[Congressional Record Volume 146, Number 12 (Thursday, February 10, 2000)]
[Senate]
[Pages S632-S634]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Lautenberg, Mr. Lieberman, and Mr. 
        Jeffords):
  S. 2072. A bill to require the Secretary of Energy to report to 
Congress on the readiness of the heating oil and propane industries; to 
the Committee on Energy and Natural Resources.


                     the home heating readiness act

  Mr. KERRY. Mr. President today I am introducing the Home Heating 
Readiness Act, which I offer with Senators Lautenberg, Lieberman, and 
Jeffords. The goal of this legislation is to prevent sharp and 
sustained increases in the price of home heating fuel, like the kind of 
price spike we are experiencing right now in Massachusetts and other 
northeastern states.
  Mr. President, at the end of December, the price of a gallon of home 
heating oil in Massachusetts average $1.78 across the state, and in 
some local areas consumers are complaining of prices as high as $2.00 
per gallon. Only several weeks ago, when the weather was warmer, the 
price was far lower, about $.98, but as soon as the weather turned 
cold--as soon as families needed more oil to heat their homes--the 
price spiked. I want to be clear, on average, it appears that this 
winter will be warmer than most. Our problem is not the weather alone, 
something else in the supply chain of heating oil has failed. The Home 
Heating Readiness Act is an effort to learn, before it's too late, the 
steps we can take to correct deficiencies and prevent price spikes.
  Already the Energy Information Administration examines the price of 
heating fuel each fall in a report called the Winter Fuels Outlook, and 
the Administration has done, overall, an excellent job of examining 
supply, demand and potential weather scenarios and estimating the price 
of heating oil and propane. This legislation would ask the 
Administration to go farther and examine the functional capability of 
the industries, to search out potential problems and help us prevent or 
mitigate them. It asks EIA to examine the global and regional crude oil 
and refined product supplies; the adequacy and utilization of refinery 
capability; the adequacy, utilization, and distribution of regional 
refined product storage capacity; weather conditions; refined product 
transportation system; market inefficiencies; and any other factor 
affecting the functional capability of the industry to provide 
affordable home heating oil and propane. In addition to identifying 
problems, EIA will make recommendations on how those problems can be 
corrected, and how price spikes can be avoided or at least mitigated.
  Mr. President, with this legislation we are asking the EIA to do more 
and we should appropriate more funding to get the job done. For now, 
this legislation does not authorize a specific amount. It is my hope 
that the Clinton administration will work with us to determine an 
appropriate authorization level that we can add into this bill at an 
appropriate time. To help alleviate our current fuel crises the Clinton 
administration has released roughly $175 million to help low income 
families. I want to applaud that decision--those resources are urgently 
needed. However, I want to also point out that if we prevent these 
price spikes with better evaluation of the industry, we may have to 
spend less of those emergency funds in future winters. Finally, I want 
to work with Energy and Natural Resources Committee to get its input on 
how this proposal can be improved to meet our goals.
  The old adage that an ounce of prevention is worth a pound of cure 
certainly holds true in this case, and I hope that we act to create the 
Home Heating Readiness Report.
  I ask unanimous consent that a copy of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 2072

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Home Heating Readiness 
     Act''.

     SEC. 2. FINDINGS.

       Congress finds that--
       (1) in the United States, more than 10,000,000 households 
     burn heating oil and more than 5,000,000 burn propane to 
     generate space heat;
       (2) sharp and sustained increases in the price of heating 
     oil and propane disproportionately harm poor and elderly 
     people with low and fixed incomes, who may be forced to 
     choose between heat and food, medicine, and other basic 
     necessities;
       (3) sharp and sustained increases in the price of heating 
     oil and propane can negatively affect the national economy 
     and regional economies, and such increases have occurred in 
     the winters of 1983-84, 1988-89, 1996-97, and 1999-2000;
       (4) sharp and sustained increases in the price of heating 
     oil and propane can be caused by--
       (A) deficiencies in global or regional crude oil or refined 
     product supplies;
       (B) inadequacy or underutilization of refinery capacity;
       (C) inadequacy, underutilization, or disadvantageous 
     distribution of regional refined product storage capacity;
       (D) adverse weather conditions;
       (E) impediments to efficient and timely transportation of 
     refined product;
       (F) market inefficiencies; and
       (G) other factors affecting the functional capability of 
     the energy industry;
       (5) the Energy Information Administration is charged with 
     analyzing the United States energy industry and markets and 
     providing projections on the retail price of energy products, 
     including heating oil and propane;
       (6) future sharp and sustained increases in the national 
     and regional price of heating oil and propane can be avoided 
     or at least mitigated if--
       (A) the Energy Information Administration identifies 
     potential failures in the functional capability of the energy 
     industry to provide affordable heating oil and propane to 
     consumers in all regions of the United States; and
       (B) those potential failures are remedied; and
       (7) avoiding sharp and sustained increases in the national 
     and regional price of heating oil and propane can reduce 
     Federal, State, and local expenditures to assist low-income

[[Page S633]]

     and other households in need of financial assistance when 
     prices increase.

     SEC. 3. ANNUAL HOME HEATING READINESS REPORTS.

       (a) In General.--Part A of title I of the Energy Policy and 
     Conservation Act (42 U.S.C. 6211 et seq.) is amended by 
     adding at the end the following:

     ``SEC. 108. ANNUAL HOME HEATING READINESS REPORTS.

       ``(a) In General.--On or before September 1 of each year, 
     Secretary, acting through the Administrator of the Energy 
     Information Agency, shall submit to Congress a Home Heating 
     Readiness Report on the readiness of the heating oil and 
     propane industries to supply fuel under various weather 
     conditions, including rapid decreases in temperature.
       ``(b) Contents.--The Home Heating Readiness Report shall 
     include--
       ``(1) estimates of the consumption, expenditures, and 
     average price per gallon of heating oil and propane for the 
     upcoming period of October through March for various weather 
     conditions, with special attention to extreme weather, and 
     various regions of the country;
       ``(2) an evaluation of--
       ``(A) global and regional crude oil and refined product 
     supplies;
       ``(B) the adequacy and utilization of refinery capacity;
       ``(C) the adequacy, utilization, and distribution of 
     regional refined product storage capacity;
       ``(D) weather conditions;
       ``(E) the refined product transportation system;
       ``(F) market inefficiencies; and
       ``(G) any other factor affecting the functional capability 
     of the heating oil industry and propane industry that has the 
     potential to affect national or regional supplies and prices;
       ``(3) recommendations on steps that the Federal, State, and 
     local governments can take to prevent or alleviate the impact 
     of sharp and sustained increases in the price of heating oil 
     and propane; and
       ``(4) recommendations on steps that companies engaged in 
     the production, refining, storage, transportation of heating 
     oil or propane, or any other activity related to the heating 
     oil industry or propane industry, can take to prevent or 
     alleviate the impact of sharp and sustained increases in the 
     price of heating oil and propane.
       ``(c) Information Requests.--The Secretary may request 
     information necessary to prepare the Home Heating Readiness 
     Report from companies described in subsection (b)(4).''.
       (b) Conforming and Technical Amendments.--The Energy Policy 
     and Conservation Act is amended--
       (1) in the table of contents in the first section (42 
     U.S.C. prec. 6201), by inserting after the item relating to 
     section 106 the following:

``Sec. 107. Major fuel burning stationary source.
``Sec. 108. Annual home heating readiness reports.''; and
       (2) in section 107 (42 U.S.C. 6215), by striking ``Sec. 
     107. (a) No Governor'' and inserting the following:

     ``SEC. 107. MAJOR FUEL BURNING STATIONARY SOURCE.

       ``(a) No Governor''.

  Mr. LIEBERMAN. Mr. President, I rise to speak about an extremely 
serious problem plaguing the citizens of my state of Connecticut and 
those throughout the Northeast--the skyrocketing cost of home heating 
oil and the fear of higher gas prices that will follow.
  This complaint may sound familiar to some of my colleagues, 
particularly those similarly-situated in cold-weather states. Senator 
Dodd and I and several others have repeatedly voiced concerns about the 
volatility of the heating oil-gasoline marketplace over the last 
several years, about the sudden swings in prices we have experienced as 
a result of that volatility, and the threat it poses to the livelihood 
of our constituents and the stability of our regional economy. The 
situation now, though, is more dire than anything we have seen in 
recent years. While I do not want to be an alarmist, I think it is 
critical for my colleagues to understand the severity of the squeeze 
many families and businesses are feeling and the potential for economic 
havoc.
  We are bordering on a real crisis. The average price of a gallon of 
heating oil in the Northeast has jumped more than 100 percent since 
mid-January. Many families are really struggling to pay their bills and 
keep their families warm. Dealers and distributors are reporting 
significant shortages throughout the region, which promises to send 
prices spiraling even higher in the near term. And if this vicious 
cycle of high demand and low supply continues to turn, and if the 
weather stays the way it has, many households may literally be left out 
in the cold, and their well-being put at risk.
  It is not just consumers, though, who are being hit hard by this 
price spike. It is also hurting a number of small businesses that are 
not prepared to absorb this kind of sudden surge in costs. It sure is 
hurting many small companies in the heating oil industry, the 
independent distributors and retailers, who form the backbone of this 
market. I have already heard of one oil dealer in Connecticut who owns 
a family business and who needed to take out a second mortgage on his 
home to make it through this hardship. It may not be long before others 
join him. There is also the very real risk of some small dealers being 
forced out of business.
  As a result of all this, a conspicuous current of fear and 
uncertainty is rippling throughout the Northeast. People are anxious 
for some answers just as they are desperate for some relief. Like many 
of my colleagues, my offices have been inundated with calls from around 
the state from outraged homeowners demanding to know why their heating 
bills are going through the roof and what we are doing to bring them 
down.
  We know that supplies are low and demand is high, and that is the 
basic source of the problem. But it goes much deeper than that. The 
decision made by OPEC to limit the production and supply of crude oil 
on the international market has been a major factor. Our domestic 
supply has shrunk considerably. Another factor has been the 
temperature; the cold weather and strong winds have not only kept 
demand high, they have frozen rivers and made it difficult at times for 
oil barges to dock and unload their product. And some questions have to 
be raised about the choices made by the major oil companies, while the 
supply of crude oil may have been sufficient to meet demand, the 
refiners may have made matters worse by focusing on turning out more 
gasoline than heating oil in anticipation of a warmer winter. These 
questions deserve more attention, and I intend to press for more 
information about how these decisions are being made about utilization 
of capacity, which are critical to determining oil supplies and by 
extension oil prices.

  But the complexity of this problem does not mean we are powerless to 
help. Along with Senator Dodd and the rest of our state delegation, we 
have been doing all we can to provide some immediate relief from these 
spiraling prices and troubling shortages. One of our principal concerns 
is for the low-income families who are being asked to choose between 
putting food on the table and heating their homes. The price spike is 
hitting these families the hardest, and we are doing our best to help 
them make it through. A bipartisan coalition sent a letter to the 
President two weeks ago urging him to quickly release emergency funds 
from the Low-Income Home Energy Assistance Program, which is a critical 
first line of defense for our neighbors who are least able to cope with 
sudden price surges. The President thankfully responded by releasing 
$45 million for the disadvantaged families of New England, including 
$3.1 million for those in Connecticut. This was a significant gesture, 
but there are many families who won't benefit from it. That is why just 
two days ago our coalition sent the President another letter requesting 
that an additional $200 million in LIHEAP funding be released 
immediately. I hope the President again hears our concerns and heeds 
our call.
  I am also concerned about the independent oil suppliers in the 
Northeast. Most home heating oil distributors are small businesses with 
few employees; these businesses are not always in the position to 
weather severe price fluctuations or shortages as we are seeing now. 
Part of the problem is that small oil dealers often must pay the high 
price of crude oil from large wholesalers before they are able to 
collect on oil sales to residential homes. This leaves them with few 
reserves to make due. To help relieve the burden on these businesses, I 
have asked the Small Business Administration to make available a 
package of short turnaround loans and technical assistance. The SBA has 
been highly sensitive to this problem, and they are moving quickly to 
spread the word around the region about these options.

[[Page S634]]

  Along with several of my colleagues on both sides of the aisle, I 
have supported and continue to support a drawdown of the Strategic 
Petroleum Reserve as a way to quickly boost stocks in the Northeast and 
thereby quickly reduce prices. Senator Dodd and I and several of our 
colleagues from neighboring states have lobbied hard for the 
Administration to take that step. We have cosponsored legislation that 
explicitly authorizes the Secretary of Energy to tap the SPR in these 
circumstances. We wrote the President two weeks ago urging him to 
approve a drawdown as soon as possible. And shortly thereafter we met 
with Energy Secretary Bill Richardson to plead this case directly. The 
Secretary unfortunately has been reluctant to pursue this option, but 
we have not given up hope of changing his mind, and will continue to 
push our argument.
  While we believe the SPR drawdown is critical to getting us through 
this short-term emergency, it is not a long-term solution. It will not 
and cannot defuse the volatility of the heating oil marketplace. But 
there are a number of steps we can take to prevent these disruptive 
price spikes from cycling in and out. First, it is important that we 
convince leaders of the oil-producing nations that colluding to hold 
down supply is not in their long-term interest. As we have seen, prices 
of oil have indeed gone up, but there is growing resentment of the 
policies of OPEC as our citizens feel a strengthening pinch. It is 
important that these countries understand that if they continue with 
this strategy, they may jeopardize good relations with the United 
States. Secretary Richardson will soon be meeting with OPEC's leaders, 
and we are pressing him to forcefully communicate this message to our 
allies and trading partners.

  Second, we should take a hard look at the use of interruptible gas 
contracts by natural gas suppliers and the evidence that these 
contracts may be exacerbating the volatility of the heating oil market. 
These ``interruptible" contracts can be obtained at a discount rate in 
exchange for giving the contractor the ability to suspend service when 
gas supply is low or demand is high. When these contracts are 
interrupted, many customers typically turn to heating oil as their 
preferred alternative, creating a sudden, secondary demand jolt to the 
oil market. I have heard from a number of leaders in the heating oil 
industry who fear that this is exactly what is happening now. We need 
to better understand the level of additional heating oil demand caused 
by these types of contracts and be able to anticipate demand 
fluctuations as accurately as possible so that we may avoid future 
situations where demand exceeds supply. For that reason, I recently 
asked Secretary Richardson to investigate the extent and impact of 
interruptible contracts, and to report back to us on his findings to 
determine what if anything we should do about this practice.
  Our current situation points to the fundamental problem that we are 
far too dependent upon foreign oil for our energy needs. We need to 
employ long-term strategies to decrease our reliance upon foreign 
nations and bolster our own energy capacity. Many of us have 
cosponsored legislation in the past to increase research and 
development funding for renewable energy sources. We need to invest 
time, money, and an increased level of effort in the development of 
energy efficient power sources such as wind, solar, and natural gas. I 
will continue to work toward this goal and I strongly urge my 
colleagues to do so as well.
  Mr. President, as I said, I rise to speak about a very serious 
problem plaguing the citizens of Connecticut and the Northeast; that 
is, the skyrocketing cost of home heating oil and the fear of higher 
gas prices that will come with the warmer weather. There is a very 
complicated situation as to why it exists.
  It begins with the decision by the OPEC cartel to reduce the supply 
of oil. It goes to the decision of some oil companies not to refine 
adequate supplies of home heating oil. Whatever the complexity, it does 
not mean that we are powerless to help.
  Senator Dodd and I, and the rest of our delegation, on earlier 
occasions, with colleagues from throughout the Northeast from both 
parties, have appealed to the President to release Low Income Home 
Energy Assistance Program funding. He did that--$45 million worth.
  We have another request in now for an additional $200 million. It is 
that bad in our State.
  The real answer to this is to open up the Strategic Petroleum Reserve 
and effect the laws of supply and demand, 560 million barrels of oil 
that we, the taxpayers, U.S. Government own. This is the time to use 
it.
  Up until now, Secretary Richardson and the administration have 
refused to do so. I appeal to them today on behalf of the people of 
Connecticut who are suffering under the shock of doubling and in some 
cases tripling of what they pay for home heating oil. Please open up 
the reserve. There is now a new idea of swaps, not selling the oil but 
allowing the oil companies to take it out of reserve, bring it into the 
market, increase supply, lower price, and then put oil back into the 
reserve, even a higher amount.
  The short of it is, we are in crisis in the Northeast. It is a crisis 
that, if it is not stopped and is allowed to go on, with higher 
gasoline prices that will affect the rest of the country in spring 
time, it will begin to create the kind of inflation that will cut the 
economic growth we have enjoyed.

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