Compact, as 
consented to and approved by Public Law 
81-66 (63 Stat. 70), approved May 19, 1949. 
SEC, 309. REPEAL. 


The Commercial Fisheries Research and 
Development Act of 1964 (16 U.S.C. 779 et 
seq.) is repealed. 

SEC. 310. EFFECTIVE DATE, 
This title takes effect October 1, 1986. 


TITLE IV—MISCELLANEOUS PROVISIONS 
RELATING TO FISH AND FISHERIES 

SEC. 401. NOAA MARINE FISHERIES PROGRAM AU- 
THORIZATIONS. 

The National Oceanic and Atmospheric 
Administration Marine Fisheries Program 
Authorization Act (Public Law 98-210; 97 
Stat. 1409) is amended— 

(1) in section 2(a), by striking out “and” 
after “1984,”", and by inserting “, $27,382,000 
for fiscal year 1986, $28,121,314 for fiscal 
year 1987, $28,915,392 for fiscal year 1988, 
and $29,764,234 for fiscal year 1989” imme- 
diately after “1985”; 

(2) in section 3(a/, by striking out “and” 
after “1984,", and by inserting “, $25,933,000 
Sor fiscal year 1986, $26,633,191 for fiscal 
year 1987, $27,385,248 for fiscal year 1988, 
and $28,189,171 for fiscal year 1989” imme- 
diately after 1985”; and 

(3) in section 4(a), by striking out “and” 
after “1984,””, and by inserting “, $11,395,000 
for fiscal year 1986, $11,702,665 for fiscal 
year 1987, $12,033,120 for fiscal year 1988, 
and $12,386,365 for fiscal year 1989” imme- 
diately after “1985”. 

SEC. 402, ANADROMOUS FISH CONSERVATION ACT 
AUTHORIZATIONS. 

Section 4(a) of the Anadromous Fish Con- 
servation Act (16 U.S.C. 757d(a)) is amend- 
ed— 

(1) by striking out “and 1985.” in para- 
graph (4) and inserting “1985, and 1986.”; 
and 

(2) by adding after paragraph (4) the fol- 
lowing: 

“(5) $7,702,500 for fiscal year 1987. 

(6) $7,920,000 for fiscal year 1988. 

“(7) $8,152,500 for fiscal year 1989.” 

SEC. 403. CENTRAL, WESTERN, AND SOUTH PACIFIC 
FISHERIES DEVELOPMENT ACT AU- 
THORIZATIONS. 

Section 8 of the Central, Western, and 
South Pacific Fisheries Development Act (16 
U.S.C. 758e-5) is amended— 

(1) by striking “and” after “1984,"; and 

(2) by inserting immediately after “1985” 
the following: “, 1986, 1987, and 1988”. 





October 15, 1986 


SEC. 404, ATLANTIC TUNAS CONVENTION ACT OF 1975 
AUTHORIZATIONS. 

Section 10 of the Atlantic Tunas Conven- 
tion Act of 1975 (16 U.S.C. 971h) is amended 
by striking out “year 1976, the period begin- 
ning July 1, 1976, and ending September 30, 
1976, and fiscal years 1977, 1978, 1979, 1980, 
1981, 1982, 1983, 1984, 1985, and 1986” and 
inserting “years 1986, 1987, 1988, and 1989”. 
SEC. 405. GREAT LAKES FISHERY COMMISSION, 

(a) INCREASE IN NUMBER OF COMMISSION- 
ERs.—Section 3 of the Great Lakes Fishery 
Act of 1956 (16 U.S.C. 932) is amended to 
read as follows: 

“Sec. 3. (a/(1) The United States shall be 
represented on the Commission by 4 Com- 
missioners who shall be appointed by the 
President and who may not receive compen- 
sation for service as Commissioners. Of the 
Commissioners— 

“(A) 1 shall be an official of the United 
States Government; and 

“(B) 3 shall be individuals who reside in 
different Great Lakes States and who are 
knowledgeable regarding the fisheries of the 
Great Lakes, except that 1 of them must also 
be an official of a Great Lakes State. 

‘(2) The President shall appoint an alter- 
nate Commissioner who shall perform the 
duties of a Commissioner— 

“(A) until a vacancy referred to in subsec- 
tion (b)(3) is filled; and 

“(B) in the event of the absence of a Com- 
missioner from any meeting of the United 
States Section or the Commission. 

“(b)(1) Except as provided in paragraph 
(2), the term of office of Commissioners ap- 
pointed under subsection (a/(1/(B) is 6 
years. 

“(2) Of the Commissioners first appointed 
under subsection (a/(1)(B) after the date of 
the enactment of this subsection, 1 shall be 
appointed for a term of 2 years, I shall be 
appointed for a term of 4 years, and 1 shall 
be appointed for a term of 6 years. 

“(3) Whenever a vacancy occurs among 
Commissioners appointed under subsection 
(a)(1)(B), the President shall appoint an in- 
dividual to fill that vacancy for the remain- 
der of the applicable term.” 

(b) TransiTIion.—The term of office of each 
United States Commissioner on the Great 
Lakes Fishery Commission who is serving 
on the date of enactment of this Act is termi- 
nated (except the United States Government 
official appointed under section 3a) of the 
Great Lakes Fishery Act of 1956 (16 U.S.C. 
932(a), as in effect before the date of enact- 
ment). However, the individuals appointed 
to those terms shall continue to serve as 
Commissioners until the President makes 
appointments under section 3(b/(2) of the 
Act of 1956 (as added by subsection (a)), 
which appointments shall be made within 
60 days after the date of enactment. 

(c) CONFORMING AMENDMENT.—Section 201 
of the Act entitled “An Act to amend the 
North Pacific Fisheries Act of 1954, and for 
other purposes”, approved October 9, 1972 
(22 U.S.C. 2672a) is amended by striking out 
“the Great Lakes Fishery Commission, ”. 

SEC. 406. NOAA ESTUARINE PROGRAMS OFFICE. 

(a) ESTABLISHMENT.—The Administrator of 
the National Oceanic and Atmospheric Ad- 
ministration (hereinafter in this section re- 
ferred to as the “Administrator”) shall estab- 
lish within the Administration an Estuarine 
Programs Office. 

(b) FuncTions.—The Estuarine Programs 
Office shall— 

(1) develop and implement a national es- 
tuarine strategy for the Administration that 
integrates the research, regulatory, and 
trusteeship responsibilities of the Adminis- 
tration; 


CONGRESSIONAL RECORD—SENATE 


(2) coordinate the estuarine activities of 
the various organizations within the Ad- 
ministration, including activities in estua- 
rine research and assessment, fisheries re- 
search, coastal management, and habitat 
conservation; 

(3) coordinate the estuarine activities of 
the Administration with the activities of 
other Federal and State agencies; and 

(4) provide technical assistance to the Ad- 
ministrator, to other Federal agencies, and 
to State and local government agencies in— 

(A) assessing the condition of estuaries; 

(B) identifying estuaries of critical na- 
tional or regional importance; 

(C) identifying technical and management 
alternatives for the restoration and protec- 
tion of estuarine resources; and 

(D) monitoring the implementation and 
effectiveness of estuarine management 
plans. 

(c) AUTHORIZATION.—There are authorized 
to be appropriated to the Administration 
not to exceed $500,000 for fiscal year 1987, 
$530,000 for fiscal year 1988, $560,000 for 
fiscal year 1989, and $600,000 for fiscal year 
1990 to carry out the provisions of this sec- 
tion. 

SEC. 407. NOAA OFFICERS. 

(a) UNDER AND ASSISTANT SECRETARIES OF 
COMMERCE FOR OCEANS AND ATMOSPHERE.— 

(1) Chapter 40 of title 15, United States 
Code, is amended— 

(A) by inserting after section 1503a the fol- 
lowing new section: 

“$ 15036, Under and Assistant Secretaries of Com- 
merce for Oceans and Atmosphere. 


“Under Secretary 


“(a) There shall be in the Department of 
Commerce an Under Secretary of Commerce 
for Oceans and Atmosphere who shall serve 
as the Administrator of the National Ocean- 
ic and Atmospheric Administration estab- 
lished by Reorganization Plan No. 4 of 1970 
(5 U.S.C. App. 1) and perform such duties as 
the Secretary of Commerce shall prescribe. 
The Under Secretary shall be appointed by 
the President by and with the advice and 
consent of the Senate and shall be compen- 
sated at the rate now or hereafter provided 
for Level III of the Executive Schedule Pay 
Rates (5 U.S.C. 5314). 


“Assistant Secretary 


“(6) There shall be in the Department of 
Commerce, in addition to the Assistant Sec- 
retaries provided by law before the effective 
date of this section, one additional Assistant 
Secretary of Commerce who shall have the 
title Assistant Secretary of Commerce for 
Oceans and Atmosphere and shall serve as 
the Deputy Administrator of the National 
Oceanic and Atmospheric Administration 
established by Reorganization Plan No. 4 of 
1970 (5 U.S.C. App. 1) and perform such 
duties and functions as the Under Secretary 
of Commerce for Oceans and Atmosphere 
shall prescribe. The Assistant Secretary for 
Oceans and Atmosphere shall be appointed 
by the President by and with the advice and 
consent of the Senate and shall be compen- 
sated at the rate now or hereafter provided 
for Level IV of the Executive Schedule Pay 
Rates (5 U.S.C. 5315).”; and 

(B) by inserting after the entry for section 
1503a in the table of contents the following: 
“15030. Under and Assistant Secretaries of 

Commerce for Oceans and At- 
mosphere.”’. 

(2) The individual serving on the date of 
the enactment of this Act— 

(A) as the Administrator of the National 
Oceanic and Atmospheric Administration 


31291 


shall serve as the Under Secretary of Com- 

merce for Oceans and Atmosphere until such 

time as a successor is appointed under sec- 
tion 1503b(a) of title 15, United States Code; 
and 

(B) as the Deputy Administrator of the Na- 
tional Oceanic and Atmospheric Adminis- 
tration shall serve as the Assistant Secretary 
of Commerce for Oceans and Atmosphere 
until such time as a successor is appointed 
under section 1503b(b/) of title 15, United 
States Code. 

(b) CHIEF SCIENTIST OF NOAA.—Section 2(d) 
of Reorganization Plan No. 4 of 1970 (5 
U.S.C. App, 1) is amended to read as follows: 

“(a) There shall be in the Administration a 
Chief Scientist of the National Oceanic and 
Atmospheric Administration who shall be 
appointed by the President, by and with the 
advice and consent of the Senate, and shall 
be compensated at the rate now or hereafter 
provided for Level V of the Executive Sched- 
ule Pay Rates (5 U.S.C. 5316). The Chief Sci- 
entist shall be the principal scientific advis- 
er to the Administrator, and shall perform 
such other duties as the Administrator may 
direct. The Chief Scientist shall be an indi- 
vidual who is, by reason of scientific educa- 
tion and experience, knowledgeable in the 
principles of oceanic, atmospheric, or other 
scientific disciplines important to the work 
of the Administration.”. 

(c) CONFORMING AMENDMENTS.— 

(1) Section 5314 of title 5, United States 
Code, is amended by striking out “Adminis- 
trator, National Oceanic and Atmospheric 
Administration.” and inserting “Under Sec- 
retary of Commerce for Oceans and Atmos- 
phere, the incumbent of which also serves as 
Administrator of the National Oceanic and 
Atmospheric Administration. ”. 

(2) Section 5315 of title 5, United States 
Code, is amended— 

(A) by striking out “Deputy Administra- 
tor, National Oceanic and Atmospheric Ad- 
ministration.” and inserting “Assistant Sec- 
retary of Commerce for Oceans and Atmos- 
phere, the incumbent of which also serves as 
Deputy Administrator of the National Oce- 
anic and Atmospheric Administration.”, 
and 

(B) by striking out “Associate Administra- 
tor, National Oceanic and Atmospheric Ad- 
ministration. ”. 

(3) Section 5316 of title 5, United States 
Code, is amended by inserting at the end 
thereof the following: 

“Chief Scientist, National Oceanic and At- 
mospheric Administration. ”. 

SEC. 408. TRANSFER OF AUTHORITY FOR REIM- 
BURSEMENT UNDER THE FISHERMEN’S 
PROTECTIVE ACT OF 1967. 

Effective October 1, 1986, paragraph (1) of 
section 7(f) of the Fishermen's Protective Act 
of 1967 (22 U.S.C. 1977(f)(1)) is amended to 
read as follows: 

“(1) the term ‘Secretary’ means the Secre- 
tary of State.”. 

SEC. 409, FISHERIES LOAN FUND. 

The third sentence of section 4(c) of the 
Fish and Wildlife Act of 1956 (16 U.S.C. 
742c(c)) is amended to read as follows: “Any 
funds received in the fisheries loan fund 
after September 30, 1986, shall be covered 
into the Treasury as miscellaneous re- 
ceipts.”. 

SEC. 410. CONVEYANCE AGREEMENT PROVISIONS, 

(a) IN GeENERAL.—Under the Agreement 
dated December 9, 1977, between the Com- 
mandant of the Coast Guard and Koniag, 
Incorporated, a regional native corporation, 
pursuant to Public Law 92-203 (a copy of 
which is recorded beginning at Book 44, 





31292 


Page 179 of the Kodiak Recording District, 
Kodiak, Alaska) and any conveyance made 
under that Agreement, the rights or title con- 
veyed to Koniag, Incorporated, shall be con- 
strued to include the following: 

(1) Under the Agreement, welding or other 
equipment or machinery may be operated or 
maintained on lands conveyed to Koniag, 
Incorporated, if the equipment or machinery 
does not cause harmful electromagnetic in- 
terference with the Coast Guard Holiday 
Beach receiver site or is operated or main- 
tained under terms and conditions mutually 
agreeable to the Coast Guard and Koniag, 
Incorporated. Harmful electromagnetic in- 
terference is defined as radio frequency sig- 
nals which disrupt or degrade communica- 
tions reception performance. 

(2) The conveyance of the “old shipyard” 
includes the wharf and all lands of any 
nature beneath the wharf. 

(3) An access and utility easement is in- 
tended as part of the conveyance for Parcel 
2, known as Cliff Point, which consists of— 

(A) a 100-foot wide access easement along 
the existing access road or a location that is 
mutually agreeable to the Coast Guard and 
Koniag, Incorporated, and includes the 
right to construct and operate an access 
road, bridges, guard rails, and other associ- 
ated improvements; and 

(B) a 40-foot wide utility easement adja- 
cent to the access easement in paragraph 
(3)(A) of this subsection or a location that is 
mutually agreeable to the Coast Guard and 
Koniag, Incorporated. 

(4) The construction, maintenance, and 
operation of a dock facility or location of 
any structure or thing on the premises de- 
scribed in section (c) of Schedule 4 of the 
Agreement is not inconsistent with the ease- 
ment for the barge landing easement and 
access to and from the barge landing area 
reserved by the United States Government 
(hereinafter referred to in this paragraph as 
the “Government”), if the dock facility is 
constructed or the structure or thing is lo- 
cated as approved by the Government. Ap- 
proval by the Government is deemed to be 
granted if a proposal for the construction 
and location of the dock facility, structure, 
or thing is submitted to the Government 
and— 

(A) the Government does not respond 
within 60 days of receipt of the proposal; or 

(B) if a response with recommendations 
for modification is submitted by the Gov- 
ernment within 60 days of receipt of the pro- 
posal, the proposal is modified in a manner 
necessary to reasonably satisfy the require- 
ments of the Government— 

(i) to use the dock facility for a barge 
landing area as contemplated by the ease- 
ment; and 

(ii) to permit access to and from the barge 
loading area to public highways for the 
transportation of materials as specified in 
Agreement. 

(b) AppLicaTion.—All rights or conveyances 
confirmed by this section are subject to the 
sanctions in the Agreement referred to in 
subsection (a). 

(c) IMPLEMENTATION.—The Commandant of 
the Coast Guard or other appropriate Feder- 
al officer shall issue the appropriate correc- 
tive conveyance and perform any other ap- 
propriate ministerial or official act neces- 
sary to carry out the purposes of this section 
within 60 days after the date of the enact- 
ment of this title. 


Amend the title so as to read: “An 
Act to amend certain provisions of the 
law regarding the fisheries of the 
United States; to provide for the estab- 


CONGRESSIONAL RECORD—SENATE 


lishment of seafood marketing coun- 
cils; and for other purposes.”’. 
AMENDMENT NO. 3403 

Mr. CHAFEE. Mr. President, I move 
that the Senate concur in the House 
amendments with a further Senate 
amendment, which I send to the desk 
on behalf of Senator DANForRTH in the 
nature of a substitute. 

The PRESIDING OFFICER. The 
clerk will state the amendment, 

The assistant legislative clerk read 
as follows: 

The Senator from Rhode Island [Mr. 
Cuaree], for Mr. DANFORTH, proposes an 
amendment in the nature of a substitute 
numbered 3403. 

Mr. CHAFEE. Mr. President, I ask 
unanimous consent that further read- 
ing of the amendment be dispensed 
with. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

(The text of amendment No. 3403 is 
printed in today’s Recorp under 
“Amendments Submitted.”’) 

Mr. DANFORTH. Mr. President, I 
am offering an amendment in the 
nature of a substitute for S. 991, a bill 
to authorize appropriations for the 
marine fishery programs administered 
by the National Oceanic and Atmos- 
pheric Administration [NOAA] of the 
Department of Commerce and for 
other purposes. Many of these provi- 
sions have already been passed by the 
Senate when this body first considered 
S. 991 in October 1985. On August 12 
of this year, the House passed as 
amended version of the bill which in- 
cluded reauthorization of, and amend- 
ments to, the Magnuson Fishery Con- 
servation and Management Act, along 
with other substantive amendments. 
The bill I am offering on behalf of the 
Commerce Committee today repre- 
sents a modified version of that pack- 
age. 

Title I of the bill includes amend- 
ments to the Magnuson Fishery Con- 
servation and Management Act 
[MFCMA]. Under this act, the United 
States exercises management author- 
ity over fishery resources within 200 
miles of our Nation’s coast. The 
amendments that are being offered 
today generally strengthen the man- 
agement and enforcement provisions 
of the act. 

An important purpose of the 
MFCMA is to encourage development 
of the U.S. fishing industry. The 
United States exercises jurisdiction 
over approximately 20 percent of the 
world’s fishery resources. Much of this 
resource has traditionally been har- 
vested and processed by foreign fleets; 
however, in recent years, the United 
States has made progress toward full 
utilization of our fishery stocks. The 
Commerce Committee will be closely 
monitoring future developments to de- 
termine whether further amendments 
to the act are necessary to assure that 
both the domestic harvestng and proc- 


October 15, 1986 


essing industry are able to fully utilize 
of our Nation’s fishery resources. 

Title It of this bill contains the fish 
and Seafood Promotion Act, which 
was unanimously reported by the 
Commerce Committee on September 3 
of this year. This bill is patterned 
after existing agricultural research 
and promotional boards. It is designed 
to increase the sales and quality of 
fish and seafood products in the 
United States and to expand foreign 
markets for United States produced 
fishery products. 

Title III of this bill includes the In- 
terjurisdictional Fishery Act. This act 
will replace the current Commercial 
Fisheries Research and Development 
Act and will provide Federal matching 
funds for important joint State and 
Federal fishery programs, including 
the regional marine fishery commis- 
sion. 

Title IV includes authorization and 
amendments of acts which comprise 
the bulk of NOAA’s non-Maguson Act 
marine fishery programs. This title in- 
cludes authorization of the NOAA 
Marine Fisheries Program Authoriza- 
tion Act; the Anadromous Fish Con- 
servation Act; the Central, Western, 
and South Pacific Fisheries Develop- 
ment Act; and the Atlantic Tunas Con- 
vention Act. It also includes: Amend- 
ments to the Great Lakes Fishery Act; 
establishment of an Estuarine Pro- 
grams Office and a Chief Scientist at 
NOAA, as well as an Assistant Secre- 
tary and an Under Secretary of the 
Department of Commerce; provisions 
dealing with the incidental taking of 
marine mammals; provisions relating 
to the Fishermen’s Protective Act; pro- 
visions relating to the fishery loan 
fund; provisions relating to a convey- 
ance of land by the Coast Guard; pro- 
visions relating to vessel documenta- 
tion; provisions relating to Coast 
Guard contracts; and miscellaneous 
amendments to title 46, United States 
Code. 

This bill is designed to increase the 
efficiency and effectiveness of U.S. 
fisheries activities. It is important leg- 
islation and I urge my colleagues to 
join me in supporting it. 

Mr. President, I ask unanimous con- 
sent that a section-by-section analysis 
of the legislation be inserted into the 
Recorp following my statement. 

There being no objection, the analy- 
sis was ordered to be printed in the 
REcorpD, as follows: 

SecrTion-ByY-SEcTION ANALYSIS OF S. 991 
TITLE I—MAGNUSON FISHERY CON - 
SERVATION AND MANAGEMENT ACT 

SECTION 101 

Section 101 of the bill brings the Magnu- 
son Fishery Conservation and Management 
Act (MFCMA) into technical conformance 
with the President’s proclamation establish- 
ing an exclusive economic zone. This amend- 
ment would substitute for the term “Fish- 
ery Conservation Zone” the term “Exclusive 
Economic Zone” (EEZ). Under this section, 





October 15, 1986 


the United States exercises sovereign rights 
and exclusive fishery management author- 
ity over all fishery resources within 200 
miles of our nation’s shoreline, all continen- 
tal shelf fishery resources extending beyond 
the EEZ, and all anadromous species of 
U.S.-origin throughout their migratory 
range, but not within any foreign nation’s 
EEZ. The United States will not assert man- 
agement authority over highly migratory 
species, defined in the MFCMA. 
SECTION 102 


Section 102 amends the MFCMA to facili- 
tate enforcement in response to requests for 
such amendments by the administration. 
Subsection (1) clarifies that foreign fishing 
permits issued under the MFCMA are not 
valid for more than one year. In addition, 
this subsection clarifies that the section of 
the Administrative Procedure Act (5 U.S.C. 
558(c)) requiring formal proceedings does 
not apply to denials or terminations of for- 
eign fishing permits that are subject to re- 
newal. 

Subsection (2) ensures that the appropri- 
ate regional fishery management councils 
receive copies of foreign fishing permit ap- 
plications, obviating the need for a council 
to request such copies in order to receive 
them. 

Subsection (3) provides that the Secretary 
of Commerce may ‘disapprove all, or any 
portion, of a foreign fishing permit applica- 
tion. 

Subsection (4) adds a new enforcement 
provision which would allow the Secretary 
of Commerce to modify, suspend, revoke or 
deny the permit of a foreign fishing vessel 
under specified circumstances. 

SECTION 103 


Section 103 requires the Secretary of 
Commerce to promulgate regulations pre- 
scribing health and safety standards that 
must be maintained by foreign fishing ves- 
sels which carry United States observers. It 
is intended that a foreign vessel that does 
not meet the minimum standards be denied 
a permit to harvest fish within the United 
States EEZ. In addition, this subsection re- 
quires that an application for a foreign fish- 
ing permit include a written certification 
that the vessel is in compliance with all ap- 
plicable vessel safety standards imposed by 
the foreign country. 

SECTION 104 


Section 104 modifies certain provisions re- 
lating to regional fishery management coun- 
cils. Subsection (a) requires that individuals 
who are appointed to serve as council mem- 
bers be both knowledgeable and experienced 
with regard to the conservation and man- 
agement, or the recreational or commercial 
harvest, of the fishery resources of the area 
concerned. In addition, when making ap- 
pointments, the Secretary should ensure, to 
the extent practicable, a fair apportionment 
of active participants in the fisheries. Fur- 
thermore, subsection (a) requires state gov- 
ernors to consult with, to the extent practi- 
cable, representatives of the commercial 
and recreational fishing interest before 
making Council nominations. Obviously, not 
every active participant in the fishery can 
be represented on a council, nor can a gover- 
nor be expected to consult with every fish- 
ing industry representative before making 
nominations to a council. The phrase “to 
the extent practicable” is intended to mean 
that good faith efforts should be made by 
the Secretary and by state governors. 

Subsection (b) provides that a council may 
comment on activities undertaken by state 
or federal agencies that affect the habitat 


CONGRESSIONAL RECORD—SENATE 


of fishery resources within its jurisdiction. 
A federal agency must respond within forty- 
five days of receiving a council's comments. 
It is anticipated that a federal agency re- 
ceiving comments from a council will, at a 
minimum, inform the council whether it 
agrees with the council’s assessment as to 
the impact of the planned activity on habi- 
tat, and whether the agency will take steps 
to mitigate that impact. 

Subsection (c) amends the provisions of 
existing law relating to procedures for the 
protection of confidential statistics. Council 
procedures for the protection of confiden- 
tial statistics submitted to it by either the 
Secretary of Commerce or a state must be 
consistent with the procedures of the Secre- 
tary or the laws and regulations of the state 
submitting them. 

Subsection (d) requires that each council 
establish procedures that it deems necessary 
or appropriate to ensure that the scientific 
and statistical committees, as well as any ad- 
visory panels established by that council, 
are involved on a continuing basis in the de- 
velopment, monitoring, and amendment of 
fishery management plans, 

Subsection (e) requires all individuals who 
are nominated to serve on a council, all 
voting members of a council, and the execu- 
tive director of each council, to disclose any 
financial interest in any harvesting, process- 
ing, or marketing activity of fishery re- 
sources over which the council concerned 
has jurisdiction. This subsection of the bill 
further provides that noncompliance with 
the disclosure requirements may not be 
treated as a cause for the invalidation of 
any Council action or decision that had oc- 
curred during the time of the noncompli- 
ance. 

SECTION 105 


Section 105 amends the section of the 
MFCMaA relating to the contents of fishery 
management plans (FMP) and the disclo- 
sure of confidential statistics. Subsection (a) 
adds two new items to the list of elements 
that must be included in every FMP. First, 
every FMP must consider temporary adjust- 
ments of limitations on access to the fishery 
for vessels that have been otherwise pre- 
vented from harvesting because of weather 
or other ocean conditions. Second, readily 
available information on fishery habitat 
must be included within every FMP. “Read- 
ily available information” is intended to in- 
clude only the habitat information that a 
council determines appropriate for inclusion 
within an FMP. It is not intended that the 
phrase be interpreted to require the inclu- 
sion of all information regarding fishing 
habitat in every FMP. 

Subsection (b) provides authority for the 
Secretary of Commerce to disclose confiden- 
tial statistics to those National Marine Fish- 
eries Service personnel and council employ- 
ees who are responsible for the development 
and monitoring of FMPs and when required 
by court order to do so. 


SECTION 106 


Section 106 contains amendments relating 
to the timing and manner of Secretarial 
review of FMPs or amendments to FMPs de- 
veloped by the councils. This section modi- 
fies the review process for FMPs by requir- 
ing the Secretary to publish proposed regu- 
lations within fifteen days after receiving an 
FMP. In addition, this section requires the 
Secretary to commence a review of FMPs or 
amendments to FMPs on the fifth day after 
the day on which a Council has transmitted 
to the Secretary a document that it charac- 
terizes as an FMP or an FMP amendment. 


31293 


SECTION 107 

Section 107 clarifies that the knowing and 

willful submission of false information to a 

council, a state governor, or the Secretary 

of Commerce regarding any matter that 

these persons are considering in the course 
of carrying out the MFCMA is prohibited. 


SECTION 108 


Section 108 of the bill contains a number 
of amendments to the MFCMA relating to 
civil penalties. Subsection (1) clarifies that 
any person against whom a civil penalty has 
been assessed by the Secretary of Com- 
merce may obtain a review of that assess- 
ment in an appropriate United States dis- 
trict court by filing a complaint in such 
court within thirty days of the Secretarial 
assessment order. Subsections (2) and (3) of 
this section add a new provision to the 
MFCMA which makes any fishing vessel 
used in the commission of a prohibited act 
liable in rem for any civil penalty assessed 
for violations of the Act. Furthermore, the 
amount of such assessment shall constitute 
a maritime lien on the vessel which may be 
recovered in the district court of the United 
States having jurisdiction over the vessel. 

SECTION 109 

Section 109 adds new administrative for- 
feiture procedures to the MFCMA. Subsec- 
tion (a) would allow the Department of 
Commerce to institute forfeiture proceed- 
ings against seized fish. In addition, the pro- 
vision clarifies that the Secretary has dis- 
cretion as to whether to release on bond 
fish or other property seized for violations 
of this Act. Subsection (b) would authorize 
the Secretary to use money received from 
penalties and forfeitures of the MFCMA to 
defray storage costs for seized property and 
to pay rewards. 

SECTION 110 


Section 110 deletes reference to the Law 
of the Sea Treaty from the MFCMA, 


SECTION 111 


Section 111 authorizes appropriations to 
carry out the MFCMA through fiscal year 
1989. In addition, this section requires the 
Secretary of Commerce to report to Con- 
gress before replacing with chartered vessels 
any fishery research vessels of the National 
Oceanic and Atmospheric Administration 
operated by the Atlantic Marine Center. 


SECTION 112 


Section 112 makes technical clerical 
amendments to the MFCMA. 


SECTION 113 


Section 113 requires that the Secretary of 
Commerce take action to ensure, to the 
extent practicable, that those persons who 
are dependent for their livelihood upon 
fisheries are fairly represented as voting 
members on regional fishery management 
councils. It is not intended that this section 
require that every fishery group have a rep- 
resentative on an appropriate council, but 
the Secretary must make a good faith effort 
to consider the representation of those who 
depend upon fisheries for their livelihood 
when making appointments to a council. 

TITLE II—FISH AND SEAFOOD 
PROMOTION 

Title II of the bill contains the Fish and 
Seafood Promotion Act. This title creates a 
National Fish and Seafood Promotional 
Council and would authorize the establish- 
ment of species-specific promotional coun- 
cils, which will enable the United States fish 
and seafood industry to establish a coordi- 
nated program of research, education, and 





31294 


promotion, including export promotion to 
expand markets for United States fishery 
products. The National Council would be 
funded through an increase in foreign fish- 
ing fees. A detailed legislative history and 
section-by-section analysis of the bill as re- 
ported by the Commerce Committee is set 
forth in S. Rept. 99-930. 

This bill modifies the Fish and Seafood 
Promotion Act as reported by the Commit- 
tee in that the authorization for the Nation- 
al Council is reduced from five million dol- 
lars annually to $750,000 in fiscal year 1987, 
three million dollars in fiscal years, 1988 
and 1989, and two million dollars in fiscal 
year 1990. In addition, the increase in for- 
eign fishing fees is reduced to the same 
amounts, thereby maintaining the Fish and 
Seafood Promotion Act as revenue neutral. 
These figures represent a recognition that 
the National Council will require less funds 
during the first year of operation. During 
the second and third years, the National 
Council will be critically important in help- 
ing to establish species-specific councils. 
During the National Council's fourth year, 
it is expected that more of its efforts will be 
devoted to promotion. In addition, as a tech- 
nical modification, “the Secretary of Com- 
merce, or his designee” is substituted for 
the “Administrator of NOAA”. 

TITLE ITI—INTERJURISDICTIONAL 

FISHERIES ACT 


Title III of the bill contains the Interjuris- 
dictional Fisheries Research Act. The provi- 
sions of this title are similar to the corre- 
sponding provisions of S. 991 as passed by 
the House of Representatives. A section-by- 
section analysis of those provisions passed 
by the House is set forth in H. Rept. 99-20. 

The text of the Interjurisdictional Fisher- 
fes Act in this bill differs from the House 
text in that it modifies the mechanism for 
apportioning funds among the states. Sec- 
tion 304 provides that no state shall receive 
less than one-half of one percent of the 
total amount of funds available for fiscal 
year 1988. After fiscal year 1988, no state 
which lands one-third of one percent or 
more of the weighted average of volume and 
value of fishery resources shall receive less 
than one-percent of the total amount of 
funds available under this legislation, In ad- 
dition, after fiscal year 1988, any state 
which lands less than one-third of one per- 
cent of the weighted average of volume and 
value of fishery resources would receive an 
apportionment of one-half of one percent 
only if that state is a signatory to an inter- 
state fishery compact, has entered into a co- 
operative enforcement agreement with the 
Secretary of Commerce or Secretary of the 
Interior, borders one or more of the Great 
Lakes, or has entered into an interstate co- 
operative fishery management agreement 
such as the Upper Mississippi River Conser- 
vation Committee. 

TITLE IV—MISCELLANEOUS 
PROVISIONS 
SECTION 401 


Section 401 reauthorizes the NOAA 
Marine Fisheries Programs Authorization 
Act through fiscal year 1989. The 1986 au- 
thorization levels are capped at the 1985 ap- 
propriation level and an increase is provided 
for inflation during 1987 through 1989, re- 
flecting the need to provide essential gov- 
ernment services while restraining federal 
spending. The funds authorized by this pro- 
vision will be used by NOAA's National 
Marine Fisheries Service to carry out a por- 
tion of its duties in the areas of information 
collection and analysis, fisheries conserva- 


CONGRESSIONAL RECORD—SENATE 


tion and management, and state and indus- 
try assistance programs. 
SECTION 402 


Section 402 would reauthorize section 4 of 
the Anadromous Fish Conservation Act 
through 1989. This Act authorizes a federal- 
state cost sharing program for research, de- 
velopment, and management necessary to 
support anadromous fish. The Act encour- 
ages a coordinated approach to research and 
management efforts. 

SECTION 403 

Section 403 provides an authorization for 
the Central, Western, and South Pacific 
Fisheries Development Act through fiscal 
year 1989 at existing levels of five million 
dollars annually. 

SECTION 404 

Section 404 authorizes appropriations to 
carry out the Atlantic Tunas Convention 
Act through fiscal year 1989. The Atlantic 
Tunas Convention Act authorizes U.S. par- 
ticipation in the International Convention 
for the Conservation of Atlantic Tunas. 

SECTION 405 

Section 405 amends the Great Lakes Fish- 
ery Act by authorizing four U.S. representa- 
tives to serve on the Great Lakes Fishery 
Commission. Current law authorizes only 
three commissioners; however, the treaty 
was renegotiated to provide for another 
commissioner. In addition, this section 
would limit the terms of office of each com- 
missioner to six years. 

SECTION 406 

Section 406 provides for the establishment 
of an Estuarine Programs Office within 
NOAA. This Office will be responsible for 
development of an agency-wide strategy for 
the coordination of estuarine management 
activities. 

SECTION 407 

Section 407(a) establishes an Under Secre- 
tary of Commerce for Oceans and Atmos- 
phere, who shall also serve as the NOAA 
Administrator. Subsection (b) establishes an 
Assistant Secretary of Commerce of Oceans 
and Atmosphere, who shall serve as the 
NOAA Deputy Administrator. This change 
in title will not result in a higher rate of 
compensation for the current NOAA Admin- 
istrator and Deputy Administrator or in any 
change to their respective duties or respon- 
sibilities. Subsection (c) establishes within 
NOAA the position of Chief Scientist to re- 
place the current position of Associate Ad- 
ministrator. The Chief Scientist will be ap- 
pointed by the President, with the advice 
and consent of the Senate. The Chief Scien- 
tist is required to have a strong background 
in appropriate scientific disciplines and 
serves as the focal point for the direction 
and coordination of agency research pro- 
grams. 

SECTION 408 

Section 408 transfers authority to admin- 
ister section 7 of the Fishermen's Protective 
Act from the Secretary of Commerce to the 
Secretary of State. 

SECTION 409 


Section 409 provides that funds received 
from foreign fishing fees after September 
30, 1986, will be covered into the Treasury 
as miscellaneous receipts. The fees generat- 
ed before that date will remain in the Fish- 
eries Loan Pund. 

SECTION 410 

This Section amends and clarifies a cov- 
enant accompanying the conveyance of 
lands owned by the Koniag Native Corpora- 


October 15, 1986 


tion at Kodiak, Alaska. This provision clari- 
fies that welding may be undertaken on 
land transferred from the Coast Guard to 
the Koniag Corporation in 1977, if it does 
not cause harmful electromagnetic interfer- 
ence with the Coast Guard's Holiday Beach 
receiver site or is operated or maintained 
under terms and conditions mutually agree- 
able to the Coast Guard and Koniag. If 
harmful electromagnetic interference is dis- 
covered, the Coast Guard would have the 
authority to halt the activity. 


SECTION 411 


This section amends the Marine Mammal 
Protection Act (MMPA) and makes con- 
forming amendments to the Endangered 
Species Act (ESA) to allow incidental taking 
of depleted as well as non-depleted specifies 
. marine mammals under certain condi- 
tions. 

The 1982 amendments of the ESA con- 
tained a provision that allowed the inciden- 
tal take of listed specifies if the result of the 
consultation process was a non-jeopardy bio- 
logical opinion or the specification of rea- 
sonable and prudent alternatives, and if the 
parties concerned took actions to minimize 
and mitigate the taking. The 1981 amend- 
ments of the MMPA contained provisions 
that allowed similar incidental taking of 
non-depleted marine mammals, Since spe- 
cies listed as threatened as endangered 
under the ESA are considered depleted 
under the MMPA and the more restrictive 
provisions of the MMPA prevail, the ESA 
provisions could not be-used to authorize in- 
cidental taking of depleted marine mam- 
mals, even if the take involved was non- 
lethal and resulted in no jeopardy. 

The provisions of this section would 
amend section 101(a)(5)(A) of the MMPA to 
allow incidental taking of depleted species 
of marine mammals under certain condi- 
tions and would amend the ESA to clarify 
that such taking must satisfy section 
101(aX5)( A) as so amended. 

The combined provisions of the ESA and 
the “negligible impact’ standard of the 
MMPA should secure effective protection 
for such listed marine mammals. 

Subsection (a) deletes the phrase “that is 
not depleted” from section 101(a)(5)(A) of 
the MMPA, thereby allowing the incidental 
taking of depleted marine mammals pursu- 
ant to the same statutory requirements as 
are applied to the incidental taking of non- 
depleted species. It is intended that the new 
statutory standards applied by the Secre- 
tary regarding depleted species be the same 
as those for non-depleted species. In order 
that there be no confusion as to the inter- 
pretation of the standard now applicable to 
incidental taking of both depleted and non- 
depleted species, it is explained below. 

It is intended that the term “negligible 
impact” as contained in subparagraph 
(5 Ai) of the MMPA be determined with 
reference to the affected population of 
marine mammals, and not with reference to 
the effects on individual members of any 
population, unless the resulting impact on 
the populations is more than negligible. For 
instance, an individual whale might be af- 
fected by industrial activities so as to alter 
its course but that would likely result in a 
negligible impact on the individual and the 
population absent some other adverse 
impact. On the other hand, effects on indi- 
viduals could result in a greater than negli- 
gible impact on the population depending 
on the number of individuals affected in 
proportion to the total population or the se- 
verity of the effect on each individual. 





October 15, 1986 


The term “negligible impact” as applied to 
populations means an impact that cannot 
reasonably be expected to, and is not rea- 
sonably likely to affect adversely the overall 
population through effects on annual rates 
of recruitment or survival. It is not intended 
that the Secretary find impacts to be more 
than negligible when the effect of specified 
activities on the population is conjectural or 
speculative. Impacts which are not negligi- 
ble must be attributable to the action being 
considered. The degree of certainty of oc- 
currence required in these judgments 
should be inversely proportional to the re- 
sultant harm to the overall population. 

It is intended that if the Secretary finds 
that mitigating measures would render the 
impact of a proposed activity negligible 
when it would not otherwise satisfy that re- 
quirement, the Secretary shall require such 
measures by regulation under subparagraph 
(5)(A)GD as a condition of the authorization 
for any such incidental taking. 

A minor impact upon a small segment of 
habitat might be found to be more than 
negligible under the prior standard, even if 
it has no impact upon the overall popula- 
tion utilizing the habitat. But it is also the 
case that populations could be affected 
aversely by actions that damage rookeries, 
mating grounds, feeding areas and areas of 
similar significance. The Secretary shall 
take those impacts into accounts when 
making a “negligible impact” determination 
under section 105(A)(5)(i). Because these 
factors are to be taken into account, in 
making such a determination, subparagraph 
(aX2)(A) of this section deletes the phrase 
“and its habitat” from subparagraph 5(A)(i) 
of the MMPA. It is expected that the exist- 
ing provisions of the ESA relating to protec- 
tion of critical habitat will secure adequate 
protection of any habitat so designated. 
Moreover, the provisions of subparagraph 
(5X A)GD of the MMPA ensure the least 
practicable adverse impact upon the species’ 
habitat, even if it is not designated as criti- 
cal habitat and even if the impact of the ac- 
tivities on the population will be negligible. 

Subsection (a) also modifies the standard 
by which the Secretary is to evaluate the 
impact on subsistence uses, in effect substi- 
tuting “unmitigable adverse impact” for 
“negligible.” This is a more workable and ef- 
fective standard. 

An “unmitigable adverse impact” in this 
context is one that is attributable to the 
particular activities resulting from the 
agency action being considered as opposed 
to environmental or other extraneous fac- 
tors, and is likely to result in a reduction in 
availability of marine mammals to a level in- 
sufficient to allow for a harvest of resources 
sufficient to meet the subsistence needs of 
the community for marine mammals by: (1) 
causing sufficient numbers of the marine 
mammal population subject to subsistence 
use to vacate subsistence hunting areas; or 
(2) directly displacing subsistence users; or 
(3) erecting physical barriers between the 
marine mammals and the subsistence hun- 
ters. In addition, such an impact must also 
be one which cannot be sufficiently mitigat- 
ed to increase that availability such that a 
harvest which meets the subsistence needs 
of the community may be obtained. It is not 
intended that this section affect the inter- 
pretation of any other laws relating to sub- 
sistence uses, rights, obligations or responsi- 
bilities. 

The reference to ‘a cooperative agree- 
ment” in subparagraph (a)(2)B) is intended 
to cover cooperative agreements such as the 
one entered between NOAA and the Alaska 


CONGRESSIONAL RECORD—SENATE 


Eskimo Whaling Commission under both 
the Whaling Convention Act of 1949 and 
the MMPA. 

It is further intended that protection of 
the marine mammals and availability of the 
marine mammals for subsistence use be se- 
cured by regulations under subparagraph 
(5MA)GD of the MMPA. Subparagraph 
(aX3B) amends subparagraph (5)(A)(ii)(1) 
of the MMPA to require that regulations be 
issued to ensure the least practicable ad- 
verse impact on such subsistence use even if 
the activity will not otherwise have an un- 
mitigable adverse effect. Mitigating meas- 
ures are intended to facilitate the harvest of 
sufficient resources to meet subsistence 
needs of the community and to minimize 
the impacts upon subsistence species and 
users. The agency or applicant and affected 
subsistence users are encouraged to agree 
upon terms and conditions for activities 
which satisfy the operational, scientific, or 
other needs of the agency or applicant and 
the requirements of the subsistence users. 
Applicants are also encouraged to meet di- 
rectly with subsistence users to develop 
agreements for specified activities which 
may have an impact on the availability of 
marine mammals taken for subsistence uses. 

It is intended that the Secretary amend 
the general regulations (50 C.F.R. 228.1- 
228.6) to implement the amended section 
101(aX(5)(A) of the MMPA as it applies to 
depleted marine mammals in accordance 
with the legislative intent as contained in 
this document and the changes brought 
about by these amendments. It is anticipat- 
ed, however, that new species-specific regu- 
lations would be required by section 
101(aX5 Ai) of the MMPA for specified 
activities in a specified region involving inci- 
dental taking of a depleted species. 

It is intended that, immediately upon pas- 
sage of this legislation and subject to the 
provisions of other applicable law including 
the ESA, the Secretary may provide for in- 
cidental taking of depleted species under 
the MMPA by promulgating regulations re- 
quired by section 101(a)(5A)(ii) and issuing 
letters of authorization through procedures 
described for incidental taking of non-de- 
pleted species in current regulations (50 
C.F.R. Part 228). The new regulations and 
letters of authorization should be patterned 
after the current regulations for incidental 
taking of non-depleted ringed seals (50 
C.F.R. 228.11-228.14) with necessary modifi- 
cations to conform to these new provisions 
and the legislative intent expressed in this 
document. 

Finally, subsections (b) and (c) make con- 
forming amendments to the ESA to reflect 
the changes to the MMPA and to clarify the 
relationship between the two statutes. It is 
intended that the decision processes under 
the involved statutes be coordinated and in- 
tegrated to the maximum extent practica- 
ble. 

SECTION 412 

This section contains provisions ordered 
reported unanimously by the Commerce 
Committee on September 24, 1986. It grants 
legislative waivers from restrictions on 
vessel documentation under the laws of the 
United States for five vessels: 

(1) DUNES SPIRIT 


The Committee approved a Jones Act 
waiver for the Dunes Spirit (U.S. official 
number 690176) because of the need to cor- 
rect a questionable action by the Coast 
Guard regarding this particular vessel. This 
45-foot sailboat, which is 49 gross tons and 
was built overseas, was purchased new from 


31295 


a New Jersey boat dealer in 1985. It is capa- 
ble of carrying up to 24 passengers with a 
two-person crew. The buyer, a real estate 
company from Hilton Head Island, South 
Carolina, purchased this vessel for the ex- 
clusive recreational use of time-share 
owners of a condominium project at Shelter 
Cove Harbour on Hilton Head. From August 
to November 1985, the time-share owners of 
the condominium development chartered 
the vessel on a bareboat basis for four days 
each week. Under terms of the August 1985 
agreement, it is clear that the charterers 
had the full responsiblity to arrange for a 
competent captain and crew. 

In late November 1985, the Coast Guard 
cited the vessel for failing to comply with 
the terms of title 46 of the United States 
Code dealing with small passenger vessel 
safety. The Coast Guard’s position was 
partly predicated on its judgment that the 
Jones Act applied to this particular vessel 
when carrying the time-share condominium 
owners. The Committee considers this judg- 
ment to have been erroneous. 

As the Customs Service has indicated in 
correspondence with the Committee, “the 
use of a vessel by a person and his guests 
under conditions amounting to a bareboat 
charter would not be considered a carriage 
of passengers for hire and their use of a 
vessel in activities which ordinarily would 
be considered coastwise trade would not be 
in violation of law.’ The Committee was of- 
fered no information indicating that the 
Dunes Spirit was not being operated in ac- 
cordance with such a bareboat charter. 
However, because the Coast Guard appears 
to be committed to its initial decision, the 
Jones Act waiver is being granted so that 
the Dunes Spirit may be operated as origi- 
nally intended, for the exclusive use of 
Hilton Head condominium owners. In light 
of this case, the Committee intends to look 
into the Coast Guard's practices with regard 
to Bareboat charters of recreational vessels 
to determine if broader statutory modifica- 
tion is required to clarify U.S. policy in this 
area. 


(2) KODIAK QUEEN 


The Kodiak Queen (U.S. Official Number 
507891), a vessel of 478 gross tons and about 
144 feet in length, was built in Mare Island, 
California, in 1941 for the Department of 
the Navy. It was placed under Liberian reg- 
istry in 1962 as the M.S. Vardshov when it 
was purchased by Somhov Tankers, Inc. of 
Monrovia, Liberia. In 1967, the vessel was 
acquired by Arntsen and Brechen, Inc. of 
Kodiak, Alaska, and placed under U.S. flag 
and registry as the Kodiak Queen. The 
vessel has been owned since that time by 
US. citizens. 

The Kodiak Queen is documented for the 
fisheries, and has been operating in the 
tanner crab fishery in and around Kodiak 
during 1986. Its present owners wish to use 
the vessel in coastwise trade, to tender 
salmon, herring, crab or freight for Ocean 
Beauty Seafoods and other seafood process- 
ing companies. However, the Kodiak Queen 
is restricted from engaging in the coastwise 
trade of the United States because of alien 
ownership in its chain of title. 

(3) LA REINA 

The La Reina (U.S. Official Number 
230115), formerly known as Noah’s Ark, is a 
56-foot Tilghman River Yacht that was 
built in Florida in 1930. It has been used as 
a pleasure boat and has never left the 
waters of Florida. 

The present owner is doing business as a 
golf and tennis resort in Florida. The owner 





31296 


wishes to use the vessel to carry guests of 
the resort on a cruise of Lake Harris for 
dining, entertainment, and sightseeing as 
part of their visit to the resort. The vessel 
cannot be documented for such coastwise 
trade because the most recent previous 
owner was a resident alien (Canadian citi- 
zen) who used the vessel as a pleasure boat 
in Florida. That alien ownership in the 
chain of title precludes documentation even 
though the vessel was built in and has never 
left the United States. 


(4) NORTHWIND 


The Northwind (U.S. Official Number 
230147), a motor yacht of 221 gross tons and 
122 feet in length, was built in Manitowoc, 
Wisconsin, in 1930. In 1938, the vessel was 
transferred from United States to British 
ownership, to be used in the service of the 
British Government and Royal Navy. After 
the war, the Northwind was sent on a diplo- 
matic world cruise in support of the British 
export trade, as well as in the service of the 
Prime Minister. In 1975, the vessel was pur- 
chased by Argyco Compania, based in the 
Mediterranean, and was placed under Pana- 
manian registry. The vessel is now located 
in Seattle, Washington. 

The vessel had suffered substantial dete- 
rioration over the years and required exten- 
sive renovation to restore its historic gran- 
deur. In addition, modern navigation and 
other electrical innovations were installed. 
The overhaul and modernization, which 
took place in Seattle, Washington, cost the 
present owner approximately $400,000, an 
amount in excess of the 1975 purchase 
price. 

The present owners wish to engage the 
Northwind in the coastwise trade cf the 
United States as a pleasure charter for 
groups of up to 12 persons, with a crew of 
five or six, in and around Seattle, Washing- 
ton. The vessel is restricted from such trade 
because of alien ownership in its chain of 
title. 


(5) WANDERBIRD 


The Wanderbird (U.S. Official Number 
229607), an oak-planked, copper-sheathed 
schooner of 52 gross tons and about 80 feet 
in length, was built in Germany in 1883. 
The vessel was originally commissioned by 
the German Government to guide vessels 
through the North Sea. In 1926, the Wan- 
derbird was purchased by Warwick Tomp- 
kins. The vessel was refitted, and in 1929, 
set a transatlantic crossing record of 16 
days. In 1936, the Wanderbird was sailed to 
San Francisco. In 1969, the current owner 
purchased the Wanderbird and began a full- 
scale restoration effort in the United States. 

The Wanderbird is presently documented 
for use as a pleasure vessel, capable of ac- 
commodating eight passengers. The owner 
wishes to use the vessel to carry passengers 
for hire on pleasure sail cruises in San Fran- 
cisco Bay and along the California coast. 
The Wanderbird is currently restricted from 
engaging in the coastwise and fisheries 
trades of the United States because it is a 
foreign-built vessel. 


SECTION 413 


This section was ordered reported unani- 
mously by the Commerce Committee on 
September 24, 1986. It requires that the 
Coast Guard include a provision in each 
contract for construction or services requir- 
ing hiring of local residents when the unem- 
ployment rate in the state where the con- 
tract is to be performed exceeds the nation- 
al average rate of unemployment. For pur- 
poses of this section, the term “local resi- 


CONGRESSIONAL RECORD—SENATE 


dent” includes individuals who are within 
daily commuting distance of such state. 
SECTION 414 

This section was ordered reported unani- 
mously by the Commerce Committee on 
September 24, 1986. 

Subsection (a) clarifies that fishing vessels 
which incidentally freeze fish during the 
course of a fishing operation are not to be 
considered ‘‘fish processing vessels” for pur- 
poses of title 46. Subsection (b) makes a sub- 
stantive change to title 46. It grants the Sec- 
retary of Transportation the legal authority 
to receive reimbursement for the travel and 
subsistence expense incurred by Coast 
Guard personnel. This authority is limited 
to instances when applicants desire a certifi- 
eate or license issued by the Coast Guard 
and no travel funds are available to perform 
the requisite tests. 

Mr. WEICKER. Mr. President, I am 
pleased to have this opportunity to ex- 
press my support for S. 991, the Na- 
tional Oceanic and Atmospheric Ad- 
ministration Marine Fisheries Pro- 
gram Authorization Act. This legisla- 
tion authorizes appropriations 
through fiscal year 1989 for NOAA's 
marine and anadromous fisheries man- 
agement programs. In addition, I am 
very pleased at the inclusion of section 
507 of the bill which would give NOAA 
the recognition and stature within the 
Department of Commerce it has long 
deserved, by designating the Adminis- 
trator of NOAA as an Under Secretary 
of Commerce, the Deputy Administra- 
tor as Assistant Secretary, and the As- 
sociate Administrator as Chief Scien- 
tist. 

This organizational change in the 
Department of Commerce is appropri- 
ate and timely. With over 60 percent 
of the Department’s budget and over 
40 percent of its employees, and as the 
Nations’ leading civilian oceanic and 
atmospheric agency, NOAA is one of 
Commerce’s most important agencies. 
Since the establishment of NOAA in 
1970, three Secretary positions have 
been created within the Department: 
one for the International Trade Ad- 
ministration, one for Economic Af- 
fairs, and one for the Travel and Tour- 
ism Administration. NOAA is long 
overdue in joining these ranks. 

The dual titles of Under Secretary 
and Administrator would better enable 
the Administrator to manage a $1.2 
billion agency with 14,000 employees. 
In intra- and inter-departmental meet- 
ings and negotiations the Administra- 
tor may be disadvantaged without the 
recognition of the rank of Under Sec- 
retary. At the international negotiat- 
ing table, where the term “NOAA Ad- 
ministrator” may be unrecognizable, 
the position of Under Secretary would 
be more likely to asssume a higher 
Oceanographic Commission, the Inter- 
national Whaling Commission, and 
the London Dumping Convention. 

An equally important provision in 
this legislation is the appointment of a 
Chief Scientist to replace the Associ- 
ate Administrator’s position. NOAA 
must have the assurance of someone 


October 15, 1986 


in upper management with direct sci- 
entific experience relevant to the 
agency’s activities. The Chief Scientist 
would act as the principal scientific 
advisor to the Under Secretary, and 
would be required to have experience 
in oceanic, atmospheric, or other sci- 
entific disciplines important to 
NOAA’s missions. It only makes sense 
that creating a Chief Scientist position 
will strengthen the agency’s scientific 
direction. 

Mr. President, I urge my colleagues 
to support S. 991, so that we as a 
nation can continue to maintain sound 
ocean, coastal, and fisheries research 
and management programs within 
NOAA. 

Mr. HOLLINGS. Mr. President, I 
urge the Senate to approve the 
amendment to S. 991 offered on behalf 
of the Commerce Committee. This 
amendment incorporates a number of 
fishery measures that the committee 
has had under consideration during 
this Congress. I would like to make a 
few comments on several aspects of 
the amendment that are of special in- 
terest to me. 

First, the amendment contains mul- 
tiyear authorizations for most of the 
fishery programs of the National Oce- 
anic and Atmospheric Administration, 
including programs for fisheries re- 
search, fishing industry development, 
and the conservation and management 
of marine fisheries within 200 miles of 
the U.S. coast. The funding levels are 
compatible with Senate and House ap- 
propriations actions for NOAA. 

Second, I note that title II of the 
amendment contains the Fish and 
Seafood Promotion Act, which was re- 
ported by the Commerce Committee 
on September 3 in the form of an 
amendment to H.R. 2935. Certainly 
seafood is vitally important to my 
State’s coastal economy. The annual 
dockside value of seafood produced in 
South Carolina is in the neighborhood 
of $20 million to $25 million, placing it 
19th in the United States. In addition 
to the actual harvest of seafood that is 
brought into my State by South Caro- 
lina fishermen, fish and shellfish play 
an important role in our restaurant 
and tourism industries. 

I anticipate that the Fish and Sea- 
food Promotion Act will be beneficial 
to the fish and seafood industry in my 
State and across the country. This leg- 
islation’s goal is to strenghen the U.S. 
commercial fishing industry through 
consumer education, research, and 
other marketing and promotion activi- 
ties. The fishing industry has never 
had the benefit of a promotion board, 
unlike many of its competitors in the 
protein production business. And in 
light of the recent medical research 
findings that point to the significant 
value of seafood in the diet, such a 
board can contribute also to wider dis- 





October 15, 1986 


semination of useful nutritional infor- 
mation. 

The act combines two different ap- 
proaches to fish and seafood promo- 
tion, a product-specific approach and a 
national promotion effort. This two- 
tiered system takes into account the 
fact that the fishing industry is com- 
posed of numerous small- and 
medium-sized firms, which tend to op- 
erate very independently. It is hoped 
that the National Council to be cre- 
ated by this legislation will help stimu- 
late the formation of industry-run 
bodies for the promotion of specific 
seafood products. The national group, 
modestly financed from foreign fish- 
ing fees, is to exist for only 4 years, 
but if it is successful, privately funded 
councils for specific products will sur- 
vive for many years to come. 

The final item of special interest to 
me is contained in section 507 of the 
amendment to S. 991. That section 
would create the position of Chief Sci- 
entist at NOAA, to take the place of 
the current Associate Administrator 
position. In addition, it provides that 
the NOAA Administrator and Deputy 
Administrator shall also serve as 
Under Secretary and Assistant Secre- 
tary of Commerce, respectively. 

Mr. President, I know my colleagues 
are aware of the major role I played in 
the establishment of NOAA back in 
1970. Since that time, I have followed 
the agency’s progress with great inter- 
est. I have worked to develop its pro- 
grams and budgets through my work 
on the Commerce and Appropriations 
Committees. And I remain committed 
to the goals and ideals that led to the 
formation of the agency 16 years ago. 
This is why today I am keenly inter- 
ested in the replacement of the Associ- 
ate Administrator position in NOAA 
with that of a Chief Scientist. 

It simply makes good sense to re- 
quire that someone in NOAA's upper 
management have direct scientific ex- 
perience relevant to the agency’s work. 
NOAA has numerous scientific respon- 
sibilities vital to the national inter- 
est—natural resource conservation, 
weather forecasting and public warn- 
ing, aviation and marine safety, the 
national geodetic network, and oceanic 
and atmospheric research and services. 
To successfully accomplish these vari- 
ous missions, NOAA has a vast array 
of scientific expertise in a number of 
areas. The Chief Scientist’s job will be 
to coordinate NOAA’s internal talent 
and act as liaison to the scientific com- 
munity outside of NOAA. In addition, 
the Chief Scientist will be the princi- 
pal scientific adviser to the NOAA Ad- 
ministrator. 

I think this change is a good idea. I 
also believe it will be useful to identify 
the NOAA Administrator and Deputy 
Administrator for what they are—two 
of the highest ranking officials in the 
Department of Commerce. The 
change to Under Secretary and Assist- 


CONGRESSIONAL RECORD—SENATE 


ant Secretary will only clarify their 
standing within the Department; they 
will remain at executive levels III and 
IV, respectively. 

For all these reasons, Mr. President, 
I urge my colleagues to join me in sup- 
porting this amendment to S. 991. 

The PRESIDING OFFICER. The 
question is on agreeing to the motion 
of the Senator from Rhode Island 
(Mr. CHAFEE]. 

The motion was agreed to. 

Mr. CHAFEE. I move to reconsider 
the vote by which the motion was 
agreed to. 

Mr. BYRD. I move to lay that 
motion on the table. 

The motion to lay on the table was 
agreed to. 

The title was amended so as to read: 
“An Act to amend certain provisions of 
the law regarding the fisheries of the 
United States, and for other pur- 
poses.”’. 


ANTIKICKBACK ENFORCEMENT 
ACT 


Mr. CHAFEE. Mr. President, I ask 
that the Chair lay before the Senate a 
message from the House of Represent- 
atives on S. 2250. 

The PRESIDING OFFICER laid 
before the Senate the following mes- 
sage from the House of Representa- 
tives: 

Resolved, That the bill from the Senate 
(S. 2250) entitled “An Act to strengthen the 
prohibition of kickbacks relating to subcon- 
tracts under Federal Government con- 
tracts”, do pass with the following amend- 
ment: 

Strike out all after the enacting clause, 
and insert: That this Act may be cited as 
the “Anti-Kickback Enforcement Act of 
1986”. 

Sec. 2. (a) The Act entitled “An Act to 
eliminate the practice by subcontractors, 
under cost-plus-a-fixed-fee or cost reimburs- 
able contracts of the United States, of 
paying fees or kick-backs, or of granting 
gifts or gratuities to employees of a cost- 
plus-fixed-fee or cost reimbursable prime 
contractors or of higher tier subcontractors 
for the purpose of securing the award of 
subcontracts or orders”, approved March 8, 
1946 (41 U.S.C. 51-54), is amended to read as 
follows: 

“SHORT TITLE 

Section 1. This Act may be cited as the 

‘Anti-Kickback Act of 1986’. 
“DEFINITIONS 

“Sec. 2. As used in this Act: 

“(1) The term ‘contracting agency’, when 
used with respect to a prime contractor, 
means any department, agency, or establish- 
ment of the United States which enters into 
a prime contract with a prime contractor. 

“(2) The term ‘kickback" means any 
money, fee, commission, credit, gift, gratu- 
ity, thing of value, or compensation of any 
kind which is provided, directly or indirect- 
ly, to any prime contractor, prime contrac- 
tor employee, subcontractor, or subcontrac- 
tor employee for the purpose of improperly 
obtaining or rewarding favorable treatment 
in connection with a prime contract or in 
connection with a subcontract relating to a 
prime contract. 


31297 


“(3) The term ‘person’ means a corpora- 
tion, partnership, business association of 
any kind, trust, joint-stock company, or in- 
dividual. 

“(4) The term ‘prime contract’ means a 
contract or contractual action entered into 
by the United States for the purpose of ob- 
taining supplies, materials, equipment, or 
services of any kind. 

“(5) The term ‘prime contractor’ means a 
person who has entered into a prime con- 
tract with the United States. 

“(6) The term ‘prime contractor employee’ 
means any officer, partner, employee, or 
agent of a prime contractor. 

“(7) The term ‘subcontract’ means a con- 
tract or contractual action entered into by a 
prime contractor or subcontractor for the 
purpose of obtaining supplies, materials, 
equipment, or services of any kind under a 
prime contract. 

“(8) The term ‘subcontractor’— 

“(A) means any person, other than the 
prime contractor, who offers to furnish or 
furnishes any supplies, materials, equip- 
ment, or services of any kind under a prime 
contract or a subcontract entered into in 
connection with such prime contract; and 

“(B) includes any person who offers to 
furnish or furnishes general supplies to the 
prime contractor or a higher tier subcon- 
tractor. 

“(9) The term ‘subcontractor employee’ 
means any officer, partner, employee, or 
agent of a subcontractor. 


“PROHIBITED CONDUCT 


“Sec. 3. It is prohibited for any person— 

“(1) to provide, attempt to provide, or 
offer to provide any kickback; 

“(2) to solicit, accept, or attempt to accept 
any kickback; or 

“(3) to include, directly or indirectly, the 
amount of any kickback prohibited by 
clause (1) or (2) in the contract price 
charged by a subcontractor to a prime con- 
tractor or a higher tier subcontractor or in 
the contract price charged by a prime con- 
tractor to the United States. 


“CRIMINAL PENALTIES 


“Sec. 4. Any person who knowingly and 
willfully engages in conduct prohibited by 
section 3 shall be imprisoned for not more 
than 10 years or shall be subject to a fine in 
accordance with title 18, United States 
Code, or both. 


“CIVIL ACTIONS 


“Sec. 5. (a)(1) The United States may, ina 
civil action, recover a civil penalty from any 
person who knowingly engages in conduct 
prohibited by section 3. The amount of such 
civil penalty shall be— 

“(A) twice the amount of each kickback 
involved in the violation; and 

“(B) not more than $10,000 for each oc- 
currence of prohibited conduct. 

(2) The United States may, in a civil 
action, recover a civil penalty from any 
person whose subcontractor or subcontrac- 
tor employee violates section 3 by providing, 
accepting, or charging a kickback. The 
amount of such civil penalty shall be the 
amount of that kickback. 

“(b) A civil action under this section shall 
be barred unless the action is commenced 
within 6 years after the later of (1) the date 
on which the prohibited conduct establish- 
ing the cause of action occurred, and (2) the 
date on which the United States first knew 
or should reasonably have known that the 
prohibited conduct had occurred. 





31298 


“ADMINISTRATIVE OFFSETS 


“Sec. 6. (a) A contracting officer of a con- 
tracting agency may offset the amount of a 
kickback provided, accepted, or charged in 
violation of section 3 against any moneys 
owed by the United States to the prime con- 
tractor under the prime contract to which 
such kickback relates. 

“(b)(1) Upon direction of a contracting of- 
ficer of a contracting agency with respect to 
a prime contract, the prime contractor shall 
withhold from any sums owed to a subcon- 
tractor under a subcontract of the prime 
contract the amount of any kickback which 
was or may be offset against that prime con- 
tractor under subsection (a). 

“(2) Such contracting officer may order 
that sums withheld under paragraph (1)— 

“(A) be paid over to the contracting 
agency; or 

“(B) if the United States has already 
offset the amount of such sums against that 
prime contractor, be retained by the prime 
contractor. 

“(3) The prime contractor shall notify the 
contracting officer when an amount is with- 
held and retained under paragraph (2)(B). 

“(c) An offset under subsection (a) or a di- 
rection or order of a contracting officer 
under subsection (b) is a claim by the Gov- 
ernment for the purposes of the Contract 
Disputes Act of 1978. 

“(d) As used in this section, the term ‘con- 
tracting officer’ has the meaning given that 
term for the purposes of the Contract Dis- 
putes Act of 1978. 

“CONTRACTOR RESPONSIBILITIES 


“Sec. 7. (a) Each contracting agency shall 
include in each prime contract awarded by 
such agency a requirement that the prime 
contractor shall have in place and follow 
reasonable procedures designed to prevent 
and detect violations of section 3 in its own 
operations and direct business relationships. 

“(b) Each contracting agency shall include 
in each prime contract awarded by such 
agency a requirement that the prime con- 
tractor shall cooperate fully with any Fed- 
eral Government agency investigating a vio- 
lation of section 3. 

“(e)(14 A) Whenever a prime contractor or 
subcontractor has reasonable grounds to be- 
lieve that a violation of section 3 may have 
occurred, the prime contractor or subcon- 
tractor shall promptly report the possible 
violation in writing. 

“(B) A contractor shall make the reports 
required by subparagraph (A) to the inspec- 
tor general of the contracting agency, the 
head of the contracting agency if the 
agency does not have an inspector general, 
or the Department of Justice. 

“(2) In the case of an administrative or 
contractual action to suspend or debar any 
person who is eligible to enter into contracts 
with the Federal Government, evidence that 
such person has supplied information to the 
United States pursuant to paragraph (1) 
shall be favorable evidence of such person's 
responsibility for the purposes of Federal 
procurement laws and regulations. 


“INSPECTION AUTHORITY 


“Sec. 8. For the purpose of ascertaining 
whether there has been a violation of sec- 
tion 3 with respect to any prime contract, 
the General Accounting Office and the in- 
spector general of the contracting agency, 
or a representative of such contracting 
agency designated by the head of such 
agency if the agency does not have an in- 
spector general, shall have access to any and 
may inspect the facilities and audit the 
books and records, including any electronic 


CONGRESSIONAL RECORD—SENATE 


data or records, of any prime contractor or 
subcontractor under a prime contract 
awarded by such agency.”. 

(b) The title of such Act is amended to 
read as follows: “‘An Act to prohibit kick- 
backs relating to subcontracts under Feder- 
al Government contracts.”. 

Sec. 3. (a) Except as provided in subsec- 
tion (b), the Anti-Kickback Act of 1986 (as 
set out in section 2(a)) shall take effect with 
respect to conduct described in section 3 of 
such Act which occurs on or after the date 
of the enactment of this Act. 

(b) Subsections (a) and (b) of section 7 of 
the Anti-Kickback Act of 1986 (as set out in 
section 2(a)) shall take effect with respect 
to contract solicitations issued by an agency, 
department, or other establishment of the 
Federal Government on or after the date 
which is 90 days after the date of the enact- 
ment of this Act. 

Mr. LEVIN. Mr. President, a month 
ago, on September 12, 1986, the Senate 
passed S. 2250, the Anti-Kickback En- 
forcement Act of 1986. The purpose of 
this legislation was to strengthen ex- 
isting law against subcontractor kick- 
backs affecting the Federal procure- 
ment system. Specifically, the bill 
sought to close loopholes in and broad- 
en the coverage of the Anti-Kickback 
Act, 41 U.S.C. 51-54. 

Since the House of Representatives 
has held hearings on S. 2250 and a 
companion bill, H.R. 4783, which was 
introduced in the House by my friend 
Congressman JOHN Bryant. The 
House made a few technical and sub- 
stantive changes in the Senate bill. On 
October 7, 1986, the House passed the 
amended bill and returned it for our 
further consideration. I believe the re- 
sulting bill represents a significant im- 
provement over current law, and I rec- 
ommend that we enact it into law 
today. 

I wish to thank the many people 
who participated in the effort to make 
enactment of this legislation a reality. 
My good friend Senator ConEN showed 
leadership and persistence in guiding 
the bill through the Senate. Congress- 
man JOHN BRYANT, who introduced 
the companion bill in the House, dem- 
onstrated equal skill in bringing the 
bill to the attention of his colleagues. 
Congressman Jack Brooks, chairman 
of the Government Operations Com- 
mittee, made an extraordinary effort 
to consider this bill near the end of 
the session, to improve it and get it 
passed. Congressman FRANK HORTON, 
ranking Republican on the Govern- 
ment Operations Committee, joined in 
this effort. Congressman MRopDINo, 
chairman of the Judiciary Committee, 
and Dan GLicKMan, chairman of the 
Subcommittee on Administrative Law, 
also made extraordinary efforts to 
consider this legislation and get it 
through. I thank you for your efforts 
and applaud the bipartisan work that 
has resulted in this legislative over- 
haul of the Federal law prohibiting 
subcontractor kickbacks. 


October 15, 1986 


PROVISIONS OF THE ANTI-KICKBACK 
ENFORCEMENT ACT 

The House changes in the bill are 
both technical and substantive. The 
technical changes included substitut- 
ing the word “rewarding” for the word 
“acknowledging;” substituting the 
word “provide” for the word “pay” 
when used to describe prohibited kick- 
back activities; substituting the word 
“possible” for the word “potential” 
when referring to the types of kick- 
back suspicions that must be reported 
to Federal authorities; substituting 
the word “knew” for “became aware” 
when determining when the statute of 
limitations for civil suits begins to run; 
including the word “willfully” in the 
criminal intent standard; and chang- 
ing the descriptive title of the act. The 
substantive changes include using a 
“civil penalty” rather than a “conclu- 
sive presumption”’ in civil suits by the 
United States to ensure that the Gov- 
ernment can recover kickback costs 
without having to establish, in each 
case, that it was injured by the kick- 
back activity; permitting recovery of 
kickback amounts against persons 
whose employees, subcontractors, or 
subcontractor employees engaged in 
kickback activities; and limiting the 
United States right to offset kickback 
amounts, when proceeding under this 
legislation, to situations where the 
moneys being offset were owed under 
the prime contract tainted by the kick- 
backs. 

Because the bill has changed some- 
what from the legislation discussed in 
the House and Senate committee re- 
ports, a detailed explanation of the 
substantive provisions that were 
changed in the final bill follows: 


SECTION 2: DEFINITIONS 

Section 2(2) defines “kickback,” a 
term which does not appear in the 
text of the existing act but is a key 
element in the bill. I want to make a 
couple of points that have not yet 
been made about the definition. 

The word “purpose” was included in 
the definition to stress the impor- 
tance, in determining whether a spe- 
cific transaction constitutes a “‘kick- 
back,” of analyzing the reasons for the 
suspect transaction. For example, 
when examining an exchange of 
money, a court should try to deter- 
mine why the money was exchanged— 
what each party achieved by partici- 
pating in the transaction. In determin- 
ing the transaction’s ‘“‘purpose,” a 
court should examine objective fac- 
tors, such as what the person paying 
the money actually received for that 
payment, and subjective factors, such 
as what the person paying the money 
expected or wanted to receive for that 
payment. 

The Government is not limited, in 
establishing the “purpose” of a pay- 
ment, to proving the mental states of 
the participants, and the Government 





October 15, 1986 


is in no way required to show that the 
participants had a specific intent to, 
for example, defraud the Government. 
What the Government must prove, 
through objective or subjective evi- 
dence, is that the reason one person 
provided something of value to an- 
other was to improperly influence a 
procurement decision. 

The word “improperly” was included 
in the definition to emphasize the 
bill’s focus on prohibiting only unethi- 
cal conduct. The bill is not meant to 
prohibit conduct which legitimately 
influences a procurement decision. For 
example, it is not a kickback when a 
subcontractor provides a prime con- 
tractor employee with an expensively 
prepared report to explain the subcon- 
tractor’s bid. Similarly, it is not a kick- 
back when a prime contractor pays a 
subcontractor a cash bonus to induce 
the subcontractor to produce a needed 
part on a rush basis. The bill’s prohibi- 
tion applies only to unethical conduct. 

As with the use of the word “pur- 
pose,” use of the term “improperly” in 
the definition of kickback is not meant 
to create an intent element. In other 
words, to judge whether a payment 
was made to “improperly” influence a 
procurement decision, a court should 
not limit the Government to establish- 
ing what was in the mind of any par- 
ticular individual—whether, collective- 
ly or individually, the participants 
thought they were doing something 
wrong. Such subjective assessments 
are less important than external, ob- 
jective measures of ethical conduct, 
such as rules and ethics codes govern- 
ing the procurement process. 

For example, in determining wheth- 
er a subcontractor provided free air- 
fare, hotel space, and meals to a prime 
contractor employee evaluating its fa- 
cilities for the purpose of “improper- 
ly” influencing the employee’s evalua- 
tion, a court may consider the subcon- 
tractor’s subjective feelings about the 
fairness of its actions, but should con- 
centrate much more on objective ethi- 
cal standards governing the propriety 
of the conduct in question. 

It is our hope and our design that 
courts will interpret the definition of 
“kickback” to condemn conduct lead- 
ing to an unfair favoritism based on 
graft and to condone only that con- 
duct contributing to an honest compe- 
tition among subcontractors based on 
merit. Our goal is a body of law pro- 
viding guidance to contractors about 
the proper way to do business with the 
United States. 

Finally, section 2(9) defines ‘‘subcon- 
tractor employee,” a term not defined 
in the existing act. The definition en- 
compasses “any officer, partner, em- 
ployee, or agent” of the subcontractor. 
The term is intended to be construed 
broadly and may include, inter alia, a 
subcontractor’s owners, directors, or 
trustees if any of these persons were 
acting to benefit or on behalf of the 


CONGRESSIONAL RECORD—SENATE 


subcontractor when participating in a 
kickback scheme. The definition’s ref- 
erence to “employee’”’ should be inter- 
preted broadly, consistent with 
common law. 

The definition of ‘subcontractor em- 
ployee” gained new importance when 
the House amended the civil recovery 
portion of the bill to permit a civil 
action against any person whose “sub- 
contractor or subcontractor employee” 
engages in kickbacks. When making 
this change, the House and Senate au- 
thors of the bill relied on the courts 
using a broad interpretation of ‘‘sub- 
contractor employee,"’ In particular, 
the with respect to the definition’s use 
of the word “agent.” 

“Agent” should be _ interpreted 
broadly to make the definition of 
“subcontractor kickback” applicable to 
third parties, such as independent 
sales representatives and consultants, 
who make improper payments to 
induce prime contractors to enter into 
subcontracts with their clients. For ex- 
ample, in cases where an independent 
sales representative offers to split a 
commission with a prime contractor 
employee if that employee purchases 
certain products from certain clients, 
the bill intends such transactions to be 
considered “kickbacks.” For purposes 
of determining the civil liability of 
prime contractors whose employees 
accept such payments, the bill intends 
the third parties to be considered 
“subcontractor employees,’ even if 
they were acting without the knowl- 
edge or consent of the companies they 
represented and even if they were 
acting contrary to their clients’ 
instructions. By making prime con- 
tractors civilly liable for such kick- 
backs, the bill provides an incentive 
for prime contractors to police their 
employees’ relationships with inde- 
pendent sales representatives, consult- 
ants and other third parties. 

SECTION 4: CRIMINAL PENALTIES 

The bill increases the existing crimi- 
nal penalties for kickbacks, Current 
law subjects violators to a maximum 
prison term of 2 years and a maximum 
criminal fine of $10,000; 41 U.S.C. 54. 
The bill provides a maximum prison 
term of 10 years and criminal fines in 
accordance with the Criminal Fine En- 
forcement Act of 1984, Public Law 98- 
596, currently codified at 18 U.S.C. 
3623. The Criminal Fine Enforcement 
Act subjects individuals to a fine equal 
to the greater of $250,000 or double 
the amount of any gain by the wrong- 
doer or of any loss by a victim, and 
subjects businesses to a fine equal to 
the greater of $500,000 or double the 
gain or loss. These penalties are com- 
parable to those in other Federal 
criminal fraud and corruption stat- 
utes. 

The bill provides that, to be subject 
to criminal penalties, the wrongdoer 
must act “knowingly and willfully.” 
The current Anti-Kickback Act im- 


31299 


poses its criminal penalties on those 
who act “knowingly.”’ The addition in 
the bill of the word “willfully” is not, 
however, a change in current law but a 
reflection of the actual standard being 
used in kickback cases. 

The knowing element in the stand- 
ard requires the Government to prove 
that the alleged wrongdoer knew what 
he or she was doing and was not acting 
through mistake, inadvertence or mere 
negligence. The willful element in the 
standard requires the Government to 
prove that the alleged wrongdoer was 
acting on his or her own volition and 
not because he or she was being co- 
erced. To meet the standard, the Gov- 
ernment could demonstrate, for exam- 
ple, that a prime contractor employee 
realized he was being offered money, 
freely accepted the money offered, 
and provided favorable treatment to 
the payor in return. In such a case, 
the employee deliberately chose to act 
as he did and is therefore criminally 
liable for his actions. 

The knowing and willful standard 
does not require proof of a specific 
criminal intent such as an intent to de- 
fraud the Government. All that is re- 
quired for criminal liability is proof 
that the alleged wrongdoer knew what 
he or she was doing and was acting on 
his or her own volition. 

Adding “willfully” to the criminal 
provision should not be construed as 
in any way reinforcing or expanding 
the scope of the so-called ‘economic 
coercion” or “extortion” defense, in 
which a subcontractor pleads relief 
from criminal liability, because it did 
not want to pay the kickback but was 
“forced” to pay it to survive or prosper 
economically. This defense has rarely, 
if ever, been successful in past kick- 
back cases, and Congress in no way in- 
tends it to be more successful after 
passage of the bill. 

Finally, in determining the criminal 
mens rea of a business entity, courts 
should look to the mens rea of the in- 
dividuals who were acting on behalf of 
or to benefit that business. 


SECTION 5: CIVIL ACTIONS 

The existing act permits the United 
States to recover the “amount of any 
{kickback] from the subcontractor or 
the recipient thereof by * * * an action 
in an appropriate court of the United 
States.” 41 U.S.C. 51. Section 5 of the 
legislation expands the act’s civil re- 
covery provisions in several ways. 

First, where current law provides for 
the civil recovery of only the amount 
of the kickback itself, the bill provides 
that, in cases where a person “know- 
ingly” engages in prohibited conduct, 
the United States may recover a civil 
penalty from that person equal to 
twice the amount of each kickback in- 
volved in the case and up to $10,000 
for each occurrence of prohibited con- 
duct. 





31300 


Requiring the United States to prove 
that the wrongdoer acted “knowingly” 
is not a change from current law, but a 
reflection of the cause of action actu- 
ally being used in civil kickback cases. 
To meet the standard, the United 
States has to prove that the alleged 
wrongdoer was acting with awareness 
of what he or she was doing and not 
acting through mistake, inadvertence 
or mere negligence. The United States 
does not have to prove any type of 
specific intent—such as an intent to 
defraud the Government—it only has 
to show that the alleged wrongdoer 
made conscious decisions to act. All of 
the elements of the civil action au- 
thorized by this section of the bill, in- 
cluding proof of knowledge, may be es- 
tablished by a preponderance of the 
evidence. 

Unlike the criminal section of the 
bill, the civil section does not require 
the United States to show “willful- 
ness” to justify a recovery. This is be- 
cause the civil section of the bill has a 
different purpose than the criminal 
section of the bill. The criminal sec- 
tion is intended to punish and deter 
persons who willfully violate the law; 
it imposes criminal fines and prison 
terms for that reason. The civil section 
is not concerned with willful miscon- 
duct but primarily with providing the 
United States with a mechanism to 
obtain compensation for the damages 
it suffers when its procurement proce- 
dures are tainted by kickbacks. 

Civil suits in antikickback law are 
based upon the principle that Federal 
contractors who engage in kickback 
activities pass on their kickback costs 
to the United States. In the most typi- 
cal case, the subcontractor who pays a 
kickback inflates its subcontract price 
to include the kickback amount so 
that, in essence, it receives reimburse- 
ment from the prime contractor. The 
prime contractor, in setting its prime 
contract price, includes its subcontract 
costs. In this way, the prime contrac- 
tor passes on the kickback costs to the 
United States. The United States tax- 
payers end up footing the bill. 

The United States Supreme Court 
described this process when analyzing 
a case under the Anti-Kickback Act in- 
volving a price redetermination con- 
tract: 

The kickbacks here are passed on to the 
Government in two stages. The prime con- 
tractor rarely submits his bid until after he 
has tentatively lined up his subcontractors. 
Indeed, as here, the subcontractors fre- 
quently participate in negotiation of the 
prime contract. The subcontractor’s tenta- 
tive bid will, of course, reflect the amount 
he contemplates paying as a kickback, and 
then his inflated bid will be reflected in the 
prime contractor’s bid to the Government. 
At the renegotiation stage, where the prime 
contractor’s actual cost experience is the 
basis for price redetermination, and kick- 
backs, paid by subcontractors and passed on 
to the prime contractor after the prime con- 
tract is awarded, will be passed on to the 
Government in the form of price redetermi- 


CONGRESSIONAL RECORD—SENATE 


nation upward. United States v. Acme Proc- 
ess Equipment Co., 385 U.S. 138, 143 (1966). 

Kickback costs are so routinely 
hidden in contract prices that their in- 
clusion has become a recognized rule 
of law. English courts have recognized 
this principle for almost 100 years. See 
Hovendon & Sons v. Milhoff [1900] 83 
L.T.R. (N.S.) 41 Grant v. Gold Explo- 
rations & Development Syndicate, Ltd. 
[1900] 1 Q.B. 233; 82 L.T.R. (N.S.) 5; 
Mayor, Aldermen, etc. of Slford v. 
Lever [1891] 1 Q.B., 168; 63 L.T.R. 
(N.S.) 658. American courts have cited 
the principle in common law and in 
cases upholding the existing Anti- 
Kickback Act. See United States v. 
Davio, 136 F. Supp. 423 (E.D. Mich. 
1955). 

In Davio, a United States district 
court upheld section 51 of the existing 
Anti-Kickback Act which states: 

Upon a showing that a subcontractor paid 
fees, commissions, or compensation or 
granted gifts or gratuities to an officer, 
partner, employee, or agent of a prime con- 
tractor or of another higher tier subcontrac- 
tor, in connection with the award of a sub- 
contract or order thereunder, it shall be 
conclusively presumed that the cost of such 
expense was included in the price of the 
subcontract or order and ultimately borne 
by the United States. 

The court held that this ‘“‘conclusive 
presumption” was “not offensive to 
due process since it is based on a logi- 
cal and probable connection with the 
antecedent facts.’ 136 F. Supp. at 429. 

Reaffirmation of principle’s validity 
was received when, as part of the Sep- 
tember 22, 1986 hearing before the 
House Government Operations Sub- 
committee, Chairman Brooks asked 
the Department of Justice whether it 
was “invariably true that the cost of a 
kickback will be passed on to the Gov- 
ernment as part of the contract price.” 
The Justice Department responded in 
a letter dated September 30, 1986: 

All of our experience in the investigation 
of such (kickback) cases supports the propo- 
sition that illicit payments do inflate the 
price which the Government pays and, 
indeed, supports the proposition that the 
Government's loss exceeds the amount of 
the kickback. We can recall no case in which 
the evidence refuted this proposition. 
(Original emphasis.) 

Current law authorizes the United 
States to recover only the amount of 
any kickback which it can prove has 
taken place in connection with a prime 
contract. Simple recovery of the kick- 
back amount, however, often fails to 
compensate the Government for all of 
its injury. The Supreme Court recog- 
nized this fact in the Acme case: 

{The defendant] argues * * * that the ex- 
press provision for recovery of kickbacks is 
enough to protect the Government from in- 
creased costs attributable to them. But this 
argument rests on two false assumptions. 
The first is that kickbacks can easily be de- 
tected and recovered. This is hardly the 
case. * * * The second * * * is that the in- 
creased cost to the Government is necessari- 
ly equal to the amount of the kickback 


October 15, 1986 


which is recoverable. Of course, a subcon- 
tractor who must pay a kickback is likely to 
include the amount of the kickback in his 
contract price. But this is not all. A subcon- 
tractor who anticipates obtaining a subcon- 
tract by virtue of a kickback has little incen- 
tive to stint on his cost estimates. * * *[HlJe 
will be tempted to inflate [his] proposal by 
more than the amount of the kickback. And 
even if the Government could isolate and 
recover the inflation attributable to the 
kickback, it would still be saddled with a 
subcontractor who * * * is perhaps entirely 
unreliable in other ways. United States v. 
Acme Process Equipment Co., 385 U.S. 138, 
144 (1966). 

By providing for civil recovery of 
twice the kickback amount plus 
$10,000 per instance of wrongdoing, 
the bill provides a mechanism that will 
more nearly compensate the Govern- 
ment for all of its damages. For exam- 
ple, the provision will enable the 
United States to recoup the kickback 
amount; the amount that the subcon- 
tractor inflated its contract price 
beyond the kickback payment; the 
costs of detecting and investigating 
the kickback; the interest lost to the 
Government during the time of the 
fraud; and for other excess charges 
and performance problems that may 
be caused by a corrupt subcontractor. 
Cf. United States ex rel. Marcus v. 
Hess, 317 U.S. 537, 550-52 (1943); Pe- 
terson v. Richardson, 370 F. Supp. 
1259, 1267 (N.D. Tex. 1973) aff'd, 508 
F.2d 45 (1975), cert. denied, 423 U.S. 
830 (1975) (double damages and for- 
feitures upheld in cases of false claims 
against the Government as a mecha- 
nism for making the Government 
whole). 

In addition to providing an expand- 
ed measure of damages, the bill mod- 
ernizes the civil mechanism used by 
the United States to recover on a kick- 
back claim. Both the existing statute 
and the proposed legislation relieve 
the United States of the costly and 
time-consuming burden of demonstrat- 
ing, in each case, that a kickback 
caused it injury and damage. Both 
bills relieve the United States of this 
burden, because of the longstanding 
rule of law, explained above, that kick- 
backs invariably injure the defrauded 
party. For technical reasons, however, 
the legislation uses a “civil penalty” 
rather than the existing “conclusive 
presumption” to achieve the desired 
result. 

The bill uses a ‘civil penalty” rather 
than a “conclusive presumption” to 
achieve the same result, because the 
authors of the bill wanted the Anti- 
Kickback Act to more closely parallel 
the False Claims Act, 31 U.S.C. 3729, 
which uses a civil penalty, and because 
Members of the House felt that use of 
a “conclusive presumption” was an 
outdated drafting approach. 

In practical terms, the bill’s use of a 
civil penalty in place of a conclusive 
presumption has and is intended to 
make no substantive change in the 





October 15, 1986 


United States’ right to recover civil 
damages in kickback cases. Contrast- 
ing the civil actions authorized by cur- 
rent law and the bill illustrate this 
point. To recover civilly under the cur- 
rent Anti-Kickback Act, the United 
States is required to establish the pay- 
ment of a kickback. Upon making this 
showing, through the “conclusive pre- 
sumption,” the Government is auto- 
matically deemed to have been injured 
and to be entitled to damages equal to 
the amount of the kickback. The bill 
works in a similar way. To recover 
under the proposed legislation, the 
United States must prove that a kick- 
back was paid, accepted or included in 
a contract price. Upon making this 
showing, the United States is entitled 
to recover a “civil penalty.” The 
United States is automatically entitled 
to this penalty, without proving specif- 
ic injury or damages, because the law 
recognizes its right to compensation 
for the kickbacks tainting its procure- 
ment system. 

In addition to providing a more 
modern civil recovery mechanism and 
compensation more nearly commensu- 
rate with the damages suffered by the 
United States, the bill also expands 
the categories of persons who may be 
sued civilly for engaging in kickbacks. 
Current law authorizes civil suits only 
against “the subcontractor” or the 


“recipient” of a kickback. 41 U.S.C. 51. 
Other categories of persons who par- 
ticipate in kickbacks and who should 
be civilly liable for their misconduct 
include independent sales representa- 
tives who pay kickbacks and prime 


contractors who include kickback costs 
in their contract prices or who permit 
kickback activities within their oper- 
ations. 

The bill accordingly expands the 
current law in two ways. Section 
5(a)(1) permits the United States to 
institute a civil suit against “any 
person” who knowingly violates the 
Act, and section 5(a)(2) enables the 
United States to recover from “any 
person whose employee, subcontractor 
or subcontractor employee violates 
{the Act] by providing, accepting, or 
charging a kickback.” 

Section 5(a)(1) is meant to permit a 
civil recovery against anyone who 
knowingly engages in kickback activi- 
ties—paying a kickback, receiving a 
kickback, including a kickback cost in 
a contract price, or attempting to do 
any of these acts. It is intended to sub- 
ject not only subcontractors and kick- 
back recipients to civil liability, but 
also prime contractors, independent 
sales representatives and others who 
knowingly participate in kickback ac- 
tivities. It is also intended to reach 
companies whose employees engage in 
kickbacks, under the doctrine of re- 
spondeat superior. The justification 
for this approach, described earlier, is 
that persons who engage in kickbacks 
in the Federal procurement process in- 


71-059 O-87-3 (Pt. 22) 


CONGRESSIONAL RECORD—SENATE 


variably finance the kickback costs by 
passing them along to the United 
States taxpayer. The United States is 
thus entitled to seek from any of the 
wrongdoers compensation equal to 
twice the kickback amount plus 
$10,000 per instance of wrongdoing. 

Section 5(a)(2) addresses a specific 
deficiency in current law—the failure 
to provide a civil incentive to business 
entities such as prime contractors and 
subcontractors to deter kickback ac- 
tivities within their operations—by au- 
thorizing a limited civil action with a 
reduced civil penalty. This section 
allows the United States to recover 
civilly from any person whose employ- 
ee, subcontractor or subcontractor em- 
ployee violates the law by engaging in 
kickbacks. The United States does not 
have to show that the person being 
sued knew of the misconduct—just 
that the misconduct was perpetrated 
by that person’s business associate— 
and the United States may recover a 
civil penalty equal to the amount of 
each kickback involved in the case. 

Because section 5(a)(2) imposes civil 
liability on one person for the actions 
of its business associate, its provisions 
are more circumscribed than those in 
section 5(a)(1). For example, it permits 
the United States to recover only the 
amount of a kickback in question 
rather than twice that amount plus 
$10,000, and it limits liability to situa- 
tions where actual rather than at- 
tempted misconduct has occurred. 

The goal of the section is not only to 
provide partial compensation to the 
Government for kickback costs includ- 
ed in Federal contracts, but also to 
impose a limited civil liability on com- 
panies for the kickback activities of 
their employees, subcontractors and 
agents, as a way of encouraging these 
companies to take steps to stop kick- 
backs within their operations. 

The foundation of this approach is 
the longstanding doctrine of respon- 
deat superior which holds employers 
responsible for the actions of their em- 
ployees. By holding employers civilly 
liable for injuries caused by their em- 
ployees, the doctrine encourages em- 
ployers to supervise their employees to 
deter misconduct. In light of this 
broad doctrine of employer liability, it 
is consistent to hold companies civilly 
liable to the United States for the 
kickback activities of the persons they 
employ. 

The bill takes the further step of 
holding a company civilly liable for 
the misconduct of its subcontractors 
and the subcontractor’s employees 
when these persons’ kickbacks affect a 
prime contract with the United States. 
The Supreme Court has upheld this 
type of civil liability in other Federal 
laws. Cf. American Society of Mechani- 
cal Engineers, Inc. v. Hydrolevel Corp., 
456 U.S. 556, 572 (1982) (principal held 
civilly liable under antitust law for 
agent’s anticompetitive actions in 


31301 


order to encourage the principal to su- 
pervise its agents to deter their mis- 
conduct). Through this expanded civil 
liability provision, the bill encourages 
companies to supervise not only their 
own émployees but also their subcon- 
tracting operations as a whole to deter 
kickback activities. 

The bill takes this approach, because 
representatives of various agencies 
within the Federal Government testi- 
fied before Congress that subcontrac- 
tor kickbacks cannot be eliminated 
from the Federal procurement system, 
unless prime contractors and subcon- 
tractors are enlisted in the fight 
against this fraud. These contractors 
are better situated than the Govern- 
ment to detect and prevent kickback 
schemes perpetrated by their employ- 
ees or agents—they select the people 
they do business with, set workplace 
procedures and monitor the work. But 
instituting procedures to detect and 
prevent kickbacks is difficult and 
costly. For this reason and based upon 
past experience with the kickback 
problem, the authors of the bill con- 
cluded that without some measure of 
civil liability for the wrongdoing, com- 
panies would not devote the necessary 
resources to an anti-kickback effort. 
The bill thus authorizes the United 
States to seek a civil penalty against 
companies based upon the kickback 
activities of their employees, subcon- 
tractors and subcontractor employees. 

Should the United States recover a 
civil penalty under section 5(a)(2) 
from one person for the misconduct of 
its employee, subcontractor or subcon- 
tractor employee, that person may, of 
course, take any available legal action 
to seek reimbursement from the 
actual wrongdoer. 

Section 5(b) clarifies the statute of 
limitations applicable to civil suits 
under section 5(a). It specifies a period 
of 6 years from the date the prohibit- 
ed conduct occurred or, if the conduct 
was kept hidden, from the date that 
the United States knew or should rea- 
sonably have known that the prohibit- 
ed conduct had taken place. Six years 
is a standard time period for filing 
Federal civil actions involving Federal 
contracts. The tolling language is mod- 
eled in part after that found in 28 
U.S.C. 2416(c). 

SECTION 6: ADMINISTRATIVE OFFSETS 

The existing act provides that the 
amount of any kickback “shall be re- 
coverable on behalf of the United 
States from the subcontractor or the 
recipient thereof by setoff of moneys 
otherwise owing to the subcontractor 
either directly by the United States, or 
by a prime contractor under any con- 
tract...’ 41 U.S.C. 51. The bill pre- 
serves this right of offset, but redrafts 
the provision in light of existing law 
on administrative offsets and Federal 
contract procedures. 





31302 


In 1982, Congress enacted the Debt 
Collection Act, codified in part at 31 
U.S.C. 3716, to standardize Govern- 
ment procedures for instituting admin- 
istrative offsets. This statute does not 
govern all types of administrative off- 
sets, but it covers a large variety of sit- 
uations. The authors of the bill deter- 
mined that the Anti-Kickback Act, 
which was enacted in 1946, should not 
preempt the Debt Collection Act or 
other common law and _ statutory 
schemes which now govern adminis- 
trative offsets by the United States. 

Accordingly, the bill redrafted the 
Anti-Kickback Act’s offset provision so 
that it applied only to moneys owed by 
the United States under a prime con- 
tract tainted by a kickback. The Debt 
Collection Act and other administra- 
tive offset laws do not apply to such 
intra-contractual adjustments. See 
Avco Corp. v. United States, Case No. 
14-85C (U.S. Claims Court Aug. 19, 
1986). By limiting the Anti-Kickback 
Act in this way, the bill in no way 
limits the United States’ right to re- 
cover kickback amounts under other 
laws authorizing administrative off- 
sets; the bill merely requires the 
United States to cite these other stat- 
utes or common law doctrines, rather 
than the Anti-Kickback Act, as the 
basis for its actions. 

Section 6(a) provides general author- 
ization for offsets of kickback 


amounts. It provides, in essence, that 
where it has been determined that a 
kickback has been provided, accepted 
or included in a contract price, the 
contracting officer may offset the 


amount of the kickback from any 
moneys owed by the United States to 
the prime contractor under the prime 
contract tainted by such misconduct. 

This section limits the U.S. right of 
offset to cases in which actual, as op- 
posed to attempted, misconduct has 
taken place. The section does not re- 
quire the United States to obtain a 
final judgment by a court of law 
before submitting a kickback claim to 
a contracting officer; the bill contem- 
plates the United States following the 
same procedures to arrive at its kick- 
back claim that it follows in submit- 
ting any other Government claim to a 
contracting officer. 

The section coordinates the offset 
provision with existing Federal con- 
tract law by requiring a contracting of- 
ficer to initiate the offset and by refer- 
encing the Contract Disputes Act of 
1978, 41 U.S.C. 601-613, which pro- 
vides general procedures for resolving 
claims between the United States and 
its contractors. The section is designed 
to allow the procedures called for in 
the bill to be handled in accordance 
with the procedures set out in the 
Contract Disputes Act. Under the com- 
bined provisions of section 6(a) and 
the Contract Disputes Act, for exam- 
ple, a contracting officer presented 


with a Government claim for a kick- 


CONGRESSIONAL RECORD—SENATE 


back amount would, pursuant to 41 
U.S.C. 605, issue a decision in writing 
to the prime contractor demanding re- 
imbursement. The contracting officer 
could, if he or she wished, combine the 
kickback claim with other claims af- 
fecting the same prime contract and 
issue a single decision letter on all of 
them. 

A prime contractor who disagrees 
with the Government’s kickback claim 
may appeal the contracting officer’s 
decision on the claim pursuant to the 
procedures set out in the Contract Dis- 
putes Act. In light of the fact that the 
Government’s claim involves fraud, 
however, the prime contractor's right 
of appeal is intended by the authors of 
the bill to lie exclusively with the U.S. 
Claims Court under 41 U.S.C. 609(a). 
An agency board should not handle 
such appeals, because the boards’ fac- 
tual determinations are subject to only 
limited review in a judicial forum 
under a standard requiring a showing 
of fraud, arbitrariness, capriciousness, 
bad faith or failure of substantial evi- 
dence. In contrast, the U.S. Claims 
Court may review the facts underlying 
the kickback claim on a de novo basis. 
Prime contractors should have de novo 
review, in a judicial forum, of the facts 
underlying contract claims involving 
fraud. 

Section 6(b) retains the U.S. right 
under the existing Anti-Kickback Act 
to exercise an offset through a prime 
contractor and further permits the 
prime contractor, in cases the Govern- 
ment deems appropriate, to recoup the 
offset sums from a subcontractor. The 
subsections implementing these provi- 
sions work in tandem and should be 
read together. 

For example, read together, subsec- 
tions 6(b)(1) and 6(b)(2)(A) apply to 
cases in which the United States 
wishes to recover kickback costs from 
a subcontractor with whom it has no 
direct contractual relationship. In this 
event, the contracting officer may 
direct the prime contractor, under sub- 
section 6(b)(1), to withhold the neces- 
sary sums from moneys that the prime 
contractor owes the subcontractor 
and, under subsection 6(b)(2)(A), to 
pay those sums to the appropriate 
contracting agency. In this way, the 
United States recovers its kickback 
costs administratively from the sub- 
contractor, by acting through the 
prime contractor. 

Subsections 6(b)(1) and 6(b)(2)(B), 
read together, apply to cases in which 
the United States has already execut- 
ed an offset against a prime contractor 
but wishes to authorize the prime con- 
tractor to recoup the offset sums from 
an appropriate subcontractor. In this 
event, on instruction of the contract- 
ing officer, subsection 6(b)(1) permits 
the prime contractor to withhold from 
sums it owes the subcontractor the 
amount of any kickback which has 
been or may be offset against the 


October 15, 1986 


prime contractor under section 6(a). 
Again on instruction from the con- 
tracting officer, subsection 6(b)(2)(B) 
permits the prime contractor to keep 
this money (rather than pay it to the 
United States) if the United States has 
already collected that sum from the 
prime contractor through an adminis- 
trative offset. Subsection 6(b)(3) re- 
quires the prime contractor to notify 
the contracting officer when, after 
being instructed to do so, it, in fact, 
has retained money under the author- 
ity of subsection 6(b)(2)(B). 

Section 6(b) was designed primarily 
to benefit those prime contractors who 
are unwitting participants in subcon- 
tractor kickback schemes, by enabling 
them to pass on or recoup from appro- 
priate subcontractors any kickback 
costs which the United States may re- 
cover or has recovered from the prime 
contractors through an administrative 
offset. The provisions are, of course, in 
addition to other legal remedies which 
a prime contractor may pursue to 
recoup such losses from an appropri- 
ate party. 

As a safeguard, a prime contractor 
may not invoke section 6(b) unilateral- 
ly; it must convince a contracting offi- 
cer to direct the prime contractor to 
proceed under the section. By assign- 
ing the responsibility of initiating the 
offset procedures to the contracting 
officer, the bill seeks to assure that 
due regard will be paid to the purposes 
of the Act and the facts of each case. 
For example, it is not intended that a 
contracting officer will authorize a 
prime contractor to retain funds under 
subsection 6(b)(2)(B) in cases where 
the prime contractor was a knowing 
participant in a kickback scheme per- 
petrated by the subcontractor or in 
cases where the identity of the sub- 
contractor responsible for paying the 
kickback is unclear. 


SECTION 7: CONTRACTOR REQUIREMENTS 

Section 7 of the bill imposes new re- 
sponsibilities on prime contractors and 
subcontractors. These provisions are 
intended to increase contractor par- 
ticipation in efforts to deter subcon- 
tractor kickbacks. 

Section 7(a) states that each Gov- 
ernment contract must require the 
prime contractor to “have in place and 
follow reasonable procedures designed 
to prevent and detect violations of 
{the Act] within its own operations 
and direct business relationships.” 
This provision is intended to encour- 
age prime contractors to institute 
formal procedures to combat subcon- 
tractor kickbacks. 

Some persons expressed concern 
that this section would require them 
to impose burdensome and intrusive 
procedures on their subcontractors, 
such as requiring the subcontractors 
to submit to periodic audits of their 
books by the prime contractor. The 


bill does not require prime contractors 





October 15, 1986 


to impose burdensome and intrusive 
procedures on their subcontractors. 
Again, the provision only requires rea- 
sonable antikickback measures. Prime 
contractors should seek a middle 
ground between ignoring their subcon- 
tractors’ possible kickback activities 
and asserting direct control over their 
subcontractors’ operations and person- 
nel. Examples of nonburdensome, un- 
intrusive procedures are requiring sub- 
contractors: (1) to submit declarations 
with each bid that they have not en- 
gaged in kickbacks to win the award of 
the subcontract, and (2) to answer 
questions about whether prime con- 
tractor employees are soliciting them 
for kickbacks. 

The word “reasonable” provides 
needed flexibility to this section of the 
bill, which requires a wide variety of 
contractors to implement antikickback 
procedures. The authors of the bill 
intend courts, when imposing liability 
for inadequate procedures, to apply 
the requirement with consideration 
for good faith efforts and substantial 
compliance with the provision. At the 
same time, courts should not allow 
prime contractors to use the test of 
reasonableness to, in essence, shield 
themselves from providing more than 
token antikickback procedures. 

CONCLUSION 

The Anti-Kickback Act had not been 
amended in 25 years, and a legislative 
overhaul was long overdue. By stiffen- 
ing criminal penalties, expanding the 
civil recovery provisions, prohibiting 
kickbacks on any type of prime con- 
tract to obtain any type of favorable 
treatment, and otherwise modernizing 
and broadening the Act, the bill pro- 
vides a needed strengthening of the 
legal deterrent to subcontractor fraud. 

Mr. CHAFEE. Mr. President, I move 
to concur in the House amendment. 

The PRESIDING OFFICER. The 
question is on agreeing to the motion. 

The motion was agreed to. 

Mr. CHAFEE. Mr. President, I move 
to reconsider the vote by which the 
motion was agreed to. 

Mr. BYRD. Mr. President, I move to 
table the motion to reconsider. 

The motion to lay on the table was 
agreed to. 


CORRECTION IN THE 
ENROLLMENT OF S. 2250 


Mr. BYRD. Mr. President, I send to 
the desk a Senate concurrent resolu- 
tion by Mr. Levin, for himself and Mr. 
ConeEN, and ask for its immediate con- 
sideration. 

The PRESIDING OFFICER. Is 
there objection? Without objection, 
the clerk will report the concurrent 
resolution. 

The assistant legislative clerk read 
as follows: 

A concurrent resolution (S. Con. 
Res. 168) authorizing a technical cor- 


CONGRESSIONAL RECORD—SENATE 


rection to be made in the enrollment 
of the bill S. 2250. 


The PRESIDING OFFICER. Is 
there further debate on the resolu- 
tion? If not, the question is on agree- 
ing to the concurrent resolution. 

The concurrent resolution was 
agreed to, as follows: 


S. Con. Res. 168 

Resolved by the Senate (the House of Rep- 
resentatives concurring/, That, in the en- 
rollment of the bill (S. 2250) to prohibit 
kickbacks relating to subcontracts under 
Federal Government contracts, the Clerk of 
the Senate shall make the following correc- 
tion: 

In the first sentence of section 5(aX2) of 
the Anti-Kickback Act of 1986 (as it appears 
in section 2(a) of the bill), insert ‘“‘employ- 
ee,” between “whose” and “subcontractor”. 

Mr. BYRD. Mr. President, I move to 
reconsider the vote by which the con- 
current resolution was agreed to. 

Mr. CHAFEE. Mr. President, I move 
to lay that motion on the table. 

The motion to lay on the table was 


agreed to. 


NATIONAL KIDNEY PROGRAM 
DAY 


Mr. CHAFEE. Mr. President, I ask 
that the Chair lay before the Senate a 
message from the House of Represent- 
atives on Senate Joint Resolution 367. 

The PRESIDING OFFICER laid 
before the Senate the following mes- 
sage from the House of Representa- 
tives: 

Resolved, That the resolution from the 
Senate (S. J. Res. 367) entitled “Joint reso- 
lution to designate September 24, 1986, as 
“National Kidney Program Day’, do pass 
with the following amendment: 

Page 2, line 4, strike out (September 24,), 
and insert: “October 23,” 

Amend the title so as to read: “Joint 
resolution to designate October 23, 
1986, as ‘National Kidney Program 
Day.’”’. 

Mr. CHAFEE. Mr. President, I move 
that the Senate concur in the House 
amendments. 

The PRESIDING OFFICER. The 
question is on agreeing to the motion. 

The motion was agreed to. 

Mr. CHAFEE. Mr. President, I move 
to reconsider that action. 

Mr. BYRD. Mr. President, I move to 
table the motion to reconsider. 

The motion to lay on the table was 
agreed to. 


TRANSFER OF THE COAST 
GUARD CUTTER “TANEY” 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Senate 
now turn to the consideration of H.R. 
5598, dealing with the Coast Guard 
cutter Taney, now being held at the 
desk. 

The PRESIDING OFFICER. Is 
there objection? Without objection, 
the clerk will report. 


31303 


The assistant legislative clerk read 
as follows: 

A bill (H.R. 5598) to provide for the trans- 
fer of the Coast Guard cutter Taney to the 
city of Baltimore, Maryland, for use as a 
maritime museum and display. 

The Senate proceeded to consider 
the bill. 

Mr. MATHIAS. Mr. President, H.R. 
5598 provides for the transfer of the 
Coast Guard cutter Taney to the city 
of Baltimore, MD, for use as a mari- 
time museum in the city’s Inner 
Harbor area. I understand that this 
bill has been cleared on both sides and 
that there are no objections from the 
executive agencies. 

The vessel is named after Roger 
Brooke Taney of Maryland who served 
as the fifth Chief Justice of the 
United States after serving as Secre- 
tary of the Treasury and Attorney 
General. He is buried in Frederick, 
MD, where he had practiced law as a 
young man. She was commissioned in 
1936 and saw action in both the Atlan- 
tic and Pacific Oceans during World 
War II as well as in Korea and Viet- 
nam. 

The Taney is due to be decommis- 
sioned this December. The Coast 
Guard has said that, because of its 
age, she would not be called to duty 
again. Baltimore will provide the 
funds for the transfer and drydocking. 

I urge my colleagues to support this 
bill so that the maritime heritage of 
the Taney can be preserved. 

Mr. SARBANES. Mr. President, I 
rise in strong support of H.R. 5598, 
providing for the transfer of the Coast 
Guard cutter Taney to the city of Bal- 
timore for use as a maritime museum 
and display, upon decommissioning of 
the vessel. 

Both the cutter and its namesake, 
Roger Brooke Taney, served the 
Nation with distinction. Roger B. 
Taney served as attorney general of 
Maryland in 1827, Attorney General of 
the United States in 1831, Secretary of 
the Treasury in 1833 and was the fifth 
Chief Justice of the U.S. Supreme 
Court in 1836. He was born in Calvert 
County, lived in Baltimore and is 
buried in Frederick, MD, where his 
home, the Taney House, is a State his- 
toric landmark. 

The cutter, commissioned in 1936, is 
the last of five Coast Guard vessels 
named after U.S. Secretaries of the 
Treasury. She is the last U.S. warship 
out of 101 naval vessels in Pearl 
Harbor during the attack on Decem- 
ber 7, 1941, to be in active service. She 
also served at Okinawa, Korea, Viet- 
nam, and more recently on the east 
coast of the United States in law en- 
forcement and search and rescue mis- 
sions. The impressive historical signifi- 
cance of the Taney warrants that once 
she is decommissioned, the memory of 
her service and of the Marylander for 





31304 


whom she is named be preserved as a 
symbol of Coast Guard heritage. 

The transfer to the city of Baltimore 
would take place after the Taney has 
been decommissioned later this year 
and the city has agreed to assume all 
costs associated with transferring and 
drydocking the cutter. Mr. President, I 
strongly support this bill and urge its 
adoption. 

The PRESIDING OFFICER. The 
bill is before the Senate and open to 
amendment. If there be no amend- 
ment to be offered, the question is on 
the third reading and passage of the 
bill. 

The bill (H.R. 5598) was ordered to a 
third reading, was read the third time, 
and passed. 

Mr. CHAFEE. Mr. President, I move 
to reconsider that action. 

Mr. BYRD. Mr. President, I move to 
lay the motion to reconsider on the 
table. 

The motion to lay on the table was 
agreed to. 


THE CENTRAL VALLEY PROJECT 
OPERATION — CONFERENCE 
REPORT 


Mr. CHAFEE. Mr. President, I 
submit a report of the committee of 
conference on H.R. 3113 and ask for 
its immediate consideration. 

The PRESIDING OFFICER. The 
report will be stated. 

The assistant legislative clerk read 
as follows: 

The committee of conference on the dis- 
agreeing votes of the two Houses on the 
amendments of the Senate to the bill (H.R. 
3113) providing for the coordinated oper- 
ation of the Central Valley Project and the 
State Water Project in California, having 
met, after full and free conference, have 
agreed to recommend and do recommend to 
their respective Houses this report, signed 
by a majority of the conferees. 

The PRESIDING OFFICER. With- 
out objection, the Senate will proceed 
to the consideration of the conference 
report. 

(The conference report is printed in 
the House proceedings of the Recorp 
of October 14, 1986.) 

Mr. McCLURE. Mr. President, the 
conference agreement on H.R. 3113 
marks a great achievement in estab- 
lishing direction for the management 
and further development of our west- 
ern water resources. The agreement is 
the culmination of not only the efforts 
of the Senate and House conferees, 
but reflects a lot of hard work on the 
part of staff and representatives of the 
environmental and water resource 
communities. The agreement is a 
major step toward the better manage- 
ment of our western water resources. 

I express my appreciation for the ef- 
forts of my colleagues on the Senate 
Energy and Natural Resources Com- 
mittee for their contributions and con- 
structive help in achieving this land- 
mark legislation. I commend also to 


CONGRESSIONAL RECORD—SENATE 


my colleagues the strong support for 
the Senate bill by the Senate confer- 
ees: Senator Domenicr, Senator 
WALLop, Senator MurkKowskKI, Senator 
Evans, Senator Jounston, Senator 
Forp, Senator METZENBAUM, and Sena- 
tor MELCHER. Each contributed to the 
agreement that is before the Senate 
today. 

I particularly thank the chairman of 
the Subcommittee on Water and 
Power, Senator Murkowsk1, for his 
able assistance in moving the legisla- 
tion through the subcommittee, the 
Senate, and the conference. His con- 
cerns for the water users and the con- 
servation of our resources helped 
shape the agreement that is before us. 

The text of the agreement is sub- 
stantially in accord with the Senate 
version of H.R. 3113 except for title I 
where the conferees agreed to a true 
compromise version which, I believe, 
combines the best elements of both 
the House and Senate bills. 

If I may take just a moment, I will 
briefly highlight segments of the 
Statement of the Managers which ad- 
dresses the areas of compromise in the 
substitute agreed to by the conferees. 

Title I of the substitute amends sec- 
tion 2 of the Act of August 26, 1937, to 
provide that: 

Unless the Secretary of the Interior deter- 
mines that operation of the Central Valley 
Project in conformity with State water qual- 
ity standards for the San Francisco Bay/ 
Sacramento-San Joaquin Delta and Estuary 
is not consistent with the congressional di- 
rectives applicable to the project, the Secre- 
tary is authorized and directed to operate 
the project, in conjunction with the State of 
California Water Project, in conformity 
with such standards. 

This language provides protection 
for the investment of the taxpayer 
and the Nation in the facilities of the 
Central Valley project. Foremost 
under the reclamation law is the obli- 
gation of the Secretary of the Interior 
to secure repayment of the reimbursa- 
ble costs of reclamation projects. In 
operating the Central Valley project 
to meet appropriate water quality 
standards, the Secretary must be con- 
sistent with the congressional direc- 
tives applicable to the project. In re- 
sponse to those directives, the Secre- 
tary must not place in jeopardy the re- 
payment capability of the project. 

This agreement also lays to rest a 
myth that enactment of this legisla- 
tion would provide a backdoor authori- 
zation for the relocation of the intake 
of the Contra Costa Canal entirely at 
Federal expense. I do not know the 
origin of this myth, but it proved trou- 
blesome in reaching a final agreement 
and is addressed by the legislation. 

I would also note that at the insist- 
ence of the Senate, the House confer- 
ees agreed to modify the provision re- 
garding the reimbursability of costs 
associated with providing Central 
Valley project water supplies for the 
purpose of salinity control and for 


October 15, 1986 


complying with the State water qual- 
ity standards identified in the coordi- 
nated operation agreement. The con- 
ference agreement provides that such 
costs shall be reimbursed in accord- 
ance with existing reclamation law 
and policy. 

The original House version would 
have made all such costs over and 
above the so-called “Tracy Standards” 
nonreimbursable. I commend the 
House and the Central Valley project 
participants for their willingness to 
shoulder the burden of the repayment 
of the necessary costs. And I thank my 
Senate colleagues for helping main- 
tain the honesty and integrity of the 
reclamation program. 

Mr. MURKOWSKI. Mr. President, 
will the chairman yield? 

Mr. McCLURE. I would be glad to 
yield to the distinguished chairman of 
the Subcommittee on Water and 
Power. 

Mr. MURKOWSKI. I thank the 
chairman. 

I would note that it is customary 
under the reclamation law for project 
beneficiaries to pay the costs of miti- 
gating the adverse environmental im- 
pacts of such projects. 

Mr. McCLURE. Yes, it is. All project 
purposes share the burden of mitigat- 
ing adverse environmental impacts 
and the conference agreement main- 
tains this policy. 

Mr. MURKOWSKI. I thank the 
chairman. It only seems fair to me 
that those who participate in a Feder- 
al project should bear the burden of 
mitigation commensurate with the 
benefits received and the impact of 
that particular project purpose. This 
is fair. 

Mr. McCLURE. Mr. President, I 
should also advise my colleagues that 
the agreement provides that the cost 
of providing water for salinity control 
and for complying with State water 
quality standards above those stand- 
ards in the coordinated operation 
agreement shall be nonreimbursable. 
There are three inherent elements in 
agreeing to this part of the compro- 
mise: 

First is that the benefits of such ef- 
forts are national in scope. The area 
addressed by the standards, San Fran- 
cisco Bay and the delta, is of national 
and international significance as 
aquatic habitat for wildlife. 

Second is the obligation on the part 
of the Secretary to operate the project 
in consistency with applicable congres- 
sional directives, regardless of what 
standards may be set. 

Third is how we define cost, and 
here I speak not of dollars and cents, 
because money alone will not provide 
salinity control or improved water 
quality. The real cost of meeting the 
requirements would be in terms of 
water. Water is the essential ingredi- 





October 15, 1986 


ent in providing for salinity control 
and water quality standards. 

I am totally confident that the par- 
ticipants in the State water project 
and the Central Valley Project, long 
before the dollar-and-cents costs could 
become burdensome on the Federal 
Treasury, will take every step to 
ensure that their contractual supplies 
would not be interrupted. I am not dis- 
illusioned as to their ability; these are 
tough western water users who live in 
an area where water is worth much 
more than money. 

Mr. MURKOWSKI. Mr. President, 
will the distinguished chairman yield? 
I wish to call to the attention of the 
Senate and those interested in the leg- 
islation a letter from the Office of 
Management and Budget regarding 
H.R. 3113. 

Mr. McCLURE. I will certainly yield 
to the chairman of the Subcommittee 
on Water and Power. 

Mr. MURKOWSKI. As my col- 
leagues know, the deliberations on this 
legislation have not been without con- 
troversy. Through great efforts in the 
Committee on Energy and Natural Re- 
sources, and on the floor of the 
Senate, the Senate passed a responsi- 
ble measure. The Senate version was 
responsible to the needs of the water 
users in the Central Valley project in 
California, responsible to the partici- 
pants in the Small Reclamation 
Projects Loan Program, responsible to 
environmental concerns, and finally, 
responsible to the taxpayer who car- 
ries the initial burden of funding the 
development of our water resources. 

I think the Senate did a good job. 

I also agree with the chairman that 
the conference agreement reflects the 
efforts of the Senate to ensure fiscal 
responsibility as well as environmental 
awareness in perfecting the manage- 
ment of the existing Central Valley 
project as well as in the granting of 
loans pursuant to the Small Reclama- 
tion Projects Act. We have done a 
good job—but I am dismayed at the ef- 
forts of the Office of Management and 
Budget. I have here a copy of a letter 
from the Office of Management and 
Budget which seems to try and lay 
down what they believe are the mini- 
mum requirements of this legislation 
if we are to avoid a veto by the Presi- 
dent. 

First, I resent the late date at which 
the OMB made their views known, and 
second, I resent their efforts to try 
and influence the legislative process of 
the conference committee. 

Mr. McCLURE. I thank the subcom- 
mittee chairman for giving me the op- 
portunity to comment on the letter 
from the OMB. I have a copy. The 
letter was received by the Committee 
on Energy and Natural Resources on 
September 9, 1986. 

First of all, the letter was behind the 
times. The Senate and the conferees 
had already addressed the concerns 


CONGRESSIONAL RECORD—SENATE 


expressed by OMB. Perhaps not to the 
extremes that OMB proposed, but on 
the other hand, I believe the Congress 
is in much closer touch with the real 
world and recognized the practicalities 
required of the legislation. 

Mr. MURKOWSKI. I thank the 
Chairman. 

On balance, I believe that the 
Senate was far in advance of the OMB 
in establishing responsible fiscal limi- 
tations for both the coordinated oper- 
ations agreement and the Small Recla- 
mation Projects Act Program. The 
Senate version of the bill required 
reimbursability for activities pursuant 
to the COA, limitea the subsidy under 
the Small Reclamation Projects Act to 
the smaller, family-sized farm, and 
provided for a market yield interest 
rate on interest-bearing components of 
the loans. In addition, we provided for 
periodic analysis of the ability to pay 
capability for the Central Valley 
project, interest on operation and 
maintenance deficits for the CVP, 
shortening of the repayment period 
for loans pursuant to the Small Recla- 
mation Project Act, and requirements 
for upfront financing of loans. Individ- 
ually, these are important steps. Col- 
lectively, they amount to a wholesale 
change in the COA as well as substan- 
tial alterations to the Small Reclama- 
tion Project Act. 

I am pleased to report to my col- 
leagues that the Senate position pre- 
vailed in conference and is reflected in 
the conference agreement. 

Most of these actions occurred 
during consideration of the legislation 
by the committee and was confirmed 
on the Senate floor, long before re- 
ceipt of the letter from the OMB. To 
the extent that the letter from the 
OMB supports the actions of the 
Senate, I am appreciative. 

Mr. McCLURE. I thank the subcom- 
mittee chairman for his remarks re- 
garding the letter from OMB and I 
agree with him that the conference 
agreement more than adequately ad- 
dresses the issues raised in the letter. 

Mr. President, the conferees having 
adopted title II of the Senate version 
in its entirety, the next point I would 
call to the attention of my colleagues 
is in title III of the agreement. 

Title III of the agreement provides 
for amendments to the Small Recla- 
mation Projects Act of 1956, and here 
I would take a moment to once again 
express my gratitude to my colleagues 
on the Energy and Natural Resources 
Committee and, in particular, Sena- 
tors MELCHER and METzENBAUM for 
their constructive efforts in crafting 
title III of the Senate version of the 
bill. The conference agreement re- 
flects their efforts. 

Mr. President, as my colleagues will 
recall from the debate on the floor of 
the Seante when we considered H.R. 
3113, grave concern was expressed re- 
garding the impact of the 20-percent 


31305 


limitation on the appropriation of 
funds to any one State. Similar con- 
cern was expressed on the part of the 
House conferees and a compromise 
was adopted. The conference agree- 
ment retains the Senate language in a 
modified form. The conference agree- 
ment would impose the 20-percent lim- 
itation for a period of 5 years. After 
that time period, the Secretary may 
waive the limitation if it is determined 
that a loan or grant has met the pur- 
poses of the act. The Secretary must 
send the reasons for waiving the limi- 
tation to the Congress and allow Con- 
gress 60 legislative days in which to 
pay a joint resolution of dissapproval. 
I think this compromise reflects the 
Senate conferees’ concern that there 
should be a mechanism whereby those 
projects which are worthwhile and 
clearly meet the objectives of the pro- 
gram should go forward. 

Title IV of the agreement is the 
Senate text with a clarifying amend- 
ment. 

Mr. President, this legislation is the 
end product of over 20 years of con- 
certed effort in California regarding 
the coordinated operations agreement 
and two Congresses in regard to the 
Small Reclamation Projects Act. The 
effort on the part of the staff of the 
Senate Committee on Energy and Nat- 
ural Resources should also be recog- 
nized. I would like to thank Russ 
Brown, professional staff of the Sub- 
committee on Water and Power, for 
his work, particularly on the Small 
Reclamation Projects Act, and Bill 
“Combine” Conway of the minority 
staff for his efforts on behalf of Sena- 
tor JOHNSTON and the minority mem- 
bers of the committee. 

Mr. President, I urge approval of the 
conference report. 

Mr. JOHNSTON. Mr. President, I 
am pleased that today we are going to 
approve the conference report to H.R. 
3113. This bill will accomplish a 
number of meritorious goals. 

Title I of the conference report 
would authorize the Secretary of the 
Interior to operate the Central Valley 
project [CVP] on a coordinated basis 
with the California State water 
project [SWP] and require the CVP in 
conjunction with the SWP to meet 
certain State water quality standards. 
Under the coordinated operations 
agreement [COA], both projects will 
reap benefits from more efficient use 
of available water resources. In addi- 
tion, the provisions of the conference 
report will ensure that the impacts of 
CVP and SWP operation on water 
quality in the Sacramento/San Joa- 
quin Delta are mitigated. 

Title II of the conference report 
would reauthorize construction of fa- 
cilities to protect Suisun Marsh from 
saline encroachment resulting from 
operation of the CVP and SWP. I am 
happy to say that the conferees adopt- 





31306 


ed provisions in the Senate-passed ver- 
sion of H.R. 3113 requiring significant 
up-front cost sharing by the State of 
California and allocation of the Feder- 
al share of costs to CVP project pur- 


poses. 

Title III of the conference report au- 
thorizes an additional $600 million for 
loans and grants under the Small Rec- 
lamation Projects Act. For the most 
part the conferees accepted the 
Senate-passed language which brings 
new fiscal discipline to the program. 
Included in the report the provisions 
for increased cost sharing by loan re- 
cipients, shortened repayment periods, 
the use of market interest rates, and 
increased payment of interest by re- 
cipients of irrigation benefits. I note 
that the Small Reclamation Loan Pro- 
gram has an excellent repayment his- 
tory. Furthermore, most loans are 
made for purposes of conserving water 
resources through the rehabilitation 
and betterment of existing projects. 
For these reasons, I strongly support 
the increased authorization for this 
program. 

Finally, title IV of the conference 
report clarifies that certain irrigation 
districts which have constructed hy- 
droelectric projects at Bureau of Rec- 
lamation dams are not required to pay 
annual charges for the use of those 
dams as a result of provisions of their 
contracts with the Federal Govern- 
ment that exclude such payments. 

Mr. President, I believe that it is in 
the public interest for the Senate to 
approve the conference report to H.R. 


3113. Among other considerations, I 
believe that this bill will significantly 
improve repayment of the Federal in- 


vestment in the Central Valley 
project. At present the CVP has ap- 
proximately 1 million-acre-feet per 
year of firm yield that would ordinari- 
ly be available for long-term contract. 
As a matter of departmental policy, 
however, the Secretary of the Interior 
has not marketed this water pending 
resolution of the obligation of the 
CVP to meet delta water quality 
standards. Enactment of H.R. 3113 
would resolve this obligation and thus 
allow the marketing of the water that 
has previously been reserved. In addi- 
tion, the provisions of H.R. 3113 would 
allow the CVP in good water years to 
expand project yield. The marketing 
of these new water supplies will in- 
crease the revenue stream received by 
the Federal Government for CVP re- 
payment. 

Mr. President, I should note one 
area of disappointment, and that con- 
cerns who is to pay for the costs of 
meeting State water quality standards 
in the delta and San Francisco Bay 
and estuary. Under the provisions of 
the conference report, the cost of 
meeting current delta standards is al- 
located to CVP purposes and required 
to be reimbursed by project benefici- 
aries in accordance with existing recla- 


CONGRESSIONAL RECORD—SENATE 


mation law. However, the costs of 
meeting future delta standards and 
standards for the bay and estuary— 
which have yet to be determined—are 
completely nonreimbursable. That ap- 
proach is very disturbing to me be- 
cause it potentially locks in one more 
layer of subsidy for the benefit of CVP 
contractors. 

To the extent that future water 
quality standards imposed on the CVP 
represent mitigation of CVP impacts, 
as opposed to general environmental 
enhancement, it is only fair that the 
cost of meeting those standards should 
be allocated to project purposes as a 
“cost of doing business.” Yet under 
the provisions of the conference 
report, CVP contractors will receive a 
free ride on all future water quality 
standards, regardless of their role in 
making the setting of such standards 
necessary. I am only able to accept 
this dubious arrangement because I 
believe that environmental quality 
must be maintained and that the ulti- 
mate increase in CVP repayment will 
be greater with enactment of H.R. 
3113 than without it. 

I note in closing, however, that the 
unwillingness of CVP contractors in 
this instance to shoulder a burden 
that is properly theirs is precisely the 
sort of position that produces ever 
more serious assaults upon the Recla- 
mation Program. Undoubtedly, we will 
revisit many of the issues concerning 
the Central Valley project. When we 
do, I would not be surprised to find 
that, as a result of actions taken 
today, the case for radical change, per- 
haps even the charging of interest on 
repayment of irrigation costs, has 
become compelling. 

Mr. WILSON. Mr. President, the 
conference report on H.R. 3113 that 
we are considering today marks what 
is perhaps the most important Federal 
legislation on California water issues 
in the last decade. Putting aside for a 
moment the substantive provisions of 
this legislation, what distinguishes 
this bill and makes it especially impor- 
tant is the spirit of cooperation and 
comity embodied in this legislation. In 
a State where it has been said many 
times that water wars have been 
raging for decades, H.R. 3113 repre- 
sents a coming together of a tradition- 
ally highly divisive California water 
community. 

Supporting this bill after long and 
difficult negotiations are the farmers, 
the environmentalists, the State of 
California, the communities depend- 
ent on the high quality of drinking 
water provided for by this bill, the 
fishermen and hunters, and scores 
other interested parties. Even north- 
ern and southern California inter- 
ests—who rarely agree on any state- 
wide water issues—support this bill, 
albeit for different reasons. 


We have already seen one manifesta- 
tion of this new-found spirit of coop- 


October 15, 1986 


eration in the work that the environ- 
mental defense fund and the West- 
lands water district have begun to- 
gether in responding to the Kesterson 
National Wildlife Refuge crisis. 

Leaving the Kesterson problem for 
another day, let me turn to the confer- 
ence report at hand. Title I of this bill 
authorizes the coordinated operations 
agreement [COA] and in so doing 
allows for the coordination of the mas- 
sive Federal Central Valley project 
and the California State water project. 
This means a number of things for 
California, but at least three direct 
benefits will accrue from this agree- 
ment. 

First, the Federal Central Valley 
project is now authorized by this legis- 
lation to be operated in conjunction 
with the State project to meet State- 
ordered water quality standards in the 
San Joaquin/Sacramento River Delta 
and the San Francisco Bay into which 
the delta feeds. Prior to this agree- 
ment, the responsibility for meeting 
these standards was unclear and cre- 
ated much uncertainty in the water 
community. 

Second, now that the Federal Gov- 
ernment’s responsibility for meeting 
State-ordered water quality standards 
is clearly delineated in the COA and 
this legislation, the Bureau of Recla- 
mation will be free to begin marketing 
over 1 million acre-feet of water that it 
has held back from the market since 
1978. For those of my colleagues who 
are unfamiliar with this Western 
water law term, an acre-foot of water 
serves a family of four for about 1 
year. There are many anxious buyers 
in California ready to take advantage 
of this new water supply, and this leg- 
islation will finally give them the op- 
portunity to commence contract nego- 
tiations. 

Third, the COA contains a provision 
that authorizes the Bureau of Recla- 
mation to conclude a _ contractual 
agreement with the State—subject to 
congressional approval—that _— will 
allow for the sale of as much as 
300,000 acre-feet of water to the 
sprawling metropolitan communities 
of southern California. In return, the 
State will make its excess water con- 
veyance system capacity available to 
the Federal Central Valley project. 
Simply put, the Federal CVP is short 
on canal capacity and long on water 
supply. The State, on the other hand, 
has the canals but not enough water 
to service the demands on its system. 
The potential for a deal here is only 
too obvious, and this legislation au- 
thorizes an agreement to be finalized. 

Title II of this conference report au- 
thorizes another Federal/State agree- 
ment, this one dealing with the protec- 
tion of the Suisun Marsh located at 
the nexus of the delta and the San 
Francisco Bay. Together with the 
Suisun Resources Conservation Dis- 





October 15, 1986 


trict, the State and the Bureau of Rec- 
lamation have agreed to cost-share on 
the building of certain water control 
facilities in the marsh that will have 
the effect of maintaining State-or- 
dered water quality standards, thereby 
preserving the precious wildfowl habi- 
tat found at this marsh. 

Title III of the conference agree- 
ment is the final major provision of 
this bill. It reauthorizes the Small 
Reclamation Projects Act of 1956 by 
making available $600 million for new 
loans and grants under this program. 
Since inception, California has bene- 
fited extensively from this program. 
The loans made available under this 
act have aided water districts through- 
out California in rehabilitating and re- 
storing their water distribution and 
supply systems. These loans and 
grants have also been used for the con- 
struction of flood control features, 
fish and wildlife enhancement, and 
recreational developments. 

When the Senate passed its version 
of H.R. 3113 earlier this summer, it 
contained a provision in title III that 
Was very onerous to the State of Cali- 
fornia. This provision would have 
capped California’s share in the Small 
Reclamation Projects Act Program at 
20 percent. Given that most of the 
needs intended to be serviced by this 
program have traditionally been found 
in California, I objected strenuously to 
this cap on the floor during the 
Senate consideration of this bill. 

I am most pleased to note that the 
conference agreement modified this 
cap provision by allowing the Secre- 
tary of the Interior to waive this cap 
on a loan-by-loan basis after 5 years. I 
think this a most equitable arrange- 
ment and commend the House and 
Senate conferees for their good work 
on this issue. 

This conference agreement touches 
on other issues that I will not mention 
in this statement. But as a general 
matter, this bill does much for Califor- 
nia and I extend my heartfelt thanks 
to the Energy Committee and its dis- 
tinguished chairman and staff for 
their dedicated efforts in bringing this 
conference report to the floor today. 
The many hours that the committee 
spent in hearings, markup, and confer- 
ence negotiations have come to a suc- 
cessful conclusion, and all of Califor- 
nia owes many thanks for this fine 
work. 

I urge adoption of the conference 
report. 

Mr. CRANSTON. I am pleased to 
support the conference report on H.R. 
3113, a bill to authorize the Secretary 
of the Interior to execute the coordi- 
nated operation agreement and Suisun 
Marsh preservation agreement and re- 
authorize the Small Reclamation 
Projects Act. 

The coordinated operation agree- 
ment is an historic and tremendously 
important agreement between the 


CONGRESSIONAL RECORD—SENATE 


Federal Government and the State of 
California regarding the operation of 
the Federal Central Valley project and 
the State water project. It ends years 
of dispute over the Federal Govern- 
ment compliance with State water 
quality standards for Sacramento-San 
Joaquin Delta and provides for use of 
the State water facilities for convey- 
ance of Federal project water. Impor- 
tantly H.R. 3113 establishes in Federal 
law the requirement that the Central 
Valley project, like the State water 
project, be operated to protect the 
water quality of the delta and San 
Francisco Bay and limit water pump- 
ing diversions during drought years, 
even if it means reducing deliveries to 
their contract buyers, in order to 
maintain bay and delta standards. 
This obligation continues irrespective 
of the future of the coordinated oper- 
ation agreement itself. Although the 
conference report does not contain the 
House language regarding nonreim- 
bursability of costs associated with 
meeting these water quality standards, 
I believe the compromise reached by 
the conferees is fair and that the legis- 
lation is in the best interest of Califor- 
nia. 

Mr. President, I’m also pleased the 
conferees have agreed to include au- 
thorization of the Suisun Marsh pres- 
ervation agreement. This agreement 
will provide for the construction of fa- 
cilities to restore the marsh which is 
critical to the Pacific flyway. 

Also I’m pleased the conference 
report includes an additional authori- 
zation of $600 million for the Small 
Reclamation Projects Act. This in- 
crease is necessary to continue a pro- 
gram which has been highly successful 
in California and proven an invaluable 
tool for the conservation and wise use 
of limited water resources. 

I urge adoption of the conference 
report. 

The PRESIDING OFFICER. If 
there is no further debate, the ques- 
tion is on agreeing to the conference 
report. 

The conference report was agreed to. 

Mr. CHAFEE. Mr. President, I move 
to reconsider that action. 

Mr. BYRD. Mr. President, I move to 
lay the motion to reconsider on the 
table. 

The motion to lay on the table was 
agreed to. 


WILD AND SCENIC RIVERS ACT 
AMENDMENTS 


Mr. CHAFEE. Mr. President, I ask 
that the Chair lay before the Senate a 
message from the House of Represent- 
atives on H.R. 4350. 

The PRESIDING OFFICER laid 
before the Senate the following mes- 
sage from the House of Representa- 
tives: 

Resolved, That the House agree to the 
amendment of the Senate to the bill (H.R. 


31307 


4350) entitled “An Act to amend the Wild 
and Scenic Rivers Act, and for other pur- 
poses”, with the following amendments: 

(1)Page 2, strike out lines 21 to 23, inclu- 
sive, and insert: 

With respect to the portions of the river 
segments designated by this paragraph 
which are within the boundaries of Rocky 
Mountain National Park, the requirements 
of subsection (b) of this section 

(2)Page 20, strike out all after line 8, over 
to and including line 2 on page 21. 

(3)Page 20, line 3, strike out (511.], and 
insert: 510. 

(4)Page 22, strike out line 1, and all that 
follows, over to and including line 2 on page 
24. 


AMENDMENT NO. 3404 

Mr. CHAFEE. Mr. President, I move 
that the Senate concur in the House 
amendments with a further Senate 
amendment which I send to the desk 
on behalf of Senator McCLure. 

The PRESIDING OFFICER. The 
amendment will be stated. 

The assistant legislative clerk read 
as follows: 


The Senator from Rhode Island [Mr. 
CuHaFreEE), for Mr. McC.Lure, proposes an 
amendment numbered 3404. 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that reading of the 
amendment be dispensed with. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The amendment is as follows: 


Add the following new title at the end of 
the Act: 


TITLE VII—TO PROVIDE RELIEF FOR 
CERTAIN DESERT LAND ENTRYMEN 
IN IDAHO 


Sec. 701. The Congress finds that— 

(1) certain developed and productive 
desert land entries in Idaho, identified in 
section 702 of this title, made pursuant to 
the Act entitled ““An Act to provide for the 
sale of desert lands in certain States and 
Territories”, approved March 3, 1877 (43 
U.S.C. 321, et seq.), commonly known and 
hereinafter referred to as the “Desert Land 
Act”, have been cancelled by the Secretary 
of the Interior pursuant to holding limita- 
tion regulations promulgated pursuant to 
section 7 of the Act (43 U.S.C. 329); 

(2) such regulations were retroactively ap- 
plied to such desert land entries several 
years after the entries were allowed and 
more than two years after final develop- 
ment, proof and final payment for such en- 
tries were made, without giving the entry- 
men any opportunity to comply with the 
new interpretation of such regulations; 

(3) cancellation of such desert land entries 
was harsh and unfair, and resulted in for- 
feiture to the Government of the developed 
entries and the monies paid for the land; 

(4) such entrymen have fulfilled the re- 
quirements of the Desert Land Act in all re- 
spects other than such holding limitation 
regulations; and 

(5) such entrymen, or their heirs or devi- 
sees, should have the entries reinstated and 
qualify for issuance of patents to carry out 
the objectives of the Desert Land Act. 

Sec. 702. The names of the entrymen, and 
the serial numbers of the desert land entries 
generally known as the “Sailor Creek 
Project’, to which this title applies, are as 
follows: 





31308 


Bureau of Land Management 
Entryman: Serial Number 
G. Patrick Morris Idaho 013820 
John E. Roth... Idaho 013905 
Elsie L. Neeley . Idaho 013906 
Idaho 013907 


Idaho 014126 

Idaho 014128 
George R. Baltzor.. Idaho 014129 
John E. Morris 

Idaho 014130 


Idaho 014249 


Idaho 014250 
Milo Axelsen . Idaho 014251 
Peggy Axelsen Idaho 014252 


Sec. 703. (a) The desert land entries iden- 
tified in section 702 of this title are hereby 
reinstated. The entrymen, or the heirs or 
devisees of any deceased entryman, may— 

(1) rescind any agreement which is pro- 
hibited by the Secretary of the Interior pur- 
suant to regulations under section 7 of the 
Act (43 U.S.C. 329) within six months after 
the date of enactment of this title; and 

(2) resubmit final proof of reclamation 
and cultivation of the land in accordance 
with the provisions of section 7 of the Act 
(43 U.S.C. 329) before December 31, 1988. 

(b) The Secretary of the Interior shall 
issue patents to the entrymen named in sec- 
tion 702, or their heirs or devisees upon 
compliance with the provision of subsection 
(a) and the submission of satisfactory final 
proof. 

Sec. 704. Notwithstanding any other pro- 
visions of law, the property right prior to is- 
suance of a patent to the land of any entry- 
man identified in section 702 of this title, or 
the heirs, or devisees of any such entryman 
whose entry is reinstated in accordance with 
section 703 of this title, shall be a personal 
right, inheritable but not assignable. Any 
such entry may be mortgaged in the manner 


permitted by regulations promulgated by 
the Secretary of the Interior for the pur- 
pose of securing repayment of monies bor- 
rowed for development of the entry or for 
farm operating or crop production expenses. 

Add at the end of the Act new titles 8, 9 
and 10 as follows: 


TITLE VINI—BLACK REVOLUTIONARY 
WAR PATRIOTS MEMORIAL 


AUTHORIZATION OF MEMORIAL 


Sec. 801. The Black Revolutionary War 
Patriots Foundation is authorized to estab- 
lish a memorial on Federal land in the Dis- 
trict of Columbia and its environs to honor 
the estimated five thousand courageous 
slaves and free black persons who served as 
soldiers and sailors or provided civilian as- 
sistance during the American Revolution 
and to honor the countless black men, 
women, and children who ran away from 
slavery or filed petitions with courts and 
legislatures seeking their freedom. Such me- 
morial shall be established in accordance 
with the provisions of H.R. 4378, as ap- 
proved by the House of Representatives on 
September 29, 1986. 

FUNDING 


Sec. 802. The Black Revolutionary War 
Patriots Foundation shall establish the me- 
morial with non-Federal funds. 

TITLE IX—WOMEN IN THE ARMED 
FORCES MEMORIAL 
AUTHORIZATION OF MEMORIAL 

Sec. 901. The Women in Military Service 
for America Memorial Foundation is au- 
thorized to establish a memorial on Federal 
land in the District of Columbia and its en- 


CONGRESSIONAL RECORD—SENATE 


virons to honor women who have served in 
the Armed Forces of the United States. 
Such memorial shall be established in ac- 
cordance with the provisions of H.R. 4378, 
as approved by the House of Representa- 
tives on September 29, 1986. 

FUNDING 

Sec. 902. The Women in Military Service 
for America Memorial Foundation shall es- 
tablish the memorial with non-Federal 
funds. 

TITLE X—NEW RIVER GORGE 
ADMINISTRATIVE SITE 

Sec. 1001. Section 1102(a) of the National 
Parks and Recreation Act of 1978 (Public 
Law 95-625) is amended by inserting the fol- 
lowing after the second sentence: “In addi- 
tion, the Secretary may acquire by any of 
the foregoing methods not to exceed ten 
acres outside the boundaries of the national 
river for an administrative headquarters 
site, and funds appropriated for land acqui- 
sition shall be available for the acquisition 
of the administrative headquarters site.”’. 

Sec, 1002. Section 1112 of the same act is 
amended by striking “$500,000” and insert- 
ing “$3,000,000”. 

Mr. BYRD. Mr. President, included 
in these amendments is an amendment 
which was introduced by my distin- 
guished colleague, Mr. ROCKEFELLER, 
as a bill, S. 2384, Calendar No. 938. My 
distinguished colleague is on the floor, 
and I am sure he will want to address 
himself to this amendment. 

The PRESIDING OFFICER. The 
Senator from West Virginia. 

Mr. ROCKEFELLER. I thank my 
distinguished senior colleague from 
West Virginia. 

Mr. President, part of this package, I 
am happy to say, is an amendment of 
mine which was passed by the Senate 
Committee on Energy and Natural Re- 
sources. I want to particularly give my 
thanks not only to Chairman 
McC.uur_E of the Senate Energy Com- 
mittee but also to my distinguished 
senior colleague, Senator Byrp. If it 
had not been for the very intense ne- 
gotiations of both these gentlemen, 
this package would not have been pos- 
sible; and this amendment, which will 
allow for construction of the New 
River Headquarters and Visitor’s 
Center in Glen Jean, WV, would not 
have been possible without the work 
of both those Senators. So I thank 
them both. 

Mr. President, I am pleased to say 
that my New River headquarters 
amendment is included in H.R. 4350. 

This amendment is identical to S. 
2384—which I introduced with Minori- 
ty Leader Byrp—that cleared the 
Senate Energy and Natural Resources 
Committee by a unanimous vote and 
was reported on September 19. The 
National Park Service also supports S. 
2384. 

The bill authorizes the acquisition of 
land for construction of the New 
River’s administrative headquarters, 
as well as a visitors’ center and mainte- 
nance facility. 

Over a quarter of a million visitors 
come to the New River each year. For 


October 15, 1986 


whitewater rafters, the New River is 
one of the best rafting rivers in this 
country. For anglers, the New River 
has long been a favorite fishing spot. 
For the local community, the river is 
an important source of jobs and eco- 
nomic activity in the southern part of 
my State that has severe economic 
problems. 

Given the sheer volume of New 
River visitors, it’s important that the 
river be well run and adequately main- 
tained—and it needs the facilities to do 
that. 

Presently, the administrative head- 
quarters for the New River are tempo- 
rarily located in three rented buildings 
in Oak Hill. To improve park oper- 
ations, the National Park Service se- 
lected this 10-acre site in the historic 
coal town of Glen Jean. The Glen 
Jean headquarters will consolidate and 
vastly improve the Park Service’s New 
River operation. It will ensure that in- 
formation and services for Park visi- 
tors will be located in a centrally locat- 
ed, accessible place. It will also be a 
great boost to the local economy. 

Mr. President, I thank this body for 
adopting this measure which makes it 
clear that funds appropriated for land 
acquisition within the New River may 
be used to acquire property for the 
Glen Jean headquarters site. 

Mr. BYRD. Mr. President, I thank 
my distinguished colleague for the 
leadership he has demonstrated in in- 
troducing this measure and for his 
leadership in bringing it to fruition on 
this day as an amendment to the 
pending measure. 

The PRESIDING OFFICER. The 
question is on agreeing to the motion. 

The motion was agreed to. 

Mr. CHAFEE. Mr. President, I move 
to reconsider the vote by which the 
motion was agreed to. 

Mr. BYRD. I move to lay that 
motion on the table. 

The motion to lay on the table was 
agreed to. 


WILD AND SCENIC RIVERS ACT 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Commit- 
tee on Energy and Natural Resources 
be discharged from further consider- 
ation of H.R. 2826, amending the Wild 
and Scenic Rivers Act, and that the 
Senate proceed to its immediate con- 
sideration. 

The PRESIDING OFFICER. The 
bill will be stated by title. 

The assistant legislative clerk read 
as follows: 

A bill (H.R. 2826) to amend the Wild and 


Scenic Rivers Act by designating a segment 
of the Horsepasture River in the State of 


North Carolina as a component of the Na- 
tional Wild and Scenic Rivers System. 

The PRESIDING OFFICER. Is 
there objection to the present consid- 
eration of the bill? 





October 15, 1986 


Mr. BYRD. Mr. President, there is 
no objection to the two requests. 

There being no objection, the Senate 
proceeded to consider the bill. 

Mr. BROYHILL. Mr. President, I am 
most appreciative of the opportunity 
to address the Senate on the merits of 
the Horsepasture River. I am pleased 
to be representing a multitude of indi- 
viduals and organizations who have 
been tireless in their efforts to ensure 
the protection of this natural resource 
by having it designated as a portion of 
the National Wild and Scenic River 
System. 

On July 31, 1986, I introduced S. 
2707, a bill to amend the Wild and 
Scenic Rivers Act by designating a seg- 
ment of the Horsepasture River in the 
State of North Carolina as a compo- 
nent of the National Wild and Scenic 
Rivers System. 

On July 28, 1986, the U.S. House of 
Representatives passed an identical 
bill, H.R. 2826, by voice vote. Although 
these important actions have hap- 
pened just recently, I can assure you 
that they are the product of years of 
effort. 

In 1984, a broad coalition of individ- 
uals and groups began to work togeth- 
er to ensure the permanent preserva- 
tion of the Horsepasture River. This 
included State and Federal representa- 
tives, Duke Power Co., the Trust for 
Public Lands, a nonprofit land conser- 
vation group, and Friends of the 
Horsepasture, a local citizens group. 

Now I’d like to explain why this 
river is held in such high esteem. In 
North Carolina, we are fortunate to 
have an enviable quantity and diversi- 
ty of breathtaking natural resources. 
Why, then, has such an enormous 
amount of effort been committed to 
the designation of a 4.25-mile stretch 
of the Horsepasture River, located in 
the far western part of the State? It’s 
because the Horsepasture River is very 
special, particularly for its recreation- 
al and scenic value. 

In a country known as “the land of 
the waterfalls,” the waterfalls of the 
Horsepasture River stand out as the 
most spectacular. Horsepasture River 
Gorge is the most rugged of those in 
the Blue Ridge escarpment. It has the 
highest and steepest walls and it is the 
narrowest. In just 4 miles, the river 
drops 1,700 feet off the Blue Ridge es- 
carpment into rocky gorges through 
rugged terrain, spilling out into Lake 
Jocassee in South Carolina. Many 
people have said the most impressive 
of the river’s attractions is the 200- 
foot Rainbow Falls, a mini-Niagara 
named for the rainbow that can be 
seen in the mists above the falls. 

Extensive woodlands and rough ter- 
rain in the Horsepasture River area is 
home to varied and abundant wildlife 
populations. Black bear are present 
and heavily hunted. Deer, turkey, 
racoon, grouse, and grey squirrel are 
abundant as well. More than 20 fish 


CONGRESSIONAL RECORD—SENATE 


species, four of which are of special 
concern, have been identified in the 
river, classified by the State as “desig- 
nated trout waters.” 

For generations, the river has been a 
favorite of hikers, swimmers, fisher- 
men, campers, and picnickers. On a 
typical summer weekend, as many as 
300 visitors hike the narrow, un- 
marked trail to Rainbow Falls and to 
the other waterfalls, swimming and 
fishing holes, and picnic sites that sur- 
round it. The river is famous among 
fishermen in the region for its fine 
trout fishing. 

Efforts to preserve Horsepasture 
River began in August 1984 when the 
Federal Energy Regulatory Commis- 
sion gave preliminary approval to Car- 
rasan Power Co.’s application for a li- 
cense to dam the Horsepasture River 
at Drift Falls and to divert the river to 
a powerhouse below Windy Falls. 
After this happened, North Carolin- 
ians united to preserve the Horsepas- 
ture in its wild and scenic state. 

Last year, Congress approved a re- 
quest for $1 million to purchase 435 
acres of privately owned land along 
the Horsepasture, helping clear the 
way for wild and scenic river designa- 
tion. By including the Horsepasture in 
the National Wild and Scenic River 
System, the Congress will cut short 
the 3-year study of the river it direct- 
ed in 1984. 

Having been born and bred in North 
Carolina, and representing North 


Carolinians in the U.S. House for over 
23 years, I will certainly not deny my 


strong love and devotion to this part 
of the country. I believe the State of 
North Carolina has a well-deserved 
reputation for providing Americans 
nationwide with a place to go to enjoy 
the beauty of our country—our moun- 
tains, our oceans, our woods, our wild- 
life, and our rivers. 

Over the years, it has been reward- 
ing for me to see more and more 
people moving to our State, particular- 
ly young families, motivated in part by 
the temperate climate and natural re- 
sources. I believe it is important to 
preserve for our children and future 
generations the spectacular natural 
beauty of this area that has enriched 
the lives of so many generations 
before us. 

I want to reiterate my deepest sup- 
port for the inclusion of the Horsepas- 
ture River in the National Wild and 
Scenic Rivers System and your favor- 
able consideration of H.R. 2826. 

The bill was ordered to be read a 
third time, was read the third time, 
and passed. 

Mr. CHAFEE. Mr. President, I move 
to reconsider the vote by which the 
bill was passed. 

Mr. BYRD. I move to lay that 
motion on the table. 

The motion to lay on the table was 
agreed to. 


31309 


EXECUTIVE CALENDAR 


Mr. CHAFEE. Mr. President, I in- 
quire of the distinguished minority 
leader if he is in position to confirm 
the following nominations in the Exec- 
utive Calendar: 1075, 1076, 1127, 1128, 
and 1129? 

Mr. BYRD. Mr. President, the nomi- 
nations that have been identified by 
the distinguished acting Republican 
leader have been cleared on this side 
of the aisle. We are ready to proceed 
to their consideration and confirma- 
tion. 

Mr. CHAFEE. I thank the distin- 
guished Democratic leader. 


EXECUTIVE SESSION 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Senate 
now go into executive session in order 
to confirm the nominations just iden- 
tified, and I ask unanimous consent 
that they be considered en bloc and 
confirmed en bloc. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

Without objection, the nominations 
are considered en bloc and confirmed 
en bloc. 

The nominations considered en bloc 
and confirmed en bloc are as follows: 


UNITED NATIONS 


Joan Clark, of California, to be an Alter- 
nate Representative of the United States of 
America to the Forty-first Session of the 
General Assembly of the United Nations. 

The following-named persons to be Repre- 
sentatives and Alternate Representatives of 
the United States of America to the Forty- 
first Session of the General Assembly of the 
United Nations: 

Representatives: Vernon A. Walters, of 
Florida; Herbert Stuart Okun, of the Dis- 
trict of Columbia; Thomas F. Eagleton, U.S. 
Senator from the State of Missouri; and 
Larry Pressler, U.S. Senator from the State 
of South Dakota. 

Alternate Representatives: Patricia Mary 
Byrne, of Ohio; Hugh Montgomery, of Vir- 
ginia; Joseph Verner Reed, of New York; 
John Kerry, U.S. Senator from the State of 
Massachusetts; and Paul S. Trible, Jr., U.S. 
Senator from the State of Virginia. 

EXECUTIVE OFFICE OF THE PRESIDENT 

Jorge L. Mas, of Florida, to be a Member 
of the Advisory Board for Radio Broadcast- 
ing to Cuba for a term expiring August 12, 
1989, (Reappointment) 

WorLpD HEALTH ORGANIZATION 

Frank E. Young, of Maryland, to be Rep- 
resentative of the United States on the Ex- 
ecutive Board of the World Health Organi- 
zation, vice Edward N. Brandt, Jr., resigned. 

DEPARTMENT OF AGRICULTURE 

Peter C. Myers, of Missouri, to be a 
Member of the Board of Directors of the 
Commodity Credit Corporation, vice John 
R. Norton III, resigned. 

Mr. CHAFEE. Mr. President, I move 
to reconsider the vote by which the 
nominations were confirmed en bloc. 

Mr. BYRD. Mr. President, I move to 
lay that motion on the table. 





31310 


The motion to lay on the table was 
agreed to. 

Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the President 
be immediately notified of the confir- 
mation of these nominations. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


LEGISLATIVE SESSION 


Mr. CHAFEE. Mr. President, I ask 
unanimous consent that the Senate 
return to the consideration of legisla- 
tive business. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

Mr. CHAFEE. Mr. President, I sug- 
gest the absence of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. 

The legislative clerk proceeded to 
call the roll. 

Mr. PACKWOOD. Mr. President, I 
ask unanimous consent that the order 
for the quorum call be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The Senator from Oregon is recog- 
nized. 


HOUSE CONCURRENT RESOLU- 
TION 395—RELATING TO TAX 
REFORM ACT 


Mr. PACKWOOD. Mr. President, 
shortly I am going to propose a unani- 
mous-consent request relating to the 
concurrent resolution, not to be con- 
fused with the continuing resolution. 
The concurrent resolution is the reso- 
lution that makes technical correction 
in the tax bill which is still to be sent 
to the President. It has not yet been 
enrolled, and it is being held to see if 
this concurrent resolution can pass. 

The reason I am not going to make 
it now is I think there may be some 
objections to consent, and I do not 
want to shutoff anyone's rights to 
make objections to it. I want to lay 
out the groundwork a bit as to what I 
will try to do if we get consent. 

First, there is in the tax bill many—I 
do not want to say numerous—but 
many technical errors, unintended. 
They affect the following States, and I 
say there is no objection to the correc- 
tion of these errors in the concurrent 
resolution. They affect: Arizona in- 
volving general aviation airplanes; 
California involving Campbell Soup 
Co.; Los Angeles Central Library; Bell 
Gardens bonds; San Jose Convention 
Center; and city of Berkeley bonds. 

They affect Colorado; the Colorado 
School Boards bond pool. 

They affect Connecticut, the Bige- 
low-Hartford Carpet Mill; John Fitch 
Court; State of Connecticut bonds; 
and Yale University. 

In Delaware, Campbell Soup Co. 

In District of Columbia, Willard 
Hotel. 


CONGRESSIONAL RECORD—SENATE 


In Florida, Campbell Soup Co.; 
Miami Airport bonds; Hernando 
County bond pool; and Santa Rosa 
Hotel in Pensacola. 

In Georgia, sewage treatment plant 
in Conyers; Marquis Two projects in 
Atlanta; Georgia municipal bond pool. 

In IUlinois, Homewood municipal 
bond pool. 

In Indiana, Indianapolis Union Sta- 
tion; Fort Wayne low income/rehab. 
project; and Indiana Bank bond pool. 

In Kentucky, Kentucky Assn. of 
Counties bond pool; Kentucky Munici- 
pal League bond pool; and East Broad- 
way project. 

In Louisiana, retirement center in 
New Orleans. 

In Maine, Bethel cogeneration facili- 
ty; and Back Bay Tower. 

In Maryland, again the Campbell 
Soup Co. 

In Massachusetts, solid waste facility 
in Haverhill; electric power facility; co- 
generation facility in Turners Falls; 
and Columbia Point Project in Boston. 

In Michigan, Muskegon cross lake 
ferry. 

In Minnesota, fiber optic network; 
Campbell Soup Co.; solid waste facility 
in Dakota County; satellite industries 
in Minneapolis; Coch oil refining facil- 
ity; and River Place. 

In Mississippi, Crown Cork and Seal 
in Batesville. 

In Missouri, Kansas City Southern 
Industries. 

In Nebraska, ethanol plant in Blair; 
and Campbell Soup Co. 

In Nevada, electric plant bonds. 

In New Hampshire, 2 waste energy 
projects. 

In New Jersey, Campbell Soup Co. 

In New Mexico, New Mexico hospital 
bond pool. 

In New York, Flushing Center; 
125th Street project; and New York 
hospital bonds. 

In North Carolina, Campbell Soup 
Co.; South Pack Plaza; and North 
Carolina Municipal League bond pool. 

In Ohio, Campbell Soup Co. 

In Oklahoma, Oklahoma State Uni- 
versity; and OK Industries. 

In Pennsylvania, Campbell Soup Co.; 
Wood Street Commons project; mat- 
tress factory project; Ransom culm fa- 
cility; Frankford Arsenal; Pennsylva- 
nia local government bond pool; and 
Pennsylvania university bonds. 

In Rhode Island, Providence Union 
Station; and Plat 141 in Newport. 

In South Carolina, Charleston solid 
waste bonds. 

In Tennessee, 3 solid waste facilities; 
Warehouse Row project in Chata- 
nooga; Carriage Trace in Clinton; Ten- 
nessee Student Loan bonds; Tennessee 
Municipal League bond pool; and Ten- 
nessee Utility Districts bond pool. 

In Texas, Campbell Soup Co. 

In Utah, Utah Municipal Finance 
bond pool. 

In Vermont, Bellows Falls building 
project. 


October 15, 1986 


In Virginia, Tobacco Row bonds. 

In Washington, Nichols Boar; and 
Bonneville Power bonds. 

In Wisconsin, fiber optic network. 

Mr. President, I know of no objec- 
tion to the technical corrections in 
that list. I think they have been 
cleared all around and people know 
about them. They are genuinely tech- 
nical. 

In addition when I propose my unan- 
imous-consent request there will be 
the following amendments you can 
call substantive if you want or techni- 
cal if you want. One will delete the 
market bond discount provisions 
which is limited to 15 life insurance 
companies and their affiliates and add 
a revenue-neutral generic rule for all 
life insurance companies. 

This was a mistake we made in the 
tax bill in allowing only 15 very large 
insurance companies to provide the 
market discount bonds and there are 
literally hundreds, perhaps thousands 
of smaller insurance companies that 
were denied the privilege. This will 
make the generic for all of them. I 
know of no objection to that. 

We will next retain the current law 
for travel expenses for State legisla- 
tors, the current law. As the House 
sent us the bill, they sunset that provi- 
sion in 1990; we keep the current law, 
no change. I know of no objection to 
that. In fact many, many Senators 
have contacted me on behalf of their 
State legislators and asked for no 
change. 

Next, we would liberalize the low- 
income housing transition relief for 
rural projects assisted under the 
Farmers Home Administration, clari- 
fies the at-risk rules, applies to real 
estate generally and also low-income 
housing project eligible to the low- 
income housing project. That is about 
$20 million. I know of no objection to 
that. 

Next, we will change the effective 
date for the employer-owned life in- 
surance provision from June 20, 1986, 
to the date of enactment of the Tax 
Reform Act. I know of no objection to 
that. 

Next, we will reinstate the Senate- 
passed rule on trucking company tran- 
sitional rule but limit the value of $8.5 
million which is one-half the full 
value. When we initially passed in the 
Senate, it was at full value. I know of 
no objection to that. 

We will make the general aviation 
transitional rule generic, and I know 
of no objection to that. 

There is one provision that is contro- 
versial in the sense there are opposite 
sides on it, and it relates to the custom 
broker freight forwarder provision. 
That is a provision the substance of 
which I agree with. I think it is a good 
position, and I think it is a proper 
competitive position, and on the 
merits, I would support it. But it is 





October 15, 1986 


within the Commerce Committee’s ju- 
risdiction. It was put in unbeknown to 
me. I feel a bit embarrassed about it 
and I certainly did not mean to tram- 
ple on the jurisdiction of my good 
friend, Senator DanrorTtH, who is the 
chairman of the Commerce Commit- 
tee. I chaired that committee for 4 
years prior to the Senator DaANFroRTH, 
and he is justifiably upset about that 
provision having been put in without 
his knowledge and without my knowl- 
edge. 

So my unanimous-consent request, 
when I make it, will be to delete that 
provision even though I agree with the 
substance of it, and if we were doing it 
on the merits, probably I would sup- 
port it. 

That, Mr. President, is the sum and 
substance of the amendments that I 
will offer. 

I say the long list that I read of the 
different States affected I know of no 
objections to. 

Here is the problem we have. Any- 
body, of course, can object to the 
unanimous-consent request, and I do 
not want this concurrent resolution 
and will not let this concurrent resolu- 
tion become a vehicle for simply reliti- 
gating everything on the tax bill, 
whether that be passive losses or book 
income for corporations or anything 
else. Those issues are done. We have 
had fair debate and full debate, con- 
ference, and we passed it. 

So if there is objection to the unani- 
mous consent, it is my intention for 
the moment not to go ahead. I may 
offer it 2 or 3 hours later when we can 
see if we can work out what objections 
there may be to the unanimous con- 
sent. If not, I will offer it again 2 or 3 
hours later. If we cannot get unani- 
mous consent, I will not offer it at all. 

So with that in mind, I am now 
going to propose the unanimous con- 
sent. 

Do you want to wait until I propose 
it? 

Mr. METZENBAUM. I think I would 
like to ask you to withhold for a 
minute. 

Mr. PACK WOOD. All right. 

Mr. METZENBAUM. As the chair- 
man of the Finance Committee knows, 
his staff and my staff have been in dis- 
cussions on this subject for some time. 
Then the other day, I gathered at one 
point that the chairman had decided 
not to even make the effort to go for- 
ward, and now he has decided to go 
forward. I have no objections to his 
doing that. 

However, I would object if the unan- 
imous-consent request were propound- 
ed at this point, notwithstanding the 
fact that we need the bill and I do not 
want to stand in the way of its pas- 
sage. However, at the very moment 
when I was called to the floor, my 
staff and your staff were in discussion 
on the subject. I have the feeling that 


CONGRESSIONAL RECORD—SENATE 


we are not that far apart that we may 
not be able to resolve our differences. 

So, rather than object to the unani- 
mous-consent request at this point, I 
would request the chairman of the Fi- 
nance Committee—and if he did, I 
would have to object—but I would re- 
quest that you delay that temporarily 
because if we could work it out, I 
would think that the whole matter 
would fly very rapidly and it would 
not require much time at all. 

Mr. PACK WOOD. Given that, I will 
not propound it. I want to say that the 
Senator from Ohio has been very fair 
on this. He and I actually agree on the 
substance of the provision I am trying 
to strike out. I am attempting to do it 
as a matter of comity to the chairman 
of the Senate Commerce Committee. 

Given that, I will not propose it at 
the moment. But I do appreciate the 
fact that the Senator from Ohio has 
been very open and very fair. I think 
we may be close to an agreement on 
this. 

But I would like, because I see a 
number of other Senators on the 
floor—I am not going to propose the 
request right now—but I do want to 
find out if others are going to have ob- 
jections to the request when it is pro- 
posed, unrelated to this issue. So we 
might have a colloquy on that. 

Mr. METZENBAUM. If the Senator 
will yield further, I would want to in- 
dicate some concern. I am not opposed 
to making the general aviation condi- 
ton generic, although I think the 
whole proposition is a very bad one. I 
do not think it is a right one and I in- 
dicated that the other day. But I still 
would not object to making it generic 
provided that the chairman of the Fi- 
nance Committee would indicate 
where he is going to pick up that 
money, because there is a cost of doing 
that. It is not a tremendous amount, 
but sometimes we fight out here for 
about $1 million, $2 million, $5 million. 
This is about $11 million. 

Mr. PACK WOOD. I would be happy 
to do that while we are discussing the 
other issues. I will try to find out what 
objections there may be from other 
Senators on other issues. 

Mr. METZENBAUM. We will be in 
further discussion with the chairman 
to see if we can get all issues resolved. 

Mr. PACK WOOD. I thank my good 
friend. 

Mr. EXON. Will the chairman yield 
for a question? 

Mr. PACK WOOD. Yes. 

Mr. EXON. I want to salute the 
chairman of the Finance Committee 
for the outstanding job that he has 
done all the way through on this. I 
think he would like to hear some good 
news. I sense a general feeling from 
most Senators that this is a tremen- 
dously important part of the overall 
tax bill and it should be passed. I 
think there is a developing consensus 
to move just as quickly as possible. 


31311 


At this particular time, I just have 
one question that we might clear up 
now. This Senator has written the 
Senator from Oregon a letter with 
regard to one portion of the technical 
corrections part of this legislation that 
had to do with what we thought could 
possibly be an unfair proposition bene- 
fiting Louisiana and Texas with regard 
to some type of promotion with regard 
to football. I am wondering if that par- 
ticular part has been removed or will 
we be required to try to get that re- 
moved with an amendment? 

Mr. PACKWOOD. That relates to 
the sky boxes? 

Mr. EXON. That is correct. 

Mr. PACKWOOD. That is removed. 

Mr. EXON. I thank my friend. 

Mr. MELCHER. Mr. President, will 
the chairman yield? 

Mr. PACK WOOD. Yes. 

Mr. MELCHER. I assume that what 
is in House Concurrent Resolution 395 
is revenue neutral. 

Mr. PACKWOOD. No; I think it is 
not revenue neutral. 

Mr. MELCHER. Can the chairman 
advise me what revenue loss there is? 

Mr. PACKWOOD. About $100 mil- 
lion. 

Mr. METZENBAUM. How much? 

Mr. PACK WOOD. Total, about $100 
million. These were, I would say, 
errors in the tax bill. Had they been 
included in the tax bill, they would 
have been within our definition of rev- 
enue neutrality in the bill itself. So we 
are correcting errors. We are directing 
the enrolling clerk to make these 
changes in the tax bill. 

Mr. MELCHER. Then, am I to inter- 
pret the chairman’s response that pas- 
sage of this as it stands would be a loss 
of $100 million in revenue? 

Mr. PACK WOOD. As it stands. Had 
it been appended to the tax bill, which 
it was intended to be, and had there 
not been technical errors, then it 
would have still been revenue neutral. 
But, standing by itself, that is correct. 

Mr. MELCHER. Well, when this 
catches up with the tax bill, the out- 
come of what is over in the House now 
and already passed by the Senate, in 
addition to House Concurrent Resolu- 
tion 395, how would it become revenue 
neutral? 

Mr. PACK WOOD. Because, when we 
were estimating revenue neutrality 
over a 5-year period, we tried to come 
as close as we could to hitting revenue 
neutrality, realizing that we would be 
collecting over the 5 years almost $5 
trillion. The $100 million that is in 
this, if it were in the tax bill, would 
still be within the margin of error we 
had for revenue neutrality. 

Mr. MELCHER. If the chairman 
would continue to yield, there is an 
amendment he has proposed and is 
not before us—I believe an amendment 
of some 22 pages. Is it revenue neu- 
tral? 





31312 


Mr. PACK WOOD. Pardon me? 

Mr. MELCHER. Is the amendment 
that the chairman would propose reve- 
nue neutral? 

Mr. PACK WOOD. No, it is not. 

Mr. MELCHER. Do we have a figure 
on that? 

Mr. PACKWOOD. Rougly $50 mil- 
lion to $55 million. 

Mr. MELCHER. Might I advise the 
chairman that I have grave concerns 
about dropping income averaging for 
farmers that was provided in the bill 
as it left the Senate. As I recall, the 
revenue loss was something between 
$75 million and $100 million; am I not 
correct? 

Mr. PACK WOOD. I thought it was 
closer to $300 million, but I am now 
reaching back in my memory and I 
cannot recall. 

Mr. METZENBAUM. I believe it was 
my amendment and I think that we 
recommended $250 million over the 
period. 

Mr. MELCHER. Well, I thank the 
Senator from Ohio for his comments. 
But I believe we had to revise the 
amendment before we finally got done 
with it. 

But, at any rate, I must advise the 
chairman that I would want that con- 
sidered when this is called up. 

Mr. PACK WOOD. Let me say to the 
Senator from Montana, I do not plan 
to have it as one of the amendments I 
will offer. If the Senator from Mon- 
tana is starting he will object to the 
unanimous-consent request and will 
until it is offered, then I think there is 
no point in going on with the unani- 
mous-consent request and we will pull 
it down. 

Mr. LAUTENBERG. Would the 
chairman yield for a question? 

Mr. PACKWOOD. Yes, I am happy 
to yield. 

Mr. LAUTENBERG. I just wanted 
to make the chairman aware of an in- 
terest that I have, though I under- 
stand the unanimous-consent request 
is not going to be offered at this 
moment, in a transition rule for a U.S.- 
flag car carrier vessel. It is one of four 
that are presently being built. Three 
would be permitted the opportunity to 
preserve some investment tax credits. 
The one that is left out is the vessel of 
New Jersey-based Marine Transport 
Lines. I just wanted to make the chair- 
man aware of the fact that I have an 
interest in this and would appreciate 
the opportunity to discuss it. 

This is not meant to object in ad- 
vance to a request but just to alert the 
chairman to my interest. 

Mr. PACK WOOD. I would be happy 
to discuss it again with the Senator 
from New Jersey. He has been very co- 
operative in the whole process. I would 
be happy to discuss it. 

Mr. LAUTENBERG. I thank the 
chairman. 

Mr. METZENBAUM. Would the 
chairman yield for a question? 


CONGRESSIONAL RECORD—SENATE 


Mr. PACK WOOD. I would be happy 
to yield for a question. 

Mr. METZENBAUM. There is a new 
provision in there for WPPSS. 
Mr. PACKWOOD. For 

WPPSS? It is not ours. 

Mr. METZENBAUM. It came over 
from the House. My understanding is 
WPPSS received favorable treatment 
in other areas of the bill but noe in 
the concurrent resolution it would 
exempt $2 billion for advanced refund- 
ing bonds from the State-by-State 
volume caps and the rule limiting the 
amount of refinancing bonds to the 
value of the project. 

My question is how much would that 
cost? It seems to me it looks like a 
pretty costly procedure. 

Mr. PACKWOOD. That is in the 
House concurrent resolution. It is not 
in the Senate bill. I will see if I can 
find out what it does cost. 

About $50 million. 

Mr. METZENBAUM. Over 5 years. 

Mr. PACK WOOD. Yes. 

Mr. METZENBAUM. Does it have a 
continued cost beyond that period? 

Mr. PACKWOOD. That I cannot 
answer. That is in the House bill. It is 
not in the concurrent resolution we 
are sending back. 

Mr. METZENBAUM. It is not in this 
concurrent resolution? 

Mr. PACKWOOD. Let me correct 
the mistake. It is in our resolution 
going back. I apologize. 

Mr. METZENBAUM. I guess it only 
goes to prove that the chairman and I 
have both can find mistakes. We have 
bills. We write letters. And sometimes 
we do not know. There is no problem 
about that. 

But I think we would have some con- 
cern about that. We might discuss 
that further. 

Mr. PACK WOOD. That is fine. 

Mr. MOYNIHAN addressed 
Chair. 

The PRESIDING OFFICER. The 
Senator from New York. 

Mr. MOYNIHAN. Mr. President, I 
rise as a member of the Finance Com- 
mittee, and one of the conferees on 
this legislation, to express to the 
chairman or perhaps more accurately 
to the staff of the committee my 
amazement that the concurrent reso- 
lution of technical corrections is only 
60 pages long. As the distinguished 
Presiding Officer knows, this is the 
most comprehensive change in the 
Federal Tax Code in half a century. In 
ways it is the most important event 
since the introduction of the income 
tax system in 1913. 

It involved a complete revision of 
the code. And it is a massive docu- 
ment, done under the very normal 
pressures of time that are associated 
with the ending of a Congress, and 


would exist in any event work having 
to be done. 


I would like to say I think it is a 
good job. It speaks to the quality of 


whom? 


the 


October 15, 1986 


the original product. There are mis- 
takes. 

I have to note that there is a provi- 
sion as is well understood, a transition 
rule in the existing bill to enable the 
rehabilitation of Carnegie Hall in New 
York City to go forward with an ac- 
companying development of an office 
building with the proceeds to be used 
for the hall. Carnegie Hall is one of 
the, by general agreement, foremost 
acoustically near-perfect halls in the 
world. Everything is known about the 
quality, but somehow or other we got 
the address wrong. [Laughter.] 

Mr. PACK WOOD. If my good friend 
will yield, what happened—and I feel 
sorry for those poor devils that are 
working on the computers. They have 
been at it 14, 15 hours a day. We are 
shoveling material into them. They 
make 1 mistake in 500 as they are key- 
punching. Many of them we catch 
when we read. Some of them we do 
not. I can appreciate the fact there are 
relatively few errors in a massive bill 
made by technicians who were over- 
worked, harassed, and with us calling 
them up all the time saying, “Why 
can’t you do this faster?” 

Mr. MOYNIHAN. Or alternately, we 
would finish at 2 o’clock in the morn- 
ing, stumble home, leave it to them to 
have it ready for us at 8 o’clock the 
next morning, and they would not go 
home at all. It turns out Carnegie Hall 
is at 7th Avenue and 57th Street. That 
will not be corrected. 

These are clerical changes in situa- 
tions where the meaning of the law 
was clear, and where I do think there 
are a number of areas where our clear 
intention was not in the law. So it is 
not exactly clerical. As for example, 
the generic provision on the sale of 
mortgage discount bonds, we now 
make that a general entitlement of in- 
surance companies rather than listing 
the 16 or 17 and leaving out 10 or 12 
we did not know about. 

Mr. PACK WOOD. I know of no ob- 
jection to that amendment. 

Mr. MOYNIHAN. I know of no ob- 
jection whatever. We thought we were 
doing what we now do. So we have 
changed, Mr. President, and corrected 
some addresses. We have made more 
explicit our intention. We have ful- 
filled our legislative intention with re- 
spect to a few matters. 

Mr. PACKWOOD. I might pass 
along a story of the staff. One morn- 
ing I called over the Finance Commit- 
tee and I asked for Karen. They said, 
“Sir, she is not here.” I said, “It is 
9:15.” “Well, she didn’t go home until 
4 o’clock last night.”” They said, “Lindy 
is here. She didn’t go home at all.” 

So indeed we do work morning, 
noon, and night, and all night on 
many occasions. 

Mr. MOYNIHAN. And with extraor- 
dinary devotion from these public 
servants. None of us who has been 





October 15, 1986 


through the experience can have any- 
thing but a saddened awareness of 
what the years have wrought on our 
capacities, and we see what people 40 
years and 30 years younger can do. 
But also it cheers you up and you 
might think it is not just entirely age 
but maybe they are better educated. 
Even, Heaven knows, although biolo- 
gists would probably argue, they may 
even be smarter. But certainly we are 
in their debt. 

Certainly I would like to say to the 
chairman, and could I ask him? Is it 
his plan? Are we in a position just to 
go forward now? 

Mr. PACK WOOD. No. We are not. I 
am going to withhold several hours to 
see if we can work out two or three 
questions that were raised by the Sen- 
ators from New Jersey and Ohio, and 
see if we can work them out. I would 
not blindside anybody. I will come 
back at 2 o’clock or 2:30 to see if we 
can pose a unanimous consent again. 
They may flush out somebody else 
that has a problem. 

I will say this. It is now Wednesday. 
I assume we are leaving Friday or 
Thursday night or Friday morning or 
something like that. The Senator from 
New York has been very good about 
this. We cannot use this vehicle to 
start reopening the passage of those 
provisions and all the other provisions. 

If the choice is that or not getting 
this vehicle through, I would rather 
not get the vehicle through. 

Mr. MOYNIHAN. No. Mr. President, 
the tax bill has been written and en- 
acted by the Congress. It remains to 
be signed by the President. We went 
through 2 years. We do not have it in 
us to go through again and ought not. 
The agreement was reached in full 
and plenary session in both bodies, 
and for a profound series of changes 
to be made now under the threat of a 
deadline would fail in our democratic 
responsibilities to our colleagues, and 
to the American citizens who under- 
stand that this has happened and now 
expect to live under this new regimen. 
I hope they will welcome it as we have 
sought to make them do. 

Mr. PACKWOOD. I thank my 
friend from New York. Again, I 
thanked him many times before, and 
not often enough in public. He was 
one of the original core group, and 
stuck with us, and stuck with us, and 
stuck with us on every vote. I appreci- 
ate very much not just his help but his 
leadership. 

Mr. MOYNIHAN. I thank my friend. 

Mr. PRYOR addressed the Chair. 

The PRESIDING OFFICER. The 
Senator from Arkansas is recognized. 

Mr. PRYOR. Would the distin- 
guished chairman, the Senator from 
Oregon, yield for a question? 

Mr. PACKWOOD. Yes. I would be 
happy to. 

Mr. PRYOR. There are two areas 
that I frankly do not quite under- 


CONGRESSIONAL RECORD—SENATE 


stand, and this point may have been 
raised previously. I am sorry I was not 
in the Chamber. One is relative to the 
issue of airplanes bought in certain 
States. I am sorry I do not have the 
language. They are making a copy. 

Mr. PACKWOOD. We are going to 
make that generic. It will cover both 
Arkansas and Delaware as equally as it 
covers the planes manufactured in 
other States. 

Mr. PRYOR. For example, more spe- 
cifically, we have a Falcon jet plant in 
Little Rock. I think the chairman has 
been made aware of our stituation. 

Mr. PACK WOOD. It will be covered 
the same as a plant in Kansas would 
be covered. 

Mr. PRYOR. So there would be no 
plant in the country that would get fa- 
vorable treatment over another facili- 
ty? 

Mr. PACK WOOD. That is correct. 

Mr. PRYOR. I thank the chairman 
for yielding. 

The second question, Mr. President, 
I have for the Senator from Oregon 
relates to the issue of athletic scholar- 
ships and moneys given to athletic 
programs. 

I talked on many occasions with our 
athletic director coach, Frank Broyles. 
He is very concerned and upset with 
the IRS ruling which precludes deduc- 
tions from taking place in the athletic 
programs. I am wondering how this 
treats that specific area. 

Mr. PACKWOOD. The way we are 
going to treat that is the same as per- 
taining to band scholarships. You will 
recall in the bill tuition scholarships 
are not taxed, but money above tuition 
is taxed. The same rule will apply 
whether you have a band scholarship 
or a football scholarship. To the 
extent it is above the tuition, it is 
taxed, but it would be taxed for every- 
body else also, whether it is athletic or 
not. 

Mr. PRYOR. Is the chairman saying 
that no specific schools are spelled 
out? 

Mr. PACK WOOD. The only schools 
that were spelled out related to sky 
boxes, and that was in Louisiana and 
Texas. Those are stricken out. That 
does not relate to scholarships. That 
related to the sky boxes in their colise- 
ums. They were stricken out. 

Mr. PRYOR. I wonder if any 
thought was given just to repealing 
the IRS regulation relating to forgive- 
ness. Was any thought given to that? 

Mr. PACK WOOD. It was given to it. 
It had a variety of permutations. One 
was scholarships. Another was a donor 
who gives $5,000 to a university and in 
exchange gets two free athletic tick- 
ets. 

We went to Boise State on behalf of 
Senator Symms and reviewed their 
problem. They had a unique problem. 
The building was built as a principal 
entertainment center for the city, not 
just the college. Thought was given to 


31313 


that, but it was not repealed because 
there was a feeling that you are 
giving, and in fairness it is probably 
true, you are giving a fair amount of 
money but you were getting a quid pro 
quo back. It was not like a normal 
charitable contribution. So we did not 
attempt to repeal that, per se. 

Mr. PRYOR. I thank the distin- 
guished chairman. I congratulate the 
chairman, the Senator from Oregon, 
for his leadership during this entire 
year. It has been absolutely something 
we never thought would happen. I do 
not think this would have happened 
without his leadership, patience, and 
understanding. I know as a member of 
the committee he always extended me 
the utmost courtesies and understand- 
ing. I know it is a very difficult time. 

Mr. PACK WOOD. I thank the Sena- 
tor. 

Mr. President, I suggest the absence 
of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. 

The legislative clerk proceeded to 
call the roll. 

Mr. DOLE. Mr. President, I ask that 
further proceedings under the quorum 
call be rescinded. 

The PRESIDING OFFICER (Mr. 
LucarR). Without objection, it is so or- 
dered. 


UNANIMOUS-CONSENT 
AGREEMENT 


Mr. DOLE. Mr. President, as I un- 
derstand, all the principal players are 
now here on Calendar No. 1007, H.R. 
5465, the appliance bill, and I hope 
that we can get some time agreement 
on that. I am also hopeful that we 
could get an agreement on the Execu- 
tive Calendar. If we could do that, 
that would dispose of all but three or 
four nominations, and we are working 
on those. I think two have holds on 
this side. We are not going to honor 
holds. First, let me make the request 
on H.R. 5465. 

I ask unanimous consent that the 
Senate now turn to Calendar No. 1007, 
H.R. 5465, the appliance bill, and it be 
considered under the following time 
agreement: 

That the committee reported 
amendment be considered agreed to, 
and there be: 

One hour on an amendment to be 
proposed by Senator Gramm, for him- 
self and Senator Nickies, with time to 
be equally divided between Senator 
Gramm and Senator JOHNSTON or his 
designee. Following the expiration of 
the hour allotted for debate on the 
Gramm amendment, I ask that Sena- 
tor Gramm be recognized only for the 
purpose of withdrawing his amend- 
ment, and that no amendments be in 
order, and no intervening motion be in 
order; 





31314 


Following disposition of the Gramm 
amendment, I further ask unanimous 
consent that no amendments be in 
order other than two amendments to 
be offered by Senator McC.iure, and 
one amendment by Senator Evans, 
and that no amendment to these 
amendments be in order; 

Following the disposition of the two 
amendments described above, I ask 
unanimous consent that the Senate 
then proceed immediately with no in- 
tervening motion, to third reading, 
and final passage, without any inter- 
vening action or debate, and that no 
motions to recommit be in order. 

The PRESIDING OFFICER. Is 
there objection? 

Mr. BYRD. Mr. President, reserving 
the right to object, I will not object. 
This agreement has been carefully 
agreed upon on this side. 

As I understand it, there will be 
some debate on the fuel use amend- 
ment but it will be withdrawn; there 
will be no vote on it, so I have no ob- 
jection to the agreement. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


ENERGY CONSERVATION 
STANDARDS FOR APPLIANCES 


The PRESIDING OFFICER. The 
clerk will report the bill. 

The assistant legislative clerk read 
as follows: 

A bill (H.R. 5465) to amend the Energy 
Policy and Conservation Act with respect to 
energy conservation standards for appli- 
ances. 

The Senate proceeded to consider 
the bill which had been reported from 
the Committee on Energy and Natural 
Resources, with an amendment, on 
page 61, stike line 7, through and in- 
cluding line 11, which reads as follows: 

The Federal Energy Regulatory Commis- 
sion shall, not later than 60 days after the 
date of the enactment of this Act, issues a 
final order in ANR Pipeline Company, 
FERC Docket No. RP 82-80, filed April 30, 
1982. 

Mr. EVANS addressed the Chair. 

The PRESIDING OFFICER. The 
Senator from Washington. 

Mr. EVANS. Mr. President, I ask 
unanimous consent that we reverse 
the order of the unanimous consent 
agreement to take up Senator 
McCture’s and my amendments prior 
to the time that Senator Gramm takes 
up his amendment just in order to 
save time. 

The PRESIDING OFFICER. It 
there objection? Without objection, it 
is so ordered. 

The Senator from Washington. 

AMENDMENT NO. 3406 


Mr. EVANS. Mr. President, I send an 
amendment to the desk and ask for its 
immediate consideration. 

The PRESIDING OFFICER. The 


clerk will report. 


CONGRESSIONAL RECORD—SENATE 


The Assistant legislative clerk read 
as follows: 

The Senator from Washington (Mr. 
Eraee proposes an amendment numbered 

On page 40, line 18, after “regulation” 
insert the following: “effective on or after 
January 1, 1992”. 

Mr. EVANS. Mr. President, this is a 
technical amendment that brings the 
date of the television appliances into 
conjunction with the dates that are 
set for other elements of the bill. 

The PRESIDING OFFICER. Is 
there further debate? If not, the ques- 
tion is on agreeing to the amendment. 

The amendment (No. 3406) was 
agreed to. 

AMENDMENT NO. 3407 

Mr. EVANS. Mr. President, I send an 
amendment to the desk on behalf of 
Mr. McCture, for himself, Mr. 
Kasten, and Mr. Proxmire, and ask 
for its immediate consideration. 

The PRESIDING OFFICER. The 
clerk will report. 

The assistant legislative clerk read 
as follows: 

The Senator from Washington [Mr. 
Evans], for Mr. McCiure and others, pro- 
poses an amendment numbered 3407. 

Mr. EVANS. Mr. President, I ask 
unanimous consent that further read- 
ing of the amendment be dispensed 
with. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The amendment is as follows: 

At the end of the bill add the following 
new section: 

“SEC. 12. FERC REQUIREMENT. 

(a) Notwithstanding any other applicable 
provisions of law, on November 17, 1986, or 
within 10 working days thereafter, the Fed- 
eral Energy Regulatory Commission shall, 
in the case of ANR Pipeline Company, 
FERC Docket No. RP82-80, filed April 30, 
1982, publish a schedule for issuing a final 
order in such case, which schedule shall pro- 
vide for such order to be issued not later 
than February 28, 1987. Such schedule shall 
include an opportunity for an oral argument 
prior to issuance of such final order, as re- 
quested by one or more of the parties, 
unless the Commission determines that 
such argument would not assist the Com- 
mission in deciding such case. 

(b) Except as expressly provided in subsec- 
tion (a), nothing in this section shall 
affect— 

(1) any Stipulation and Agreement 
reached by the parties in such case or any 
applicable provisions of law with respect 
thereto; 

(2) the right of any party to such case to 
appeal the final order issued in such case in 
accordance with the applicable provisions of 
law; or 

(3) any other applicable provisions of law 
with regard to any such ruling or order.” 


Mr. KASTEN. Mr. President, I ask 
the Senator from Idaho, am I correct 
that subsection 12(a) requires the 
Commission to publish a schedule for 


issuing a final order in FERC Docket 
No. RP82-80 and that such schedule 


shall include an opportunity for an 
oral argument in front of the Commis- 


October 15, 1986 


sion before such order is issued, unless 
the Commission determines that such 
oral argument would not assist the 
Commission in deciding the case? 

Mr. McCLURE. The Senator is cor- 
rect. 

Mr. KASTEN. Am I not correct that 
although this subsection allows the 
Commission to not hold oral argument 
before issuing an order in this docket, 
that it is your understanding and firm 
belief that oral argument is critical 
and essential to the Commission's un- 
derstanding of the case and therefore 
would be of great assistance to the 
Commission in deciding this case? 

Mr. McCLURE. The Senator is cor- 
rect. 

Mr. KASTEN. With that under- 
standing I believe that this amend- 
ment addresses my concerns in this 
matter. 

Mr. PROXMIRE. I agree with the 
statement of my colleague, and I move 
the adoption of this amendment. 

Mr. KASTEN. I second the motion. 

Mr. JOHNSTON. Mr. President, I 
want to comment briefly on one aspect 
of the amendment to H.R. 5465 of- 
fered by the Senator from Idaho [Mr. 
McC.oureE]. The amendment includes a 
new section 12 which directs the Fed- 
eral Energy Regulatory Commission 
[FERC] to act on a pending rate case. 
The amendment directs FERC to pub- 
lish a schedule for issuing a final order 
no later than February 28, 1987 in the 
case of ANR Pipeline Co., docket No. 
RP 82-80. 

When H.R. 5465 passed the House of 
Representatives it included a provision 
requiring FERC to take action in the 
same rate case within 60 days after the 
date of enactment. That provision was 
dropped when the Energy and Natural 
Resources Committee considered H.R. 
5465 because of our desire to expedite 
action on the underlying National Ap- 
pliance Standards Act. The provision 
has reemerged in the McClure amend- 
ment, but in modified form. The modi- 
fications are the subject of my com- 
ments. 

First the amendment requires FERC 
to include an opportunity for an oral 
argument prior to issuance of its final 
order, as requested by one or more of 
the parties in the pending case, unless 
the Commission determines that such 
argument would not assist the Com- 
mission in deciding such case. I fully 
expect the Commission to hold such 
an oral argument; indeed, I urge them 
to do so. The case has significant rami- 
fications for the parties involved, and 
could have the effect of shifting sig- 
nificant costs from customers in one 
State served by ANR to customers in 
another State. While I realize that it 
is rare for FERC to hold an oral argu- 
ment in rate cases, I believe that an 
oral argument is justified in light of 
the fact that we are legislating a dead- 





October 15, 1986 


line by which they must make a deci- 
sion. 

The amendment also includes a pro- 
vision protecting the stipulation and 
argument entered into by the parties 
in the case. The amendment requires 
that the decision FERC makes in the 
case shall not affect the stipulation 
and agreement. It is our intent that 
the decision shall not affect the timing 
and judicial review provisions that 
were included in the stipulation and 
agreement. All of the parties in the 
case participated in the negotiations 
that led to it; the Commission itself 
approved it. We certainly do not 
intend for it to be upset by the re- 
quirement that the Commission issue 
a final order by the date specified. 

The House-passed provision did not 
have either of these requirements; I 
believe that both requirements repre- 
sent a reasonable accommodation be- 
tween those who would expedite the 
FERC’s decisionmaking process and 
those who would prefer to have the 
case drag on. Within this framework, 
Mr. President, the Commission will 
have an opportunity to reach an equi- 
table decision in this important 
matter. 

Mr. EVANS. Mr. President, this is an 
amendment that has been worked out 
with the Senators from Wisconsin and 
with the chairman of the committee. I 
urge its adoption. 

The PRESIDING OFFICER. Is 
there further debate on the amend- 
ment? 

If not, the question is on agreeing to 
the amendment. 

The amendment 
agreed to. 

AMENDMENT NO. 3408 

Mr. EVANS. Mr. President, I send an 
amendment to the desk on behalf of 
Senator McCiure and Senator Syms. 

The PRESIDING OFFICER. The 
clerk will report. 

The assistant legislative clerk read 
as follows: 

The Senator from Washington [Mr. 
Evans) for Mr. McC.ure and Mr. Syms, 
proposes an amendment numbered 3408. 

Mr. EVANS. Mr. President, I ask 
unanimous consent that further read- 
ing of the amendment be dispensed 
with. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The amendment is as follows: 

At the end of the bill add the following 
new section: 

“SEC. 13. MISCELLANEOUS. 

(a) FERC Orper.—Notwithstanding any 
petition filed by the Idaho Power Company 
on November 26, 1984 with the Federal 
Energy Regulatory Commission for a declar- 
atory order concerning an Agreement dated 
October 25, 1984 (Exhibit A, Petition of 
Idaho Power Company for Declaratory 
Order, Docket No. EL-85-38-000) relative to 
the projects of such company specifically 
referenced in the petition, the Federal 


Energy Regulatory Commission is only au- 
thorized and directed, in lieu of the petition 


(No. 3407) was 


CONGRESSIONAL RECORD—SENATE 


request, to issue an order within 90 days 
after enactment of this Act under the Fed- 
eral Power Act that such Agreement shall 
not be considered by the Commission in any 
subsequent proceeding before the Commis- 
sion during the remaining term of the li- 
censes applicable to such projects, to be (1) 
inconsistent with the terms and conditions 
of such licenses concerning project property 
or the utilization thereof; or (2) imprudent 
for purposes of section 205 of the Federal 
Power Act. 

(b) Savincs Provisron.—Nothing in this 
section or in any order issued by the Com- 
mission pursuant to this section, shall be 
construed as affecting any stipulation or 
other agreement entered into with the State 
of Idaho or the Idaho Power Company prior 
to enactment of this section relating to any 
fish and wildlife matters affected by any 
such project. Except as expressly provided 
in subsection (a), nothing in such subsection 
shall affect the application or requirements 
of section 10 of the Federal Power Act or 
any other provision of such Act to any 
person or project.” 

Mr. McCLURE. This amendment au- 
thorizes and directs the Federal 
Energy Regulatory Commission to 
issue an order in lieu of the order re- 
quested, in its Docket No. EL 85-38- 
000 that the agreement of October 25, 
1984, shall not be found to be incon- 
sistent with the terms and conditions 
of the existing licenses referenced, 
concerning project property (including 
water rights) or the utilization thereof 
or imprudent for the purposes of sec- 
tion 205 of the Federal Power Act on 
the basis of the agreement. The agree- 
ment of October 25, 1984, was execut- 
ed by the State of Idaho and Idaho 
Power Co. It resolved major issues 
concerning existing and future uses of 
the resources of the Snake River and 
will result in the dismissal of pending 
litigation between the utility and 
thousands of individual defendants. 

The savings provision of subsection 
(b) makes it clear that the Commis- 
sion’s authority to act on matters not 
covered in the agreement will not be 
affected by this section. This section 
also is intended to be perfectly clear 
that any basis, other than the agree- 
ment, for challenging or changing the 
term and conditions of such licenses or 
for the purposes of section 205 of the 
Federal Power Act is unaffected. 

I would like to express my apprecia- 
tion to my colleagues Senator Symms 
for his help in this matter, as well as 
the assistance of Congressmen CRAIG 
and Sraritincs. This is a matter in 
which the Idaho delegation is unani- 
mous in its support. I would also like 
to thank representatives of the Idaho 
Governor’s office, the Idaho Attorney 
General’s office and of the Idaho 
Power Co. for their cooperation. Final- 
ly, Congressmen DINGELL and MARKEY 
and their staff have been instrumental 
in this process and their efforts are 
greatly appreciated. I ask unanimous 
consent that a letter from Chairman 
DINGELL in support of this amendment 
be included at this point in the 
REcORD. 


31315 


There being no objection, the letter 
was ordered to be printed in the 
REcorD, as follows: 

COMMITTEE ON ENERGY AND 
COMMERCE, 
RaYBURN House OFFice BUILDING 
Washington, DC, October 9, 1986. 

Hon. James A. McCiure, 

Chairman, Senate Committee on Energy 
and Natural Resources, Dirksen Senate 
Office Building, Washington, DC. 

Dear Jtm: It was a great privilege to work 
with you in conference on the hydro reli- 
censing bill and the reconciliation legisla- 
tion. You are an excellent conference Chair- 
man and a good friend. 

I understand that in connection with H.R. 
5465, the House-passed appliance legisla- 
tion, Congressman Stallings and you have 
suggested a germane Senate amendment 
seeking to settle, on a one-time basis, a peti- 
tion pending at the Federal Energy Regula- 
tory Commission (FERC) since 1984 con- 
cerning several licensed projects in Idaho. 
As I understand the proposal, it is unique 
and not precedent-setting. It relates to an 
agreement that enjoys broad support in the 
state and will not affect any existing or 
future actions relative to fish and wildlife 
resources of the area. Most importantly, it 
does not affect the application or require- 
ments of section 10 of the Federal Power 
Act, including existing section 10(a) and the 
new section 10(j). 

The proposal, as worked out with partici- 
pation of our Committee staff, appears 
workable, limited, and acceptable. Most im- 
portantly, it is not a precedent for similar 
amendments in the future which is clearly a 
concern we both share. For these reasons, I 
can accept it and support it when the bill is 
returned to the House. I know that Subcom- 
mittee Chairman Markey, who also partici- 
pated in the development of the proposal, 
shares my view. 

I commend you and Congressman Stal- 
lings for your joint efforts in working it out 
and helping to gain passage of the House 
bill. 

With best wishes. 

Sincerely, 
Joun D. DINGELL, 
Chairman. 

Mr. EVANS. Mr. President, this 
amendment I believe has been cleared 
by all concerned. I urge its adoption. 

The PRESIDING OFFICER. Is 
there further debate on the amend- 
ment? If not the question is on agree- 
ing to the amendment. 

The amendment (No. 
agreed to. 


3408) was 


0 1220 


Mr. EVANS. Mr. President, I suggest 
the absence of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. 

The assistant legislative clerk pro- 
ceeded to call the roll. 

Mr. GRAMM. Mr. President, I ask 
unanimous consent that the order for 
the quorum cali be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

Mr. EVANS. Mr. President, I am 
pleased that today the Senate is 
voting on what is almost certainly the 
most important piece of energy con- 





31316 


servation legislation in the past 
decade, H.R. 5465, the National Appli- 
ance Energy Conservation Act of 1986. 

This legislation really represents the 
culmination of a process which began 
in 1975 when Congress passed the 
Energy Policy and Conservation Act 
[EPCA] which directed the Depart- 
ment of Energy [DOE] to consider the 
issue of appliance efficiency standards. 
In 1978, Congress took an additional 
step, passing the National Energy 
Conservation Policy Act [NECPA] 
which amended EPCA to require that 
energy efficiency standards be estab- 
lished for each of 13 classes of home 
appliances which are major consumers 
of energy. These standards, which 
were to be designed to achieve the 
maximum improvement in energy effi- 
ciency which the Secretary determines 
is technologically feasibl and economi- 
cally justified. 

The Department issued proposed 
standards in 1980 for 8 of the 13 class- 
es of covered appliances. In 1982, the 
new administration reversed the earli- 
er DOE decision and issued zero-level 
standard, the so-called no-standard 
standard. This decision was almost im- 
mediately challenged in the courts by 
the Natural Resources Defense Coun- 
cil [NRDC]. On July 16, 1985, the D.C. 
Court of Appeals issued a unanimous 
decision striking down the DOE zero- 
level standard, and ordered DOE to 
initiate a new rulemaking to establish 
substantive standards. The rulemaking 
is currently underway. 

The States also expressed a strong 
interest in the potential savings which 
would result from appliance efficiency 
standards. The most notable example 
is California, which has developed ap- 
pliance standards for home appliances 
which have served as a model for the 
standards in this bill. I should add 
that in my own State, appliance effi- 
ciency legislation was considered in 
the State legislature during its last 
session. I am also aware the current 
power plan released recently by the 
Northwest Power Planning Council, 
there is a provision calling upon the 
four Northwest States to adopt stand- 
ards similar to those contained in the 
bill. Several States have already peti- 
tioned DOE for a waiver from preemp- 
tion from Federal standards, and DOE 
has granted nearly all of these peti- 
tions. 

The stage was not set for this legis- 
lation and the remarkable coalition 
which produced it. Manufacturers 
were faced by the enormous economic 
difficulties which would result from 
the fragmentation of the marketplace 
as each State adopted its own set of ef- 
ficiency standards. The NRDC and 
other environmental and conservation 
groups had long understood the bene- 
fits to both the consumer and the en- 
vironment which would result from 
substantive standards. Rather than 
continue to oppose each other, the 


CONGRESSIONAL RECORD—SENATE 


major appliance manufacturers and 
the NRDC chose to sit down and nego- 
tiate a resolution to the situation. At 
the end of July an agreement was 
reached, and the bill now before us 
represents this marvelous accomplish- 
ment. 

H.R. 5465 is one of those rare in- 
stances when all parties concerned in 
an issue will benefit from the proposed 
solution. Under the provisions of the 
bill, manufacturers will have an 
achievable, uniform initial standard, 
and a fixed schedule established for 
the revision of these efficiency levels, 
rather than a fragmented, confusing 
array of changing State regulations. 
Consumers will also realize significant 
savings, which have been estimated at 
nearly $300 per household through 
the year 2000. Finally, this legislation 
will provide an important tool to utili- 
ties and State regulatory agencies as 
they anticipate their future energy 
needs. 

Mr. President, I realize that this leg- 
islation came at the tail end of our leg- 
islative session, but I feel strongly that 
the benefits which will be achieved by 
enacting H.R. 5465 make it imperative 
that we act this year. I remind my 
fellow Senators that without this leg- 
islation, we leave manufacturers and 
consumers in the worst of all possible 
worlds. Given past history, it is ex- 
tremely likely that the standards 
which are currently scheduled to be 
released next year by DOE will be 
challenged in the courts, resulting in 
increased legal fees and further 
delays. In addition, it seems certain 
that more States will move to estab- 
lish their own efficiency standards, 
joining the seven States which have 
already done so. Manufacturers costs 
will rise dramatically, resulting in in- 
creased costs to consumers over and 
above what they will save from re- 
duced energy use. 

Finally, Mr. President, I would like 
to acknowledge the spirit of coopera- 
tion which has characterized the 
movement of this bill to the floor. I 
have appreciated the willingness of 
the chairman of the Energy and Natu- 
ral Resources Committee, Senator 
McC tore, to schedule quick hearings 
and markup. I would also like to thank 
the Ranking Member of the Commit- 
tee, Senator JoHNsTon, whose staff 
has been very helpful in this effort. 

Mr. President, I fully expect that 
after we act favorably on this bill, the 
House will join us in approving it, 
sending a strong message to the Presi- 
dent and the American consumer that 
energy conservation remains truly our 
most cost-effective energy resource. 

DEFInitTion oF AFUE 

Mr. JOHNSTON. Mr. President, the 
definition of annual fuel utilization ef- 
ficiency [AFUE] in H.R. 5465 makes 
certain assumptions about the loca- 
tions where furnaces and boilers are 
installed and about the source of air 


October 15, 1986 


used by nonweatherized furnaces for 
combustion and ventilation. Is it the 
Senator's understanding that these as- 
sumptions were made solely so that 
the meaning of the initial standards 
for furnaces and boilers prescribed in 
section 325(f) is clear to the manufac- 
turers who must design products to 
meet the standards, and to those 
charged with the enforcement of the 
standards? 

Mr. EVANS. Yes; I assure the Sena- 
tor that nothing in the act is intended 
to limit how furnaces or boilers are 
vented, or to limit the source of air 
used for combustion or ventilation. 

Mr. WEICKER. Mr. President, I rise 
today in support of H.R. 5465, the Na- 
tional Appliance Energy Conservation 
Act of 1986. As an original cosponsor 
of this legislation I am glad to see that 
35 of my colleagues have joined to- 
gether as sponsors in support of this 
measure and I would urge others to 
support it as well. H.R. 5465 achieves 
two broad objectives, either of which, 
I believe, has sufficient merit to enlist 
the support of my colleagues. First, 
H.R. 5465 would establish uniform na- 
tional appliance energy efficiency 
standards which would preempt the 
growing number of separate and con- 
flicting State standards. Such preemp- 
tion greatly reduces the regulatory 
and economic burdens that separate 
State standards placed on the appli- 
ance industry. Second, H.R. 5465 
would significantly reduce the Na- 
tion’s demand for electricity. Such a 
reduction in energy demand will assist 
the Nation in meeting future energy 
needs and in reducing our growing de- 
pendence on foreign energy resources. 
H.R. 5465 is needed to strengthen our 
national energy policy. 

The history of H.R. 5465 goes back 
to 1975, when Congress passed the 
Energy Policy and Conservation Act 
{EPCA]. EPCA directed the Depart- 
ment of Energy to consider the estab- 
lishment of appliance energy efficien- 
cy standards in response to the energy 
crisis which the Nation then faced. Al- 
though the energy crisis is not as im- 
mediate a problem as it was in 1975, I 
believe that it remains one of the most 
serious problems still facing the 
Nation today. 

In 1975 the Congress amended 
EPCA to require the Department of 
Energy to establish appliance energy 
efficiency standards. However, in 1983 
the Department ruled that no stand- 
ards were economically justified. This 
no-standard standard was challenged 
in court and in July of 1985, the D.C. 
District Court of Appeals ruled against 
the Department and ordered that sub- 
stantive standards be issued. Unfortu- 
nately, it will be at least 2 years before 
the Department can promulgate new 
standards. In the meantime, the court 
ruling and current DOE practice allow 
the 50 States to establish their own 





October 15, 1986 


State regulations regarding appliance 
energy efficiency. States are increas- 
ing their adoption of such regulations, 
resulting in a growing patchwork of 
separate and conflicting regulations. 
This patchwork of State regulations 
has made a nightmare of the design, 
production, and marketing plans of 
the Nation's appliance manufacturers. 
One excellent example of the prob- 
lems which have resulted from this 
patchwork of regulations is a small 
but growing traffic in smuggled appli- 
cances; particularly in my region of 
the country. Appliance retailers have 
already found that customers are will- 
ing to drive to other States in order to 
purchase cheaper and less efficient ap- 
pliances. It is obvious that uniform na- 
tional standards would substantially 
reduce the current regulatory and eco- 
nomic burden on the appliance in- 
dusty. 

It was in an effort to develop such 
national standards that representa- 
tives of the appliance industry began 
negotiations with representatives of 
the environmental community. H.R. 
5465 embodies the agreement reached 
in those negotiations. 

The interest of the environmental 
community in these negotiations was 
to assure that EPCA would be 
strengthened and would provide for 
actual energy conservation. It is cur- 
rently estimated that approximately 
18 percent of the Nation’s energy is 
consumed by major home appliances. 
It is difficult to quantify how much 
energy would actually be saved by en- 
actment of this measure. However, be- 
cause the legislation would require ef- 
ficiency improvements on the order of 
20 percent for many appliances, it is 
clear that energy savings would be sig- 
nificant. 

An analysis by the American Council 
for an Energy-Efficient Economy of 
the energy savings which would result 
from H.R. 5465 concludes that peak 
electrical loads in the year 2000 would 
be reduced by 10 percent, or 22,000 
megawatts. These estimates seem opti- 
mistic to me. However, savings of even 
a half or a quarter of this amount 
would justify enactment of this legis- 
lation. 

I have often stated my concern that 
the Nation has failed to develop an 
energy policy capable of dealing with 
the Nation’s pressing energy problems. 
As a nation we are once again headed 
toward an energy crisis similar to that 
which we experienced in the early 
1970’s. I believe that energy conserva- 
tion must become and remain an inte- 
gral part of our national energy policy. 
H.R. 5465 is a long overdue addition to 
that policy. 

Mr. President, this legislation has 
broad support from industry and it 
has broad support from the environ- 
mental community. H.R. 5465 was 
passed by the House and reported 
unanimously by the Senate Commit- 


CONGRESSIONAL RECORD—SENATE 


tee on Energy and Natural Resources. 
I believe that the reasons for enacting 
this measure are compelling. H.R. 5465 
will reduce the economic and regula- 
tory burdens on the Nation’s appliance 
manufacturers and it will strengthen 
our Nation’s energy policy. 

Mr. President, I urge my colleagues 
to support enactment of H.R. 5465. 

AMENDMENT NO. 3409 
(Purpose: To revitalize oil and gas 
production in the United States) 

Mr. GRAMM. Mr. President, I send 
an amendment to the desk and ask for 
its immediate consideration. 

The PRESIDING OFFICER. The 
amendment will be stated. 

The assistant legislative clerk read 
as follows: 

The Senator from Texas [Mr. Gramm], for 
himself and others, proposes an amendment 
numbered 3409. 

Mr. GRAMM. Mr. President, I ask 
unanimous consent that reading of the 
amendment be dispensed with. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The amendment is as follows: 

At the end of the bill, add the following 
new title: 

TITLE—OIL AND GAS PRODUCTION 

REVITALIZATION ACT 
SEC. *01. SHORT TITLE. 

This title may be cited as the “Oil and 

Gas Production Revitalization Act”. 
Subititle A—Oil Provisions 
SEC. *11, WINDFALL PROFIT TAX REPEAL. 

(a) Chapter 45 of the Internal Revenue 
Code of 1954 is repealed. 

(b)(1) Sections 6050C, 6076, 6232, 6430, 
and 7241 of the Internal Revenue Code of 
1954 are repealed. 

(2A) Subsection (a) of section 164 of 
such Code is amended by striking paragraph 
(5). 

(B) Paragraph (3) of section 168(i) of such 
Code is amended by striking “(A) In gener- 
al.—" and subparagraph (B). 

(C) The following provisions of such Code 
are each amended by striking “44, or 45” 
each place it appears and inserting “or 44”: 

(i) section 6211(a), 

Gi) section 6211(b)(2), 

(iii) section 6212(a), 

(iv) section 6213(a), 

(v) section 6213(g), 

(vi) section 6214(c), 

(vii) section 6214(d), 

(viii) section 6161(b)(1), 

(ix) section 6344(a)(1), and 

(x) section 7422(e). 

(D) Subsection (a) of section 6211 of such 
Code is amended by striking “44, and 45” 
and inserting ‘‘and 44”. 

(E) Subsection (b) of section 6211 of such 
Code is amended by striking paragraphs (5) 
and (6). 

(F) Paragraph (1) of section 6212(b) of 
such Code is amended— 

(i) by striking “chapter 44, or chapter 45” 
and inserting ‘or chapter 44”, and 

Gi) by striking “chapter 44, chapter 45, 
and this chapter” and inserting “chapter 44, 
and this chapter’. 

(G) Paragraph (1) of section 6212(c) of 
such Code is amended— 

(i) by striking “of chapter 42 tax” and in- 
serting ‘or of chapter 42 tax", and 

Gi) by striking “*, or of chapter 45 tax for 
the same taxable period”’. 


31317 


(H) Subsection (e) of section 6302 of such 
Code is amended by striking paragraph (2). 

(I) Section 6501 of such Code is amended 
by striking subsection (p). 

(J) Section 6511 of such Code is amended 
by striking subsection (h) and redesignating 
subsection (i) as subsection (h). 

(K) Subsection (a) of section 6512 of such 
Code is amended— 

(i) by striking “of tax imposed by chapter 
41" and inserting “or of tax imposed by 
chapter 41", and 

(ii) by striking “, or of tax imposed by 
chapter 45 for the same taxable period”. 

(L) Paragraph (1) of section 6512(b) of 
such Code is amended— 

(i) by striking “of tax imposed by chapter 
41” and inserting “or of tax imposed by 
chapter 41", and 

(ii) by striking “, or of tax imposed by 
chapter 45 for the same taxable period”. 

(M) Section 6611 of such Code is amended 
by striking subsection (h) and redesignating 
subsections (i) and (j) as subsections (h) and 
(i), respectively. 

(N) Subsection (a) of section 6653 of such 
Code is amended— 

(i) by striking “Gift, or Windfall Profit 
Taxes", in the heading and inserting “or 
Gift Taxes”, 

(i) by striking “, or by chapter 45 (relat- 
ing to windfall profit tax)” in paragraph (1), 
and 

(iii) by striking the comma after “subtitle 
A” in paragraph (1) and inserting “or”. 

(O) Paragraph (3) of section 6678(a) of 
such Code is amended by striking subpara- 
graphs (A) and (C) and redesignating sub- 
paragraphs (B), (D), (E), and (F) as subpara- 
graphs (A), (B), (C), and (D), respectively. 

(P) Subsection (a) of section 6862 of such 
Code is amended by striking “44, and 45” 
and inserting “and 44”. 

(Q) Section 7512 of such Code is amend- 
ed— 

(i) by striking “, by chapter 33, or by sec- 
tion 4986” in subsections (a) and (b) and in- 
serting “or chapter 33”, and 

(ii) by striking “, chapter 33, or section 
4986" in subsections (b) and (c) and insert- 
ing “or chapter 33”. 

(3A) The table of contents of subtitle 
(D) of such Code is amended by striking the 
item relating to chapter 45. 

(B) The table of contents of subpart B of 
part III of subchapter A of chapter 61 is 
amended by striking the item relating to 
section 6050C. 

(C) The table of contents of part V of 
such subchapter is amended by striking the 
item relating to section 6076. 

(D) The table of contents of subchapter C 
of chapter 63 is amended by striking the 
item relating to section 6232. 

(E) The table of contents of subchapter B 
of chapter 65 is amended by striking the 
item relating to section 6430. 

(F) The table of contents of part II of sub- 
chapter A of chapter 75 is amended by strik- 
ing the item relating to section 7241. 

(c) The amendments made by this section 
shall apply to crude oil removed from the 
premises beginning after December 31, 1986. 
SEC. *12. STRATEGIC PETROLEUM RESERVE PETRO- 

LEUM ACQUISITION. 

Section 160 of the Energy Policy and Con- 
servation Act (42 U.S.C. 6240) is amended by 
adding after subsection (e) the following 
new subsection: 

“(f)(1) The Secretary shall assure that at 
least 50 percent, by volume, of the petrole- 
um products acquired for storage in the 
Strategic Petroleum Reserve during each 





31318 


fiscal year, exclusive of crude oil produced 
from the Naval Petroleum Reserves or re- 
ceived in kind as royalties from production 
on Federal lands, are derived from domestic 
crude oil production, provided that these do- 
mestic petroleum products can be aquired at 
delivered prices that are no less favorable to 
the United States than the price of compa- 
rable foreign petroleum products available 
to the Reserve, exclusive of duty. 

“(2) If, during the acquisition of domestic 
petroleum products for the Strategic Petro- 
leum Reserve, the Secretary determines 
that the requirement in paragraph (1) of 
this subsection cannot be met, the Secretary 
may acquire imported petroleum products 
totaling more than 50 percent of the petro- 
leum products acquired for storage in the 
Reserve for that fiscal year. 

(3) The Secretary may issue the regula- 
tions and directives necessary to carry out 
this subsection.”’. 

SEC, *13. INVESTIGATIONS BY DEPARTMENT OF 
COMMERCE. 

(a) The Congress finds that— 

(1) falling oil prices are encouraging in- 
creased consumption of petroleum products 
while discouraging petroleum exploration 
and development; 

(2) broad sectors of the economy have suf- 
fered severe impacts as a result of the sharp 
decline of the energy industry; 

(3) the decline in domestic exploration 
and development could result in increased 
dependence on imports of energy resources 
from unreliable sources; 

(4) surplus worldwide production capacity 
may discourage oil and gas exploration in- 
vestment, development of alternative 
sources of energy, and conservation by the 
United States and its allies; 

(5) a healthy domestic energy industry 
and reliable international energy sources 
are critical to assure an adequate supply of 
energy at a reasonable cost, minimize our 
dependence on unreliable sources, assure 
free and fair trade in energy products, and 
attain the goal of energy independence and 
diversification; and 

(6) the Administration has, in response, 
implemented a number of appropriate 
changes in Federal energy programs, includ- 
ing a decision to fill the Strategic Petroleum 
Reserve, revision of natural gas valuation 
methods to better reflect actual market 
prices, and implementation of procedures to 
prevent premature abandonment of produc- 
ing oil and gas wells, both onshore and off- 
shore, and is seeking to identify further ac- 
tions to respond to these conditions and 
assure our national security. 

(b\1) The Congress is deeply concerned 
about the adverse effects of the current 
state of the energy industry on the national 
security and economic well-being of the 
United States. Therefore the Congress 
urges the Administration to expand upon 
the initiatives already undertaken by identi- 
fying and using all authority available, con- 
sistent with free market principles and pro- 
tection of the environment, to increase the 
exploration and development of domestic 
energy resources. The Congress also urges 
the President to take whatever actions are 
necessary and appropriate to protect our na- 
tional security. To accomplish this, the Con- 
gress strongly urges the Secretary of Com- 
merce to undertake immediately, upon ful- 
fillment of the requirements of section 
232(b) of the Trade Expansion Act of 1962 
(19 U.S.C. 1862(b)), and to complete as soon 
as feasible a study under section 232 of the 
Trade Expansion Act of 1962 of the national 
security effects and implications of the cur- 


CONGRESSIONAL RECORD—SENATE 


rent and projected levels of petroleum im- 
ports into this Nation. 

(2) The Congress urges the President to 
evaluate any study conducted by the Secre- 
tary of Commerce pursuant to section 232 
of the Trade Expansion Act of 1962 and 
take appropriate action without causing 
undue adverse effects on our domestic and 
international economic interests. 

(3) The Congress urges the Department of 
Commerce in conjunction with other affect- 
ed departments to fully analyze the econom- 
ic impact of current restrictions on the 
export of oilfield equipment and drilling 
technology as required in the Export Ad- 
ministration Act of 1979, as amended. The 
Congress specifically urges that the re- 
quired study for 1986 assess the present 
effect of such restrictions on employment 
and growth of the United States economy, 
taking into account the recent domestic 
change in a number of sectors of the energy 
industry, and further assess the availability 
of other similar technologies from Western 
countries. Due to the particular impact of 
foreign policy controls on the domestic oil 
and gas equipment and technology industry 
the Congress urges that the study be under- 
taken immediately upon passage of this 
title. 


Subtitle B—Natural Gas Provisions 


SEC, *21. TRANSPORTATION OF NATURAL GAS. 

(a) Section 31l(a) of the Natural Gas 
Policy Act of 1978 (15 U.S.C. 3371(a)) is 
amended by— 

(1) amended paragraph (1) to read as fol- 
lows: 

“(1) IN GENERAL.—The commission, by rule 
or order, may authorize any pipeline to 
transport natural gas on behalf of any 
person.”; 

(2) redesignating paragraph (1B) as 
paragraph (2); 

(3) striking paragraph (2)(A); 

(4) redesignating paragraphs (2)B)i), 
(2)0BE)0), (2)0B)GDCD, and (2)(B)iiMTD) as 
paragraphs (3)(A), (3B), (3BXi), and 
(3)(B)ii), respectively; and 

(5) adding a new paragraph (4) to read as 
follows: 

““(4) Non-DISCRIMINATION,— 

“(A) A pipeline transporting gas pursuant 
to this subsection shall do so without dis- 
crimination. 

“(B) An intrastate pipeline receiving gas 
pursuant to this subsection shall provide 
transportation service pursuant to this sub- 
section without discrimination.”’. 

(b\(1) Title III of the Natural Gas Policy 
Act of 1978 (15 U.S.C. 3361-3375) is amend- 
ed by adding the following new section: 

“SEC. 316. OPEN ACCESS CARRIAGE. 

“Upon request by any person, the Com- 
mission shall order any interstate pipeline 
to provide transportation service without 
discrimination unless the pipeline demon- 
strates to the Commission that it lacks the 
physical capacity necessary to render the 
service. The Commission may implement 
this section by rule or order, and may 
attach appropriate terms and conditions 
consistent with the fullest practicable use of 
capacity. The rates and charges for trans- 
portation service under this section shall be 
just and reasonable within the meaning of 
the Natural Gas Act.”’. 

(2) The table of contents of the Natural 
Gas Policy Act of 1978 (15 U.S.C. 3301 note) 
is amended by adding after the item relat- 
ing to section 315 the following: 


“Sec, 316. Open access carriage.”’. 


October 15, 1986 


SEC, *22, FUEL USE ACT. 

(a) The following sections of the Power- 
plant and Industrial Fuel Use Act of 1978 
(42 U.S.C. 8301 et seq.) are repealed: 

(1) sections 103 (a)16), (a)(18), (a)(19), 
and (a)(29) (42. U.S.C. 8302 (a)(16), (a)(18), 
(a)(19), and (a)(29)); 

(2) sections 201(1) and 202 (42 U.S.C. 
8311(1) and 8312); 

(3) section 302 (42 U.S.C. 8342); 

(4) section 401 (42 U.S.C. 8371); 

(5) section 402 (42 U.S.C. 8372); and 

(6) section 405 (42 U.S.C. 8375). 

(b) The table of contents in section 101(b) 
of the Powerplant and Industrial Puel Use 
Act of 1978 (42 U.S.C. 8301(b)) is amended 
by striking the items relating to the sections 
repealed by subsection (1) of this section. 

(cX1) Section 102 of the Powerplant and 
Industrial Fuel Use Act of 1978 (42 U.S.C. 
8301) is amended by striking “major fuel- 
burning installations” each place it appears. 

(2) Section 103 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8302) is amended— 

(A) in subsection (a)(13)B), by— 

(i) striking clause (ii)(ITI); 

(ii) striking “; or” at the end of clause 
(ix), and inserting a period in its place; 
and 

(iii) inserting ‘“‘and’”’ at the end of clause 
(iD); 

(B) in subsection (a)(15), by striking “or 
major fuel-burning installation” each place 
it appears; 

(C) in subsection (a)(20), by striking “or 
major fuel-burning installation”; 

(D) by redesignating subsections (a)(17), 
(aX20), (ad(21), (ad(22), (a)(23), (a)(24), 
(a)(25), (aX26), (aX27), and (a)(28), as sub- 
sections (a)(16), (a)(17), (a)(18), (a)(19), 
(aX20), (a)(21), (a)(22), (aX23), (a)(24), 
(a)(25), respectively; 

(E) in subsection (b), by striking ‘‘or major 
fuel-burning installation” wherever this 
phrase appears; 

(F) in subsection (b)(1)(D), by striking ev- 
erything after ‘synthetic gas involved” and 
inserting in its place a period; and 

(G) by striking subsection (b)(3), and re- 
designating subsection (b)(4) as subsection 
(bX3). 

(3) Section 104 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8303) is amended to read as follows: 

“The provisions of this Act shall apply in 
all the States, Puerto Rico, and the territo- 
ries and possessions of the United States.”. 

(4) Section 211 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8321) is amended by striking subsection (c) 
and redesignating the following subsections 
accordingly. 

(5) Section 303 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8343) is amended by— 

(A) striking “or installation” and ‘‘or in- 
stallations” wherever the phrases appear; 

(B) striking “or 302” wherever the phrase 
appears, 

(C) striking subsection (a3); 

(D) amending subsection (b)(1) to read as 
follows: 

“(1) The Secretary may prohibit, by rule, 
the use of natural gas or petroleum under 
section 301(b) in existing electric power- 
plants.”’; 

(E) in subsection (b)(3), striking “or major 
fuel-burning installation”; and 

(F) amending the last sentence of subsec- 
tion (bx(3) to read as follows: “Any such 
rules shall not apply in the case of any ex- 
isting electric powerplant with respect to 





October 15, 1986 


which a comparable prohibition was issued 
by order.”’. 

(6) Section 403 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8373) is amended by striking— 

(A) in subsection (a)(1), “major fuel-burn- 
ing installation, or other unit” and the 
comma immediately preceding this phrase 
and “installation, or unit’’ and the comma 
immediately preceding this phrase; 

(B) in subsection (a2), “installation, or 
other unit” and the comma immediately 
preceding that phrase, and “installation, or 
unit” and the comma immediately preced- 
ing that phrase; 

(C) in subsection (a)(2), the last sentence; 
and 

(D) subsection (a)(3). 

(7) Section 404 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8374) is amended by striking— 

(A) in subsection (c), “new or’ in phrase 
“applicable to any new or existing electric 
powerplant”; and 

(B) subsection (g). 

(8) Section 701 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8411) is amended by striking— 

(A) in the last sentence of subsection (b), 
“or installation’; 

(B) subsection (c); 

(C) in the title of subsection (d), “AND 
EXEMPTIONS”; 

(D) in the first sentence of subsection 
(d)(1), “or any petition for any order grant- 
ing an exemption (or permit)”; 

(E) in subsection (d)(1)(B), ‘or in the con- 
sideration of such petition’; 

(F) in subsection (f), “or a petition for an 
exemption (or permit) under this Act (other 
than under section 402 or 404),”; and 

(G) subsection (g). 

(9) Section 702 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8412) is amended by striking— 

(A) in the title of subsection (a), “OR EX- 
EMPTION”; 

(B) in subsection (a), “or granting an ex- 
emption (or permit)”; 

(C) subsection (b), and redesignating sub- 
section (c) as subsection (b); 

(D) in the first sentence of subsection 
(b)(1) (as redesignated) “, or by the denial 
of a petition for an order granting an ex- 
emption (or permit) referred to in subsec- 
tion (b),”; 

(E) in the first sentence of subsection 
(b)(1) (as redesignated), ‘such rule, order, or 
denial is published under subsection (a) or 
(b)” and inserting in its place “such rule or 
order is published under subsection (a)’’; 

(PF) in the first sentence of subsection 
(b2) (as redesignated), “the rule, order, or 
denial” and inserting in its place “the rule 
or order”; 

(G) in the second sentence of subsection 
(b)(2) (as redesignated), “(or denial there- 
of)”; and 

(H) in subsection (b)(3) (as redesignated), 
“any such rule, order, or denial” and insert- 
ing in its place “any such rule or order”. 

(10) Section 711 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8421) is amended by striking in the first sen- 
tence of subsection (a), “or major fuel-burn- 
ing installation”. 

(11) Section 721 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8431) is amended by striking subsection (c) 
and redesignating subsection (d) as subsec- 
tion (c). 

(12) Section 723 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8433) is amended by striking subsection (b) 


CONGRESSIONAL RECORD—SENATE 


and redesignating subsections (c) and (d) as 

subsections (b) and (c), respectively. 

(13) Section 731 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8441) is amended by striking— 

(A) “or major fuel-burning installation” 
wherever the phrase appears; and 

(B) “title II or” subsections (a1) and 
(g3). 

(14) Section 745 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8455) is amended by striking in the first sen- 
tence of subsection (a), “from new and exist- 
ing electric powerplants and major fuel- 
burning installations’ and inserting in its 
place ‘‘from existing electric powerplants”. 

(15) Section 761 of the Powerplant and In- 
dustrial Fuel Use Act of 1978 (42 U.S.C. 
8471) is amended by striking— 

(A) in subsection (a), ‘“‘any existing or new 
electric powerplant or major fuel-burning 
installation” and inserting in its place “any 
existing electric powerplant”; and 

(B) in subsection (b)— 

(i) “new or” in the phrase ‘‘In the case of 
any new or existing facility’; and 

(ii) “except to the extent provided under 
section 212(b) or section 312(b)” and the 
comma immediately preceding that phrase. 

(d)(1) Subject to paragraphs (2) and (3), 
title II of the Natural Gas Policy Act of 
1978 (15 U.S.C. 3341-3348) is repealed, and 
the items relating to title II are stricken 
from the table of contents of that Act. 

(2) A rule promulgated by the Commission 
under title II of the Natural Gas Policy Act 
of 1978 shall continue in effect only with re- 
spect to the flow-through of costs incurred 
before the enactment of the Oil and Gas 
Production Revitalization Act, including 
any surcharges based on such costs. 

(3) The Commission may take appropriate 
action to implement this section. 

SEC. *23. LIMITED ANTITRUST EXEMPTION FOR IN- 
DEPENDENT PRODUCER COOPERA- 
TIVES. 

(a) There shall be available as a defense to 
any civil or criminal action brought under 
the Federal antitrust laws as that term is 
defined in section 2(37) of the Natural Gas 
Policy Act of 1978 (15 U.S.C. 3301(37)), or 
any similar State law, with respect to action 
taken to develop cooperative associations of 
independent producers or actions taken by 
such cooperative associations to carry out 
any voluntary agreement or plan of action 
to market natural gas if— 

(1) the action is necessary to market natu- 
ral gas, and 

(2) the action is not taken for the purpose 
of reducing competition. 

(b) For purposes of this section, the term 
“independent producer” means, with re- 
spect to any quarter, any person other than 
a person to whom subsection (c) of section 
613A of the Internal Revenue Code of 1954 
does not apply by reason of paragraph (2) 
(relating to certain retailers) or paragraph 
(4) (relating to certain refiners) of section 
613A(d) of such Code. For purposes of the 
preceding sentence, paragraphs (2) and (4) 
of section 613A(d) shall be applied by substi- 
tuting “quarter” for “taxable year” each 
place it appears in such paragraphs, and by 
substituting ‘‘$1,250,000" for “$5,000,000” in 
paragraph (2) of section 613A(d). 

SEC. *24. FAIR STANDARD FOR COMPARING COST 
OF PURCHASED GAS SUBJECT TO 
COMMISSION JURISDICTION. 

Section 4(a) of the National Gas Act of 
1938 (15 U.S.C. T17(b)) is amended by 
adding at the end thereof the following new 
paragraph: 

“In ascertaining whether any amount paid 
in any purchase of natural gas for resale 


31319 


(other than a first sale of natural gas as de- 
fined in section 2(21)) of the Natural Gas 
Policy Act of 1978 (15 U.S.C. 3301) is just 
and reasonable, the Commission shall con- 
sider the full cost of the purchased gas, 
both demand and commodity rates, it sepa- 
rately stated. Nothing in this section shall 
affect the jurisdiction of the Secretary of 
Energy under section 3 of the Natural Gas 
Act. 


Subtitle C—Regulatory Reform Provisions 


SEC. *31. REGULATION OF PRODUCTION WASTES 
UNDER THE SOLID WASTE DISPOSAL 
ACT. 

Section 8002(m) of the Solid Waste Dis- 
posal Act (42 U.S.C. 6982(m)) is amended— 

(1) in paragraph (1) by adding at the end 
the following new sentence: “The Adminis- 
trator shall conduct the study and prepare 
the report with the participation of the Sec- 
retary of Energy; the Secretary of the Inte- 
rior; representatives of the industries associ- 
ated with the exploration, development, or 
production of crude oil or natural gas or 
geothermal energy; and representatives of 
the State agencies that regulate these in- 
dustries.”; and 

(2) in paragraph (2) by striking ‘“twenty- 
four months from the date of enactment of 
the Solid Waste Disposal Act Amendments 
of 1980” and inserting in its place “January 
1, 1989”. 

SEC. *32. UNDERGROUND STORAGE TANKS. 

Section 9001(1) of the Solid Waste Dispos- 
al Act (42 U.S.C. 6991(1)) is amended— 

(1) in subparagraph (H) by inserting ‘; 
well cellars, sumps, or drip collection de- 
vices” after “lines” and by striking out ‘‘or” 
at the end thereof; and 

(2) by redesignating paragraph (I) as para- 
graph (J) and by adding after paragraph 
(H) the following: 

“(1 hydraulic lift reservoirs in petroleum 
marketing operations, oil/water separators 
in petroleum marketing, production, and re- 
fining operations, and sumps in petroleum 
marketing and refining operations, or”. 

SEC. 33. FACILITY VARIANCES. 

It is the sense of Congress that— 

(1) fundamentally different factors var- 
iances should be available for any facility 
that is subject to national effluent limita- 
tion guidelines including, but not limited to, 
the oil and gas extraction point source cate- 
gory; and 

(2) applications for fundamentally differ- 
ent factors variances from national effluent 
limitation guideline requirements for the oil 
and gas extraction industry may be based 
upon information and supporting data 
which had not been submitted earlier to the 
Administration, but shall be submitted at 
the earliest practicable time that such infor- 
mation and data exist or is reasonably avail- 
able to the applicant. 

SEC. *34, RECYCLING ACTIVITIES. 

It is the sense of Congress that the “mix- 
ture” and “derived from” rules in 40 CFR 
261.3 were promulgated to address inten- 
tional dilution of hazardous wastes—a mis- 
management practice designed to avoid reg- 
ulation. These rules should not be invoked 
to curtail recycling activities in the petrole- 
um industry designed to conserve resources 
or minimize wastes when there is no infor- 
mation to demonstrate that the recycling 
activities pose any threat to human health 
and the environment. 

SEC. *35. LAND TREATMENT SITES. 

It is the sense of Congress that— 

(1) the Administrator of the Environmen- 
tal Protection Agency should encourage 





31320 


continued use of land treatment for petrole- 
um waste to the extent consistent with pro- 
tection of human health and the environ- 
ment; 

(2) protection of human health and the 
environment from air emissions at land 
treatment units under the Solid Waste Dis- 
posal Act. should be addressed solely 
through promulgation of standards under 
section 3004(n) of such Act: 

(3) land treatment should be determined 
to be protective of human health and the 
environment under subsections (d), (e), and 
(g) of section 3004 of the Solid Waste Dis- 
posal Act when an owner or operator dem- 
onstrates there will be no statistically signif- 
icant increase of hazardous constituents 
over background to groundwater arising 
from placement of hazardous waste at the 
land treatment unit; and 

(4) land treatment of petroleum waste 
should be considered to be a method of 
treatment which meets the requirements of 
section 3004(m) of the Solid Waste Disposal 
Act (42 U.S.C. 6924(m)). 

SEC. *36. INDUSTRY ACCOUNTING METHODS. 

It is the sense of Congress that— 

(1) the full cost method of accounting for 
oil and gas operations should continue to be 
recognized as an acceptable financial ac- 
counting practice in the United States; 

(2) financial statements using the full cost 
method should continue to be accepted in 
documents filed with all Federal agencies, 
including registration statements, reports 
and other filings with the Securities and Ex- 
change Commission; and 

(3) the use of the full cost method should 
not be limited by action of any Federal reg- 
ulatory agency. 

Mr. GRAMM. Mr. President, I offer 
this amendment on behalf of myself 
and Senators NIcKLES, McCLuRE, 
Doe, STEVENS, COCHRAN, HELMS, MurR- 
KOWSKI, SIMPSON, WALLOP, BorEN, Do- 
MENICI, and KASSEBAUM. 

Mr. President, we have seen now for 
2 years a decline in the price of petro- 
leum products; and while that has 
caused applause in some segments of 
the economy, it has caused great prob- 
lems in other segments of the econo- 
my. We have a growing foreign energy 
dependence. Oil imports are rising. 
The impact of declining prices is deci- 
mating the economic infrastructure of 
the oil and gas industry, affecting 
hundreds of thousands of jobs in 
Texas, Louisiana, Oklahoma, and all 
the other oil-producing areas of the 
country. Declining prices represent 
bad news for producers, and for all 
those involved in the production proc- 
ess. Declining prices not only affect 
our energy production for today, but 
also our future ability to produce 
energy here at home, to provide do- 
mestic fuel for our national defense 
and for our economic growth. 

As a result of this problem, I began 
about 6 months ago, along with a half- 
dozen other Members of the Senate, to 
have meetings with the oil and gas 
producing associations, with the De- 
partment of Energy, the Department 
of the Interior, and the White House, 
to try to come up with a comprehen- 
sive program to build a national 
energy policy. 


CONGRESSIONAL RECORD—SENATE 


The amendment I have offered 
today is not going to be voted on be- 
cause of the debate concerning the 
Fuel Use Act, which we know would 
produce a filibuster, thereby holding 
up the Senate and denying us a vote. 
We are also aware that while we had 
hoped to get this adopted in the 
Senate, our chances of consideration, 
much less passage, in the House, in 
what is hopefully the last day or two 
of the Senate session, are remote. 

We decided that instead of bringing 
it up for a vote today, we would bring 
it up for debate. We understand that 
there are those who wish to join as co- 
sponsors today, but we thought it was 
important to put the bill on the table 
before the Senate, before the Ameri- 
can people, to let those who are con- 
cerned about energy know that there 
is concern in the Senate and in Con- 
gress and in the Federal Government. 

The bill before us, the Oil and Gas 
Production Revitalization Act, is, I be- 
lieve, the first comprehensive effort 
we have undertaken that has had the 
support of the White House and that 
has also had the support of oil and gas 
producers around the country. The 
bill has no special uniqueness. The 
Senate has voted on provisions of the 
bill—at least some parts. Many Mem- 
bers of this body and many Members 
of the House have introduced similar 
measures. Some elements of this bill 
have been adopted in one form or an- 
other by both Houses. 

What is significant about the bill is 
that it is the first successful effort to 
bring the industry concerns together 
with the administration concerns and 
with senatorial concerns in a compre- 
hensive bill. 

The Oil and Gas Production Revital- 
ization Act has four basic provisions 
related to oil. 

No. 1, it repeals the windfall profit 
tax, something that the Senate, in its 
wisdom, has already done; something 
that the House, in the next day or 
two, will vote on as an amendment to 
the debt ceiling. Their intention is to 
strip that provision and kill it. I hope 
thay will not be successful, but that is 
the intent. 

There are many of us who would 
argue that the windfall profit tax was 
never good public policy; but if there 
ever were any windfall profit, that sit- 
uation long ago has been eliminated, 
because now there are no profits what- 
soever. This confiscatory amendment, 
while not collecting any revenues 
today, would come into effect if oil 
prices rose by $4 a barrel, and today is 
imposing over $500 million in paper- 
work costs on oil and gas producers 
around the country. 

The second oil-related provision is to 
mandate by law that 50 percent of the 
oil for the strategic petroleum reserve 
comes from domestic sources. 

The third element of the bill is a vi- 
tally important one. It asks for an eco- 


October 15, 1986 


nomic and security assessment of oil 
imports. It asks that the Department 
of Commerce and the National Securi- 
ty Council conduct a comprehensive 
analysis of the security and economic 
impact of rising oil prices, and that all 
potential remedies be looked at, in- 
cluding an oil import fee. As I am sure 
my colleagues are aware, we have had 
much heated debate on this subject. 
In fact, cosponsors of this bill differ 
greatly on the issue of an oil import 
fee. 

The purpose of this study is to put 
all the facts on the table, to have a 
comprehensive analysis. By getting 
the facts on the table, we let the facts 
speak for themselves. I think it is vi- 
tally important that we agree on a 
common set of facts. 

Everybody is entitled to his own 
opinions but everybody is not entitled 
to his own facts. 

For those of us who opposed the oil 
import fee, if the facts bear out our 
position, it will be strengthened; if the 
facts do not bear out our position, ob- 
viously we have to go back and look at 
our position. And the converse is true 
for those who take the other position. 

But I think it is vitally important if 
we are ever to build a consensus on 
this important issue to examine what 
are the security perils of increasing 
imports, what remedies are available, 
what those remedies are to cost and 
what represents the best national 
policy that can be undertaken by the 
Congress and the President. One indis- 
pensible ingredient of that debate is 
going to be getting the facts on the 
table so we can deal with a commonly 
agreed-upon set of facts. 

The fourth and last oil provision has 
to do with the exportation of oil field 
equipment and drilling technology. 
Again, it is vitally important that we 
get all the facts on the table concern- 
ing the export availabilty of oil field 
drilling equipment and technology 
from France, Britain, West Germany, 
and Japan. We need to determine 
whether or not current restrictions ac- 
tually prevent American technology 
from being transfererd to the Eastern 
bloc and to the Soviet Union, or 
whether the net impact is merely to 
transfer American jobs producing oil 
field equipment and technology from 
Houston, New Orleans, and other 
American cities, Western Europe and 
Japan. 

That I submit, Mr. President, is a 
critical issue, and only by having the 
facts, an agreed-upon set of facts on 
the table, can we hope to settle that 
issue. 

The natural gas provisions of the bill 
break down into five basic areas. 

No. 1 is to set out a nondiscrimina- 
tory program to require the pipelines 
to carry gas from small producers to 
assure their access to markets. 





October 15, 1986 


The second provision has to do with 
fairness in competition, in terms of 
rate design. It simply requires, in set- 
ting a rate design schedule, that in 
comparing United States and Canadi- 
an gas the comparison has to be on a 
competitive basis where all costs are 
allocated and where the comparison is 
on a full and comparable cost basis. 

I want to make it clear to my col- 
leagues that there is nothing protec- 
tionist about this provision. This pro- 
vision in no way affects the ability of 
Canadians to sell gas. It simply re- 
quires that in setting a rate structure 
the allocation between fixed and vari- 
able costs must be taken into account 
and the comparison of purchase of gas 
and the interstate pipeline has to be 
on a full and comparable cost basis. 

The next provision simply allows 
antitrust exemption where small inde- 
pendent gas producers can pool their 
gas into one supply source for sale to a 
pipeline. 

The next provision would repeal the 
demand restraints of the Fuel Use Act, 
and the final provision would repeal 
incremental pricing. 

I know the Fuel Use Act demand 
constraints are very controversial. 
There are those who are concerned 
that if we do something to open up a 
market for natural gas we are going to 
hurt coal. 

I want my colleagues to know that I 
have had a series of meetings with 
coal producers and I worked out what 
I believe can be an effective compro- 
mise to allow us, when this bill is in- 
troduced next year, to move ahead 
with the support of the coal industry. 
In part, that compromise simply en- 
tails requiring future boilers that are 
built to be coal capable; not that we 
have to build the transportation to 
bring the coal to the boiler, not that 
we have to build the scrubbers, but 
that it simply has to be coal capable so 
that at some future time if the price 
ratio should change the transfer could 
occur. 

I think that represents an important 
step at compromise, and I am hopeful 
that when the bill comes up early next 
year we will have the support of the 
coal industry and those who are con- 
cerned about coal. 

I submit, Mr. President, there is no 
reason that there ought to be a con- 
flict between oil and gas on the one 
hand and coal on the other, what we 
want is a viable national energy policy 
and that is in the interest of every- 
body. 

Finally, there are some six provi- 
sions that relate to regulatory reform 
aimed at trying to prevent the heavy 
burden of regulation from stifling the 
production of oil and gas here at home 
at a price the consumer could afford 
to pay. 

Let me say in conclusion, Mr. Presi- 
dent, because I know others want to 
speak, that I think this is an impor- 


CONGRESSIONAL RECORD—SENATE 


tant step forward. There is nothing in 
the bill that is dramatic. There is 
nothing in the bill that in and of itself 
will solve our energy problems, but it 
is a first comprehensive step forward. 
It is a step forward that I believe can 
speed the day when we can make the 
energy industry competitive. 

I submit, Mr. President, that it is in 
the interest of every American con- 
sumer to preserve a viable domestic 
energy industry. 

I submit this amendment to my col- 
leagues. I want to make it clear that 
this bill will be introduced on the first 
day of the new session, that we will, in 
the interim, after Congress adjourns, 
have major meetings here in Washing- 
ton and around the country to develop 
support for this bill. 

We hope to work out a comprehen- 
sive compromise with the coal indus- 
try so that we can have a unity of pur- 
pose when this bill is introduced on 
January 3. 

I am hopeful that consideration of 
this bill with other suggestions that 
might be developed over the recess 
will be one of the first orders of busi- 
ness of the new Congress. 

I thank my colleagues and those in 
the administration who have worked 
so hard to help us get to this point. 

I am happy to yield as much time as 
he might consume to the distinguished 
chairman of the Energy Committee, 
Senator McClure. 

Mr. McCLURE. Mr. President, I 
thank the Senator from Texas for 
yielding. 

I want to thank him, too, for the 
leadership that he has given to put- 
ting together a package that now has 
the administration’s support. 

A great many of these single ele- 
ments we have looked at separately 
and sometimes in combination, but 
never before have we been able to put 
together a package that had broad 
enough support that the administra- 
tion would join in support of it. 

I commend the Senator from Texas 
because without his leadership, I do 
not believe that would have happened. 

In the Energy and Natural Re- 
sources Committee, we have held a 
number of hearings over the last sev- 
eral years, most recently less than 60 
days ago, looking at world oil supply 
and outlook. 

I am convinced and I think most of 
the members of the committee are 
convinced that there is a danger to the 
military security of the United States 
and a threat to the economic well- 
being of the United States in the mas- 
sive fluctuations of price in the energy 
market. 

We are not the masters of our own 
fate. The industry is hostage to ac- 
tions that are taken outside of this 
country by other people seeking their 
own self-interest, much less interested 
in what is good for the United States 


31321 


or good for the industry in the United 
States. 

This package of proposals, which 
has been put forward in the form of 
this amendment and of which I am 
proud to be a cosponsor, would go a 
short distance towards dampening 
some of that tremendous price swing 
in the marketplace which, when it is 
going down, feels good to some people; 
when it is going up, feels good to 
others and exactly it is true while it is 
going down, feels awful to some 
people; when it is going up, feels awful 
to others. 

I think there is a reason for us to try 
to find a way to dampen those swings. 

One of the reasons for my support 
of this package among its several pro- 
visions is the study to which the Sena- 
tor from Texas has made reference, 
the study of the effect of import fees. 
I have been among those who have op- 
posed import fees and I am still op- 
posed to import fees, but I will have to 
say as I look at the tremendous poten- 
tial for damage that lies in the fluctu- 
ations induced by others for other 
than market reasons that we may 
have to try to find some mechanism by 
which we can dampen that swing. 

I guess I have a little sense of deja 
vu. This is where I entered in 1968. As 
a Member of the other body, I was 
forced to look at the old oil import 
quota program that had been designed 
in the 1950’s to protect the U.S. oil in- 
dustry against a flood of cheap foreign 
oil, and it had worked. It had worked 
to preserve a two-price market system 
in which the U.S. oil producer had a 
share and foreign producers had an- 
other share. 

But it had worked for a number of 
years and it was under test at that 
time. It was under test growing during 
1968, 1969, 1970, 1971, and 1972 as oil 
imports increased dramatically over 
that period of time. 

We had gotten above 30 percent, 35 
percent, oil imports by 1973, and a 
great many people were concerned 
about what it was going to mean to 
the future security of this country. 

Mr. President, if you will look at 
today’s facts, we are about where we 
were in percentages in 1973, with the 
future looking very much worse than 
it looked in 1973 because our own do- 
mestic oil industry is in a much more 
weakened position today than they 
were in 1973. 

I think it is time for us to address 
this problem. 

I commend the Senators who have 
joined in this and who will join in the 
sponsorship of this particular package 
for the forward-looking nature of this 
proposal. 

It may well be that we will not get 
all of this proposal. It may well be 
that there will be other things added 
to it before it is completed, but I join 
with the Senator from Texas in believ- 





31322 


ing that it is important for us to raise 
this flag at this time. 

I am sorry we will not get a vote on 
it, I am mindful of the fact that the 
repeal of the Fuel Use Act, without 
any protection for the coal industry, 
would bring about a filibuster. The 
senior Senator from Kentucky has 
made very clear that without protec- 
tion for the coal industry in the Fuel 
Use Act this bill would not go any- 
where. The junior Senator from Ohio 
has indicated that the antitrust provi- 
sions, without being cleared in the Ju- 
diciary Committee, would alone be 
enough for him to filibuster this issue. 

So I suppose it is impossible for us 
today to expect to be able to pass the 
piece of legislation, as constructive as I 
believe it to be. I think that is too bad. 
I wish we could. And perhaps next 
year we will be able to persuade those 
Members and others that the better 
part of wisdom is to permit us to move 
forward on some kind of legislation 
that provides a greater degree of 
energy security for this country with a 
lower cost to our economy than simply 
sitting doing nothing. 

Again, I thank the Senator from 
Texas for his leadership and for yield- 
ing me this time that I may make 
these remarks. 

Mr. JOHNSTON addressed 
Chair. 

The PRESIDING OFFICER. The 
Senator from Louisiana. 

Mr. JOHNSTON. Mr. President, as 
the unanimous-consent agreement in- 
dicated, this amendment will be dis- 
cussed and then withdrawn. That is 
necessary because, in the closing 
hours, neither this nor any other 
matter of controversy can be effective- 
ly considered here on the floor of the 
Senate. 

I think, however, Mr. President, that 
this amendment serves a very useful 
purpose by bringing up the whole 
question of oil and gas, its domestic 
production, its importation, and the 
effect upon not only national security 
but the economy of the country. 

Mr. President, it is very unfortunate 
that neither the American public nor 
this administration seems to be aware 
of what is happening to this country. 
Just on October 9, an article appeared 
in the Baton Rouge Morning Advocate 
quoting my friend, the Secretary of 
the Interior, Donald Hodel. The arti- 
cle reads: 

Oil industry advocated of government 
help and their political allies have failed to 
make a case so far with the Reagan adminis- 
tration and the public interior, Secretary 
Donald P. Hodel said Wednesday. 

“They can make that case until doomsday 
and nobody is going to have any sympathy 
for them” Hodel told reporters at a lunch 
sponsored by the Washington Journalism 
Center.” 

Mr. President, I ask unanimous con- 
sent that a copy of this article be 
printed in the Recorp at this point. 


the 


CONGRESSIONAL RECORD—SENATE 


There being no objection, the article 
was ordered to be printed in the 
REcorp, as follows: 


{From the Baton Rouge Morning Advocate, 
Oct. 9, 1986) 


Hope. Crres OPPosITION TO OIL INDUSTRY 
BaILout 


WASHINGTON.—Oil industry advocates of 
government help and their political allies 
have failed to make a case so far with the 
Reagan administration and the public, Inte- 
rior Secretary Donald P. Hodel said 
Wednesday. 

“They can make that case until doomsday 
and nobody is going to have any sympathy 
for them,” Hodel told reporters at a lunch 
sponsored by the Washington Journalism 
Center. 

Anyone proposing to aid the industry 
better know why you disadvantage one in- 
dustry to benefit another,” he said, and that 
is a question not yet answered. 

The Reagan administration “generally op- 
poses bailouts” for particular industries, and 
the public does not see the oil industry’s 
problems as a general problem, Hodel said. 

“People in the industry are urging the ad- 
ministration to do something,” but if the ad- 
ministration agreed, “the reaction of the 
American people would be, ‘Why are you 
doing this?’ 

President Reagan has convened an inter- 
departmental committee to consider wheth- 
er the industry’s problems pose a threat to 
national security. The domestic oil and gas 
exploration and production industry has 
been devastated by a 50 percent price col- 
lapse since last December. 

The committee’s findings will be essential 
to lay the groundwork for any aid proposals, 
Hodel said. The panel has not prejudged the 
issue, he added; ‘They could come up and 
say Don Hodel is wrong.” 

Deputy Energy Secretary William Martin, 
chairman of the committee, already has said 
he is “not an easy sell on the national secu- 
rity argument,” Hodel said. 

As he has on previous occasions, Hodel 
said he believed that rising oil imports—4.2 
million barrels a day last year and currently 
more than 6 million barrels a day—could 
pose a threat to national security by leaving 
the economy vulnerable to supply interrup- 
tion. 

“If you imagine that the citizens will do 
without, there will always be enough to run 
fighter planes,” he said, explaining that by 
harm to national security, he meant “a 
shortfall in the amount of oil needed to run 
this economy at the level the people expect 
or demand.” 

Even if the committee agrees—and other 
Cabinet officers remain to be convinced, he 
said—‘‘solutions that will be offered will not 
be identical with solutions offered to date. I 
say that without knowing what the solu- 
tions are going to be.” 

As an example, Hodel said, ‘If the idea is 
to protect an oil supply, then there are op- 
tions that haven't been presented to me yet, 
such as additional agreements with Canada 
and Mexico.” 

On other occasions, Hodel has identified 
Defense Secretary Caspar Weinberger as 
one who “wants to see the documentation” 
for the proposition that the industry’s trou- 
bles pose a threat to national security. 

Mr. JOHNSTON. Mr. President, 
that indeed is very unfortunate. I find 
it uncharacteristic of Secretary Hodel 
that he would speak in terms of no 
sympathy because I am sure he could 


October 15, 1986 


not have meant that, considering the 
personal suffering that is inflicted on 
my State of Louisiana, I know on 
Texas, and on Oklahoma and other 
States. So I am sure he did not mean it 
in that respect. 

Nevertheless, Mr. President, this ad- 
ministration ought to be aware of 
what is going on in terms of the de- 
struction of an industry, the systemat- 
ic destruction of the domestic oil and 
gas industry, bit by bit, piece by piece 
being dismantled; workers are going to 
other jobs, and, of course, presently 
being unemployed and having great 
difficulty. 

But in very short order, Mr. Presi- 
dent, in historic terms, in a matter of 
months, that industry is going to be 
incapable of producing the domestic 
oil and gas that it needs to and that it 
soon will be called upon to do once 
OPEC gets its act back together. 

When OPEC gets its act back to- 
gether—and who knows how long that 
will be, perhaps 2 years, perhaps 3 
years—but when that happens, and 
they call upon the domestic oil and 
gas industry, when the sheiks in the 
Middle East say, ‘““We want $2 a gallon 
or $3 a gallon for gasoline,” or what- 
ever the unacceptable price is, and we 
say, “All right, Gulf and Standard Oil 
and Exxon and independents, produce 
your domestic oil and gas,” and they 
are unable to do so, then it will not be 
a question of sympathy, it will be a 
question of national security, It will be 
a question of the national economics. 

So, Mr. President, we ought to be 
doing more than we are doing. We 
ought to start with the one measure 
that I know the senior Senator from 
Oklahoma has been so active with, and 
others on this floor, and that is an oil 
import fee. It is the one and only 
really effective thing you can do for 
the oil and gas industry. 

Other things are important. Things 
in this bill are important. For exam- 
ple, the repeal of the Fuel Use Act 
ought to be done, should have been 
done a long time ago. And I guess we 
will have to do it next year. I think we 
can muster up the votes to do that and 
some of these other things next year. 

But the most important thing that 
can be done at this time is an oil 
import fee. That ought to be done not 
just because of the revenue it raises, 
which this country direly needs to go 
against the deficit, but because it will 
at least preserve in part the domestic 
oil and gas industry, so that when the 
time comes where we will call on them 
again to do their part for domestic in- 
dustry, when we call on them to 
produce that 10 million barrels a day 
which they have produced in the past, 
they will be able to do so. If we do not 
have an oil import fee and if the situa- 
tion goes on very much longer, they 
will be unable to respond when called 
upon. 





October 15, 1986 


So, Mr. President, the items in this 
package are good items. I can only say 
that I would like much more. I know 
the distinguished Senator from Texas 
would like more. Instead of a study, I 
know he would like to do something 
about the price of oil and gas. I know 
he would like to get the package en- 
acted, but we must face political reali- 
ty as we find it. 

So, Mr. President, I am delighted 
that the package has been brought up 
for discussion here because it renews 
our resolve, those of us in the oil and 
gas-producing States, to be ready next 
year to fight with renewed vigor a 
battle that is important and vital not 
only for us in our States, but for the 
country as a whole and for the indus- 
try as a whole. So it reminds us to be 
ready for next year for those battles, 

Mr, President, I yield whatever time 
the distinguished senior Senator from 
Oklahoma may need. 

Mr. NICKLES addressed the Chair. 

Mr. BOREN addressed the Chair. 

The PRESIDING OFFICER. The 
Chair would indicate that the junior 
Senator from Oklahoma was seeking 
recognition first. There is ample time 
for both Senators. 

The Chair will recognize the junior 
Senator from Oklahoma. 

Mr. NICKLES. I will be happy to 
defer. 

The PRESIDING OFFICER. The 
Chair will recognize the senior Sena- 
tor. 

Mr. BOREN. Mr. President, I thank 
my colleague for his courtesy. 

I am very pleased to join with him 
and with the Senator from Texas in 
cosponsoring this proposal, the Energy 
Revitalization Act, which is before us 
in amendment form. 

I am very pleased that the Senator 
from Texas has indicated it is his in- 
tention to bring this forward as a bill 
early next year and we can get action 
on it as soon as possible. I look for- 
ward to being a part of that effort. 

It is crucial that we begin to move. I 
think it is important that we set the 
stage now; that we bring to the atten- 
tion of our colleagues in the Congress 
and those across this country the situ- 
ation that we face. 

We speak here not from a parochial 
point of view. Of course, as everyone 
knows, the States of Oklahoma and 
Texas and Louisiana and other energy 
producing States are suffering terribly 
at the current time. 


O 1245 


We have what can only be called a 
severe economic recession bordering 
on a depression in those particular 
States. But we must also look more 
broadly at the national interest. It is 
not in the interest of anyone in the 
United States of America to destroy 
the domestic oil and gas industry in 
this country. It is not in the interest of 
the American consumer that they 


CONGRESSIONAL RECORD—SENATE 


should once again be completely at the 
mercy of the OPEC nations. We will 
be the hostages of the OPEC nations 
in terms of the price and level of pro- 
duction which they then will be em- 
powered to set if we destroy our own 
domestic industry here at home. It is 
certainly not in the interest of nation- 
al security and preparedness that we 
have that kind of dependence upon 
sources of production that are very, 
very unreliable and are subject to dis- 
ruption by forces beyond our control. 

The facts are clear. We are becoming 
more dependent every single day. We 
have 470,000 wells in this country— 
stripper wells that produce less than 
10 barrels of oil each day. At the price 
of $15 a barrel, 28 percent of those 
wells will be shut in. If the prices fall 
back into the range of $10 which is not 
beyond the realm of possibility we will 
lose 41 percent of those wells. That re- 
source will be forever gone; a tremen- 
dous waste, wells that have been paid 
for by the American people, the envi- 
ronmental costs have already been 
paid as well as the exploration costs. 

So we must take some action to pre- 
vent it. In September 1985 we were de- 
pendent upon foreign sources for only 
27 percent of our petroleum needs in 
this country. Just less than a year 
later in July 1986 that figure had risen 
to 39 percent, jumping from 27 per- 
cent foreign dependence to 39 percent 
dependence in less than a year’s time. 

Imports from Saudi Arabia during 
this period, for example, have risen 
from 27,000 barrels a day to over 
700,000 barrels a day in less than a 
year. We are destroying, as has been 
said by those who have spoken before 
me, the domestic industry and our 
ability for that industry to operate. 

I think there are people in this coun- 
try who simply believe that the pro- 
ducers of this country, the industry, 
the supply and service industry can 
simply sit back and when the price of 
oil recovers, we can turn on the water 
tap again just like going to the sink in 
the apartment in the kitchen and 
turning the water back on when it is 
time. It is not that simple. Once the 
industry is destroyed, once those wells 
are plugged, they cannot be brought 
back into production at anything ap- 
proaching a reasonable cost. In some 
cases it is simply not technologically 
possible to bring them back into pro- 
duction. Once the supply and service 
industry is gone and those people have 
sought jobs in other fields, they 
simply cannot be brought back over- 
night into oil and gas production, ex- 
ploration, and the servicing of those 
particular operations. We cannot 
expect people in this country to sit 
aside for 5 or 10 years without employ- 
ment, without any source of liveli- 
hood, simply waiting until the price of 
oil in this country again reaches the 
cost of production. It cannot happen. 


31323 


We are destroying the future talent 
pool of this country. You look at what 
has happened in the four great 
schools of petroleum engineering; the 
University of Oklahoma, the Universi- 
ty of Texas, Texas A&M, and LSU. 
Two years ago we had over 7,000 stu- 
dents majoring in fields that related to 
the production and exploration of oil 
and gas. This year that number has 
fallen to fewer than 3,000. 

We are destroying an industry im- 
portant to our national security. We 
are destroying an industry important 
to the American consumer in terms of 
having a stable and fair price for a 
product that they have to have in the 
future. 

So this is a step in the right direc- 
tion. Repeal of the windfall profits tax 
has already passed on the floor of the 
Senate. It should be passed by both 
Houses, enacted into law, and signed 
by the President. He has already indi- 
cated he would do so. We are spending 
millions and millions of dollars on use- 
less paperwork that does not produce 
one thing. If there was an example of 
a bureaucratic waste, that is continu- 
ing the windfall profit tax with hun- 
dreds of millions of dollars of cost to 
the private sector without the Govern- 
ment collecting one single penny, 
without any person in this country 
benefiting by one single cent as a 
result of this additional burden on the 
private sector. : 

Repeal of the Fuel Use Act, and in- 
cremental pricing is long overdue so 
we can use the economic resources to 
shut in natural gas for example that 
we have already found. We already 
can produce it. We can use it now, and 
yet it is being shut in because of the 
artificial restrictions in the law and 
not because of market forces. 

I hope we can eventually move to an 
import fee. I think by the time we 
come back next year the studies that 
will have been made by the adminis- 
tration and others will find sufficient 
justification on the basis of national 
security to take action. I think that 
will happen. I hope we can incorporate 
in this package next year the proposal 
from Senator BENTSEN, and our col- 
league, Senator Gramm, has proposed 
that the President should establish a 
national energy policy, and should 
provide that in no case should the 
United States be dependent on im- 
ports for more than 50 percent of our 
oil needs. 

I think that is critically important. 
It sets a short timeframe in which to 
have action from this Congress that 
would keep us below the 50-percent 
mark. We are well on our way back to 
that level if we do not take action. We 
are well on our way to the loss of 
thousands of marginal wells across 
this country. We are well on our way 
to the destruction of an industry in 
this country. What will it mean when 





31324 


3 or 4 years down the road the price of 
oil recovers and we are having to 
spend, consumers are having to spend 
millions of dollars more for the energy 
they need? 

It will mean this: those dollars will 
not go into the pockets of American 
producers. They will not go into the 
paychecks of thousands of American 
workers here at home. They will not 
go to keep an industry stable so we 
will have some impact on world price 
to keep it reasonable. They will go into 
the pockets of foreign producers and 
foreign employees who will be exact- 
ing a price far greater from the Ameri- 
can consumer than would have been 
exacted if we had kept a competitive 
industry here in the United States. 

So I commend my colleagues for this 
effort. I am pleased to join with them 
on it. I hope we will see very, very 
quick action on this package and on 
additional steps soon after Congress 
comes back into session next year. 

I thank my colleague for his courte- 
sy in yielding. 

Mr. NICKLES addressed the Chair. 

The PRESIDING OFFICER. The 
junior Senator from Oklahoma is rec- 
ognized. 

Mr. GRAMM. Mr. President, I yield 
to the junior Senator from Oklahoma 
under whose leadership the Senate re- 
pealed the windfall profits tax earlier. 

Mr. NICKLES. I thank my friend 
and colleague from Texas. I compli- 
ment him on the work that we have 
done together in putting together this 
bill, the Oil and Gas Production Revi- 
talization Act. 

Mr. President, I will say at the 
outset I am disappointed we are not 
going to have a vote on this package 
today because I think we need it. I 
think the country needs it. When I say 
we need it, a lot of people say that is 
just the Senator from Oklahoma talk- 
ing about his State. But I am not just 
speaking for the State of Oklahoma. I 
am speaking for the country. 

Our country needs to wake up to the 
fact we are growing ever more depend- 
ent on foreign sources that are not 
stable. This is not a free market situa- 
tion at work today. We have a situa- 
tion where we have foreign sources 
that are manipulating the market. 

The Presiding Officer knows the 
OPEC ministers are meeting today in 
Geneva. They are discussing what 
type of price arrangements there will 
be. In other words, they are setting 
the price. You have manipulated 
prices set by governments; not a free 
market price. And if they do not come 
to an agreement, you will probably see 
again a real aberration in prices, possi- 
bly with oil prices falling down as low 
as, this Senator might guess if they 
come to total disagreement, $6 or $7 or 
$8. If that happens, you are going to 
have total devastation in the domestic 
oil and gas industry. We will be 
making ourselves very much more de- 


CONGRESSIONAL RECORD—SENATE 


pendent on foreign sources, even more 
so than we are today. I think America 
should wake up to the fact that we are 
becoming much, much more depend- 
ent and we are just standing idly by. 

A year ago this country imported 27 
percent of its crude oil and products 
needs. Last month we crossed the 40- 
percent range. That figure is continu- 
ing to accelerate because we are not 
drilling. We are not replacing the re- 
serves and the production that we 
found many years ago. A lot of those 
wells are being depleted. A lot of those 
wells are being shut in and shut in pre- 
maturely as the prices have fallen. 
They are not economic. 

Our lifting costs are much higher 
than most other countries’ costs. So 
we are shutting down a lot of that 
marginal production. We have over 
450,000 stripper wells which are mar- 
ginal producing wells. They produce 
less than 10 barrels per day. And 
about a third of those right now are 
not economic. If prices decline much 
further, as well they might if an 
accord is not reached in Geneva, we 
will find even higher and higher per- 
centages of those wells being shut in. 
If they are shut in, we will be import- 
ing more and more and more. 


O 1255 


I might remind my colleagues when 
we had the shortage of 1973 we were 
only importing, about 35 percent of 
our oil and refined product needs. In 
the shortage of 1979, we had the long 
gaseline lines and we had factories 
shut in, and we were importing again, 
about 44 percent. Right now, we just 
crossed the 40 percent threshold and 
we are becoming more and more de- 
pendent. 

So we have not learned from history. 
There are some things that we ought 
to be doing to help this industry. I am 
not talking about having the Govern- 
ment write checks. I am not talking 
about major subsidies. 

The elements in this package were 
well thought out. They were put to- 
gether by several of us who were 
trying to see what we could do to help 
this industry when it is hurting and it 
is on its back, really in bad shape. 
What can we do? Several of these pro- 
posals are nothing but common sense. 
They should have been enacted some- 
time ago. 

I really regret the fact that we are 
not able to get this bill up for a vote. I 
know the legislative time schedule is 
short. I know my good friend, the Sen- 
ator from Kentucky, has indicated he 
would speak at great length if we had 
the coal capability provision put in as 
it is. I respect his position. But I think 
we could and should be able to work 
out a combination to help the coal in- 
dustry as well as the oil and gas indus- 
try. This Senator also happens to have 
coal production in his State. He is not 
interested in doing one thing to help 


October 15, 1986 


one industry to the detriment of an- 
other. I really think that economics 
should be making these fuel choice de- 
cisions and not politicians and bureau- 
crats. 

There are several provisions in this 
legislation that would help, and help 
today. Repeal the windfall profit tax. 
We should not have passed the wind- 
fall profit tax in 1979, but certainly 
now there is no justification whatso- 
ever to have a windfall profit tax on 
the books. There is no windfall profit! 
The people who are producing oil in 
my State and throughout the country 
are losing money. They are not - 


making money. So let us eliminate this 
ridiculous tax, get it off the books. It 
is probably the most anti-free enter- 
prise legislation that ever passed Con- 
gress. It should be repealed by Con- 


gress. 

I am pleased that we did repeal it in 
the Senate. I proposed that amend- 
ment. It was repealed by a vote of 51 
to 47. It is still pending on the debt 
limit bill, but most people are saying 
now that the House will not agree and 
will strip that provision from the debt 
limit extension. 

I hope that is not the case. 

This proposal also calls for an assess- 
ment, a study, on the impact and secu- 
rity consequences of the amount of oil 
that we are importing, which I have 
already addressed. One of the prob- 
lems that we have is that we have an 
industry presently still diverted on an 
oil import fee. I support an oil import 
fee. I do not think we should become 
that dependent on foreign sources. 

I also think it is ludicrous that we 
had a domestic tax called a windfall 
profit tax, which has only been on do- 
mestic producers, not on foreign oil 
and not on foreign imports. We have 
had the absurd policy of taxing domes- 
tic producers and not taxing imports, 
thereby hurting our own producers 
and helping foreign production. 

So we have encouraged imports and 
we have discouraged domestic produc- 
tion. That makes no sense. It makes 
no sense whatsoever. 

I would hope that maybe as a result 
of this study, we will be able to get 
some conclusive information together 
that, yes, we are becoming too depend- 
ent on foreign sources. Maybe the 
minds and powers will agree, and 
maybe we can get more support 
throughout Congress, that it really is 
not to the advantage of this country to 
become so dependent on unreliable 
sources, particularly when those 
sources are Government-controlled 
and Government-manipulated and 
very much not in the best interest of 
the United States in the long term. 

We have several other provisions in 
this proposal that I think will help. 
We have a transportation provision for 
natural gas. I know Senator Forp and 
others have worked on this at some 





October 15, 1986 


length in the Energy Committee. We 
worked on this for a couple of months. 
This provision basically would help us 
move gas from the production areas to 
the consuming area. That is a provi- 
sion that will help not only the natu- 
ral gas industry, but also the produc- 
tion industry and the consumers. 

In addition, the bill repeals the Fuel 
Use Act. It makes no sense whatsoever 
to have politicians and bureaucrats de- 
ciding what fuel we will or will not 
burn. Let us allow the marketplace to 
make those decisions. 

We have several provisions dealing 
with regulatory reform. We need regu- 
latory reform. Again, this is common 
sense, with well-thought-out proposals 
that I think can help the industry and 
our country. 

Mr. President, when we reconvene 
for the 100th Congress I can say as 
this Senator, a principal cosponsor of 
this legislation, I will do everything I 
can possibly do to enact the legisla- 
tion. I hope at that time we will be 
successful. I hope with the meeting in 
Geneva which is currently occurring, 
that we are not too late. I hope by the 
time we are convening in January and 
February of next year that we will not 
find the domestic industry of our fur- 
ther decimated. 

Mr. President, I rise in support of 
my distinguished colleague from 


Texas and the Oil and Gas Production 
Revitalization Act. As everyone knows 
by now, our domestic petroleum indus- 
try is on the ropes. The energy securi- 
ty of our country is seriously threat- 


ened by restrictive laws, declining 
prices, and imports. 

It is high time we got on with the 
reform measures set forth in this Oil 
and Gas Revitalization Act. In addi- 
tion, I believe we need to enact an oil 
import fee to set a floor on the price 
of ‘oil in order to keep our marginal 
wells from being shut in. The econom- 
ic and security assessment of oil im- 
ports provision in this bill will go a 
long way toward furnishing a basis for 
such a fee. 

Let me recap briefly the symptoms 
and problems we face in the industry. 


RIG COUNT 

Rig counts, the tangible test of our 
energy exploration and development 
effort, have dwindled from a high of 
4,500 rigs in 1982 to 814 nationwide as 
of yesterday, down from 1,906 a year 
ago. In my own State, we once had 800 
rigs running; today we have only 
about 100. 

OIL PRICES 

Prices have dropped to the point 
where it is no longer economic for 
many American wells to continue to 
operate. With west Texas intermediate 
crude quoted at $14.23 a barrel, strip- 
per wells, which comprise two-thirds 
of the producing wells in the United 
= today, have become uneconom- 
ic. 


CONGRESSIONAL RECORD—SENATE 


At $15 a barrel, the Nation will lose 
22 percent of its over 450,000 stripper 
wells. This means over 100,000 lost 
wells, 277,000 barrels a day of lost pro- 
duction, and three quarters of a mil- 
lion barrels of lost U.S. reserves. 

OIL IMPORTS 

Saudi net back arrangements and 
price cutting have resulted in imports 
of 5.9 million barrels a day for the last 
month, up 42 percent above the aver- 
age a year ago. We are fast reap- 
proaching the reliance levels of the 
1970’s embargo days. It will not be 
long until we are 50 percent reliant on 
foreign oil imports. 

JOBS 

The fall in oil prices and accompany- 
ing increase in imports has had a cata- 
strophic effect on employment in the 
industry. Studies show that over 51 
percent of the oil and gas service in- 
dustry jobs—some 223,000—have been 
lost since the beginning of 1985, and 
another 60,000 to 70,000 additional 
jobs will disappear by the end of 1986. 
In my State alone, about 60,000 jobs 
have been lost. 

The loss of jobs has had a ripple 
effect on the economy. Thirty-three 
banks have failed in our State in the 
last 2 years and bankruptcies are up 51 
percent. 

Mr. President, with conditions such 
as these, it becomes all the more im- 
portant that we have an effective oil 
and gas reform program such as that 
in our bill. We need to repeal the 
windfall profit tax as the Senate did a 
few weeks ago. The industry has paid 
out $77 billion in the last 5 years and 
received absolutely nothing in return. 

We also need to continue filling the 
strategic petroleum reserve, preferably 
with domestic oil. If it ever made sense 
to buy low and later sell high, now is 
the time. 

We also need to get a strong con- 
tract carriage provision in order to get 
our natural gas to market to keep 
income up for our producers and save 
money for consumers. Despite an 
excess pipeline capacity in the United 
States, producers in my State are still 
shut in. The Energy Information Ad- 
ministration predicts that a full imple- 
mentation of carriage provisions will 
save the consumer about 30 cents per 
million cubic feet and _ stimulate 
demand for natural gas by about 0.25 
trillion cubic feet in the next 3 to 4 
years. 

Mr. President, the bill contains 
many other provisions which will help 
the industry to get back on its feet. 
Repeal of the Fuel Use Act will allow 
consumers to choose the least costly 
fuel available, thus saving the con- 
sumer billions of dollars. 

In addition, repeal of FUA should 
further reduce domestic consumption 
of imported oil. Repeal of incremental 
pricing will remove legal impediments 
to the full and efficient use of domes- 
tic energy supplies and will further 


31325 


help to reduce the use of imported for- 
eign oil. 

Other provisions will help domestic 
gas to compete with foreign gas im- 
ports on an equal basis, encourage the 
export of oil field equipment and drill- 
ing technology, and permit small, in- 
dependent producers to pool their nat- 
ural gas for more effective resale to 
the consumer. In addition, the envi- 
ronmental provisions go a long way 
toward establishing workable condi- 
tions with which the industry can live, 
while protecting the environment at 
the same time. 

Mr. President, I would ask our dis- 
tinguished colleagues from the other 
side of the aisle join us in cosponsor- 
ing this bill and making it a truly bi- 
partisan measure with the backing of 
both parties, as well as industry and 
the President. 

Since it is so late in the legislative 
year, I promise to work with my col- 
league and friend from Texas, as well 
as with my colleague from Idaho, the 
distinguished chairman of the Senate 
Energy and Natural Resources Com- 
mittee, in the coming months to 
ensure that hearings are held on this 
landmark legislation and with the dis- 
tinguished majority leader to ensure 
that it gets the highest legislative pri- 
ority in the next Congress. 

We owe at least that much and more 
to the industry and the security of our 
country. 

The PRESIDING OFFICER (Mrs. 
KASSEBAUM). Who yields time? 

Mr. GRAMM. Madam President, I 
yield such time as the distinguished 
Senator from New Mexico desires. 

Mr. DOMENICI. Madam President, 
I yield myself 5 minutes. 

The PRESIDING OFFICER. There 
are 4 minutes remaining. 

Mr. DOMENICI. I yield myself 4 
minutes. 

Madam President, obviously, as a 
Senator from New Mexico, I have a 
genuine parochial interest in this 
issue. Frankly, my concern goes well 
beyond that. I am very concerned 
about our growing dependence upon 
foreign oil, and, on the other hand, 
the significant diminution or lessening 
of our reserves of both oil and natural 
gas. 

This country is a country that exists 
on energy. If our country is denied the 
capability of having enough energy to 
run its day-to-day life, its industrial 
life, its business life, if we are denied 
that even in some small respect as we 
were in the one boycott that we had, 
this country just cannot make it. 

We can harken back to the days of a 
very small percentage of the oil that 
was coming in being denied us by some 
of the countries in the Middle East 
who said we could not have any more, 
but just a very small portion. To show 
the significance of oil in those days 
and their derivatives by way of gaso- 





31326 


line and diesel fuel, we almost had 
civil strife. 

You recall in some of the Eastern 
States as people waited in line for gas- 
oline starting at 3 or 4 in the morning 
and sometimes until the evening to get 
to the pumps, we even had murders 
occurring in the lines as they waited 
because of the anxiety and hatred 
that was generated. I believe in one 
State a fight occurred and there was 
even a shooting. We were only talking 
about a small percentage reduction in 
the oil necessary for our ordinary 
daily lives and the operation of this 
energy-consuming Nation which has 
received such benefits that our materi- 
al wealth is unparalleled and unri- 
valed. They go together. Our material 
and economic strengths are tied to the 
fact that we need great quantities of 
energy every day. 

We built that machine around oil 
and natural gas. Obviously, we have 
huge quantities of coal and in the elec- 
tric generating area that is very, very 
important. 

But you see what is happening to 
the United States today as we have 
moved in the past few years more 
toward independence, as we moved 
away from dependence on imported 
oil, how strong we began to feel about 
our future and how confident. 

Now, with the precipitous drop in 
prices, engineered, obviously, because 
the Middle East countries were no 
longer capable of managing that 
market so they created a glut and 
down came the prices, with it go our 
hopes of independence and, converse- 
ly, our growing dependence on foreign 
oil. The numbers have all been spoken 
here today. 

The projections into the late part of 
this decade and the early part of the 
next have been spoken of in terms of 
how dependent we will be. 

I must say, Madam President, that 
we do not have the capacity to diversi- 
fy as we thought. We thought perhaps 
we would have moved down the line 
substantially with new technology on 
converting coal. We have not. We did 
one of the big programs, synthetic 
fuels, which went by the boards, for 
better or for worse; we are still signifi- 
cantly dependent on foreign oil, basi- 
cally foreign oil in its original form, 
and we have not broadened our capac- 
ity to use coal in diversified ways, in 
ways that are conversions from the 
natural state to the extent that we 
should. 

The reason I am here today is I 
know we are not going to pass this bill. 

The PRESIDING OFFICER. May I 
say to the Senator from New Mexico 
that he would have to get time from 
the Senator from North Dakota. 

Mr. GRAMM. Madam President, 
would the distinguished Democratic 
manager yield me 10 minutes of his re- 
maining 15 minutes? 


CONGRESSIONAL RECORD—SENATE 


Mr. BURDICK. I yield to the Sena- 
tor 10 minutes. 

Mr. GRAMM. I thank the Senator. 

I yield to the Senator from New 
Mexico 2 additional minutes. 

Mr. DOMENICI. Madam President, 
I thank both Senators. 

I come here not because I believe 
there is a chance in the waning days of 
this session to pass this bill, but clear- 
ly, I would like to send some hope to 
those people in my State and sur- 
rounding energy States, in particular 
the oil and gas producers and those 
who depend upon them for a liveli- 
hood, that we have not forgotten 
about them, that our country under- 
stands that we have a real crisis, and 
that indeed, we must take whatever 
steps we can consistent with our eco- 
nomic system to alleviate the growing 
dependence and the tremendous mal- 
aise, human and economic, that exists 
in many of the States that were pro- 
ducing oil and gas in abundance for 
the United States. 

If we passed a windfall profit tax 
repeal, I am sure it would die in con- 
ference. Strategic petroleum reserve— 
the bill provides for 50 percent of it 
coming from American production. We 
know many of the other provisions 
that have been alluded to. They are 
good, they are solid, they have a real 
chance of helping. 

I am most pleased with the provision 
that requires an economic and security 
assessment of imports and the reliance 
thereon. I am hopeful that, even with- 
out passing this bill, the President and 
his advisers will do that. The Presi- 
dent has the authority to do it and ul- 
timately will have the authority to re- 
spond if the study comes out, as we 
think it will, with some kind of import 
fees to begin to alleviate the problem 
that is so rampant in Oil Patch and 
that will soon be felt across this land 
if we do not develop more reserves; if 
we do not get out there and produce 
more oil for ourselves; and if we con- 
tinue to grow in reliance, as far as nat- 
ural gas, on Canadian natural gas and 
diminished use of it in the United 
States because we are substituting 
other products. 

I am hopeful that next year, we will 
get started in a serious way on these 
items I have enumerated, all those in 
the proposed bill, many on natural 
gas, including the repeal of the Fuel 
Use Act. I compliment the original co- 
sponsors of it. I am pleased to be here 
to support it and pledge my assistance 
next year as we attempt to move this 
kind of measure early in the session so 
it may reach some kind of fruition and 
try to do some good for the people in 
our States and in the United States. 

Mr. GRAMM. Madam President, I 
yield 5 minutes to the distinguished 
Senator from Wyoming. 

Mr. SIMPSON. Madam President, I 
shall not require that much time. I ex- 
press my appreciation to the Demo- 


October 15, 1986 


cratic manager (Mr. Burpick] for his 
courtesy in yielding some time to Sen- 
ator GRAMM. 

Madam President, I rise to support 
the amendment and to commend the 
efforts of my colleagues, Senator 
Gramm, Senator NICKLES, my good 
friend and fellow Wyomingite, Senator 
WaALLop, and others who have joined 
in cosponsoring this very important 
piece of legislation. This amendment 
will nicely cover just about all the 
bases in our attempts to assist the be- 
leaguered oil and gas industry in this 
country. People, who live outside of 
the traditional oil and gas exploration 
States are just starting to realize that 
our increased dependence on foreign 
oil imports and our greatly reduced ex- 
ploration and production activities in 
this country will result in an unstable 
and insecure reliance on energy sup- 
plies from other countries. 

This legislation contains some very 
important provisions such as the 
repeal of the windfall profit tax, as- 
sessment and review of oil imports 
from both the economic and security 
perspective, repeal of the Fuel Use Act 
and a variety of regulatory reform 
provisions. 

This legislation is a starting point—a 
good place to begin. It is not perfect, 
and I trust that all interested parties 
will take the opportunity to have their 
voices heard during hearings when 
this legislation is reviewed both by 
Congress and by the oil and gas indus- 
try. 

I will be right there participating in 
that debate. Many issues will have to 
be reviewed, such as retaining coal ca- 
pability to ensure fuel flexibility for 
new boiler plants. Another issue which 
needs to receive our serious consider- 
ation is the provision which expresses 
the sense of the Congress that the cur- 
rently accepted “full cost” and “‘suc- 
cessful efforts” accounting methods 
presently used by the oil and gas in- 
dustry should not be changed. Requir- 
ing small independent producers to 
change from the full cost method to 
the successful efforts method could 
affect about 60 percent of the industry 
and would result in an enormous eco- 
nomic burden during the transition. 
The successful efforts accounting 
method would not reflect the business 
status of independent producers as 
fairly as would the full cost method. 
These are but two examples of the 
provisions that need to be seriously 
considered and studied and I pledge 
my support in working hard for the 
passage of this legislation, 

I just want to state, as those of us 
have from the oil and gas-producing 
States, that here is an opportunity to 
do something. We have as yet done 
nothing. 

I do not think people realize what is 
happening in the oil and gas-produc- 
ing States. They are pleased with the 





October 15, 1986 


lower price of the product. They are 
pleased with the lower fuel prices and 
fuel oil prices. It has been covered 
very well and I shall not be repetitive. 
I simply say it is a deeply serious prob- 
lem and I appreciate the recognition 
of it by our colleagues around the 
United States. 

Madam President, I support the 
amendment. I know full well we have 
our time crush upon us. I know it will 
come before us next year. I am very 
proud to cosponsor this legislation be- 
cause I think, finally, it begins to 
cover all the bases as to what we have 
to do here. People, as I say, who live 
outside these traditional States realize 
this increasing dependence, which 
presses us back on things that Senator 
NICKLEs so carefully reviewed. But the 
several things among all the things in 
this bill that please me the most are 
the work we do in repealing the wind- 
fall profit tax—which is, of course, not 
in existence right now because there 
are no profits to windfall. So we do not 
do it. 

There is one provision in here that is 
particularly good. That is on export of 
oil field equipment and drilling tech- 
nology. I think that is one we need to 
pay attention to. That can help our 
large construction and machine tool 
industry. Exporting oil field equip- 
ment and drilling technology into 
China and other countries around the 
world, I think, will be very, very im- 
portant and reduce these current re- 
strictions on trade. 

The transportation of natural gas 
portions of the amendment are excel- 
lent. The natural gas rate design is 
something we have needed. The re- 
pealing of the demand restraints of 
the Fuel Use Act is very important; 
particularly repealing the incremental 
price requirements of the Natural Gas 
Policy Act. Those have caused us lots 
of pain. And decontrol did not lead to 
increased prices, it led to lower prices. 

I hope we will correct all of it. This 
is a good vehicle to correct all of it and 
I commend the sponsors for the provi- 
sions on waste requirements, under- 
ground tanks, land treatment sites, 
and industry accounting methods. 

Madam President, I conclude by 
urging my colleagues to give this 
measure consideration during the com- 
mittee process and during floor debate 
at the appropriate time. We need to 
heed the warnings in this country and 
begin to heal the pain and anguish of 
the oil and gas industry, which is, 
indeed, our bread and butter in my 
State and in the country. I think this 
is a critically important measure. I 
commend all the cosponsors of both 
parties who have been so active on 
this measure. 

I thank the Chair. 

Mr. MURKOWSKI. Madam Presi- 
dent, I rise today in strong support of 
the Oil and Gas Production Revitaliza- 
tion Act. I am a cosponsor of this bill 


CONGRESSIONAL RECORD—SENATE 


and believe that many of its provisions 
are sorely needed to help our domestic 
energy industry through these diffi- 
cult economic times. 

This amendment is being offered 
under a unanimous-consent agreement 
that provides for the amendment to be 
withdrawn once a record has been de- 
veloped on the extreme need for the 
relief provided by the act. I under- 
stand and appreciate the constraints 
which have forced such an agreement. 
However, I am disturbed that many 
Members of the Senate are willing to 
ignore the very serious situation 
facing our domestic energy industry. 

The ramifications of that situation 
are extreme—not only to the hundreds 
of thousands of people who have lost 
their jobs in recent months because of 
the decline in oil prices—but to this 
Nation as a whole. 

Mr. President, we are rapidly losing 

our ability to provide for our own 
energy needs at a level which ensures 
any degree of national security. Our 
reliance on imported oil has increased 
by 42 percent since last year at this 
time. And there are plenty of reasons 
to believe that imports will continue to 
rise. 
The obvious question presented by 
this scenario is: At what level of im- 
ports is our national security put at 
risk? 

This bill provides a clear way to 
answer that question. It directs the 
National Security Council and the De- 
partment of Commerce to conduct a 
thorough assessment of the impact of 
oil imports on national security. Such 
an evaluation would give us many of 
the answers that we do not now have. 

This bill does other things which 
would be of great benefit to the 
energy industry of this country— 
repeal of the windfall profits tax, 
repeal of the Fuel Use Act, repeal of 
incremental pricing of natural gas— 
just to name a few. 

Mr. President, my only objections to 
this bill is that it does not go far 
enough. I believe there are other steps 
we can take to address the problem 
currently facing us. 

An oil import fee proposal compara- 
ble to the one introduced by Senator 
DoMENICcI, myself and a dozen other 
Senators in August would be a wel- 
come addition to this bill. Repeal of 
the prohibition on the export of 
Alaska north slope crude oil is another 
provision that we should be consider- 
ing in the present context. 

I understand the reality of the situa- 
tion, however, both of those proposals 
are more controversial than the provi- 
sions of this amendment—if that is 
possible. As a consequence, all that we 
can do here today is to build a record 
and hope that we are capable of 
taking constructive action early next 
year. 

Let me assure my colleagues, Mr. 
President, that we will be back next 


31327 


year. The problems facing this Nation 
as a result of the current price of oil 
will not go away before next year— 
they will only get worse. Congress 
must face up to these problems sooner 
or later, and the sooner the better. 

The PRESIDING OFFICER. Who 
yields time? 

Mr. GRAMM. Madam President, 
under the unanimous-consent request, 
I yield back the remainder of my time 
and withdraw the amendment. 

Mr. BURDICK. The minority yields 
back the remainder of its time. 

The amendment (No. 3409) 
withdrawn. 

Mr. JOHNSTON. Madam President, 
I rise in support of H.R. 5465 , the Na- 
tional Appliance Energy Conservation 
Act of 1986. I hope the Senate will act 
promptly to return this bill to the 
House and that the House will send it 
on to the President for his signature. 

The legislation before us is identical 
in every provision affecting energy 
conservation in applicances to the bill 
the House passed overwhelmingly on 
September 22. The only difference is 
the absence of a single section of the 
House-passed bill affecting a matter 
being considered by the Federal 
Energy Regulatory Commission. This 
provision was deleted by the Commit- 
tee on Energy and Natural Resources 
because it is in no way related to appli- 
ance energy conservation and because 
the controversy over the matter could 
imperil passage of the appliance effi- 
ciency legislation that has such wide- 
spread support. 

These amendments to the appliance 
efficiency provisions of the National 
Energy Act are supported by a coali- 
tion of more than 40 organizations, 
running from the National Association 
of Manufacturers to the Sierra Club 
and the Methodist Church. The de- 
tails of the bill establishing national 
appliance efficiency standards in Fed- 
eral law for all major appliances are 
the result of intense negotiations in- 
volving representatives of the appli- 
ance manufacturers and State and en- 
vironmental groups. This process is an 
interesting one and one that we may 
see more of as long as the current 
leadership vacuum persists at the Fed- 
eral level. This legislation was devel- 
oped by a coalition of private, public 
interest and local government groups 
because the current administration, 
imprisoned in its free market ideology, 
has abdicated its responsiblities under 
the existing appliance efficiency law. 
Ironically, this abdication now threat- 
ens the appliance manufacturing in- 
dustry, and that is the reason we are 
amending the existing appliance effi- 
ciency law to nearly eliminate any sub- 
stantive administration role in it. 

In many respects the provisions of 
H.R. 5465 resemble the original legis- 
lation contained in the 1978 National 
Energy Act that directed the Depart- 


was 





31328 


ment of Energy to promulate manda- 
tory appliance efficiency standards. 

Then, as now, there was a perception 
that standards would result in energy 
savings that the free market would 
not provide. 

Then, as now, States were showing 
considerable interest in establishing 
efficiency standards of their own as a 
way of capturing the benefits of 
energy conservation for their citizens. 

Then, as now, the appliance manu- 
facturing industry was seeking relief 
from a potential patchwork of State 
regulation that threatened to make 
design and marketing of appliances 
much more costly and difficult. 

Then, as now, the quid pro quo for 
the preemption of State appliance ef- 
ficiency standards was establishment 
of uniform, achievable Federal stand- 
ards. 

The policy of the 1970’s was never 
implemented because the administra- 
tion refused to promulgate the re- 
quired Federal standards. A clash of 
conservative ideology led us in a com- 
plete 360-degree circle to where we are 
today. Free-market conservation ideol- 
ogy abhors Federal standards. States- 
rights conservative ideology abhors 
preemption of State law. 

So the administration completely 
emasculated the Federal appliance ef- 
ficiency standards required under the 
National Energy Act, promulgating a 
no-standard standard at the Federal 
level. That was the good news for the 
appliance industry. The bad news was 
that the administration has no inten- 
tion of allowing the Federal no-stand- 
ard standard to preempt appliance ef- 
ficiency standards promulgated by 
States. 

The door was open for a system of 
State regulation of the appliance in- 
dustry far more extensive than any- 
thing that could occur under the most 
vigorous and lopsided implementation 
of the National Energy Act. It had 
taken years to recreate the exact con- 
ditions that led to the original appli- 
ance efficiency legislation, but this ad- 
ministration had done the job. 

We now have States moving agres- 
sively to promulgate energy efficiency 
standards for new appliances. These 
standards, inevitably, given the 
vacuum in Federal leadership, will 
impose a considerable burden on the 
appliance industry. Meanwhile, con- 
sumers have lost years during which 
the more efficient appliances this leg- 
islation would mandate could have 
been saving them money. And this has 
happened as a direct and entirely for- 
seeable result of administration policy. 

Having recreated the problem, the 
administration has done nothing to de- 
velop the solution to it that is being 
presented to the Senate today. The ad- 
ministration has simply been irrele- 
vant. 

The solution we are considering 
today has been developed by an ex- 


CONGRESSIONAL RECORD—SENATE 


traordinary coalition of industry and 
environmentalists and other interested 
parties who, in effect, are playing the 
role that the administration is sup- 
posed to play in our form of Federal 
Government. This coalition has nego- 
tiated a proposal that addresses the 
national interest in energy conserva- 
tion, the industry interest in rational 
regulation and the State interest in 
protection of its citizens. This coali- 
tion has come to Congress with its 
case for reform because there is no 
way that an administration that is so 
beset with contradictory ideological 
impulses could deal with its problems. 

We will deal with them. This legisla- 
tion will pass, and it will certainly lead 
to less regulation. Moreover, it will 
save energy and it will save resources. 

It is a shame that, with its ideologi- 
cal blinders so firmly in place, the ad- 
ministration has been able to contrib- 
ute nothing to these worthy goals. 

Consideration of H.R. 5465 in the 
Committee on Energy and Natural Re- 
sources was not without some contro- 
versy. It is appropriate that the legis- 
lative history reflect that controversy 
and the manner in which the commit- 
tee dealt with it. There was a concern 
on the part of several Members that 
the rule to be issued by the Depart- 
ment of Energy under the bill to set a 
standard for small gas furnaces, set a 
standard for these furnaces that pro- 
vides a level playing field for gas utili- 
ties, especially in the starter homes 
and multifamily builder markets. First 
cost—not operating cost—influences 
builders selecting heating equipment 
for starter homes and multifamily 
dwellings. In many cases the consumer 
does not have a choice because the 
builder has made it for him. This is a 
major reason which efficiency stand- 
ards for appliances achieve benefits 
for consumers that the free market 
cannot provide. 

According to the American Gas As- 
sociation, the average annual heating 
bill for a natural gas home is $457, 
compared to $1,160 for electric resist- 
ance heating. In 1995, the gap may 
widen. The owner of a natural gas- 
heated home would pay $404 annually, 
while an_ electric-resistance-heated 
home would require $1,526 annually 
for heating. Thus, natural gas would 
seem to be far less costly to operate, 
offering significant payback advan- 
tages over electric resistance heating. 

Gas utilities vigorously compete in 
the marketplace by encouraging build- 
ers to add gas water heaters and other 
gas appliances in the home to provide 
the ultimate customer with an even 
greater positive payback. 

We were concerned that, if the Sec- 
retary establishes a standard for small 
gas furnaces at 78 percent, as original- 
ly proposed, the first cost differential 
between electric resistance heat and 
natural gas will increase to the point 
where builders will not even consider 


October 15, 1986 


gas heat, particularly in southern 
areas where heating is a minor part of 
the overall residential energy require- 
ment. With regard to the first cost, ac- 
cording to AGA, a 71-percent efficient 
gas furnace costs $475. Electric-resist- 
ance-heating equipment costs on an 
average $350, a difference of $125. By 
contrast, a 78-percent efficient gas fur- 
nace entails additional installation and 
duct work cost estimated conservative- 
ly at $150 to $200. Thus, the builder 
could save some $500 per living unit by 
choosing electric resistance heat over 
a 78-percent efficient gas furnace. 

One of the main goals of this legisla- 
tion is to encourage energy conserva- 
tion without unduly altering the eco- 
nomics of fuel choices. This goal will 
be impaired unless the standard for 
small gas furnaces is set so as to avoid 
raising the cost of these furnaces to 
the point where builders are forced to 
select electric resistance heat instead 
of a gas furnace purely on the basis of 
first cost. 

That is why I added language in our 
Energy and Natural Resources Com- 
mittee report making it clear that the 
Secretary must pay due consideration 
to the need for utilities to continue to 
compete fairly when DOC considers 
setting the standard for small gas fur- 
naces. I made it clear the committee 
Was concerned that setting a standard 
for small gas furnaces at or near the 
78-percent level mandated in the bill 
for larger gas furnaces would increase 
the first cost of the small gas furnace 
sufficiently to induce a significant 
switch to electric resistance heating. 

The report language goes on to say 
that the bill will, upon a sufficient 
showing, “* * * forbid a standard for 
small gas furnaces being set at a level 
that would increase the price to the 
point that the product would be non- 
competitive, resulting in minimal 
demand for the product.” 

Madam President, I urge adoption of 
the bill. 

Mr. CRANSTON. Mr. President, I 
am delighted that the Senate today 
will pass legislation establishing na- 
tional energy conservation standards 
for major household appliances, an 
idea I first authored in S. 1360, intro- 
duced in June 1985. 

I appreciate the prompt work of 
Chairman McC.Lure on the latest ver- 
sion of the bill, and want to thank my 
distinguished colleague from Washing- 
ton [Mr. Evans] and the other Sena- 
tors who have worked so hard for pas- 
sage of this important legislation. 

I have been actively involved with 
the appliance efficiency issue since the 
energy crisis in the early 1970’s. I real- 
ized long ago that the future of our 
Nation rests, in part, on more efficient 
use of our energy resources. This bill 
will result in very large energy savings 
nationally. 





October 15, 1986 


Since S. 1360 was first introduced, 
extensive negotiations have occurred, 
and the bill we pass today, which the 
House has previously passed, has the 
complete support of the trade associa- 
tions representing the appliance indus- 
try, as well as the National Resources 
Defense Council and other groups pri- 
marily interested in conserving energy 
and other precious natural resources. 

S. 2781, the National Appliance 
Energy Conservation Act of 1986, is an 
important step toward ensuring Amer- 
ica’s energy future. By eliminating the 
least efficient appliances in the mar- 
ketplace, this bill will, by 1993, cause 
major appliances to be at least 15 to 25 
percent more efficient than the aver- 
age appliance sold in 1985. In addition, 
there are other near-term benefits for 
the American people. 

With national standards and the 
strong State preemption language in 
this bill, manufacturers of major home 
appliances will avoid facing a rapidly 
multiplying patchwork of varying 
standards in each State in which they 
choose to do business, and will have 
their ability to compete in foreign 
markets enhanced. 

It will benefit consumers who oper- 
ate new energy-efficient appliances, 
because they will save money on their 
electric bills. One-third of the energy 
we use in our homes operates electri- 
cal appliances and this percentage is 
increasing. 

Utility ratepayers and shareholders 
will benefit, because as consumers use 
more efficiently the electricity utilities 


generate, utilities can avoid building 
expensive new powerplants to meet 
anticipated demand increases, and can 
cut use of inefficient, costly to run 
powerplants. Just replacing with high- 
efficiency models the 12 million refrig- 


erators and freezers Californians 
owned in 1982 will enable California 
consumers to reduce their energy use 
by an estimated 5 percent, about 1,700 
megawatts. 

The new appliances will cost con- 
sumers about $705 million—much of 
which people would spend routinely 
for appliance replacement—while 
building new powerplants this size to 
meet increasing demands for electrici- 
ty would cost more than $6 billion, 
more than six times as much. 

By adopting clear national standards 
that meet the needs of the States, this 
bill will satisfy each of these interests. 

At the same time, the bill preserves 
the ability of States to respond to sub- 
stantial or unusual local energy prob- 
lems, such as high electricity, gas, 
high dependence on oil—or fuels 
whose price is tied to oil—unusual cli- 
matic conditions, or adverse environ- 
mental or health and safety conditions 
that can be alleviated by energy-saving 
appliances, within the regulatory 
scheme. 

The energy savings at stake are very 
substantial. Before California adopted 


CONGRESSIONAL RECORD—SENATE 


its appliance efficiency standards, re- 
frigerators and _ refrigerator-freezers 
consumed 12 billion kilowatt hours of 
electricity each year, according to the 
California Energy Commission. 

But in 1983, as a result of the appli- 
ance standards on refrigerators and re- 
frigerator-freezers, residential users 
saved around 213 million kilowatt 
hours of electricity. 

California consumers saved $18 mil- 
lion in operating costs on refrigerators 
alone. 

According to the American Council 
for an Energy Efficient Economy, this 
bill will enable the average American 
household to save over $250, and the 
economy to save a total of 22,000 
megawatts of electricity—the equiva- 
lent of the peak output of 22 larger 
powerplants—between now and the 
year 2000. 

DOE now estimates that new power- 
plants—which will be needed unless 
projected electric demand is reduced— 
could cost utility ratepayers upward of 
$1.8 trillion by the end of the century. 

With efficient appliances much of 
this capital expenditure and wasteful 
use of energy resources will be elimi- 
nated. 

Manufacturers will be able to meet 
the standards without undue hard- 
ship, and consumers, utilities, indus- 
try, and the enviroment all will bene- 
fit. 

National use of efficient appliances 
will save consumers billions of dollars, 
ease utility load management prob- 
lems—especially during peak periods— 
hold down future energy costs, free 
capital for other purposes, and permit 
the rapid and least costly reduction of 
emissions from coal-fired plants re- 
sponsible for so much acid rain 
damage. We can provide for our future 
energy needs without endangering our 
environment. 

I am very proud of the role I have 
played in the development of this im- 
portant legislation. 

The PRESIDING OFFICER. All 
time has been yielded back, is there 
any further debate? 

There being no further amendments 
to be proposed, the question is on the 
engrossment of the amendments and 
the third reading of the bill. 

The amendments were ordered to be 
engrossed and the bill to be read a 
third time. 

The bill was read the third time. 

The PRESIDING OFFICER. The 
bill having been read the third time, 
the question is, Shall it pass? 

So, the bill (H.R. 5465) was passed. 

Mr. FORD. I move to reconsider the 
vote by which the bill was passed. 

Mr. BYRD. I move to lay that 
motion on the table. 

The motion to lay on the table was 
agreed to. 

Mr. FORD. Madam President, I sug- 
gest the absence of a quorum. 


31329 


The PRESIDING OFFICER. The 
clerk will call the roll. 

The legislative clerk proceeded to 
call the roll. 

Mr. CHILES. Madam President, I 
ask unanimous consent that the call 
for the quorum be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


THE DRUG BILL 


Mr. CHILES. Madam President, at 3 
o'clock, it is my understanding that 
the Senate will proceed to a cloture 
vote on the drug bill. That vote is very 
important. We know that we are into 
the last few days of this session, and 
we know that if cloture is invoked, we 
would still have 30 hours available for 
debate under the bill. If cloture is not 
adopted, there is no limitation of time. 

I know there are some 14 Senators 
on the Republican side who have writ- 
ten the majority leader expressing 
their disapproval and that they will 
conduct a filibuster on the bill if the 
death penalty is included. I know 
there are perhaps a like number of 
Senators on the Democratic side who 
have also expressed this concern. 

We find ourselves in this kind of di- 
lemma: We have people with very 
strong feelings on both sides of the 
issue of the death penalty, some who 
are taking the position that this bill 
without the death penalty is not 
worth passing and should not be 
passed. We have some on the other ex- 
treme who say that if the bill has the 
death penalty, there will be no bill. 
Somewhere in the middle I think is a 
majority of the Senate, I think a 
strong majority, which says we find 
ourselves with the opportunity to pass 
the most far-reaching bill to deal with 
drugs that Congress has ever had 
before it. We have a bill that has been 
put together within about 2 months— 
again, it is historical for the Congress 
to be able to move this quickly. 

We have to ask ourselves why has 
that happened. It has happened be- 
cause we are a nation under seige. We 
are under seige with the onslaught of 
drugs that have come into our coun- 
try. We are seeing our children 
become victims of addiction to crack 
and many other drugs, but now the 
new wave of crack cocaine that you 
cannot experiment with; if you try it 
once, chances are that you will be 
hooked. If you use it up to three times, 
we know that you will become hooked, 
and it is the strongest addiction that 
we have found. We find again once 
people are hooked, all they can think 
about is staying high, that euphoria 
which they get, but there is a corre- 
sponding down that is just as deep in 
its trough as the high is at the crest of 
the wave. And so we find that people, 
when they are addicted, will go out 
and steal, rob, lie, cheat, take money 





31330 


from any savings, take refrigerators 
out of their houses, anything they can 
get their hands on to maintain that 
habit. 

That, of course, has caused crime to 
go up at a tremendously increased rate 
in our cities and in our States—the 
crimes of burglary, robbery, assault, 
purse snatching, mugging, those 
crimes where people are trying to feed 
that habit. Our local police and our 
sheriffs have found themselves unable 
to cope with the crime, and we are 
finding areas in which drugs are deliv- 
ered in curb service—you just drive 
onto certain streets and the peddlers 
are out there besieging you to show 
you that they have a better form of 
rock, a better form of drugs. 

Because of that, there has been this 
feeling that we had to do something 
about it. I have never seen anything 
strike the Congress with such impact; 
virtually during one recess the minds 
of the Members of Congress changed 
entirely, recognizing that we have a 
terrible problem and we must deal 
with it. 

I think we find in this bill something 
that goes beyond saying that we are 
going to get tough. To do that we have 
very strong penalties, mandatory sen- 
tences for the use of crack in small 
amounts; we distinguish crack and 
make it ome of the most dangerous 
drugs; we deal with designer drugs; we 
deal with many other areas, so there 
are very, very tough law-enforcement 
provisions. 

But at the same time, Madam Presi- 
dent, this Congress is recognizing 
there must be some money for educa- 
tion, we must do something on the 
demand side if we are going to get to 
the root of this problem. So we virtu- 
ally double the funds for interdicting 
drugs, stopping drugs from coming in, 
and we say we are going to do some- 
thing to stop the demand for drugs; we 
are going to do something to encour- 
age every State to provide mandatory 
programs of education kindergarten 
through 12, starting at the earliest 
grades and going through high school, 
to see that we inform our young 
people of the dangers of drugs and 
teach them to be able to say no, to be 
able to resist those kinds of drugs. 

We also are providing some funds 
for rehabilitation. We recognize that 
we have a large number of people who 
are addicted, many of whom we hope 
will seek and get help if they know it 
is available. In my State, the waiting 
list for beds in public rehabilitation 
centers is over 500. Private facilities 
are so terribly expensive there is no 
way they are available to the mass of 
the people. 

We provide funds for those State 
and local police forces, assistance 
which has to be matched by some of 
their own money, so we are not talking 
about a revenue sharing situation. It 
has to be new money. We are talking 


CONGRESSIONAL RECORD—SENATE 


about new efforts they are making, 
not just helping in some of their addi- 
tional efforts. So there are major, 
major features. 

However, Madam President, for 
those people who do not want to seek 
treatment, who want to continue traf- 
ficking in these drugs, we are talking 
about building the Federal prison 
space in which to be able to put those 
people, lock the door for a while, and 
throw the key away if they resist any 
kind of treatment or help. 

All those features are in this bill, 
from interdiction to trying to beef up 
our own Federal effort, our DEA, our 
Customs effort, Coast Guard, using 
the military in a better way, then 
trying to assist the State and local ef- 
forts in law enforcement, then trying 
to work on the demand side, educa- 
tion, rehabilitation, and providing the 
necessary prison beds. 


O 1330 


To my knowledge, it is the most far- 
reaching bill I have ever seen dealing 
with drugs. Will this bill in itself solve 
the problem? No, it will not. It is going 
to take a lot of effort at the family 
level and at the local level to be able 
to deal with this problem. But the 
Federal Government will be taking its 
role of being a major player in this 
~~ showing how seriously we consider 
t. 

There is a sense of the Senate provi- 
sion in here urging the States to call 
special sessions to change their laws to 
deal with the drug problem, because 
we know that many of those crimes 
will be tried in State courts. I am de- 
lighted to say my State is already talk- 
ing about when they are going to call 
their special session. I think it will be 
at their organizational session after 
the elections. They already have a spe- 
cial panel appointed by the committee 
that is recommending changes in sen- 
tencing, changes in rehabilitation, 
beefing up the rehabilitation program, 
and the education efforts that must be 
made. Those efforts are good, and the 
States should do those. We, the Feder- 
al Government, need to be the leader. 

So we have this opportunity in the 
closing days of this session. It would 
be tragic if we allowed this to slip by, 
by this fight over the death penalty. I 
support the death penalty. If I could 
draw this bill in its entirety—and I 
have certainly tried to help in adding 
some items to it—I would include the 
kind of narrowly defined death penal- 
ty that is in this bill. But, at the same 
time, there is no way I would sacrifice 
all the good things in this bill by 
saying that we have to have the death 
penalty in it. I will try to urge my col- 
leagues who feel so strongly about the 
death penalty that they should not 
sacrifice this bill because they have 
this feeling against it. 

So, regardless of how this cloture 
vote comes out, I hope we will recog- 


October 15, 1986 


nize that we have to pass this bill, not 
only the Senate but the House as well. 
If the Senate passes the bill, I assume 
it will be without the death penalty, 
and it will be sent back to the House, 
and then we have to be concerned as 
to whether the House will accept it on 
that basis. 

I say to our brethren in the House 
that if we are able to pass the bill in 
the Senate—and that is a stripped- 
down version of the bill—I hope the 
House will not allow this bill to die be- 
cause they would insist on the death 
penalty. 

So we find ourselves in the position 
where, in our closing days, we have 
within our grasp a bill that is impor- 
tant, that has many worthwhile fea- 
tures, that literally is sort of devoid of 
controversy, that the body almost 
unanimously is for, other than this 
one provision. It is the purpose of a de- 
liberative body to deliberate, and it is 
to conclude, and it is to pass a product 
that could be very valuable for the 
people of our States, for the people of 
this great country, to attack this on- 
slaught in which we find ourselves, I 
hope we will not pass up this great op- 
portunity we have over the issue of 
the death penalty. 

Madam President, I am urging our 
colleagues to search their hearts and 
their consciences and to realize that, 
regardless of their personal feelings on 
that one issue, this bill contains so 
many worthwhile provisions that we 
need to pass it in the Senate and in 
the House; and we should give this 
kind of assistance to the people it will 
help. 

Madam President, I suggest the ab- 
sence of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. 

The legislative clerk proceeded to 
call the roll. 

Mr. BYRD. Madam President, I ask 
unanimous consent that the order for 
the quorum call be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


SENATOR RUSSELL LONG 


Mr. BYRD. Madam President, it is 
with regret that I say farewell to my 
friend and colleague, Senator Russe. 
B. Lone. He is a Senator whom I have 
long watched and admired, and for 
whom I have learned incalculably 
much since the first day I took a seat 
in the U.S. Senate. And I will always 
be inspired and guided by his example 
after he leaves the Senate. 

Senator Lone came to the Senate 
under a burden that few of us realize— 
having to follow in the footsteps of his 
legendary father, Senator Huey Pierce 
Long. But as all of us know, he has 
more than succeeded in that task. His 
accomplishments as a Senator are 
legion. His performance as the skillful 





October 15, 1986 


chairman of the important and power- 
ful Senate Finance Committee for 14 
years was masterful. His legacy is 
monumental, 

Russet, Lonec was first elected to 
the Senate in 1948. On most of the 
landmark tax and trade legislation 
since that time, you can see the im- 
print of this remarkable Senator. 

During his 37 years as a U.S. Sena- 
tor—time in which he has ever been 
attentive to the wants and needs of 
the people of Louisiana and the people 
of the entire United States—Senator 
Lonc became one of the Senators who 
is an institution within this institu- 
tion. He became one of the Senate’s 
most powerful voices on Federal eco- 
nomic and tax policy, and he dominat- 
ed legislative areas such as trade, 
health care finance, tax, and Social 
Security. 

During his tenure in the Senate, he 
served on the Commerce, Science, and 
Transportation Committee, the Bank- 
ing and Currency Committee, the 
Senate Select Committee on Small 
Business, the Senate Armed Services 
Committee, the Democratic steering 
committee, and the Foreign Relations 
Committee. He also served on the 
Select Committee on Ethics and the 
Joint Committee on Taxation. 

He further served as the Senate’s as- 
sistant majority leader, chairman of 
the Merchant Marine Subcommittee 
of the Commerce Committee; chair- 
man of the Surface Transportation 
Subcommittee; and chairman of the 
Military Construction Subcommittee 
of the Armed Services Committee. 

But it was on January 10, 1966, that 
Senator Lonc was named chairman of 
the Senate Committee on Finance— 
and then a legend began. In his 15 
years as chairman of one of the Sen- 
ate’s most powerful and important 
committees, Senator Lone displayed a 
mastery of the subject matter and 
such skillful management abilities 
that his opponents were often in awe. 

Senator Lone’s legislative achieve- 
ments included the landmark 1972 and 
1976 Federal revenue sharing laws, the 
1969 and 1976 tax reform laws, and in- 
creases and changes in Social Security 
and Medicare benefits to ensure that 
most of this Nation's aged, blind, and 
disabled citizens would be raised out of 
poverty and could receive adequate 
medical treatment. 

He was an influential cosponsor of 
legislation extending the Voting 
Rights Act in 1984, and he has pressed 
for a balanced foreign-trade policy to 
protect American jobs and to save in- 
dustries that are vital to the security 
of the United States. 

As the Senate Democratic leader, I 
have witnessed another special quality 
in Senator Lone that I have long ad- 
mired and appreciated over the years. 

Senator Lone has never failed to 
revere the U.S. Senate as an institu- 


CONGRESSIONAL RECORD—SENATE 


tion crucial to the successful working 
of American democracy. 

Senator Lone has been one of those 
Senators who understands the work- 
ing of the Chamber. He reveres its 
rules, its procedures, its precedents, its 
customs, and its traditions. He knows 
that if they are ignored or forgotten, 
American democracy loses, because 
the carefully balanced system of gov- 
ernment established by our forebears 
is thrown out of alignment. 

Time after time, I have seen Senator 
Lonc brace the momentary political 
winds and whims to ensure that these 
time-honored traditions and proce- 
dures are continued. 

It was his respect for the Senate’s 
traditions, and for the role of the 
Senate in American society and gov- 
ernment, that led him to oppose tele- 
vising Senate proceedings. This is one 
of the infrequent occasions when he 
and I disagreed—but even in our dis- 
agreement, as usual, I respected his 
judgment, 

As a matter of fact, when I decided 
that the time had come for television 
and radio coverage of Senate proceed- 
ings, the very first Senator with whom 
I talked was Senator Lone. I knew of 
his strong feelings about the matter, 
and I realized how important it would 
be if I could persuade Senator Lone to 
change his position and support televi- 
sion and radio coverage of Senate 
debate and deliberations. But even 
though I felt I might not be able to 
persuade him to change, I felt it was 
highly important that I discuss it with 
him and that at least I might help 
those of us who were going to work for 
coverage of Senate debates by having 
such discussions with Senator Lone in 
advance, and I felt that in some way it 
would certainly not be time wasted, it 
would be time well spent whether or 
not he was persuaded, that it could do 
our cause no harm but only good. For 
those reasons I spent considerable 
time of his and my own in the course 
of those discussions. 

I am not sorry that I did that. Even 
though Senator Lone did not change 
his position, I do feel that those dis- 
cussions were helpful to both of us 
and in the long run that they were 
beneficial to the cause which I came to 
support. 

I respected his judgment. At one 
point, he expressed his oppositon stat- 
ing: 

The Senate should give stability to the 
Government, and the Senate is easy enough 
to stampede the way it is now. The Senate 
should be something of a citadel where a 
minority armed with a righteous cause can 
stand off an angry mob. 

His commitment to this principle, 
Madam President, spanned his tenure 
of nearly four decades in the Senate. 
In his maiden speech to the Senate, on 
March 2, 1949, Senator Lone expressed 
his opposition to limitation of debate 
by curbing the filibuster because it 


31331 


would deprive Senate minorities of 
their rightful protection. Senator 
Lonc has taken another position that 
I must respect. ‘Every Senator should 
decide for himself at what point he 
thinks he should retire,” Senator Lone 
recently said. And so he will soon leave 
us. 
In his first Senate campaign in 1948, 
Mr. Longe stressed his desire to vindi- 
cate his father and to work in behalf 
of the “‘little people.” 

As all of us know, Senator Lone suc- 
ceeded remarkably well in both. I 
know that his father would be proud 
of his son Russeity. And the “little 
people,” as he called them, obviously 
appreciated him because they kept 
sending him back to the Senate—most 
of the time by overwhelming mar- 
gins—and they have given him an 80 
percent approval rating. 

And I have never seen Russet, LONG 
falter in his support for the common 
man and woman—the people who bear 
the burdens, most of the burdens, of 
making this Government run, paying 
the bills, supplying the blood and the 
sweat and the tears as well as the sons 
and daughters in time of war. Those 
are the people to whom RussELL LONG 
was referring and those are the people 
to whom he has been faithful. 

He will be greatly missed in this 
Chamber. But the legacy of this im- 
portant and influential Senator will be 
with us. 

When I came to the Senate 28 years 
ago, there were the following Senators 
who were here then and who are still 
here: Senator Stennis, Senator Lone, 
Senator THuRMOND, and Senator 
PROXMIRE. Senator Lone will, by his 
own volition, be leaving the Senate 
after this session is completed at the 
end of the 99th Congress. 

Mr. wife Erma and I join in best 
wishes to Russe.tt and his wife Caro- 
lyn as they return to his beloved State 
of Louisiana. 

I cannot say, and I will not say, fare- 
well to this distinguished gentleman 
and outstanding Senator. I simply say, 
thank you, and may God bless you in 
the years ahead. 

Mr. LONG. Madam President, will 
the Senator yield? 

Mr. BYRD. Yes, I yield. I yield the 
floor. 

The PRESIDING OFFICER. The 
Senator from Louisiana. 

Mr. LONG. Madam President, it has 
been a heartwarming experience to 
hear my dear friend, the minority 
leader, the Democratic leader, Rospert 
Byrp, say, those kind words about me 
as a Member of this body. I will always 
think of him as a friend from the 
heart forever. I was once associated 
with a group of young men in college 
and we had that description of one an- 
other—‘friends from the heart for- 
ever.” That is how I feel about my 
leader, ROBERT Byrp of West Virginia. 





31332 


As the Senator knows, it was my 
privilege to support him for the lead- 
ership on this side of the aisle, even 
against a very dear friend, the late 
Hubert Humphrey, who, at that time, 
indicated that he was planning to run 
for the same thing. And, at that time, 
it seemed to me it was an inappropri- 
ate idea for him to run and Bos Byrp 
ought to be our majority leader. And I 
was never disappointed. He has been a 
great leader. 

He has had some difficult decisions 
to make now and then. I know some- 
times the pressure from colleagues 
from the left and right, tugging for his 
help on one side or the other, has been 
very difficult for him to handle, be- 
cause you cannot please all of your 
friends, you cannot please all of your 
troops. But he has done a great job in 
doing the best he could as his Maker 
gave him the light to see it. 

He is a very principled man. He is a 
believer in most of the same things I 
believe in. I love and admire him and I 
will always feel the same toward our 
leader as I have always felt toward 
him down through the years. It is a 
little late for me to change in that re- 
spect, and I do not think I would 
change my mind about our leader, 
Rosert Byrp, of West Virginia. 

Thank you for those kind remarks. 

Mr. BYRD. Madam President, I 
thank my friend. 

I suggest the absence of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. 

The legislative clerk proceeded to 
call the roll. 


Mr. DOLE. Madam President, I ask 
unanimous consent that the order for 
the quorum call be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 


PERMITTING REGISTERED 
PUBLIC UTILITY HOLDING 
COMPANIES TO OWN CERTAIN 
INTERESTS IN QUALIFYING 
COGENERATION FACILITIES 


Mr. DOLE. Madam President, I ask 
unanimous consent that the Senate 
now turn to H.R. 5056, to permit regis- 
tered public utility holding companies 
to own certain interests in qualifying 
cogeneration facilities, now being held 
at the desk. 

The PRESIDING OFFICER. The 
clerk will report. 

The legislative clerk read as follows: 

A bill (H.R. 5056) to permit registered 
public utility holding companies to own cer- 
tain interests in qualifying cogeneration fa- 
cilities. 

The PRESIDING OFFICER. Is 
there objection to the request of the 
Senator from Kansas? 

There being no objection, the Senate 
proceeded to consider the bill. 

AMENDMENT NO. 3424 

Mr. DOLE. Madam President, I send 

an amendment to the desk on behalf 


CONGRESSIONAL RECORD—SENATE 


of Senator Kasten and ask for its im- 
mediate consideration. 

The PRESIDING OFFICER. The 
clerk will report. 

The legislative clerk read as follows: 

The Senator from Kansas (Mr. DoLe) on 
behalf of Mr. Kasten proposes an amend- 
ment numbered 3424. “Strike all of Section 
2.” 

Mr. BYRD. Madam President, I ask 
unanimous consent, on behalf of Mr. 
PROXMIRE, that he be made a cospon- 
sor of the amendment. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

Mr. KASTEN. Madam President, I 
urge passage of this amendment to 
delete from H.R. 5056 the House lan- 
guage requiring the Federal Energy 
Regulatory Commission [FERC] to 
issue a final order on docket No. 
RP82-80. 

If approved, this amendment would 
force FERC to issue a decision on a 
longstanding case that could have a 
devastating impact on the State of 
Wisconsin. An adverse ruling on this 
case, involving minimum billing for 
pipeline customers, could cost Wiscon- 
sin utilities consumers $30 to $50 mil- 
lion per year. 

I believe it is absolutely essential 
that the Commission carefully consid- 
er all the potential cost shifts inherent 
in this case before a final order is 
made. The Wisconsin delegation has 
requested, along with the Wisconsin 
Public Utilities Commission and repre- 
sentatives of Wisconsin utilities, that 
FERC hear oral arguments on behalf 
of Wisconsin ratepayers before issuing 
a decision in this case. So far, our re- 
quest has not been granted. 

Madam President, the Commission 
needs time to find a way to mitigate a 
rate shock for Wisconsin consumers. 
That cannot be accomplished if we 
rush FERC into a premature decision. 

I believe the reasons outlined above 
in themselves justify deletion of the 
“FERC Requirement” language from 
the bill. However, I would only remind 
my colleagues that this language in no 
way pertains to the provisions affect- 
ing public utility holding companies. 
This language has no place in the 
PUHCA bill, and I urge my colleagues 
to support this amendment which will 
delete it from H.R, 5056. 

The PRESIDING OFFICER. Is 
there any further debate? If not, the 
question is on agreeing to the amend- 
ment. 

The amendment 
agreed to. 

Mr. PROXMIRE. Madam President, 
I support passage of H.R. 5056, as 
amended, to delete House language re- 
quiring the Federal Energy Regula- 
tory Commission to issue a final order 
on docket number RP82-80. 

This case is the subject of a letter 
from the entire Wisconsin delegation 
to the Federal Energy Regulatory 


(No. 3424) was 


October 15, 1986 


Commission [FERC] dated July 23, 
1986. In this letter, we state that: 

Because Wisconsin gas customers current- 
ly have no alternative means for getting gas 
from pipeline sources other than ANR, any 
major change in rate design or in ANR’s 
cost allocation among its customers can 
have a devastating impact on our State. 

We urged the FERC to carefully 
consider docket number RP82-80 and 
convene an oral argument to ensure 
that all the costs and impacts of their 
decision are fully presented. They 
have not yet acted. 

The House amendment would have 
had a serious impact on Wisconsin 
consumers, raising prices as much as 
$30 to $50 million per year and tied 
the Commission’s hands. 

Deletion of this language, which is 
nongermane to PUHCA, both im- 
proves the bill and protects our con- 
sumers. 

The PRESIDING OFFICER. If 
there be no further amendment to be 
proposed, the question is on the en- 
grossment of the amendment and 
third reading of the bill. 

The amendment was ordered to be 
engrossed and the bill to be read a 
third time. 

The amendment was engrossed and 
the bill was read the third time. 

The bill (H.R. 5056), as amended, 
was passed. 

Mr. DOLE. Madam President, I 
move to reconsider the vote by which 
the bill was passed. 

Mr. BYRD. I move to lay that 
motion on the table. 

The motion to lay on the table was 
agreed to. 


ORDER OF PROCEDURE 


Mr. DOLE. Madam President, I hope 
that we can get an agreement to move 
to a number of nominations on the Ex- 
ecutive Calendar. It is my understand- 
ing that the Malone nomination was 
the problem and that we are now in a 
position to withdraw that from consid- 
eration. 

Madam President, let me indicate 
what we may be doing the balance of 
the day. At 3 o’clock there will be a 
cloture vote on the antidrug bill. Fol- 
lowing that vote, we are on the drug 
bill if cloture is obtained. I assume it 
will be, but, in any event, there is still 
hope that we can resolve one major 
issue in that bill, at least postpone 
final decision on that issue until 
maybe sometime next spring. 

I know the House Members will not 
be happy with that result. I have just 
talked with the sponsor of the amend- 
ment on the House side who did not 
seem to be a bit pleased. But I indicat- 
ed to him that it was fairly obvious to 
me that if in fact cloture is invoked, 
that there could be 30 hours to be 
stretched into a rather long period of 
time, maybe 3 or 4 days; and that I did 
not believe that the Senate would 





October 15, 1986 


want to have a drug bill fail because of 
our failure to agree on one provision, 
though it is a very important provi- 
sion, one that I support; and that is 
the death penalty under certain cir- 
cumstances. 

It was suggested yesterday by a 
number of Senators on each side of 
the aisle, and on each side of the issue, 
that one way to resolve that would be 
to have an agreement that there 
would be a death penalty provision re- 
ported by the Judiciary Committee 
sometime early next year, in the 
spring, and that then the minority and 
majority leaders not knowing who will 
be in which spot next year could also 
suggest that we would be willing to 
schedule that for floor debate some- 
time next spring. 

So that is in the process. We hope 
that there could be some resolutions 
of that. If that can be resolved, then I 
believe we can pass it. There may be 
one or two or maybe more additional 
amendments, but I would hope we can 
get action on the drug bill by 5:30 or 6 
o’clock. 

Then we need to make a judgment 
on whether we should wait for the 
House to act on the CR. I am advised 
by the Republican leader, Representa- 
tive MicHet, it may be midnight or 
later before they finish the CR. So I 
suggest they send us another 24-hour 
extension. It did not seem to me to 
make much sense to just sit here until 
midnight and then stay up all night 
working on the CR if we can come 
back in early in the morning and ac- 
complish the same result. So I think 
that may be progress. 

In addition, tomorrow we would 
have the immigration conference 
report. They are still negotiating on 
the reconciliation conference report. If 
the drug bill were disposed of, that 
would still leave the debt ceiling. 

With reference to the debt ceiling, 
there are one or two options, as I un- 
derstand, floating. One would be to 
put in reconciliation for 7 months, 8 
months, or 6 months, but not for a full 
year’s time. Another would be to send 
us a clean debt ceiling from the House 
but with 1 year and we would send it 
back for 6, 7, or 8 months, and have 
those who are concerned about the 
Gramm-Rudman-Hollings provision, 
satisfy them in that way, knowing 
they would have an opportunity next 
spring again, March, April, or May to 
approach the debt ceiling extension at 
that time. 

This matter has been discussed with 
Senators RupDMAN and Gramm. I know 
they have been in contact with Sena- 
tor Hoiuincs. I believe that approach 
would be satisfactory to them. That 
would give them some assurance that 
there would be another vehicle around 
in early spring. 

I guess what I am hoping is we may 
be able to do all of these things tomor- 
row, maybe late tomorrow night, but if 


71-059 O-87-4 (Pt. 22) 


CONGRESSIONAL RECORD—SENATE 


so, that would certainly help us be out 
of here by Friday morning. 

Mr. STAFFORD. Madam President, 
will the majority leader yield? 

Mr. DOLE. I am happy to yield. 

Mr. STAFFORD. I hope the majori- 
ty leader might have in mind, the 
Democratic leader as well, that there 
is a possibility the conference reports 
on clean water and on water resources 
might be available for consideration 
by the House and Senate tomorrow. I 
do not think either would take much 
time. But I hope there would be a 
chance to handle those matters if 
indeed the conference reports are 
available. 

Mr. DOLE. I would have no problem 
with that. I doubt the minority leader 
would. 

There would be a number of those. 
We have been keeping up fairly well 
with all of the items of that kind. 
There may be a defense authorization 
conference report here this afternoon. 
Senator GOLDWATER has indicated he 
would like to bring that up. It would 
not take over 10 minutes. So we cer- 
tainly will try to accommodate. 

There is the question on the Super- 
fund conference report which was 
raised yesterday by the minority 
leader and Senator LAUTENBERG. I 
know it has been raised a number of 
times by the Senator from Vermont, 
Senator STAFFORD. 

Again I believe if we could give the 
President some assurance, and I have 
discussed this with the chairman of 
the Ways and Means Committee, that 
we would not be in here next year 
trying to raise the funding level with 
additional taxes, it would certainly 
make it much easier for the President 
to look upon that legislation favor- 
ably. 

Mr. STAFFORD. If the majority 
leader will yield again, I would certain- 
ly be willing to give that assurance as 
far as I am concerned as chairman of 
the Environment and Public Works 
Committee. I have signed a letter to 
that effect. 

Mr. DOLE. I thank the Senator. 

Mr. BYRD. Madam President, I 
want to thank the majority leader for 
continuing to keep in mind the Super- 
fund legislation. That is a piece of leg- 
islation that is very important in my 
State to the chemical industries there- 
in. I would hope we could work out 
some arrangement whereby the White 
House would give us assurance that 
there would be no veto of that impor- 
tant legislation. 

I also think the majority leader was 
wise in suggesting that a short-term 
CR, continuing resolution, be sent 
over from the other body rather than 
sit around here and wait until mid- 
night, waiting on the CR, the long- 
term CR, from the other body and 
trying to transact business on that 
during the rest of the night. 

(Mr. HATFIELD assumed the chair.) 


31333 


Mr. BYRD. It seems to me that the 
majority leader has chosen the best 
course in his thinking. I have a feeling 
however that instead of the Senate 
completing its business tomorrow, I 
hope we could at least think in terms 
of completing the business of the 
Senate Friday, if not tomorrow. 

Mr. DOLE. I thank the distin- 
guished minority leader. I know the 
Presiding Officer has a great deal of 
interest in the continuing resolution. 
As he indicated earlier, if in fact we 
would have the bill by 7 or 8 o'clock, 
or even 8:30 or 9 o'clock, it might be 
worth doing it this evening. But we 
will continue to check. My latest 
advice is, or at least suggested advice, 
is it would be 11 o’clock, midnight or 
after. 

I know the Presiding Officer wants 
to pass it as quickly as possible. But I 
would hope we would start early in the 
morning rather than at 1 a.m. or 
something. 

Mr. BYRD. The distinguished Pre- 
siding Officer, the Senator from 
Oregon, (Mr. Harrretp], has already 
saved the Senate at least 2 or 3 days 
on the continuing resolution when he 
advised our friends in the other body 
that they should not attempt to tack 
on the Fuel Use Act to the continuing 
resolution. There would have been a 
point of order raised against that and 
continuing debate with respect to that 
measure because for a major piece of 
legislation like that to be put on to an 
omnibus appropriation bill in confer- 
ence, especially when the legislation 
had not been added to the appropria- 
tion bill and to the continuing resolu- 
tion by either body, just to go to con- 
ference, and have it tacked on there I 
think would be very unwise on the 
part of the other body. I am happy 
that they have had some second 
thoughts. 

The distinguished Senator from 
Oregon, who is the chairman of the 
Appropriations Committee of the 
Senate, I think gave some very helpful 
advise to them in that respect and to 
all of us because I have no doubt that 
the Senate would have done well to 
have completed the continuing resolu- 
tion this week if that had been the 
course taken. 

I thank the majority leader. 

Mr. DOLE. I thank the distin- 
guished minority leader. We will con- 
tinue to work on the agreement. 

On the Executive Calendar, let me 
indicate again that if we can complete 
action on all of these matters we have 
in the agreement, that would leave 
only three or four nominees on the 
Executive Calendar. 


O 1405 


I think three were being held by 
Members on this side. We have al- 
ready advised Members on this side 
that we are not going to honor holds 





31334 


at this time, so we can dispose of at 
least two additional nominees. That 
will leave, as I recall, a couple of Den- 
mark treaties that will not be taken up 
this year, Mr. Lawrence to be an As- 
sistant Secretary of Agriculture, and 
maybe one additional nomination. 

Mr. President, I suggest the absence 
of a quorum. 

The PRESIDING OFFICER. The 
clerk will call the roll. 

The assistant legislative clerk pro- 
ceeded to call the roll. 


O 1415 


Mr. EXON. Mr. President, I ask 
unanimous consent that the order for 
the quorum call be rescinded. 

The PRESIDING OFFICER. With- 
out objection, it is so ordered. 

The Chair recognizes the Senator 
from Nebraska. 

Mr. EXON. I thank the Chair. 


TRIBUTES TO RETIRING 
SENATORS 


THOMAS F. EAGLETON 

Mr. EXON. Mr. President, change is 
one of the things in life which we 
know will happen. Many times change 
is for the better and we must always 
be ready to accept the desirability or 
inevitability of change. That is a big 
part of life and I try to accept or at 
least deal with change as time goes on. 

However, some changes are harder 
to deal with than others. One very dif- 
ficult change for me personally will be 
the retirement of several Senators 
from this body, all good friends of 
mine. One of them is the U.S. Senator 
from Missouri, TOM EAGLETON. 

Tom EaGLeton is one of my dearest 
and closest friends—not just in the 
Senate, but in life. Few people can 
combine a high intellect and a fabu- 
lous sense of humor as Tom EAGLETON 
can. Men such as he are rare indeed. 

When Tom EAGLeTON speaks, I listen. 
And so do other Senators. Whether 
the subject is the confirmation of a 
new Chief Justice of the United 
States, the complexity of the situation 
in the Middle East, the future of edu- 
cation, or the fine points of the War 
Powers Act—I listen. When I want to 
gain the benefit of a perspective I re- 
spect and trust, I go to Tom EAacLe- 
ton—and I listen. 

It was once said, ‘A person does not 
learn anything while he is talking.” 
How true. But we have all learned so 
much from Tom EacLeton by listen- 
ing. I shall continue to seek his advice 
and counsel in the future even though 
he will no longer be readily among us 
every day here in the Senate. Howev- 
er, as a body, we will all miss greatly 
having the opportunity to sit in our 
seats in the Chamber or seek him out 
in the dining room and engage him in 
a conversation from which we always 
learn so much. 


CONGRESSIONAL RECORD—SENATE 


Tom EacGteton is truly a fountain of 
wisdom and knowledge in an institu- 
tion which needs so much of both 
qualities. The Senate has been a richer 
place because of his presence, and the 
Senate will suffer from his absence. 

Now that he will be in St. Louis ona 
more consistent basis, I suspect he will 
be able to see the beloved St. Louis 
Cardinals that he and I have shared so 
many hours of discussion on and so 
many hours watching from time to 
time during the last few years. I shall 
join him there at every opportunity, to 
listen to him further and also listen to 
this discussion of our professional 
baseball teams. 

As this 99th Congress and Tom 
EAGLETON’s 18 years as a Senator come 
to a close, I want him to know that the 
8 years we have shared here together 
will always be special to me. 

Tom, you have made a difference for 
the better—for your colleagues here, 
for the U.S. Senate and for our won- 
derful country. 

Godspeed and the best of every- 
thing, my friend. You have my admi- 
ration, my thanks, and my friendship. 

BARRY GOLDWATER 

Mr. President, since my arrival in 
the Senate in 1979, I have served on 
the Armed Services Committee, where 
I have had the pleasure and honor of 
working closely with one of that com- 
mittee’s most respected leaders of all 
time, my friend, BARRY GOLDWATER. 

Long before he became chairman of 
this committee, BARRY was recognized 
as one of this body’s most knowledgea- 
ble Members in the area of national 
security. In addition to his military 
career and skills as an aviator, BARRY 
brought to the Senate much-needed 
good old, down-to-earth common sense 
in dealing with the complexities of our 
defense plans and budget. This was no 
better demonstrated than in his re- 
sounding success in getting a major de- 
fense reorganization bill through Con- 
gress and made into law. 

BarRy GOLDWATER knew what 
needed to be done and did not hesitate 
in doing it. As a result, our Nation will 
continue to benefit from his judgment 
and hard work for many years to 
come. He has selflessly dedicated his 
life to making our Nation strong and I 
shall miss him greatly in the commit- 
tee and here in the Senate. 

Barry GOLDWATER has long been 
known as “Mr. Republican.” He has 
certainly been that. However, I prefer 
to refer to him as ‘“‘Mr. National Secu- 
rity.” There is not a man or a woman 
in any of our armed services who does 
not know that Barry GoLDWATER is at 
their side, fighting for them here, in 
the Halls of Congress. And believe me 
when I say that, when I am in any 
kind of a fight, I want Barry at my 
side. There is no better testament to a 
man than that one. 

So Barry, as you return to your be- 
loved Arizona, take with you our 


October 15, 1986 


thanks for all that you have done for 
America. The name of Barry Go .p- 
WATER will always be a part of this in- 
stitution and of America’s history. 
This Senator, your friend, will miss 
you very much. 


PAUL LAXALT 

Mr. EXON. Mr. President, today I 
rise to pay tribute to retiring Senator 
Pau LAXALT. 

In the past 8 years, my impressions 
of Senator LaxaLtt have been formed 
from close association and also, some- 
times, from a distance. We have not 
served on the same committees and we 
do not share the same party affili- 
ation. 

Despite those circumstances, I have 
come to admire the senior Senator 
from Nevada a great deal. Pau. 
LAXALT has been a valuable line of 
communication between this body and 
the White House. The duties he as- 
sumed as “first friend” have been dis- 
patched with unparalleled ability. 

Mr. President, there is a common 
practice here in Washington called, 
running one up the flagpole. It means 
to quietly check out a reaction to an 
idea in a way which, if it proves un- 
popular or unworkable, the originator 
of an idea can drop it quietly before 
the storm hits. Paut Laxatt has run 
many ideas “up the flagpole” at the 
White House for most of us here. It is 
a double duty which many people out- 
side the Senate do not fully appreciate 
but which all Senators value and 
thank him for. His willingness to serve 
this function is one of the things 
which makes this Senate work. It is 
clear to me that his ability to combine 
personal and professional consider- 
ations without compromising either is 
a trait worth emulating. 

When Paut Laxatt leaves the 
Senate, the record should be clear that 
he is admired far beyond his circle of 
personal and political friends. He has 
earned the deep respect of many, in- 
cluding this Member of the USS. 
Senate. 


CHARLES MAC MATHIAS, JR. 

Mr. EXON. Mr. President, before 
coming to this body in 1979, I had ai- 
ready heard of the distinguished 
senior Senator from the State of 
Maryland whose reputation for integ- 
rity was known to a great many of us 
from the plains. 

CHARLES Mac Maruias, Jr. has 
served his beloved Maryland and this 
Nation with great distinction. Over 
the years, Mac MarTuras has earned 
the recognition as one of the Senate’s 
truly great thinkers; a man who has 
shown great strength and fortitude in 
the many times he has, through con- 
science, been thrown against the tide. 
Such times I suggest, were very diffi- 
cult for him, but Mac always seemed 
to see through the complexities and 
far more often than not came down on 
the side of reason, fairness, and com- 





October 15, 1986 


passion. Such abilities, I believe, are 
inherent in only a few individuals and 
Mac Maruras is one so gifted to be a 
leader of that pack. 

Many Members of this body have 
taken the floor to pay fitting tribute 
to Senator CHARLES Mac MarTuias and 
his insight into the need to bring the 
greatest deliberative body in the world 
into the modern age. During his 
tenure as chairman of the Senate 
Committee on Rules and Administra- 
tion, he was the advocate for and suc- 
cessful in bringing the wonders of the 
computer age to each of our respective 
offices and the committees of the 
Senate. In addition, Mac was a stal- 
wart in his support of bringing the 
day-to-day activities of the Senate to 
the American people through radio 
and television. Such accomplishments 
only further prove his dedication to 
the welfare of this body, the public, 
and to the furthering of democratic 
ideals. 

Mac Marurias will soon cast his final 
vote as the very distinguished senior 
Senator from the State of Maryland. 
Though he will leave a great void, he 
also will leave us with a great legacy; a 
legacy of conscience and of honor. For 
this we thank him and wish him God’s 
speed in his days ahead. 

GARY HART 

Mr. EXON. Mr. President, I rise to 
pay tribute to the senior Senator from 
Colorado who will be departing the 
Senate at the end of this term. I have 
had the honor and privilege of serving 
closely with Senator Gary Hart on 
the Senate Armed Services and 
Budget Committees. 

On the Armed Services Committee 
he has been a strong advocate of build- 
ing a military machine which “fights 
smart” and on the Budget Committee 
he has been a spokesman for fiscal re- 
sponsibility. As a Senator from a Mid- 
western State. I have also appreciated 
the excellent work of Senator Hart on 
the Environment and Public Works 
Committee. Colorado and Nebraska 
share many of the same challenges in 
finding an appropriate balance be- 
tween developing and preserving our 
natural resources. 

Senator Hart has been a valued 
friend and colleague. The U.S. Senate 
will miss the clear and thoughtful 
voice of Gary Harr. I have never 
known him to turn away from a diffi- 
cult problem or take an easy way out 
of any situation and never taking an 
irresponsible position. Senator Harr 
gives thoughtful reflection to each 
major issue which faces the U.S. 
Senate and the Nation. While there 
may have been times when Senator 
Hart and I have disagreed on particu- 
lar issues, I have always appreciated 
the keen intellectual analysis that he 
brought to every debate. 

The people of Nebraska hold a spe- 
cial affection for Gary Hart. In the 
spring of 1984, the senior Senator 


CONGRESSIONAL RECORD—SENATE 


from Colorado stole the hearts of Ne- 
braska Democrats, when he scored an 
impressive victory in the Nebraska 
Democratic Presidential primary. 

Senator Hart leaves the U.S. Senate 
with an impressive record of accom- 
plishment and the respect of his col- 
leagues. I fully expect that his retire- 
ment from the Senate will not be a re- 
tirement from politics. I trust that citi- 
zens will recognize and realize that 
Gary Hart will continue to offer the 
Democratic Party and the American 
people his leadership and new ideas 
for America’s future. 


RUSSELL LONG 

Mr. EXON. Mr. President, the re- 
tirement of Russet, Lone will mark 
the end of a truly outstanding career 
in the U.S. Senate; probably history 
will show it to be one of the outstand- 
ing careers of all time. 

Since my election to this body, I 
have had the privilege of serving on 
the Senate Commerce Committee with 
RussELL Lonc. There are few Senators 
who have a better understanding of 
how this body works and how to get 
things done. Russet Lone has that 
rare ability to get right to the heart of 
any issue. 

Being elected to the Senate at the 
age of 30 and being the son of the leg- 
endary Huey Long, Russet, Lone had 
some big shoes to fill. He met those 
challenges and has established an out- 
standing record in the U.S. Senate. 

Without a doubt, Russett Lone has 
a better understanding of the Tax 
Code than any Member of Congress. 
He has served on the Senate Finance 
Committee for 34 years and was chair- 
man of that committee for 14 years. In 
that role, Russet, Lone will likely be 
most remembered as the father of em- 
ployee stock ownership plans. No Sen- 
ator has worked harder to expand the 
free enterprise system and private 
property ownership among the people 
of the United States. 

Russet, Lone has dedicated more 
than half of his life to serving the 
people of Louisiana and the United 
States. To the Senate, he has brought 
wisdom, humor, and hope. While we 
will greatly miss Russet Lone here in 
the Nation’s Capital, I am confident 
that he will find a way to continue to 
serve the people of his great State. 


APPOINTMENT BY THE 
PRESIDENT PRO TEMPORE 


The PRESIDING OFFICER (Mr. 
BROYHILL). The Chair on behalf of the 
President pro tempore appoints to the 
National Commission on Agricultural 
Finance in accordance with section 
501(a) of Public Law 99-205, the fol- 
lowing individuals: 

Mr. Don C. Steffes, of Kansas, and 
Mr. Maxie D. Love, Jr., of South Caro- 
lina. 


31335 


DOMESTIC OIL AND GAS 
INDUSTRY 


Mr. DOLE. Mr. President, Congress 
should not be caught playing our col- 
lective fiddle while our national and 
economic security burns. Make no mis- 
take about it, the United States is an 
energy-driven economy, and our 
Armed Forces—the very defense of our 
country—are energy-driven. 

Following the two energy crises 
which rocked this country during the 
1970's, the Congress took aggressive 
steps to promote alternate fuels, but 
we have yet to discover the technol- 
ogies needed to displace oil and natu- 
ral gas from being the backbone of 
this country’s energy supply. So, 
whether you think they wear black 
hats or white hats, we need to ensure 
domestic oil and gas producers contin- 
ue to explore for and produce domes- 
tic crude oil and natural gas. 

IMPORTS 

We are now approaching the same 
level of imports which existed prior to 
the two oil shocks of the 1970's. Since 
last October, imports of crude oil and 
petroleum products have increased 32 
percent. Supplies from Arab OPEC 
countries have nearly doubled in the 
last 5 months, and now Saudi Arabia, 
in an effort to regain its market share, 
has begun to flood the world markets 
with even lower priced crude. In June 
of 1985, we bought from the Saudi’s 
only 26,000 barrels of oil per day. In 
July of 1986, that level had increased 
to 716,000 barrels of oil per day, put- 
ting them into the same category as 
Mexico and Canada as our top suppli- 
ers of oil. 

OIL PRICES 

I know of no Senator who is propos- 
ing a commodity support price pro- 
gram for oil and gas—and do not be- 
lieve such a program is either warrant- 
ed or would be beneficial to the do- 
mestic oil and gas industry. Unfortu- 
nately, it is the price of the commod- 
ities that is causing the severe prob- 
lems now being experienced. Last Oc- 
tober, crude oil prices were $24.06 per 
barrel; today the prices have plummet- 
ed to $13, a 46 percent decline. During 
this same period, 139,600 Americans 
have lost their jobs in the oil and gas 
extraction industry—a 25 percent. de- 
cline. 

Three statistics are the best measure 
for the health of this industry, and all 
three have been dismal in this past 
year. Seismic crews, those who look 
for geologic formations which could 
hold hydrocarbons, have declined 56 
percent. Drilling permits, required 
prior to any actual exploration, have 
plummeted 62 percent. Finally, the 
“rig count,’”’ the number of drilling 
rigs actually exploring for new re- 
sources, stands at 814 this week—an all 
time post-World War II low. The rig 
count is roughly one-half of what it 





31336 


was only 1 year ago, and some 3,716 
below the level in 1981. 
LEGISLATION NEEDED 

Clearly, it is time to put to bed the 
old debate on the black hats versus 
white hats. The proposal before us 
today would be an important first 
step. Time is short, however, and it is 
impossible to get it enacted into law 
this year. 

It is a good foundation for legisla- 
tion we will certainly consider next 
year. Legislation which will be neces- 
sary for our economic and national se- 
curity. 


ANIMAL RIGHTS 


Mr. HATFIELD. Mr. President, one 
of the more volatile issues to confront 
us of late is the growing concern 
among certain individuals and groups 
over the use of animals for medical re- 
search. The so-called “animal rights 
movement” has indeed raised some le- 
gitimate concerns about the conditions 
under which biomedical experimenta- 
tion occurs. Such expressions of con- 
cern have resulted in better supervi- 
sion and more care being taken in the 
conduct of such research where neces- 
sary. 

The animal rights effort, however, 
in the view of a majority of respected 
academic, medical and scientific lead- 
ers, has the potential for seriously im- 
peding our Nation’s medical research 
effort—an effort of which we are ex- 
tremely proud. Medical research has 
been of immeasurable benefit to our 
people in preventing and treating seri- 
ous illness and injury. The quality of 
life we now enjoy and the years added 
to our lives are the direct result of re- 
search conducted in the laboratory 
often utilizing nonhuman subjects. 

A recent article appearing in the 
Washingtonian magazine warns of the 
potential damage to medical science if 
extremism within the animal rights 
movement succeeds in representing 
the view of all those concerned about 
the use of nonhuman subjects for 
medical research. It raises several 
issues worthy of consideration. To un- 
derstand the range of views held on 
this matter, I believe it would be 
useful to note two letters to the editor 
responding to the article, one from a 
respected scientific organization and 
one from the Humane Society of the 
United States. 

Mr. President, I ask unanimous con- 
sent that the article and accompany- 
ing letters be inserted in the Rrecorp at 
this point. 

There being no objection, the mate- 
rial was ordered to be printed in the 
Recorp, as follows: 

Wuo WIL Live, WHO WILL DIE 
(By Katie McCabe) 
“Save the Monkeys!” pleads the sign that 


has dominated the entrance to the National 
Institutes of Health since spring. Beside it, a 


painting of a plaintive, heavily bandaged 


CONGRESSIONAL RECORD—SENATE 


macaque monkey draws the attention of 
passers-by along Rockville Pike. On the 
lawn and sidewalk, demonstrators organized 
by People for the Ethical Treatment of Ani- 
mals (PETA) have maintained a round-the- 
clock vigil, holding rallies and press confer- 
ences, trying to force the release of fifteen 
monkeys five years ago from a Silver Spring 
research lab accused of animal cruelty. 

The protest has become a familiar sight to 
commuters as well as to viewers of the late- 
night news—where the scene has usually 
been accompanied by graphic photos of the 
monkeys, some with unbandaged wounds 
and others in seemingly torturous re- 
straints. 

Ostensibly at issue is the removal of the 
monkeys from the care of NIH to a primate 
sanctuary in Texas, a cause that has gar- 
nered sympathy among members of Con- 
gress, columnists, and some of the public. 
But there is much more at stake in the 
debate than the ultimate residence of fif- 
teen monkeys. 

The scene being played out at NIH is 
merely the most visible manifestation of a 
growing movement that seeks not just to 
ensure the humane treatment of animals, 
but to end the use of animals in medical re- 
search. 

The “animal rights” movement has grown 
in the past five years from small groups of 
radical activists to embrace—and dominate— 
the spectrum of animal-welfare interests at 
the local, state, and national levels. 

Absent from the humane pleas of the 
PETA demonstrators at NIH is evidence of 
the human costs of the activists’ efforts. 
Their activities include midnight raids on 
animal facilities, the pilferage of docu- 
ments, and the destruction of labs, which in 
turn have driven up security costs, driven 
out researchers, and created what activists 
themselves have described as a “climate of 
fear in the research community."’ They have 
initiated costly litigation and led main- 
stream animal-welfare organizations in 
pushing for well-intended but often restric- 
tive legislation that has greatly increased 
the costs of research and sapped the time, 
resources, and will of research scientists. 

Out of the public’s view, this pro-animal 
activity has measurably impeded research 
on AIDS, Alzheimer's disease, heart disease, 
transplantation, and a host of other areas 
that depend on the use of dogs, cats, and 
primates—the animals targeted for immedi- 
ate elimination from laboratories by animal- 
rights groups. But the self-professed goal of 
PETA's leaders does not stop there—it is to 
bring a halt to animal research altogether. 
And they are closer to that goal than even 
they ever thought possible. 

To understand what is at stake—and to 
see what is not apparent on the front lawn 
at NIH—you can travel across town to Chil- 
dren's Hospital, where four-year-old Kendra 
Hawthorne wriggles impatiently through 
lab tests to monitor the level of cyclosporine 
in her bloodstream. Were it not for that 
anti-rejection drug—and the animal re- 
search that led to its development—Kendra 
would not have survived the liver transplant 
performed when she was eighteen months 
old. 

That was three years ago. Today, unless 
you unbuttoned her pink Oshkosh overalls 
and saw the surgical scar, you'd never know 
that Kendra had been sick. In March 1982, 
five-week-old Kendra was diagnosed as 
having a rare liver disease called biliary 
atresia. Her chances for survival were slim, 
doctors said, without a liver transplant. 

For two years, Kendra and her parents 
waited and hoped in their Gaithersburg 


October 15, 1986 


home, When a donor organ finally became 
available, they flew to Pittsburgh University 
Hospital for the operation that saved Ken- 
dra’s life. 

The fourteen-hour operation was the 
shortest part of a story that goes back to 
the late 1950s, when human organ trans- 
plantation was still science fiction and medi- 
cal researchers began the first laboratory 
trials with animals. 

For the next 25 years, researchers ap- 
proached the many problems associated 
with liver transplantation, working from 
every direction to perfect surgical tech- 
niques, preserve donor organs, and over- 
come the body’s immune barrier with anti- 
rejection drugs. Time and again, investiga- 
tors returned to laboratory animals to work 
out yet another piece of the puzzle. 

For people like Kendra, this research pro- 
duced miracles. But the real miracle, or 
luck, was her birth date. Had she been born 
six months earlier—before the completion 
of animal trials for the anti-rejection drug 
cyclosporine—her chances of survival would 
have been only half as good. 

Animal research is important to the thou- 
sands of critically ill children like Kendra, 
and also to the millions of children who do 
not get sick—those who are vaccinated 
against polio, tetanus, diphtheria, and 
whooping cough, who survive strep throat, 
ear infections, bronchitis, and pneumonia 
because of antibiotics, all developed—and 
continuously tested today—in animals. It is 
the story of 11 million diabetics kept alive 
by insulin, cancer patients treated with radi- 
ation and chemotherapy—in short, of every 
major medical breakthrough in this centu- 


ry. 

And of the breakthroughs to come? That 
is the question. Kendra Hawthorne’s life de- 
pended on the use of research dogs, the 
animal model that, along with swine and 
monkeys, was critical in developing liver- 
transplant techniques, All the problems are 
not solved, particularly those having to do 
with rejection of alien tissue. Yet important 
work on the problem in Massachusetts has 
made the cost of acquiring dogs for research 
prohibitive. 

“When money runs out, you simply stop,” 
says Harvard Medical School professor Dr. 
Anthony Monaco. “Our work on inducing 
tolerance in organ grafts has come to a com- 
plete halt.” 

The result? Knowledge and techniques 
that could save another Kendra’s life might 
come too late—or not at all. 

Nothing at 4080-B Howard Avenue in 
Kensington speaks of such life-or-death con- 
sequences. The first-time visitor might miss 
the unmarked warehouse, tucked between 
an auto-parts store and plumbing contrac- 
tor, that is the headquarters of People for 
the Ethical Treatment of Animals—the 
country’s largest animal-rights group, orga- 
nizers of the NIH demonstrations. Only the 
bumper stickers on the cars parked in 
back—“Liberate Laboratory Animals”’— 
signal PETA's location. 

There is no knob on the door, and no bell. 
The visitor peering through a small, high 
window, sees a poster tacked to bare stud- 
ding. ‘“‘Vivisectors Are Scum,” it declares. 

PETA co-director Ingrid Newkirk echoes 
the poster’s theme as she ushers the inter- 
viewer past several large, friendly dogs. 
“Don't worry,” she laughs, ‘‘they’re only 
trained to bite vivisectors,"" She lays out the 
animal-rights position. 

“Animal liberationists do not separate out 


the human animal,” she begins, “‘so there is 
no rational basis for saying that a human 





October 15, 1986 


being has special rights. A rat is a pig or a 
dog is a boy. They're all mammals.” 

This ethic, Newkirk explains, ‘shakes the 
whole grubby system of biomedical re- 
search, because if you jeopardize an animal 
one iota in something that doesn’t benefit 
it, you’re doing something immoral. Even 
painless research is fascism, supremacism, 
because the act of confinement is tra‘ :matiz- 
ing in itself.” 

Newkirk's views on animal] experiisenta- 
tion are part of a broader animal-rights phi- 
losophy that has its roots in the 1977 book 
Animal Liberation, by Australian philoso- 
pher Peter Singer. 

Singer—who has called Newkirk ‘“‘one of 
the sharpest strategists in the movement”— 
argues that all sentient beings have equal 
moral status and regards humans’ use of 
animals for food, sport, or research as “‘spe- 
ciesism’’—the moral equivalent of racism. 

This philosophy goes beyond the tradi- 
tional animal-welfare concerns of the older 
humane organizations. As Newkirk ex- 
plained in a City Paper interview last year 
with Howard University philosopher 
Charles Griswold, the movement regards 
“the right to human life as a perversion,” 
meat-eating as “primitive, barbaric, and ar- 
rogant,”’ and pet ownership as an “‘absolute- 
ly abysmal situation brought about by 
human manipulation.” 

For now, her attention is focused on vivi- 
section. She charges experimenters with 
“lying and misleading the public” about the 
benefits of animal research: “The bulk of 
experimenters are mucking about with pigs 
and dogs while people are dying.” That 
statement—literally true, yet profoundly 
false—is characteristic of the logic that has 
brought thousands of animal-lovers into 
league with the radical animal-rights cam- 
paign. 

PETA, which claims 90,000 members 
across the country, represents the radical 
end of a broad animal-interest spectrum en- 
compassing 10 million supporters in more 
than 400 organizations. Of the 70 interest 
groups formed during the last two years, 
the majority are—by title or self-descrip- 
tion—radical in their position on animal re- 
search. And the PETA philosophy is in- 
creasingly influential inside the imposing 
eight-story office building at 2100 L Street, 
Northwest, home of the Humane Society of 
the United States. 

The visitor is struck not so much by the 
differences between 2100 L Street and 
PETA’s headquarters at 4080-B Howard 
Avenue as by the similarities. The rhetoric 
is softer, the awareness of public image 
higher, but the substance of the message is 
the same. 

“The HSUS is definitely shifting in the di- 
rection of animal rights faster than anyone 
would realize from our literature,”’ says the 
society’s director of lab-animal welfare, 
John McArdle, one of several ‘ethical vege- 
tarians” on the society’s executive staff. 

Acknowledging the limited appeal of an 
uncompromising vegetarian philosophy, 
McArdle advised delegates at the 1984 
HSUS convention to “avoid the words 
‘animal rights’ and ‘anti-vivisection.’ They 
are too strange for the public. Never appear 
to be opposed to animal research. Claim 
that your only concern is the source of the 

McArdle was discussing tactics to use in a 
“pound seizure” campaign—the top HSUS 
priority for 1986. It concerns the 10 to 15 
million unclaimed cats and dogs put to 
death in pounds each year. About 2 percent 
of those animals are sent to research insti- 


CONGRESSIONAL RECORD—SENATE 


tutions instead of being euthanized at the 
pound. The HSUS wants the transfers 
stopped. 

The impetus—and the emotionalism— 
behind the pound-seizure campaign is easy 
to understand. No one likes to think of pets, 
even former pets, as subjects for scientific 
experimentation, and instances of illicit 
animal sales to research laboratories have 
fueled efforts to improve regulation of traf- 
fic in research animals. 

But banning the use of pound animals al- 
together—and legislation toward that end 
has been introduced in Congress—can have 
devastating effects. In Massachusetts, which 
has the strictest laws against the use of 
pound animals in research, institutions 
must purchase animals specifically bred for 
that purpose—at four times the cost. Be- 
cause funding has not risen accordingly, and 
is unlikely to in the age of Gramm-Rudman, 
critical research—including work on heart, 
liver, and intestinal transplantation at Har- 
vard University—has stopped. It is a small 
irony, but a telling one, that prohibiting the 
use of pound animals in research means 
that twice as many animals ultimately die. 

To animal-rights advocates, who oppose 
all use of animals for human benefit, the 
source of research animals is immaterial. 
But the issue has proved useful in soliciting 
support. As McArdle explained to the HSUS 
delegates, “It is an ideal issue for the 
animal-rights community, as it is the easiest 
to explain to the general public, who are 
concerned about their pets (being used in 
research], and it has the greatest potential 
for adding new members to animal organiza- 
tions.” 

McArdle also pointed out that a successful 
pound campaign can serve as an opening 
wedge for introducing other laws to elimi- 
nate animal research. That is what hap- 
pened in Massachusetts in 1983; the day 
after passage of the state’s pound-animal 
ban, ads placed in the New York Times and 
the Boston Globe by the New England Anti- 
Vivisection Society showed a battle-helmet- 
ed dog with the caption, “We've won the 
battle; now help us win the war.” 

Like Ingrid Newkirk, John McArdle dis- 
misses the value of animal research. “Most 
of biomedical research has very little to do 
with human health,” he says. Researchers, 
he believes, “are up on a pedestal, but we’re 
whacking away at the base of that pedestal, 
and it's going to fall.” 

Animal research, McArdle says—again 
echoing Newkirk—is unnecesary to contin- 
ued medical progress. A PhD, he is at work 
on a comprehensive study of alternatives to 
animal testing, including computer models, 
cell cultures, and improved statistical meth- 
ods. His most innovative proposal, McArdle 
says, is the substitution of brain-dead 
humans for animals in surgical research. “It 
may take people awhile to get used to the 
idea,” he admits, “but once they do, the sav- 
ings in animal lives will be substantial.” 

That there are alternatives to using live 
animals in biomedical research is a major 
tenet of the animal-rights movement— 
though the goal seems not so much to devel- 
op such alternatives as to end the use of ani- 
mals altogether. 

Scientists view computer models and 
tissue cultures as useful adjuncts to, but not 
replacements for, live animal models. A 
recent report on the subject by the Office of 
Technology Assessment, Congress’ in-house 
scientific think tank, agreed. Current tech- 
nology, it concluded, is not adequate to 
eliminate animal research. 

In order to study the complex interaction 
of cells, tissues, and organs, the 430-page 


31337 


report said, research will continue to require 
live animals. The OTA noted that even 
tissue-culture studies must eventually be 
validated with results of whole-animal ex- 
periments, and that computer models of 
living systems cannot simulate all the reac- 
tions of a living creature. 

For now, McArdle and the animal-rights 
advocates are concentrating their attacks on 
the use of large mammals—primates and 
“companion” animals such as cats and dogs, 
which provide the closest models for 
humans in many kinds of research, and also 
are the species for which the public has the 
most sympathy. 

The HSUS, for example, wants NIH’s re- 
gional primate-research centers converted 
to “Centers for the Development of Alterna- 
tives to Animal Testing.” That effort, if suc- 
cessful, would eliminate the primate center 
where the isolation of the AIDS virus in 
monkeys provided the first step in develop- 
ing a vaccine for the disease. More impor- 
tant, say researchers, it would divert limited 
funds from research that depends on animal 
use to a search for alternatives. 

Along with his lobbying efforts on nation- 
al issues, McArdle coordinates and guides 
local humane societies in taking a more ag- 
gressive animal-rights stance. On his desk 
during an interview is a letter from the Pe- 
ninsula Humane Society in San Mateo, Cali- 
fornia, one of the country’s wealthiest 
humane organizations. 

According to the December 18, 1985, San 
Mateo Times, a ‘surprise coup” at the Socie- 
ty by local activists forced the resignation of 
the board's conservative members, one of 
whom said, “I am resigning because I do not 
agree the philosophy of extreme activists.” 

The radicalization of local humane soci- 
eties is a nation-wide phenomenon. Says 
PETA's Ingrid Newkirk: “Humane societies 
all over the country are adopting the 
animal-rights philosophy, becoming vegetar- 
ian, and working harder to get inside labs.” 

Other high-profile humane organizations 
that have shifted from traditional animal- 
welfare goals to an anti-research stance in- 
clude the 50-year-old Animal Protection 
League, the Animal Rescue League, and the 
American Society for the Prevention of Cru- 
elty to Animals. 

Campaigning on many fronts animal- 
rights activists have generated 80 bills in 
state legislatures to restrict animal research 
and have precipitated the shutdown of two 
major labs. They have radically shifted the 
federal Animal Welfare Act that regulates 
lab-animal use and have fundamentally al- 
tered the research climate. 

How has this come about, especially when 
80 percent of the public supports the use of 
animals in medical research, according to a 
recent Associated Press poll? 

Part of the answer can be found in the 
PETA demonstration at NIH. Shown there 
is a videotape shot by PETA codirector Alex 
Pacheco, who posed for four months as a 
lab volunteer in Dr. Edward Taub’s Insti- 
tute for Behavioral Research in Silver 
Spring. The scenes on that videotape depict 
unsanitary lab conditions and monkeys ap- 
parently in need of veterinary care. The pic- 
tures of monkeys with atrophied limbs and 
unbandaged wounds are hard to watch; 
many people turn away. 

It is a natural reaction. It was that video- 
tape, along with other evidence gathered by 
Pacheco, that led to a police raid on the lab 
in 1981, removal of the monkeys to NIH, 
and the prosecution of Dr. Taub for animal 
cruelty. 





31338 


The impact of those pictures, which have 
been used repeatedly on television and in 
PETA appeals for support, has overshad- 
owed Taub’s denial of animal mistreatment, 
the reversal by the Maryland Court of Ap- 
peals of his initial conviction, and his exon- 
eration by a U.S. Public Health Service 
Board of Appeals in 1984. 

But if the pictures tell a 60-second story 
of animal abuse to viewers of the evening 
news, the court documents in the case tell 
another. The major dispute in the Taub 
trial centered on his handling of the com- 
plex problems associated with deafferenta- 
tion—the severing of nerves, in this case to 
deprive limbs of sensation in order to simu- 
late human stroke and spinal-cord injury. 
The two groups who gave expert testimony 
on the proper treatment for deafferentation 
disagreed as to whether the monkeys’ limbs 
should have been bandaged. 

These scientific and veterinary argu- 
ments—on which experts still disagree— 
have been lost in the five years since the 
trial, overshadowed by sensational headlines 
and lurid pictures. Pacheco’s pictures cast 
the final shadow of suspicion over the re- 
search community’s treatment of animals 
and gave the animal-rights movement a ral- 
lying cry. 

The case also has advanced activists’ ef- 
forts to gain legal standing in behalf of ani- 
mals. In addition to demonstrating outside 
NIH, PETA has filed suit—now before the 
Pourth U.S. Circuit Court of Appeals in 
Richmond—to force the release of the Taub 
monkeys from NIH, in whose care they have 
been since 1981. 

The monkeys were moved in June, over 
PETA's protests, to a private NIH-funded 
facility in Louisiana, where they will be re- 
socialized and allowed to breed and range 
freely. Though they will be used only for 
observational studies there, PETA continues 
to oppose, on principle, their presence at a 
research facility of any kind, pressing in- 
stead to have them sent to a private primate 
sanctuary in Texas. 

It is an appealing notion, and it has 
gained the sympathy of columnist James J. 
Kilpatrick, among others, as well as more 
than 200 Members of Congress who have co- 
sponsored a resolution calling upon NIH to 
accede to PETA's request. 

But the case involves more than reloca- 
tion. PETA seeks guardianship rights over 
the monkeys similar to those granted to 
guardians of minors and mentally incompe- 
tent humans. PETA claims those rights by 
virtue of the “bonding” that has taken place 
between the monkeys and PETA members 
during their weekly visits over the past five 
years. 

Should PETA succeed, the precedent 
would be set for having courts—rather than 
scientific review boards—decide on the ap- 
propriateness of particular animal models to 
be used in research, including whether they 
should be used at all. This would trigger 
widespread legal action by activists seeking 
to remove animals from laboratories, gener- 
ating high litigation costs to researchers 
and eventually, activists hope, bringing 
animal research to a halt. 

Whatever the outcome of the case, the es- 
calation of the debate to the U.S. Congress 
and a judicial level one step removed from 
the Supreme Court is a barometer of a 
movement that was almost nonexistent in 
1981, when Alex Pacheco founded PETA. 

Says Pacheco: ‘We've come so far, so fast. 
To have done what we've done this year 
would have been unthinkable ten years 
ago.” 


CONGRESSIONAL RECORD—SENATE 


The most effective battles against animal 
research have been waged on non-legal 
fronts. PETA, which Ingrid Newkirk de- 
scribes as an “above-ground abolitionist or- 
ganization,” also provides central organiza- 
tion, legal-defense funding, and media cov- 
erage for the Animal Liberation Front, an 
underground group of separate cells that do 
not divulge their members’ identities to 
other cells or to outsiders. 

Over the last five years, the ALF has 
taken credit for dozens of lab break-ins, 
bombings, and threats to animal research- 
ers. Three ALF raids in particular—at the 
City of Hope National Medical Center in 
Duarte, California, the University of Cali- 
fornia at Riverside, and the University of 
Pennsylvania—have disrupted important re- 
search and instilled fear in the research 
community. 

If the Taub incident set the animal-rights 
movement in motion, the even more widely 
publicized University of Pennsylvania inci- 
dent marked a turning point. 

ALF members conducted a raid in May 
1984 on Penn’s Head Injury Clinic where a 
study was under way in which baboons were 
dealt brain injuries similar to those suffered 
by humans in auto accidents. 

Sixty hours of videotapes, stolen by ALF 
and edited by PETA to 30 minutes, revealed 
technicians smoking and making callous re- 
marks while performing non-sterile surgery 
on inadequately anesthetized baboons. 

The reaction was strong. While PETA 
members demonstrated at NIH, then-Secre- 
tary of Health and Human Services Marga- 
ret Heckler ordered funding for the project 
suspended. A report by NIH’s Office for 
Protection from Research Risks cited the 
project for “material failure to comply with 
Public Health Service policy for the care 
and use of laboratory animals,” and the US 
Department of Agriculture—enforcer of the 
Animal Welfare Act—imposed a $4,000 civil 
penalty on the university. 

The Penn case marked the first time a 
Cabinet official had intervened in NIH's 
management of its grantee institutions. Also 
for the first time, evidence obtained by ALF 
was used in Congress to enact tighter 
animal-welfare legislation, especially regard- 
ing the care of primates. Most important, 
many people wondered whether situations 
like the one at Penn were the exception or 
the rule. 

Like the photos of Taub’s monkeys, the 
Penn videotapes appealed to the normal 
desire to see animals treated in a humane 
way. 

Despite researchers’ claims that Penn was 
an exception—that the vast majority of lab- 
oratory animals are treated humanely— 
animal liberationists use the visual evidence 
from the case to argue that all animal ex- 
perimentation is cruel, unethical, duplica- 
tive, and unnecessary. 

“I have gone into research out of a pro- 
found respect for life at all levels,’”’ says 
Harvard immunologist Dr. Norman Letvin, 
whose work at the New England Regional 
Primate Center recently provided a critical 
link in AIDS-vaccine development. “It’s ab- 
solutely ludicrous to think I would use ani- 
mals callously. 

“If I use an animal and it dies, it’s painful 
for me. I give it a great deal of thought and 
planning.” 

Most researchers echo Letvin’s concern. 
But many are only now discovering what ac- 
tivists have known all along: that the real 
issue is not how animals are treated, but 
whether they are used at all. 

There was little discussion of legislative 
reform, new NIH guidelines, or pet-related 


October 15, 1986 


issues at a national Animal Rights Coalition 
conference in Minnesota last September, 
two months after the Penn experiments 
were halted. According to a representative 
of the research community who attended 
the conference—an account later corrobo- 
rated by PETA's Lori Gruen to Newsday re- 
porter David Zimmerman—“the one legiti- 
mate goal of the movement, as endorsed by 
speakers and accepted by the delegates, is to 
eliminate completely the exploitation of 
animals for food, for sport, for fashion, and 
especially for research.” 

Speakers made clear that the most effec- 
tive means toward that end was the support 
of ALF activities, reported the witness, who 
insists on anonymity for fear of retribution 
from animal-rights activists. Guerrilla ac- 
tivities were deemed “extremely useful in 
getting the movement media exposure,” al- 
though speakers noted that “there are actu- 
ally many more raids, pilferings of docu- 
ments, and acts of terrorism than are re- 
ported in the press.” 

That theme was picked up in a recent 
“Direct Action Paper” of the New York- 
based Human/Animal Liberation front. 
Citing the halting of research at Penn as a 
landmark victory, the paper urged front 
members to target other facilities for raids, 
“preferably universities because security is 
more relaxed and information on research 
more readily available.” Instructions are 
given on selecting vulnerable targets by 
using university bulletins. NIH grant-appli- 
cation listings, and Medline abstracts. 

“Choose what seems most redundant, 
absurd, or offensive, and best concentrate 
on cats, dogs, and primates so as to ensure 
public sympathy,” the paper counsels mem- 
bers. “It is quite possible to know a tremen- 
dous amount on a specific researcher with- 
out ever walking into a facility or having 
inside information. The most important 
aspect of an action is creativity; do not be 
afraid of being outrageous. One idea... is 
to block the gates of a research center with 
animal corpses, stolen or negotiated from 
local shelters.” 

In the absence of evidence of widespread 
animal abuse, liberationists have relied 
largely on visual evidence, used out of con- 
text, to trigger public response. Participants 
in the Animal Rights Coalition conference 
in Minnesota were advised that “TV and 
radio are much more effective than newspa- 
pers” and urged to “raise hell, be outra- 
geous, present gory details” in order to “put 
researchers on the defensive.” 

Donald Barnes, president of the National 
Anti-Vivisection Society, counseled misrep- 
resentation of facts, stating that he uses a 
figure of 70 million animals used in research 
a year—a figure he knows is too high—and 
forces his opponents to refute his numbers. 

Both the immediate and long-term effects 
of such tactics are clear to the animal-rights 
activists, who characterized the research sit- 
uation this way at the Minnesota confer- 
ence: 

“The climate of fear in the research com- 
munity is causing them to spend more 
money on security, reducing the amount of 
funds available for research. It may also dis- 
courage young scientists from going into 
animal research since they fear their 
chances of advancement may be jeopardized 
if they become the target of a liberation. In 
this way, the actions of the ALF save many 
more animal lives than the ones that are ac- 
tually liberated.” 

The animal liberationists' view is con- 
firmed by researchers. Following an April 
1985 raid on the University of California at 





October 15, 1986 


Riverside—during which ALF members re- 
leased animals, damaged computers, poured 
blood on files, and spray-painted liberation- 
ist slogans on laboratory walls—scientists 
throughout California work in a “siege men- 
tality,” says Dr. Thomas Hamm of the Stan- 
ford University Medical Center. “We are 
under constant threat of a break-in,” he ob- 
serves. 

Following the Riverside raid, research on 
infant blindness came to a halt while NIH 
investigated ALF claims of animal abuse. 
And although the eight-month investigation 
exonerated the facility, none of the 467 
stolen animals or the $638,000 in damages 
was recovered. 

“Worse than the dollar value,” notes 
Stanford’s Dr. Hamm, “are the personnel 
costs. I see a number of colleagues leaving 
the field because they can’t adjust to the 
harassment of the activist groups.” 

For obvious reasons, security has become 
a major concern—and expense—at research 
facilities. According to Dr. Arthur Butter- 
field, director of the Research Resources 
Facility at Georgetown University’s new 
multimillion-dollar animal-research center, 
“security was the overriding factor” in the 
facility’s design. 

At the University of California at San 
Francisco—where recent animal-rights activ- 
ism has cut off the supply of dogs for car- 
diovascular research—Dr. Joseph Spinelli 
says, ‘We are losing some faculty because of 
the problems with large-animal availability. 
Younger researchers are not going to go 
someplace where their work and their 
chances of advancement are impeded.” 

Says Dr. Frederick Goodwin, director of 
intramural research programs for the Na- 
tional Institute of Mental Health: “My 


people speak more and more of extreme 
fear and demoralization.” 

The loss of talented researchers could 
translate quickly into appalling human 
health costs, says NIMH neuroscientist Dr. 


Steven Wise. “If the chain of scientific 
talent is broken, society won't be able to re- 
verse that trend easily,” he warns. “In five 
or ten years, when we desperately need good 
scientists to solve another health emergency 
like AIDS, the scientific talent just will not 
be there.” 

Between the lurid images of widespread 
animal torture evoked by anti-vivisectionists 
and the research community’s near-univer- 
sal claims of concern for animal welfare, the 
question that remains in most people's 
minds is: Are lab animals treated humanely? 

In a sea of emotionalism, a few facts pro- 
vide some perspective. Current data from 
the US Department of Agriculture show 
that more than 90 percent of the 20 million 
animals used in laboratories each year are 
rodents; 2 percent are dogs and cats; less 
than 1 percent are non-human primates. 
The remainder are other species, including 
swine, sheep, calves, pigeons, and reptiles. 

According to 1984 USDA figures, 61 per- 
cent of the nonrodent species are not ex- 
posed to pain at all, while an additional 31 
percent receive analgesics or anesthetics. 
The remaining 8 percent are involved in 
studies of pain and methods of pain relief; 
even here, scientific protocols require that 
pain be minimized in order to separate the 
pain from other stress. 

Researchers argue that, in addition to eth- 
ical concerns, scientific and economic fac- 
tors militate against the mistreatment of 
animals. They note that unhealthy, stressed 
animals make poor research subjects. “If 
we're going to do good research, the varia- 
bles have to be controlled,” says George- 
town’s Dr. Butterfield. 


CONGRESSIONAL RECORD—SENATE 


To activists’ charges that much animal re- 
search is trivial or duplicative, researchers 
counter that the highly competitive way in 
which research grants are awarded elimi- 
nates all but the most meaningful, innova- 
tive work. Economic incentives—including 
NIH’s limitation of 15 percent of a grant for 
animal costs—mean that minimal numbers 
and alternatives are used whenever possible. 

Nevertheless, the ALF raids at the City of 
Hope National Medical Center and the Uni- 
versity of Pennsylvania yielded evidence of 
animal-welfare policy violations that result- 
ed in the suspension of NIH grants at both 
institutions. The issue of how extensive 
such violations are is hard to pin down. 

Following the raid on the University of 
California at Riverside last year, PETA cir- 
culated photos of a tiny macaque monkey 
with its eyelids sewn shut as evidence of 
abuse. But an NIH report exonerating the 
facility of all abuse charges cited inconsist- 
encies in the photographic evidence submit- 
ted by ALF, suggesting that “the ALF delib- 
erately attempted to misrepresent the facts 
concerning the living conditions of the ma- 
caque money.” 

As for humane treatment, the report also 
cited videotape of ALF members using 
sharp-pointed scissors to cut off the mon- 
key’s head bandage, failing to restrain its 
hands and feet to prevent injuries, and ex- 
posing the light-deprived animal to intense 
light for photograhic purposes. The photos 
of the monkey, dubbed “Britches” in PETA 
literature, have been used extensively in the 
group’s public-relations efforts. 

Perhaps the closest thing to an objective 
statistical view of lab-animal treatment 
came last year when an animal-welfare or- 
ganization, the Society for Animal Protec- 
tive Legislation, obtained USDA inspection 
reports under the Freedom of Information 
Act to provide data in support of amend- 
ments to the Animal Welfare Act. The 
study sampled 186 of the 1,400 major US re- 
search institutions, and found that about 23 
percent had problems with sanitation, venti- 
lation, veterinary care, or caging. 

In amending the Animal Welfare Act last 
year, Congress took a number of steps to 
tighten controls on animal research—some 
of them too tight, researchers contend—and 
commissioned the National Academy of Sci- 
ence to conduct a two-year study of animal- 
research conditions. 

All but lost in the shrill exchange between 
anti-vivisectionists and scientists called 
upon to justify animal research are the 
voices of moderation, advocates of the 
“three Rs” of animal welfare—replacement 
of animals where feasible alternatives exist, 
reduction in numbers where possible, and 
refinement of techniques to minimize pain. 

That is the concern of the Scientist's 
Center for Animal Welfare, a science-based 
humane organization begun six years ago by 
former NIH physiologist F. Barbara Orlans. 
“One of the reasons SCAW got started,” she 
says, “was that we saw these polarized view- 
points, and we wanted to provide a forum 
for unemotional discussion, to identify what 
reforms are needed, at the same time de- 
fending necessary animal! experiments.” 

Discussion, however, has been muted by 
the tactics of the animal-rights groups. 
“Terrorism has sidetracked what was at 
first a productive heightening of concern 
for animals,” says Stanford's Dr. Hamm. 

“The fact of that matter is, the movement 
is not going away; it’s gaining momentum,” 
says Frankie Trull, president of the Founda- 
tion for Biomedical Research, which was 
founded three years ago “to educate the 


31339 


public about the downside ramifications” of 
eliminating animal research. 

Actually, the scientific community—which 
has seen anti-vivisectionist sentiment rise 
and fall before—was slow in responding to 
the current animal-rights campaign, tending 
to dismiss it as the work of a handful of 
zealots. The movement’s sudden and far- 
reaching impact on research has left many 
scientists bewildered. 

“Perhaps the threat [was] easier to deny 
because so many of us applaud the senti- 
ments of the movement,” wrote Dr. Thomas 
Insel, a neuroscientist at the National Insti- 
tute of Mental Health, to a colleague last 
year. “We deplore suffering, and we care 
deeply about the welfare of animals, par- 
ticularly those used in research,” he ob- 
served, adding that scientist now “find it 
hard to believe that so many people are 
working full-time to abolish our research.” 

And no area of research is immune. Says 
Harvard AIDS researcher Dr. Norman 
Letvin: “We who are doing primate research 
are targeted by animal-rights groups. The 
fact that we're working on AIDS in no way 
protects us.” 

What does all this mean to human 
health? Sometimes the translation is 
remote; often it is frighteningly immediate. 
AIDS research—in which primates are the 
research model for vaccine development—is 
an example. The targeting of primate labs 
for break-ins and legislative restrictions 
mean slower development of a vaccine for a 
disease that has already infected more than 
1 million men, women, and children, and is 
expected to have killed 179,000 people in 
the US by 1991. 

Even the $126 million allotted to AIDS re- 
search in 1985 has not buffered research 
from the large additional costs of security 
or of new primate-caging requirements es- 
tablished under recently revised NIH guide- 
lines. And depending on regulations now 
being drawn up, new federal requirements 
that researchers “insure the psychological 
well-being of primates” could send costs 
soaring—with no concomitant increase in 
NIH funding. 

The state-by-state efforts of activist 
groups may ultimately prove more devastat- 
ing than national action. Local laws banning 
the use of pound animals for research, 
greatly driving up animal costs, have forced 
some Massachusetts researchers to stop 
work entirely, according to Dr. John Powell, 
a cardiologist and professor at Harvard 
Medical School. In other cases, the time lost 
in shifting to less appropriate animal spe- 
cies—for which new data bases must be 
built—will markedly slow the pace of re- 
search. 

This means that in certain kinds of cardio- 
vascular research—where the canine model 
provides the closest parallels to man—the 
answers to heart problems that afflict some 
60 million Americans will come much more 
slowly, or not at all. “We simply won't be 
able to do critical experimentation in cardi- 
ac surgery and coronary care,” says Powell. 

Among cardiovascular researchers affect- 
ed by the Massachusetts pound legislation is 
surgeon and Harvard Medical School profes- 
sor Dr. Willard M. Daggett. “Cost factors 
have forced us to curtail much of our re- 
search,” he says, “and one line of re- 
search”—involving techniques for minimiz- 
ing damage to heart muscles after heart 
attack—‘‘was completely scrapped.” 

Nine other states have pound laws compa- 
rable to those of Massachusetts, and similar 
laws are under consideration in twenty 
others. This spring, New York Congressman 





31340 


Robert Mrazek introduced legislation pro- 
hibiting the use of pound animals in all fed- 
erally funded research. 

Increasing layers of regulation, the result 
of pressure from activist groups, also pose a 
threat to research. In a year when Gramm- 
Rudman will cut $232 million from the 
Health and Human Services research 
budget, the costs of complying with new 
federal regulations will tax research re- 
sources even harder. 

“Who is going to pay for the immense cost 
of this new bureaucracy?” asked Dr. Clif- 
ford Saper of the University of Chicago in 
an April 10 letter to the New England Jour- 
nal of Medicine. The submission of dozens 
of protocols for each experiment, he main- 
tained, “make it so difficult to perform cer- 
tain types of experiments that the experi- 
ments become impractical.” Saper noted 
that the use of routine anesthetics now re- 
quires time-consuming documentation of 
arcane points about veterinary anesthesia; a 
new regulation limiting repeated surgical 
procedures on the same animal has forced 
investigators to double the number of ani- 
mals used and made it difficult to monitor 
their physiological responses over a period 
of time. 

The cumulative impact of all these devel- 
opments has been “subtle, yet profound,” 
says Dr. Frederick Goodwin, director of in- 
tramural programs for the National Insti- 
tute of Mental Health. “If you stop funding 
or drive up costs by layers of regulations, 
nobody on the outside knows it’s happening. 
Research just quietly dies.” 

Observers NIH neuroscientist Dr. Zaven 
Khachaturian: “Most of society ignores this 
issue, and yet the impact is colossal.” 

“It’s not just a question of saving or not 
saving the animals,” asserts Howard Univer- 
sity philosopher Charles Griswold. “It’s a 
question of saving or not saving us—not just 
in the sense of self-preservation, but in our 
it means to be 


understanding of what 
human. The thesis that there is no moral 
difference between man and a rat amounts 
to the ethical and moral debasement of 
man.” 

Says Laurence McCullough of George- 


town University’s Kennedy Center for 
Bioethics: ‘We have to look at the conse- 
quences of giving animals rights. ... Are 
you ready to say to the thousands of human 
beings in this country who have heart at- 
tacks every year that we're more obligated 
not to use those dogs than we are to you 
and everybody else to try to reduce the 
long-term consequences of heart attack?” 
To “stand by and not attempt to reduce the 
risk of 100 percent lethality’’ among AIDS 
victims, he believes, would be to put ani- 
mals’ rights above those of humans. 

When the discussion moves from the phi- 
losopher’s office to the surgical ward, the 
tone is more urgent. Dr. Glenn Geelhoed, 
director of surgical research at George 
Washington University Hospital, says, “I 
have to recognize the rights of the patients 
who come to me, one at a time, and say, 
‘Please don’t let me die.’ They are not 
asking for fine philosophical distinctions. 
They are asking me to do anything I can to 
help. And today the most successful thing I 
can do to help them is to perfect medicine 
and operations in the animal model.” 

Yet the connections between animal 
models and human health are often diffi- 
cult for the layman to see. “People are un- 
comfortable with the image of an animal in 
a cage being used for research,” says Carol 
Sherman of the Association of American 
Universities. “But we are also uncomfort- 


CONGRESSIONAL RECORD—SENATE 


able about seeing a sick child in bed hooked 
up to tubes. We are uncomfortable about 
pain and suffering, and we should be. We’re 
human beings, and that part of our human- 
ity is important. But what's also important 
is using our heads to understand the whys 
and effects of doing certain things.” 

Understanding comes easy in the brightly 
decorated nursery of an Oakton townhouse, 
where one-year-old Keith Fernandez lets 
out a hearty cry. His chances of doing so 
seemed remote a year ago as he lay in the 
intensive-care nursery at Georgetown Uni- 
versity Hospital hooked to a machine called 
ECMO, which stands for Extra-Corporeal 
Membrane Oxygenation. 

Keith had been born with a lung disorder 
that failed to respond to conventional high- 
pressure ventilation therapy. Two hours 
after his birth, his lungs were collapsing; he 
was going to die. “They told us how risky 
ECMO was, about the danger of brain bleed- 
ing,”’ recalls Keith’s mother, Brana Fernan- 
dez. “But he was exhausting himself trying 
to breathe. ECMO was his only chance.” 
The machine, acting as an artificial lung, 
gave Keith's lungs a chance to rest and, in 
time, to heal. 

Keith was the fourth “ECMO baby” since 
Georgetown started its program in March 
1985. For a year before that, teams of doc- 
tors and nurses at Georgetown had been 
perfecting in the animal lab the final details 
of the complex procedure. Since its concep- 
tion in 1970 by Dr. Robert Bartlett, animal 
trials—on sheep—had been critical to its de- 
velopment. 

“You just can’t predict everything that 
will happen with such a delicate process,” 
explains Georgetown's ECMO director, Dr. 
Marty Keszler. ‘Unless you do the proce- 
dures in the animal lab first, you're going to 
be experimenting on babies.” 

Born July 10, 1985, Keith Fernandez was 
just in time for ECMO. He is now one of fif- 
teen babies saved at Georgetown since the 
program began. Says Brana Fernandez: “I 
can't imagine what it would have been like 
if that treatment hadn't been ready for my 
baby when he needed it.” 

For every child like Keith Fernandez or 
Kendra Hawthorne born at the right time 
for the right medical “miracle,” there are 
thousands, like Salinda Smith, to bring to 
life what is at stake in the animal-rights 
debate. The only sign that the two-year-old 
girl is critically ill is the portable IV appara- 
tus that rolls behind her down the halls of 
Children's Hospital. 

The IV is Salinda’s lifeline. She does not 
have enough intestine to enable her to eat, 
absorb food, and grow. Thousands of chil- 
dren like Salinda race for time, their bodies 
struggling for independence from the IV 
before it fails them, as it inevitably does. 

Sustained for two years by the IV, Salinda 
is just now beginning to absorb nutrition 
through a tube into her intestine. If this 
method succeeds in the long term, Salinda 
will be one of the lucky ones. Otherwise, the 
only answer is intestinal transplantation, a 
procedure that is years away. 

“When the day finally comes that we can 
do intestinal transplants in human beings,” 
Says surgeon Judson Randolph, “it will only 
be because of animal research” on surgical 
techniques to join the intestinal arteries 
and on the various infection and rejection 
problems that are far more complicated in 
the intestine than in other organs. 

The question for children like Salinda is 
when these techniques will be perfected. 
“We can’t keep these children on long-term 
IV forever,” says Dr. Randolph. “When 


October 15, 1986 


they’re six or eight years old and we run out 
of veins to put the tubes in, we'll have to 
watch them die.” 

Yet final-stage work on intestinal trans- 
plantion has stopped as a result of the Mas- 
sachusetts ban on the use of pound animals. 
“Here we are, ready to translate all our pre- 
liminary work—done in rats—to the patients 
whose survival depends on transplantation,” 
says Dr. Anthony P. Monaco, chief of organ 
transplantation at the New England Dea- 
coness Hospital. “But without adequate doc- 
umenation in the dog model, we cannot pro- 
ceed to the human.” 

So some dogs will die at the pound instead 
of being used in research. And some chil- 
dren also will die. For those like Salinda, it 
is a question of time. 


Wuat's aT STAKE: THE IMMEDIATE CASE FOR 
ANIMAL RESEARCH 


Virtually every major medical advance of 
the twentieth century has depended on 
animal research. The major health prob- 
lems we face today are no different. 


CHILDHOOD DISEASES 


The specter of polio has all but disap- 
peared in the last three decades with the de- 
velopment of the Salk and Sabin vaccines, 
both of which used monkeys—to which 
human poliomyelitis could be transmitted— 
as test subjects. But the testing could not 
end there. Dr. Joseph Bellanti, director of 
Georgetown University’s Immunology 
Center, points out that every new batch of 
vaccine for polio and other childhood dis- 
eases must be tested on animals to make 
sure that the virus has been adequately in- 
activated. 

For every new vaccine produced, live- 
animal testing answers the questions ‘‘Does 
it work?” and “Is it safe?” This year those 
questions will be important to everyone who 
receives the newly released vaccine for Hae- 
mophilus influenza (HIB) and the soon-to- 
be-released chicken-pox vaccine. 

Increased use of synthetic vaccines won't 
reduce the need for animal testing, Dr. Bel- 
lanti explains. “If you have no evidence for 
their efficacy and safety in the animal 
model, how can you proceed to the human?” 


AIDS 


The most crucial search now under way is 
for a vaccine to combat AIDS, which is ex- 
pected to have killed 179,000 people in the 
US by 1991. Only a year ago did scientists at 
the New England Regional Primate Center 
succeed in isolating the STLV-3 virus 
(SAIDS, the simian form of AIDS) in ma- 
caque monkeys and inducing it in others. 

It is not yet clear whether a vaccine can 
be made to disable the virus, because the 
way it infects is unlike that of other dis- 
eases. But researchers at the National 
Cancer Institute recently found that chim- 
panzees could produce antibodies to the 
AIDS virus and that those antibodies, when 
cultured with live cells, protected the cells 
from the virus. The next step is to vaccinate 
the chimpanzees. If the vaccine works in 
them, the reasoning is that it will protect 
humans. 

The chimpanzee is so far the only animal 
that develops the antibodies indicative of 
AIDS infection but it doesn’t exhibit any 
symptoms of the disease. Macaque monkeys 
do, however, which means that the infection 
process can be tracked in them to develop 
better understanding of AIDS. That may 
help pinpoint, for instance, the optimum 
stage for instituting therapy in AIDS pa- 
tients. “These question can’t be answered in 





October 15, 1986 


man,” explains Dr. Anthony Fauci, director 
of the Institute for Allergy and Infectious 
Diseases, “because AIDS in humans is diag- 
nosed very late.” 

Efforts to isolate the simian form of AIDS 
actually began in 1979 when primate re- 
searchers observed opportunistic infections 
and tumors in breeding colonies of macaque 
monkeys. “We realized seven years ago that 
it was essential to get to the bottom of the 
disease for the sake of the monkeys,” says 
Dr. Norman Letvin, immunologist at the 
New England Regional Primate Center. 
“Now that the virus has been isolated, we 
have an animal model in which to develop 
vaccines for monkeys and for humans.” 

Letvin adds, “It is possible to learn a great 
deal more from a very small number of ani- 
mals in a controlled study than you would 
from observing hundreds of human AIDS 
patients.” 

CANCER 


Six years of working with laboratory mice 
lies behind the discovery, by Dr. Steven 
Rosenberg and his team at the National 
Cancer Institute, of Interleukin-2, a natural 
body substance that has proved highly suc- 
cessful, since human trials began last year, 
in treating cancerous tumors otherwise un- 
treatable by surgery, chemotherapy, or radi- 
ation. 

Alternatives, such as computer data analy- 
sis and genetically engineered bacteria, com- 
plemented the live-animal testing, but none 
could have substituted for it in proving the 
safety and efficacy of the treatment, Rosen- 
berg maintains. 

ALZHEIMER'S DISEASE 


“Eight years ago, we were at ground zero,” 
says Dr. Zaven Khachaturian of the Nation- 
al Institute on Aging. “There has been in- 
credible progress in Alzheimer’s research be- 
cause of our investment in basic research 
concerning brain functioning going back to 
the 1930s." The bulk of that research in- 
volved animals, Khachaturian notes, and 
they hold the key to continued progress. 

Through studies with primates and other 
animals, researchers have identified the 
region of the brain—the nucleus basilis of 
Meynert—that is critical to the development 
of Alzheimer’s. Though autopsy studies of 
the human brain provide some information, 
the disease must be observed during its de- 
velopment of find clues to its origins—and 
that can be done only in animals. 

Attempting to simulate the early stages of 
Alzheimer’s researchers have lesioned the 
areas of rats’ and monkeys’ brains believed 
to be affected by the disorder and evaluated 
the chemical and anatomical alterations. 
Within two years, Kachaturian predicts, 
they will have identified the chemical mark- 
ers for the disease and will be able to diag- 
nose it early. “In the foreseeable future— 
the next ten to twenty years,” he believes, 
“we will be able to transplant from cell cul- 
tures the kinds of cells necessary for normal 
functioning of the brain.” 

Brain research holds promise for medical 
breakthroughs in other mental disorders, 
too. This year, animal work by NIMH’s Dr. 
Robert Post provided evidence for the suc- 
cess of a new drug, carbamazepine, in treat- 
ing manic-depressives who do not respond to 
lithium—a drug treatment also developed 
and tested in animals. Because primates 
share 95 percent of human DNA, explains 
Dr. Frederick Goodwin, director of intramu- 
ral programs for the National Institute of 
Mental Health, they are irreplaceable 
models in the neurosciences. “If you want to 
understand the human brain, you must first 
understand the primate brain,” he says. 


CONGRESSIONAL RECORD—SENATE 


FEDERATION OF AMERICAN 
Societies FOR EXPERIMENTAL BIOLOGY, 
Bethesda, MD, August 11, 1986. 
JouN A. LIMPERT, 
Editor, the Washingtonian, Washington, 
DC. 

Dear Mr. Limpert: Katie McCabe, author 
of “Who Will Live, Who Will Die?” has writ- 
ten what may be the most trenchant analy- 
sis yet of the controversy over using animals 
in biomedical research. Ms. McCabe's article 
comes to all the right conclusions: that the 
use of animals as experimental models is es- 
sential to understanding disease in humans 
as well as animals; that without laboratory 
animals, progress toward treatments and 
cures for cancer, heart disease, AIDS and 
other afflictions would be halted at the ex- 
pense of human life; and that the goal of 
the so-called animal rights movement is to 
stop the use of animals in research entirely. 

The animal rightists are surely creating a 
crisis in health research that eventually 
could affect everyone of us. Ms. McCabe and 
the Washingtonian have acted in the best 
traditions of journalism by providing a clear 
and insightful article that will help the 
public better understand what is at stake in 
this matter. 

We who represent thousands of biomedi- 
cal and biological researchers dedicated to 
improving human and animal health com- 
mend Ms. McCabe and the Washingtonian 
for performing a most courageous and valu- 
able public service. 

Sincerely, 
Rosert W. Krauss, 
Executive Director. 
THE HuMANE SOCIETY OF 
THE UNITED STATES, 
Washington, DC, August 6, 1986. 
Letter to the Eprror, 
The Washingtonian, Washington, DC. 

Dear Epritor: I am utterly amazed that a 
publication as responsible and respected as 
The Washingtonian would publish an arti- 
cle as poorly researched and slanted as 
Katie McCabe's ““Who Will Live, Who Will 
Die?” If this article was intended to be 
nothing more than a promotion piece for 
those engaged in laboratory animal re- 
search, it was a success. But if it was the 
desire of your magazine to responsibly 
inform readers about the questions and 
issues surrounding the use of animals in re- 
search, Ms. McCabe did both you and your 
readers a great disservice. 

McCabe's bias is evident. I am confident 
that discriminating readers will agree that it 
is inconceivable that any issue worthy of 
eleven pages in your magazine could be as 
one-sided as is set forth in McCabe's article. 
Few things in life are ever quite that simple, 
and the use of animals in research is clearly 
avery complex issue. 

Be that as it may, I am even more con- 
cened with what will have been less evident 
to many of your readers—the many inaccu- 
racies, misstatements, manipulations of in- 
formation, and glaring omissions that per- 
vade the article. I seriously object to the 
grossly distorted and inaccurate portrayal 
of The Humane Society of the United 
States. The HSUS has long been recognized 
as a rational and responsible force within 
the animal movement by the public, the 
Congress, the press, and, with few excep- 
tions, by the scientific community itself. 

I also wish to state that The HSUS is not 
an anti-vivisectionist organization. It does 
not contend that all research using animals 
is unnecessary. To quote from our State- 
ment of Policy, “The Humane Society of 


31341 


the United States recognizes that benefit 
for both animals and mankind has been 
achieved through some scientific research 
and testing on animals...” and we surely 
recognize that “this research and testing is 
not likely to end in the immediate future.” 
We do, however, vigorously support the 
humane treatment of animals in laborato- 
ries and elsewhere, an effective system of 
accountability on the part of the scientists 
and facilities utilizing animals, and the de- 
velopment and utilization of alternatives 
that will reduce and hopefully end the suf- 
fering of animals in biomedical research and 
testing laboratories. I am pleased to enclose 
a copy of our policy statement on the use of 
animals in biomedical research and request 
that The Washingtonian print it in its en- 
tirety at the end of this letter. I would also 
urge all interested readers to contact us for 
a copy. This policy statement was available 
to McCabe, as it is to anyone, but she either 
failed to ask for it or chose to ignore it. 

There is neither the time nor the space 
here to detail the numerous McCabe errors, 
whether deliberate or unintentional, or to 
point out each item presented as irrefutable 
scientific fact that is open to legitimate 
debate. I do, however, wish to mention the 
most troublesome. 

McCabe refers to “the voices of modera- 
tion, advocates of the ‘three R's of animal 
welfare—replacement of animals where fea- 
sible alternatives exist, reduction in num- 
bers where possible, and refinement of tech- 
niques to minimize pain” and applauds the 
Scientists Center for Animal Welfare for 
embracing these reforms. The HSUS not 
only agrees with the “three R’s” concept, 
but in fact adopted and promoted these re- 
forms as early as 1978, several years prior to 
the advent of SCAW. They remain funda- 
mental to our current endeavors. 

McCabe ascribes to the HSUS spokesper- 
son several quotes from a workshop address- 
ing the use of shelter animals for resarch. 
She fails to cite her source for those com- 
ments and leaves the reader with the im- 
pression that they were provided by the 
HSUS spokesperson himself on the occasion 
of her interview with him. The language 
within quotation marks in McCabe's story 
is, however, identical to that in a document 
that the research community has been cir- 
culating since 1984, entitled “Notes taken 
from the 1984 Annual Conference of the 
Humane Society of the United States.” The 
document is not a transcript, the workshop 
was not taped, and nothing in the document 
is identified as a direct quotation. In fact, 
several of the notes use the third-person 
style, “‘He believes . . .", etc. McCabe, how- 
ever, using the notetaker’s comments, em- 
broiders them with quotation marks and at- 
tributes them as direct quotes from the 
HSUS spokesperson. Even the research 
community didn’t have the audacity to pur- 
port that the document they were circulat- 
ing contained direct quotes, but McCabe 
had no hesitation to do so. Had she asked 
for confirmation of the information con- 
tained in the document, she would have 
been provided the corrected version of those 
comments, which has been in print two 
years. 

McCabe depicts the HSUS and PETA as 
virtual mirror images of each other. In fact, 
these organizations are vastly different in 
both substance and style, as well as in the 
specific goals and policies each embraces. 
Within the animal movement, as in any 
other movement, there is a wide range of or- 
ganizations, the diversity of which enriches 
and vitalizes the movement as a whole. 





31342 


Your readers should understand that not 
everyone who supports animal protection is 
necessarily an animal rights activist. And 
not everyone who embraces the concept of 
animal rights accepts the proposition that 
there is no legitimate use of animals by 
humans, 

Both researchers and reporters contend 
that the search for truth is one of their pri- 
mary goals. It is sadly ironic that in this al- 
leged report about research, so much truth 
was lost or distorted along the way. 

Sincerely, 
Joun A. Hoyt, 
President. 


ANIMALS IN BIOMEDICAL RESEARCH AND 
TESTING 


The Humane Society of the United States 
recognizes that benefit for both animals and 
mankind has been achieved through some 
scientific research and testing on animals, 
but that the advancement of medicine and 
human health has also been hindered by an 
overemphasis on such animal research, 
safety testing, and other programs are many 
and varied, and that this research and test- 
ing is not likely to end in the immediate 
future. 

While some of the animals used in re- 
search and testing are subjected to proce- 
dures that result in only momentary dis- 
comfort. The HSUS believes that millions of 
laboratory animals do suffer severely and 
needlessly in painful experiments, resulting 
from exposure to noxious substances and 
pathogenic organisms, or from cruelty, care- 
lessness, ignorance, and indifference. The 
HSUS also contends that toxicity testing on 
live animals, as now required by government 
agencies to test the safety of serums, drugs, 
cosmetics, and other chemicals, is often un- 
reliable, inaccurate, and unnecessary and 
should be replaced as soon as possible by 
new methods not involving animal suffer- 
ing. Existing measures intended to ensure 
humane treatment, including the Animal 
Welfare Act and its enforcement, have 
proven inadequate. The Animal Welfare Act 
should be strictly enforced. Coverage should 
be expanded to include all vertebrates used, 
protect animals undergoing the actual re- 
search and experimental process, and re- 
quire prohibition of specific painful invasive 
procedures. 

The HSUS believes that scientists and fa- 
cilities using experimental animals should 
be held strictly accountable for their care 
and use and should keep animals in a 
manner fulfilling both physical and behav- 
ioral needs. Experiments should be rigorous- 
ly planned, with proper statistical design, so 
as to minimize the number of animals neces- 
sary to be used to achieve reliable results 
and, through the administration of anesthe- 
sia and analgesics and other appropriate 
medication and veterinary care required, to 
preclude animal suffering. the HSUS be- 
lieves that government agencies and rele- 
vant professional organizations should en- 
courage and actively support efforts to 
eliminate animal suffering in the laborato- 
ry. 

Therefore, The HSUS strongly advocates 
the development and application of alterna- 
tive methods of research and testing which 
could reduce the number of animals re- 
quired, refine existing techniques and proce- 
dures so as to minimize the level of stress 
endured by an animal, and replace the use 
of laboratory animals. Refinement and re- 
duction are interim steps towards the ulti- 
mate goal of complete replacement of ani- 


CONGRESSIONAL RECORD—SENATE 


mals in biomedical research and product 
testing. 

Therefore, it is the policy of The Humane 
Society of the United States to use every 
means in its power to reduce and end the 
suffering of animals in biomedical research 
and testing laboratories by advocating the 
attitudes and approaches set forth in this 
statement. 


TRIBUTE TO SENATOR LONG 


Mr. HATFIELD. Mr. President, I 
cannot let this 99th Congress draw to 
a close without paying tribute to my 
dear friend from Louisiana, Russet 
Lonc. One of the joys of serving in 
this body is the chance to work with 
those Senators who seem to possess an 
extra measure of leadership, wisdom, 
perspective, and good temperament. 
With the retirement of Senator Lonc 
from the Senate after 36 remarkable 
years, we lose such a man. 

Mr. President, an oftrepeated obser- 
vation of the Senate is that it is com- 
prised of too many politicians and too 
few statesmen. In my opinion, RussEeLL 
Lonc is one of the preeminent Senate 
statesmen. His delightful sense of 
humor and easy manner combine with 
his knowledge of parliamentary proce- 
dure and his talent for achieving bi- 
partisan consensus to make him one of 
this body’s most effective legislators. 
In fact, for 36 years if you had Rus- 
SELL LonG on your side of a bill, you 
probably won. 

During his 15-year tenure as chair- 
man of the Senate Finance Commit- 
tee, Senator Lone developed a reputa- 
tion for careful strategy and skillful 
management, both qualities contribut- 
ing to his impressive list of legislative 
accomplishments. 

Perhaps the greatest accomplish- 
ment of Senator Lone’s illustrious 
career, and one most indicative of his 
concern for the American worker, was 
an addition to the Tax Code which 
created the employee stock ownership 
plan, or ESOP. I was pleased to join 
him in this effort beginning in 1973. 

As is characteristic of the senior 
Senator from Louisiana, Senator 
Lonec’s motivation for the creation of 
the ESOP was not partisan, nor was it 
political. His purpose was simply to 
bring out the best in our free enter- 
prise system and to grant to those who 
work to make our economy succeed 
the opportunity to share in that suc- 
cess. Senator Lone was a visionary in 
his belief that ESOP’s could help di- 
versify capital stock ownership, enable 
citizens to participate directly in the 
profitability of their employers, and 
provide a convenient and available 
source of capital for companies seek- 
ing to expand. 

Senator Lonc has always been con- 
cerned about simple and basic equity 
and he can take pride and satisfaction 
that he has left a legacy to the Ameri- 
can people which will advance eco- 
nomic growth for years to come. 


October 15, 1986 


Mr. President, I take great pleasure 
in calling Russet, Lonc my friend. His 
retirement from the Senate and his 
return home will be this country’s loss, 
but Louisiana's gain. 


COMMENT ON IMPEACHMENT 


Mr. MATHIAS. Mr. President Prof. 
Raoul Berger has observed that while 
impeachment in this country has been 
“largely a means for the ouster of cor- 
rupt judges,” it was in England “the 
chief institution for the preservation 
of the government.” R. Berger, ‘“Im- 
peachment: The Constitutional Prob- 
lems” 1 (1973). In the 198 years since 
it first assembled in New York, the 
Senate has removed only five civil offi- 
cers of the United States, all judges. 
While this supports the observation 
that impeachment in this country has 
been used narrowly, we must be mind- 
ful of the larger purpose, “the preser- 
vation of the government,” that is 
served by the framers’ decision to 
import this English institution into 
our national charter. 

The framers did not specify the pro- 
cedures which the Senate should use 
when trying impeachments, other 
than that the Senate shall have “the 
sole Power to try all Impeachments,” 
that ‘‘Cwlhen sitting for that Purpose, 
{Senators] shall be on Oath or Affir- 
mation,” that “Cwlhen the President 
of the United States is tried, the Chief 
Justice shall preside,” and that “no 
Person shall be convicted without the 
concurrence of two-thirds of the Mem- 
bers present.” (U.S. Const., Art. I, sec. 
3, cl. 6). Beyond these requirements, 
the Constitution grants to the Senate 
discretion, through its authority to 
“determine the Rules of its Proceed- 
ings,” (Art. I, sec. 5, cl. 2), to choose 
the means of implementing its im- 
peachment trial responsibilities. 

The Senate’s impeachment proce- 
dures must serve three objectives. 
They must enable the Senate to deter- 
mine if there is sufficient evidence to 
convict an officer of the United States 
of a high crime or misdemeanor. They 
must enable the officer to defend him- 
self against the accusation of the 
House of Representatives. Finally, in 
adopting procedures to aid in “the 
preservation of the government,” the 
Senate must be careful not to diminish 
its ability to perform the other func- 
tions of the Government which it is 
seeking to preserve. 

In the impeachment trial of Judge 
Harry E. Claiborne the Senate was 
called upon to consider the propriety 
of two procedures, one of which the 
Senate rejected and another of which 


it utilized. My purpose in addressing 
the Senate today is to examine these 


important decisions. 





October 15, 1986 


1. THE MOTION BY THE HOUSE FOR SUMMARY 
DISPOSITION OF THE THIRD ARTICLE OF IM- 
PEACHMENT 
The House exhibited four articles of 

impeachment. The first and second ar- 
ticles alleged that Judge Claiborne 
had willfully filed fraudulent tax re- 
turns for 1979 and 1980 which failed to 
report substantial income. The third 
article alleged that he had been con- 
victed of those offenses in a U.S. dis- 
trict court. The fourth article alleged 
that Judge Claiborne’s willful falsifica- 
tion of tax returns brought disrepute 
on the Federal courts and the adminis- 
tration of justice. 

At the outset of the proceedings 
before the Impeachment Trial Com- 
mittee, appointed by the Senate in ac- 
cordance with Impeachment Rule XI, 
the House filed a motion for summary 
disposition of the Third Article of Im- 
peachment. The House noted that 
Judge Claiborne had been convicted of 
two felony offenses, and asked “that 
the Senate recognize this judgment of 
conviction and determine that it is an 
adequate basis, under article III of the 
Articles of Impeachment, for Judge 
Claiborne’s conviction by the Senate 
and removal from office.’ (S. Hrg. No. 
99-812, at 147-48). The House dis- 
avowed any intention, with respect to 
the third article, to present proof of 
the commission of the underlying of- 
fenses. It stated that it would rest its 
case in support of the third article on 
the record of the trial and appellate 
proceedings in the criminal case. The 
House submitted the trial transcript 
solely “‘as evidence of the regularity of 
the proceedings.” Id. at 149 n.2. The 
House urged the Senate to credit the 
final judgment of the judicial branch 
and not to make an independent deter- 
mination of the facts. 

The Impeachment Trial Committee 
lacked jurisdiction to rule on the 
House motion for summary disposi- 
tion, and it referred the motion to the 
Senate at the conclusion of its hear- 
ings. The committee rejected the com- 
panion House motion which requested, 
in essence, that the committee desist 
from taking evidence and refer the 
House summary disposition immedi- 
ately to the Senate. As chairman of 
the committee, I explained why I be- 
lieved that the committee should not 
disturb the Senate’s decision that the 
committee receive the parties’ evi- 
dence on all of the articles prior to the 
Senate’s consideration of their legal 
and factual merit. 

In my ruling, I noted that the House 
argument, which was based heavily on 
principles of comity, the conservation 
of resources, and the avoidance of in- 
consistent results, might have been 
compelling if the Senate had been sit- 
ting simply as another court. The 
Senate, however, has the “sole’”’ power 
to try all impeachments, and it has no 
authority to delegate that power to 
another branch. The evidence is that 


CONGRESSIONAL RECORD—SENATE 


the framers deliberately constructed a 
system which would contemplate, in 
Alexander MHamilton’s phrase, a 
“double prosecution.” “The Federalist 
No. 65”, at 429 (B. Wright ed. 1961). 
The separation of criminal and im- 
peachment proceedings was designed, 
in Hamilton’s further words, to pro- 
vide impeached officials of the execu- 
tive and judicial branches with “the 
double security intended them by a 
double trial,”” Id. at 428. The reverse 
side of double jeopardy. The need to 
separate criminal proceedings in the 
judicial branch from impeachment 
proceedings in the legislative branch is 
underscored by the framers’ rejection 
of a proposal to confer on the Su- 
preme Court the power to try im- 
peachments. 

The Third Article of Impeachment 
garnered the support of fewer than 
half of the 98 Members who were 
present for voting on the articles: 46 
Members voted guilty, and 52 voted 
not guilty or simply announced their 
presence. In this manner, the Senate 
convincingly recorded its conclusion 
that it should not delegate the im- 
peachment function to the courts by 
making removal a further and auto- 
matic consequence of a criminal con- 
viction. While we may hope that the 
courts will always be virtuous and cor- 
rect in their judgments, our special 
function under the separation of 
powers does not permit us to reunite, 
in the judicial branch, powers which 
the framers thought should be sepa- 
rated. 

2. SENATE IMPEACHMENT RULE XI 

Members are now thoroughly famil- 
iar with the provisions of Senate Im- 
peachment Rule XI. The rule author- 
izes the Presiding Officer to appoint, 
if the Senate so orders, a committee to 
take testimony in impeachment pro- 
ceedings. Upon the committee’s report 
to the Senate of a certified transcript 
of its proceedings, the testimonial and 
documentary evidence received by the 
committee is to be considered, to all 
intents and purposes, as having been 
received and taken before the Senate. 
The rule reserves to the Senate the 
right to determine the competency, 
relevancy, and materiality of this evi- 
dence. The rule also preserves the 
right of the Senate to send for any 
witness and hear that witness’ testimo- 
ny in open Senate, or by order of the 
Senate to have the entire trial in open 
Senate, 

What may be less familiar to the 
Senate is the fact, which is demon- 
strated by rule XI’'s English anteced- 
ents and the Senate’s prior impeach- 
ment experiences, that it is not novel 
for Senators to base their judgments 
in an impeachment trial on a written 
record of previously recorded testimo- 
ny. 

THE ENGLISH ANTECEDENTS 

In 1916, in support of a proposal 

that the Senate consider alternatives 


31343 


to the taking of evidence in open 
Senate, Alexander Simpson, who had 
been one of Judge Robert Archbald’s 
counsels at an impeachment trial sev- 
eral years earlier, cited as authority a 
passage in “Jefferson's Manual of Par- 
liamentary Practice.’’ See A. Simpson, 
“A Treatise on Federal Impeach- 
ments” 68. Jefferson had prepared the 
manual for his guidance as President 
of the Senate during his Vice Presi- 
dency from 1797 to 1801. On the sub- 
ject of witnesses at impeachment 
trials, Jefferson, reflecting on English 
impeachment practice, wrote that 

The practice is to swear the witnesses in 
open House, and then examine them there; 
or a committee may be named, who shall ex- 
amine them in committee, either on inter- 
rogatories agreed on in the House, or such 
as the committee in their discretion shall 
demand. 

Constitution, Jefferson’s Manual, 
and Rules of the House of Representa- 
tives,”’ (H.R. Doc. No. 277, 98th Cong., 
2d Sess., § 614, at 296 (1985)). 

While the choice of impeachment 
procedures cannot be left exclusively 
to a study of English practice, the evi- 
dence appears to be that, at least for a 
period of time, committees were used 
in the House of Lords during the trials 
of impeachments. In 1620, for exam- 
ple, the House of Lords “appointed a 
select Committee of themselves, to 
take Examination of Witnesses” in the 
trial of Sir Francis Bacon. 2 T. Howell, 
“A Complete Collection of State Trials 
and Proceedings for High Treason and 
Other Crimes and Misdemeanors from 
the Earliest Period to the Year 1783” 
(1101 (1816)). The same year the 
House of Lords appointed a committee 
to examine witnesses in the trial of Dr. 
Theophilus Field, Bishop of Landaff. 
(Id. at 1116.) In 1621, the House of 
Lords examined witnesses in commit- 
tees in the trial of Sir Giles Mompes- 
son. (Id. at 1122-24.) Then, in 1624, 
depositions taken by a committee were 
read to the House as evidence of im- 
peachment charges against Lord 
Treasurer Middlesex. (Id. at 1183; 3 
H.L. Jour. 350, 352-61, 365.) 

I have in my office several volumes 
of these reports of State Trials which 
came from an old Maryland law li- 
brary where I believe they had been 
since before the Revolution. The Con- 
stitutional language “high crimes and 
misdemeanors” suggests that the 
Founders were familiar with these re- 
ports and presumably with the estab- 
lished practice of employing commit- 
tees to take impeachment evidence. 

The use of committees during im- 
peachment trials in the House of 
Lords is documented in an article by 
Prof. Napoleon Williams, which he 
wrote in response to a brief suggestion 
to the contrary by Professor Berger. I 
ask unanimous consent that an ex- 
cerpt from Professor Williams’ article, 
“The Historical and Constitutional 
Bases for the Senate’s Power to Use 





31344 


Masters or Committees to Receive Evi- 
dence in Impeachment Trials,” (50 
N.Y.U. L. Rev. 512, 528-32 (1975)), be 
reprinted as an addendum to my state- 
ment today. 

These English precedents indicate 
that, in utilizing Impeachment Rule 
XI, the Senate is not writing on a 
blank slate. 

THE HISTORY OF RULE XI 

While the Claiborne impeachment 
was the first Senate impeachment 
trial in which witnesses were exam- 
ined before a committee and not on 
the Senate floor, rule XI is not a de- 
parture of the practice of receiving 
evidence through a printed record. 

The initial suggestion that a Senate 
committee receive impeachment evi- 
dence was made in 1904 after the 
House had initiated an investigation of 
District Judge Charles Swayne. Sena- 
tor George Hoar proposed an addition 
to the Senate’s impeachment rules to 
require the Presiding Officer (except 
in an impeachment of the President or 
Vice President) to appoint a commit- 
tee 

To take all the testimony on both 
sides . . . [and] cause all the testimony by 
them heard to be reduced to writing and re- 
ported to the full Senate. 38 Cong. Rec. 
3902 (1904)). 

The resolution was referred to the 
Committee on Rules which took no 
action on it, and the Swayne impeach- 
ment trial proceeded in 1905 without 
the use of a committee. 

The suggestion for a committee was 
renewed in 1912 during the impeach- 
ment trial of Circuit Judge Robert 
Archbald. Senator (later Justice) 
George Sutherland introduced a reso- 
lution to amend the impeachment 
rules to provide that in all subsequent 
impeachments, except when the Presi- 
dent, the Vice President, a Cabinet 
member, or a Justice of the Supreme 
Court is being tried, testimony may be 
taken by the Judiciary Committee and 
reported to the Senate. Senator Suth- 
erland compared this procedure to the 
“reference, in the case of a court of 
equity, to a master, and in the case of 
the Senate by reference to a special 
committee or to a standing commit- 
tee.” (49 CONGRESSIONAL REcOoRD 698 
(1912).) 

In the remarks to the Senate, Sena- 
tor Sutherland paid special attention 
to the reality that at impeachment 
trials many Senators learn of all or 
portions of testimony through a writ- 
ten record rather than by direct obser- 
vation of witnesses. He noted that be- 
cause of other business of the Senate, 

{mlany of the Senators could not be 
present to hear the testimony.* * * 

Consequently, for those Senators 


Of necessity they are obliged to read [the 
testimony] before they can act. The same 
result, it seems to me, would be obtained by 
referring the case in the first instance to 
the Judiciary Committee to take the testi- 
mony and report it to the Senate. 


CONGRESSIONAL RECORD—SENATE 


The Senate did not act on Senator 
Sutherland’s suggestion, but his idea 
and the idea enunciated earlier by 
Senator Hoar persisted. Several years 
after the Archbald impeachment, Al- 
exander Simpson, who, as I have indi- 
cated, was one of Judge Archbald’s 
counsel, suggested that impeachment 
evidence be taken by a committee or, 
preferably in Simpson’s view, by U.S. 
judges, except when the President, 
Vice President, or a Supreme Court 
Justice is impeached. Simpson shared 
Senator Sutherland’s observation 
about attendance during the Archbald 
trial: ‘“{TJhe thing that strikes a 
common law lawyer most is the few 
Senators who in fact listen to the evi- 
dence. During the Archbald Impeach- 
ment the membership of the Senate 
exceeded ninety, yet rarely over 
twenty members were present.” A. 
Simpson, A Treatise on Federal Im- 
peachment 67 (1916). 

Simpson regretted that few Senators 
actually heard testimony directly, but 
he also expressed his understanding 
that, after periodic quorum calls 
during the trial, Senators would 
“return{] from whence they came, 
leaving the Senate as bare as it had 
been before. While that result was, 
and in all such cases must be regret- 
ted, yet it is not so much to be won- 
dered at. Most of the work of Congress 
must now be done by committees, and 
the Senator who really attends to that 
work, and is present at the important 
legislative sessions of the Senate, has 
all his official time fully occupied.” Id. 

The impeachment trial in 1933 of 
District Judge Harold Louderback 
brought again to the force the prob- 
lem of attendance at impeachment 
trials. Three years after the trial, Rep- 
resentative Hatton Sumners, chairman 
of the House Committee on the Judici- 
ary and one of the managers at the 
trial recalled the scanty attendance of 
Senators, noting: “At one time only 
three Senators were present, and for 
10 days we presented evidence to what 
was practically an empty Chamber.” 
Impeachment No. 13, Time, March 16, 
1936, at 19. 

In reaction to the Louderback trial 
and at the urging of many Senators, 
Senator Henry Ashurst, the chairman 
of the Committee on the Judiciary, of- 
fered in 1934 the resolution which 
became Impeachment Rule XI follow- 
ing its adoption the next year. Senator 
Norris, who had experienced impeach- 
ment trials as a House manager in 
1912 at the Archbald impeachment 
and as a Senator in 1933 at the Lou- 
derback impeachment, related to the 
Senate, as Senator Sutherland had 
done 20 years earlier, that most Sena- 
tors in the final analysis would have to 
study the evidence in a printed record. 
In Senator Norris’ words, 

I think the object of the resolution is to 
avoid what always takes place in an im- 
peachment trial before the Senate. There 


October 15, 1986 


are times when there is not a quorum in the 
Senate present, when a dozen may not be 
here, when there are less than the number 
provided as the membership of the proposed 
committee to take the evidence. There is no 
use expecting all the Senate, or a quorum of 
the Senate, to be present every minute 
while evidence is being taken. Senators have 
to read the evidence in the Recorp in order 
to know what it is. 78 ConGRESSIONAL 
REcorD 9929 (1934). 

The use of committees to receive evi- 
dence at impeachment trials is a 
matter, therefore, which has had the 
attention of thoughtful Senators in 
this century. In an ideal world we 
might all prefer that each Senator 
personally hear all impeachment evi- 
dence, just as we might prefer that 
each Senator personally hear wit- 
nesses to every matter bearing upon 
war or peace or other aspects of the 
Nation’s welfare that we are called 
upon to consider. However, we are re- 
quired of necessity to learn through 
the study of printed records about 
many of the important matters which 
compete for our attention. 


THE USE OF RULE XI IN THIS IMPEACHMENT 

Rule XI, of course, does not require 
the Senate to receive evidence 
through a committee nor does it fore- 
close the Senate, even after evidence 
has been received by a committee, 
from calling for some or all of the wit- 
nesses to testify in open Senate. The 
question in any particular impeach- 
ment is whether, based on the facts of 
that impeachment, the rule should be 
used or used exclusively. 

The principal deficiency attributed 
to rule XI is the contention that the 
triers of fact, the membership at large 
of the Senate, are unable to assess the 
credibility of witnesses. There may, 
indeed, be cases in which it is essential 
to observe witnesses directly, and 
there may be, perhaps, cases in which 
review of even a videotape is not an 
adequate substitute for direct observa- 
tion. While it is not my purpose in 
these remarks to review in any detail 
the evidence upon which the Senate 
convicted Judge Claiborne, I would 
like to offer several comments about 
the importance of evaluating the 
credibility of witnesses in this proceed- 


ing. 

The point has been urged that the 
question whether Judge Claiborne 
wrote to his tax preparer, Joseph 
Wright, on April 11, 1980, to inform 
Mr. Wright of his full income from 
legal fees for 1979 presents an issue of 
credibility which cannot be deter- 
mined from the printed record of 
sworn testimony. The difficulty with 
this contention is that it assumes that 
Judge Claiborne had a complete, or at 
least a compelling, defense if the letter 
had actually been written. 

Of course, if the letter was written 
after the date it bears, then Judge 
Claiborne’s tax violations would pale 
beside potential charges of perjury 





October 15, 1986 


and the fabrication of evidence. It 
seemed to me, therefore, that we 
should begin by assuming that the 
letter had been written. We could 
equally assume that, for one reason or 
another, Mr. Wright had not seen the 
letter. Ellen Arthur, Judge Claiborne’s 
newly discovered witness, stated in her 
affidavit that, 2 or 3 days after the 
judge’s secretary had delivered an en- 
velope to Mr. Wright’s office, Mr. 
Wright had stated that the letter 
could not be found or had been mis- 
placed. 

The assumption that the letter was 
written on April 11, 1980, does not ele- 
vate Judge Claiborne to high ground. 
Rather, the letter confirms an image 
of Judge Claiborne produced by other 
evidence. The judge was a person who 
had a very good sense of his financial 
situation. He prepared slips to memo- 
rialize his legal fee income and he re- 
corded the information from these 
slips in a financial diary. On or about 
March 1, 1980, without consulting his 
detailed records, Judge Claiborne 
wrote to his accountant that his legal 
fee income for 1979 amounted to 
about $46,000. He was off by about 
$5,000, but he was in the right neigh- 
borhood. 

Then, if we continue to assume that 
he wrote the April 11, 1980, letter on 
the date it bears, Judge Claiborne 
made a precise calculation of his legal 
fee income for 1979 on that day. He 
performed this calculation by totaling, 
on April 11, 14 separate items of legal 
fee income, and writing by hand a 
letter to his accountant which stated 
the result of this calculation. Judge 
Claiborne asked the Senate to believe 
that 19 days later he simply placed 
this careful calculation out of mind 
when he spoke to his accountant 
about the preparation of his 1979 tax 
return. 

Then, 34 days later, when Judge 
Claiborne filed his judicial financial 
disclosure report, he again did not use 
the figure for legal fee income which 
he had only recently calculated. The 
disclosure report diminishes the rel- 
evance of another credibility issue; 
namely, whether Judge Claiborne had 
signed his 1979 return in blank or 
whether he signed the return in Mr. 
Wright’s office after the return had 
been prepared. The disclosure report 
confirms, no matter who is to be be- 
lieved about the signing of the tax 
return, that Judge Claiborne knowing- 
ly intended to disclose to the Govern- 
ment, both on his disclosure form and 
on his subsequent tax return, only 
part of his legal fee income for 1979. 
These objective circumstances are suf- 
ficient to support the conviction on 
the first article without resolving the 
credibility of testimony about ancil- 
lary matters. 

Then, with respect to the second ar- 
ticle, it should be recalled that the 
case presented by the House consisted 


CONGRESSIONAL RECORD—SENATE 


primarily of documents, including 
Judge Claiborne’s tax return for 1980, 
and the testimony of an expert. A 
letter to Judge Claiborne dated April 
6, 1981, from his tax preparer for 1980, 
Jerry Watson, establishes that Judge 
Claiborne knew that his tax preparer 
was planning to report a capital loss 
on the law practice which the judge 
had abandoned several years earlier. 
The patently fictitious capital gains 
transaction on the previously aban- 
doned law practice, which was used to 
eliminate $88,000 in ordinary income 
from legal fees, was sufficient to estab- 
lish a willful failure to report income 
for 1980. 

The demeanor of witnesses may be 
important in other impeachments, but 
in this impeachment the critical facts 
were fairly established based on solely 
the written record. Furthermore, as 
Members were aware, videotapes of 
the committee’s hearings were avail- 
able to any Member who wished to 
supplement his or her reading of the 
transcript of the committee’s proceed- 
ings. 

THE SENATE'S OBLIGATION TO “TRY” 
IMPEACHMENTS 

The Constitution provides that the 
Senate shall have the power to “try” 
impeachments. If the word “try” im- 
ported into the Constitution the exact 
specifications of a judicial trial, then 
the Senate might have little latitude 
to define its rules of proceedings. How- 
ever, the Framers did not intend to ob- 
ligate the Senate to replicate all fea- 
tures of a judicial trial. Hamilton rec- 
ognized that the Senate “can never be 
tied down by such strict rules, either 
in the delineation of the offence by 
the prosecutors, or in the construction 
of it by the judges, as in common cases 
serve to limit the discretion of courts 
in favor of personal security.”’ The 
Federalist No. 65, at 428 (B. Wright ed. 
1961). Justice Story expressed the 
similar opinion that “it is obvious that 
the strictness of the forms of proceed- 
ing in cases of offences at common law 
is ill adapted to impeachments.” J. 
Story, Commentaries on the Constitu- 
tion, § 765, at 532 (3d ed. 1858). 

Instead, the requirement that con- 
viction on impeachment be by “trial,” 
I believe, was intended to fulfill the 
Framers’ intent that the Senate act in 
“judicial character as a court.” The 
Federalist No. 65, at 426 (A. Hamil- 
ton). The Framers intended that the 
Senate perform this judicial function 
impartially, “to preserve, unawed and 
uninfluenced, the necessary impartial- 
ity between an individual accused, and 
the representatives of the people, his 
accusers.” Id. at 427 (emphasis omit- 
ted). 

In my opinion, the Senate per- 
formed its judicial task with complete 
impartiality. There were many outside 
of the Senate who thought that this 
impeachment should have taken the 
Senate only several hours to resolve 


31345 


after the House exhibited its articles 
in early August. The Senate deter- 
mined, instead, that Judge Claiborne 
should have available to him the sub- 
pena power of the Senate to bring 
here witnesses who could testify to the 

tax transactions in 1979 and 1980. 

These witnesses were examined and 

cross-examined by counsel and also 

questioned by members of the commit- 
tee over 7 days of hearings. The full 

Senate received briefs from the parties 

and then heard closing arguments 

from the managers, from Judge Clai- 
borne’s counsel, and from Judge Clai- 
borne. The Senate deferred its deci- 
sion whether to hear witnesses in open 

Senate until it heard and considered 

these arguments. Senators then delib- 

erated with great care prior to voting. 

In every sense the Members of the 

Senate fulfilled their special impeach- 

ment oath to “do impartial justice ac- 

cording to the Constitution and laws.” 

I would like to conclude with a brief 
note of appreciation. Each member of 
the Impeachment Trial Committee— 
the vice chairman, Mr. SARBANES and 
Mr. Hatcu, Mr. WARNER, Mr. RuDMAN, 
Mr. PRESSLER, Mr. McCoNnNELL Mr. 
HEFLIN, Mr. DeConcrni, Mr. Pryor, 
Mr. Gore, and Mr. BINGAMAN—ap- 
proached the task of the committee 
with a great sense of purpose and seri- 
ousness. The membership of the com- 
mittee agreed to, and then adhered to, 
a requirement that a quorum, a major- 
ity of the 12-person committee, be 
present at all times. The committee 
was presented with important ques- 
tions about the proper scope of the im- 
peachment proceedings before it, and 
our ability to resolve those questions, 
wisely I hope, depended on the intelli- 
gence and effort which each Member 
contributed to our deliberations. 

There being no objection, the ex- 
cerpt was ordered to be printed in the 
Recorp, as follows: 

(New York University Law Review] 

THE HISTORICAL AND CONSTITUTIONAL BASES 
FOR THE SENATE’S POWER TO USE MASTERS 
OR COMMITTEES TO RECEIVE EVIDENCE IN 
IMPEACHMENT TRIALS 

(Napoleon B. Williams, Jr.) 
(Excerpt) 
3. THE COMMITTEE PRACTICE OF THE HOUSE OF 
LORDS 

Although the House of Lords turned less 
freq