[Congressional Record Volume 146, Number 25 (Wednesday, March 8, 2000)]
[Senate]
[Pages S1331-S1334]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               OIL CRISIS

  Ms. LANDRIEU. Mr. President, I take this opportunity to speak for 
just a few minutes, as we are closing up today, on a very important 
policy question before the Senate, one that while actually not being 
debated on the Senate or House floors at this time, it is being hotly 
debated in private meetings and corridors and in some public meetings 
of the various committees; that is, the problem, the crisis, the 
challenge that this country is now facing with extraordinarily high oil 
prices.
  The price of crude oil today, according to the Wall Street Journal, 
is above $34 a barrel. For some, this causes--as in an oil-producing 
State--a bonanza; for others, it causes a real problem.
  I will speak for a few minutes about some of the steps we could 
perhaps take. Wild swings in and the volatility of the price of oil are 
not good. Senators heard troublesome testimony today from senior 
citizens and a young family struggling in the Northeast, which is the 
most dependent part of our Nation. Neither are these price swings good 
for the oil-producing States, of which I represent Louisiana.
  What a difference a year can make. Last year at this time, our 
committee was actually meeting about the world price of oil pushing $5 
a barrel. Our Energy Committee met time and time again, trying to 
figure out what we could do to help stabilize a very important industry 
to our Nation, to help provide some relief, particularly for the small 
and independent producers who obviously were driven out of business. 
The oil and gas industry lost literally tens of thousands of workers 
over the course of the year because they simply could not turn any kind 
of profit at that low price.
  Just today, we had a hearing in the same committee, now talking about 
oil at $34 a barrel and the havoc it is wreaking in other places.
  In the Northeast, people are having great difficulty, understandably 
so, having not been able to predict this would happen. Adding $300 and 
$400 a month to home heating oil, it is tough for many families to make 
that payment.
  As in Louisiana last year, in Texas, Oklahoma, Alaska, and other 
places around the Nation, some families were not able to pay any bills 
because they lost an entire paycheck which rested on the strength of a 
domestic industry that had the rug pulled out from underneath it.
  We now face a looming energy crisis of a completely different 
nature--not extraordinarily low prices but extraordinarily high prices. 
It is said only in times of war do we really appreciate our military. 
At least this time, perhaps at times of high oil prices, we now can 
fully appreciate the importance of our domestic energy industry in the 
producing States--not just oil producers, who are important, but gas 
producers and producers of energy who will help our country be more 
self-reliant. Since we are the greatest consumer of energy in every 
sector, we must have a policy that encourages the strength and 
robustness of the energy-producing sector. I suggest we have a long way 
to go, given what is happening today.
  In 1959--quite a while ago, but not so long ago that many people in 
this Nation cannot still remember quite well--our Nation imported only 
16 percent of its oil and gas. Today we import over 50 percent. We have 
moved from self-reliance to reliance on others, and in many instances 
it is not even allies on whom we are relying. It is one thing to have 
to rely on our allies and our friends such as Saudi Arabia and 
Venezuela, encouraging them to help in this difficult time, as we most 
certainly have stepped up to their aid and continue to do so.

  However, we also have to go hat in hand to countries that are not our 
allies--in fact, enemy nations--and have interests contrary in terms of 
freedom and democracy--Iran and Libya, to name two.
  It is a particularly difficult situation and one which I think is 
avoidable if this administration and others had a better policy 
regarding energy self-reliance for a strong and vibrant economy.
  I will make a few suggestions. First, let me comment on some of the 
things I hear other people suggesting as a remedy. I say to my 
colleagues, we should all be engaged in coming up with solutions. We 
should be putting remedies on the table. We might not adopt every one, 
but we most certainly should be engaged in finding solutions to this 
problem, not just turning our head and hoping it goes away, hoping OPEC 
will provide the relief we need. We need to get our fate back in our 
own hands.
  One suggestion being tossed around and has actually been filed as a 
bill by several Members of the Senate is using the Strategic Petroleum 
Oil Reserve to provide some temporary relief. That may or may not be a 
good idea.

[[Page S1332]]

  Let me quote from Chairman Greenspan who, when presented with this 
idea, made this statement in front of the House Banking Committee 
recently:

       It is foolishness to believe we can have any significant 
     impact short of a very major liquidation short-term of that 
     reserve. There is more to this than economics. It is a 
     diplomatic security question.

  That reserve was created to protect the U.S. from a cutoff and keep 
the U.S. from being held hostage.
  While some think dipping into that reserve might move us out of this 
crisis, I suggest that before we make that decision we do the math. 
There are only 55 days of supply. We might be able to drive down the 
price if we liquidated a significant portion of that oil and gas for a 
certain amount of time, maybe at a 7 or 10-percent drop. But thinking 
we can liquidate our strategic oil reserve and drive down this price 
and sustain a low price, I am not sure that case has yet been made.
  For the purposes of this discussion, that should be kept on the 
table. We must be very careful not to give the American people the idea 
that we have a secret key, that we have a magic wand, that we can 
simply liquidate this reserve and prices will fall and all things will 
be made whole again. Not only am I not sure that would work, but it 
could leave our country in a very difficult position from a national 
security standpoint to have liquidated that reserve. Then it would be 
at a great expense to the taxpayer in that a lot of this oil that was 
purchased when the price was quite low, which was smart to do, would 
then, at great expense to the taxpayer, have to be replenished at three 
and four times the cost. So let us say I would agree to keep it on the 
table but not present the American public with the idea that 
liquidating the SPR is the answer.

  Another sort of false solution, I think, rests with some who are 
suggesting we simply need to call in our chips, that America can simply 
rely on the good will of our neighbors. Yes, we do many wonderful 
things for countries. We have stepped up to the plate to help Mexico 
and Venezuela most recently in a crisis. We have helped, obviously, 
Kuwait. We went to war on their behalf. But I think just relying on 
calling in our chips, calling in good will, at times such as this is, 
again, one small thing that can be done but we most certainly do not 
want to rely on that to keep prices stable and to sustain this great 
economic boom. I think, again, it is a false remedy.
  I believe, rather, that some of the things we can do internally would 
help us to better prepare for situations such as this. One would be to 
have more aggressive drilling and exploration in the United States. 
Instead of having oil and gas drilling moratoria as the rule and then 
making exceptions for drilling, we should have an aggressive drilling 
policy that is environmentally sensitive.
  Let me be quick to say the industry, contrary to popular opinion, has 
made significant efforts in this regard because there are now local, 
State, and Federal regulations, tough regulations, regulations many of 
us support from oil- and gas-producing States, to make sure this 
extraction is done with the minimum negative environmental impacts. So 
I am not suggesting going back to the days, 30 or 40, even 20, years 
ago when none of these regulations was in place. I am suggesting we can 
have an environmentally sensitive drilling policy, particularly that 
would give preference, perhaps, or give priority or help to encourage 
the extraction of natural gas, which is in itself a clean burning fuel.
  Let me read from ``Fueling the Future''--I will submit this for the 
Record--about the potential benefits of natural gas. It says:

       Changes in U.S. energy policy that favor increased use of 
     natural gas could improve air quality, conserve energy and 
     reduce reliance on imported oil from politically unstable 
     countries.

  It would seem to me, since we have all of these natural gas reserves, 
some in the Gulf of Mexico, in shallow and deep water, some around 
Alaska, and some in other places in this Nation, that it would do us a 
world of good to be much more open to the idea of using natural gas in 
its many different forms to help us fill our energy grid and make it 
greener, to meet our own expectations and to meet new international 
standards for clean air. That is one thing that we most certainly can 
do.
  Another, we have taken the step in an aggressive policy to 
acknowledge what a good thing we did when we gave royalty relief for 
deep water drilling in the gulf. There were many Members of this body 
who not only did not vote for that, they vigorously opposed it. My 
predecessor was the lead sponsor of that legislation. I can only say 
thank goodness that that has given us a window of hope. Because new 
technologies have been developed, we are able to find reserves in 
deeper water in the Gulf of Mexico to give us the balance we need in 
domestic production. Whether it is necessary to extend that relief now, 
with prices going up, would be a question for another day. But thank 
goodness we did it at the time we did it so we now have increased 
reserves and because technology has been developed, that helps us to 
minimize those dry holes, and maximizes--and it makes much more 
efficient--this extraction. We can continue to do those things.
  Another thing, we should put our money where our mouth is when we 
talk about alternative fuels development. I mentioned natural gas, but 
we have solar; we have the potential for fuel cells; we have other 
potential sources of energy. We cannot take nuclear off the table, 
which we have discussed in this body for the last 20 years. I hope now 
people can appreciate the part that nuclear power can play when 
properly regulated and properly run to help make our grid greener.
  France takes 80 percent of their energy needs from nuclear. We should 
at least be open to the possibility of sustaining our current nuclear 
capacity and perhaps even increasing it to help us get our grid greener 
and again minimize our reliance on outside sources. So vigorous 
programs for alternatives, promoting the use of natural gas, and also, 
of course, continuing to promote conservation--whether it is in 
transportation or weatherization of our homes--are also important.
  My point is, in times of war we appreciate our military all the more 
and the great sacrifices our men in uniform make and how proud we are 
of them and how happy we actually are to support them with our tax 
dollars because we recognize their great value.
  I hope the country will take note that when prices are this high, we 
feel vulnerable. We feel scared and nervous and frustrated and angry. 
There is a lot of pain. When prices are high, truckers cannot move 
their product. Farmers have now been hit not only with tough weather 
and rock-bottom prices but high diesel fuel costs. It is a triple 
whammy for our farmers.

  I hope this country will recognize and express appreciation for our 
domestic oil and gas and other energy producers, and say we cannot take 
it for granted. We must nurture this industry, help it to be as 
environmentally sensitive as possible, but not allow this Nation, the 
greatest nation on Earth, to be so dependent on sources outside of our 
sphere of influence and outside of our boundaries. It would be the same 
as depending on other nations for our food. We would not do that. We 
would not import 100 percent of our food. I do not think people in this 
Nation realize how much we are importing from other nations.
  Let us take this opportunity to put all our suggestions on the table. 
Let us urge those running to be the President of our Nation to come up 
with a real, comprehensive, workable policy that will help to maintain 
stable prices where our producers can make money and turn a profit. 
Obviously, people would not be in business if they could not make 
money. That is why people are in business. We are in government for 
different reasons, but business people usually go into business only if 
they can turn a profit in that enterprise or activity. So we have to 
maintain a stable price at a level where our domestic industry can make 
a profit, where people can stay in and work. Tax policies can have a 
lot to do with that.
  We appreciated the help, although it was small and somewhat 
noncomprehensive, last year when our energy producers were feeling the 
pinch. We hope we can give some short-term relief to those who are 
clearly suffering from these high prices. Ultimately, the answer lies 
in long-term, comprehensive fixes, based on real-world economics and 
helping the American people

[[Page S1333]]

understand with every choice to take some area away from drilling or 
with every choice to turn away from some source of energy, with every 
decision made, there are consequences to those choices. Then we can 
create a policy that Americans feel good about and a policy which 
expands our economy.
  I ask unanimous consent the article ``Fueling the Future'' be printed 
in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

                    [From American Gas, March 2000]

                           Fueling the Future

                            (By Karen Ryan)

       Could U.S. consumption of natural gas rise by as much as 13 
     quadrillion Btu (quads) over the next 20 years? A new 
     American Gas Foundation study says it's certainly a 
     possibility if appropriate policies are implemented.
       ``Fueling the Future: Natural Gas & New Technologies for a 
     Cleaner 21st Century'' confirms what natural gas industry 
     professionals have long suspected: Changes in U.S. energy 
     policy that favor increased use of natural gas could improve 
     air quality, conserve energy and reduce reliance on imported 
     oil from politically unstable countries. Consequently, the 
     study forecasts that the environmental, economic and 
     efficiency advantages of natural gas--combined with advances 
     in gas-related technologies and the introduction of new end-
     use technologies--could help push U.S. gas consumption into 
     the 35-quad range over the next two decades. Currently, U.S. 
     gas demand is close to 22 quads a year.
       The study tracks two scenarios: a ``current projection,'' 
     which shows gas demand reaching nearly 30 quads by 2020, and 
     an ``accelerated projection,'' which foresees demand topping 
     35 quads by then based on the adoption of national policies 
     encouraging greater use of natural gas. Gas supply will keep 
     pace with rising demand, with at least 84 percent of demand 
     in 2020 fulfilled by gas produced domestically, compared with 
     85 percent today, says the study. The rest will be imported 
     primarily from Canada, just as it is now. The nation's gas 
     resource base is enormous, continues the study, and tapping 
     into it to produce enough gas to sustain 35 quads of demand 
     will require technological innovations similar to those that 
     opened up major new domestic sources of gas over the past 15 
     years.
       Assuming continued resource base expansion, coupled with 
     continued technological progress in the ways the nation 
     finds, produces, delivers and uses gas, the cost of gas 
     service will increase only modestly over the next 20 years, 
     says the study. The price of gas purchased at the wellhead is 
     expected to remain in the mid-$2 per MMBtu range.


                         the common denominator

       ``We believe that the study challenges conventional 
     estimates of the natural gas market's potential,'' says AGA 
     Chairman Gary Neale, who is president, chairman and CEO of 
     NiSource Inc. Changing energy, technological and 
     environmental forces are creating extraordinary market 
     opportunities for the natural gas industry, from advanced 
     residential furnaces and water heaters to gas cooling, fuel 
     cells and advanced industrial applications. Neale points to 
     distributed generation, as does the study, as a major reason 
     gas consumption will swell in coming years. In the 
     accelerated projection, distributed generation--in the form 
     of reciprocating engines, microturbines and fuel cells--
     accounts for about 20 percent of the electricity generated 
     in the nation by 2020.
       ``AGA can play an immensely important role in expanding 
     this new market,'' says Neale. In an early step, the 
     association joined the Distributed Generation Forum, managed 
     by GRI to provide its members with technical, regulatory and 
     market information to use in strategic planning and in 
     market-development and education programs. The membership of 
     the Distributed Generation Forum comprises gas and electric 
     utilities, manufacturers and other parties developing and 
     promoting distributed generation. AGA also is working with 
     Congress to make sure nothing in the upcoming electric 
     industry deregulation legislation will hamper the distributed 
     generation market.


                            at home with gas

       Today, 56 million out of the 102 million households in the 
     United States--55 percent--have natural gas service. In 1998, 
     these customers used 4.5 quads of gas. Residential gas 
     consumption is forecast to reach 5.7 quads in 2020 under the 
     study's current projection. The accelerated projection pegs 
     demand at 7.4 quads, based on continued growth in traditional 
     markets coupled with an assumption that greater demand for 
     gas fireplaces, air conditioners, microturbines and fuel 
     cells will radically alter the residential gas market.
       The forecast goes on to say that home builders will 
     continue to favor gas over electricity by a wide margin. In 
     1998, 70 percent of newly built houses were heated with 
     natural gas. It also assumes that owners of existing homes 
     will continue to convert their heating systems from other 
     fuels to natural gas at the same pace as in the past decade 
     when about 200,000 homeowners a year switched fuels. The 
     study sees significant potential for conversion of other 
     household tasks to natural gas in homes already hooked to the 
     gas system.
       In addition, gas fireplaces have been a huge draw for 
     energy-conscious consumers in recent years. The typical gas 
     fireplace is far cleaner than its wood counterparts, 
     eliminating or making major reductions in a variety of 
     pollutants, including carbon dioxide, nitrogen oxides, carbon 
     monoxide and soot. In fact, wood fireplaces are banned or 
     restricted in a number of areas, including Denver, 
     Portland, Phoenix and Los Angeles because of environmental 
     concerns. Currently, gas fireplaces account for 125 
     trillion Btu annually.


                        Getting Down to Business

       The businesses and institutions making up the commercial 
     market currently use about 3 quads of gas annually. 
     Consumption in 2020 is forecast to total 4.4 quads under the 
     current projection and 5.5 quads under the accelerated 
     scenario. New technologies, says the study--especially gas-
     fueled cooling and dehumidification systems and aggressive 
     growth in space and water heating and various food service 
     applications--will drive the demand increase.
       To help spread the news about gas-based technologies, AGA 
     recently began a national accounts program aimed at the food-
     service and supermarkets sectors. The goal this year, says 
     Walter Woods, who heads the program for AGA, is to call on 
     executives at the headquarters of 16 restaurant and 16 
     supermarket chains to discuss the advantages of using gas.
       ``We hope to persuade these companies to test and specify 
     gas equipment by giving them information they may not have,'' 
     says Woods, who is accompanied on the visits by 
     representatives of the local gas utilities. One thing Woods 
     has discovered is that some national companies are surprised 
     when a representative of the gas industry pays a visit. ``The 
     electric side does this sort of thing all of the time,'' he 
     says, ``but apparently the gas side has not.''
       Another program, the Gas Foodservice Equipment Network, was 
     launched last fall to serve as a resource for information, 
     education and marketing support. The network is an alliance 
     of utilities, foodservice equipment manufacturers, trade 
     associations (including AGA) and other industry participants. 
     The April issue of American Gas will cover the network's 
     program.


                    Fueling Instury and Power Plants

       The environmental and energy-efficiency attributes of 
     natural gas technologies will continue to prove attractive to 
     the operators of the nation's factories and power plants. 
     According to the foundation's forecast, industrial 
     consumption of gas in 2020 will reach 11 quads under the 
     current projection and 13 quads under the accelerated 
     projection, up from 10.1 quads in 1998. The industrial sector 
     has led the resurgence in gas demand since the mid-1980's 
     with factory operators selecting a number of innovative new 
     technologies from direct-contact water heaters to gas-fired 
     infrared burners. Continued equipment advances in the new 
     millennium will offer additional choices.
       Even though coal is forecast to remain the dominant power 
     plant fuel, natural gas is projected to double its share of 
     this market by 202 with demand moving up to 6.7 quads under 
     the accelerated projection. This market includes electric 
     utilities as well as independent (non-utility) power 
     producers. Most of the rise in power plant gas demand is 
     linked to wider use of combined-cycle technology, which 
     captures the waste heat produced by the generator's large gas 
     turbines and uses it to produce more electricity.
       Demand is actually a little lower under the accelerated 
     projection than in the current projection. The accelerated 
     projection forecasts that slightly less new generating 
     capacity will be required because: The operating lives of 
     some coal-fired and nuclear-powered generating plants will be 
     extended, some new coal-fired plants will be built, 
     distributed generation will account for 20 percent of added 
     generation capacity and renewable sources of energy will 
     generate more electricity in 2020 than today.


                             the ngv market

       ``Fueling the Future'' sees gas consumption in the 
     transportation sector increasing to 2.8 quads by 2020. More 
     than 1.5 quads of this growth is attributed to natural gas 
     vehicles (NGVs) although the study points out that widespread 
     use of NGVs will hinge on the success of on-going efforts to 
     increase their driving range and make the vehicles more 
     economically competitive, including bringing down the 
     purchase price.
       Natural Gas Vehicle Coalition President Richard Kolodziej 
     reports that roughly 80,000 NGVs travel U.S. roads today, 
     mainly as fleet vehicles. The industry's strategy, he says, 
     is ``to pursue the high fuel-use fleet market, which includes 
     transit and school buses, trash trucks, urban delivery 
     vehicles, airport shuttles and taxis.''
       Kolodzeij also notes that the national transportation-
     related environmental focus until recently has been on 
     reducing the automotive emissions that contribute to smog. 
     ``There is now a growing focus on diesel fuel because of 
     concerns about the health effects of particulates and other 
     air toxins,'' says Kolodzeij. ``Studies are showing that 
     diesel vehicles have a disproportionate impact on air quality 
     with respect to carcinogenic toxins.'' The shift in emphasis 
     is improving the prospects for natural gas in the truck and 
     bus markets. In the past two years alone, between 17 and 20 
     percent of all new transit buses that have been ordered have 
     been fueled by natural gas, he says.

[[Page S1334]]

                       other optimistic outlooks

       Reality check: Is the American Gas Foundation's accelerated 
     scenario too optimistic? Not especially when compared with 
     some other recent projections. While the other forecasts may 
     use different parameters to arrive at their conclusions and 
     look only as far as 2015, they all reach basically the same 
     conclusion: Gas use will rise substantially in the early 
     years of the new century.
       In contrast with GRI's and the National Petroleum Council's 
     recent studies, the American Gas Foundation's study is a bit 
     more optimistic, predicting a slightly higher potential for 
     demand. It also projects market growth differently--
     attributing potential higher demand coming more from end-use 
     applications in the residential and commercial sectors rather 
     than from electricity generation. The foundation is also more 
     optimistic that technology in the natural gas industry--from 
     exploration and production through transmission, distribution 
     and end use--will continue to advance at a pace similar to 
     that in the 1990s.

                          ____________________