[Congressional Record Volume 147, Number 18 (Thursday, February 8, 2001)]
[Senate]
[Pages S1225-S1227]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. KERRY (for himself, Mr. Lieberman, Ms. Snowe, Mr. 
        Bingaman, Ms. Landrieu, Mr. Johnson, Mr. Domenici, Mr. Levin, 
        Mr. Wellstone, Mr. Jeffords, Mr. Harkin, Mr. Schumer, Mrs. 
        Clinton, Mr. Kohl, Mr. Edwards, Mr. Leahy, Mr. Baucus, Ms. 
        Collins, Mr. Smith of New Hampshire, Mr. Dodd, Mr. Chafee, and 
        Mr. Bayh):
  S. 295. A bill to provide emergency relief to small businesses 
affected by significant increases in the prices of heating oil, natural 
gas, propane, and kerosene, and for other purposes; to the Committee on 
Small Business.
  Mr. KERRY. Mr. President, today I rise to introduce legislation that 
helps to address the significant price increase of heating fuels and 
the adverse impact those prices are having on our 24 million small 
businesses and the self-employed. I thank my colleagues who are 
cosponsors. Senators Lieberman, Snowe, Bingaman, Landrieu, Johnson, 
Domenici, Levin, Wellstone, Jeffords, Harkin, Schumer, Clinton, Kohl, 
Edwards, Leahy, Baucus, and Collins.
  As so many of my colleagues know, many small businesses are dependent 
upon heating oil, propane, kerosene and natural gas. They are dependent 
either because they sell or distribute the product, or because they use 
it to heat their facilities or as part of their business. The 
significant and unforseen rise in the price of these fuels over the 
past two years, compounded by cold snaps and slowed economic conditions 
this winter, threatens their economic viability.
  The financial falter or failure of small businesses has the potential 
to extend far beyond the businesses themselves, and we simply can't 
afford that.

[[Page S1226]]

Jobs alone make this a reason to mitigate the small business 
disruptions or failures because they provide more than 50 percent of 
private-sector jobs. And the self-employed, who largely work out of 
their homes, and number 16 million according to the National 
Association for the Self-Employed, NASE, represent more than 7 percent 
of the nation's workforce.
  My bill, the Small Business Energy Emergency Relief Act of 2001, 
would provide emergency relief, through affordable, low-interest Small 
Business Administration Disaster loans, to small businesses adversely 
affected by, or likely to be adversely affected by, significant 
increases in the prices of four heating fuels--heating oil, propane, 
kerosene, and natural gas.
  Who are these business owners? They are the self-employed who work 
out of their homes and can't turn down the thermostat to 55 degrees 
while they are at the office from 8 am to 6 pm. They are the home 
heating oil distributers who see the price of their inventory skyrocket 
beyond the reach of their credit lines and cash flows. They are the 
Mom-and-Pop stores, local restaurants and corner cafes that need to 
keep a warm place for folks to enjoy. They are the small day-cares for 
children and nursing homes for the elderly.
  According to Department of Energy statistics, the cost of heating 
fuel has been highly volatile in recent years. For example,
  The cost of heating oil nationally climbed 72 percent from February 
1999 to February 2000.
  The cost of natural gas nationally climbed 27 percent from September 
1999 to September 2000.
  And the cost of propane climbed 54 percent from January 2000 to 
January 2001.
  While these national fluctuations capture the larger market trends, 
they do not demonstrate how some localities have been even harder hit 
by unpredictable and sudden price spikes because of a greater 
dependence on a single fuel, insufficient inventories, distribution 
problems and other reasons. Last year in New England, for example, the 
threat of a relatively common cold winter snap put such serious 
pressure on the insufficient supply of heating oil that Massachusetts 
declared a state of emergency. With consumers at the mercy of a 
market--need up and supply down--the price of heating oil soared. In a 
matter of weeks, the average price per gallon of heating oil fuel went 
up 60 percent, from $1.12 to $1.79. When operating costs rise 
gradually, small businesses have time to plan and adjust their pricing 
and operations accordingly. Rapid shifts in operating costs, however, 
can disrupt a small company's business plans causing short-term cash 
flow difficulties. It is the kind of volatility that can make planning 
month to month as difficult as planning year to year.
  Here's the situation. For those businesses in danger of or suffering 
from significant economic injury caused by crippling increases in the 
costs of heating fuel, they need access to capital to mitigate or avoid 
serious losses. However, commercial lenders typically won't make loans 
to these small businesses because they often don't have the increased 
cash flow to demonstrate the ability to repay the loan. In fact, the 
Massachusetts Oilheat Council in Wellesley Hills, which is a state 
trade association that represents the heating oil industry, and whose 
members deliver more than 60 percent of the heating oil to homes and 
businesses across the state, retailers of heating oil faced not only 
``stretched credit lines'' but even ``negative cash flows.'' Who is 
going to give you a loan when you have a negative cash flow?
  To exacerbate the situation, banks have tightened their lending to 
small businesses by 45 percent over the past three months. According to 
the Federal Reserve Board's quarterly survey on lending practices that 
was released Monday, February 5th, banks surveyed said they have 
tightened credit to small businesses, particularly on riskier loans, by 
making borrowing more expensive and requiring customers to have less 
outstanding debt. They have changed their lending policies because they 
are concerned about ``a less favorable or more uncertain economic 
outlook . . . and a reduced tolerance for risk.'' While the banks say 
that only a handful of borrowers canceled their plans under the 
stricter lending policies, I think the Federal Reserve Board's survey 
reinforces the need for this legislation.

  You see, Mr. President, commercial lenders are unlikely to make the 
type of loans we're talking about without an added incentive, such as a 
Federal loan guarantee. And last year I supported that approach to help 
small businesses deal with the heating oil problem by enlisting the 
SBA, its lending partners, and relevant trade associations to use and 
publicize the SBA 7(a) government guaranteed loan program to make loans 
to affected small businesses. In the 7(a) loan program, the bank makes 
the loan, and the SBA guarantees 75 to 80 percent so that if the 
borrower can't repay the loan, the bank isn't on the hook for every 
outstanding dollar.
  I wrote to the SBA. I called the Massachusetts Bankers Association, 
and I called individual bank presidents and asked them to use this tool 
for affected small businesses and to aggressively market the 
availability of the 7(a) loans and SBA's other programs. Some of the 
publications helped to spread the word, including the Boston Business 
Journal and the Boston Herald. It was a real team effort.
  While tapping into the SBA's guaranteed loan programs was helpful for 
some, and one part of the solution, the heating fuel price spike has 
turned out to be more than a one-year anomaly and so there is a need to 
go a step further--we need to make capital accessible to even more 
small businesses. We can do that through the SBA's Economic Injury 
Disaster Loans.
  Economic injury disaster loans give affected small business necessary 
working capital until normal operations resume, or until they can 
restructure or change the business to address the market changes. These 
are direct loans, made through the SBA, at subsidized interest rates, 
of 4 percent or less, versus the current Federally guaranteed lending 
rate of Prime + 2\1/4\ percent, 10\3/4\ percent on Monday. Paying 4 
percent versus almost 11 percent in interest makes a big difference to 
that small business owner. Further, SBA tailors the repayment of each 
economic injury disaster loan to each borrower's financial capability, 
enabling them to avoid the robbing Peter to pay Paul syndrome, as they 
juggle bills.
  Clearly, these loans are much more affordable for the already 
struggling small businesses, and, since time is of the essence, the 
infrastructure is already in place to quickly distribute the loans. SBA 
delivers disaster loans through four specialized Disaster Area Offices 
located in New York, Georgia, Texas and California. In addition, the 70 
SBA District Offices can help small businesses learn the program and 
direct the paperwork to the disaster offices. And there are the Small 
Business Development Centers in every state, with a network of more 
than 1,000 service locations, the Business Information Centers, and the 
Women's Business Centers to help small businesses seeking information 
about and applying for these loans.
  Building on the SBA's Disaster Loan Program so that small businesses 
adversely affected by the heating fuel prices are eligible to apply for 
economic injury loans complements our efforts last year. I encourage 
SBA's lending partners to continue to publicize and provide guaranteed 
loans to affected small businesses. It creates a comprehensive approach 
to helping small businesses across the nation get the assistance they 
need, and gives us one more way to assist in the success of our small 
businesses. And again, economic injury disaster loans are a reasonable 
approach to the problem.
  By providing assistance in the form of loans which are repaid to the 
Treasury, the SBA disaster loan program helps reduce the Federal 
emergency and disaster costs, compared to other forms of disaster 
assistance, such as grants.
  On practical terms, SBA considers economic injury to be when a small 
business is unable, or likely to be unable, to meet its obligations as 
they mature or to pay its ordinary and necessary operating expenses. To 
be eligible to apply for an economic injury loan, you must be a small 
business, you must have used all reasonably available funds, and you 
must be unable to obtain credit elsewhere.
  Under this program, the disaster must be declared by the President, 
the SBA Administrator, or a governor at

[[Page S1227]]

the discretion of the Administrator. Small businesses will have six 
months to apply from November 1, 2000 or, for future disasters, from 
the day a disaster is declared.
  This legislation will help those who have nowhere else to turn. We've 
got the tools at the SBA to assist them, and I believe it's more than 
justified, if not obligatory, to use the economic injury disaster loan 
program to help these small businesses.
  The volatile price jumps of heating fuels are tied to international 
factors relating to larger energy issues--among them the supply and 
demand of crude oil--and therefore beyond the control of small business 
owners. While you have scholars and industry experts making 
prognostications about whether the price spikes were temporary or here 
for the long haul, I have grown weary of long-term prognostications. As 
Yogi Berra is alleged to have said, ``Predictions are always difficult, 
especially about the future.''
  I believe small business owners can be cautious and budget for the 
proverbial rainy day, but I think it is unreasonable to expect that 
they can anticipate, and afford to budget enough money to cover, price 
jumps of 60 to 100 percent. And who can predict the weather, 
particularly cold snaps during historically mild winter conditions? 
These price spikes are largely unforeseeable, even though there will 
always be the people who say, ``I told you so.''
  Introducing this legislation is only a first step. We need to 
consider it in Committee, Congress to pass it, and the President to 
sign if before it is too late to help struggling small business owners. 
I thank Senator Bond for his cooperation on this legislation, 
particularly his willingness to expedite judicious consideration by the 
Small Business Committee.
  I urge my colleagues to support this legislation. SBA's programs make 
recovery affordable, and with the right support, can help mitigate the 
cost of significant economic disruption in your states caused when 
affected small businesses falter or fail, leading to job lay-offs and 
unstable tax bases.
  I ask unanimous consent that the text of the bill and a letter to 
Aida Alvarez be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                 S. 295

       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 ``Small Business Energy 
     Emergency Relief Act of 2001''.

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) a significant number of small businesses in the United 
     States use heating oil, natural gas, propane, or kerosene to 
     heat their facilities and for other purposes;
       (2) a significant number of small businesses in the United 
     States sell, distribute, market, or otherwise engage in 
     commerce directly related to heating oil, natural gas, 
     propane, and kerosene; and
       (3) sharp and significant increases in the price of heating 
     oil, natural gas, propane, or kerosene--  
       (A) disproportionately harm small businesses dependent on 
     those fuels or that use, sell, or distribute those fuels in 
     the ordinary course of their business, and can cause them 
     substantial economic injury;
       (B) can negatively affect the national economy and regional 
     economies;
       (C) have occurred in the winters of 1983-1984, 1988-1989, 
     1996-1997, and 1999-2000; and
       (D) can be caused by a host of factors, including global or 
     regional supply difficulties, weather conditions, 
     insufficient inventories, refinery capacity, transportation, 
     and competitive structures in the markets, causes that are 
     often unforeseeable to those who own and operate small 
     businesses.

     SEC. 3. SMALL BUSINESS ENERGY EMERGENCY DISASTER LOAN 
                   PROGRAM.

       Section 7(b) of the Small Business Act (15 U.S.C. 636(b)) 
     is amended by inserting after paragraph (3) the following:
       ``(4)(A) In this paragraph--
       ``(i) the term `heating fuel' means heating oil, natural 
     gas, propane, and kerosene; and
       ``(ii) the term `sharp and significant increase' shall have 
     the meaning given that term by the Administrator, in 
     consultation with the Secretary of Energy.
       ``(B) The Administration may make such disaster loans, 
     including revolving lines of credit, either directly or in 
     cooperation with banks or other lending institutions through 
     agreements to participate on an immediate or deferred basis, 
     to assist a small business concern that has suffered or that 
     is likely to suffer substantial economic injury as the result 
     of a sharp and significant increase in the price of heating 
     fuel.
       ``(C) A small business concern described in subparagraph 
     (B) shall be eligible to apply for assistance under this 
     paragraph beginning on the date on which the sharp and 
     significant increase in heating fuel cost occurs, as 
     determined by the Administration, and ending 6 months after 
     that date.
       ``(D) Any loan or guarantee extended pursuant to this 
     paragraph shall be made at the same interest rate as economic 
     injury loans under paragraph (2).
       ``(E) No loan may be made under this paragraph, either 
     directly or in cooperation with banks or other lending 
     institutions through agreements to participate on an 
     immediate or deferred basis, if the total amount outstanding 
     and committed to the borrower under this subsection would 
     exceed $1,500,000, unless such applicant constitutes a major 
     source of employment in its surrounding area, as determined 
     by the Administration, in which case the Administration, in 
     its discretion, may waive the $1,500,000 limitation.
       ``(F) For purposes of assistance under this paragraph--
       ``(i) a declaration of a disaster area shall be required, 
     and shall be made by the President or the Administrator; or
       ``(ii) if no declaration has been made pursuant to clause 
     (i), the Governor of a State in which a sharp and significant 
     increase in the price of heating fuel has occurred may 
     certify to the Administration that small business concerns 
     have suffered economic injury as a result of such increase 
     and are in need of financial assistance which is not 
     available on reasonable terms in that State, and upon receipt 
     of such certification, the Administration may make such loans 
     as would have been available under this paragraph if a 
     disaster declaration had been issued.''.

     SEC. 4. GUIDELINES.

       Not later than 30 days after the date of enactment of this 
     Act, the Administrator of the Small Business Administration 
     shall issue such guidelines as the Administrator determines 
     to be necessary to carry out this Act and the amendments made 
     by this Act.

     SEC. 5. EFFECTIVE DATE.

       The amendments made by this Act shall apply to economic 
     injury suffered or likely to be suffered as the result of 
     sharp and significant increases in the price of heating fuel 
     occurring on or after November 1, 2000.
                                  ____

                                                      U.S. Senate,


                                  Committee on Small Business,

                                 Washington, DC, January 31, 2000.
     Hon. Aida Alvarez,
     Administrator, Small Business Administration,
     Washington, DC.
       Dear Administrator Alvarez: I am writing to urge immediate 
     action on a critical problem facing small businesses in the 
     Northeast that deliver home heating oil. As you may know, the 
     price of home heating oil has increased dramatically in 
     recent weeks--as much as 80 to 100 percent in certain areas--
     creating a tremendous burden on the financial resources of 
     several small companies. Many of these businesses do not have 
     the credit lines or cash flow to compensate for the price 
     increase and are in dire need of assistance.
       As a general matter, home heating oil distributors develop 
     seasonal business plans, including credit lines, based on 
     anticipated oil prices, customer demand, customer repayment 
     schedules and obligations to repay suppliers. However, the 
     surge in heating oil prices exceeds what most businesses 
     could have possibly anticipated, and it has placed a 
     tremendous strain on several companies' cash-flow. 
     Compounding this problem is the fact that the repayment 
     schedules to pay suppliers is often considerably shorter than 
     the repayment schedules for customers. This problem is 
     becoming acute and is threatening the financial viability of 
     many small businesses in the home heating oil market place. 
     The financial failure of these small businesses has the 
     potential to extend far beyond the businesses themselves if 
     the delivery of the fuel to commercial and residential 
     consumers is disrupted.
       SBA, with its network of district offices in every state, 
     is uniquely situated to respond quickly to this situation. On 
     behalf of the businesses and consumers affected by this 
     current price spike, I ask that you immediately start working 
     with SBA-participating lenders in affected states to expedite 
     short-term loans to credit-worthy home heating oil dealers.
       Thank you for your immediate attention to this problem. I 
     am ready to facilitate this assistance in any way I can.
           Sincerely,
                                                    John F. Kerry.
                                 ______