Capitol View V O L U M E 2 , N U M B E R 6 M A R C H 2 0 0 4 - - PDF document

Capitol View

V O L U M E 2 , N U M B E R 6 M A R C H 2 0 0 4 V A L U E A D D E D , V A L U E S D R I V E N.

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PERILS OF PAULINE: THE ADVENTURES OF THE ENERGY BILL On March 4, 2004 the Chairman of the Senate Energy Committee, Pete Domenici (R-NM), stated that he hopes Congress can complete consideration of a comprehensive energy bill "before the year is out." While the Senate may again take up the energy bill sometime after they return from the Recess on March 22, this is the most recent and perhaps somewhat pessimistic timetable for completion of a piece of legislation that has been on a tortuous journey to enactment for several years. Along the way it has taken on various forms, sometimes growing and sometimes shrinking, as parts are added or subtracted to attract votes needed in various situations. The proposed Energy Policy Act is currently enduring another near death experience but its primary proponent, Chairman Domenici, continues his efforts to bring it to a final vote. In the 107th Congress failed to enact a comprehensive energy bill when a Senate-House Conference was unable to agree on compromise legislation. At the start of the 108th Congress, then-Chairman of the House Energy and Commerce Committee, Billy Tauzin (R-LA), renewed his efforts at comprehensive energy reform when he introduced the Energy Policy Act of 2003 (H.R.6). This massive bill addresses a wide range of issues such as

• il and gas production, coal, energy efficiency, hydroelectric licensing, nuclear power, electricity, vehicle

efficiency, as well as energy research and development. It was adopted by the House on April 30, 2003 by a vote of 247-175. However, like many controversial bills, its troubles began to multiply when it reached the Senate. On April 30, 2003 the Senate Energy and Commerce Committee approved its version of the Energy Policy Act

• f 2003 (S.14) by a vote of 13-10. The electricity title of the bill (Title XI) proved to be the most contentious

with major disagreements concerning the authority of the Federal Energy Regulatory Commission over state regulators and local electric utility companies. One measure of the difficulty facing the electricity title was that the version approved on April 30 was the fourth proposed electricity title circulated to Committee members by Chairman Domenici in repeated efforts to garner sufficient votes for approval. The full Senate began debate on S.14 on May 6 and continued discussing the bill on an intermittent basis for 18

• days. This was more time than the Senate had spent on any other bill last year but little real progress was
• achieved. On July 23 Chairman Domenici introduced a new electricity title in another effort to increase support

among members of the Senate and on July 28 consideration of the bill resumed. By July 31 the Senate had voted on only four amendments and the Senate was on the verge of leaving for its August Recess. Majority Leader Frist (R-TN) threatened to keep the Senate from its Recess until the electricity title was complete but time was obviously running out on the energy bill. Minority Leader Tom Daschle (D- SD) stated there were far too many controversial issues to be resolved any time soon and, as an aside, suggested bringing up and passing the version of the energy bill enacted by the Senate in the 107th Congress. This bill had

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garnered broad bipartisan support and later in the day the Republicans accepted the Daschle proposal and passed the energy bill by a vote of 88-11. While this was the same bill adopted by the Senate in 2002 when the Democrats controlled the Senate, it was obviously being used by Chairman Domenici as a vehicle to get the energy bill to a conference with the House on H.R.6. The Chairman indicated that the bill that would emerge from that conference would be more like the bill approved by the Senate Energy Committee than the one adopted by the full Senate. On Saturday, November 15, 2003 Chairman Domenici and Chairman Tauzin released the proposed Conference Report on the Energy Policy Act of 2003. Some Democrats complained that the Conference Report was drawn up by the Republican members of the Conference Committee and that Democrats had been largely excluded in the process. Nevertheless the House quickly approved the Conference Report on November 18, 2003 by a vote

• f 246-180.

Once again the energy bill ran into trouble on the Senate floor when Majority Leader Frist (R-TN) brought up the Conference Report to H.R.6. Some Senators complained that the bill had become too expensive with various subsidies and grants designed to attract votes of specific members. There was also criticism of a provision inserted in the Conference Report by the House which gave product liability protection for manufacturers of the renewable fuel additive methyl tertiary butyl ether (MTBE). Several manufacturers of MTBE were defendants in ongoing civil suits and some of them were located in Texas, home of House Majority Leader Tom DeLay (R-TX) and the Chairman of the House Energy and Air Quality Subcommittee, Joe Barton (R-TX). As in the House, some Senate Democrats complained about being excluded from the deliberations of the Conference Committee. On November 21, 2003 the Senate failed to invoke cloture on the filibuster of the Conference Report to H.R.6 by a vote of 57-40 and the Senate adjourned for the year without an energy bill. Shortly after the Second Session of the 108th Congress convened, Chairman Domenici introduced another version of a comprehensive energy bill, S.2095. Chairman Domenici announced that despite his efforts over the Recess, he had not been able to secure the votes necessary to invoke cloture on the Conference Report to H.R.6 and he decided to draft a new energy bill that would remedy the objections voiced by some Senators. S.2095 removed the MTBE product liability protections found in H.R.6 and reduced the overall cost of the bill from $31 billion to about $14 billion. On February 23, 2004 Majority Leader Frist used a procedure found in Rule 14

• f the Standing Rules of the Senate to bypass sending the bill to Committee and had it placed directly on the

Senate Legislative Calendar. It is possible that the Senate may again turn to the energy bill shortly after March 22. However, its ultimate fate is far from certain. While S.2095 will probably garner sufficient votes to cloture any filibuster, there is currently no agreement to limit the number of amendments which may be offered on the Senate floor. Given the fact that there are only about 50 legislative days remaining in this Session of Congress, if the number of amendments cannot be limited, there may be pressure on the Leadership to pull the bill from the floor. In addition, since S.2095 is a new piece of legislation, if it passes the Senate it would have to be approved by the

• House. Majority Leader DeLay and Chairman Barton have indicated they would oppose any energy bill

without liability protections for MTBE manufacturers. All of this activity and maneuvering demonstrates that legislation addressing comprehensive energy reform is among the most contentious issues for Congress to address. Significant regional differences in energy production and consumption, disagreements over conservation versus production, competing demands of producers and consumers of energy, and questions over the regulation of new technology create disagreements

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which affect all Americans and which are particularly difficult to resolve by their elected officials. This is the reason that despite years of efforts to do so the last time Congress was able to enact a comprehensive energy bill was in 1992. Whether or not the 108th Congress will succeed in enacting new energy legislation will probably be known in the next few weeks of the Session. If Congress fails to do so, Chairman Domenici has indicated he will begin the process again in the 109th Congress. Kevin Faley is the Editor of Capitol View and a partner in Venable's Legislative Group. Mr. Faley can be reached at 202-344-4706 or at kofaley@venable.com RENEWING THE USA PATRIOT ACT? NOW OR NEVER On March 11th, 2004 the League of Women Voters of Swampscott and Marblehead Massachusetts convened a forum entitled "The USA Patriot Act: How Can We Ensure Our Liberty While Securing Our Country?" Prompted by a request from the Swampscott's Board of Selectmen, the forum featured a constitutional law professor and a representative from the US Department of Justice. Were this an isolated event, even one coming from an area often referred to as the “Cradle of Liberty”, the forum might pass quietly into the night. The debate, however, appears to be more than just one of passing

• interest. Civil liberties advocates from the left of the political spectrum are joining those on the right in

expressing their concern about the reach of the USA PATRIOT Act. As the Swampscott forum conveners noted, “Many citizens find that collecting information for the Patriot Act has become part of their everyday

• jobs. The League's forum will focus on this area, as local securities analysts, mortgage brokers, lawyers and
• thers speak on the ways the act has changed their work.”

This article looks at the history of the Act, its expiring provisions, and its impact or potential impact on individuals and businesses. Post 9/11 legislation broadly supported. It took the Congress little more than 45 days after the horrific events

• f September 11, 2001 to enact the USA PATRIOT Act. Passing with 357 votes in the House and 98 in the

Senate, the law was widely seen as a necessary and proper response. Its ten (10) titles enhance the ability of the federal government to monitor, apprehend and punish those responsible for money laundering and terrorist

• activities. Even with these laudable goals, Congress wanted to look again at certain aspects of that authority in
• 2005. Parts of Title II, dealing with “Enhanced Surveillance Procedures” must be re-enacted by December 3l,

2005 and Congress may terminate Title III, the International Money Laundering Abatement Act and Anti- Terrorist Financing Act of 2001 after the beginning of fiscal year 2005 upon adoption of a joint resolution. Sunset an Overstatement. It is often misunderstood -- the entire law does not expire in 2005. In fact, only limited portions terminate in twenty-one months. That does not mean, however, that more than 38 state resolutions and hundreds of city ordinances from around the country calling for careful review of the Act are not going to be heeded. Government Intrusion or Useful Tools? During the State of the Union speech by President Bush the mention

• f the expiration of the USA PATRIOT Act brought a round of applause before the call came to urge re-
• enactment. Whether the members present knew which provisions were expiring or whether they had discovered

actual abuse isn’t certain. What is clear is that the process of review will involve more than just those provisions that expire or are subject to Congressional “termination.”

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Title II Sunsets1, Title III may be Terminated2. Among the potential lightning rods found in the provisions of Title II that cover the enhanced surveillance procedures available to the Federal government under the Act, the following expire:

• Section 201, Authority to intercept wire, oral, and electronic communications relating to terrorism;
• Section 202, Authority to intercept wire, oral, and electronic communications relating to computer fraud

and abuse offenses;

• Section 203 provisions (b), Authority to Share Electronic, Wire, and Oral Interception Information, and

(d), Foreign Intelligence Information;

• Section 204, Clarification of intelligence exceptions from limitations on interception and disclosure of

wire, oral, and electronic communications;

• Section 206, Roving Surveillance authority under the Foreign Intelligence Surveillance Act of 1978

(FISA);

• Duration of FISA surveillance of non-United States persons who are agents of a foreign power;
• Section 209, Seizure of voice-mail messages pursuant to warrants;
• Section 212, Emergency disclosure of electronic communications to protect life and limb;
• Section 214, Pen register and trap trace authority under FISA;
• Section 215, Access to record and other items under FISA, the Library provision;
• Section 217, Interception of computer trespasser communications;
• Section 218, Foreign intelligence information;
• Section 220, Nationwide service of search warrants for electronic evidence;
• Section 223, Civil liability for certain unauthorized disclosures;
• Section 225, Immunity for compliance with FISA wiretap.

Admittedly some of the titles appear quite dramatic. The actual provision, however, could be a short single line. For example, the amendment to Section 204 adds only the word “electronic” to the existing authority of the government to intercept wire and oral communications under the present intelligence exceptions. With cell phone communications of such concern, the expansion is one of several that may be said to bring legal authority in line with the technology used by terrorists. Proponents of the Act argue with some justification that its provisions allow law enforcement to use tools to catch terrorists that have been used for years to attack organized crime and drug dealers. Those questioning the Act focus on the ability of the government to obtain information about the choices made by individuals. For example, Section 215 had been widely criticized by librarians as authorizing the government to obtain information on the books or other information obtained from a public library. Although no inquiry to a library has been made under that authority and prosecutors could already get that information under certain circumstances, the criticism persists. Likewise, Section 213, sometimes referred to as the “sneak and peek” provision revises the procedure for searches of homes and businesses by making uniform the standard by which a court may delay any required

• notification. Although it doesn’t expire next year, the provision has already attracted the attention of

Congressman C. L. “Butch” Otter, R-Idaho, who secured House passage of an amendment last year to remove funding for those activities. The Senate hasn’t acted yet on the amendment but the White House has threatened a veto if it does pass both houses. At the direction of the Attorney General, each of the nation’s 93 U.S. Attorneys and their staff have been made available to public forums considering the USA PATRIOT Act. As

1 Act, Section 224, 18 U.S.C. 2510, note 2 Act, Section 303, 31 U.S.C. 3511, note

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Jim Letten, Acting U.S. Attorney, EDLA said recently, “If anything, [Section 213] actually restricted our access a little bit, because it created one standard for the whole country.” Another area of active criticism of the Act involves the Student and Exchange Visitor Information System (SEVIS), a data base that enables the government to keep tabs on international students. Various commentators have indicated it is having a “chilling effect” on foreign student entry, particularly among graduate students, into post-secondary schools in the United States. The SEVIS provision (which does not expire) was added to fully implement certain provisions of the Illegal Immigration Reform and Immigrant Responsibility Act of 19963 in response to the disappearance of one of the suspected 9/11 plane pilots, Hani Hanjour, who entered the United States on a visa to study English in California but dropped out of sight. Turning to the provisions of Title III which may be terminated by Congress upon passage of a joint resolution stating in its enacting clause that the provisions of Title III “shall no longer have the force of law,” we find among its provisions the requirement 4 that financial institutions take all steps that are “reasonable and practicable” to verify the identity of customers seeking to open or be added to an account (deposit or loan) at a financial institution. Generally, this requires the financial institution to review and verify the name, address (home or business), identification number and whether the person or entity is on a list of persons with whom or which account activity is restricted, e.g., OFAC lists. Added by the Act to make more difficult the funding of terrorism and money laundering in the United States using accounts at financial institutions, adoption represented a simply amazing turn around in the opposition to a Know Your Customer rule that had been suggested a few years earlier. Despite the broad reach of the definition of "financial institution" which included insurance agents, stock brokers and some retailers, the law does not prevent any financial institution from doing business with any

• person. It merely requires that the institution verify the identity of the person with whom it will be doing

business, keep a record of the information used to make that verification and be able to make it available to the government upon proper request for a period of up to five (5) years after the account relationship ends. Most, if not all, covered financial institutions have made the changes in operating procedures that became effective in October of 2003. The Act5 also permits financial institutions to "share" information relating to money laundering and terrorist activities with the federal government and other financial institutions. If the certification procedures established by the US Department of the Treasury are followed by a financial institution, the information sharing that

• ccurs will not subject the institution to liability under any federal, state or local law or private agreement

adopted to limit such information sharing. The information gathering and retention requirements of these provisions of the Act are among the most extensive of the Act. Even so, at this point, little direct opposition has surfaced and no organized movement that we can identify has developed calling for the termination of the provisions of Title III. Congressional Oversight. The Act has been the subject al least 115 hearings before Congress related to the USA PATRIOT Act and the ongoing war against terrorism. A partial list of Justice Department participation in the process can be found at: http://www.lifeandliberty.govtsubs/ r_congress.htm. EPIC (Electronic Privacy Information Center) also provides a view of the process with a complete review of material on the Act at: http://www.epic org/privacy/terrorism/usapatriot.

3 Act, Section 416, implementing 8 U.S.C. 1372, note 4 Act, Section 326, Verification Identification, 31 U.S.C. 5318 5 Act, Section 314, Cooperative Efforts to Deter Money Laundering, 31 U.S.C. 5311, note

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Impact of USA PATRIOT Act on Business and Individuals. Business Information Gathering. The burden of the Act's information gathering provisions seem to fall squarely on "financial institutions." The broadly defined term "financial institution" mandates recordkeeping requirements under parallel rules of the Federal Reserve Board, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, the Securities and Exchange Commission, the Federal Trade Commission and the various state insurance regulatory bodies. Despite the broad reach of the definition which includes the expected banks and thrifts but also includes anyone delivering financial services, the early indications of the effect of the enhanced Know Your Customer criteria are that they do not discourage the account creation process. Initial controversy over the acceptance, for example, of the Matricula Consular cards issued by the Mexican government seems to have dissipated. Use of computer enabled screening tools to identify individuals or entities on lists of Specially Designated Nationals published by the Office of Foreign Asset Control (OFAC) prior to opening accounts or accepting deposits has gone relatively smoothly. Personal Privacy and the Patriot Act. On the other hand, concern about the government's enhanced ability to inquire about business and individual activities continues to attract attention. The focus of the effort has clearly shifted to the grassroots where states and local communities are demanding that Congress look closely on those provisions that may give rise to privacy concerns. Recent efforts by the federal government to build information data bases to identify likely terrorists have exposed the potential that business can be asked to provide data about individuals seeking access to airline, rail, travel and automobile rentals. Entry and exit by foreign nationals to the United States by air and sea may involve the creation of U.S. government controlled (Immigration and Customs) photo and fingerprint identification records. The SEVIS system already mandates proof of registration in a course of study by those foreign nationals seeking admission to the United States by means of a student visa. Although there isn't any evidence of an effort to locate the rental or temporary stay arrangements of those entering on a student or other temporary visa, the ability to track that information exists through credit card and other records and arguably could be requested by the Secretary of the Treasury from financial institutions, although it seems more likely it will come on a case-by-case inquiry by the government under court supervision. Would the knowledge that the U.S. government can and will request and use data about those entering and staying in the United States have an adverse impact on legitimate foreign travel if it involved the records of the travel, hotel, apartment and retail industry? If the experience of universities they attribute in part to the SEVIS system continues in the future, it may raise concern for the other sectors mentioned. Where are the snake pits? Without doubt, the authority to acquire and use information about individuals and businesses afforded the federal government by the USA PATRIOT Act is significant. To date the overall use of the authority appears reasonable and consistent with expectations of privacy and historic restraints on government power. That dynamic is likely to change rapidly, however, if another terrorist act the magnitude of 9/11 or March 11, 2004 (Spain) occurs in this country. In the meantime, a careful and considered review of the use and potential for use of the powers granted in the USA PATRIOT Act was wisely scripted into the legislation when adopted and pushed beyond the 2004 Presidential election year. The Senate and House have the floor. We have their ear. Bruce Jolly is a partner in Venable's Financial Services Group. Mr. Jolly can be reached at 202-344-4818 or at bojolly@venable.com.

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Dan Lungren Wins Primary Our partner in Venable's Legislative Group, Dan Lungren, won the March 9 Republican Primary in California's Third Congressional District. Before joining Venable Dan was the Attorney General in California and prior to that served in Congress for 10 years. Birch Bayh Honored On March 4 our partner former Senator Birch Bayh was the keynote speaker at the annual convention of the Association of University Technology Managers in San Antonio, Texas. Birch was honored by the Association as the author of the Bayh – Dole Act which established a uniform policy concerning patent rights to inventions developed with the support of the Federal Government. __________________________________________________________________________________________ ### Capitol View is published by the Legislative Practice Group of the law firm Venable LLP, 575 7th Street, N.W. Washington, DC 20004-1601. Internet address: http://www.venable.com. It is not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations. Editor: Kevin O. Faley Associate Editor: Kyle Miller Questions and comments concerning materials in the newsletter should be directed to Kevin Faley at kofaley@venable.com. Please direct address changes to Kyle Miller at kpmiller@venable.com.