[Congressional Record Volume 144, Number 123 (Wednesday, September 16, 1998)]
[Senate]
[Pages S10401-S10415]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
DEPARTMENT OF THE INTERIOR AND RELATED AGENCIES APPROPRIATIONS ACT,
1999
The Senate continued with the consideration of the bill.
Mr. MURKOWSKI addressed the Chair.
Amendment No. 3594
The PRESIDING OFFICER. Who yields time to the Senator from Alaska?
Mr. DOMENICI. Mr. President, I would like to ask Senator Boxer--we
have been going back and forth. Senator Murkowski just wants to speak
for 3 minutes, and I wonder if we could then have Senator Thomas speak
for up to 10 minutes.
Mrs. BOXER. Absolutely.
Mr. DOMENICI. Then we would go to your side.
Mrs. BOXER. Fine.
Mr. DOMENICI. I yield to the two Senators in that order.
Mr. MURKOWSKI addressed the Chair.
The PRESIDING OFFICER. The Senator from Alaska.
Mr. MURKOWSKI. I rise as chairman of the Committee on Energy and
Natural Resources. I would like to advise my colleagues that we had an
oversight hearing in June on the MMS oil valuation issue. The results
of that hearing indicated that we should initiate a dialogue with the
principals. That dialogue was entered into. I felt gratified that we
were making progress relative to this complex issue and was chagrined
to find at a later date that the advances we thought we were making
simply had been overturned by the policymakers of the Department of the
Interior and the administration.
As a consequence, this conversation about corporate welfare, big oil,
and big business is incorrect because we are talking about small
companies in many cases. The oil and gas industry has lost a quarter of
a million jobs. This is an industry that now finds itself moving
overseas where there is a favorable climate for exploration and
production.
As evidence of that, Mr. President, in 1973 and 1974, we were 37-
percent dependent on imported oil; today, we are 52-percent dependent.
The Department of Energy suggests we are going to be 66-percent
dependent in the year 2004 or 2005.
The amendment offered by Senator Domenici and Senator Hutchison
during committee markup would delay the implementation of the final
rules on Federal oil valuation until October 1999, or until a
negotiated rule can be achieved.
The oil and gas industry is struggling in a declining market. This is
an industry where we have lost a quarter of a million jobs. We are
talking about implementation of regulations that would drive this
industry out of the United States and make us more dependent on
imported oil. It is unconscionable. The taxes paid by this industry and
mortgage payments made by industry employees in their communities are
contributions being overlooked in this general climate of ``well, throw
it out--because somehow big business is cheating,'' if you will. And
that is simply unconscionable, Mr. President.
As Senator Domenici and Senator Hutchison indicated, they personally
met twice with Interior Department officials and industry executives to
resolve what amounts to a handful of issues concerning the rulemaking.
It is rather interesting, because if you look at the MMS proposal, it
attempts to set the oil royalty away from the lease; that is,
downstream, almost near the burner, not as required by law, and set it
on the value added by the companies
[[Page S10402]]
through their extraordinary efforts to market the product. And by
denying the companies an allowance for reasonable marketing costs, MMS
unnecessarily and artificially raises the price of oil on which the
royalty is based. That is what they are doing here.
So, Mr. President, do not be misled by these generalities that
somehow this is corporate welfare. This is an effort to help an
industry be competitive. The policy of the Department of the Interior
to mandate royalty valuation, through rulemaking, would be detrimental
and not resolve the issue, and would leave many unanswered questions
relative to the industry's ability to be internationally competitive.
It is beyond me, Mr. President.
I thought when the Interior officials met, they were going to meet in
good faith. It appears that Interior did little more than pay
lipservice to that effort. The rule is just as unfair now as it was
when discussions of it took place. Only now, Interior is trying to put
its spin on the issue by saying, ``We gave the industry its meeting. We
addressed their concerns. Why do we need to have any further delay?''
Mr. President, it appears the Interior Department is going to
continue to base its oil royalty on market factors away from the lease.
Any attempts to strip the Domenici amendment away should be opposed.
And there are three specific reasons. Then I will conclude.
First, contrary to what Interior claims, the amendment was scored by
CBO as having zero effect on the current baseline. Interior's claim
that it will save $65 million a year is simply puffery and nothing
more.
Second, with world oil prices depressed, we do not need to add what
amounts to a new tax on this industry, particularly the independents,
the small oil companies. Do not talk to me about big business.
Third, delaying oil valuation rules is nothing new. Congress did it
in 1987. Delay will allow better public policy to be formulated.
So I urge my colleagues to join in opposing the removal of the oil
valuation amendment from the Interior appropriations bill.
I yield the floor to Senator Thomas.
Mr. THOMAS addressed the Chair.
The PRESIDING OFFICER. The Senator from Wyoming is recognized.
Mr. THOMAS. Thank you, Mr. President.
I rise in strong opposition to the Boxer amendment. Contrary to what
we have heard over there about withdrawal and cheating and all these
things, there are some real issues here, issues that many of us,
particularly those of us who live in public land States, have been
working on for a very long time.
That is the question--how do you have regulations that extract one-
eighth of the value of Federal oil into the Federal Treasury? Nobody
objects to that. That is the law. Nobody argues with that. There are
some real issues here.
For instance, what is the value in Chugwater, WY, as compared to
Oklahoma City? What is the value when you are close to a collection
point as opposed to having to carry the oil for a very long time? Where
do you apply the value? Do you have to pay for the transportation to
where it is going in order to have one-eighth of it? There are some
real issues here, and we have not been able to come together with the
bureaucracy to have a satisfactory solution. And that is why this
amendment is there--to have a moratorium on time so that this can,
indeed, be resolved.
I have been involved in some of these meetings here in which we have
tried to find a solution. I, by the way, have not seen any of my
friends from the other side of the aisle there participating in trying
to find a solution. All they do is come up and complain. I am, frankly,
a little offended at the idea that seems to be promoted that somehow if
you are not for this it is because you may have gotten a contribution
from an oil company. I am offended by that.
People believe in what they are doing here. They believe it is
important to their communities and to their States. They believe there
ought to be jobs. They believe we ought to have a domestic oil
industry. These are beliefs. I do not hear anyone saying they are where
they are because the environmentalists are having TV ads to support
their candidacy. I suppose you could say that. I do not think that is a
great idea.
What we have is some real confusion. Let me give you a little
example. We had an independent who was brought back before the agency
because they did what someone in the agency told them to do. They did
what the employee told them to do. And the director of MMS says,
``Well, you can't go by that because that might not be what the
Assistant Secretary meant to happen.'' Give me a break. You mean a
citizen who goes to an employee of an agency cannot rely on the
information they get there because it might not be consistent with what
someone said who is Assistant Secretary? That is the kind of thing we
are dealing with here and the kind of thing we need to get resolved.
We have met with MMS on a number of occasions. I must tell you, I
have been working with this since I was in the House 4 years ago, where
I suggested, and would suggest again, that the States do the actual
collection of the mineral royalty and share it with the Feds. We are
duplicating it now.
MMS is one of the most inefficient agencies we have in this
Government in terms of their cost. It is not clear what it is that they
are doing. It is clear that it is not a workable situation. When you
take the NYMEX and apply it to a place in Oklahoma City, and out in
Wyoming, that is not a workable way to determine what the market value
is. We need to do something about that.
Mr. President, I do not think we ought to be fooled by arguments of
the proponents that they are not getting a fair share of the royalties.
This amendment is not about reasonable valuation, collection. This
amendment is not about schoolchildren. This amendment is quite simply
one that wants to attack the oil industry by those who are critical of
business, those who think that this is some kind of an environmental
question. And it is not.
It is important that the MMS rule be understood, that it does not
only impact large petroleum producers. If that were the case, why would
the independents be involved? Why would the independents be interested
in bringing some kind of court action? It is because they are very much
impacted.
We have also heard over the last several days that the Governors are
not for this. I just bring to the attention of my colleagues a letter
by the Governor of Wyoming.
. . . I strongly object to Senator Barbara Boxer's
amendment to the Department of Interior's Appropriations
Bill. . . . The amendment would allow the Department to
implement new and untested federal royalty crude oil pricing
regulations.
And it goes on, in opposition to that.
Minerals Management has proposed rules that are complicated, that are
unworkable, that result in hardship to the producer, result in a loss
of jobs, a loss to the economy of our State of Wyoming, and I think a
security issue to this country when we have 55, nearly 60 percent of
our oil imported. We have an opportunity here.
Simply put, this valuation rule is a job killer. We ought not to go
forward without having some time to make it work.
I think the current language in the appropriations bill is fair and
reasonable. Instead of taking reckless actions and getting up in broad
generalities and talking about the evils of business, we ought to craft
some rules that work. We can, in fact, do this.
Again, I urge my friends in the Senate to vote against the Boxer
amendment and continue to resolve the question in a way that is
workable and a way that really deals with some regulations that will
cause us to be able to collect these royalties, as we are all willing
to do.
I yield the floor.
The PRESIDING OFFICER. The Senator from California is recognized.
Mrs. BOXER. Mr. President, as we agreed before, I will speak 5
minutes now and then I will yield 20 minutes to Senator Dorgan.
There were many misstatements made here, but I will start from the
top. The Senator from Wyoming said that he didn't see me or any Members
on this side at some closed-door meetings that were held between oil
companies, the Department of Interior, and Members of the Senate.
A, I was never invited to even one of those meetings. B, had I been
invited, I wouldn't have gone, because I don't
[[Page S10403]]
think it is right for Senators to meet with regulators and companies
that are being regulated by those regulators. A, I wasn't invited; and
B, I wouldn't have gone, and I would have expressed my opinion as to
why I declined the invitation.
There were comments made by the Senator saying those of us who oppose
the rider in this bill are antibusiness. I want to make something
clear: 95 percent of the oil companies are doing right by the American
people. They are paying their fair share of royalties. I applaud that.
As a matter of fact, Atlantic Richfield has stepped away from the big
oil companies and said, ``You know what? We will be a good corporate
citizen. We are going to pay the right royalty based on the market
price.''
So, please, let no one say that this Senator is antibusiness when I
support 95 percent of the oil companies in this particular matter.
I also want to point out that we have a letter addressed to Senator
Bingaman, which I ask unanimous consent to have printed in the Record,
from a number of commissioners of public land, including New Mexico,
Texas, Arkansas, South Dakota, Montana, North Dakota, Colorado, and
Robert Hight from California, who support the Boxer amendment, as well
as a letter to Senator Gorton.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
The Western States
Land Commissions Association,
September 4, 1998.
Hon. Jeff Bingaman,
U.S. Senator, Hart Senate Office Building,
Washington, DC.
Dear Senator Bingaman: We, the undersigned Lands
Commissioners who are members of the Western States Lands
Commissions Association, urge your support for Senator
Barbara Boxer's amendment to the Department of Interior's
Appropriations Bill, S. 2237, to allow the Department of
Interior to implement new federal royalty crude oil pricing
regulations. The Department's proposed regulations would
ensure that oil companies would pay no more and no less than
fair market value for federal royalty oil. S. 2237 currently
includes a provision which continues the ban on implementing
the proposed regulations for the next fiscal year. This delay
is costing taxpayers $5 Million per month.
The state agencies that are members of the Western States
Land Commissioner's Association have a strong interest in
ensuring that oil companies pay the market value of federal
royalty oil. The member states of the Association share in
the revenues collected by the Department of Interior. The
failure of the oil companies to pay market value for federal
royalty crude reduces the revenues obtained by the federal
government and the states.
The Department's Mineral Management Service (MMS) has been
eminently fair in proposing its new regulations. MMS has held
numerous public and private meetings for over two and a half
years to allow the industry to comment and the industry has
filed over two thousand pages of comments. Based on industry
concerns, MMS has revised its proposed regulations a number
of times to take into account industry's suggestions and
criticisms. For example, MMS has revised its proposed
regulations to recognize regional differences, particularly
for the Rocky Mountain Area.
The proposed MMS regulations are very reasonable. If oil
companies sell royalty crude on arm's-length transactions,
they pay on the basis of the prices they receive. If they do
not sell the oil on arm's-length transactions, they pay on
the basis of prices at market centers, adjusted for location
and quality differences, which are universally recognized to
result from competition among innumerable buyers and sellers.
Oil companies presently use their posted prices to value
royalty oil. Posted prices are unilaterally set by individual
oil companies less than the market value of those crudes. In
contrast, the market prices proposed by MMS to value royalty
crude not sold by arm's-length transactions are set by
innumerable buyers and sellers and are publicly reported on a
daily basis.
MMS' proposed switch from posted prices to market prices is
not a radically new concept:
(1) The State of Alaska uses the spot price of Alaska North
Slope crude oil quoted for delivery in the Los Angeles Basin
as the basis for royalties;
(2) Arco, since the early 1990's, uses spot prices as the
basis of payments of royalties throughout the country;
(3) The recent State of Texas Chevron and State of Texas
Mobil settlements rely on the use of spot prices for royalty
valuation purposes.
Mobil recently settled for $45 million a case brought by
The United States Department of Justice that Mobil had
underpaid federal royalties throughout the United States.
The Department's comprehensive proposal is the logical
alternative to posted prices.
Industry's efforts to require the federal government to
take and sell its royalty oil-in-kind should be rejected.
MMS, numerous states and more recently the General Accounting
Office (GAO) have voiced legitimate objections to industry's
proposal. Mandatory sales of royalty-in-kind oil would not
work for the thousands of federal leases which produce low
volumes of crude and in remote locations. Moreover, the
federal government's lack of easy access to pipelines, and
the major oil companies' unwillingness to pay more than
posted prices for their crude oil, would also mean that the
mandatory in-kind sales would generate even less revenue than
are presently generated.
Thank you for your consideration.
Sincerely,
Ray Powell, Commissioner of Public Lands, New Mexico
State Land Office; Curt Johnson, Commissioner, South
Dakota Office of School and Public Lands; Jeff Hasener,
Administrator, Montana Department of Natural Resources
& Conservation; Robert C. Hight, Executive Officer,
California State Lands Commission; Garry Mauro,
Commissioner, Texas General Land Office; Charlie
Daniels, Commissioner, Arkansas Commissioner of State
Lands; Robert J. Olheiser, North Dakota Commissioner of
University and School Lands; John Brejcha, Deputy
Director, Colorado State Board of Land Commissioners.
____
Department of Natural Resources,
Olympic, WA, September 3, 1998.
Hon. Slade Gorton,
U.S. Senator, Hart Senate Office Building,
Washington, DC.
Dear Senator Gorton: I'm writing to urge your support for
Senator Barbara Boxer's amendment to the Department of the
Interior's Appropriations Bill, S. 2237, to allow the
Department of the Interior to implement new federal royalty
crude oil pricing regulations. The department's proposed
regulations would ensure that oil companies would pay no more
and no less than fair market value for federal royalty oil.
S. 2237 currently includes a provision that continues the ban
on implementing the proposed regulations for the next fiscal
year. This delay is costing taxpayers $5 million per month.
The members of the Western States Land Commissioners
Association, of which the State of Washington is a member,
have a strong interest in ensuring that oil companies pay the
market value of federal royalty oil. The association's member
states share in the revenues collected by the Department of
the Interior. The failure of oil companies to pay market
value for federal royalty crude reduces the revenues obtained
by the federal government and the states.
The Department of the Interior's Mineral Management Service
has been eminently fair in proposing its new regulations. The
service has held numerous public and private meetings for
over two and a half years to allow the industry to comment
and the industry has filed over two thousand pages of
comments. Based on industry concerns, the service revised its
proposed regulations a number of times to take into account
industry's suggestions and criticisms. For example, the
service revised its proposed regulations to recognize
regional differences, particularly for the Rocky Mountain
area.
The proposed Mineral Management Service regulations are
very reasonable. If oil companies sell royalty crude by means
of arm's-length transactions, they pay on the basis of the
prices they receive. If they do not sell the oil by arm's-
length transactions, they pay on the basis of prices at
market centers, adjusted for location and quality
differences, which are universally recognized to result from
competition among innumerable buyers and sellers.
Many companies presently use their posted prices to value
royalty oil. Posted prices are unilaterally set by individual
oil companies and are set at a level lower than the market
value of those crudes. In contrast, the market prices
proposed by the Mineral Management Service to value royalty
crude not sold by arm's-length transactions are set by
innumerable buyers and sellers and are publicly reported on a
daily basis.
The service's proposed switch from posted prices to market
prices is not a radically new concept:
(1) The State of Alaska uses the spot price of Alaska North
Slope crude oil quoted for delivery in the Los Angeles Basin
as the basis for royalties;
(2) ARCO, since the early 1990s, uses spot prices as the
basis of payments of royalties throughout the country; and
(3) The recent State of Texas/Chevron settlement relies on
the use of spot prices for royalty valuation purposes.
The Department of the Interior's comprehensive proposal is
the logical alternative to posted prices.
Industry's efforts to require the federal government to
take and sell its royalty oil-in-kind should be rejected. The
Mineral Management Service, numerous states, and, more
recently, the General Accounting Office, have voiced
legitimate objections to industry's proposal. Mandatory sales
of royalty-in-kind oil would not work for the thousands of
federal leases that produce low volumes of crude and in
remote locations. Moreover, the federal government's lack of
easy access to pipelines, and the major oil companies'
unwillingness to pay more than posted prices for their crude
oil, would also mean that the mandatory in-kind sales would
generate even less revenue than is presently
[[Page S10404]]
generated. In addition, it makes sense to evaluate the
results of the current Mineral Management Service
demonstration program before requiring an approach nationwide
to locations that are likely to lose money.
The bottom line for states is: These are assets that belong
to the beneficiaries of the states' trust lands and they
should be fairly compensated when those assets are sold.
Thank you for your consideration of my position on Senator
Boxer's amendment.
Sincerely,
Jennifer M. Belcher,
Commissioner of Public Lands.
Mrs. BOXER. Mr. President, I also will read into the Record the
groups that support the Boxer amendment: American Association of School
Administrators, American Bioenergy Association, Americans for Clean
Energy, American Wind Energy Association, Arkansas State Lands
Commission, California State Lands Commission, California State
Superintendent of Public Instruction, Colorado State Board of Land
Commissioners, Council of Chief State School Officers, Friends of the
Earth, Global Biorefineries, Inc., Montana Department of Natural
Resources and Conservation, National Association of State Boards of
Education, National Education Association, National Parent-Teachers
Association--the PTA--National School Boards Association, The Navajo
Nation, National Trust for Historic Preservation, New Mexico State
Lands Commissioner, Project on Government Oversight, Public Citizen,
Safe Energy Communication Council, South Dakota State Lands
Commissioner, SUN DAY Campaign, Taxpayers for Common Sense, Texas State
Lands Commissioner, U.S. Public Interest Research Group, The Wilderness
Society, and the Washington State Lands Commissioner.
Later, after Senator Dorgan has finished and colleagues on the other
side have had a chance to speak, I want to read what the States are
saying as to how they view this rule and how they support the fact that
there is a process going on to make sure that the largest of the oil
companies--5 percent--pay their fair share of royalty payments so that
the taxpayers get what is due them.
Those who are supporting the Boxer amendment are standing with the
taxpayers. That is very, very clear. I am very honored to have been
able to offer this amendment.
Again, I want to thank Senator Gorton for his indulgence in allowing
us to have adequate time to debate this amendment.
I yield up to 20 minutes to Senator Dorgan.
Mr. DOMENICI. Senator Boxer, I thought when I proposed that we go
next, that I had little statements, not 20-minute ones, and three of
them could go because they were short.
Mrs. BOXER. If Senator Dorgan would yield--I thought it was only two.
Mr. DOMENICI. I wanted Senator Burns to discuss his 5-minute
statement.
Mrs. BOXER. I ask unanimous consent, when Senator Burns completes his
statement, Senator Dorgan get 20 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
The distinguished Senator from Montana is recognized.
Mr. BURNS. I thank my friend from New Mexico. I will not be long, I
say to my friend and neighbor from North Dakota.
I want to put some things in perspective. Yes, the lands belong to
the United States of America and are held in trust for the citizens of
this country. But the citizens of this country and the taxpayers in
this country do not participate in the expense of drilling the well.
There is no argument on the eighth that is the royalty that goes to the
surface owner. After all, the oil companies did buy the leases. They
paid hard money for those leases. If there is a resource--in this case,
oil--under the ground, they go and find it.
That is not to say that every well they put in the ground is
successful. We have more dry wells than we have wells producing. The
American people did not make any investment in drilling that so-called
dry hole, and they didn't even participate in footing the bill; the
expense of putting the well down is a producer's.
There is no argument with the eighth. I can simplify this very
easily. ``In kind'' would be right. If you want to participate in the
value added to compute your royalty, as the chairman of the Energy
Committee said is being attempted by MMS, then MMS should participate
in the transportation and the cost of the value added. That is only
fair.
Now, if that is not fair, then I suggest that the Interior Department
go out to the well site, take their truck, and every eight buckets of
oil that come out of the ground, they get the eighth one, put it in
their truck, and do with it whatever they want to do with it--go on
open markets, like the independents or even the big companies do. It
doesn't make any difference. That is their eighth. They have been paid.
The market goes up, the market goes down; the risk is the same for the
surface owner as it is for the one who is bringing it up. That is very
simple. No argument with the eighth.
What we are saying is: Fair is fair. If you want to collect the
royalty on the value-added product, then there has to be expense
incurred by those who want to participate in that part of the process
of getting oil to gasoline and the energy that we need in this country.
Senator Domenici brought up the point a while ago that people are
paying more for their bottled water in the grocery store than they are
for their gasoline. There is another aspect of this--and I think
Senator Dorgan from North Dakota will agree with this--in this economy
today, nobody who produces a raw product is making any money. Our
farmers understand that. I will give my old ``F-U'' line here, old
farmers union line they call it: Go and price Wheaties at the grocery
store at $3.75 a pound and the farmer can't even get $1.75 for a 60-
pound bushel of wheat.
Something is out of whack here. So we are not arguing about the
eighth. We are arguing where do you take the eighth and what our
investment or our part of the expense should be. You can't let
everybody else pay all the expenses and you just participate in the
harvest of those dollars. It is a very, very simple thing. There is
nothing difficult about understanding that. But I think that is what we
ought to do. Yes, we are worried about children in schools. I sure am.
I am worrying about the children of those folks who work awfully hard
in the oil patch to feed their families, participate in their
communities, and take care of the obligations they have as citizens of
the United States of America.
Mr. President, I yield the floor.
Mr. DORGAN addressed the Chair.
The PRESIDING OFFICER. The Senator from North Dakota is recognized.
Mr. DORGAN. Mr. President, this is an interesting debate.
Mr. DOMENICI. Mr. President, if the Senator will yield briefly, I ask
unanimous consent that the next speaker on our side be Senator Nickles
and he be allowed 10 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from North Dakota is recognized.
Mr. DORGAN. Mr. President, this is an interesting debate that likely
will get very little attention, given the proclivity of the press to
cover other things going on in our country these days.
I rise today to support the amendment offered by Senator Boxer. There
is a charming quote from Abraham Lincoln that came during his debates
with Douglas. At one point, very exasperated because he simply could
not get Douglas to understand a point he was making, Lincoln turned to
Douglas and said, ``Tell me, how many legs does a cow have?'' Douglas
said, ``Four, of course.'' Lincoln said, ``Now, assume that the tail
were a leg; how many legs would the cow have?'' Douglas said, ``Five.''
Lincoln said, ``You see, that's where you are wrong. Just calling it a
leg doesn't make it a leg at all.''
As I heard members discuss this amendment on the floor of the Senate,
saying this amendment affects independent oil companies, I thought it
was easy to say, but it was totally removed from the facts. This bill
has no impact on independent oil companies. It does not have an impact
on independent oil companies. It has nothing to do with the fact that
commodity prices are collapsing which is true on the farm and true for
energy companies. It has nothing to do with that either. In fact, the
lower the price for oil, the less royalty fee would be required to be
paid by the oil industry. So that is not what this issue is about.
A lot of folks want to confuse the issue. It is not about that. It is
not
[[Page S10405]]
about independent oil companies who are not affected, and not about the
price of oil. When the price of oil goes down, royalty fees go down.
Let me describe what it is about. It is very simple. The companies
who drill for oil on Federal lands pay a 12-percent royalty to the
American people for the privilege of doing that on the oil that they
bring up out of those lands and sell. They are required, because they
are drilling on lands that are owned by the American people, to pay a
royalty fee. That is fair. I suppose some think they ought to drill and
keep all the money. But it is fair.
Over many years, we have decided that if they are going to get
something the public has, they will pay a fee. That is the 12-percent
royalty fee. A fair portion of that fee that goes to the States is used
for education. That is an important part of the revenue base of our
States. A large part, no, but an important part. How much do we get
from these royalties? When someone wants to produce oil on public
lands, how much do we get from the royalties of 12 percent? Well, it is
12 percent of the price of the oil. What is the price of the oil with
respect to the independent oil companies that produce it and sell it?
That sale price is the price of the oil. They are then required to pay
a royalty fee on the price of the oil. So an arm's length transaction
between a willing buyer and a willing seller establishes the market
price for oil. That is not a problem. That is not a matter of
contention.
But what about a company that is a large integrated company that
produces oil and then, as a producer, sells it to itself as a
wholesaler or a retailer and it produces the oil and prices it and
sells it to itself? What about that company? What then is the price of
the oil, and how much in royalty payments do the American people get
from that transaction? The answer is, the price of that oil in a large
integrated oil company is whatever the company says the price of the
oil is.
What if they say, gee, well, the price of our oil is $4 a barrel, and
you get 12 percent of that? Are we being cheated if, in fact, oil is
selling for $12 a barrel and they say, ``Ours is only worth $4 because
we are selling it to ourselves, and we have artificially priced it
because we want to avoid paying your fees, avoid paying our fair share
to the American people?''
Are we being cheated? Of course we are being cheated. The question
is, Who cares about that in here? Does anybody care? Does anybody care
if the American people get taken to the cleaners by somebody that wants
to underprice something they sell to themselves and, as a result, pay
the American people something less than they were supposed to pay? Does
anybody care about that? A few of us do. We will have a vote on it to
see who cares.
So what is the royalty fee we get? It is 12 percent times the value
of the oil. Who establishes the value of the oil? In most cases--95
percent of the cases, with all of the independents and some others--it
is the fair market value, a willing buyer and a willing seller in an
open market transaction, which establishes a price upon which a 12-
percent royalty payment is made.
This amendment isn't even a close call, by any standard. I want to
use this example to talk about two other things that relate exactly to
this, which give me as much concern as this does. In fact, this is not
a very large issue. It is an issue of $66 million a year; $66 million
is a lot of money, but in the construct of a trillion dollars, or a
trillion and a half--the $1.6 trillion budget that we have, and the
$135 billion of revenue here and there--I mean, it is not that big an
issue. Yet, they are waging a fight; the major integrated oil companies
are waging a fight, and you would think you were taking away their last
oil truck.
Let me tell you about an exact replica of this debate. We lost it on
the floor of the Senate. We have the exact same issue on taxation--
corporations, especially foreign corporations, but domestic as well,
that sell to themselves and then tell us at what price they sell the
product to themselves, a wholly owned subsidiary, and therefore how
much profit they made and how much income tax they will pay to the
Federal Government. And 65 percent of the foreign corporations doing
business in this country, most of whose names you will recognize, do
tens of billions of dollars of business in America and pay zero in
income tax--not a penny. Zero. How do they do that? Let me give you one
example. A company sells a piano to its affiliated subsidiary and
prices it at $50. Would you like to buy a piano for $50? It is exactly
the same thing we are talking about with pricing oil you sell
yourself--undervalue it and pay a tax, or in this case, a royalty,
based on evaluation that is artificially low so you can avoid paying
the royalty, or as in the case I described, avoid paying the income
tax.
How about a tractor tire? I don't know if anybody in here buys and
sells tractor tires. Probably not, but $7.60 is the price of a tractor
tire in a transaction between a corporation--a foreign corporation--and
its wholly owned subsidiary in the U.S. Why $7.60? The company
artificially prices it low so that it doesn't pay income taxes in the
U.S. We voted on that. We voted on something that corrects that
problem. We have people in this Chamber, sufficient numbers, who have
said, ``We don't want to correct that. We don't even want to debate
whether it is cheating. We don't want to deal with it because big
business doesn't want that to be changed.''
We don't intend to change it. It is the same principle here. Big,
integrated oil companies sell to themselves, underprice what they are
selling to themselves, and, therefore, cheat the American people out of
royalty payments that they ought to be making. Then members come to the
floor of the Senate and say to us, ``Gee, you are being unfair.'' We
are not being unfair. We are required to stand up for the interests of
the American people. They own that land. They own that land on which
drilling takes place. They are owed the 12-percent royalty based on a
fair computation of the price of that oil.
I will tell you one more story. I served in State office before I
came here. In our State, we assess a tax on railroads. It is exactly
the same principle we are talking about here today. We assess a tax on
railroads. When I assumed office as Tax Commissioner, which was an
elective office, and assumed responsibility for that tax, I asked one
of the folks who were responsible for that tax--which is an ad valorem
property tax on the railroad system--``How do you do that?'' He said,
``Sit down and I will show you.'' He said, ``Because the railroads
aren't bought and sold, you look at all of the stocks and all of the
debt. Assuming you bought all of their stock and debt, that is the
value of the railroad.'' I said, ``Tell me a little more about that.''
He said, ``Here is the stock. I sell you this railroad. Here is the
stock.'' I said, ``Gee, what price are you using, par value?'' ``Par
value,'' he said.
Remember, we have been doing that for 25 years. The railroads
indicated to us that that is the value. Using the par value, of course,
is absolutely ridiculous. Par value has nothing to do with the value of
the railroad stock. But the industry had convinced the people in our
State who value railroads to use an artificially low, absurd value for
the railroad stock. They were fat and happy for dozens of years
underpaying their taxes. They loved it. The minute I decided to change
it, they said ``Holy cow. What are you doing to us? Why on Earth are
you being unfair to us?'' I said, ``I am not being unfair. I am asking
you to do what every other American does--pay your fair share of the
taxes.''
That is the principle and the issue on which we will be voting. The
principle and the issue here is not about ma and pa. It is not about
independents and not whether you support the oil industry. I do. I have
cast a lot of votes on behalf of the independents, and support the
majors as well, because I think they play an important contributing
role for this country in providing energy for our future. But in cases
like this where you have integrated companies who are undervaluing
their oil so they can underpay the royalty fee they owe to the people
of the United States, I say let's correct it.
Some of my colleagues say that underpayment is not happening.
Let's take a look at the rates. Alaska settled with the oil companies
for over $2.5 billion. Is that because somebody was making arithmetic
errors? I don't think so. California, $350 million; Texas, $17.1
million.
[[Page S10406]]
My point is that the States have been plodding their way through this
issue with respect to royalties owed to the States. Can we not have the
strength to stand up here and say to the integrated oil companies,
``You have a responsibility to be fair to the people of the United
States? We are not asking for more than you owe. Your oil prices have
declined. Therefore, you should pay the new price.'' We understand
that. ``We are not asking for more than you owe; not a penny more. We
are asking you on behalf of the people of this country to pay your fair
share.''
What is happening today--and in this bill that came to the floor of
the Senate--is an attempt to intercept a rule that will require these
folks to pay their fair share of royalties. And a bunch of folks here
in the Senate stand up and say, ``No, no, no. We want to protect the
old order.'' The old order is to let people sell oil to themselves, to
underprice it, undervalue it, and avoid paying the American people what
they owe them in royalty fees. That is what is wrong.
If we turned out the lights and voted on this, people in this Chamber
would express that view. I hope when we have a vote on this we will all
decide that there is a right and wrong answer. The right answer is to
just ask the integrated majors who sell oil to themselves to price it
fairly and abide by the new MMS rules. They have been studied and
worked on and they are fair. Do this the right way.
The Senator from California is not on the floor trying to attack an
industry. The Senator from California is not offering an amendment that
in any way affects the independent oil producers. Ninety-five percent
of the oil producers in this country will be unaffected by this
amendment, 95 percent of them. In fact, some of those who have been
unaffected have been convinced to send us letters saying that they are
going to be affected by it. I assume they have been convinced by their
bigger cousins, or bigger uncles. But the fact is, it is wrong. Calling
a tail a leg doesn't make it a leg at all, as Lincoln said. Saying this
affects independents doesn't make it affect independents. It does not.
It is a very simple, direct approach to say to the integrated oil
companies who sell oil to themselves that they have a responsibility to
price oil fairly so that the American people get what they deserve.
Mr. President, I yield the floor.
Several Senators addressed the Chair.
The PRESIDING OFFICER. The Senator from Oklahoma is recognized.
Mr. DOMENICI. Mr. President, will Senator Nickles yield for an
inquiry?
Mr. NICKLES. Certainly.
Mr. DOMENICI. Mr. President, I would like to state for anybody who
would like to speak in opposition to the Boxer amendment that we have a
few minutes left. I would like to ask unanimous consent that on our
side, when appropriate, that the following order for our speakers be
the order: Following Senator Nickles, who will speak for 10 minutes,
the Senator from Louisiana will speak for up to 5 minutes; then Senator
Hutchison for 25 minutes. That will leave some additional time for
additional Senators, or for me. We would like to do it in that order
pursuant to the rotation from one side to another.
I ask unanimous consent that be the order.
Mrs. BOXER. Mr. President, may I ask the Senator? That sounds fine to
me. In other words, all of your three speakers will include Senator
Hutchison, and we will finish up with our time. Is that what the
Senator is suggesting?
Mr. DOMENICI. I don't want to do that. I said that Senator Nickles
will go next. If you have somebody, they will be next. If you don't,
Senator Landrieu will go next, and back and forth. But our times are
now set for three Senators. As Republicans are recognized, they will
speak in that order.
Mrs. BOXER. That is fine.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DOMENICI. I thank the Chair.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. NICKLES. Mr. President, I want to compliment my colleague,
Senator Domenici, as well as Senator Hutchison, for their leadership on
this issue.
Mr. President, I want to correct what I hear from my colleagues, the
proponents of this amendment, and make a couple of statements that I
think are factual.
One, I think I heard somebody say on the other side--Senator Durbin--
that there were not any hearings. We had a hearing. I conducted the
hearing. I don't conduct hearings very often, but when this issue came
up, I knew a hearing was needed. Some people have demagogued this issue
and tried to use it for whatever purposes, political or otherwise. I
wanted to know the facts. I am chairman of the relevant subcommittee in
the Energy Committee so we scheduled a hearing. We had the hearing, I
believe, in June of this year.
There are just a couple of points that I would like to make. One, in
testimony before the House subcommittee, the director of MMS said the
purpose of the regulations were not to raise money. She said, that the
regulations are to be revenue neutral. I hear all of the list of the
groups who are supposedly proponents of the Boxer amendment--
schoolboards and so on--thinking they are going to get a lot more
money. The proposed regulations are supposed to be revenue neutral. It
is not supposed to raise any money. Proponents are saying, ``Oh well.
If we don't pass this amendment, the schoolboard is going to be out of
some money,'' and so on. That is false. It is not the case. It is
contrary to what the director of MMS has testified to.
I don't happen to agree with the director of MMS, or the Assistant
Secretary of the Interior in proposing this oil valuation regulation. I
think they have gone too far. I happen to like Mr. Armstrong. But I
don't think their regulation makes sense. That is one of the reasons we
had hearings.
One of the things we don't do enough of in the Senate and House is we
don't have oversight over our various agencies. A lot of times the
agencies propose rules and regulations, and sometimes those rules and
regulations don't make sense. They may be well intended, and they may
have stated goals of simplicity, clarity, and definability, but they
may do just exactly the opposite.
Unfortunately, the regulations that MMS has come up with--at least
according to the people who work in the industry--the regulations won't
clarify anything. They won't even raise the Government any money--maybe
not as much money as they are raising right now. What they will raise
is litigation. That doesn't help anybody. That doesn't help the
Government. That doesn't help the schoolboard. That doesn't help the
tribes. That doesn't help the States or anybody, except for maybe the
lawyers who are involved in the litigation.
Some of us have looked at this. This is one of the regulations that
we need to review. I mentioned that we had a hearing. Several of us
have had meetings with members of the administration, the Department of
the Interior, and MMS proponents of this regulation, and people who
work in the industry. We tried to pull them together.
Both Senators from Louisiana, both Senators from New Mexico, Senator
Hutchison from Texas, and myself have met with MMS and said, ``Can't we
figure this out? Can't we come up with workable, definable, clearly
understandable regulations on how to determine royalty evaluations?''
We have had interesting meetings. But, unfortunately, sometimes it
appears that MMS is not really listening to some of the complaints and
really hasn't made the necessary changes to the regulations to make
them workable.
I would take issue with some of my colleagues who said, ``Well, these
big oil companies, they are cheating, they are selling to an affiliate,
and they lowball the price, and they make more money, and the
Government is being cheated.''
I do not think that is the case. If it is the case, the government
has every right to take the company to court, and maybe they can win.
What we want to do is have clarity. We want to have definability. We
want people to pay exactly what they owe in royalties--not a dime more,
not a dime less. And that is our objective. It is easier said than
done. And the MMS came up with some proposed regulations. They said,
``Oh, well, we will put out some prices that are on the exchange, and
that will be what the royalty will be based on, on that given date.''
[[Page S10407]]
But wait a minute. What if there is an arm's length transaction where
somebody actually bought and sold? Maybe they didn't buy or sell at the
same price posted on the exchange. Market valuation on some exchanges
is based on some transactions, but you have some transactions below it
and some above it; you have some transactions that might be a little
higher because of a little different weight of oil or different grade
of oil or a transportation problem or a little different sulfur
content. There are lots of variables in the equation.
So to have some bureaucrat say, well, I am going to pick this market
index or this posted price somewhere and that will be the value of what
the Federal Government will be paid on instead of the actual value of
an arm's length transaction, that doesn't make sense. I will tell you,
in my own State we have several different prices on different types of
oil. We have Texas crude; we have Oklahoma sweet, Texas sweet; we have
Cushing prices; we have a lot of different prices, posted prices, and
so on.
So I just mention to my colleagues, I don't think the oil companies
are trying to cheat anybody. I think the proposed regulations are not
clear; they need to be clarified. We need to work with MMS to try to
come up with better regulations that are clear and work. They haven't
done it yet. And their proposal leaves a lot to be desired. Their
proposal would result in more litigation, and that is not going to help
any schoolboard in the country.
And so I think we have the responsibility in Congress as maybe the
countervailing branch of Government, the branch of Government that
listens to our constituents when we find a regulatory agency that is
not listening, that is not working, that is not promulgating
regulations that will work, to get their attention. We have an
obligation to make them work with us to come up with something that is
reasonable and sound. And if they continue to come up with regulations
that will not work, that do not make sense, then we should stop that.
This is called checks and balances. It is called balance of power. We
cannot allow regulatory agencies to run amok.
And so I think we have a constitutional responsibility to try to make
some progress in this area. If we find regulatory agencies that are not
doing what they are supposed to be doing, we should hold them in check.
That is what this provision, that the Senator from California is trying
to strike, strives to do. This provision doesn't say that MMS cannot go
further on their proposed regulations. It basically says let's put out
regulations that are reasonable and sound. And many of us have tried to
facilitate meetings to make that happen.
My colleagues on the other side said that this proposed rule exempts
95 percent of the companies. Independents are not covered. Independents
tell me they are covered. The regulations are written for all oil
producers; 100 percent of all oil producers are covered by these
regulations. Some of my colleagues have said: Oh, no; it just applies
to those companies who are selling to marketing affiliates. Guess what.
More and more companies today are selling into a company that maybe
they have a little piece of or something--a natural gas marketing
company, an oil marketing company, and so on. They are banding together
in these types of organizations. And so this regulation certainly
reaches, I would say--I don't know what percentage, but according to
the independent petroleum producers--I happen to think they would know
more about it than anybody else--it says 100 percent. The independent
producers say in a memo, ``Percentage of oil producers impacted by the
proposed oil royalty rule, 100 percent.'' I happen to think they know
what they are talking about.
And so again I compliment my colleagues, Senator Hutchison and
Senator Domenici, for including this provision in this bill. I think
they are right in doing so. I think MMS needs to work with Congress and
with the affected parties to make sure that every company pays exactly
what they owe--no more, no less.
If colleagues are interested in trying to raise money, they should
try to raise the royalty rate, and we can have a debate on that. That
is certainly within their rights. I don't think they will be
successful, but they have the right to try that. But to try to raise
the royalty rates by changing the regulations or trying to change the
regulations in a way so that they will raise money is a tax increase by
a regulatory agency, I reject that emphatically. Congress has the power
to raise taxes, not some unelected bureaucrat in the Minerals
Management Service.
To all the arguments that our colleagues from California and others
made, that this proposed regulation is going to raise so much money and
it is going to help schools, and so on--no; what we have to do is make
sure that every company pays exactly what they owe--no more, no less.
The current system is not correct. It needs to be improved. However,
the regulations proposed by the MMS do not fit the bill. They need to
be revised. We are trying to get their attention so they will revise
those rules in a workable, definable, understandable way that is clear,
so that everyone will know exactly what should be paid and will pay
that much and no more.
Mr. President, again I thank my colleagues for their efforts, and I
urge my colleagues to support our effort to defeat the amendment of our
colleague from California.
Mr. BUMPERS addressed the Chair.
The PRESIDING OFFICER (Mr. Hutchinson). The Senator from California.
Mrs. BOXER. I would like to yield 10 minutes to my colleague from
Arkansas, Senator Bumpers, but I want to just make a point on the
comments of Senator Nickles.
We have here a chart that shows how many meetings were held before
this rule was put into place. I want to make sure that colleagues
understand there were actually many, many months of proposals. That it
is a fact that the purpose of this rule is not to raise additional
revenue. But, if companies pay their fair share, the Mineral Management
Service has shown us, if they do in fact pay the royalty payment on the
market price rather than a made-up price when a company sells to its
own affiliate, taxpayers will receive $66 million in additional
revenue. That is why all these various schoolboards are for it and many
state land commissioners.
I wanted to point out, when the rule was beginning, there were very,
very favorable comments from Louisiana, Wyoming, New Mexico, Alaska,
and there is a reason for it. We see that these States have had to sue
in the past, I say to my friend from Oklahoma, for the fair share of
the royalty payments that they believed they were owed. And I think
that the States are saying to us: ``We don't want to go this route. We
don't want to be litigious. We don't want to be in court every day. We
want a fair rule.'' I know my friend from Oklahoma wants a fair rule.
The issue is, How do you go about it? Do you go about it by shutting
down the ability of the Interior Department to proceed on what many in
the States are saying is fair, even New Mexico? The Tax Revenue
Department said, ``The MMS should be commended for the effort they have
made in developing oil valuation regulations that are fair to all
interested parties.''
We can see that the oil companies settled for $2.5 billion in Alaska;
in New Mexico, $8 million; in California, $350 million; in Texas, $17.5
million. The fact is, oil companies are settling because they are not
in a strong position. When you pay a royalty payment based on a made-up
price and not a market price, you open yourself up to lawsuits.
I also wanted to point out that if you really look at the companies
that are affected by this--and we have put this in the Record--they
make in the billions of dollars, and these royalty payments are a tiny
percent. As a matter of fact, what we have learned is that one of the
companies, Shell Oil, which would see the greatest increase in their
royalty payment, that great ``increase'' is equal to 7-100ths of 1
percent of Shell Oil's revenue every year.
So, we are not talking about huge sums of money to these giant oil
companies. What we are really fighting about here is the principle, the
issue that they should pay their fair share. And even if $66 million
does not look like a lot of money to some of my colleagues, it is a lot
of money when it goes into various States and into classrooms.
I yield 10 minutes to Senator Bumpers at this time.
[[Page S10408]]
The PRESIDING OFFICER. The Senator from Arkansas is recognized.
Mr. BUMPERS. Mr. President, I thank the Senator from California for
yielding to me.
Mr. President, just to put this thing in perspective, I call on all
of my colleagues to recall the number of times they have appeared
before their local chamber of commerce and Rotary Clubs and told them
that, once they get to the U.S. Senate, or even the House of
Representatives, it is going to be a new day. They are going to protect
the people's rights. They are going to take care of their money. We
have pledged: ``I will treat your property and your money as though it
were my own.''
I have made that speech, and I daresay 99 other Senators have made it
as well. So I say, we have to ask ourselves, are we fulfilling our
commitment and our solemn vow to the people back home? Ask yourself
this question: If you had an oil well, and you discovered that your
lessee was selling your oil to an affiliate or a wholly-owned
subsidiary, and they were selling it at a price considerably less than
published spot prices of that oil--would that be acceptable to you as a
private landowner? Let's assume your lessee is selling your oil to an
affiliate for $12 a barrel, but the spot price of that oil is $14 a
barrel--if you were the royalty owner, wouldn't you question that?
Would you tolerate it?
I read a story in USA Today from which I quote:
States, native American tribes and landowners are suing for
the full, open-market price fees, and a few oil companies
have begun to cut settlement deals from Alabama to New
Mexico, rather than face trial. According to the Watchdog
Project on government oversight, there is more than $2
billion in uncollected Federal royalties at open-market
prices, and the total grows by $1 million every week.
When you vote against Senator Boxer's amendment, are you keeping
faith with the people back home who own this oil? It does not belong to
the U.S. Senate, it belongs to the taxpayers of America. When the
Secretary of the Interior signs a lease with Exxon, Mobil, or whoever,
the lessees agree to pay a royalty, usually 12.5 percent, on the oil
they take from the Federal land. However, having agreed to that, they
now are not paying that. While I appreciate that oil prices are
currently low, that does not provide justification to cheat the
taxpayers of America out of the fair royalty on their oil.
If this case did not have any merit, why did Mobil recently settle
with the U.S. Government for $45 million on this very issue? They have
essentially agreed to the very same thing Senator Boxer is saying they
owe. Why are Native Americans suing for royalties? Why are States
collecting big, big settlements with the oil companies? Precisely for
the very reason Senator Boxer brought this amendment up. All she is
saying is let's collect on the lease for what the oil brings, not for
some fictitious price created by selling to yourself, by selling to an
affiliate. If you are going to treat the taxpayers' money as though it
were your own, ask yourself what would you do? Why, you wouldn't
tolerate this for 10 seconds, would you, if you found out that the oil
company that had the lease on your land had been selling oil to a
wholly-owned affiliate at $2 under the spot price for which they could
have sold it?
This reminds me of a coal case. We found out that Ohio Power Company,
a utility company in Ohio, had been buying coal from one of its wholly
owned affiliates for 100 percent more than they could have bought it on
the open market. You talk about a cozy relationship. This was a
slightly different situation, but I am just telling you, these things
happen. So, if you vote against Senator Boxer's amendment, don't go
home and tell people how you are treating their property as if it was
your own, because you wouldn't tolerate it for a second.
Mr. President, the Minerals Management Service is the agency we
depend on to manage royalties on Federal lands leased for oil and gas.
We expect them to get the most for it they can get. Congress has set
the royalties on oil here. We say the Secretary of the Interior cannot
lease it for less than 12.5 percent, and then say to the Minerals
Management Service, ``But if you catch the oil companies pulling
shenanigans, don't do anything about it''? If Senator Boxer's amendment
fails, that is what we are saying.
So I regret that the price of oil is low, and the Senator from Texas
has made that point a number of times; oil prices are low. Most of you
know I have spent 9 years trying to make the Federal Government make
the hard rock mining companies pay royalty on the land we give them for
$2.50 an acre. I faced it. I am leaving here at the end of this year. I
don't know what will happen after that, but I can tell you one thing, I
tried for 9 years. I stood where I have been standing right now for 9
years and squealed like a pig under a gate, saying the same thing I am
saying now: You are cheating the American taxpayers.
You think about us giving away 3.2 million acres of land in this
country for the last 130 years for $2.50 an acre, land that had
billions and billions of dollars of minerals under it, and what did the
taxpayers get back? They got 557,000 abandoned mine sites that are
going to cost them $70 billion to reclaim. Royalties? Zip. Nothing. Not
a dime. I lose it every year, and the people who vote against me go
back to the Chamber of Commerce and say, ``Oh, I'll treat your property
just as though it were my own.'' If you believe that is the truth, you
ought to be in a mental institution. If that is your idea of treating
property the way you would treat it if it were your own, you need a
guardian. The situation here is essentially the same thing.
The other day when I tried to raise another issue, just an
environmental issue on how we are going to mine these hard rock
minerals, I lost. I got 40 votes. I knew I was going to lose. The same
people who voted against me will go back home and say they are
environmentalists, even though they do not want the Interior Department
to regulate how we mine and how we reclaim the land after we mine. I
just got killed on it, 58 to 40. As I say, I am leaving, so the other
side won. I know a couple of people here who I think will take it on,
and it will be in capable hands, but I forewarn you: ``It ain't an easy
battle.'' That is the most egregious case I have ever run across in my
life--billions in gold and palladium and silver taken off the land over
the years and taxpayers don't get a nickel for it. All they get is a
big environmental Superfund site.
Mr. President, in this case I will plead with my colleagues, the
States favor this. I understand Wyoming has kicked the traces over, but
the rest of them favor this amendment, and they are cutting deals with
the oil companies right now. Senator Hutchison said no, the United
States is not going to cut a deal; if the Indian tribes and the States
want to, that is their business, but oil prices are low, and we are
just not going to bother with it.
Gold prices are low, too, and I know that.
Mr. President, I will close by simply reminding my colleagues that I
have heard in the last 24 hours that one of the principal candidates
planning to run for President says he is reconsidering because he
doesn't know whether he wants to subject his family to what goes on up
here.
Mr. President, I ask unanimous consent for 2 additional minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BUMPERS. He says he doesn't want to subject his family to the
kind of things to which politicians are being subjected. There are two
sides to that story, and I understand that.
When I ran for Governor 28 years ago--I won the Democratic primary
almost 28 years ago today--I had a slogan: ``Let's get our State
together.'' We had been bickering and nothing was happening in the
State. I said, ``Let's get our State together,'' and when I was
Governor, I called people together, Republicans and Democrats, and we
worked well together. We had 4 great years, if you will pardon a self-
serving statement.
I always said politics is a noble profession. My father said it a
long time before Jack Kennedy did. He believed it. He served in the
legislature. He wanted his two sons to go into politics. How long has
it been since a parent has said they want their son or daughter to go
into politics?
In any event, he didn't say all politicians are noble, he said public
service is an honorable, noble profession. I have always believed that.
I think it
[[Page S10409]]
still is. I think what a tragedy it is that the country is in the
situation it is right now and the effect that has on people and their
willingness to serve and their wanting to serve as I did. I think about
us voting on things here where it is obvious to me--I don't want to
seem arrogant about this, but this is not even a debatable amendment
about what is fair and what is right. We all know what it is. So I
plead with you, do your duty. I yield the floor.
Mr. DOMENICI addressed the Chair.
The PRESIDING OFFICER. Under the previous order, the Senator from
Louisiana is recognized.
Ms. LANDRIEU. Thank you, Mr. President.
Mr. DOMENICI. I ask the Senator if she will yield for 2 minutes.
Ms. LANDRIEU. Yes, I yield.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Mr. President, I say to Senator Bumpers, in particular
I speak of the last 2 minutes of his statement. I commend him for what
he said and his concerns about the condition of our country, and in
particular--I use a different word--but the cynicism that is generating
by leaps and bounds about politicians and people in public life. We
can't have our democracy and have that continue indefinitely. It will
go right to the heart of it.
Having said that, I was going to say something a little bit more
jovial and just suggest that your eloquence is going to be greatly
missed, but the fact that you keep losing, could it mean that you
happen to be wrong? I yield the floor.
The PRESIDING OFFICER. The Senator from Louisiana.
Ms. LANDRIEU. Mr. President, I say to my wonderful colleague from
Arkansas before I get into the substance of my remarks, I have
tremendous respect for him for his tremendous fight over such a long
period of time on issues like this. Yesterday, we were together in our
arguments because we have very similar feelings, which I think is
shared by many in this body, about paying the taxpayer their fair share
when it comes to minerals. I say to Senator Bumpers, he is going to be
missed. I am going to pick up the fight, as I told him before, on hard
rock mining, but there are some big differences between what we talked
about on mining yesterday and what we are speaking about today.
One of those big differences is in hard rock mining there are no
royalties paid. It is a system that cries out for reform and change. In
this instance--and I know you say, ``Well, there is Landrieu; she's
from an oil and gas State. We knew she was going to say this.'' Trust
me, when this issue first came up, I didn't know what I was going to
say, for a number of reasons. Maybe I should say something about that
first.
Before you came here, you were a Governor, but I was a State
treasurer and I managed a billion dollars that came from the Outer
Continental Shelf. Because we are a poor State, because we haven't
managed our resources as well as we could have in the past, and because
of other issues--we didn't have computers in the classrooms--I managed
that money more carefully than I manage my own. It came from these
royalties, and I treasured every single penny, because with every dime,
we could then hire a new teacher or put a computer in a classroom or
buy software for kids. I am there with you on that 100 percent. We had
that billion dollars, and it is growing every day and we are happy for
it in Louisiana.
I believe as deeply as I can express that we want the taxpayers to
receive their absolute fair share to the penny because these dollars
can be put to good use, and I hope they will be put to better use,
because the other point I want to make is I am getting ready to
introduce--I hope with Senator Bumpers and others and Senator Hutchison
from Texas--a bill that will help redistribute these royalties that we
get and have been getting since 1955 to the tune of $120 billion, which
the Federal Government has received from these royalties; to
redistribute it in a better way; to invest it in our environment; to
invest it in the expansion of our national parks; to invest it for the
expansion of our urban parks; to prevent species from becoming
endangered, a real investment in our environment, a real payback in the
right and noble sense to the taxpayer.
I am 100 percent on the record for just royalties being paid, for
substantial royalties being paid when appropriate, so I don't want
there to be a question--and I so much respect the Senator for his
fight--but this issue is about really litigation and lawsuits and
unclear regulations. It is not necessarily an environmental or
antienvironmental issue, and it shouldn't be a drilling or a
nondrilling issue.
It is about whether we should adopt a rule that is either going to
stop the litigation, or we are going to adopt this new rule that isn't
going to stop the litigation. The rule that we have to consider for
which we are now asking for a suspension is not going to do anything,
as much respect as I have for Senator Boxer, in stopping the
litigation.
To put this in perspective, let me say to my colleagues that last
year, Minerals Management Service received $6 billion from royalties.
At issue here is $66 million, which is less than 1 percent of the
total. This isn't about oil companies not wanting to pay royalties. I
say to the distinguished Senator from California, they sent to the
Federal Treasury $6 billion last year, and the year before it was $4
billion, and since 1955 it has been $120 billion. They are not opposed
to sending their fair share, but because the regulations are
complicated, they are difficult--the oil industry is reorganizing
itself, driven by technology and the pressures--may I have 2 more
minutes?
Mr. DOMENICI. I yield 2 more minutes.
Ms. LANDRIEU. The oil industry is reorganizing itself in such a way
that all it is asking for, I say to the Senator from California and
others, is a fair rule that is clearly understood so that they can pay
their fair share, get out of the courtrooms, cut their cost of their
lawyers and accountants, pay the taxpayers their fair share, and get on
with their business.
It is in nobody's interest for this to continue in this way--not for
business, not for jobs, not for the taxpayer. That is what this
argument is about, with all due respect to everyone who has said, I
think, very tough things about oil companies wanting to cheat.
Most of the oil companies I know do not want to cheat. Most of the
oil companies are happy to pay their tab, they just would like a clear
signal about what tab it is that they owe. And they do not want to
spend their time in court.
I am afraid if we let this rule go through, we are going to spend
more time in court, waste more taxpayer money and not move us 5 feet
down the ballfield on this subject. So that is why I am opposing
Senator Boxer's amendment and supporting to give us additional time to
work out some language so that everybody can pay their fair share, and
the taxpayers can benefit, and we can all get out of the courtrooms and
get on to running our businesses.
Thank you so much.
Mrs. BOXER addressed the Chair.
The PRESIDING OFFICER. The Senator from California.
Mrs. BOXER. I yield myself 3 minutes.
The PRESIDING OFFICER. The Senator is recognized.
Mrs. BOXER. Thank you very much.
I thank my dear colleague from Louisiana for giving us her
perspective from her State. And I greatly respect it. I want to pick up
on something she said. She said, ``It's in nobody's interest to
continue in this way.'' And what is ``this way''? This way is lawsuit
after lawsuit after lawsuit. And she is right, we should not continue
in this way.
We have seen Louisiana sue the oil companies and collect $10 million
because the oil companies are cheating on their royalty payments. They
settled. The oil companies would not have settled for these large sums
were they not cheating. Alaska settled for $2.5 billion; California
$350 million so far; New Mexico, $8 million so far; private royalty
interests $15 million so far; and Texas $17.5 million so far.
In other words, given the current status, without a change in the
rule, which Interior is trying to put into place, we will continue in
this way--lawsuit after lawsuit. And no one can say--I mean, you would
have to be born on another planet to say that oil companies would
settle for over $2.5 billion
[[Page S10410]]
if they had not been making a mistake on their royalty payments which
they send to the taxpayers of this great Nation.
I think the issue here is: Do we want to continue in this way, which
is what the rider does? It keeps us for another 12 months, for a total
delay of 15 months, in this way of litigation and lawsuit and
aggravation and all the rest.
What we are saying with our amendment is: It is time to change the
way we do things. And my friends are saying, ``Oh, all we need to do is
meet and we'll fix it up,'' and so on. ``Everything will be fine. We
know we can resolve this. We can negotiate it.''
This rule started back in December of 1995. We are headed toward the
end of 1998. There were 14 pubic hearings, 5 solicitations for comment,
all sorts of things, to resolve this matter. The basic issue is this:
Companies that sell to their affiliates are paying a royalty on a made-
up price, a phantom price, rather than paying it on the fair market
price--which 95 percent of the oil companies are doing.
Just 5 percent of the oil companies are involved in this and will
have to pay a fair share. It is not the mom and pop folks. It is a list
here, a page and a half long, compared to 34 pages long of those
unaffected. Shell makes $29 billion a year in total revenue, Exxon $134
billion. We are talking about the biggest corporations who, in fact,
themselves are admitting by settling all these myriad of lawsuits, that
they have not paid their fair share to the States or to the Federal
Government.
The PRESIDING OFFICER. The Senator has used her 3 minutes.
Mrs. BOXER. I ask for 1 additional minute.
The PRESIDING OFFICER. The Senator is recognized.
Mrs. BOXER. Here is where we are. Here is the market price, the real
price. You know, this is a capitalistic system. I am stunned by my
friends on the other side of the aisle. I used to be a stockbroker, so
I know what supply and demand means. A market price is supply and
demand. It is the fair price. When the market price goes down, the
royalty payment goes down. When the market price goes up, the royalty
payment goes up.
But they are not paying on the market price, these 5 percent of the
companies who own their affiliates and sell to their affiliates. They
make up the price and they pay a royalty on that price. How would you
like to be able to do that in your life? It is a pretty sweet deal; and
it is wrong. I think that the various States are saying, thank you very
much to the Minerals Management Service for moving forward. All of them
here are saying: We commend you. ``The Minerals Management Service must
be complimented,'' said Wyoming's Governor in 1997. Louisiana said it,
Alaska said it.
I withhold for the remainder of the debate.
The PRESIDING OFFICER. Under the previous order, the Senator from
Texas is recognized for 25 minutes.
Mr. DOMENICI addressed the Chair.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. DOMENICI. Will the Senator from Texas permit me to use a minute
off our time?
Mrs. HUTCHISON. Of course.
Mr. DOMENICI. Not off your time; off the bill.
Mr. President, let me just say, immediately after Senator Landrieu
spoke, I wanted to get up, but I did not timely, so Senator Boxer
spoke. But I commend her. I think she made a very brief statement
today, but I think it was right on point. For those who are looking for
a succinct wrap-up of what this issue is about, that 5 minutes is a
very good summary.
The issue is whether the new set of rules is going to solve the
problem of litigation and of making things clear and reasonable and
easy to understand, or is it going to invite more litigation? And I
think the industry, small and large, come down on the side that it is
too complex, leaves too much to the subjectivity of the Mineral
Management Service, and has a number of rules that are so arbitrary and
onerous that this is not going to help us out of the mess we are in. I
am saying it my way; I think Senator Landrieu said it her way. But
before we are finished, we will talk about that some more.
I yield the floor.
The PRESIDING OFFICER. The Senator from Texas is recognized.
Mrs. HUTCHISON. Mr. President, I want to answer some of the arguments
that have been made earlier in the debate. First, it keeps being said
that the oil companies are not paying their fair share, that they are
in lawsuits about it, and that they have been settling the lawsuits and
therefore they must be guilty. All of this is totally separate from the
amendment before us today.
There is a disagreement between the oil companies and several States
about how the valuations under the present regulation have been made. I
want the oil companies to pay their fair share. So does the Senator
from California, so does the Senator from New Mexico, so does the
Senator from Louisiana. These matters are in court, and they will be
settled in court. They have nothing to do with the amendment before us
today. In fact, as the Senator from New Mexico and the Senator from
Louisiana have said, the oil royalty valuation process is very
complicated.
The new MMS proposal is very complicated. In fact, I would make the
case that we do not change anything in the process as far as making it
clear what is owed. It is just a matter of the Mineral Management
Service raising the rates on oil companies at a time when oil prices
are at an all-time low. That is the issue.
A second argument has been made that this only affects big oil
companies. I would just say that I have received a memo from the
Independent Producers Association of America that represents the small
independent oil producers. And what they say is: ``Percentage of oil
producers impacted by proposed oil royalty rule--100 percent.'' Because
everyone who is in this industry knows that whatever is the standard
for royalties on public lands is also the standard throughout the
industry.
So to say that we are only talking about 5 percent of the large oil
companies in America is absolutely untrue. We are talking about small
producers, independent producers, and we are talking about marginal
producers. Those are the ones that are drilling 15 barrels or less a
day. They are operating at very low margins. With the oil prices at 11-
and 12-year lows, they are not even making a profit in many instances.
So we are affecting oil jobs in our country.
Now, it was said by the Senator from Illinois that the amendment
delaying the rule was put on an emergency supplemental appropriations
bill. That is true. It was put on an emergency supplemental
appropriations bill and passed by both Houses of Congress and signed by
the President. The reason it was put on is because the Bureau of
Mineral Management Services announced they were going to finalize a
rule without going through the congressional process that they had been
told they must do. There was no alternative but to immediately stop
that. Otherwise, they were going to implement a rule without reporting
to the appropriate congressional committees.
Of course, Congress exercised its prerogative to say no, that is not
what we told you to do. After all, we do make the laws and the policies
of this country. Raising taxes is the prerogative of Congress for a
very good reason--because we are accountable to the people. If we are
going to set the policies of this country, we must consider many
things. We must consider jobs, we must consider crises, we must
consider security, how much of our oil needs to be imported, is there a
security issue in our country. The reason that elected representatives
make policy is because we are accountable. We look at other factors
such as how much of our oil we are importing, how many jobs are going
to be affected, and what is the overall situation in the economy of our
country.
I want to talk about the first part of a policy decision that
Congress considers, and that is jobs. Oil prices are at a 12-year low
in this country. I refer to a chart for the jobs at risk in our country
if we now raise the cost of drilling on oil companies. Let's take some
examples: In California, 115,000 jobs are at stake; in Missouri, 31,000
jobs are at stake; in Montana, over 9,000; New Hampshire, over 3,000;
New Jersey, almost 30,000; Nevada, over 7,000; Ohio, 54,000;
Pennsylvania, 48,000; Texas, 253,000; Virginia, almost 30,000.
Now, those are the jobs at stake.
Let me just read to Members recent articles that talk about the job
layoffs
[[Page S10411]]
that are occurring right now because, of course, the industry is on its
knees.
August 28, 1998:
J. Ray McDermott, a builder of offshore petroleum
platforms, has laid off 41 employees in Houston [Texas],
cutting about 10 percent of that office's staffing.
[McDermott] left open the possibility that more layoffs
could result if the oil market remains in a slump.
August 29, 1998, Halliburton lays off 100:
The state of the oil industry is being blamed for the
layoffs of about 100 employees at Halliburton Energy Services
[in Oklahoma.]
August 12, 1998:
Schlumberger laid off several hundred people in the second
quarter and plans further cuts, as falling oil prices lower
demand for its services and products.
Schlumberger's news comes as a number of oil-field-service
companies have been cutting staff in recent months. The
industry is struggling with some of the lowest crude oil
prices in 12 years.
Oil and Gas Journal, August 3, 1998:
Triton Energy Ltd., Dallas, laid off 65 employees from its
Dallas office as a part of a corporate restructuring and
cost-reduction plan. The move cuts Triton's Dallas staff by
more than one third.
August 18, 1998:
Low prices particularly hurt small producers who rely on
marginal, or stripper, wells producing less than 10 barrels
of oil a day. Some 74 percent of New Mexico's 24,000 wells
are considered marginal.
Some small producers have cut back or eliminated new
drilling projects. . . .
Others have shut-in wells--stopping pumping, a solution
intended to be temporary but which often results in permanent
loss of production.
Tom Dugan of Dugan Production Corp. in Farmington [New
Mexico], said, ``Essentially our income has been cut in half
within the last six or seven months.''
Dick Frank, the state Department of Labor's area director
in Lea County [New Mexico], said the unemployment rate in the
oil rich county has been climbing, reaching 6.7 percent in
June.
Oil and Gas Journal, July 20, 1998:
An independent Petroleum Association of Mountain States
survey has found that the plunge in oil prices is forcing
marginal well shut-ins in the U.S. Rocky mountains. Twenty
producers have shut in more than 200 marginal wells. . . .
Big U.S. Independent Union Pacific Resources said it will slash its
rig count from 49 to 18 for the balance of the year, further depressing
an already shaking North America land rig market.
Oryx Energy battened down the hatches, July 28, saying it will cut
its 1,000-worker payroll costs 20 percent, or $14 million a year, and
sell another 35 million of properties in response to continued weak oil
prices.
I think it is very important that we look at the impact on people, on
their families, their lives, on States that are not going to have sales
tax revenue if people don't have jobs in States that will have to start
paying unemployment compensation because people don't have jobs.
Yesterday, in the debate on the mining bill, Senator Harry Reid from
Nevada said, ``These are the best blue-collar workers in America,'' and
he was talking about gold prices being the lowest in years. I can make
the same arguments today. The Senate voted for keeping the mining
industry intact yesterday. As Senator Bumpers said, he lost his
argument.
The same arguments apply today. We have oil prices at their lowest in
11 years and we have the best blue-collar jobs in America. In fact, oil
and gas jobs are among the highest paid in our economy. In Montana, for
example, the average oil and gas jobs pay $32,380 compared to $20,500,
which is the average of jobs in Montana. Every oil industry job creates
an average of 2.3 service-related jobs.
This is a very important issue for jobs in our country. As you can
see, almost every State is affected. It not only creates jobs in the
industry, but over two jobs in the service industry are related to oil
production in our country. What could be bad about that? Yet, we are
talking about raising fees and taxes on the companies that are on their
knees, with low prices, that are laying people off as we speak. It
doesn't make sense.
The other side has said, ``We are losing $5.5 million a month.'' In
fact, I thought Senator Landrieu made a very important point. We are
talking about $6 billion in revenue to the Federal and State
Governments, and they want to tear it down, saying they are going to
add $5 million a month. You would jeopardize a steady stream of revenue
from an industry that is on its knees, that is shutting down wells as
we speak, to try to gain $5.5 million a month. Even if you thought you
were going to get $5.5 million a month, you would have to assure that
the companies are going to stay in business.
If they go under, you are not going to get $5.5 million a month; you
could lose $5.5 million a month, and those are jobs that we now have in
place. Why would we jeopardize those and risk losing revenue, when you
hope they will stay in business and gain revenue? That is not a very
good hope when the industry is on its knees.
Let's talk about the policy of raising taxes. In fact, we have shown,
both in Congress and in 13 States, that lowering the taxes on the oil
and gas industry have actually increased revenues. In fact, the
Congress passed the Offshore Drilling Deep Water Royalty Relief Act in
1995. They gave tax relief, they gave tax breaks, lowered taxes, to
companies that would go out and do the expensive drilling in the water,
especially the Gulf of Mexico. For doing this, the Government has
received $3.1 billion in bids on those leases in the gulf. This has
created over 3,500 direct jobs to manage the increased activity. In
fact, it has created $3 billion in revenue. So we have shown that when
we lower revenue, we increase the amount that comes into the Federal
Government.
When we lower taxes, we increase revenue. This has been duplicated in
my State of Texas, where they have given tax relief to drill the
marginal wells which are less than 15 barrels a day in Texas. Or if
someone goes in and unplugs a plugged well, they will get a tax break.
Here is what that has done in Texas: 6,000 wells were returned to
production; $1.65 billion came into the Texas economy; 10,000 direct
and indirect jobs were created every year; and $22 million more went
into the Texas treasury--$22 million by giving a tax break. Thirteen
States have inactive well recovery programs that are doing the same
thing.
Yet, the amendment before us today would go in exactly the opposite
direction. It would increase the amount that the oil companies would
have to pay, putting many of these small producers in jeopardy because
that will be the industry standard, creating a loss of jobs and, I
submit, a loss in revenue.
I have a chart that shows the economic effect of the abandonment of
marginal wells just in 1997. The lost revenue to California was $45
million; Kansas, $24 million; Louisiana, $8 million; New Mexico, $19
million; Oklahoma, $29 million; Texas, $97 million. These are lost
revenues because marginal wells went under. They had to plug the wells.
This doesn't even address the lost jobs or the lost sales tax revenue
to these States.
So I think we have the evidence that raising taxes is going to cost
revenue to the Federal Government, not raise revenue to the Federal
Government, because so many of the wells in this country are marginal;
they produce under 15 barrels a day. So if they go under, these States
are not going to get more money for their schoolchildren, they are
going to get less. That is what the amendment before us would do.
Let's talk about another policy issue that Congress must address when
we increase taxes on an industry. We import over 50 percent of the oil
that we need in this country--the oil we need to drive our cars to
work, the oil we need to operate our plants, the oil we need to produce
fuel for every home in America. Fifty percent is imported. This is a
national security issue. It is an economic issue.
Does anybody remember what it was like when we had the severe oil
shortage several years ago and people had lined up for 5 hours to get
gas for their cars? They could not fill them up; they were limited.
They were limited in the amount or the number of gallons they could put
in because we had an oil shortage.
This country cannot depend on imports if we are going to have control
of our own economy. How could we be talking about shutting down wells
and causing our dependency to become greater? It does not make sense.
It would be highly irresponsible of this Senate to do something that
would jeopardize every person driving a car in this country, every
plant that operates, and every home that depends on
[[Page S10412]]
oil or gas for its energy. We should not be even considering something
so irresponsible.
I have letters of support from many organizations. I ask unanimous
consent that they be printed in the Record.
There being no objection, the letters were ordered to be printed in
the Record, as follows:
Citizens Against Government Waste,
Washington, DC, September 10, 1998.
Hon. ------ ------,
U.S. Senate
Washington, DC.
Dear Senator: On behalf of the 600,000 members of Council
for Citizens Against Government Waste, we respectfully ask
you to oppose any efforts in the Senate to strike the
provision in the Interior Appropriations Bill that delays the
implementation of a final crude oil valuation rule, unless a
resolution between MMS and industry can be reached. The
Minerals Management Service (MMS) proposed new oil valuation
rules that would eventually raise taxes on producers. The
rulemaking effort has involved several revisions to the
original proposal, but remains ambiguous, unworkable, and
would create even greater uncertainty and unnecessary
litigation.
Passage of this provision in the Interior Appropriations
Bill will provide the time necessary for the MMS and the
industry to reach a fair and workable agreement on the rule,
benefiting both sides. The taxpayers have a vested interest
in this issue, because the rule proposed by the MMS would
lead to an unnecessary administrative burden for both the
government and the private industry as auditors, accountants,
and lawyers attempt to resolve innumerable disputes over the
correct amounts due.
Please take this opportunity to prevent the current
proposed rule, which benefits no one, from being implemented.
We urge you to oppose any amendment to strike the provision
for delay of final valuation rule in the Interior
Appropriations Bill as it reaches the floor for debate in the
full Senate this week.
It is my hope that you give this suggestion serious
consideration. If I can be of further assistance, please do
not hesitate to contact me.
Regards,
Council Nedd II,
Director, Government Affairs and Grassroots.
____
Citizens for a Sound Economy,
Washington, DC, September 11, 1998.
Dear Senator: I write on behalf of the 250,000 members of
Citizens for a Sound Economy regarding the Boxer amendment to
S. 2337, the Interior Appropriations bill. This amendment
allows the Executive branch to operate unchecked in its
efforts to legislate through regulation.
Our members have long opposed the reckless regulating that
is consuming some federal agencies. Historically, the cost of
this type regulation is passed on to the consumer in the form
of higher prices for commodities. Specifically, the Boxer
amendment circumvents the authority of Congress to ensure
that agencies of the federal government operate within the
bounds of the law, and it will have the ultimate effect of
increase the cost of oil and gas for every American. The
appropriators have attempted to support sensible
environmental policy through the appropriations process. The
Boxer amendment will reverse their sensible policies.
As the Senate considers S. 2337, I ask you to consider the
effect the Boxer amendment will have on consumers and their
wallets and vote to defeat the Boxer amendment.
Sincerely,
Matt Kibbe,
Executive Vice President.
____
National Black
Chamber of Commerce,
Washington, DC, June 10, 1998.
Re Oil Royalties.
Hon. Kay Bailey Hutchison,
U.S. Senate,
Washington, DC.
Dear Senator Hutchison: The membership of the NBCC wants to
applaud you for your courageous stand taken against the
Minerals Management Services attempt to totally control the
method (or madness) of collecting oil royalties. Your
leadership is certainly pro-business and ensures us of a
continued prosperous economy.
The cost of fuel is extremely influential in most levels of
our economy and our competitiveness in the global market. Any
approach in how we assess royalties is very critical to each
and every one of us. Congress should certainly be involved as
they truly represent the people, not bureaucrats.
Thank you for your strong position and consider us your
ally on this issue.
Sincerely,
Harry C. Alford,
President and CEO.
____
People for the USA,
Pueblo, CO, September 4, 1998.
Hon.------ ------,
U.S. Senate,
Washington, DC.
Dear Senator: We understand that when the full Senate
debates the Interior Appropriations bill next week, there may
be an effort to remove the provision which prevents the
Minerals Management Service (MMS) from issuing a new ruling
on oil royalty valuations until Oct. 1, 1999. On behalf of
the 25,000 members of our grassroots People for the USA
campaign, I am respectfully asking you to resist any such
efforts to remove this provision.
We feel very strongly that this provision will be critical
to helping devise a royalty collection system that is truly
fair to the federal government and the oil industry. The
provision requires the MMS to take the time to develop a more
workable rule and not undermine Congress by changing yet
another law through bureaucratic regulation.
The new rule proposed by MMS is far too complex and could
lead to the loss of hundreds of thousands of jobs in the
energy industry, where so many of our members are employed.
Please oppose any amendment that would strip this provision
out of the Interior Appropriations bill. Our members and
their communities are counting on you.
Respectfully yours,
Jeffrey P. Harris,
Executive Director.
Mrs. HUTCHISON. First is Citizens Against Government Waste. In part,
they write:
On behalf of the 600,000 members of the Council for
Citizens Against Government Waste, we respectfully ask you to
oppose any efforts in the Senate to strike the provision in
the Interior Appropriations Bill that delays the
implementation of a final crude oil valuation rule, unless a
resolution between MMS and industry can be reached. The
Minerals Management Service proposed new oil valuation rules
that would eventually raise taxes on producers.
They go on to say:
Passage of this provision in the Interior Appropriations
Bill will provide the time necessary for MMS and the industry
to reach a fair and workable agreement on the rule,
benefiting both sides.
Here is a letter from the Citizens for a Sound Economy:
I write on behalf of the 250,000 members of Citizens for a
Sound Economy regarding the Boxer amendment to the Interior
Appropriations bill. . . . Historically, the cost of this
type regulation is passed on to the consumer in the form of
higher prices for commodities.
Of course, it makes sense that if we are going to raise the rates
that producers have to pay, it is going to raise the price of every
gallon of gas that you buy at the pump.
Specifically, the Boxer amendment circumvents the authority
of Congress to ensure that agencies of the Federal Government
operate within the bounds of the law, and it will have the
ultimate effect of increasing the cost of oil and gas for
every American.
This is in a letter from the National Black Chamber of Commerce:
The cost of fuel is extremely influential in most levels of
our economy and our competitiveness in the global market. Any
approach in how we assess royalties is very critical to each
and every one of us. Congress should certainly be involved as
they truly represent the people, not bureaucrats.
This is from the People for the USA:
The new rule proposed by MMS is far too complex and could
lead to the loss of hundreds of thousands of jobs in the
energy industry, where so many of our members are employed. .
. .
On behalf of the 25,000 members of our grassroots People
for the USA campaign, I am respectfully asking you to resist
any such efforts to remove this provision.
Mr. President, we are talking about tax policy in this country. If
you vote for the amendment before us today, we are saying that the
Mineral Management Service can walk away from Congress and the
congressional intent and congressional mandate that they report to us
about any kind of fees or increases.
If they do this--and if we allow them to do this--we will shut down
marginal wells throughout our country, which we have already seen
happening because of the low prices. Thousands of people will be out of
jobs. We will lose revenue in our States and our Federal Government,
hurting the schoolchildren of our States when they are not able to have
that income stream that is now steady--$6 billion worth of steady
income stream--which will become shaky from marginal producers because
they cannot make ends meet. They are laying off people every day
because of the low price of oil.
This is not the time to raise prices. We should not let unelected
bureaucrats do it, and we should not jeopardize the energy independence
of our country by allowing a bureaucracy to raise taxes when that is
the prerogative of Congress.
Thank you. Mr. President, I thank Senator Domenici for his
leadership, along with the bipartisan group that is trying to make sure
we keep jobs and energy independence and gasoline pumps filled
throughout our country.
[[Page S10413]]
Mr. DOMENICI addressed the Chair.
The PRESIDING OFFICER (Mr. Ashcroft). The Senator from New Mexico.
Mr. DOMENICI. Mr. President, parliamentary inquiry. How much time
does Senator Boxer have and how much time do I have?
The PRESIDING OFFICER. The time remaining for Senator Boxer is 7
minutes 15 seconds. The time remaining for the Senator from New Mexico
is 13 minutes 10 seconds.
Mr. DOMENICI. Thank you. Mr. President, I thank Senator Boxer for
agreeing to this unanimous consent. I very much appreciate it for some
personal reasons.
I ask unanimous consent that when all debate time is consumed, or
yielded, that the amendment be set aside until the hour of 5:50; and,
at that time, there be 10 minutes for debate for closing remarks prior
to the vote on the motion to table the Boxer amendment.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. DOMENICI. Mr. President, since I have considerably more time than
the distinguished Senator from California, I would like to make a few
remarks and then save a few minutes for Senator Gorton, the manager of
the bill.
Mr. President, fellow Senators, first of all, there has been a lot of
talk about lawsuits that are out there that have been going on for
years on end. Essentially, fellow Senators, the reason that a new set
of regulations and rules were supposed to be adopted was so we wouldn't
have all of that litigation; so that we have a more clear-cut
definition of what is market value for oil and gas, rather than leave
so much to subjectivity, to arguments and disputes.
Let me suggest, if that is the case, that I can almost promise the
U.S. Senate that if the rules that the Minerals Management Service is
proposing to adopt are adopted that they will all be back in court over
and over again, because they are unintelligible. They leave many
opportunities for the Minerals Management Service to second-guess. They
leave at times many opportunities to go back in an audit and even undo
the market value as determined by a company upon the advice of people
from the MMS.
Mr. President, when I was a Senator in the middle of the Iranian-
prompted crisis where we had lines--Senator Hutchison's statement was
that they even shot at each other in New York in one of those lines
early in the morning because somebody thought one car was moving ahead
of them. You might have been Governor, I say to the occupant of the
Chair, when that happened. You may remember that.
During that period of time, a gentleman in my State, who is currently
one of the most successful and marvelous businessmen in the retail
marketing of oil and gas products in my State, was down in a little
office where his business was beginning. He begged me to come and see
him. I went to see him. And a grown man was on the brink of falling
apart. Whenever he would talk, he would cry, because the then-U.S.
Government Energy Department had been told by Congress to enforce some
very vague rules about gouging.
Here comes auditors to that man's office. He can't give them enough.
They come back month after month, and his business is floundering. And
they want more information. They want to go back further in time. They
want him to bring in his customers and let them talk to the enforcing
agency about the various arrangements.
I pledged to him right then that, not knowing the facts, I would see
that he was treated fairly. He was. He succeeded in getting around
that, and is surviving, as I have just indicated, bountifully.
Mr. President, what we don't want to let happen is we don't want a
new set of regulations that permit a bureaucracy, however much we must
rely on them--the MMS--to go into American energy producers in the
manner that I have just described for my good friend down in Artesia,
NM.
I contend that is what is going to happen, because, pursuant to
congressional requests, some of us, Democrats and Republicans, sat down
at the table with the MMS and the industry. And it is absolutely a
cinch based upon the disagreements that occurred around that table and
the failure on the part of the MMS to consider what many of us thought
to be a very reasonable request; that if we let these get adopted, we
haven't seen anything yet with reference to tying up this money in
litigation and arguments. As a matter of fact, there is even a position
in these new rules where the MMS can actually contend that a company
would sell below market value to avoid the 12.5-percent royalty. Does
that make sense to anyone? When you sell below market and give
something away, you are giving away 12.5 percent to the Government, but
you are keeping 87.5 percent of your own money. Right? But there is
something in here to make sure they don't sell below market. There are
so many nuances. I am not sufficiently expert. Again, I think I know
when I see something that isn't going to work.
Let me conclude. Industry is not to blame for the current rule. The
MMS wrote it. All producers are affected by it--not 5 percent. Under
current law, MMS can collect the royalties that are fair market value.
Nothing is stopping them. Anybody thinking we are going to stop
collecting royalties is mistaken. We are going to keep on collecting
them under a set of rules that are very unreasonable and complicated.
But why substitute another set that we think is going to do equally as
bad and maybe move even more arbitrarily against the producers of
energy in this country? There is a concept within it that you are
guilty until proven innocent. There is, as I said before, a notion that
producers will sell cheaply to avoid a royalty. Why would anybody do
that? I just explained that to the Senate.
There is extensive opportunity for second-guessing. The scourge of
the regulated is to have regulators second-guess. That is the scourge.
You have one answer and you thought you were abiding by it. But they
second-guess it and you get audited. And there is another set of rules.
These rules are unworkable. One well, 10 different valuation
calculations for on-shore oil; one well, 8 different valuation
calculations for off-shore.
For whatever has been said here today about who we are working for in
opposing the Boxer amendment, actually what I believe is happening is
we are saying to a bureaucracy of the U.S. Government that we have had
a good view of how you make rules, we think you are doing it in an
unreasonable manner, and we would like you to do it better, so we are
not going to give you any money to enforce what you have proposed to
do.
Essentially, all the arguments have been made about how important gas
and oil production is for our Nation. We understand that. But this is
not an issue about anybody cheating. It is an issue about whether a new
set of rules is better than the old ones when we firmly believe they
are not.
I reserve the remainder of my time.
Mrs. BOXER. Mr. President, how much time do I have?
The PRESIDING OFFICER. The Senator from California is recognized for
7 minutes 15 seconds.
Mrs. BOXER. I would like to ask my friend if it is OK if when we come
back I close the debate with 5 minutes. Would that be all right with
the Senator from New Mexico?
Mr. DOMENICI. We each get 5 minutes.
Mrs. BOXER. Yes. I would like to close. I ask unanimous consent that
I get to close the debate.
Mr. DOMENICI. When we do our 5 minutes each.
Mrs. BOXER. Yes.
Mr. DOMENICI. Of course.
Mrs. BOXER. I thank the Senator so much. I just want to say to my
friends, Senator Domenici and Senator Gorton, again, how much I
appreciate their courtesies. This is a very important issue.
Mr. President, I ask if you would advise me when I have 2 minutes
remaining.
The PRESIDING OFFICER. The Chair will advise the Senator when she has
used all but 2 minutes of her time.
Mrs. BOXER. Mr. President, I have really enjoyed this debate. I was
saying to Senator Gorton I thought it was very important to have it
because when it was raised in committee, it was a truncated debate.
This has given us a chance to really show both sides.
I think another reason I have enjoyed the debate is because it goes
to the
[[Page S10414]]
heart and soul of why I want to be in the Senate; and that is to look
out for real people, the real people who make this country go, who get
up every day and go to work and save to get a car and hopefully save to
get a condominium or a home and to get the American dream.
I think there is another part of that American dream that sometimes
gets overlooked, and that is our heritage; that we have much more as
Americans than our personal possessions, important though they are. We
own the parks. We own the waters, the coastal waters. And others cannot
destroy those because they belong to us.
I think it is important for us to note that we are talking about the
most powerful oil companies--5 percent of oil companies, some of which
make in the many billions of dollars. And I pointed this out before.
For example, Exxon, in 1996, generated $134 billion in revenue from oil
and gas. And the vast majority of the oil companies impacted by this
rule are huge. The impact on Exxon, for example, would be one one-
hundredth of 1 percent of their revenue.
My friend from Texas says that is going to cause a disaster. Well,
the one good thing about royalty payments, as they are owed to the
hard-working Americans of this country, because it is, in fact, oil
drilled on their land which they own, that we all own as Americans, is
that the royalty payments go down with the price of oil. So it is very
fair. And here you see, again, the lease that is signed by the oil
companies wherein they promise to pay a fixed royalty which is a
percentage of the value of the production, and therefore when oil
prices are up, the American people get more. It is a rent that is
basically paid on a floating basis depending on the market price of
oil.
Now, my friend from New Mexico, for whom I have the greatest respect
and admiration, says it is very complicated to figure out what is the
market price of oil. And as I said before, I was a stockbroker in a
former life, and I know that oil prices are posted and listed every
day. I would place into the Record this publication, ``Platts Oil Price
Report.'' If you look at it, you will see every single day, every
single market. The market price listed here reflects the price of oil.
So when my colleague worries that the Interior Department is off on the
wrong track, I would say I agree with the New Mexico Tax Revenue
Department which said:
The MMS should be commended for the effort they have made
in developing oil valuation regulations that are fair to all
interested parties. They should also be commended for
recognizing an issue and following through with it to
resolution, in an environment where litigation abounds,
unfounded criticism is made public and political mechanisms
are used to mandate positions.
You cut through that and what they are saying is very clear, that the
MMS is, in fact, working hard to come up with a solution to this
problem.
Now, I showed before, I think, the most telling chart of all. Mr.
President, this is where we are. The oil companies sign a lease with
us, the American people, promising to pay rent, in essence, for
drilling on Federal lands. It is supposed to be based on market price,
and here you see with ARCO in the west Texas market, the market price
very clearly shown and the ARCO posted price, which is their, in
essence, made-up price.
The PRESIDING OFFICER. The Senator has 2 minutes remaining.
Mrs. BOXER. I thank you, Mr. President. I will take another 30
seconds and withhold. What we are going after is this difference. We
think the taxpayers deserve to have the fair royalty payment paid. That
is why I raise this issue.
I will reserve the remainder of my time to close this debate.
Mr. DOMENICI. I yield 3 minutes to Senator Gorton and the remaining
time to Senator Gramm of Texas.
The PRESIDING OFFICER. The Senator from Washington.
Mr. GORTON. I have been in the Chamber through most of this debate as
I am the manager of the bill under discussion now. I believe that I am
the only one, at least on this side of the issue, who has no immediate
constituent interest in the subject. But I do have certain observations
from listening to the debate on the part of others.
The Senator from Oklahoma, Mr. Nickles, mentioned at one point that
the Minerals Management Service had said that this was a revenue-
neutral proposal, although in fact it seems not to be that case. The
proponents of this amendment emphasize that there is a lot of money
involved here for schools and for parks and for other purposes.
It occurs to me that if this is a debate over revenues to the Federal
Government, we are in effect talking about a tax, a tax on certain
companies engaged in the oil business. And if we are speaking about a
tax, it seems to me we ought to be deciding that question here in the
Congress of the United States. Under our Constitution, taxes are not
levied by regulatory agencies of the Government. They are determined
and they are levied by the Congress.
If, in fact, this amendment will produce tens of millions of dollars
for various governmental purposes, then it is inevitable that someone
is going to pay for those purposes. One of two things is going to
happen, it seems to me. And one of my colleagues can correct me if I am
wrong. Either it will be reflected in the price of gasoline and other
petroleum products that every consumer in the United States pays and
will be in effect an increase in the gas tax, or if these companies can
simply import more and produce less domestically, it will simply drive
American producers out of business because their cost of business will
be increased.
But one of those two consequences seems to me to be inevitable.
Either this is going to be a tax on the American people by increasing
the cost of their gasoline, or it is going to increase our dependence
on foreign oil and drive American producers out of business. I think
that conclusion is absolutely inevitable. I think that is a policy
decision that should be made by the Congress of the United States and
not by an obscure Federal agency, and for that reason I oppose the
amendment.
Mr. DOMENICI. Mr. President, I send a letter to the desk and ask
unanimous consent it be printed in of the Record from the Revenue
Department of New Mexico indicating they support the oil moratorium.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
State of New Mexico,
Taxation and Revenue Department,
Santa Fe, NM, July 20, 1998.
Hon. Pete Domenici,
U.S. Senate,
Washington, DC.
Dear Senator Domenici: Thank you for giving me the
opportunity to comment on your appropriation rider placing a
moratorium on MMS oil valuation regulations. After careful
consideration, we have determined that the moratorium would
allow MMS and the industry more time to reach a consensus,
therefore we are in favor of the moratorium.
If I can be of further assistance, please contact me.
Sincerely,
John J. Chavez,
Secretary.
The PRESIDING OFFICER. The Senator from Texas is recognized.
Mr. GRAMM. I congratulate my colleagues, especially my dear colleague
from New Mexico and my fellow Senator from Texas, for doing an
outstanding job. I think anybody who has listened to the debate, and
who started the debate with an open mind that was not totally empty,
would conclude that you are right and this amendment should be tabled.
My opposition to the amendment is very simple. Congress should make
decisions about collecting fees and imposing taxes. Article I, section
8, clause 1 of the Constitution says, ``The Congress shall have the
power to lay and collect taxes, duties, imposts and excises.''
We should not be granting our constitutional powers to faceless
bureaucrats who have agendas that may not reflect the will of the
American people. If our colleagues wanted to mandate by law that we
raise royalty fees, that would be one thing. But to simply set a
process in place where bureaucrats are going to effectively raise
taxes, I think, is fundamentally wrong. So I want to urge my colleagues
to reject this amendment, and I want to especially congratulate those
who I believe have made an excellent case in opposition to the
amendment.
I reserve the remainder of my time.
Mrs. BOXER addressed the Chair.
The PRESIDING OFFICER. The Senator from California is recognized.
Mrs. BOXER. There is little time remaining. I just want to say again
what
[[Page S10415]]
the USA Today editorial said, because I think it sums it up beautifully
and it doesn't come up with the same conclusion that the Senator from
Texas, Mr. Gramm, comes up with. It comes up with another conclusion,
and that is, ``Industry's effort to avoid paying full fees hurts
taxpayers and others.''
Since 1920 when Congress passed the Mineral Leasing Act, the MMS has
been acting to set the rules that guide the payments of royalties. So,
now, all of a sudden we have a move to say this is wrong. I think is
kind of interesting, all of a sudden it is wrong, something that has
been in place since 1920. This is what the MMS is supposed to do. So I
think this editorial really says it.
Imagine being able to compute your own rent payments and grocery
bills, giving yourself a 3 percent 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 that nothing threatened
to change that cozy arrangement.
And they basically say, ``Taxpayers have been getting the unfair end
of this deal for far too long.''
Mr. President, I say to Senators, we have an opportunity to end this
cozy deal today. I know some of my colleagues feel they need more time,
they want to work on a more fair way to collect these royalties. I
cannot imagine, as someone who knows supply and demand--I am an
economics major, I was a stockbroker--it is pretty simple. You have the
market price. Pay the royalty based on the market price. This is a
capitalistic system. We do not have industry executives sitting in and
deciding what the market price is in the dead of night in the back of
their corporate headquarters. These 5 percent of oil companies, the oil
giants, are the ones who are getting away with thievery. Let's end it
now. Support this amendment.
I yield the floor.
Mr. GORTON addressed the Chair.
The PRESIDING OFFICER. The Senator from Washington is recognized.
Mr. GORTON. Mr. President, has all time now been used on this
amendment?
The PRESIDING OFFICER. All but 8 seconds.
Mr. GORTON. We yield back that 8 seconds.
What now is the order before the Senate?
The PRESIDING OFFICER. The amendment is set aside until 5:50, at
which time there will be 10 minutes equally divided between the parties
for debate.
Amendment No. 3581
Mr. GORTON. Then what is the matter before the Senate at this point?
The PRESIDING OFFICER. The matter before the Senate at this time is
the Daschle amendment to S. 2237.
Mr. DASCHLE addressed the Chair.
____________________