[Congressional Record Volume 140, Number 62 (Wednesday, May 18, 1994)]
[Senate]
[Page S]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: May 18, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
               FEDERAL RESERVE BOARD INTEREST RATE POLICY

  Mr. LIEBERMAN. Mr. President, for the fourth time in 4 months, the 
Federal Reserve has raised short-term interest rates --it happened 
yesterday, as we all know--the discount rate, by half a percent, and 
the Federal funds rate by half a percent. Apparently, they did so 
because they have concluded that the economy is overheating and 
inflation is just around the corner.
  Mr. President, I do not know about anybody else, but I have looked 
around the corner and I have looked right in front of me, and I do not 
see inflation in this economy. What I do see is these increases in 
interest rates cutting and stifling the economic recovery that is 
trying to begin in States like Connecticut.
  I do not think anyone wants to return to the inflation levels we 
suffered through the 1970's. But, at the same time, you really have to 
wonder whether the people at the Fed are in touch with the daily lives 
of most working Americans, or even whether they are reading the 
newspapers.
  Stated succinctly, the Fed has raised interest rates in the face of 
slow growth on the one hand and low inflation on the other. For the 
first quarter of this year, the newspapers tell us--you do not have to 
be an economist--the economy grew at a moderate rate of 2.6 percent. We 
cannot even feel confident that that is going to continue. Just last 
week, we saw signs of a softening economy, when retail sales for the 
month of April dropped by eight-tenths of 1 percent. Yesterday, it was 
announced that housing starts for April dropped by 2\1/2\ percent.
  When it comes to inflation, all the news has been good. The big 
indicators show no signs of inflation. Producer prices for the month of 
April dropped by one-tenth of 1 percent. Consumer prices for the month 
of April rose by a meager one-tenth of 1 percent. So in the light of 
all of the good news about inflation--which is to say there is none--
and the dampening news about economic growth, I have to ask: What are 
our friends at the Fed thinking?
  There are no inflation fires to be dampened. The action the Fed took 
yesterday is more akin to throwing water on a pile of dry sticks that 
are waiting for a match.
  Mr. President, without question, the business of setting interest 
rates is complicated. The goal is to reach a delicate balance between 
economic growth and inflation. Rampant growth can spur inflation. But a 
number of economists are now challenging the old theory that 
unemployment rates and inflation must move in opposite directions, and 
there is a lot on the line here. What is on the line are the jobs of 
millions of Americans and the capacity of millions of American families 
to buy a home, to buy a car, to pay their credit card bills.
  Mr. President, I said a few moments ago that none of us want to 
return to the high inflation times of the 1970's, but this is not the 
1970's, and it is not the 1970's because today we have a truly 
integrated global economy. I am not sure some of our economists are 
accounting for that. There is a global labor surplus, and that has been 
having the effect of holding down the real wages of American workers 
for more than a decade. Intense international competition will continue 
to hold prices and wages down. That is why I so fundamentally question 
the increase in interest rates that has occurred. It is largely due to 
this international competition, and the fact that corporate America is 
completing its most expansive and painful downsizing in decades.
  Why is this so important? As I said before, there is a lot of 
economic data flying around, but for a lot of Americans--at least a 
million of them--this is a question of whether they are going to have 
jobs or not. There is an economic theory which I fear the Fed is 
reacting to that you cannot let unemployment go too low, or it will 
stimulate inflation. Go tell that to the people behind the numbers who, 
as a result of rising interest rates, are not going to get the jobs 
they want because the businesses cannot borrow the money, the people 
cannot buy the cars, the people will not build the new homes.
  The Fed needs to understand that the actions they take not only 
affect the bond market on Wall Street, but the supermarket on Main 
Street. The last Fed action sent the prime interest rate to its highest 
point in 2 years, and that was felt by consumers and small businesses.
  Mr. President, we are talking here about credit cards, home equity 
loans, and auto loans. The Fed's action has sent long-term interest 
rates to their highest level since 1992, and since these are the rates 
to which home mortgages are tied, it is consumers who will bear the 
brunt of higher home mortgage payments.
  Last week, the average 30-year fixed-rate mortgage rose to 8.77 
percent from a low of 7 percent earlier in this year. For a new home 
buyer, that is not just percentage points, that is $125 more in monthly 
mortgage payments.
  We in Connecticut know that these numbers are real to real people. We 
are still in the midst of what I would describe, at best, as a fragile 
economic recovery, not an overheated economy. Unemployment is still at 
unacceptably high levels, and forecasters know New England growth 
levels will continue to lag behind the rest of the country.
  Mr. President, what the Fed is doing is putting at risk our recovery 
and undercutting the courageous efforts Congress has made to cut the 
deficit and keep interest rates down.
  I will just say this: If the folks at the Fed really think the 
economy is overheating, I invite them to come to Connecticut, and I 
suggest they bring a coat, because it is still awfully cool 
economically in my State.
  Mr. GRASSLEY. Mr. President, I ask unanimous consent to address the 
Senate for 6 minutes as in morning business.
  The PRESIDING OFFICER. Is there objection?
  Mr. BAUCUS. Mr. President, we have been, in effect, in morning 
business since 9 o'clock this morning and have not had an opportunity 
for amendments.
  Mr. GRASSLEY. I will not object if the Senator wants to work on the 
bill and does not want me to speak now.
  Mr. BAUCUS. There are about 40 or 50 amendments on the list.
  Mr. GRASSLEY. The Senator needs no explanation. Please go ahead.
  Mr. BAUCUS. I thank the Senator.


               SAFE DRINKING WATER ACT AMENDMENTS OF 1994

  The Senate continued with the consideration of the bill.


                         PRIVILEGE OF THE FLOOR

  Mr. BAUCUS. Mr. President, I ask unanimous consent that Randy Wetzel, 
a fellow of the Environment and Public Works Committee, be afforded 
privileges of the floor during debate on S. 2019 and any votes thereon.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. JOHNSTON. Mr. President, I have a unanimous consent to put in an 
amendment dealing with the Oil Pollution Act of 1990. Our Committee on 
Natural Resources dealt with it and had a recommended amendment.
  I understand, if I may have the attention of the Senator from 
Montana, that the committee is knowledgeable about the problem created 
by the Oil Pollution Act of 1990, and that is that it requires that 
independents who drill on the Outer Continental Shelf have financial 
responsibility assets of some $150 million, which means that when and 
if that goes into effect, and we understand that--``Open 90'' is what 
we call the Oil Pollution Act of 1990 --when and if Open 90 goes into 
effect and requires $150 million in insurance or financial assets, it 
will mean that independents who now drill some 80 percent of the wells 
on the Outer Continental Shelf will be frozen out of the business.
  I do not know how we made that mistake, but the administration is 
aware of it, and I understand that the Committee on Environment and 
Public Works is aware of it. I will not press the amendment now if I 
have the assurance from the chairman that their committee will deal 
with this matter.
  I understand we have a written colloquy that may reflect our 
agreement on that. I ask the chairman if that is correct.
  Mr. BAUCUS. Mr. President, the distinguished chairman of the Energy 
Committee is correct. This is a matter which the committee has 
examined, and we worked out an understanding between the two 
committees. I thank the chairman for being helpful.
  Mr. JOHNSTON. I wish the Senator would look at that colloquy. I 
understand it has been approved by the staff. If that would adequately 
reflect our agreement, then I will not be putting in the amendment on 
the Oil Pollution Act of 1990.
  Mr. BAUCUS. I must say I am going to have to look at this. It was 
just now handed to me. If the Senator might proceed and I would like to 
read this.


                       oil pollution act of 1990

  Mr. JOHNSTON. I would like the assurance of the bill manager, the 
Senator from Montana, that he will work with me to address an egregious 
problem with the Oil Pollution Act of 1990.
  The Oil Pollution Act of 1990 [OPA '90] was passed and signed into 
law following the Exxon Valdez tanker spill in Alaska. The intent of 
OPA '90 was to lessen the risk of oil spills and to improve the level 
of preparedness and responsiveness when spills do occur.
  OPA '90 was primarily designed to address the serious damage we all 
know to be a risk with tanker traffic. It also included separate 
requirements for nontanker facilities operating on the Outer 
Continental Shelf [OCS]. However, in our usual postdisaster zeal, the 
legislation went far beyond the problem.
  Currently the Outer Continental Shelf Lands Act [OCSLA] requires 
owners of OCS facilities and nontanker facilities to demonstrate 
evidence of financial responsibility equal to $35 million. OPA '90 
increased the financial responsibility to a much higher level, $150 
million. Unfortunately, this does not relate to the actual experience 
with nontanker facilities on the OCS, and would in all likelihood make 
it impossible for smaller, independent oil and gas companies to operate 
on the OCS.
  Between 1974 and 1991, 27 times as much oil was spilled from tankers 
as that spilled from nontanker facilities. The most expensive spill 
from an offshore facility on the Gulf of Mexico had cleanup costs of 
about $10 million. For that same 1970 spill, which occurred before 
current safety devices and procedures came into routine use, the 
Minerals Management Service of the Department of the Interior [MMS] 
estimates that damages as now provided for under OPA '90 would have 
been about $20 million, still significantly below the existing 
requirement of $35 million and way below the OPA '90 $150 million 
requirement.
  The OPA '90 requirement needlessly penalizes the independent 
producers, those who have stayed and provided jobs while the majors 
have moved overseas. Over the past 10 years, the total number of 
operators in the Federal offshore has nearly doubled. The increase has 
come entirely from independent operators. The majors are still 
responsible for the bulk of offshore oil and gas production; however, 
only 15 of the 139 offshore operators are major integrated oil 
companies. Independents now account for nearly 90 percent of the 
offshore operators, producing 23 percent of the oil and 36 percent of 
the natural gas offshore. Since 1988 independents have acquired more 
lease acreage, paid the majority of bonuses to the Federal Government, 
and made an overwhelming number of new discoveries. They have also 
hired 70 percent of the drilling contractors active offshore.
  According to the Energy Information Agency and Arthur Andersen, only 
20 percent of the offshore operators would be able to self-ensure to 
meet the $150 million financial responsibility requirement. The 
remaining 80 percent will be forced to seek traditional insurance. The 
National Petroleum Council, in an interim report released in December 
1993, estimates these insurance costs could be as much as $1.10 per 
barrel of oil. Only small operators would be affected by this, the 
majors, who can self-ensure, will not be burdened with these costs.
  The Department of Interior recognizes the necessity of amending this 
provision of the act. Tom Fry, Director of the Minerals Management 
Service, was quoted in the Oil Daily on May 3, 1994 as saying that 
Congress may want to reconsider the $150 million mandate. He said, 
``maybe $150 million is more than is needed under every circumstance.'' 
He also suggested a risk-analysis approach might be the best way to 
determine how much insurance to require of offshore drillers.
  In testimony last month, Assistant Secretary Bob Armstrong told the 
Energy and Natural Resources Committee that the Department of the 
Interior is not in a rush to implement OPA '90, ``because of the agony 
that it imposes.'' He went on to say, ``we do not believe that you can 
take as clear a language as in OPA '90 and fix it by regulation that 
runs contrary to the clear language * * * some sort of legislative help 
is going to be necessary to fix that problem.''

  The Energy and Natural Resources Committee, having repeatedly heard 
from all quarters that a legislative remedy would be necessary, has in 
fact endorsed just such an amendment. The amendment gives the Secretary 
of the Interior the leeway to evaluate risks posed by different 
facilities--based on size, storage capacity, oil throughput, history of 
discharges, class or category of facilities--and where appropriate, set 
a different financial responsibility requirement. This is the same risk 
based approach that OPA '90 applies to the liability limits for onshore 
facilities.
  The amendment is very narrowly crafted--the only issue it addresses 
is the level of financial responsibility. It does not mandate a lower 
requirement, it simply gives the Secretary the necessary discretion for 
a reasonable rule.
  With respect to the committee amendment, Assistant Secretary 
Armstrong said, ``it looks to me like that would fix the problem. * * 
*''
  Does the Senator from Montana agree that there are some legitimate 
concerns regarding the impact of the $150 million financial 
responsibility requirement?
  Mr. BAUCUS. I agree that there are concerns with the OPA '90 
provision. I am hopeful that some of these problems can be worked out 
in the rulemaking that the MMS is currently engaged in. There may, 
however, be limited flexibility under OPA '90 in certain areas, 
requiring some legislative adjustment. It is my belief, though, that 
any such adjustment must be carefully limited in scope to avoid 
reopening hard-fought and hard-won compromises agreed to in OPA '90.
  I am concerned that the language endorsed by the Energy and Natural 
Resources Committee gives the Secretary unfettered discretion and that 
a financial responsibility requirement could be set that would not 
assure that money is available to pay for spill damages or that would 
be less than what is required under existing law. Is this the Senator's 
intent?
  Mr. JOHNSTON. It is not my intent to give the Secretary unfettered 
discretion. Nor is it my intent to provide for less protection than 
exists under current law or to allow financial responsibility 
requirements to be set lower than the amount necessary to cover a 
realistic assessment of the potential spill damages, given the risks 
posed by an operation. I would be happy to work with the Senator from 
Montana to address his concerns.
  Mr. BAUCUS. I would like to work with the Senator from Louisiana on 
language that addresses both of our concerns. Assuming we can reach 
agreement on legislative language, and I will commit to the Senator 
that I will work toward that end, I think that the Clean Water Act, or 
other legislation, would be an appropriate vehicle for such a language.
  Mr. JOHNSTON. I thank the Senator. I had intended to offer the 
amendment today on the Safe Drinking Water Act. However, if we are in 
agreement that mutually agreed upon language will be included in the 
Clean Water Act or other appropriate legislation in the near future, I 
will withhold the amendment for now. I appreciate the Senator's 
willingness to try to work out a problem of significant importance to 
the State of Louisiana.
  Mr. BAUCUS. I believe we are in agreement. I appreciate the Senator's 
withdrawing the amendment, and look forward to working with him to 
resolve this issue.


                           amendment no. 1722

  (Purpose: To provide for the energy security of the Nation through 
 encouraging the production of domestic oil and gas resources in deep 
  water on the Outer Continental Shelf in the Gulf of Mexico, and for 
                            other purposes)

  Mr. JOHNSTON. Mr. President, I send an amendment to the desk and ask 
for its immediate consideration.
  The PRESIDING OFFICER. The clerk will report.
  The bill clerk read as follows:

       The Senator from Louisiana [Mr. Johnston] proposes an 
     amendment numbered 1722.

  Mr. JOHNSTON. Mr. President, I ask unanimous consent that the reading 
of the amendment be dispensed with.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  The amendment is as follows:

       At the appropriate place in the bill, add the following, 
     numbered accordingly:
       Sec.  . Amendments to the Outer Continental Shelf Lands 
     Act.--The Outer Continental Shelf Lands Act, as amended, is 
     amended by redesignating section 8(a)(3) (43 U.S.C. 
     1337(a)(3)) as section 8(a)(3)(A) and by adding at the end 
     thereof the following:
       ``(B) The Secretary may, in order to promote development 
     and new production on a producing or non-producing lease, 
     through primary, secondary, or tertiary recovery means, or to 
     encourage production of marginal or uneconomic resources on a 
     producing or non-producing lease, reduce or suspend any 
     royalty or net profit share set forth in the lease.
       ``(C)(i) Notwithstanding the provisions of this Act other 
     than this subparagraph, no royalty payment shall be due on 
     new production, as defined in clause (iii) of this 
     subparagraph, from any lease located in water depths of 200 
     meters or greater in the Western and Central Planning Areas 
     of the Gulf of Mexico, and the Eastern Planning Area of the 
     Gulf of Mexico west of the lateral seaward boundary between 
     the States of Florida and Alabama, or for any lease in the 
     frontier areas of Alaska, which shall, at a minimum, include 
     those areas with seasonal sea ice, long distances to existing 
     pipelines and ports, or a lack of production infrastructure, 
     until the capital costs directly related to such new 
     production have been recovered by the lessee out of the 
     proceeds from such new production.
       ``(ii) With respect to any lease in existence on the date 
     of enactment of the Outer Continental Shelf Deep Water 
     Royalty Relief Act meeting the requirements of this 
     subparagraph, upon application by the lessee, the Secretary 
     shall determine within ninety days of such application 
     whether new production from such lease would be economic in 
     the absence of the relief from the requirement to pay 
     royalties provided for by clause (i) of this subparagraph. In 
     making such determination, the Secretary shall consider all 
     costs associated with obtaining, exploring, developing, and 
     producing from the lease. The lessee shall be afforded an 
     opportunity to provide information to the Secretary prior to 
     such determination. Such application may be made on the basis 
     of an individual lease or unit (as defined under the 
     provisions of 30 CFR part 250). If the Secretary determines 
     that such new production would be economic in the absence of 
     the relief from the requirement to pay royalties provided for 
     by clause (i) of this subparagraph, the provisions of clause 
     (i) of this subparagraph shall not apply to such production. 
     Redetermination of the applicability of clause (i) shall be 
     undertaken by the Secretary when requested by the lessee upon 
     significant change in the factors upon which the original 
     determination was made. The Secretary shall make such 
     redetermination within sixty days of such application. The 
     Secretary may extend the time period for making any 
     determination under this clause for thirty days if 
     circumstances so warrant. The lessee shall be notified in 
     writing of any determination or redetermination and the 
     reasons for and assumptions used for such determination. In 
     the event that the Secretary fails to make the determination 
     or redetermination upon application by the lessee within the 
     time period, together with any such extension thereof 
     provided for by this clause, the relief from the requirement 
     to pay royalties provided for by clause (i) shall apply to 
     such production.
       ``(iii) For purposes of this subparagraph, the term--
       ``(aa) `capital costs' shall be defined by the Secretary 
     and shall include exploration costs incurred after the 
     acquisition of the lease and development costs directly 
     related to new production. The terms `exploration' and 
     `development' shall have the same meaning contained in 
     subsections (k) and (l) of section 2 of this Act except the 
     term `development' shall also include any similar additional 
     development activities which take place after production has 
     been initiated from such lease. Such capital costs shall not 
     include any amounts paid as bonus bids but shall be adjusted 
     to reflect changes in the consumer price index, as defined in 
     section (1)(f)(4) of title 26 of the United States Code; and
       ``(bb) `new production' is--
       ``(I) any production from a lease from which no royalties 
     are due on production, other than test production, prior to 
     the date of enactment of the Outer Continental Shelf Deep 
     Water Royalty Relief Act; or
       ``(II) any production resulting from lease development 
     activities pursuant to a Development Operations Coordination 
     Document approved by the Secretary after the date of 
     enactment of the Outer Continental Shelf Deep Water Royalty 
     Relief Act; and
       ``(iv) In any month during which the arithmetic average of 
     the closing prices for the earliest delivery month on the New 
     York Mercantile Exchange for Light Sweet crude oil exceeds 
     $28.00 per barrel, any production of oil subject to relief 
     from the requirement to pay royalties under clause (i) of 
     this subparagraph shall be subject to royalties at the lease 
     stipulated rate, and the lessee's gross proceeds from such 
     oil production, less Federal royalties, during such month 
     shall be counted toward the recovery of capital costs under 
     clause (i) of this subparagraph.
       ``(v) In any month during which the arithmetic average of 
     the closing prices for the earliest delivery month on the New 
     York Mercantile Exchange for natural gas exceeds $3.50 per 
     million British thermal units, any production of natural gas 
     subject to relief from the requirement to pay royalties under 
     clause (i) of this subparagraph shall be subject to royalties 
     at the lease stipulated rate, and the lessee's gross proceeds 
     from such natural gas production, less Federal royalties, 
     during such month shall be counted toward the recovery of 
     capital costs under clause (i) of this subparagraph.
       ``(vi) The prices referred to in clauses (iv) and (v) of 
     this subparagraph shall be changed during any calender year 
     after 1994 by the percentage if any by which the consumer 
     price index changed during the preceding calendar year, as 
     defined in section (1)(f)(4) of title 26 of the United States 
     Code.''.
       Sec.  . Regulations.--The Secretary shall promulgate such 
     rules and regulations as are necessary to implement the 
     provisions of this Act within one hundred and eighty days 
     after the date of enactment of this Act.
       Sec.  . Area-Wide Leasing.--The Secretary shall not 
     implement the system of tract nomination for oil and gas 
     leasing in the Central and Western Planning Areas of the Gulf 
     of Mexico under the Outer Continental Shelf Lands Act, and 
     shall use the existing area-wide system of leasing in such 
     areas.
       Sec.  . Report to Congress.--(a) The Secretary shall review 
     Federal regulations and policies within the Secretary's 
     jurisdiction which create barriers and disincentives that 
     unnecessarily preclude new production, or result in premature 
     abandonment or suspension of existing production of oil and 
     gas on Federal lands, including the Outer Continental Shelf. 
     Such review, conducted with the participation of all 
     interested parties, shall assess how Federal policies could 
     be modified to reduce compliance costs and improve the cash 
     flow of oil and gas operations on Federal lands. The review 
     shall include administrative compliance, royalty collection, 
     timing of operational and production management requirements, 
     such as permanent plugging and abandonment of wells, and any 
     other requirements which unduly burden natural gas and oil 
     exploration, production and transportation on Federal lands.
       (b) The Secretary shall evaluate the impact, if any, of 
     current royalty rates for oil and gas on Federal lands, both 
     onshore and offshore, on the viability of undeveloped fields 
     by general category, such as production volume, crude 
     quality, water depth, and distance from existing 
     infrastructure. The review shall be based on current industry 
     technology and cost information, and shall assess how a 
     reduction in Federal oil and natural gas royalties would 
     encourage development.
       (c) The Secretary shall report to the Committee on Energy 
     and Natural Resources of the United States Senate and to the 
     United States House of Representatives on the review required 
     by this section and actions taken as recommended pursuant to 
     such review, or the reason such actions have not been taken, 
     within ninety days of the date of enactment of this Act.

  Mr. JOHNSTON. Mr. President, as I think all Senators are aware, 
domestic production in the United States is plummeting, imports are 
escalating at a frightening rate. The balance of payments caused by 
this is very negative to the United States.
  One of the reasons that domestic production is plummeting is the high 
cost of drilling in the Outer Continental Shelf. For that reason the 
Committee on Energy and Natural Resources has reported S. 318, dealing 
with the question of drilling in the deep water on the Outer 
Continental Shelf.
  What this bill does is first clarifies the existing law whereby the 
Secretary has authority to reduce royalty for producing or nonproducing 
leases in the Outer Continental Shelf. In other words, the Secretary 
has discretion at the present time to reduce those royalties. This 
clarifies that authority where there are expensive secondary or 
tertiary recovery technologies that need to be employed on those Outer 
Continental Shelf wells.
  The principal thing that the bill does is provides that with respect 
to deep-water leases, that is 200 meters or more, that royalty shall be 
suspended until the capital costs are recovered in those cases where 
the wells would not otherwise be drilled.
  The Secretary is mandated to determine whether or not it would be 
economic to drill or to produce those wells without this incentive in 
the form of royalty reduction.
  If the wells would be drilled anyway, then there is no incentive; 
there is no reduction in royalties. It is only when those wells that 
would not be drilled otherwise that the incentive in S. 318, which is 
this amendment, would apply.
  The CBO has scored this at zero for the very logical and 
understandable reason that if a well is not going to be drilled, it is 
not going to produce any royalty, so there is no loss to the Federal 
Government. There is actually a gain to the Federal Government, because 
if you get an otherwise noneconomic well to be drilled, and you do 
drill it, and then it is going to produce income, it is going to 
produce income taxes and eventually will produce royalties once the 
capital costs are recovered.
  I can see no reason why anyone would oppose this amendment. I urge my 
colleagues to vote affirmatively on it.
  The PRESIDING OFFICER. The Senator from Ohio [Mr. Metzenbaum] is 
recognized.
  Mr. METZENBAUM. Mr. President, will the Senator from Louisiana yield 
for a question?
  Mr. JOHNSTON. Of course.
  Mr. METZENBAUM. Mr. President, does the Senator's amendment have the 
same language as that which is found in S. 318, the Senator's bill that 
was introduced on April 11, 1994?
  Mr. JOHNSTON. Yes. There have been some changes. The Oil Pollution 
Act of 1990 language has been deleted.
  Mr. METZENBAUM. But it is substantially the same?
  Mr. JOHNSTON. Yes, it is substantially. Correct.
  Mr. METZENBAUM. I thank the Senator from Louisiana.
  The PRESIDING OFFICER. The Senator from Ohio [Mr. Metzenbaum], is 
recognized.
  Mr. METZENBAUM. Mr. President, one of the things is sort of an 
absurdity. First of all, there is a pending piece of legislation on 
this subject which in the normal course of events would be considered 
by the appropriate committee. It has been considered by the appropriate 
committee, and it is my understanding that that bill is now pending at 
the desk.
  This is an effort on the part of my friend from Louisiana to 
circumvent the fact that there are certain holds that are on that 
measure. It is indicated that a number of us are prepared to debate it 
at considerable length.
  Frankly speaking, this is a giveaway. This is a plain, simple 
giveaway of the Treasury's dollars. And when the Senator from Louisiana 
says it is scored at zero, that is sort of specious reasoning.
  It is scored at zero because it is only permissible for the Secretary 
to suspend these royalties or net profit sharing that are presently in 
the lease. That is what is there. The reason it is scored at zero is 
because he may never do that to any of them. But the fact is, knowing 
the way Washington works, you can bet all the tea in China that the 
Secretary will come under political pressure to suspend the royalties 
or the share of the net profits that are called for in the leases as 
they were negotiated.
  What we are talking about here is these oil companies, these 
drillers, negotiated with the Federal Government--and I must say in an 
aside that my colleague from Louisiana knows 100 times more about the 
oil industry and drilling than the Senator from Ohio, but the Senator 
from Ohio knows at least as much as the Senator from Louisiana about 
how moneys go into the Treasury and how moneys fail to get in the 
Treasury, how we are always talking about balancing the budget around 
here, and running out and telling our constituents how strongly we want 
to balance the budget.
  This is a raid upon the Federal Treasury, and let no one be kidded 
about it. Frankly, it does not belong in this bill. It has no 
relationship to this bill. This is an inappropriate way of trying to go 
around the bend to see to it that we do not have a full debate on the 
floor of the Senate on this particular pending legislation.
  But the language of the bill--and I have not seen the amendment, but 
my colleague indicates it is the same--``The Secretary may,''--and I 
skip some language--``in order to promote development and new 
production on a producing or nonproducing lease, through primary, 
secondary, or tertiary, recovery means, or to encourage production of 
marginal or uneconomic resources on a producing or nonproducing 
lease''--here is the relative language--``reduce or suspend any royalty 
or net profit share set forth in the lease.''
  These people entered into an agreement, and this is an effort to 
remove from them the obligation to live up to the terms of that lease.
  What kind of Senators are we that we would even consider such a 
proposal? You make a deal, you live up to the terms of your deal. You 
do not go to the Congress of the United States and say take away our 
obligation.
  Mr. JOHNSTON. Mr. President, will the Senator yield at that point?
  Mr. METZENBAUM. When I am through I will yield.
  Then it goes on to say: ``Notwithstanding the provisions of this Act 
other than this subparagraph, no royalty payment shall be due on new 
production, as defined in clause (iii) of this subparagraph, from any 
lease''--and it goes on to define the leases. And then it adds ``and 
the Eastern Planning Area of the Gulf of Mexico,'' et cetera. Then it 
goes on to say other terms.
  But when you get all said and done, this is a wolf in sheep's 
clothing. This amendment is bad business. This amendment, in my 
opinion, if enacted, would be irresponsible on the part of the U.S. 
Senate.
  I address myself to my colleagues on the other side of the aisle with 
respect to this amendment. I am known as a liberal Member of the U.S. 
Senate, and I am one who is willing to give away the Federal assets--
which is not true, but that is some of the reputation. But many of 
those on the other side of the aisle are known as the conservatives. 
They are the ones who are standing up day in and day out and saying we 
have to balance the budget, and I agree with them on that. But the fact 
is in many instances their voices have been louder than mine.
  Here is an instance in which you are called upon to face the issue, 
to run head on into the question of whether or not you are going to 
permit someone to come in and dig out a portion of the Federal 
revenues.
  It is a subtly disguised raid on the Federal Treasury to benefit big 
oil and little oil. Frankly, I do not care whether it is big oil or 
little oil. There is not any reason that someone who has entered into 
an agreement should have the right to get out from under the obligation 
of that agreement, and there is not any reason why those who are 
drilling in Federal waters should not be paying a reasonable royalty, 
whether it is an old lease or a new lease. According to the Senator's 
amendment, royalty lease payments would be suspended for drilling on 
the Outer Continental Shelf until the oil company recouped its capital 
costs.
  Why? You would not do that if you were drilling on some private 
farmer's piece of land or any other person's piece of land. Why should 
you do it because you are on the Federal land? Because Big Daddy is 
always willing to give away the Federal assets if you have the right 
people proposing the amendment.
  And I do not say this in a negative manner about my colleague. He is 
doing what he thinks is right for his constituents in Louisiana. But I 
think it is wrong for the constituents of every other Member of the 
U.S. Senate and all of the other States of this country.
  Frankly speaking, this would just be a windfall. It would be a 
giveaway of I do not know how many billions of dollars. I believe I saw 
some figure like $1.750 billion. But, whatever, if the amount is only 
$100; but it is not $100, you can be sure of that.
  I have a note here from my staff.
  According to an earlier analysis of the bill, the Treasury would lose 
as much as $1.9 billion--$1.9 billion. When we are fighting for money 
to take care of the homeless, to take care of those with Alzheimer's, 
to cake care of those with AIDS, to take care of senior citizens, to 
provide health programs for this country, are we in a position to even 
take the chance of losing $1.9 billion or any lesser amount, whatever 
it may be?
  The version we are talking about today disguises the loss by hiding 
behind it the discretion of the Secretary. Well, if the Secretary does 
not want to do it--I do not remember hardly any Secretary that was not 
subject to some political pressure, just as probably every Member of 
the U.S. Senate is probably subject to some political pressure.
  There is not any reason under the sun for this matter to be in this 
bill. It has not anything to do with it. And there is not any reason, 
logic, or justification for us to adopt this amendment.
  Frankly, this whole proposal is just a gimmick to hide the true 
impact of the bill. This question of making it permissive with the 
Secretary does not really make it a better bill.
  If you really look at it, the amendment is nothing more than a plain 
subsidy.
  You would think that we had learned our lesson on royalty relief 
earlier this week when the Secretary gave away mineral rights worth $11 
billion for the princely sum of $9,000. I do not blame that on the 
Secretary. It was under circumstances that he could not help. But the 
fact is, we gave away billions of dollars of mineral rights to a 
Canadian company to permit them to mine gold for the paltry sum of 
$9,000. And yet today the Senator from Louisiana is asking the Senate 
to approve yet another raid on the Treasury.
  I understand this amendment is designed to spur job creation. I do 
not know of many bills that have come to the floor that somebody does 
not say it will spur job creation. It will not spur job creation. It 
will spur a raid upon the Treasury, and it will mean that the Federal 
budget will be more negative than it presently is. The deficit will be 
a greater one. Frankly, it is the wrong way to go about creating jobs.
  Mr. President, I want to make it clear to my colleagues that if this 
amendment is not tabled--and it is my understanding that the manager of 
the bill is considering that approach--the Senator from Ohio will be 
prepared to discuss this subject and elaborate upon all of the reasons 
why this amendment should not be adopted. I think it is a horrendous 
amendment. I think it is just exactly the wrong way to go.
  I salute my colleague from Louisiana, who is really one of the more 
conservative Members of the Senate and probably more of a leader in 
that area as far as balancing the budget. The Senator from Ohio is 
oftentimes willing to vote for human service programs the Senator from 
Louisiana may have some reservation about.
  This is not the way to go. I do not believe the Senator ought to 
press his amendment. I think this is an amendment that had a bad 
beginning, a bad birth, and I hope it has an early death.
  Mr. JOHNSTON. Will the Senator yield?
  Mr. METZENBAUM. Surely.
  Mr. JOHNSTON. Mr. President, I am not certain the Senator 
understands. Does he understand that there is no incentive, no royalty 
relief unless the Secretary determines that the well would not 
otherwise be drilled or produced?
  Mr. METZENBAUM. I do not believe that is the way the language reads. 
I do not believe that is what the language is.
  It says: ``The Secretary may, in order to promote development and new 
production on a producing or nonproducing lease''--I assume this is the 
same language that is in the amendment--``through primary, secondary, 
or tertiary recovery means, or to encourage production of marginal or 
uneconomic resources on a producing or non-producing lease. * * *''
  That does not conform, if I may say so, to what the Senator has just 
asked of me.
  Mr. JOHNSTON. Mr. President, the Senator apparently did not 
understand the amendment. If I can invite his attention to page 2 of 
the amendment.
  Mr. METZENBAUM. I do not have the amendment in front of me. I only 
have the bill. I have not been afforded a copy of the amendment.
  I will take a look at it.
  Mr. JOHNSTON. I invite his attention to page 2. That points out, with 
respect to any lease in existence on the date of enactment, the 
Secretary shall determine ``whether new production from such lease 
would be economic in the absence of the relief from the requirement to 
pay royalties provided for by clause (i) of this subparagraph.''
  And then it goes ahead and states that, ``If the Secretary determines 
that such new production would be economic in the absence of relief 
from the requirement to pay royalties provided for by clause (i) of 
this subparagraph, the provisions of clause (i) of this subparagraph 
shall not apply to such production.''
  In other words, the Secretary of the Interior, who is the former 
President of the League of Conservation Voters--hardly an organization 
founded or promoted by big oil and hardly a big oil background--will 
have to determine, with every one of these leases, whether it would be 
economic to drill the lease in the absence of this incentive. And if 
the lease would be drilled anyway, then he is directed not to give the 
relief. That is why CBO has scored this amendment as zero.
  Mr. President, we have leases out there that are not being drilled. I 
mean, how would we lose anything at all by this amendment? We can only 
gain by it.
  I know the Senator is fair-minded, and I know he will read this. And 
if he concurs with what I think is the very plain language--and, in all 
fairness, he did not have the amendment--if he concurs with that, I 
hope he will withdraw his objection.
  Mr. President, we have lost 450,000 jobs in the oil and gas business 
in America. That is more than all the jobs lost in autos and steel 
combined.
  In 1992, for the first time, major oil companies spent more on 
production and exploration outside of this country than they spent in 
America. Crude oil production decreased almost 3 percent in 1992 and in 
July of 1993 reached its lowest level since 1958--the lowest level of 
domestic oil production, last year, since 1958--and it is dropping 
rapidly. During 1992, crude oil reserves actually dropped by 937 
million barrels. Domestic oil and gas drilling decreased nearly 17 
percent during 1992 and was the lowest level since 1942.
  So, Mr. President, this is a serious problem for the country. I mean, 
this is no giveaway for big oil companies. Look, the big oil companies 
are going out of the country. Now the question is whether you want them 
to do all their production and exploration out of the country where we 
pay royalties to Saudi Arabia or Nigeria or Indonesia, or whether you 
want to drill on wells in the United States that would not otherwise be 
drilled.
  I mean, this is a modest attempt in those areas in very deep water--
which are very expensive, which would not otherwise be drilled--to give 
to the former president of the League of Conservation Voters, that is 
Bruce Babbitt, the Secretary of the Interior--the discretion to 
determine that these wells would not otherwise be drilled and give this 
incentive.
  The CBO says it costs the Treasury nothing. If it costs the Treasury 
nothing, it is actually going to be a gain for the Treasury because a 
well that otherwise would not be drilled will have a lot of economic 
activity, will have payment of wages and income taxes, and eventually 
royalty payments when the capital costs are recovered.
  I can see no valid objection to this amendment. The administration 
has endorsed it in its thrust. They want to tweak some of the 
provisions in conference.
  I cannot for the life of me see why we would not agree to this 
amendment.

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