[Congressional Record Volume 146, Number 33 (Wednesday, March 22, 2000)]
[Senate]
[Pages S1542-S1548]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BALANCED PRODUCTION OF ENERGY RESOURCES
Mr. MURKOWSKI. Mr. President, I compliment my good friend, the senior
Senator from West Virginia, for his attention to the energy crisis that
clearly this Nation faces, and particularly his attention to the
realization that we have become so dependent on imported energy which
clearly affects our national security interests.
In 1973--this is a time the Senator would certainly remember, as many
Americans do--as a consequence of the Arab oil embargo, we had a very
significant event in the United States. We had gas lines around the
block. Many younger people don't remember that time. We were 37-percent
dependent on imported oil. We created the Strategic Petroleum Reserve
as a consequence of our concern, fearing we might approach 50 percent
dependence. We fought a war in the Persian Gulf. At that time, I
believe we were 47-percent dependent.
Today, this Nation is 56-percent dependent on imported oil. The
Department of Energy forecasts by the year 2015 to 2020 we will be 65-
percent dependent. I hope we can learn something from history; that is,
that we lose our leverage if we become so dependent on that single
source of imports.
As the Senator from West Virginia pointed out, we have many forms of
energy in this country. We have coal, as the Senator notes; we have
gas; we have hydro; we have nuclear. However, we don't have a cohesive
energy policy. As a consequence, we face a crisis. The farmers in this
country are getting ready to plant, and they are going to be facing
high energy costs. We have seen truckers come to Washington, DC, and
plead because they can't pass on the increased price of diesel to
consumers. We have our Secretary of Energy in Nigeria, he was in Saudi
Arabia, he has been to Mexico, urging they produce more oil.
What we need is a balance. We need a balance in domestic production
of energy resources in this country, including coal, oil, and gas,
using America's technology and America's know-how to develop these
resources safely.
I commend my friend from West Virginia for bringing this matter to
the attention of this body and recognizing that we have a capability in
the United States to relieve our dependence on imported energy. The
answer is not to go out and generate more imports; it is to generate
more resources domestically. In his State of West Virginia and in my
State of Alaska, we have a tremendous capacity to produce energy, if it
is given the opportunity. We can do that because we have the advanced
technology. He talks about clean coal technology. In our State of
Alaska, we talk about drilling in the Arctic in the wintertime where
you do not make a footprint because you are on top of the frozen
ground. If there is no oil there, there is no scar, no footprint in the
spring.
I have the obligation of managing some time this morning. Does the
senior Senator from West Virginia have anything further to say?
Mr. BYRD. Only 1 minute, if the Senator will yield?
Mr. MURKOWSKI. I yield.
Mr. BYRD. I thank the Senator for his observations. He has very
cogently and lucidly expressed those observations. I thank him for the
work he has done in this subject area. I have been glad to work with
him on some legislation, and I look forward to the opportunity of our
working and cooperating to deal with this very serious problem.
I thank him very much.
Mr. MURKOWSKI. I thank my friend from West Virginia because I think
his years of experience and participation in this body on energy
matters is a legacy to which he continues to contribute, and we can
learn a great deal from his advice. I thank my friend.
I believe the Senator from Wyoming would like recognition at this
time. I ask how much time he would require.
Mr. THOMAS. About 6 minutes, I believe.
Mr. MURKOWSKI. I yield 7 minutes.
The PRESIDING OFFICER (Mr. Hutchinson). The Senator from Wyoming is
recognized for 7 minutes.
Mr. THOMAS. Mr. President, we are here, of course, to talk about oil
prices, high oil prices that affect each of us. Let me start by
recalling that less than 2 years ago, in 1998, we had what was
considered to be the largest oil collapse since 1900. The price of oil
in my State, which is heavy oil and less expensive than some other
places, was $5 or $6 a barrel. Now, of course, we are faced with oil
prices that are in the neighborhood of $30 a barrel.
I think we will hear a great deal of talk that we need to find a
long-term answer to stabilize the production cost of energy so we have,
in fact, an ample amount of energy. We need an incentive to produce
energy on a continuing basis so the price is relatively stable.
I have talked to a number of the producers in my State, and
production is still not as high--there are not as many wells, not as
many pumps--as it could be. We say the price is as high as it has ever
been, but there is no assurance it will continue, so you are hesitant
to invest the money you have--a great deal of money, as a matter of
fact--when you do not know if that price is going to be back where it
was before. So what we are talking about basically is some kind of
policy that would bring about some stability in fuel prices.
[[Page S1543]]
I thank Senator Murkowski, the distinguished chairman of the Senate
Committee on Energy and Natural Resources, for his interest and
leadership in this matter. Why this has happened is no real surprise.
There are a number of things, frankly, that have happened over time,
and this administration cannot be surprised that we now have energy
prices that are impacting truckers' diesel fuel prices, that are
impacting seniors, that will have an impact on the tourism economy in
my State of Wyoming and in agriculture, and certainly in many places in
home heating.
It is not a surprise this has happened. We need a long-term energy
policy. We need tax relief for low-production wells. We need
commonsense royalty collection. We need access to public lands for a
multiple-use concept and to develop oil and gas and coal.
By the way, the Senator from West Virginia spoke of coal. Certainly,
that is very important as well. Wyoming is the largest coal producer in
the Nation, low-sulfur coal. We are very pleased with that.
There will be opportunities for quick fixes. Certainly we support the
idea of Low-Income Home Energy Assistance Programs, for example. But
the fact is, over time, we will need a policy that is not just short-
but rather long-term so we can get away from this idea that we are
going to be threatened in both our national security and our fiscal
security from time to time because of this.
Part of it is regulatory. EPA has tried to shut down coal-fired
powerplants in the U.S. when all they were doing was routine
maintenance. Coal supplies 55 percent of the Nation's electricity. A
third of that is produced in Wyoming.
There is an interchange between energy uses. Of course, you do not
use coal in the car, but you can use coal in some places where you
could then release the oil for transportation.
Lots of things are occurring. The Secretary of Interior, Mr. Babbitt,
is talking about taking down hydroelectric dams in the Pacific
Northwest. We have had substantial limitations on the use of public
lands in the West particularly. Vice President Gore has promised to
prohibit future exploration for gas in the Outer Continental Shelf,
places where we could do this and at the same time protect the
environment.
We are into this whole question of nonaccess to public lands. It is
part of this administration's idea of the land legacy, where we have
now 40 million roadless acres in the forest. We have BLM roadless areas
that keep us from using the multiple resources. Interestingly enough,
the access thing goes so far as national parks, where now there is a
policy in winter use to keep people away from the access to Yellowstone
Park but at the same time promote the burning of nuclear waste upwind
from the park, and have no concern about its impact. Interesting.
A failed domestic policy is certainly what we have. It has already
been mentioned that, since 1992, U.S. production is down 17 percent;
consumption is up 14 percent. In just 1 year of the Clinton-Gore
operation, oil imports increased 7.6 percent. It is now at 56 percent
and growing. It will be up as high as 65.
The United States is spending $300 million a day importing crude oil,
$100 billion a year. One-third of the trade deficit is based on the
importation of oil.
So these are the kinds of things with which we are faced. We
certainly need a long-term policy. As I suggested, we need to take a
look at the Rocky Mountain States. We need to take a look at Alaska. We
need to take a look at offshore opportunities, tax incentives to help
oil production get started, exploration costs.
Yesterday, I cosponsored a bill introduced by Senator Kay Bailey
Hutchison from Texas on marginal well credits. I think these are the
kinds of steps we can take--incentives, of course, trying to make
regulations that do not inhibit production moving forward.
We have a lot of things to do. There are some real impacts, in
addition to the costs. In 1990, U.S. jobs exploring and producing oil
involved 405,000 people. In 1999, jobs exploring and producing oil and
gas were down to 293,000--a 27-percent decline in the production of
energy.
I think there is a great deal we can do, but the overriding demand is
to have a long-term policy which helps us to increase our domestic
production so we are less reliant on overseas oil. American families
should not have to bear the full cost of this failed energy policy. In
the long term, I hope the administration will embrace Congress' efforts
and we will move forward. I yield the floor.
Mr. MURKOWSKI. I wonder if my friend from Wyoming will yield for a
question relative to the advanced technology applicable to coal.
I believe there have been projects in Wyoming that have addressed the
issue in general terms of clean coal, how it can be reformulated to
reduce the moisture and generate higher Btu's. I wonder if the Senator
could comment briefly as to the area in Wyoming, as well, that could be
available for oil and gas and coal exploration but has been withdrawn
by the administration, and the rationale behind that; if those areas
were open, what they might contribute to lessen our dependence on
imports.
Mr. THOMAS. The Senator is correct, of course. There are a great many
things that could happen. We have low-sulfur coal, which is very clean,
but it is relatively low Btu. You can do some things to enrich the
Btu's. One of the problems is transportation. We have this great coal
now that costs us less than $5 a ton. That is what it is worth at the
mouth of the mine. But if you take it then to Fort Worth, TX, it is $25
because of transportation. You could transport many more Btu's if you
would do this enrichment.
Fifty percent of Wyoming belongs to the Federal Government. Some of
it is set aside, of course, and should be, as wilderness. Some of it is
set aside in forests and lands that need special protection. But much
of the land is high plains lands, and so on, that can be used for
multiple use, can be used for production. Frankly, it has been made so
difficult. We have had such a hard time with royalty payments, these
kinds of things that really are unnecessary.
The Senator from Alaska is right. We can do a few things to encourage
domestic production and really take us out of this kind of a
proposition.
Mr. MURKOWSKI. I thank my friend from Wyoming.
I believe the Senator from Maine seeks recognition, Ms. Collins. She
represents a part of the country that has been very hard hit by high
heating oil prices with a cold winter.
While we have seen excuses made relative to certain volumes of
storage capacity being taken out of existence for heating oil because
of age and the fact that they did not comply with current environmental
requirements for fuel oil storage, we have seen refineries go out of
existence. But the constituents in her area have been hit very hard.
It is my understanding that this year in the Northeast corridor there
is a potential threat associated with high electric prices as a
consequence of the likelihood that, indeed, some of the oil-fired
plants are going to have to be put on line to meet peak demand. The
costs associated with the high price of oil to fuel those plants will
be passed on to the consumers in her areas, which puts a further burden
on the residents of the Northeast corridor. As a consequence, that
addresses the dilemma we have: Whether we are going to continue to rely
on imports of energy or finally develop a balance with domestic
alternatives.
How much time does the Senator from Maine need?
Ms. COLLINS. I request 10 minutes, if that is available.
Mr. MURKOWSKI. I am happy to yield 10 minutes.
The PRESIDING OFFICER. The Senator from Maine is recognized.
Ms. COLLINS. Mr. President, I begin my remarks this morning by
commending the Senator from Alaska, the distinguished chairman of the
Energy and Natural Resources Committee, for his outstanding leadership
in pulling together a plan to deal with the oil crisis.
He has been very attentive and responsive to the concerns of those of
us who represent Northeast States. He has pointed out, correctly, time
and again that one reason we are in such a bind where we are
experiencing this oil crisis is that this administration has had no
plan, it has had no policy. Thus, we have been particularly vulnerable
to the manipulation of our oil markets by the OPEC nations.
[[Page S1544]]
I commend the Senator from Alaska for his leadership. It has been a
great pleasure to work with him.
During the past winter, in Maine, home heating oil prices have more
than doubled from the level of the previous winter. I point out, we
still have a lot of winter left in New England. It is difficult to
remember, when we are in Washington and surrounded by the cherry
blossoms that are in full bloom and the tulips that are coming up, that
in my home State of Maine we still have a considerable amount of winter
yet to go through.
In fact, last weekend, when I was in Maine, in Aroostook County, the
temperature was a very chilly zero degrees; and in southern Maine, in
Portland, on Sunday morning the temperature was 9 degrees. The crisis,
as far as the impact of home heating oil costs on my State--and on many
New England States--has not yet eased. The crisis is very much still
with us.
Moreover, we are now seeing the increase in oil prices affecting the
cost of gasoline. According to the latest American Automobile
Association survey, gasoline prices in Maine now average a staggering
$1.62 a gallon. In some parts of the State, such as Aroostook and
Washington Counties, the prices are even higher. And there is no end in
sight.
The Department of Energy has predicted sharply higher prices for
gasoline as the summer approaches. Again, this is a particular concern
to my State of Maine. We are very dependent on the tourists who come to
Maine to enjoy our beautiful scenery and outdoor recreation during the
summer months. I fear that many of them will stay away if they are
confronted with gasoline prices that approach, or perhaps even exceed,
$2 a gallon.
The reason behind these soaring prices is simple. OPEC's decision to
engage in unfair and anticompetitive practices to constrict the supply
of oil and drive up the prices is responsible, primarily, for the
crisis we face. This cartel inflicts--and will continue to inflict--
economic hardship on the families and the businesses of the Northeast
and throughout America. The results of the jump in oil prices may have
been felt first in the Northeast, but they are rolling as thunder
across America.
Let's look more closely at the primary cause of the oil crisis.
OPEC is a cartel of 11 oil-producing states that supply over 40
percent of the world's oil and possess over 77 percent of the world's
total proven crude oil reserves.
OPEC member countries have colluded to take some 6 percent of the
world's oil supply off the market in order to maximize their profits.
And the strategy is working.
Although OPEC countries sold 5 percent less oil last year, their
profits were up by more than 38 percent.
Last October, I began warning the Clinton administration about OPEC's
production squeeze and the detrimental impact the cartel would have on
our economy. At that time, oil prices were already beginning to rise
and U.S. inventories were falling.
Throughout the winter, Mainers and all Americans who heat with oil
have suffered from the highest prices in a decade. Gradually, the
economic pain caused by OPEC has spread throughout the country. The
entire Nation is suffering--and will continue to suffer--the results of
record high fuel costs.
Last fall, the administration, in response to the concerns Senator
Schumer and I and other Members expressed, told us what it is still
telling us: Just wait and see. Be patient. We will somehow increase
production. We will convince OPEC to raise production to normal levels.
We have waited and waited and waited. The cost of oil has gone from
$20 to $25 to $30 to $34 a barrel. Energy Secretary Bill Richardson has
admitted that the ``Federal Government was not `prepared' for this
crisis. When he was in Maine, he said they had been `caught napping'.''
That is an astonishing admission of a lack of leadership by this
administration.
The fact is, this administration has no plan, no policy, no approach
for dealing with this crisis. It has no energy policy at all. The
administration should act immediately to combat OPEC's manipulation of
oil markets by using a tool that has proven effective in the past; that
is, a measured release of oil from our Strategic Petroleum Reserve.
Along with Senator Schumer, I have repeatedly asked the
administration to release some of the oil from our Strategic Petroleum
Reserve into the marketplace. I have worked with the chairman to make
sure it would be done in a way that did not in any way jeopardize our
national security. It would not in any way drain the reserve, which has
approximately 575 million barrels in its storages. This would ease the
price.
Last November, again, Senator Schumer and I introduced a bill making
clear the President's authority to act. Time and again, we called upon
the administration to take some action to provide us with relief. On
March 2, we introduced legislation calling upon the administration to
draw down the SPR in an economically feasible manner using what is
known as swaps. A release from the SPR would have an immediate and
dramatic impact on the price of oil. It would help break OPEC's resolve
to maintain an iron grip on our Nation's oil supply.
I will relate what has happened in the two past cases where we did
have a measured release of oil from our reserves. In 1996, the
administration sold oil from the SPR simply to raise revenue, and oil
prices declined almost immediately by over 7 percent. That was in
response to merely the announcement of a one-time sale of 12 million
barrels. Previously, when President Bush tapped the reserves during the
gulf war, prices dropped by 30 percent.
In proposing that we release oil from our reserves, I am pleased to
have the very strong support of the American Trucking Association.
Perhaps no one has felt the pain of soaring oil prices more than our
Nation's truckers. The jump in prices deeply harms them and, by
extension, all American consumers and businesses.
I have heard from a small Maine trucking company that is in dire
straits. One operator of a trucking company in Ellsworth tells me that
due to the high cost of diesel, many independent contractors with whom
she contracts will simply not be able to stay in business. Potato
farmers in northern Maine are concerned they are going to have
increasing difficulty in shipping their crop because the high cost of
diesel has made it economically infeasible for truckers to drive to
Aroostook County. High diesel costs also hurt our lumber and paper
industries.
Everyone shares in the pain inflicted by OPEC. Record-high crude oil
prices hurt all Americans--at the pump, on the farm, in the
supermarket, at the airline ticket counter, and at home during cold
nights. These exorbitant prices even hurt our kids. Recently a
newspaper in my State reported that the high cost of fuel is straining
school budgets in Maine. Several schools have canceled all field trips
because they have already depleted their budget for gasoline, diesel,
and oil costs for the year.
I have been disappointed that the administration has failed to heed
our call during the past several months. What makes the
administration's failure to act even more perplexing is the fact some
of the nations involved in the scheme to manipulate prices are
supposedly our allies. They have depended heavily on American support
in the past. These countries include Kuwait, Saudi Arabia, Venezuela,
and Mexico. I am so frustrated in particular with Kuwait and Saudi
Arabia. We rescued these countries; 147 Americans gave their lives in
the cause of freeing Kuwait and protecting Saudi Arabia.
I hope next week when the OPEC nation ministers meet they will decide
to restore normal production levels. But we cannot wait. We have to
keep the pressure on. We have to provide short-term and long-term
relief.
There are other steps we could take. We should suspend the 3.4-
percent gas tax hike while protecting the highway trust fund, and we
must make clear to the OPEC nations that we will not stand idly by.
Again, I thank the chairman of the task force and of the committee
for his excellent leadership. I look forward to continuing to work with
him on this very critical issue.
Mr. MURKOWSKI. Mr. President, I thank my good friend from Maine for
an update on what has occurred as a
[[Page S1545]]
consequence of the crisis in the Northeast corridor and the
implications associated with that in her area. I think she certainly
has been diligent in attempting to bring about some relief for her
area. It is unfortunate that the administration's answer seems to be
soliciting more imports. Of course, those of us who follow this closely
know that it is somewhere between 6 and 8 weeks before a barrel of oil
that originates in Saudi Arabia is going to be available in her area
for the benefit of relieving those who are subjected to the high prices
of heating oil.
Before I recognize my friend from Texas who is seeking recognition on
this subject, I remind my colleagues that there is going to be a lot of
finger pointing as to who bears responsibility. The claim by the
administration that they have been ``caught by surprise'' suggests that
they must have been napping because evidence certainly shows that the
President had knowledge of the extent of this crisis developing back in
1994, when the Independent Petroleum Association of America petitioned
the Commerce Secretary, under section 232 of the Trade Expansion Act.
Under that act, upon a request from an interested party, which the
independent petroleum producers certainly were, the Secretary of
Commerce must institute, over a 270-day period, an investigation into
whether imports threaten U.S. national security. Then, if the Secretary
determines such imports do threaten national security, the President
has 3 months to disagree or agree and, if he agrees, to determine a
response or a solution.
In 1994, the Independent Petroleum Association petitioned the
Commerce Department. At that time, the late Secretary, Ron Brown, under
section 232 of the Trade Expansion Act, responded. After study, the
Department of Commerce found that imports did threaten the national
security and reported this to our President. What was the President's
response? I quote from the 1994 findings:
I am today concurring with the Department of Commerce and
their finding that the Nation's growing reliance on imports
of crude oil and refined petroleum products threatens the
Nation's security because they increase U.S. vulnerability to
oil supply interruptions.
Granted, that was in 1994, but something else happened in March of
1999. The Congress asked for a new section 232 finding on oil imports.
I ask unanimous consent that a letter asking the Department of
Commerce for an evaluation under section 232 be printed in the Record.
There being no objection, the letter was ordered to be printed in the
Record, as follows:
United States Senate,
Washington, DC, March 12, 1999.
Hon. William M. Daley,
Secretary of Commerce, U.S. Department of Commerce,
Washington, DC.
Dear Secretary Daley: For over a year now, the world oil
market has been glutted with excess supply, which has
severely depressed oil prices. The crash in oil prices has
resulted in record low gasoline prices and shaved at least
half a point off the inflation rate. At the same time, the
impact on domestic oil production has been devastating.
According to a January survey by the Independent Petroleum
Association of America (IPAA), 193,000 marginal oil and gas
wells have been shut down wth a loss in oil production of
360,000 barrels per day since November of 1997. Even if oil
prices were to increase to $14 for the next six months,
another 184,000 oil wells would likely be shut in. Once
marginal wells, well that produce less than 10 barrels per
day, are shut in they rarely come back into production. With
1 million barrels per day of U.S. production coming from
marginal wells, loss of that production would have a dramatic
impact on U.S. oil imports.
The future implications of a slowdown of this magnitude are
severe and long lasting. New drilling is down nearly 50
percent. In general, the only wells being drilled are those
required to maintain a lease. The major oil companies have
announced significant cuts in capital spending, averaging 20
percent. The impact on the United States, a high-cost
province, is expected to be a reduction in capital spending
on the order of 40 percent. The absence of new drilling means
that for several years we are going to have declining
production as old fields are depleted without new fields
being brought into production. Oil development requires long
lead times and oil production cannot be brought back up in
short order.
According to press reports, oil industry bankruptcy filings
started to accelerate late last year. The courts in Texas
alone are expecting over 80 Chapter 7 oil industry
bankruptcies as a result of the crisis. Over 24,000 jobs
directly in the oil industry have already been lost, with
another 17,000 expected. In the short run, the economic
impacts in some areas are staggering. In the long run, the
risk is the lost capability for domestic production. As
companies go out of business, equipment is taken out of
service and people are forced to find other lines of work. As
the United States discovered after the last price downturn,
once the expertise and capability disappear, they are costly
to replace when prices do recover.
The total U.S. trade deficit last year for goods and
services was $168.6 billion, up from $110.2 billion in 1997.
The petroleum contribution to the deficit was $20 billion
less than in 1997, even though imports of crude oil were up 6
percent and all petroleum products 8 percent. When oil prices
recover, and they will as non-OPEC supplies decline and
developing country economies emerge from recession, our trade
deficit figures will see a sharp increase. The Energy
Information Administration, in its Annual Energy Outlook
1999, is projecting oil imports as high as 71 percent of
consumption by 2020 at a cost of $100-$158 billion. While low
oil prices have provided obvious benefits to the economy in
the short run, we believe it is reckless not to be taking
immedate action to mitigate the future impact of our
increasing dependence on imported oil.
In 1994, your Department conducted a review under section
232(b) of the Trade Expansion Act of 1962 (19 U.S.C. 1862)
and found that the nation's growing reliance on imports of
crude oil and refined petroleum products threatened the
nation's security because they increase U.S. vulnerability to
oil supply interruptions. On February 16, 1995, President
Clinton concurred with the finding, but took no action. In
1994, the U.S. was 51 percent dependent on foreign oil; in
1998 it was 56% dependent. Clearly, the security threat that
was found in 1995 has increased along with those imports.
With all these factors in mind, we are hereby requesting
that you conduct an expedited review and investigation into
the impact of low oil prices and ever increasing oil imports
on the United States national security under the authorities
granted to you under Sec. 232 of the Trade Expansion Act of
1962. A finding that the level of oil imports is a threat to
our national security will put the focus on a national policy
to respond to the crisis. We respectfully request that you
complete your investigation and send your findings to the
President within 60 days.
Sincerely,
Jeff Bingman, John Breaux, Mary L. Landrieu, Frank H.
Murkowski, Kent Conrad, Michael B. Enzi, Max Baucus,
Byron L. Dorgan, Trent Lott, Conrad Burns, Blanche
Lincoln.
Mr. MURKOWSKI. Further, I note that that particular letter is a
bipartisan letter. Many Democrats as well as Republicans are on that
letter, specifically asking, again, for a new finding on oil imports
and pointing out that the domestic oil and gas industry was basically
in a free-fall--this was March of 1999 --and that that free-fall would
further threaten our national security.
In April of 1999, Secretary of Commerce Daley initiated the study.
That study was delivered to the President last November. Now, the
President has not released that study, but clearly that study is going
to point out that national security is at risk because of our
increasing dependence on imports. Why hasn't the White House released
that report?
Yesterday the Majority leader, Senator Lott, along with Senator
Warner, chairman of the Armed Services Committee, Senator Helms,
chairman of the Foreign Relations Committee, and myself wrote to the
President laying out this sequence of facts and asking the President to
release that report that has been sitting on his desk since November.
Now, he is required by law to do this within 90 days--which has past.
So when I hear from the administration that they were caught by
surprise, or caught napping, I can only assume they haven't been
reading their mail, or they haven't been moving the reports, or they
have decided they didn't want to bring this issue up before the
American people, because they were told in 1994 and they were told
again last November that we were risking our national security as a
consequence of our import and dependence on foreign oil, which is now
up to 56 percent.
The Department of Energy, in its own forecast last year, said in the
years 2015 to 2020 we will probably be in the area of 65-percent
dependent on imports. I am not buying the excuse that they were caught
napping or caught by surprise. They were caught because they haven't
done anything about it. They haven't wanted to do anything about it.
They hoped they would get out of town before the American public became
aware, before the crisis hit, before the farmers came to Washington,
before the truck drivers came to Washington, before we had a surcharge
on
[[Page S1546]]
our airline tickets, before we were approaching $2-a-gallon gasoline.
But it has caught up with them.
It will be very interesting to hear what the White House is going to
say now that they have this report under section 232 of the Trade
Expansion Act; they have had it since November. And why haven't they
released it to the American people?
I ask the Senator from Texas how much time she will need. We have had
7 minutes. We have had 10 minutes. And we have a couple more speakers.
Is 10 minutes adequate?
Mrs. HUTCHISON. Yes.
Mr. MURKOWSKI. Mr. President, I yield 10 minutes to my good friend
from Texas, who has been very much an integral part of our Special
Energy Committee to try to address some short-term, interim, and some
long-term relief for the crisis we are currently facing in our country.
Mrs. HUTCHISON. Mr. President, I thank the Senator from Alaska, the
chairman of our Energy Committee, for taking the lead on this very
important issue. Not one person who drives a car in this country or
rides on an airplane can fail to realize what is happening--that we
have oil prices that are going through the roof and it is affecting
every one of us in our daily lives.
The sad thing is that this could have been avoided. We had the
opportunity to present an energy policy in this country that would not
make us beholden to foreign oil resources. In fact, when President
Clinton took office, we imported 48 percent of the oil needs in our
country. Today, it is approaching 56 percent. Over 50 percent of the
oil needs in our country are imported.
I am going to vote for all the quick fixes that we can to get prices
down as quickly as possible because it does hurt people who have to
drive for a living, or those who are planning family vacations, to have
this kind of added expense they didn't count on. But if we do a short-
term fix without a long-term fix, we are doing nothing to solve the
real problem in this country--that we are consuming more oil than we
are producing and we are too dependent on foreign sources.
I want to help the people in the Northeast who are suffering from
terrible heating oil shortages and high prices. I want to help every
American who is driving a car and seeing $50 register on the gasoline
pump. I want to make sure we realize we can do something to make our
own country more self-sufficient and these are things that will be good
for everyone.
When prices were so low that small producers could not break even--in
1997 and 1998--we lost much of the small business in our country that
is in oil production. I have a great empathy for farmers in our
country, as does Congress and the President. So when prices are
artificially low for agricultural products, we do something for the
small farmer to make sure they can stay in business because they are
the bread basket of America and it is in all of our interests to do
that.
But somehow, when we talk about small oil producers, people don't
think of that as a small business. They think of oil as big oil. They
think of it as J.R. Ewing. That is not the small producer in our
country. A normal well in our country would be putting out 1,000
barrels. In Alaska, they put out 6,000 barrels a day. When we talk
about a marginal well, we are talking about a 15-barrel-a-day quantity;
the output is 15 barrels a day. This is a very small, low-profit-margin
well. These are small businesses that are creating jobs in America.
What I want to do as part of a long-term solution is help those small
producers when prices go so low that they have to go out of business
and close their wells. In 1997 and 1998, 20 percent of these producers
were put out of business because prices were $7, $8, $9 a barrel and
they could not break even. Once a well is shut in, they pour concrete
down the hole, so it is very expensive to reopen it.
Now, to put this in perspective, you might think, why would we want
to save a 15-barrel-a-day well? The reason is that all of those small
wells, put together--about 500,000 of them across the country--can
create the same amount of oil as we import from Saudi Arabia. So if we
can keep these little guys in business, that creates a base for our
country that does make a difference--the same amount of oil we import
from Saudi Arabia that we are getting in our own country, creating jobs
in our own country, creating taxpaying citizens, paying taxes to school
districts, paying sales taxes to our States and income taxes to the
Federal Government. So this is not a loss to the Federal Government;
this is a win for everyone.
In my State of Texas, where they have given tax breaks to small
producers--the 15-barrel-a-day producers--they have reopened wells and
they have put over a billion dollars into the economy of the State just
by giving incentives for these small guys to stay in business. So if we
can do this when prices fall below $17 a barrel, we will create revenue
for our States and Federal Government, jobs for American people, and we
will create more oil so the price is stabilized, so we won't see the
spikes caused by foreign countries deciding they are not going to
produce. It is a win for everyone.
This is not big oil. The big oil companies rarely, if ever--I would
say never, but I could be wrong; maybe there is a well out there that
is 15 barrels a day, but it is not the kind of thing big companies do.
But it is a livelihood for a small producer, and we should treat them
like a small family farmer because it is in our interest to do so. It
doesn't hurt us in revenue, it helps us.
My addition to the long-term solution here is to help producers who
are drilling wells that produce 15 barrels a day, or less, by giving
them a tax credit for the first 3 barrels of the 15 barrels when the
price falls below $17 a barrel.
That is it.
If it goes to $18 a barrel, there is no tax credit because then they
can break even on their own. But when it falls below $17, then they
need that help to keep those jobs, to keep that well pumping until they
get to $18 a barrel. Frankly, if we did this, the prices would
stabilize and we wouldn't have the lows and the highs.
I commend our chairman, Frank Murkowski, for putting together a
package. I wish we had an energy policy from the administration. I hope
they will work with us.
Our package says we are going to lower the gasoline taxes immediately
until prices go back up to the $17 or $18 a barrel level; we are going
to give help to people who need help in extra funding for fuel oil; we
give help to the truckers who rely on fuel prices being at a steady
level when they make contracts. We will do the short-term fixes. But we
must address the long-term problems. If we did, we could pump
immediately 250,000 barrels a day in our country with the small guys,
with the little guys--the little oil producers who would reopen a well
or believe they could make the investment to go back in and start
drilling again--and start our production so we would not be totally
beholden to foreign countries for our energy needs.
I hope our package is not just short-term fixes because if it is, we
will be walking away from the responsibility of Congress to have an
energy policy that will for the long term stabilize prices at a
reasonable level so we can keep jobs in America and so we can have the
security that we will not import more than 50 percent of the needs of
our country.
Thank you, Mr. President.
Mr. MURKOWSKI. Mr. President, I wonder if I might ask a question of
my friend from Texas relative to, again, the contribution of these
small stripper wells. They are prevalent in our State, Oklahoma, and
other areas. While they don't produce much, the numbers are
significant. Collectively putting them together could offset
dramatically a significant portion of what we import.
Mrs. HUTCHISON. That is exactly right.
Mr. MURKOWSKI. Does the Senator have a figure on how significant they
are collectively?
Mrs. HUTCHISON. I think the chairman is exactly right. In fact, if we
helped these small stripper wells and these little guys so they could
afford to go back in and drill again, we would be creating the same
number of barrels as we import from Saudi Arabia. They could produce
250,000 barrels almost immediately if they knew there was a policy that
would protect them against a drop because then they could afford to
make the investment.
Mr. MURKOWSKI. When they are shut down, they are difficult to reopen
and are almost lost.
[[Page S1547]]
Mrs. HUTCHISON. That is exactly right, and 250,000 barrels a day
could come on line practically immediately.
Mr. MURKOWSKI. This proposal of a floor and a ceiling for somewhere
in the area of $14 to $17 would guarantee them an opportunity to
continue when prices dropped below a figure and when ordinarily they
would cease to exist because they couldn't operate below that price.
Mrs. HUTCHISON. They couldn't exist when prices fell to $11, $10, or
$9 a barrel. They cease to exist. Some of them will never come back.
Mr. MURKOWSKI. We would be losing those jobs, and the dollars would
be spent overseas.
Mrs. HUTCHISON. When the price goes to $18 a barrel, there are no tax
credits--nothing--because they can make it on their own.
Mr. MURKOWSKI. I very much appreciate the contribution of the Senator
from Texas who has been very instrumental, I think, in coming up with
some solutions as opposed to just importing more oil.
Mr. President, how much time is remaining?
The PRESIDING OFFICER. The Senator has 13 minutes.
Mr. MURKOWSKI. I yield 6 minutes to my friend from Oklahoma.
The PRESIDING OFFICER. The Senator from Oklahoma.
Mr. INHOFE. Thank you, Mr. President.
I think one thing the Senator from Texas, Mrs. Hutchison, failed to
say is that she has legislation to do the very thing she is talking
about that is critical to more than just the economy of this country
and just the price of oil but also to our national security.
I can remember in 1985 serving in the other body. At that time, we
and Secretary of the Interior Hodel had a dog-and-pony show where we
would go around the Nation and explain to people in consumption States
that our dependency on foreign sources for our oil was a national
security issue. That means we are dependent upon them for our ability
to fight a war. This is an incontrovertible fact. In fact, if you go
back to World War I, the wars have been won by those countries that
have control of the energy.
I certainly applaud Senator Hutchison for her legislation. I am a
cosponsor.
I think this is one of the ways we do it. We have two major sources
in this country that we need to tap: One is in the State of Alaska, and
offshore. I have been up there. I know how compatible that is to the
ecology up there. I believe we are going to have to do it. Of course,
in our areas, to some degree--Arkansas, Oklahoma, and Texas in the oil
belt--we have tremendous reserves. But all of it is in shallow steppes.
She talks about 15 barrels a day. I used to do this for a living. I
was a tool dresser on a table tool rig. Nobody knows what a table tool
rig is anymore. But at that time, you had to work and work very hard.
It costs us in the United States of America 10 times as much to lift
a barrel of oil out of the ground than it costs in Saudi Arabia.
You would think we were smart enough in this country to learn from
experience, but we are not. In 1973, we were going through exactly the
same thing we are going through today. The OPEC countries could produce
oil cheaply. They had control of this. We were at that time only 36-
percent dependent upon them, but that was enough for them to control to
the extent they lowered the price and starved out the small, marginal
well producers and stripper producers. They were no longer able to stay
in business.
It is not easy to say: It is fine now because it is $38 a barrel, or
$28 a barrel. It doesn't work that way. There has to be a
predictability of price.
When you are making an investment decision to drill one of these
wells, that has to be made about 6 months before you actually go into
the ground. If you have fluctuating prices, you can't find many people
who are willing to risk their capital to go in the ground. We have to
have predictability. The only way we are going to have that is with a
national energy policy.
I have probably been the chief critic of this administration in every
area, from energy to national defense. But in this case I have to, in
all fairness, say we do not have a national energy policy. We tried to
get a national energy policy under President Reagan, under President
Bush, and certainly under President Clinton. We have not been able to
do it. This is where we are going to have to concentrate our efforts.
I think people who are concerned about prices need to understand
there is another thing coming, and that is the EPA. Truck drivers have
been requesting that Congress step in to reduce the cost of diesel
fuel. If they think prices are high now, wait until the EPA finalizes
their sulfur and diesel rule. I have talked to small refiners. They do
not know how they can operate at that particular level. That is going
to have a direct effect. It could double the cost of diesel.
Yesterday, Carol Browner said she wanted to eliminate the oxygenate
mandate in fuels. However, she wants to mandate that all fuels contain
a 1.5-percent renewable component. That means the cost is going to go
up. It is done under the banner of the ecology.
The issue we are dealing with today is far more serious than just the
price of gas at the pumps or the price of oil to heat our houses. This
is a national security issue. We are now dependent upon foreign sources
for our ability to defend America.
It has to come to a stop. The only way it can come to a stop is
develop a national energy policy, the cornerstone of which is a
percentage beyond which we cannot go beyond for dependence on foreign
sources. I applaud the chairman for his efforts and join in the efforts
to bring about such a policy.
Mr. MURKOWSKI. I thank my friend, the Senator from Oklahoma. I remind
the Senator that in 1973 when we had the Arab oil embargo, we had a
bipartisan effort to come together, to take steps to ensure we would
never be over 50-percent dependent on imported oil. We created the
Strategic Petroleum Reserve. Clearly we didn't follow what we were
preaching at that time. I thank my friend from Oklahoma for his
contribution.
In the remaining minutes, I will point out a couple of relevant facts
I think Members need to be cognizant of. One of the short-term
proposals that our energy caucus has come up with is to support a
temporary suspension until year end of the 4.3-cent-a-gallon gasoline
tax that was added in 1993. Some will remember we had a debate on the
floor regarding that tax. We were tied on the 4.3-cent-per-gallon
gasoline tax increase. Vice President Gore came to the floor and broke
the tie. Some have taken the opportunity to suggest this is the Gore
tax, the 4.3 cent a gallon. It amounted to a 30-percent tax increase on
the gasoline.
We are proposing a temporary suspension. The proposal suggests we
will not jeopardize any of the contracts that are outstanding for
highway funding this year, that we will replace the offset by the end
of the year through the general fund or surplus, or a combination of
both, or perhaps if the price of oil should come down, we will do it
that way. However, we clearly will not jeopardize the highway trust
fund by this proposal.
Another reality I think is worth mentioning because it is very
significant relates to the fact we are currently importing a
significant amount of oil from Iraq. We fought a war over there not so
many years ago. We lost 147 American lives of service men and women.
The object was to expel Saddam Hussein from Kuwait. We have 458
Americans who were wounded; 23 were held prisoner of war. What has it
cost the American taxpayer since the end of the Persian Gulf war to
ensure that Saddam Hussein stays within his borders? A little over $10
billion--we were enforcing a no-fly zone; we were enforcing some
embargoes. I mention this because of the inconsistency.
Now we are importing oil from Iraq. Our greatest percentage of growth
in imports is coming from Iraq. In 1998, I think it was 336,000 barrels
a day; In 1999, it is over twice that much.
Where is the consistency in our policy? We can condemn the Saudis for
not increasing oil production. We can condemn the Mexicans. The
Secretary of Energy went to the Saudis and said: We have an emergency,
we need more production.
Do you know what they said? They will have a meeting on March 27 and
let us know. He says: No, you do not understand. We have an emergency.
And they said: No, we have a meeting.
[[Page S1548]]
He went to Mexico and begged for more production from Mexico. Do you
know what the Mexicans said? They said: Where were you, United States,
when oil was $13, $14, $15 a barrel and our economy was in the bag?
That is what we are hearing as a consequence of our dependence on
this source. Some suggest we should consider pulling out troops if OPEC
fails to raise production. Obviously, that is contrary to our own best
interests, as well.
It is important to point out the inconsistencies associated with our
policies and the realization we have allowed ourselves to become so
dependent. We were aware of it as evidenced by the section 232 Trade
Expansion Act report. The President had it in 1994 by the Department of
Commerce and he had it last November and he has not chosen to release
it. That is where we are.
I conclude by reminding my colleagues that things are probably going
to get worse in some areas of the country. We had the Senator from
Maine indicate the difficulties associated with heating oil. Let me
advise the Northeast corridor that there may be higher electric
generation prices coming this summer in their electric bills. Only 3
percent of the Nation's electricity comes from oil-fired generating
plants, but in the Northeast corridor it is much higher. It is
estimated that the older oil-fired plants will have to come online this
summer and the price will go up because they use a uniform price method
to set prices.
In other words, the last energy source that comes online dictates the
price for the other sources and there is a windfall. In other words,
those providing electricity using gas, which is cheaper, charge the
same price as those generating electricity using oil. If I have not
confused the President, I think he has an idea of the point:
Electricity prices will go up in the Northeast.
The Northeast corridor relies 33 percent, I am told, on fuel oil for
its power generation. By some estimates, an oil plant that offered
electricity at $37 per megawatt hour 1 year ago may now seek a price of
$75 or more--assuming fuel is purchased on the open market. It may be
more as owners of oil units are free to ask whatever price desired.
If there were an abundance of power this would not be an issue, but
there is not an abundance of power. It is very likely, according to the
estimates we have received from sources in the industry, that every
kind of generation available will likely be utilized this year in the
Northeast corridor--including fuel-oil units.
The bottom line is that as long as OPEC controls the price of oil and
we allow our domestic production to continue to decline, American
consumers continue to pay the price.
The alternative is clear: We have to reduce our dependence on
imported oil. To do that, we have to go across the breadth of our
energy sources. We have to have the people in the Northeast corridor
recognize the answer to their problem is more domestic production and
less dependence on imported oil. That suggests an aggressive policy of
opening up the overthrust belt in the Rocky Mountains, opening up
Alaska, opening up OCS areas, and do it right, with the technology we
have. Otherwise, this situation will happen again and again and again.
The Northeast corridor will feel it first and foremost.
I thank the Presiding Officer for his patience and diligence in
listening to the presentation.
The PRESIDING OFFICER. The Senator's time has expired. Under the
previous order, the Senator from Illinois, Mr. Durbin, or his designee
is recognized to speak for up to 50 minutes.
Mr. KERREY. Mr. President, I yield such time as necessary for this
presentation.
The PRESIDING OFFICER. The Senator is recognized.
____________________