[Congressional Record Volume 144, Number 123 (Wednesday, September 16, 1998)]
[Senate]
[Pages S10393-S10400]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS ACT,
1999
The PRESIDING OFFICER (Mr. Allard). The Senate will now resume
consideration of S. 2237, which the clerk will report.
The assistant legislative clerk read as follows:
A bill (S. 2237) making appropriations for the Department
of the Interior and related agencies for the fiscal year
ending September 30, 1999, and for other purposes.
The Senate resumed consideration of the bill.
Pending:
Daschle amendment No. 3581, to provide emergency assistance
to agricultural producers.
Mr. DOMENICI. Mr. President, we are awaiting Senator Boxer. I suggest
the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mrs. BOXER. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Under the previous order, the Senator from California is recognized
to offer an amendment related to oil royalties in which there shall be
3 hours for debate equally divided.
The Senator from California is recognized.
Mrs. BOXER. Thank you very much, Mr. President.
Amendment No. 3594
(Purpose: To strike the section delaying issuance of a notice of final
rulemaking with respect to the valuation of crude oil for royalty
purposes)
Mrs. BOXER. Mr. President, I send an amendment to the desk and ask
for its immediate consideration.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from California [Mrs. Boxer], for herself, Mr.
Bumpers, Mr. Daschle, Mr. Durbin and Mr. Wellstone, proposes
an amendment numbered 3594.
Mrs. BOXER. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
Mr. DOMENICI. Reserving the right to object, is it a short amendment?
Mrs. BOXER. Pardon me?
Mr. DOMENICI. Is it a short amendment?
Mrs. BOXER. Yes.
Mr. DOMENICI. I would like it read.
Mrs. BOXER. That is no problem with us at all.
The PRESIDING OFFICER. The clerk will read the amendment.
The assistant legislative clerk read as follows:
On page 74, strike lines 13 through 20.
Mrs. BOXER addressed the Chair.
The PRESIDING OFFICER. The Senator from California is recognized.
Mrs. BOXER. Mr. President, I said it was a short amendment. It is in
fact a short amendment. It is a very straightforward amendment. It
would actually strike a rider that has been placed in this bill that
deals with oil royalty payments that are due Federal taxpayers.
[[Page S10394]]
Mr. President, Senator Bumpers, Senator Durbin, Senator Daschle and
Senator Wellstone are joining me today to offer an amendment to repeal
a special interest rider that has been attached to the Interior
appropriations bill. And I think, to put it in very, very
straightforward terms, the taxpayers are being robbed. Now, that is a
pretty strong statement, but I can back it up. They are being robbed to
the tune of $5.5 million a month, and that is a lot of money, Mr.
President. It adds up real fast to many, many millions of dollars, and
over years, hundreds of millions of dollars.
If any one of us were standing outside on the street and we saw
someone's purse being snatched, and we saw somebody grab that purse and
take the money out and pocket it, we would act like good Samaritans and
we would say that is wrong. Well, I think it is wrong when we see the
most powerful companies in this country--only 5 percent of the oil
companies in this country are doing this--not paying their fair share
of royalty payments.
How do I know this is a fact? Because there have been lawsuits, Mr.
President. All over this country the oil companies have, in fact,
settled and admitted--admitted--they underpaid their royalties.
I am very pleased that the Senator from Illinois has wound his way
over here because he and I have worked on this together, as well as
Senator Bumpers and Senator Wellstone. I was very proud that in the
committee my motion to remove this rider got the support of Senator
Byrd. And that is because wrong is wrong and right is right. It is
wrong for the powerful oil companies, with teams of lawyers, to be able
to take away the rightful funds of taxpayers.
Now, what does this rider do?
The rider prevents the Interior Department from acting to ensure that
oil companies pay their fair share of royalties for oil drilled on
public lands.
Now, if you are asking what a royalty payment is, it is very simple.
It is like a rent payment. The oil companies drill on Federal land,
they have to pay a royalty payment, 12.5 percent of the value of the
oil that they find on Federal land. What do we do with it in the
Federal Government? It goes straight to the Land and Water Conservation
Fund, which is the fund that purchases parks, to the Historic
Preservation Fund, and a share of it goes to the States. What do the
States do with it? They do with it what State law requires. In the case
of my State of California, those royalty payments go directly to the
schools.
So this amendment that I am offering, if we are fortunate enough to
pass it and we can strip this rider out, will mean more money for
schoolchildren and more money for the Land and Water Conservation Fund.
Now, this royalty payment is not a tax. It is a payment that the oil
companies sign on to pay. They sign on to an agreement, just as you do
if you lease an apartment. It says:
The value of production for purposes of computing royalty
on production from this lease shall never be less than the
fair market value of the production.
Keep that in mind. The oil companies have signed on to a lease that
says that their royalty payments ``shall never be less than the fair
market value of the production.''
What has been happening? A small percentage of oil companies are
paying a royalty not on the fair market value of the production, but on
a made up price. A price that they, themselves, make up. I will explain
that later. As a result of this phantom price system, they value the
oil at a lower price than the market price. Taxpayers, therefore, are
getting 12.5 percent of a lower price. Taxpayers are getting robbed,
plain and simple. Only 5 percent of the oil companies are doing this,
95 percent are not. We want to make sure those 5 percent, the bad
actors, pay their fair share.
That is what our amendment will do. It will strip out a rider that
says to the Interior Department, ``Stop what you are doing to fix this
problem.'' The rider in this bill says to the Interior Department,
essentially, ``Stop what you are doing to fix this problem.'' The
Interior Department is trying to get millions of dollars back for
taxpayers. They are being stopped by a rider in an appropriations bill.
It is a very simple issue. Believe me, it will be contorted to make
it look complicated, but it isn't complicated. For years, oil companies
have been cheating the American taxpayers out of millions, if not
billions, of dollars. The Department of Interior took action to stop
the cheating. And now, the Senate Appropriations Committee, pretty much
on a party line vote, said to the Interior Department, ``You can't fix
the problem.'' What we are doing in our amendment is saying, ``Yes, you
can, Interior Department, fix the problem. Do it in a fair way, go
after the 5 percent of the oil companies that are cheating the people.
Fix the problem.''
Now, how do we know that they are cheating? First of all, common
sense will tell you. We have a chart that shows the difference between
the posted price and the market price. We know that the Interior
Department has already billed 12 companies over $260 million for past
royalty underpayments. So we know there is a problem. The Interior
Department wouldn't do that if they didn't think they had proof that
there has been cheating. There have been settlements in five States on
royalty underpayments. California has collected $350 million; Alaska,
$2.5 billion; Texas, $17.5 million; Louisiana collected $10 million;
New Mexico collected $8 million. So the States are ahead of us on this.
They are suing the companies because the States know they are being
cheated, and they are collecting.
Just 2 weeks ago, Mobil Oil paid an additional $56.5 million in
settlement. Now, oil companies would not have settled for these large
sums of money if they truly believed they could justify their royalty
payments. You don't go and say, ``Here are millions of dollars. I'm
really innocent, but let's just get this over with.'' I don't know of
any company that would turn over $56 million, or $2.5 billion, if they
didn't think they were liable for it.
Here is the issue. This chart shows ARCO as an example. This is the
market price of oil in the west Texas market, in the blue on this
chart. This is what ARCO said the price was. It is very easy to see the
chart and see the difference, the area where we should be collecting
money. Another chart shows the Koch Oil Company, the same thing. This
is the market price in the blue line in the Louisiana market, and the
red line is what they said the market price was.
We also know that in February 1998 the Department of Justice
intervened in a lawsuit under the False Claims Act, accusing five major
oil companies of knowingly undervaluing oil extracted from public land
and thus paying lower royalties. The suit was originally filed in the
U.S. district court in Lufkin, TX, by three private parties. The
Justice Department entered the suit because of the overwhelming
evidence against the companies. These lawsuits are still pending, and
the Justice Department is continuing its investigation of the remaining
seven companies that have been billed by the Interior Department. Under
the False Claims Act, the United States may recover, on behalf of
taxpayers, three times the amount of its losses plus civil penalties.
If anyone comes on this floor and says there is no cheating--and they
will--if anyone comes on this floor and says, ``There is nothing there,
Senator Boxer; what is the fuss?'' I will show them exactly what the
fuss is all about. And that is the underpayment of royalties that the
oil companies promised to pay. Remember:
The value of production for purposes of computing royalty
on production from this lease shall never be less than the
fair market value of the production.
And we know what the fair market value is because there is an open
market on these prices.
Who benefits from this rider that is on this appropriations bill that
Senator Durbin, Senator Wellstone, Senator Bumpers, and I, and others
are trying to remove? Who wins? Five percent of the oil companies.
If you hear someone come on this floor and say this is an attack on
small oil companies, this is an attack on the mom-and-pop oil
companies, that is just not true. Five percent of the oil companies,
the biggest oil companies, are the only ones who are affected by this
rule; 95 percent of them are not, and there is no change. So we are
talking about a rider that protects 5 percent of the oil companies--
namely, the biggest oil companies in the country
[[Page S10395]]
who make billions of dollars and who are not paying their fair share of
royalties and basically have admitted it in lawsuit after lawsuit after
lawsuit--maybe not technically, but when you settle for those amounts
of money, you know they don't want to go to court about it.
Mr. President, I ask unanimous consent to have printed in the Record
the names of the companies who are affected by this rule.
There being no objection, the list was ordered to be printed in the
Record, as follows:
----------------------------------------------------------------------------------------------------------------
Paid vs. Liability
Companies (Oil and gas J.) (Oil and revenue Under the v. revenue
cond.) (percent) rule (percent)
----------------------------------------------------------------------------------------------------------------
Shell Total........................... $29,151,000,000 $213,008,437 0.73 $19,459,159 0.07
Exxon Corp. USA, Total................ 134,249,000,000 154,531,037 0.12 7,993,222 0.01
Chevron USA, Inc. Total............... 43,893,000,000 159,611,684 0.36 7,111,509 0.02
Texaco Exploration & Prod., I Total... 45,500,000,000 87,370,721 0.19 6,375,000 0.01
Marathon Oil Company Total............ 16,356,000,000 53,593,234 0.33 5,225,380 0.03
Mobil Explor. & Prod. U.S. Total...... 81,503,000,000 55,511,623 0.07 3,978,051 0.00
Conoco Inc. Total..................... 20,579,000,000 30,562,431 0.15 2,444,738 0.01
Phillips Petroleum Co. Total.......... 15,807,000,000 10,527,634 0.07 2,334,420 0.01
BP Exploration and Oil Inc. Total..... 17,165,000,000 46,819,366 0.27 2,138,002 0.01
Amerada Hess Corporation Total........ 8,929,711,000 12,271,849 0.14 1,446,901 0.02
Amoco Production Company Total........ 36,112,000,000 31,030,184 0.09 1,427,185 0.00
Pennzoil Products Co. Total........... 2,486,846,000 23,858,522 0.96 1,416,140 0.06
Unocal Exploration Total.............. 9,599,000,000 36,205,793 0.38 1,358,282 0.01
Murphy Oil Company U.S.A. Total....... 2,022,176,000 16,445,805 0.81 778,351 0.04
Arco Western Energy Total............. 19,169,000,000 50,363,676 0.26 718,384 0.00
Coastal Oil & Gas Corporation Total... 12,166,900,000 4,364,577 0.04 470,939 0.00
Total Petroleum, Inc.--Oil Total...... 34,526,000,000 3,059,110 0.01 364,045 0.00
Koch Oil Co. Total.................... Unavailable 3,214,012 ........... 342,222 ...........
Fina Oil & Chemical Company Total..... 4,078,502,000 1,393,795 0.03 156,560 0.00
Hunt Oil Company Total................ Unavailable 8,256,498 ........... 125,731 ...........
Howell Petroleum Corporation Total.... 712,501,000 1,581,010 0.22 122,669 0.02
Frontier Oil & Refining Co. Total..... 3,379,000 486,634 14.40 47,853 1.42
Giant Refining Company Total.......... Unavailable 945,403 ........... 46,854 ...........
Citgo Petroleum Corp. Total........... Unavailable 600,941 ........... 45,755 ...........
Navajo Crude Oil Mktg Co. Total....... Unavailable 2,598,096 ........... 45,063 ...........
BHP Petroleum (Americas), I Total..... 135,180,000 6,266,511 4.64 34,020 0.03
Barrett Resources Corp. Total......... 202,572,000 306,239 0.15 32,719 0.02
ANR Production Total.................. Unavailable 402,039 ........... 13,801 ...........
Petro Source Total.................... Unavailable 919,725 ........... 12,049 ...........
Berry Petroleum Company Total......... 57,095,000 132,733 0.23 9,711 0.02
Sinclair Oil Corp. Total.............. Unavailable 181,480 ........... 5,949 ...........
Ashland Exploration, Inc. Total....... 13,309,000,000 47,270 0.00 3,825 0.00
Big West Oil & Gas Inc. Total......... Unavailable 1,877,664 ........... 3,415 ...........
Sun Refining & Marketing Co. Total.... Unavailable 73,075 ........... 2,683 ...........
Pride Energy Company Total............ Unavailable 113,116 ........... 2,389 ...........
Cenex, Inc. Total..................... Unavailable 140,119 ........... 2,267 ...........
Sunland Refining Corp. Total.......... Unavailable 4,034 ........... 1,919 ...........
Diamond Shamrock Ref. & Mktg. Total... Unavailable 6,805 ........... 226 ...........
Montana Refining Company Total........ Unavailable 2,923 ........... 213 ...........
Gary-Williams Energy Corp. Total...... Unavailable 27,848 ........... 8 ...........
-------------
Grand Total--40 Companies....... ................. .............. ........... 66,097,612 ...........
----------------------------------------------------------------------------------------------------------------
Mrs. BOXER. Mr. President, let the Record show that we have 1\1/2\
pages of companies that are affected by the rule, and we literally have
34 pages of all the companies that are not affected by this rule. So
we, in this amendment, are going after only the 5 percent of oil
companies that are cheating the taxpayers, and 95 percent of them are
unaffected by this rule. So the only one that is benefited by this
rider, as it stands in the bill, is big oil.
The delays caused by this and other riders will cost taxpayers--hold
on to your hats--$82 million in taxpayer money lost by this rider--$5.5
million a month for 15 months, from June of 1998 when the rules were
expected to be finalized and this problem was supposed to be taken care
of.
I would like to share with you an editorial in the USA Today about
this issue. I am going to read it because I think it is worth reading.
It is one thing when I say this; it is another thing when an USA Today
editorial says it.
Today's debate: oil, politics and money.
Time to clean up big oil's slick deal with Congress.
Industry's Effort to Avoid Paying Full Fees Hurts
Taxpayers, Others.
Imagine being able to compute your own rent payments and grocery
bills, giving yourself a 3 to 10 percent discount off the market price.
Over time, that would add up to really big bucks. And imagine having
the political clout to make sure nothing threatened to change that cozy
arrangement.
According to government and private studies, that's the
sweet deal the oil industry is fighting to protect: the right
to extract crude oil from public land and pay the government
not the open market price, but a lower posted price based on
private deals the oil companies can manipulate for their own
benefit.
Big oil has contributed more than $35 million to national
political committees and congressional candidates in that
time--a modest investment in protecting the royalty pricing
arrangement that's enabled the industry to pocket an extra $2
billion.
This is USA Today speaking. I don't associate myself with that
thought. I think there are people here who are not motivated by this.
But I think it is interesting that that is the perception of USA Today.
They go on about the lost payments:
That's millions missing in action from the battle to reduce
the Federal deficit and from accounts for the land and water
conservation, historical preservation, and several Native
American tribes. In addition, public schools in 24 States
have been shortchanged. States use their share of Federal
royalties for education funding.
But the taxpayers have been getting the unfair end of this
deal for far too long. One major producer, Atlantic
Richfield, has already adopted market pricing for calculating
its royalty payments.
In other words, Atlantic Richfield has stepped out and done the right
and corporate-responsible thing.
Instead of protecting industry recalcitrants and campaign
contributors, the Congress should protect the public
interest.
I want to identify and associate myself with that thought. I know
colleagues believe it is in the best interest of America to stop the
Interior Department from moving ahead with their rule. But if you
really look at it and you see that we are being shortchanged by $6
million--$5.5 million to be exact--every month, that hurts taxpayers.
As I said, it is just the same as seeing a purse being snatched and a
little lady running after the criminal saying, ``Give me back my
money.'' Well, we can do a cartoon here of the oil companies--only 5
percent of them, the bad actors here--snatching the taxpayers' purse to
the tune of $66 million each and every year, and having the taxpayers
say, ``Wait a minute, that's ours. You signed a royalty agreement and
you said it shall never be less than the fair market value of the
production.''
I know there are many others who wish to speak, Mr. President, so I
will soon conclude my remarks. But I want to make one point about why
this is happening. The big oil companies are so large that they have
affiliates to whom they sell. The problem is that if they sell to their
own affiliates, that is called a ``non-arm's-length transaction.'' So
if I have a product to sell on the market, because I don't own an
affiliate, it is a very easy way to calculate the royalty. You go out
on the marketplace, sell it to the highest bidder--you know what the
market price is--and you pay a royalty payment of 12.5 percent on that
price. If you own your own affiliate, you can pay whatever you want. So
they sell it at a
[[Page S10396]]
lower price because they control the price, and then they go ahead and
pay the royalty payment on the lower price that they control. It is
very much like what the USA Today said about being able to manipulate
the price. They say, ``Imagine being able to compute your own rent
payments and your own grocery bill.'' That is a pretty good deal.
But if you are the landlord and you pay yourself rent, you could pay
yourself any amount and you won't evict yourself. That is what is
happening here. They are selling the oil at a lower price because they
control the affiliate, and then they pay the royalty payment on the
lower price. Whereas, the oil companies that are smaller, that don't
own the affiliate, have to go by the market price.
Let's show that chart one more time. Here you have a case of a
company that owns its affiliate and sells to its own affiliate at the
posted price--the red line--when the market price that all the smaller
companies have to pay is up here. The difference between the red and
blue lines is the area of cheating. That is what we are trying to
recover.
So, Mr. President, I am honored that I have been able to offer this
amendment. I am very pleased that Senator Gorton showed me great
courtesy in allowing me to open up the debate this morning because it
is an issue that is very important. Frankly, when it came up in the
Appropriations Committee, we had to struggle to even get a minute or
two to discuss it. It was almost as if people didn't want it to be
discussed. I am very proud today that we now have time so Senator
Durbin can speak on its behalf, as well as Senator Wellstone, and
others, and some on the other side can have a chance to be heard.
In concluding this portion of my remarks, let me thank my colleagues
for their interest. Let me say that there aren't too many
straightforward issues around here, and people are going to tell you
this isn't straightforward. But for over 2\1/2\ years the Interior
Department has tried to come up with a fair way to make sure the oil
companies pay their fair share of royalty payments. They have done so.
In my next series of remarks I will read you the accolades the
Interior Department is getting for the way they went about this. And
what do we do in the face of finally straightening out a mess that has
caused lawsuits, has meant that kids in California are not getting
payments into the classroom, has meant that the Land and Water
Conservation Fund and Native Indian tribes and the Historic
Preservation Fund have been cheated out of funds? We get a rider that
says to the Interior Department: Sorry, we don't like what you are
doing. Stop short right here, and let's not do anything to recover
these royalty payments.
Mr. President, I think that is wrong. I would like to see the
Interior Department be allowed to do its job and, therefore, we offer
this amendment with the best of intentions to allow the Interior
Department to move forward on this rule.
I yield the floor.
I will later participate in the debate.
Thank you very much.
Mr. DOMENICI addressed the Chair.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, let me ask the Senator from California,
Is there any urgency on her side to conclude her remarks? We can wait.
We have others who want to speak.
Mrs. BOXER. There are several others.
Mr. DOMENICI. The Senator from California has 1\1/2\ hours. We have
1\1/2\ hours. I am not sure we will use all of ours. I don't know
whether the Senator from California will use all of theirs. I have a
few Senators who want to speak.
Mrs. BOXER. I think we will be using our time.
Mr. DOMENICI. Mr. President, I yield myself just 5 minutes for some
opening remarks.
From our standpoint, I would like very much the distinguished Senator
from Louisiana to take a few minutes of my time because the Senator
from California spoke longer than 5 minutes. I will yield time to the
Senator from Louisiana for his comments.
First of all, Mr. President, it is too bad that the MMS, the Federal
agency that is establishing these rules, doesn't have better
credibility with those that they are proposing rulemaking against. You
need not have the industry that you regulate think that you are totally
against them--arbitrary, or somewhat capricious--in order to get your
job done.
As Senator Boxer has indicated on at least three occasions, this only
affects 5 percent of the oil companies. That is MMS's view. That is the
agency of the Federal Government that thinks these rules are wonderful.
From my standpoint, I would like to tell you what the independent
producers say. Frankly, I believe this is as valid as an MMS
evaluation. The IPAA--that is the independents across America--say that
the percentage of oil producers impacted by the oil royalty rule is 100
percent. In fact, this is their principal concern this year, that these
proposed regulations, if adopted, will have a serious impact on many,
many independent producers. Frankly, I believe that is the case.
First all, MMS, the regulating agency, has permitted so broad a
latitude under the rubric of unreasonable that I believe they can do
almost anything. It is not certain what the rules will be when they are
completed. They will be very uncertain. Litigation will not disappear.
It will become more rampant.
I would like the statement from the independent oil and gas
producers--many of them from my home State, many very small, many going
broke today because of low oil prices--be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Percentage of Oil Producers Impacted by Oil Royalty Rule: 100 percent
It's time to debunk the mistruths surrounding the proposed
oil royalty rule. Opponents of the oil industry and the
Minerals Management Service claim that America's independent
oil producers will not be affected by the proposed
rulemaking. Not true.
Rulemaking will cripple independent producers
Before exposing the sham on this issue, it's necessary to
state the position of independent producers on the proposed
oil royalty rulemaking. Under the current proposal, no oil
producer will be certain that royalty payments to the
government are final. In other words, the Interior Department
will have license to knock on the doors of independent
producers years down the road and demand additional tax
payments for oil drilled on federal lands. Not only is the
rule a violation of the lease contract between government and
industry, it will badly impact the health of independent oil
companies who are already on its knees because of the
devastatingly low oil prices.
The proposed rulemaking will most certainly lead to years
of litigation and audit. In fact, IPAA's Board of Governors,
who represent over 8,000 independent oil and gas companies,
voted yesterday to pursue options to litigation should this
rulemaking be implemented. A proposed rule promoting more
government and less certainty should not be finalized.
Fighting it in the courts is an expensive proposition, but
independents are impacted by the rule and will have no choice
but to pursue costly litigation for survival.
Debunking more lies
Opponents of the oil industry claim the industry-backed
moratorium is anti-environmental. Not true. In 1997, the oil
industry generated more than $4 billion in revenues from oil
and natural gas production on federal lands, much of which is
used for the Land and Water Conservation Fund. The rulemaking
affects accounting procedures, not the environment.
Opponents claim the moratorium will cost taxpayers and
school children $60 million per year. Not true. Interior has
the ability under the current rules to collect all they
believe is due and owing regardless of a moratorium.
All independent oil producers impacted
Many changes. Like new duty to market at no cost.
Second guessing, moving producers to alternative pricing.
Chasing arm's-length prices away from the lease.
Mr. DOMENICI. Mr. President, we are here on the floor of the Senate,
it seems to me, proposing a set of rules that would like to gouge for
oil bucks, gouge for oil royalties.
Let me state for the Senate a couple of facts about oil production in
the United States and about the cost of oil that I believe are
startling.
First of all, about 3 weeks ago--I don't know what the exact
measurement is today--one of my staff members drew some comparisons in
terms of what oil is worth today, what gasoline is worth today for our
automobiles and for our Nation. If you go to a supermarket, I say to my
friend from Illinois, or if your wife does, and she buys bottled water,
she will pay more for a
[[Page S10397]]
gallon of bottled water than Americans are paying for gasoline for
their cars. That is good economics for America, but it is bad economics
for America's oil independents, for America's independent producers.
Because, just as that truism indicates that gasoline and oil producers
have been at an all-time low for the last 5, 6 or 7 years, oil
production is going down in the United States. Many independents who
have been stalwarts are literally saying they do not know if they can
make their bank payments for 1 additional month.
Here we come to the floor with an amendment that is saying, let the
regulators impose new regulations, and we sing the praises--at least
the Senator from California does--that it is going to get more money
out of the oil companies. That sounds wonderful. In fact, it is kind of
alleged here this morning that, you know, they--these oil companies--
are just taking money out of somebody's purse so we ought to go after
them like we would go after somebody who took a purse away from
somebody.
Mr. President, if you are going to take more money from the oil
producers of this country--and we are already becoming more and more
dependent on foreign oil, and the price of oil is going down and down--
I ask you, won't you in about 3 or 4 or 5 years get less by way of oil
royalties than you are getting today by shutting off American
production and causing some more of them to get closed? Where will the
royalty come from as we produce less oil, rather than more?
So whether it is $60 million, $70 million, $80 million or $100
million that allegedly will come in, that is not the test of whether
the rules are fair. If we imposed those kinds of regulations on any
industry we regulated, could we stand up and say we just got $50
million from the patent applicants of the United States because we just
increased the fee? But you have to ask, what is fair, what is right,
what is just, not just are the regulators right because they picked up
more money.
Before we are finished, we will go through a litany of arbitrary,
confusing regulations that they intend to pursue. They are just looking
for a little window--I can tell you these regulators are--because there
is a moratorium right now. They are hoping against hope that they will
get an 8- or 10-day window when there is no moratorium so they can slap
on these.
I want to tell them here and now that they are going to have a hard
time doing that, because I believe we will prevail today, and I believe
we will make sure that any bill that goes to the President for
signature is going to have this on it.
Having said that, I reserve the remainder of my time, excepting I
would yield whatever amount of time that Senator Breaux from Louisiana
desires.
Mr. DURBIN addressed the Chair.
The PRESIDING OFFICER (Mr. Roberts). The Senator from Illinois.
Mr. DURBIN. Mr. President, thank you.
The PRESIDING OFFICER. Who yields time to the Senator?
Mrs. BOXER. I yield time to the Senator, 15 minutes.
The PRESIDING OFFICER. The Senator from Illinois.
Mrs. BOXER. Mr. President, how much remaining time do I have?
The PRESIDING OFFICER. The Senator has 56 minutes remaining.
The distinguish Senator from Illinois is recognized for 15 minutes.
Mr. DURBIN. Thank you, Mr. President. I thank my colleague from the
State of California.
Let me say at the outset that this is about more money for California
schools. It is about more money for land and water conservation, which
funds the acquisition of park space and green space across America. It
is about more money for historic preservation. It is about more money
for Indian tribes, Native Americans, who receive benefits from these
royalties. This is about a matter of principle on which the Senator
from California is taking the floor to lead the fight. I salute her at
the outset, and say to those who are listening to this debate that we
are fortunate to have people of the caliber of Senator Boxer from the
State of California who are willing to wage these battles, because, you
see, it would have been so easy for us to really kind of look the other
way with a wink and nod and let this one slip by.
This is not an issue that went before a committee with a lot of
investigation, witnesses and hearings so that America could tune in and
be part of the debate. This was done on a disaster bill for tornado
victims--a bill that was also designed to buy emergency funds for our
troops in the Middle East.
You say, What could that possibly have to do with the royalties oil
companies pay for drilling on Federal land? The honest answer is that
it had nothing to do with it. It was put on at a late moment with no
hearings and with little publicity.
I have been around legislatures for about 32 years--State and
Federal. I can tell you there are two things to keep your eye open for
toward the close of business: find out if there is something that just
got popped on a bill without any hearings, and find out whether it
benefits some large special interest group. Guess what? Bingo. That is
what we are talking about here. Senator Boxer caught it, brought it up
in the Appropriations Committee, and said to her colleagues, Please
don't do this. At least for the taxpayers of this country, take a close
look at what is going on here.
I salute her for doing that. Her leadership is important, and this
issue is important. It is about $66 million a year. And I guess by
Federal standards people say, wait a minute, in a budget that is
dealing with $1.5 trillion, what does this mean?
Well, it means a lot, because for schoolchildren in her State and a
lot of other States and for the people I mentioned earlier who are
dependent on these royalties, this is an important amount of money.
I think what is more important than the money involved is the
principle that is involved in this. Consider for a moment, you own a
piece of property and someone comes to you and says, ``I want to rent
from you under one condition, and that is I decide how much rent I am
going to pay you.'' Well, you say, ``Well, at least let's have some
standard. Let's have some objective standard.'' And they said, ``Yes, I
will tell you what the objective standard will be. I will ask my Uncle
Louie what's fair.'' And you say to yourself, ``Why would we sign such
a lease?''
That is what has happened here. The land that they are drilling for
oil on is land that we own, ladies and gentlemen. It is the land of the
people of the United States. It is not land owned by oil companies.
They come on our land with our permission to drill oil from our land to
make profits for their companies. That is what this is all about. And
we say to them, ``Make a profit. That's fine. That's the American way.
But we want one-eighth of your profit. We want one-eighth of the cost
of the oil.'' Those who are involved in the oil business know that is
not an unusual request. The owner of the land gets an eighth.
The problem here is that the oil companies have said, ``We will
determine an eighth of what. We will determine what Uncle Louie says is
an eighth.'' And in this situation they won't take a market price that
they are supposed to take. They take a price they have absolutely
fabricated. They have made it up. They trade among themselves. They
post prices and say, ``This is the price,'' and we know better.
The charts the Senator from California brought to us make it clear
the taxpayers are being cheated, because a handful of oil companies are
declaring a price that they are basing the royalty on which is a phony,
false price. State after State has turned around and sued them
successfully for this sort of cheating. And now we are trying to
promulgate a law here on Capitol Hill in the Senate which condones this
cheating, saying, ``Keep on reaching in Uncle Sam's pocket, pull out
all the money you need, play us for Uncle Sucker, and we are going to
look the other way.''
I do not think we should do that. I do not think that is fair to a
lot of people. And I really am, in a way, surprised that a lot of oil
companies that have extraordinarily good business reputations would be
involved in this chicanery.
I listened to the Senator from New Mexico give a speech. His speech
is, as far as I am concerned, very accurate. The oil industry in this
country does suffer some problems, particularly independent producers.
They come from my State. Illinois is not a major production State, but
we have a lot of
[[Page S10398]]
producers there who have come to see me. And it is a fact that the
price of oil and the products of oil are so low that many of them
cannot survive. It has domestic and international ramifications; I
don't question that. But to argue that that situation with the oil
industry in general means that we should give a handful of oil
companies, 5 percent of them, an opportunity to reach in the Federal
Treasury and pull more money out at the expense of taxpayers begs the
question. If you let this 5 percent turn around and absolutely drill
the oil for free and not pay the taxpayers a penny, it would not create
a recovery in the oil sector. I am afraid that is what the other side
is arguing. We are dealing with a small percentage here.
And let me tell you what these royalties mean to these large
companies that are drilling on taxpayers' land. The additional
royalties represent approximately 1-100th of 1 percent of the $461
billion in 1996 revenues for these companies. We have crocodile tears
in the Chamber here about these struggling oil companies at a time when
we look at their balance sheets, and many of them are making billions
of dollars and would say to the taxpayers of this country, ``No, we
can't pay you a royalty based on the real market price; we want to
create some fiction.'' And so not in the dark of night but in the
darkness of a conference committee room, along comes a provision which
basically says the Department of Interior may not investigate, may not
determine whether there is fairness in the price that is being charged.
No. The Senate of the United States will shut them down and tell them,
keep their noses out of these corporate boardrooms.
Mrs. BOXER. Will the Senator yield for 1 minute?
Mr. DURBIN. I will be happy to yield.
Mrs. BOXER. I wanted to know if the Senator was aware, when the
Senator from New Mexico read from the independent oil producers, the
director of the Minerals Management Service sent us over an
announcement that I am going to put on everyone's desk that says:
We understand that information is being provided to
Congressional Members indicating that the proposed Federal
oil valuation rule will put independent oil companies out of
business. This is untrue. The rule will have no impact on
independents who sell on the open market.
And it goes on that only 5 percent of the companies will be impacted.
The reason I interrupted my friend was to see if the Senator had seen
this, because I think this is the key part of the debate. We know that
the companies that are impacted in fact have billions of dollars of
revenue. I just wanted to make sure that Senator Durbin from Illinois
had seen this, and we will be putting it on everyone's desk.
Mr. DURBIN. I am happy that the Senator from California brought up
the point, and I have this in my possession. I do not believe we can
allow these major oil companies to hide behind the skirts of these
independent oil producers who are struggling to survive.
A letter from Secretary Babbitt that was sent to USA Today on this
subject says that his data tells an entirely different story.
Business is booming in the Gulf of Mexico. The industry
recently paid more than $1.3 for new deep water leases in the
gulf. Published reports claim there are more jobs available
than workers to fill them.
This is hardly an industry on its knees. And we are talking here
about those who will come on our land, the taxpayers' land, the Federal
land, draw oil from our land to make a profit, who are unwilling to pay
a fair share of that profit back to the taxpayers of this country.
Right outside of this Chamber in the corridor is the bust of a man
who I consider to be a real inspiration in public life, Theodore
Roosevelt. I would like to hear Theodore Roosevelt in this debate. If
you take a look at this bust here, if you have a chance to see it, it
looks like he is about to charge right off the pedestal; that is the
kind of man he was. And then when you read the sign below it, it says
they picked the more common, thoughtful pose; there was one that was
more aggressive. I can imagine Theodore Roosevelt in this Chamber
talking about the public lands and the exploitation of these lands by
special interest groups and big corporations at the expense of the
taxpayers of this country.
I might say to my friend from New Mexico, I believe that that
Senator, if he were one, would have been on your side of the aisle
making our argument, and thank goodness he was there to set the tone in
this century for the profit relationship between corporations and the
public good. Thank goodness the Senator from California has the courage
to stand up here and take on the oil giants when it comes to this
issue.
This is simple and straightforward. Will the taxpayers receive a fair
amount from those who would come on our land to drill oil from the
taxpayers' resources and whether or not this is going to pass.
I say to my colleague from California and those who support her that
she has taken on an important issue, one that is critically important
not just for the money for those who would receive it but one
principle: If this position that is being espoused by the other side is
so right and so good, why did we not have a hearing? Why did this not
come before us with witnesses so that all could hear both sides of the
stories, that the oil companies' executives who are making these
billions of dollars could sit there in the chairs before the cameras
and the microphones and explain it?
They could not face the music. They could not take that kind of
scrutiny, and neither can this program. Let the Department of the
Interior go forward on behalf of the taxpayers. Let them make sure that
we receive a fair amount for those who would take profits from
America's lands.
I yield back the remainder of my time. I yield the time back to the
Senator from California.
Mr. Domenici addressed the Chair.
The PRESIDING OFFICER. The distinguished Senator from New Mexico is
recognized.
Mr. DOMENICI. Mr. President, I yield to Senator Breaux from Louisiana
as much time as he desires.
Before I do that, I just want to make an observation. I just read a
most authentic history of Theodore Roosevelt, and my observation to the
Senator from Illinois is he wouldn't take this case so he wouldn't be
down here arguing on anything because he would look at the facts, and
he would say I don't want to be on the wrong side of the facts. He
wouldn't be down here anti-anything. He would leave the argument to
somebody else.
I yield to the Senator.
The PRESIDING OFFICER. The Senator from Louisiana is recognized.
Mr. BREAUX. Mr. President, it is interesting. During the time I have
been in the Senate and Congress, a lot of times when you don't have the
facts on your side you have to create an enemy and talk about the
enemy. I think this is exactly the case here. It is easy to find an
enemy in the oil and gas industry. The oil and gas industry are the
first people in the world to admit that they, on any kind of a
popularity chart, would probably be right at the bottom--or probably
right above the Members of Congress. The oil industry right in front of
us, and we would be at the bottom.
The point is, if you do not have the facts, you have to get somebody
to argue against, somebody who people don't generally like. And I
agree, people don't generally like oil and gas companies. So, let's
make them the big bogeyman in this and argue about how bad they are.
Fortunately, that is not the issue in this case. The issue in this case
is really very simple. The issue is, how do you determine the proper
value for oil that is discovered on Federal lands, and what is the
royalty that companies who explore and develop should pay the Federal
Government? It is very clear that companies do not determine how much
they have to pay--we do. We passed the OCS Lands Act in 1976 and
innumerable other Federal acts in Congress to determine what royalties
should be. Congress makes that decision and we have made it many times.
The question before the Interior Department in which they, I think,
made a mistake is how do you determine the value of the oil. We know
what the percentage is. Interestingly, companies made a proposal to the
Federal Government and said let us quit fighting over what the value of
the oil is; let us just give you the oil. If you are entitled to 15
percent of the oil, and we have 100 barrels, let us just give you 15
barrels
[[Page S10399]]
of oil and let you go sell it and you determine what the price is by
selling it in the marketplace.
The Federal Government said we don't want to do that. We think that
is too complicated--and it is complicated. The problem before this
Congress is what do we do, in trying to work with the Interior
Department, in helping to determine what is the proper value. How do we
find the proper value for oil?
Someone said we ought to have hearings on this. We did. We had a
hearing. We had two hearings. We had hearings in the Senate Energy
Committee. We had hearings in the House Resources Committee. Minerals
Management Service came and testified, members of the oil and gas
industry came and testified and talked about how they were trying to
work this problem out. I also hosted, along with Senator Hutchison from
Texas, Senators Domenici and Bingaman from New Mexico and Senator
Landrieu from my State and others, meetings between oil industry
representatives and Interior officials to try to get them to sit at the
same table and try to come to a resolution of the very complicated
technical problem of determining how do you find out what the proper
value of a barrel of oil.
The oil is brought to the surface in the middle of the Gulf of
Mexico. You can determine what the price is, if you look at what it is
at the wellhead. One problem in this proposed rule is that we look at
different prices and at a different time to determine the value. We
don't look at what its value is in the middle of the Gulf of Mexico,
but we look at it after it is brought onshore. How do you determine
what are the legitimate transportation deductions in reaching the
royalty value of crude oil? And, should companies have to pay all of
the costs to this point onshore. If it is the Government's oil,
shouldn't the Government pay the transportation cost of its share?
Therefore, one of the real conflicts is how do you determine a proper
transportation deduction?
Companies will argue that the entire pipeline system is part of the
cost of transporting oil. They say, ``If we do not have this elaborate
system out there, we cannot transport it to the place onshore where the
Government takes ownership, so that should be deductible.'' Minerals
Management says ``No, you should not deduct all of that; it should be
less.'' So this is a battle of what you should deduct and how you reach
a legitimate price. There is nothing mysterious about this. Nobody is
trying to rob anyone of anything.
Oil and gas companies have paid more in royalties to the Federal
Government than they have received in the price of oil they have taken
from the Federal lands in terms of taxes they have paid and royalties
that they have paid over the years since we have had an offshore oil
and gas industry--companies have paid more to the U.S. Treasury than
they have made in finding oil in the Gulf of Mexico. Eventually, in the
future, it will turn around. They will start making more money than
they have paid. That is why they are in the business. Up until this
point they have still paid more to the Federal Treasury in royalties
and taxes and benefits to the U.S. Government than they have made in
selling the oil that they have found.
We tried to have meetings with Minerals Management Service to resolve
this. This rider is not the best way to handle it. I would admit that.
But I think it is appropriate that when Congress sees something
happening that is not consistent with what is good policy and what is
the law, then Congress has an obligation to say ``hold it,'' ``stop,''
``slowdown,'' ``let's continue to try to work this out.'' That is
exactly what an appropriation rider has done. We have told Interior
Department, in the Interior appropriations bill, that this rule is
fundamentally flawed. It is not correct. It is not right. It does not
allow for the legitimate deductions in the costs of transportation that
should be allowed, and therefore don't go forward with a rule that is
fundamentally flawed. Give Congress and the Interior Department time to
come to an agreement on what is appropriate and proper.
That is the argument. That is the issue. We can talk about how bad
the oil companies are. That is a easy thing to say if you don't like
oil companies. I happen to like them. They employ hundreds of thousands
of people in my State and provide the energy for people to drive to
work in the morning. It is part of our national economic security and
part of the national defense in our country. They do an important
service for this country of ours. So the issue is not whether or not
you like oil companies. The issue is very simple, Is this a good rule?
The answer is no. Should it be stopped? The answer is yes. Should this
amendment be tabled? The answer is also yes. I think when this
amendment is tabled it will allow the administration and the Department
to continue to work with those who are interested in trying to resolve
this and come to a resolution that makes sense. Companies will continue
to pay.
It is interesting, when they had the hearings over in the House, when
the administration testified concerning this argument about how much we
are losing in lost revenue. The Director of the Minerals Management
Service, when she testified at the House Resources Committee on
February 26, 1998, said that these regulations ``are intended to
simplify the royalty payments, make valuation methods reflective of
modern market conditions, offer the industry more flexibility, reduce
administrative costs, and maintain revenue neutrality.''
When MMS proposed the rule, as flawed as it was, it wasn't to
increase the amount of money they would get. At least that is what they
said. It is simply to ``maintain revenue neutrality.'' Now the argument
is we are losing millions of dollars every month. The whole purpose of
the rule was to make the way we determine the value of the oil simpler
and reflect modern market conditions. It doesn't do that. Therefore we
should say stop, slowdown, let's continue to negotiate to come up with
something that makes sense.
That is what the bill before the Senate does. It should not be
changed, and the amendment should be tabled.
I yield back the time to the distinguished Senator from New Mexico.
Mr. WELLSTONE addressed the Chair.
The PRESIDING OFFICER. The Senator from Minnesota. Who yields time?
Mr. WELLSTONE. Mr. President, Senator Boxer stepped out. She yielded
me 15 minutes.
The PRESIDING OFFICER. Without objection, the Senator is recognized
for 15 minutes.
Mr. DOMENICI. Mr. President, I ask the Senator, may I ask a
parliamentary question, please?
Mr. WELLSTONE. Yes.
Mr. DOMENICI. Mr. President, how much time has been used by each
side?
The PRESIDING OFFICER. The Senator from California, Senator Boxer,
has 55 minutes. The Senator from New Mexico has 74 minutes.
Mr. DOMENICI. I thank the Senator.
The PRESIDING OFFICER. The Senator from Minnesota.
Mr. WELLSTONE. Mr. President, the Boxer amendment would simply let
the Interior Department do its job, which is making sure that oil
companies pay full royalties for the oil they are drilling on Federal
or Indian lands. That is what this amendment does.
Right now, some of these companies are not paying the money that they
owe, and several are being sued for it. Amazingly, there is a rider in
this bill, the same rider put in during the conference committee on
this spring s supplemental appropriations bill, that stops Interior
from doing its job. That is what this is about. This rider stops
Interior from issuing rules to collect these royalties. No wonder
Senator Boxer has sounded the alarm.
As a Senator from Minnesota, I am glad that we have Senators who are
willing to stand up to oil companies. There are not that many Senators
who will do so. The Senator from California has the courage to do so.
This kind of sweetheart deal--and that is exactly what it is--is
simply outrageous. It is corporate welfare of the worst kind. And even
worse, in many cases this money is being taken away from our children's
schools. In 24 States, the State's share of the royalties is used to
fund public education, so when the oil companies underpay their
royalties, education is the loser.
In addition, the Federal share of these royalties goes to the Land
and Water Conservation Fund and the National Historic Preservation
Fund.
If the Boxer amendment is adopted, the money will go where it should
be
[[Page S10400]]
going--to public education, the environment, historic preservation, and
to Native American communities--instead of corporate bank accounts.
Mr. President, this is an unbelievable story. The Interior
Department's Mineral Management Service--MMS--simply wants to collect
the money these companies owe the public. Interior Secretary Babbitt
says:
Many of the industry's largest companies are underpaying
royalties.
Just recently, Mobil Oil agreed to a $56.5 million settlement of
Federal and State lawsuits alleging underpayment of royalties. That is
what has been going on. And there has been a flurry of such
settlements: $2.5 billion in Alaska, $350 million in California, $17.5
million in Texas, $10 million in Louisiana, and $8 million in New
Mexico. MMS has now billed 12 of these companies $260 million for
overdue royalties. Now the Justice Department has joined a lawsuit
under the False Claims Act alleging fraud. According to Justice,
several of these oil companies have been deliberately underpaying their
royalties.
Remember, this oil belongs to the public and to Native American
tribes. We are leasing the mineral rights to them, but only under one
condition. We are saying, ``Go ahead, take the oil; all we ask is a
12.5 percent cut on the fair market value.'' I don't think that is too
much to ask. Nor do the people of this country think it is too much to
ask. But apparently the oil companies do.
Let me be clear about one thing. This has already come up in the
debate. Senator Durbin spoke to it, and Senator Boxer spoke to it as
well. We are not talking about all the oil companies. We are not
talking about mom-and-pop independents. We are talking about the large
integrated companies who sell to affiliates at undervalued prices. They
make up only 5 percent of all the oil companies drilling on Federal
land, but they account for 68 percent of all Federal production.
For over 2 years, the Interior Department has been developing
regulations to put a stop to this highway robbery. This is not new
authority. Interior already has statutory authority to collect
royalties on the ``fair market value'' of this oil, but the new
regulations would keep oil companies from manipulating ``fair market
value'' to underpay their royalties. The oil companies don't like that.
Here is the question I ask colleagues: Do these companies, do these
huge integrated oil companies, really deserve our sympathy? I don't
think so. They have been caught--let me repeat that--they have been
caught underpaying their royalties.
Since when do we have such tremendous sympathy in the U.S. Senate for
people who are cheating the public? It is interesting to me. We pass
crime bills all the time. Now we have the Juvenile Justice Act--a
crackdown on children. Very little sympathy there. Put children in
adult corrections facilities; very little sympathy for these children.
We passed a welfare bill. We don't really know what is happening. We
know women have been taken off the welfare rolls. We know the children
have been taken off the rolls. But we don't know what kind of jobs they
have, what kind of wages. We don't know whether there is good child
care for those children. Very little sympathy for these families
either.
We tried to bring an amendment to the floor to increase the minimum
wage so that working people can make a decent living. There is very
little sympathy on the floor of the Senate for any of these folks.
But in through the door walks a CEO from one of these oil companies--
large integrated oil companies that have been underpaying their
royalties, oil companies who happen to be heavy campaign contributors--
and all of a sudden we have sympathy to spare. We have sympathy coming
out the wazoo. We feel their pain. All of a sudden it is, ``At your
service, sir. What can we do for you, sir? How can we serve you
better?''
These companies have been caught red-handed. The cops are after them.
Law enforcement is closing in. They are in deep trouble, and they are
desperate for someone to come to their rescue, and fast.
So who do they call? They call their friends. They call the U.S.
Congress. And guess what. Congress answers the call without a moment's
hesitation. With a rider in this bill, Congress comes to the rescue and
rewards them with a ``get out of jail free'' card.
The Boxer amendment would revoke this sweetheart deal that lets oil
companies keep ripping off the public, lets them keep shortchanging
education, even after they have been caught cheating. If there ever was
a time to be tough on crime, this is it. In fact, I say this is a time
for zero tolerance. The rider in this bill sends law enforcement on
paid holiday. The Boxer amendment puts the cops back on the beat.
I say to my colleagues, we have to ask ourselves a question: What is
our purpose here? Are we elected to fight for people or for the oil
companies? Were we elected to fight for good government or for
corporate welfare? Are we going to do what the public wants us to do,
or are we going to do what the oil companies want us to do?
I urge my colleagues to join in a broad coalition that opposes this
$66 million corporate welfare giveaway. That is what this amendment
speaks to. That is what this debate is all about, and all of us will be
held accountable.
Mr. President, how much time do I have left?
The PRESIDING OFFICER. The Senator has 7 minutes left.
Mr. WELLSTONE. With the indulgence of my colleagues, I ask for a
couple of minutes. I have been trying to give a speech for 3 days on
what is happening in Burma. It will take me about 4 minutes. I ask
unanimous consent that I have 4 minutes as in morning business.
Mr. DOMENICI. At this moment?
Mr. WELLSTONE. I am not taking near the 15 minutes.
Mr. DOMENICI. And you are not going to take the rest of the 15
minutes?
Mr. WELLSTONE. No. I thought my colleague wanted to hear me repeat
the statement.
The PRESIDING OFFICER. If there is no objection, the Senator is
recognized for 4 minutes.
Mr. WELLSTONE. I think this is a statement with which every single
Senator will agree.
____________________