[Congressional Record Volume 151, Number 90 (Thursday, June 30, 2005)]
[House]
[Pages H5570-H5577]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EXPRESSING THE SENSE OF THE HOUSE THAT A CHINESE STATE-OWNED ENERGY
COMPANY COULD TAKE ACTION THAT WOULD THREATEN THE UNITED STATES
Mr. NEY. Mr. Speaker, I move to suspend the rules and agree to the
resolution (H. Res. 344) expressing the sense of the House of
Representatives that a Chinese state-owned energy company exercising
control of critical United States energy infrastructure and energy
production capacity could take action that would threaten to impair the
national security of the United States.
The Clerk read as follows:
H. Res. 344
Whereas oil and natural gas resources are strategic assets
critical to national security and the Nation's economic
prosperity;
Whereas the global demand for oil and natural gas is at the
highest levels in history;
Whereas the global excess capacity of oil production, at
between 1,500,000 and 2,000,000 barrels per day, is at its
lowest level in the past several decades, contributing to
world oil prices reaching historic highs of above $60 per
barrel;
Whereas natural gas globally is the fastest growing
component of primary energy consumption, projected to
increase by nearly 70 percent by 2025;
Whereas the National Security Strategy of the United States
approved by President George W. Bush on September 17, 2002,
concludes that the People's Republic of China remains
strongly committed to national one-party rule by the
Communist Party;
Whereas China's daily consumption of crude oil grew by
nearly 850,000 barrels in 2004, accounting for more than one-
third of the increase in world demand for oil in 2004;
Whereas China's consumption of crude oil is expected to
grow by an additional 7.5 percent in 2005, and world oil
prices are projected to rise significantly as a result of
increasing demand from China for oil;
Whereas notwithstanding the increasing demand from China
for oil, domestic Chinese output of oil has remained
relatively stagnant;
Whereas on June 23, 2005, the China National Offshore Oil
Corporation (CNOOC) announced its intent to acquire Unocal
Corporation, in the face of a competing bid for Unocal
Corporation from Chevron Corporation;
Whereas the People's Republic of China owns approximately
70 percent of CNOOC;
Whereas a significant portion of the CNOOC acquisition is
to be financed and heavily subsidized by banks owned by the
People's Republic of China;
Whereas Unocal Corporation is based in the United States,
and has approximately 1,750,000,000 barrels of oil
equivalent, with its core operating areas in Southeast Asia,
Alaska, Canada, and the lower 48 States;
Whereas CNOOC has made various representations about its
intention to sell oil developed in the Gulf of Mexico to the
United States, but has not made any commitment to sell other
natural gas and oil it develops into global energy markets
instead of shipping it directly to China;
Whereas a CNOOC acquisition of Unocal Corporation would
result in the strategic assets of Unocal Corporation being
preferentially allocated to China by the Chinese Government;
Whereas a Chinese Government acquisition of Unocal
Corporation would weaken the ability of the United States to
influence the oil and gas supplies of the Nation through
companies that must adhere to United States laws;
Whereas Unocal Corporation was responsible for the
production of energy equivalent to approximately 411,000
barrels of oil per day in 2004, which is approximately one-
third of all global excess oil production capacity;
Whereas CNOOC's control of Unocal Corporation's productive
capacity would mean control of approximately one-third of all
global excess oil production capacity;
Whereas the petroleum sector uses a range of sensitive
technologies for exploration (such as seismic analysis and
processing, downhole logging sensors, and modeling software),
production, and refining (such as processing technologies and
equipment), including technologies that have ``dual-use''
commercial and military applications;
Whereas several of the technologies used in oil and energy
production require export licensing for export from the
United States to China;
Whereas the CNOOC acquisition of Unocal Corporation could
provide access to Unocal Corporation's sensitive dual-use
technologies that the United States would otherwise restrict
for export to China;
Whereas oil companies owned by the People's Republic of
China are active in parts of the world, such as Sudan and
Iran, that are subject to United States sanctions laws, and
the national security of the United States is threatened by
the export of sensitive, export controlled, and dual-use
technologies to such countries;
[[Page H5571]]
Whereas barriers to the ability of the United States
Government to enforce export controls and sanctions could
pose a direct threat to the national security of the United
States; and
Whereas section 721 of the Defense Production Act of 1950
(50 App. U.S.C. 2170) authorizes the President to suspend or
prohibit any foreign acquisition, merger, or takeover of a
United States corporation that threatens the national
security of the United States, if the President finds that
``there is credible evidence that leads the President to
believe that the foreign interest exercising control might
take action that threatens to impair the national security''
and other provisions of law ``do not in the President's
judgment provide adequate and appropriate authority for the
President to protect the national security'': Now, therefore,
be it
Resolved, That it is the sense of the House of
Representatives that--
(1) the Chinese state-owned China National Offshore Oil
Corporation, through control of Unocal Corporation obtained
by the proposed acquisition, merger, or takeover of Unocal
Corporation, could take action that would threaten to impair
the national security of the United States; and
(2) if Unocal Corporation enters into an agreement of
acquisition, merger, or takeover of Unocal Corporation by the
China National Offshore Oil Corporation, the President should
initiate immediately a thorough review of the proposed
acquisition, merger, or takeover.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Ohio (Mr. Ney) and the gentlewoman from Michigan (Ms. Kilpatrick) each
will control 20 minutes.
The Chair recognizes the gentleman from Ohio (Mr. Ney).
Mr. NEY. Mr. Speaker, I yield myself 3 minutes.
Mr. Speaker, I rise today in support of House Resolution 344,
introduced by the gentleman from California (Mr. Pombo), and urge its
immediate adoption.
Briefly, this resolution asks that the President initiate a thorough
review of any potential takeover of Unocal Corporation by the Chinese
National Offshore Oil Company as soon as any agreement of such a
takeover is announced, on the grounds that such a purchase could
threaten the national security of the United States.
Mr. Speaker, at a time of rising prices on global oil supplies, ready
access to energy resources is a vital element to our economic security.
It is imperative that the United States protect its access to Unocal's
energy resources in order to protect our economy and our national
security.
Just as importantly, Mr. Speaker, I and many Members are extremely
skeptical of assurances that the Chinese oil company executives have
sought to offer that they would dedicate any oil production from this
region to consumption in the United States.
Mr. Speaker, we know from a number of past experiences that the
Chinese do not look at trade the same way we do, that agreements made
or treaties signed are more of a starting point for negotiation than
documents that must be adhered to. Especially in this purchase, the
Chinese company and the Chinese government are not playing fair. This
company is 70 percent owned by the Chinese government, is said to be
receiving more than a quarter of the funding of its bid for Unocal at
zero percent or at highly subsidized interest rates.
Mr. Speaker, American companies who are interested in buying Unocal
cannot get funding deals like that. They borrow on the open,
nonsubsidized credit market, or they would be able to offer a few
billion dollars more in an instance like this. I call that an unfair
trade practice, and a good enough reason for the deal to be waved off
all by itself.
But, Mr. Speaker, there is a much more serious reason to be skeptical
of this proposed purchase, and it is for that reason I support this
resolution.
In my view, a purchase of Unocal by a company that the Communist
government of China controls, a government that is one of our major
trading partners but also one of our major trade competitors, threatens
the national security of this country by holding out the prospect that
every drop of oil, every unit of natural gas produced by that company
could end up being shipped to China.
We are all reminded every time we go to the gas pump what has
happened to the price of oil recently, and if the Chinese shut off the
Unocal tap, the United States supply of oil would be that more scarce
and a gallon of gas or heating oil that much more expensive.
You only need 2 numbers to understand how serious this problem
potentially could become: the global excess capacity of oil production
right now is estimated to be just 1.5 to 2 million barrels of oil a
day, the lowest in the past several decades. Compare that to this: last
year, China's increase in demand for crude oil is said to have been
850,000 barrels a day, with the demand expected to grow another 7.5
percent this year alone.
Mr. Speaker, the Chinese economy is inhaling oil, and a lot of other
commodities, at a staggering rate. How can we imagine that a
government-owned oil company will not send its fuel to feed that
government's economy, and not our own?
Mr. Speaker, I urge support of this resolution that is so needed.
Mr. Speaker, I reserve the balance of my time.
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield myself such time as
I may consume.
I rise in support of the resolution. The House went on record earlier
today in a strong, bipartisan way, to support that we would, first of
all, make sure that CFIUS, which is the Committee on Investments in the
United States chaired by the Secretary of the Treasury Snow, that we go
on record making sure that we not spend money at this time for a
Chinese company that is Communist-owned by the Communist government to
take over our ninth largest oil company. The Congress has spoken, and
we are happy that we did so in a loud, strong voice.
The sense of the Congress resolution before us is one that we also
support. General Motors is losing technology to China, and it is
costing the company $12 billion a year. Intellectual property rights
are not being protected, and China has been abusing those rights.
We must protect American business, and we must do what is necessary.
So, I am proud of the Congress and the gentleman from California (Mr.
Pombo) for introducing this resolution that we also further state our
strong support for not allowing the sale to go through.
Mr. Speaker, I reserve the balance of my time.
Mr. NEY. Mr. Speaker, I yield 2 minutes to the Chairman of the
Committee on Energy and Commerce, the gentleman from Texas (Mr.
Barton).
(Mr. BARTON of Texas asked and was given permission to revise and
extend his remarks.)
Mr. BARTON of Texas. Mr. Speaker, I thank the gentleman for yielding
me this time.
Mr. Speaker, I rise in strong support of this resolution, and I am
proud to be one of the original cosponsors. I would like to point out a
couple of problems with the proposed transaction.
Number one, if Unocal was trying to buy the Chinese National Offshore
Oil Company, they could not do it, because Chinese law does not allow a
foreign company to have a controlling interest in a company in China.
That is one problem.
Number two, CNOOC is a front company for the Communist Chinese
government. Seventy percent of the equity in the company is owned by
the Communist Chinese government. The money that is going to be used to
buy Unocal comes from the Communist government in the form of a loan.
This loan almost doubles the total amount of debt; in fact, it over-
doubles the total amount of debt that the company currently has.
Number three, if we wanted to sell our products in China, under
current law, that probably would not be allowed. So I am in strong
support of this resolution.
I chair the committee that has jurisdiction over the Committee on
Foreign Investment of the United States, CFIUS, and I plan to hold a
hearing on this when we get back sometime in the very near future,
after the July Fourth recess. There is no reason that we cannot find a
buyer for Unocal that meets all of the tests that a company in the
United States would have to meet.
So I am in strong support of this resolution, and I hope all Members
of the House of Representatives will support it.
Ms. KILPATRICK of Michigan. Mr. Speaker, at this time, I yield 3
minutes to the gentleman from Virginia (Mr. Moran).
Mr. MORAN of Virginia. Mr. Speaker, I thank the gentlewoman for
yielding me this time.
[[Page H5572]]
I do not have any objection to a review of this contract, and I
certainly understand the domestic politics, but I think we need to be
fully aware of two things about this: how China is able to purchase
UNOCAL, and why they need to.
The how is all about what we have done to ourselves. With $9 trillion
of public debt outstanding, somebody has to buy it, and 44 percent of
our Treasury debt, I say to my colleagues, is foreign-owned. The
fastest-growing component of that foreign ownership is in China, and it
is a darn good thing for us that they are buying it, because if they
were not, our interest rates would be much higher than they are today.
They are keeping our interest rates low, but it does not come for free.
The fact is, if we say that they cannot use that money legally to
purchase assets, to give 16+ billion to American shareholders in return
for a corporate asset, what are they likely to do? They are going to
say this currency is not as valuable to us as it is to other people in
other countries, so we are going to have to dump this, and imagine what
that would mean. They are holding a financial guillotine over the neck
of our economy, and they will let it drop if we do things like this
that are not well-considered.
Now, the why. They desperately need energy to keep their economy
sustained, but if we do not let them invest in western firms, what are
they going to do? They are going to invest more capital in Iran, in
Sudan; they are going to make those governments even stronger than they
are today and a much greater threat to us. So think seriously about
this.
Now, the reality is that UNOCAL only produces about 1 percent of our
oil and gas production, and they intend to market that and continue
providing that to the United States. Also bear in mind, though, that
American oil companies have a whole lot of drilling rights and oil
reserves off the coast of China. We have an investment all over the
world, and when we start with these kinds of resolutions, start
deciding, well, we are not going to let the market work, we are not
going to let free enterprise control this, this is not truly a globally
free economy if it is not completely to out liking. We are going to
treat China differently.
I cannot stand State-controlled economies. But when we start doing
things like this, there are ramifications that we have not thoroughly
thought out, and I think we need to be very careful about passing
resolutions like this.
Again, I understand the domestic politics, I understand why we do not
want State-owned companies controlling American oil companies, but I
also understand why China is doing this. Their CEO was educated in the
United States. They will keep all of UNOCAL's employees. Chevron plans
to save millions by firing most of them. This is one of the better-run
Chinese companies. Ultimately what they are proposing is much more in
our interests than the alternatives also available to them. So let us
fully consider this before we pass this resolution. I'm voting no.
Mr. NEY. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. Hunter), the chairman of the Committee on Armed
Services.
Mr. HUNTER. Mr. Speaker, I thank the gentleman for yielding me this
time.
I support the attempt to block this sale. This sale involves a
strategic asset and, more importantly, a strategic lever for Communist
China. Our policy for the last many years has been to deter the Chinese
government in Beijing from ever coming into the position where they
thought they had enough leverage over the U.S. to cross the Straits of
Taiwan. This would be a major lever that would accumulate to the
Chinese Communist government on top of the Sovereign class missile
cruisers that they have acquired, on top of the MiG fighter production
that they have acquired, on top of the other acquisitions of major U.S.
economic interests.
{time} 2045
I hope everyone votes against this, votes to block this important
transfer of a strategic asset to, and make no mistake about it, the
communist government, not a private entity, but the communist
government of China.
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield 1\1/2\ minutes to
the gentleman from Massachusetts (Mr. Capuano), a member of the
committee.
Mr. CAPUANO. Mr. Speaker, this is a good resolution, and I support
it, and the issue is important. However, I just wanted to stand tonight
to point out the fact that we are really just talking about the tail.
This is not the dog; it is simply the tail. It is important. I do not
want to minimize it. But the truth is we are talking a $16 billion sale
most of which will go to American shareholders.
However, what we are not talking about is the elephant in the room
where right now as of today, after 4\1/2\ years of this administration,
we currently owe China $277 billion. That is what we owe them right
now. That is a 257 percent increase over 4\1/2\ years ago. We are going
to have a 40-minute debate tonight on this particular issue. In that 40
minutes, on average, over the last 4\1/2\ years, America will have
borrowed $3 million from China. By the time we are finished talking, we
will owe them another $3 million. I do not want to pick on China. China
is only one of the issues. It is not the only country.
In the last 4\1/2\ years, 84 percent of all debt sold, all private
debt sold by the United States Government has been sold to foreign
governments and foreign corporations of which China is only the second
largest.
To me this is an important issue. I support it. I am glad we are
taking action. But more importantly, we had better wake up. We are
sending too many jobs, too much money, too much economic power
overseas. China is only one of them. But they are a large one. I just
wanted to use this opportunity to make sure that we know this is only
the beginning. It is not the end.
Mr. NEY. Mr. Speaker, I yield 1 minute to the gentleman from North
Carolina (Mr. Hayes).
Mr. HAYES. Mr. Speaker, I rise in strong support of the resolution.
This legislation is going to send a much needed strong signal to China.
We do not support government-sponsored acquisitions of American
corporations that clearly threaten our national security. I am
extremely concerned at CNOOC's proposal to buy Unocal, one of our
Nation's leading independent natural gas and crude oil exploration
companies. The Chinese Government owns over 70 percent of the China
National Offshore Oil Corporation.
This is frightening. China is the second largest consumer of energy
in the world behind the U.S. China's only desire to purchase this
energy company is to meet the demands of their ever-growing population
and economy. We cannot let this purchase move forward. What type of
precedent would it set? What would the Chinese take next? They have
already taken the textile industry jobs, thousands of jobs from other
business, whether it is currency manipulation, the intellectual
property rights or even government subsidies. China does not play by
the rules. Why in the world would we expect them to do so now?
Folks, this is a no-brainer. It is time for America to take a stand
and say no. We have suffered too much. We cannot allow the Chinese to
lock into one of our most precious resources and leave our Nation
vulnerable.
Support the resolution. I commend the gentleman from California (Mr.
Pombo). Stop this move now.
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield 3 minutes to the
gentleman from Oregon (Mr. Blumenauer).
Mr. BLUMENAUER. Mr. Speaker, I appreciate the gentlewoman's courtesy
in permitting me to speak on this bill. There are a number of things in
here that I have no objection to, that I think we should do in terms of
preserving our national security.
But what is striking about H. Res. 344 is that it basically misses
the point. It is inadequate. It talks about only a little bit of the
equation.
The problem that we have now is first, we have a reckless fiscal
policy in this country aided and abetted by this Congress. We are as
addicted to the Chinese loans, to their credit to us, as we are to
Saudi oil. Nothing in this resolution talks about getting our fiscal
house in order. What would happen if instead of using their money that
we have given them to purchase this oil company, what if they purchased
something in another area or if they start
[[Page H5573]]
dumping our bonds. What would happen to interest rates and the problems
in this country?
It is also interesting that the resolution talks about the Chinese
oil supply being stagnant in terms of their domestic production. Our
supply in the U.S. is not just stagnant; it is going down. Even if you
suck the entire oil supply out of the Arctic wildlife refuge and
threaten our offshore areas with drilling, we are still in decline.
This resolution does not talk about energy independence for the
United States. In fact, the Republican majority's energy bill,
according to the Department of Energy, is going to increase our
dependence on foreign imported oil by 75 percent. Interesting. We have
gone from a one-third in the 70s, 56 percent imported today, it will be
68 percent in 2025; yet the best that my friends in the majority can do
is bash China a little bit and not do anything about our oil addiction,
not do anything about diversifying our sources of energy, not do
anything about the reckless fiscal policy that puts us at their mercy.
As my colleague from Virginia pointed out, 44 percent of our debt is
foreign owned, an increasing percentage from China. Our addiction to
things from Wal-Mart means that it is going to be more the case in the
future.
What are the Chinese doing? They are diversifying their supply. They
are taking some of the money we have given them to invest. They are
increasing the energy efficiency of their cars, something that, sadly,
the Republican energy bill does not allow in any meaningful way.
I would suggest, ladies and gentlemen, that you can examine the
national security implications of dual-use technology. That is fine.
But what really has us at risk is that we are addicted to imported oil,
wasting energy and a reckless fiscal policy. This resolution is
completely beside the point on these critcial factors.
Mr. NEY. Mr. Speaker, I yield 3 minutes to the gentleman from Arizona
(Mr. Hayworth).
(Mr. HAYWORTH asked and was given permission to revise and extend his
remarks.)
Mr. HAYWORTH. Mr. Speaker, I had hoped to come to the well to speak
on a bipartisan resolution. Given the preceding remarks from the well,
it may be difficult for international observers to detect the
bipartisanship. Rather than succumb to the temptation of snappy
rejoinders in the field of domestic political debate, rather than use
this time as a pretext for a campaign screed that would criticize the
opposing party instead of deal with the resolution at hand, rather than
rephrase history about troubling campaign donations that emanated from
the People's Republic of China, perhaps it is best, Mr. Speaker, to
deal with the resolution at hand, and find some common agreement, apart
from the grandstanding and campaigning that is so easily enjoined.
Fact number one: just as Dwight Eisenhower warned America about the
growing influence of a military industrial complex, the fact is, there
is a political business military complex in the martial markets of
communist China. What do I mean by that? The communist Chinese do not
enjoy free markets. They, instead, have a program of martial markets.
American investment is kept in minority status; and every application,
from the most innocuous widget to the fried chicken drumstick,
eventually brings proceeds to the Chinese Red Army. And now we have the
most graphic example, where the Chinese-owned energy company, with
government, Communist government investment, seeks to buy an American
oil company.
It has been said that information is power. Energy literally is
power. Early in the 21st century, though we may look to new
technological advantages, the fact is this: a nation that surrenders
its energy concerns, its energy technology is a nation inviting
vulnerability. And so I would enjoin Members of this House, Mr.
Speaker, as tempting as political debate and one-upsmanship might be,
not to succumb to the temptation, not to stand as Republicans or
Democrats or Independent or Libertarians or vegetarians, but to stand
as Americans. Support this resolution because we dare not yield our
energy future to the Communist Chinese.
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield 3 minutes to the
gentlewoman from Ohio (Ms. Kaptur).
Ms. KAPTUR. Mr. Speaker, I thank the gentlewoman from Michigan (Ms.
Kilpatrick) for yielding 3 minutes to me and wish to rise in support of
the resolution, but also to compliment the gentlewoman from Michigan
for successfully passing an amendment this afternoon that stopped this
merger by claim with Unocal from going through. That is in the base
bill that we were debating for the entire day.
This resolution is helpful. It gives us a sense of the Congress that
the U.S. does not want to lose her strategic energy edge. But this July
4th weekend, it is important for America to think about our
independence, indeed, our diminishing independence due to imported
petroleum. It is the largest share of our trade deficit with the world;
63 percent of what fuels this economy has to be imported.
Yes, America has lost her independence, and under this President, it
is 7 percent worse than it was before he took office now, with the cost
of a barrel of oil over $60 and gas at the pump $2.50 and rising all
over this Nation.
So what are the Chinese trying to do? They are trying to trump our
strategic edge over in Afghanistan now, because the Unocal pipeline
running through Afghanistan has all that natural gas just ready to
flow, but it is right on the border of China. So China has been very
smart with the money she has earned off this market. She is buying
pieces of us or what some claim to be ``U.S. companies,'' but in
actuality they have their assets spread all over the world. It's no
secret we have pumped ourselves dry except for what is left up in
Alaska.
And so we ask ourselves what is going on here? What is going on here
is America is losing her independence, starting with petroleum. The
Chinese need petroleum too. What America needs is energy independence
here at home and the sooner we realize that, the fewer resolutions we
would need to try to interfere with the free market. But you know what?
We do not have any more choice, because we expect we will be 75 percent
dependent on petroleum if this Congress does not trump this President
of the United States and produce a real energy bill that will put us on
the road to true energy independence. We need new biofuels, new energy
from fuel cells, from hydrogen, from solar, from renewables, from all
kinds of new energy sources that should be tapped and built in this
country.
Meanwhile, we sort of have to limp our way across the finish line on
this July 4th celebration and admit America is losing her energy edge
around the world. We should not be dependent. We should not have to
kneel down in front of the Chinese, the Communist Chinese, vegetarians
as Mr. Watt referenced, or anyone else. We should become energy
independent here at home. This resolution points us in the only
direction open to us now. The gentlewoman from Michigan's amendment
earlier in the day hit a real home run in blocking the merger. We
compliment her for her excellent work.
Mr. NEY. Mr. Speaker, I yield 1 minute to the gentleman from Illinois
(Mr. Kirk).
Mr. KIRK. Mr. Speaker, both The Wall Street Journal and the New York
Times agree, a rare event, that we should not interfere with free
markets in this way. America stands for freedom, and that means not
just voting for who we want, speaking the way we want, but also the
right to buy and sell from whoever we wish.
I remember when Japanese investors moved to buy Rockefeller Center,
at inflated prices, and many in this body wanted to stop that deal. We
did not. And only a few years later the Japanese sold it back to the
United States for pennies on the dollar. Bottom line, we made a
killing. And Americans are better off for letting the market work.
If we take this action, China could rightfully cancel American
investments in China now totaling $25 billion. Wal-Mart, Conoco,
Motorola, United Air Lines all bought companies in China and should be
allowed to do so.
{time} 2100
We should recover the conviction of our own convictions, especially
in our Republican party, to make sure we let the market work and let
efficiency and fair play rule the day.
[[Page H5574]]
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield 3 minutes to the
gentleman from Louisiana (Mr. Jefferson).
(Mr. JEFFERSON asked and was given permission to revise and extend
his remarks.)
Mr. JEFFERSON. Mr. Speaker, I will enter into the Record a letter
that a number of us in this House wrote to the Secretary of the
Treasury with respect to this transaction.
I am one who has supported free trade since I have been in the
Congress and I support it today. If it were true that this were a
market-based transaction, as the preceding speaker has said, I would
not be standing here talking about this issue whatsoever. The fact of
this is this is not a free market transaction. This is a transaction by
a government-owned company, financed by the government of China,
financed with subsidies with the government of China and it puts every
other competitor for the assets that they are seeking to acquire at a
disadvantage.
There are substantial questions here about the motives of the Chinese
as well. I have been dealing with oil and gas issues for a very long
time as a representative from Louisiana, and ordinarily one thinks of
the oil and gas market as one where free commodities move and oil is a
very fungible commodity. But what we have here is a Chinese government
with an accelerating demand for oil and gas trying to find a way to
corner a market here and to put it to their exclusive use. This is
unheard of in the oil and gas commodities market.
No one ever thinks that one explores for oil and then uses the oil
only in the place where they have their own demand and not make it
available to the rest of the world. That is the scary part of what is
happening here.
As China seeks more and more assets that they themselves control and
they themselves corner, it makes it much more difficult for us to argue
that this is a free economy, a market-based economy. That is the real
reason I have come to this microphone tonight.
I think it is important to support this resolution, and I think the
actions we are taking today by the Congress were appropriate to be
taken. I think the warning signs that are going up from this House
about the Chinese government's interest in cornering the market on a
strategic asset such as petroleum today, is a dire warning indeed and
one we should take heed of.
So I urge the Members of the House and all who are within the sound
of our voice to take heed of this warning and to support this important
resolution.
Congress of the United States,
Washington, DC, June 24, 2005.
Hon. John W. Snow,
Secretary of the Treasury, Department of the Treasury,
Washington, DC.
Dear Mr. Secretary, Energy security is a matter of
significant and ever increasing importance for the United
States. In particular, we are very concerned about China's
ongoing and proposed acquisition of energy assets around the
world, including assets of U.S.-based energy and oil
companies.
China is now the second largest consumer of energy in the
world, right behind the United States. In order to fulfill
the energy consumption requirements of its growing
population, China has developed an aggressive strategy to
acquire offshore assets to supplement its limited domestice
supply of resources. It will become increasingly difficult
for U.S.-based companies to compete for scarce energy
resoures on the world market against China's state-owned and/
or controlled energy companies.
To that end, we are very concerned to read reports that the
China National Offshore Oil Corporation (CNOOC)--whose
majority owner is the Chinese government--is planning to make
an offer to acquire one of America's leading independent
natural gas and crude oil exploration and production
companies. Moreover, it is our understanding that two
influential Chinise government agencies have reportedly given
tentative approval to this acquisition by CNOOC.
As you are aware, the Committee on Foreign Investment in
the United States (CFIUS) was established to monitor the
impact of foreign investment in the United States and to
coordinate the implementation of U.S. policy on foreign
investment. In 1988, CFIUS was given additional authority
under Section 721 of the Defense Production Act of 1950 (the
Exon-Florio Amendment) to authorize the President to conduct
investigations to determine the impact of foreign
acquisitions of U.S. companies on national security.
Given what we know about CNOOC to date, we think this
potential transaction should be reviewed immediately by CFIUS
to investigate the implications of the acquisition of U.S.
energy companies and assets by CNOOC and other government
controlled Chinese energy companies. As the official chair of
CIFUS, we would request that the Treasury Department look
into this proposed acquisition to determine whether an
official CFISUS investigation should be undertaken should an
official offer come from CNOOC. Specifically, the CFIUS
should review the following issues, among others:
Whether and to what extent the Chinese government is
involved in financing any potential acquisitions by CNOOC;
Whether such investments by CNOOC are market-based and free
of subsidies;
Whether there are technology transfer implications of these
investments that present national security concerns; and
How CNOOC investments in the U.S. energy sector and
acquisitions of U.S.-based energy and oil companies advance
China's energy agenda to the detriment of U.S. national
security objectives.
Mr. Secretary, we know that you understand well the
critical importance of ensuring U.S. energy security and the
critical need to secure the future availability of energy
resources for American consumers. We ask that you treat this
matter with the utmost urgency and report back to us with
yout findings.
Sincerely,
William J. Jefferson, Al Green, Dana Rohrabacher,
Edolphus Towns, Sheila Jackson-Lee, Roger Wicker, Bobby
Jindal, Kevin Brady, Michael Rogers of Michigan, Joseph
Crowley, Devin Nunes, Ginny Brown-Waite, Richard Baker,
George Radanovich, Ellen Tauscher, Gary Miller.
Gregory Meeks, Gene Green, Darrell Issa, Frank Wolf,
Barbara Cubin, Charlie Melancon, Ted Strickland, Geoff
Davis, Gene Taylor, Ralph Hall, Bill Jenkins, Wally
Herger, Charles Boustany, Walter Jones, John Tanner,
Bart Gordon.
John Shimkus, Michael Burgess, Paul Gillmor, Lincoln
Davis, Ted Poe, J.D. Hayworth, Jim Walsh, Bob
Goodlatte, Donald Manzullo, Roy Blunt, John Sullivan,
Bernard Sanders, Collin C. Peterson, Roscoe G.
Bartlett, John Doolittle, Peter T. King.
John J. Duncan, Jr., Bart Stupak, Dennis Cardoza, Thomas
Reynolds, Eric Cantor, Carolyn Kilpatrick, Darlene
Hooley, Mary Bono, Mark Foley, Robin Hayes, Tom
Tancredo, Ken Calvert, Melissa Hart, Mark Souder, Jo
Ann Davis, Michael Rogers of Alabama.
Mr. NEY. Mr. Speaker, I yield 6 minutes to the gentleman from
California (Mr. Pombo), the chairman of the Committee on Resources.
Mr. POMBO. Mr. Chairman, I thank the gentleman for yielding me time.
First of all, I want to thank the gentleman from Louisiana (Mr.
Jefferson) for the work he has put in to this issue and for the tone
that he used in this debate. This is an important issue and it never
ceases to amaze me to see that Members come to the floor and try to
make it a partisan issue and try to complicate what is already a very
complicated issue.
This is not about free trade or free markets. If it was it would be a
very different debate. If we were talking about Exxon and Chevron or BP
competing to buy Unocal, that would be a completely different debate.
What we are talking about is a company that is 70 percent owned by
the Communist government of China, competing against a U.S. company to
purchase a U.S.-based energy company. That is not free market. And no
matter how you twist or turn or try to make this sound good, that is
not free market. That is free market competing against the Communist-
financed company. That raises concerns just because of that.
But let us look at it a little bit more and look at the assets of the
company they are trying to buy. They are trying to buy a major U.S.
energy provider. That is a major concern. In the world today, in the
world market today we are near an energy crisis. We are almost equal in
terms of supply and demand, and that is why the price of oil has gone
up dramatically. The U.S. economy is growing. The Chinese economy is
growing. The Indian economy is growing. The Brazilian economy is
growing. All of these different economies are growing and they are
competing for the same source of energy. And that has caused energy
prices to go up worldwide.
Now, I tell my colleagues, you have got to wake up here. This is a
wake-up call to all of us, to America and to us here, the Chinese have
figured out that in order for their economy to grow, they need a safe,
dependable supply of energy, primarily oil, coming into their market,
in order for their economy to continue to grow. That is how you grow
your economy. It is based on energy.
What are we doing to increase our domestic energy supplies? What are
we
[[Page H5575]]
doing to provide a greater amounts of a safe, dependable supply of
energy into this country? We have been trying to pass an energy bill
for 5 years. Wake up. It is time for us to get together and figure out
what our energy future is. We cannot, in my opinion, we cannot afford
to have a major U.S. energy supplier controlled by the Communist
Chinese. But what we are asking for in this resolution is for the
President, for the administration to convene the Commission on Foreign
Investment into the United States and investigate this possible sale,
to look at it and determine whether or not this is in the best economic
and national security interests of the United States. That is the
purpose of the Commission on Foreign Investment. That is what we are
asking them to do.
We are asking them to step forward and look at this and report
whether or not this is in our best interest. It is my opinion it is
not. It is my opinion that it is a huge risk that we run to allow a
foreign government to own one of our major U.S. energy producers. That
is a huge risk that we are running. At a time like this when we are
looking at international shortages on energy, skyrocketing prices, we
need to do what we can to increase domestic supplies and to hold on to
what we have got. And at the same time I would encourage my colleagues
to begin to put enough pressure so that we finally get an energy bill
passed.
I heard one of the previous speakers talk about alternatives and
solar and wind and fuel cells. I would just suggest read the energy
bill. That is in it. But it also has the realistic view that in the
short term, we are dependent on fossil fuels which are oil, gas and
coal. That is the reality. That is what fuels the U.S. economy today.
We need to do both. Part of it is increasing domestic production of
our fossil fuels and making that competitive in this market. The other
part of it is looking at the future and how are we going to replace our
dependence on current technology. That is the direction we are going.
If we allow this sale to go forward, we are taking a huge risk. And I
would encourage my colleagues to support this resolution. It is the
right policy, the right thing for this country, and the right thing for
Congress to do.
Ms. KILPATRICK of Michigan. Mr. Speaker, how much time remains on
each side?
The SPEAKER pro tempore (Mr. Simpson). The gentlewoman from Michigan
(Ms. Kilpatrick) has 6 minutes remaining. The gentleman from Ohio (Mr.
Ney) has 3\1/2\ minutes remaining.
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield 3 minutes to the
gentlewoman from Texas (Ms. Jackson-Lee).
(Ms. JACKSON-LEE of Texas asked and was given permission to revise
and extend her remarks.)
Ms. JACKSON-LEE of Texas. Mr. Speaker, I thank the gentlewoman from
Michigan (Ms. Kilpatrick) for yielding me time. I want to thank her,
first of all, for focusing the House on this very important issue, and
as has been said before, giving us an opportunity to affirmatively
stand against an idea whose time has not come.
If there is ever a time to speak about investing in America I think
the time is now. On the shadow of celebrating the freedom day, July 4,
our day of independence, it is a time now to stand up for investing in
America. And I guess in discussing this purchase of Unocal by China, I
think we should make the point that China has been and hopefully will
continue to be our friend. We engage in cultural exchange and
educational exchange. It is a great opportunity to learn from each
other to do research with each other.
But in this instance, I think any purchase of Unocal by China at this
time would be a disservice and a detriment to our homeland security.
For example, one of the reasons why Unocal is such an attractive
purchase is because it has deep reserves. And one of the reasons it has
deep reserves is because it is one of the few companies that has
developed the kind of technology that has allowed it to project into
the future and be able to keep and find the amount of reserves that
keep it with a sizable amount of reserves in place.
Then, of course, China is dropping cool cash, $18 billion, which puts
at a disadvantage a number of American companies in particular who are
interested in purchasing Unocal.
Now, of course, this is a private purchase and shareholders rights
have to be taken into consideration, but I think this Congress,
although we are a capitalist society, should look at the government
money that Communist China is going up to buy not only in America but
in South and Central America, in the Caribbean, in Africa, more and
more in the Middle East and elsewhere. We need to begin to put together
a package that suggests that we will be able to help some of our
companies who are trying to invest in America companies and purchasing
them.
Well, an unusual idea but one whose time may have come. We cannot
compete. We need to be able to support our companies such as General
Motors. Why does General Motors owe China $2 billion. Why do we owe
China almost $300 billion? Because we have not kept our eye on the
prize and we have not reminded not only our individuals, but our large
corporate sector of investing in America.
I rise to support this amendment. There should be bipartisan support.
I thank the distinguished gentlewoman from Michigan (Ms. Kilpatrick)
for her very affirmative amendment that keeps the money away from this
deal. But I believe the sense of Congress should acknowledge that this
is a protracted deal. We need oversight, and it should not go forward
unless we pass the litmus test of national security, homeland security,
investing in America and allowing American companies to purchase
Unocal. Because I remind my friends, the technology that you lose today
is the technology that you will regret tomorrow.
This purchase should not go forward. I ask for the support of the
amendment.
Mr. NEY. Mr. Chairman, I reserve the balance of my time.
Ms. KILPATRICK of Michigan. Mr. Speaker, I yield myself such time as
I may consume.
Mr. Speaker, thank you for allowing us to have this debate. I believe
it has been a good debate and we do support the amendment, many of us
on this side of the aisle, although a couple who spoke do not support
it.
It is important as we talked about it earlier today that we
remembered that 53 percent of America's private debt is held by foreign
countries, 53 percent. That means many of our debt and the two owners
of those debts are Japan first, and China second. 53 percent of our
private debt is owned by foreign countries. I think that is not good
for our country, for our grandchildren. We have got to strengthen
America, calling those debts when we are able to pay them off, and give
America back to Americans.
Should we have work with China? And I said this earlier, yes, we
should, and other foreign markets. This is an international, global
community that we live in. But we should always put America first, and
I think the debate that we have had today, and I thank the gentleman
from California (Mr. Pombo) for some of his remarks and for the
resolution, the sense of the Congress, again, will reinforce what we
have done earlier today.
We have got to make sure that American companies stay strong so that
Americans can continue to work, so they can take care of their
families, pay taxes, help cities, towns and villages maintain
themselves with the revenue that it gets from them.
So trade, yes, and this is free trade. Somebody said free trade. This
is not that deal. This is something less than that. As the gentleman
from Louisiana (Mr. Jefferson) spoke, it is getting the corner of the
market because you can pay $18.5 billion in cash at a time when our
country has $160 billion trade deficit and then you turn some of that
money back and want to buy our company. It is not a good deal.
We call on CFIUS, the Committee on Foreign Investment in the United
States, Secretary Snowe and his 12-member committee to look closely at
what is before them, to do the proper investigation and then not to
recommend to the President that we go forward with this sale.
It is not the right time for America. It will weaken our economy. And
our national security interests as well as our economic interests, as
well as our energy interests are at stake.
[[Page H5576]]
{time} 2115
So, Mr. Speaker, let us not do this sale. Let us continue to build
America and keep America strong.
Mr. Speaker, I yield back the balance of my time.
Mr. NEY. Mr. Speaker, I yield myself the time remaining.
Mr. Speaker, I want to thank the gentlewoman from Michigan for
standing up tonight for this resolution, standing up for the American
people.
I want to thank the gentleman from California (Chairman Pombo) for
this resolution and also the gentleman from Ohio (Chairman Oxley) for
expediting this, also being a cosponsor, but expediting this to the
floor.
Mr. Speaker, national security has to include economic security. This
is an important resolution. Never in a million years would China let us
do this type of deal over there, and do not fool yourselves about that.
This deal is not good for America. It is not good for American
workers. As we near our birthday of this country, let us not give a
gift to the Chinese Government. Let us give a gift to the American
people and support this important resolution.
Mr. PAUL. Mr. Speaker I rise with great reservations over this
legislation. Why is the federal government involving itself in the sale
of a private American company? Do we really believe we have this kind
of authority?
I would remind my colleagues that Unocal is a private company with
shareholders and a board of directors. That is the governance of the
company--not the U.S. Congress. Do we really believe that we should be
the real board of governors of Unocal?
If in the United States a private company does not have the right to
be sold on the free market, should we really be criticizing the lack of
freedom in China? Many conservatives who have decried the recent
Supreme Court decision that severely undermines the principle of
private property in the United States are now on the other side,
cheering this blatant Congressional attempt to do something that may be
even worse than Kelo vs. New London.
I voted recently against allowing the EximBank to use U.S. taxpayer
money to underwrite Chinese construction of nuclear power plants. I do
not support subsidizing the Chinese government's economic activities.
But I also do not support the U.S. Congress involving itself in the
private economic transactions of U.S. companies.
Some have raised concerns that the purchase of Unocal by a company
tied to the Chinese government will create security problems for the
United States. I would argue the opposite. International trade and
economic activity tends to diminish, not increase tensions between
countries. Increased economic relationships between the United States
and China make military conflict much less likely, as it becomes in
neither country's interest to allow tensions to get out of hand.
Mr. Speaker, we should not criticize a lack of economic freedom in
China when Congress, as evidenced in this legislation, attempts to
restrict the economic freedom of American citizens.
Mr. STARK. Mr. Speaker, I rise in opposition to H. Res. 344, which
blames China for our dependence on foreign oil.
The Republican Majority has already sold the entire farm to foreign
central banks and multinational corporations, and now they're trying to
tell the American people that they're standing up for them by stopping
China from buying a leftover chicken.
Mr. Speaker, where were these patriotic Republicans when the House
passed an energy bill and couldn't even muster the votes to raise fuel
economy standards on automobiles? Where were they when we passed trade
deals and tax laws to make it easier for their corporate friends to
ship jobs to China? Why has President Bush refused to stand up for
American workers who wither against illegal dumping practices and an
undervalued Chinese currency?
The American people need to know: as long as the Republican Majority
and their corporate friends get their tax breaks and boondoggle defense
contracts, they don't care who pays the bill. China, in turn, is happy
to prop up the dollar and finance the debt because it gives them great
leverage over the U.S. for years to come. No empty resolution like this
or indignant politician can change that.
So why are we talking about China now when they have been stocking
oil supplies and U.S. currency for years with no change in course from
this administration? It's very simple: cheap Chinese imports and labor
enrich the pockets of the people who really matter in the Republican
party, but a Chinese company owning Unocal does nothing for the base.
This non-binding resolution is a talking point for July 4th barbecues,
just the way the Republicans will tell their constituents that they're
making them safer by throwing billions more into the quagmire in Iraq.
Mr. Speaker, I have proudly voted for renewable energy, against trade
deals that sell out American workers, and against tax breaks for
millionaires financed by foreign governments. I support real economic
security, and I will not support this sham resolution to give cover to
my greedy colleagues and their corporate contributors.
Mr. GARY G. MILLER of California. Mr. Speaker, I rise today in
support of H. Res. 344, which expresses the sense of the House of
Representatives that a Chinese government acquisition of a critical
United States energy company could impair our national security and
therefore justifies a comprehensive review.
As a member of the Congressional China Caucus, I would like to
commend Chairman Pombo for his hard work to ensure our country and its
resources are protected.
The bid by the China National Offshore Oil Corporation (CNOOC), whose
majority owner is the Chinese government, to acquire Unocal Corporation
is China's first attempt to secure energy resources in the United
States and must be thoroughly evaluated.
Unocal is one of America's leading independent natural gas and crude
oil exploration and production companies. It is the country's ninth
largest oil company, producing 159,000 barrels of oil and more than 1.5
billion cubic feet of natural gas per day.
The Chinese oil company's plan to buy California-based Unocal poses
serious questions about national security. In addition, this
acquisition could mean less energy for the United States.
In a free market economy, mergers and acquisitions are a common way
to enter foreign markets. However, China does not yet comprehend
laissez faire economic principles. While our economy promotes
competition for the sake of consumers, China's economy is easily
influenced by political forces. As a state-owned corporation with ties
to Chinese government leaders, I am worried that CNOOC's motivation is
aligned to political and nationalistic goals. Specifically, I am
troubled that CNOOC may use Unocal's technology to advance China's
military.
As is evidenced by passage of the Energy Policy Act in the House and
the Senate, I know that all Members of Congress understand the critical
need to secure the future availability of energy resources for American
consumers. I fear China is attempting to buy Unocal not as an
investment, but to use the company's vast reserves, especially its
natural gas fields, for its own benefit at the cost of the U.S.
economy. For these reasons, Congress must ensure the Chinese company's
bid is carefully reviewed by all of the relevant agencies.
I urge my colleagues to support this resolution to demonstrate that
we will not let China damage our economy or compromise our national
security through hostile acquisitions of oil and natural gas resources.
Mr. OXLEY. Mr. Speaker, I rise in strong support of the resolution
authored by the gentleman from California concerning the bid by CNOOC
Ltd. to purchase Unocal Corp.
Mr. Speaker, I remain fully committed to free and fair trade.
However, I don't believe that this offer constitutes free and fair
trade. The offer also could threaten our national security. This
resolution would encourage immediate review of a merger agreement,
which is authorized by the statute already, rather than waiting for
bureaucratic processes to kick in. Acting quickly is important because
national security reviews of proposed merger transactions often take
months and can last over a year.
Mr. Speaker, a review of any Unocal merger agreement with CNOOC would
be done by the Committee on Foreign Investment in the United States,
known as CFIUS, which was created pursuant to language inserted into
the Defense Production Act (DPA) nearly two decades ago. It is chaired
by the Department of the Treasury and includes Commerce, Homeland
Security, Defense, State, the U.S. Trade Representative and other parts
of the government.
The DPA is solely in the jurisdiction of the Committee on Financial
Services because it seeks to identify, stop or mitigate negative
effects on the economy from our efforts to protect the Nation's
security. As Chairman of the Committee of jurisdiction, I believe it is
critically important that the Administration act quickly to review any
merger agreement so that shareholders who would need to review
potentially competing bids would have all relevant information at their
disposal.
Mr. Speaker, the national security implications of a proposed merger
between CNOOC and Unocal are unmistakable. China's appetite for energy
is enormous. I agree with the gentleman from Ohio, Mr. Ney, that
national security includes economic security here. It is important for
CFIUS to review the possibility that the Chinese might divert from the
United States all of Unocal's energy production to China to feed its
energy appetites if a merger with Unocal were to be completed. I think
we
[[Page H5577]]
can all agree that this would be a blow to the U.S. economy.
Please consider the following facts:
China's consumption of crude oil is expected to double within the
next two decades.
World production of oil exceeds capacity by the smallest margin in
decades.
China's need for energy is so great that electricity has been
rationed to some factories, and the Chinese are reported to be
investing in technology to ``cook'' low-quality coal into gasoline.
This is costly, inefficient and has environmental problems.
China is the world's largest economy without a meaningful strategic
petroleum reserve.
The U.S.-China Commission's 2004 Report to Congress indicated that
China's strategy for securing oil supplies ``is still focused on owning
the import oil at the production point . . . The Chinese policy is to
own the barrel that they import . . . to gain control of the oil at the
source. Geopolitically, this could soon bring the United States and
Chinese energy interests into conflict.' '' The United States, in
contrast, has a free market strategy ``based on global market supply
and pricing.''
The same report indicates that China ``plans to expand its strategic
reserve to fifty to fifty-five days worth of oil imports by 2005 and
sixty-eight to seventy days by 2010.''
So, as today's Washington Post points out, it makes perfect sense
that a majority-owned Chinese oil company seeks to acquire control of
oil and gas production and reserves.
Make no mistake about it, Mr. Speaker, this offer comes from the
Chinese government. CNOOC is 70 percent owned by the Chinese
government. One quarter of the funding for its cash offer comes at no
or minimal interest rates. If that is not a subsidy, Mr. Chairman, I do
not know what a subsidy is. News reports indicate that more than $5
billion of the Unocal offer is available at no interest--more than $2
billion of the bid--or at 3.5 percent interest. These are not market
rates.
I absolutely agree with a spokesman for China's Foreign Ministry, who
is quoted in the Post article as saying: ``We think that these
commercial activities should not be interfered in or disturbed by
political elements.'' By that I mean: without a Chinese government
subsidy.
Mr. Speaker, I would like to add that I doubt whether the CNOOC
proposal will result in a deal which would trigger CFIUS review. The
Chevron offer will go to Unocal shareholders August 10. The Chevron
offer now has all of the appropriate regulatory approval. The CNOOC
offer comes late in the process and has not received any regulatory
approvals to date. It is far from clear, even with the Chinese
government subsidies, that the CNOOC bid would be competitive with the
Chevron bid . . . but that is a decision for Unocal shareholders to
make, not us.
Mr. Speaker, I urge immediate approval of this resolution and
immediate review of any accepted CNOOC offer for Unocal.
As well, Mr. Speaker, I urge swift convening of a conference
committee on a comprehensive energy bill for the United States, an
adoption of the President's comprehensive energy program for the U.S.
and swift adoption of the conference report.
Mr. NEY. Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Simpson). The question is on the motion
offered by the gentleman from Ohio (Mr. Ney) that the House suspend the
rules and agree to the resolution, H. Res. 344.
The question was taken.
The SPEAKER pro tempore. In the opinion of the Chair, two-thirds of
those present have voted in the affirmative.
Mr. NEY. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX and the
Chair's prior announcement, further proceedings on this motion will be
postponed.
____________________