[Congressional Record Volume 152, Number 46 (Tuesday, April 25, 2006)]
[Senate]
[Pages S3437-S3439]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                                 ENERGY

  Mr. BURNS. Mr. President, this morning the leader touched on a lot of 
problems we have before us as we come back from Easter break. I know 
most of us have been home and listened to the folks at home. Most of us 
have probably come back with more challenges than when we left. Here 
are a couple of issues.
  I was glad to hear the leader bring up the situation on insurance 
premiums, especially for small businesses and the self-employed. 
Senator Enzi of Wyoming and I have been working on the small business 
health plans for almost a year now. That is nothing new. It is not a 
new idea. Ever since I joined the Small Business Committee and even 
under the chairmanship of my good friend from Arkansas, Senator 
Bumpers, prior to 1994, we were working on the same issue, but we were 
unsuccessful then and have been unsuccessful up until now in striking a 
balance. There is broad support for the approach being taken by the 
chairman of the HELP Committee.
  If you talk with folks engaged in small business, Montana businesses 
with 10 employees or less have little or no leverage when it comes to 
buying group insurance or trying to broaden their pool to keep their 
insurance premiums at a minimum. I look forward to that debate when the 
bill comes to the floor, and I look forward to final passage and 
getting it to the President for his signature.
  I took a drive across the State of Montana over Easter Recess, all by 
myself. I just jumped into my pickup and took off and talked with rural 
Montanans. I fight awfully hard for rural Montanans for the simple 
reason that, right now, they are sort of being pushed into the 
background when we start talking about what is happening in our 
economy. Even though our livestock prices are decent, the grain 
producers, and many other folks, still have a real problem because they 
cannot get their arms around this business of containing costs, and the 
cost of energy is their main issue.
  Whenever gas and diesel prices go up, it goes up on the farm also, 
and the cost of putting a crop in and getting it out has increased 
substantially due to these high energy costs.

  We are a big State. We are a mobile State. We are 147,000 square 
miles. Yes, we only have 900,000 people, and some could probably make 
the case it is getting a little crowded up there. We have to drive long 
distances just to do business around the State, and these energy prices 
are impacting all of us.
  Everybody wants to stand around on the floor of the Senate pointing 
fingers, when we could be looking at the real case of cumulative 
effects--of what we have done in policy and what has to be done to 
produce more energy for a growing society and a growing economy.
  We are driven by agriculture in my State. Farmers and ranchers are 
price takers; in other words, we sell wholesale, we buy retail, and we 
pay the freight both ways. Any time we talk about freight, whether it 
is delivering or receiving, energy is involved.
  So we are caught in what some would think is a perfect storm. We 
haven't hit the $3 mark for gasoline in Montana yet, as other parts of 
the country have, but we are nearing it. In fact, we are so close to it 
that folks are afraid of what will happen if we do hit it.
  I will tell you this: We have a situation in northeast Montana and 
northwest North Dakota called the Williston Basin. This area is quite a 
large producer of oil and gas. When we start quoting the price of oil 
on the New York Mercantile Exchange, we are not really talking about 
what the cash or spot price of oil is costing today. Do you realize, 
even though everybody is talking about the price of $73 a barrel, that 
market price is not being paid to our oil producers today? It is a long 
way from that $73. In fact, it is from $25 to $35 lower than even the 
spot price. Why? We are finding more oil, we are doing a better job of 
finding oil and lifting it, but the infrastructure of transportation--
in other words, getting the crude to the refineries--and the 
refineries' capacity to refine it has not kept pace even with our own 
production in the United States. Therein lies a problem, and it is one 
we have to address.
  We have not built a refinery in this country for 30 years--35 years, 
I think, if you want to get very particular. The ability to expand 
refining capacity in the present-day facility is becoming very 
expensive and cannot be done without expanding outside the boundary.
  If anybody has the idea that the refiners are making a lot of money, 
look at their return on investment. It is not very big. So people point 
their fingers at the refiners. Do they point their fingers at the big 
oil companies? Yes, they do, and in some cases justifiably so. We can 
sit here and poke holes in that argument. But our basic problem is 
siting and building facilities to satisfy a growing demand.
  If you want to build a new refinery, or if you want to build a new 
pipeline to move the crude to the refining areas, I will tell you, you 
are going to have sticker shock when you look at what it costs just in 
permitting and siting for that facility. It is unbelievable. 25 percent 
of the estimated construction cost of a new refinery now will be eaten 
up in permits and siting, and all because of some laws and regulations 
that basically do not serve this country very well.
  Am I justifying the prices today? Somewhat. But I think what we are 
seeing is a perfect storm of cumulative effects, of not keeping pace 
with our ability to produce and lift oil from the ground.
  Alternative fuels and renewable fuels are also an important part of 
our energy program.
  In 2002, we actually got a title into the agricultural bill that 
dealt with renewables and agriculture. We knew that we were going to 
have an energy bill and that title would dovetail into some of the 
policies that we wanted to put forward in an energy bill. We knew that 
an energy bill should come pretty quick. However, it did not come 
quickly. It came some 4 years later. After dragging and stalling and 
putting up all kinds of barriers, we finally got an energy bill in 
2005, and we did dovetail some of the elements on renewables as it 
relates to agriculture.
  In 2007, we will renew the Agriculture bill. And I would not be a bit 
surprised if we do not see energy even in the main title because we can 
produce renewables and we can produce alternative fuels to make sure we 
wean ourselves off of our dependency on foreign oil. We have to do 
that. We are going to get it done even though there are people who will 
obstruct and drag their feet in setting the policy.
  I see my good friend from Utah is in the Chamber. Whenever you are 
producing oil at post-1970 production in the State of Montana, that 
means we have crude oil, like the crude oil that could go to refineries 
today in his State of Utah, from pipelines that are fed out of Montana, 
as well as to refineries in Montana and also in Colorado. Do you 
realize a 36-inch pipeline moves something like 86 thousand barrels a 
day? We can't even get on that pipeline. That pipeline is owned by 
Canada,

[[Page S3438]]

and it is full of tar sands oil moving to refineries in Utah and 
Colorado. Meanwhile we are actually slowing down production at wells 
since we can't get all the crude oil being produced in the Williston 
Basin area today out of the area. If we do manage to get some of the 
crude oil on the pipeline, it is at a discounted price of around $25 to 
$30 a barrel.
  What is wrong with this picture? The infrastructure isn't there to 
move the oil. The refining capacity is not there to refine the oil. We 
are picking and choosing who gets the oil on the pipeline and who gets 
to sell their crude oil at prices that are far less than $73 a barrel. 
The price that is going through the roof, that we hear so much about, 
is the oil futures price, which is set by speculators and expectations. 
That is not the spot price. Americans have to understand the 
difference.
  So we need infrastructure, but we also need this ability to produce 
the alternatives and the renewables and to get those energy products on 
line as well. And we can do just that if we don't have to chew up 25 
percent of our construction costs just in permitting and selecting a 
site in which to do the work.
  I know that high costs affect people who have to drive automobiles to 
get to work and have to go places to make this economy grow. Yes, the 
President is right on. Let's take a look at the oil companies. Let's 
see what is going on there. Let's get on the internal part of it and 
see what the prices are all about today.
  But I stand here today with the appeal that we need to look at our 
food and fiber production across this country.
  I will tell you something else I found out while driving around 
Montana. I would drive down the highway through a little town, and if I 
saw a little restaurant there, a little cafe with six or seven pickups 
sitting there, I would go in and have a cup of coffee. You will get 
some conversation going on in there, I guarantee you. When I hear of 
farmers cutting back on the use of fertilizer by almost a third last 
fall and this spring when going in with their crops, that sends a 
message to the rest of the country that food and fiber production is 
being negatively impacted by these energy costs. Yields go down, the 
amount of grain and food products that moves to the marketplace goes 
down. The producers just can't afford the fertilizer. Then they go to 
pay their diesel costs for putting the crop in and taking it out, and 
it makes for a very interesting discussion around the restaurant or the 
cafe in the coffee clutch. Usually those fellows have all the answers, 
if you will just listen. I hope most of our Members of this Senate 
would do that: Just take off, sit down in a restaurant, listen to what 
people are talking about, and then try to come up with some sort of 
policy that would increase our ability to move and to be mobile and to 
fuel an economy that supports a very mobile society.
  For alternative fuels, our technology is moving right along. We have 
many technologies that are going to help us in ethanol production, 
especially the cellulosic technology that uses plant residues. What we 
usually throw away, the waste, can now be turned into energy.
  Biodiesel is viable. Genetically improved oilseeds are being produced 
and can be turned into a cleaner diesel. We were in Billings yesterday 
and saw an experiment of what can be done with biodiesel. We are the 
Saudi Arabia of coal in Montana. There are ways to turn that into 
diesel. Basically, we haven't found any alternative to diesel in moving 
big loads. We have to continue our research and development and our 
effort to turn what we grow every year, what is renewable every year, 
into usable, practical renewables to fuel our every day lives.
  So I hope that during this week policies which would increase 
production, whether hydrocarbon or renewable, could move out because 
there is nothing in the short term that is going to take care of it. I 
tell you: we have to look at the long term of where we want to be in 20 
years and ask ourselves how we get there. To formulate that policy in 1 
week is asking a lot from this body or any other policymaking body. 
Nonetheless, we have to take up that challenge and be aware of what is 
happening on our farms and ranches across this country because the 
second thing every one of us does when we get up in the morning is eat 
breakfast, and we know the cost of that is going to rise if we don't 
address this business called high energy prices.
  There is a cumulative effect here. We could point fingers at one, 
two, three, or four different contributing factors, but it is the 
perfect storm of all these factors that have come together. Finally we 
are being sent a message that policy has to be changed in order to 
increase our ability to move Americans.
  I thank the Chair, and I yield the floor.
  Mr. BENNETT. Mr. President, today's papers are filled with stories 
about energy prices and particularly gas costs and editorials demanding 
that the Congress and the President do something about it. I think 
perhaps the best comment that appeared was in this morning's Wall 
Street Journal in a story with the headline ``Bush Aims To Rein In Gas 
Costs,'' where there is a quote from Robert Ebel, who directs the 
energy program at the Washington Center for Strategic and International 
Studies. All of us are familiar with CSIS and the good work that it 
does. I would like to quote Mr. Ebel because what he has to say is the 
clear understanding of where we are. He says:

       A good politician never admits he's powerless in a 
     situation, but I don't see anything that the Congress can 
     propose that will make any difference. We don't stand in 
     isolation from the rest of the world oil market, and there 
     are events going on around the world that affect the world 
     price of oil.

  I note that he uses the term ``world''--I could count how many times, 
but multiple times--and we act as if this is a domestic problem. We act 
as if this is something we in Congress or the President in the White 
House can wave a magic wand and do something about.
  I would like to point out a few facts and perhaps bring a little 
humility into this body, something that is in fairly short supply but 
in great need.
  As Mr. Ebel points out, the price of oil is set by a series of world 
events. It is not set in the Congress. It is not set in the White 
House. People look at the cost of a gallon of gasoline and say to 
themselves: You know, it only costs--picking numbers out of the air but 
being illustrative--$1.50 to put that gallon of gasoline in the tank at 
the service station, yet the service station operator is charging me $3 
to take it out; there is price gouging going on somewhere. The reality 
is that the price in the tank at the service station is not figured on 
the basis of what did it cost to get that gallon there; the price at 
the service station is figured on the cost of what will it cost to 
replace that gallon there. So the reason a gallon of gas is at $3 at 
the service station is that all of the forces involved in putting that 
gallon of gas in there assume that it will cost $3 to replace it; 
therefore, they better charge $3 for it in the first place.
  Now, they may be wrong. It may be that they can replace that gallon 
of gas for $2.50, and as soon as they come to that conclusion, that 
gallon of gas will come down to $2.50. It may be that the cost of 
replacing that gallon of gas will be $3.50, and at that point, 
everybody will lose some money along the way. But whether it is the 
production of oil in the oilfield, the transportation of oil around the 
world, the refinement of oil in the various refineries, the 
transportation from the refinery to the service station, everyone is 
making a guess as to what it will cost for the next gallon of gas along 
the way, and that shows up in what appears at the service station.
  So when there is trouble in Nigeria, someone says, by virtue of that 
trouble in Nigeria, the next gallon of gas is going to cost more than 
we think, and that is why the price goes up. If there is trouble and 
difficulty in Iran, well, that is going to cause the price to go up, 
and let's bet against that future. If there is trouble in Venezuela, 
then that figures in. When it turns out that the trouble doesn't 
materialize, the price of gasoline drops dramatically, and we have seen 
that in this past history.
  The primary thing that started gas prices going up was Katrina. Why? 
Because Katrina wiped out a good percentage of our refinery capability. 
As the Senator from Montana has pointed out, we haven't built a 
refinery in this country for several decades. We need to get about it. 
But that is a 5- to 10-year

[[Page S3439]]

problem. We can't instantly create a refinery out of nothing. As the 
refineries were shut down as a result of Katrina, the price of gas 
spiked as people anticipated that there would not be enough supply. As 
the refineries came back on line more rapidly than anybody anticipated, 
the price of gasoline dropped.
  Now refinery capacity is being shut down again. Why? Because we here 
in this Congress mandated the replacement of MTBE with ethanol, and the 
refineries have to gear up to make that shift. When they do that, they 
shut down in order to retool. When they shut down, there is a lack of 
gasoline, and you have prices going back up again. Once they have made 
the shift over, we will find those prices will start to come down, 
unless there is some other unsettling situation somewhere in the world.
  The bottom line, to repeat a refrain I have stated ever since I have 
been in the Senate, is that we cannot repeal the law of supply and 
demand. We engrave Latin phrases around here--and they are wonderful--
to remind us of our history and our background, but if I could control 
what we carve in marble and see every day, it would be that statement: 
You cannot repeal the law of supply and demand. If we had built the 
facilities in ANWR in 2001 when there were sufficient votes in the 
House but was killed in the Senate, it is likely that oil would be 
coming on line now, because at the time people said: Don't get excited 
about ANWR; it is going to take at least 5 years. Well, 2001 was 5 
years ago. If we had done that, we would start to see that oil. Would 
it lower the price? Of course it would because it would change the 
equation of expectations of people who are involved in this whole 
situation.
  One last comment. I have talked about ethanol, and I have talked 
about MTBE. These are additives to lower the emissions that come out of 
gasoline, and they are good things. They are, however, expensive, and 
we cannot say on one hand: OK, let's get the price of gasoline as low 
as possible, and by the way, while we are doing it, let's put new 
burdens on the refineries that require this additive, that additive, 
and the other additive, that will require the creation of what are 
called boutique fuels, so that the refinery, instead of just putting 
out gasoline in regular or super high test, are putting out a boutique 
fuel for this part of the country and a boutique fuel for that part of 
the country and a boutique fuel for the other part of the country. That 
means constantly retooling, shutting down, starting up, changing, and 
all of that adds to the cost.
  We have added to the cost here in the Congress in the name of 
environmental protection. I am not saying environmental protection is 
bad, but I am saying it costs money. We should pay attention to that so 
when the time comes for us to say what can we do about the high 
gasoline prices, the answer is we can pay attention and be a little 
more humble before the power of market forces. If we think Government 
can intervene with market forces and produce long-term lower prices, 
all we need to do is dredge up memory of what happened the last time we 
panicked about this as a nation in the 1970s. Under the leadership of 
President Carter we created a synfuels corporation, created oil company 
windfall taxes, and ended up in lines on separate days. You could only 
get your gas tank filled on alternative days. Ultimately, we saw all of 
the effort collapse when market forces finally took hold and brought 
the prices back in line.
  I know it is not a message people want to hear. I, like Senator Burns 
and other Senators, have been out in my constituency during the break, 
and I heard people talking about: What are you going to do about gas 
prices? I had two choices. I could either tell them I will come back 
here and I will fight to lower the gas prices--and make them feel 
good--or I could tell them the truth. I chose to tell them the truth. 
This is a long-term problem, it is a serious problem, and it can only 
be solved by serious policies. The most intelligent serious policy that 
we can adopt is to do whatever we can to facilitate the kinds of 
competition and market forces that ultimately will bring supply up and 
prices down and deal with the demand side as best we can through 
conservation.
  It is not a quick fix. We can't pass a resolution and say, gee, look 
what we did and see something happen at the pump the day after 
tomorrow. It is time we recognize that fact and told our constituents 
the truth.
  I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Michigan.

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