[Congressional Record Volume 153, Number 27 (Tuesday, February 13, 2007)]
[Senate]
[Pages S1920-S1922]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. FEINSTEIN (for herself, Ms. Snowe, Mr. Levin, Ms. 
        Cantwell, Mrs. Boxer, Mr. Feingold, Mr. Bingaman, Mr. 
        Lieberman, Mr. Lautenberg, and Ms. Mikulski):
  S. 577. A bill to amend the Commodity Exchange Act to add a provision 
relating to reporting and recordkeeping for positions involving energy 
commodities; to the Committee on Agriculture, Nutrition, and Forestry.
  Mrs. FEINSTEIN. Mr. President, I rise today with Senators Snowe, 
Levin, Cantwell, Boxer, Feingold, Bingaman, Lieberman, Lautenberg, and 
Mikulski to introduce a bill to provide necessary Federal oversight of 
our energy markets.
  Just as is currently required for trades performed on the New York 
Mercantile Exchange (NYMEX), this bill would require record keeping and 
create an audit trail for all electronic over-the-counter energy 
trades.
  Generally, in energy markets, the term ``over-the-counter trading'' 
refers to the trading of an energy commodity directly between two 
parties that does not take place on a regulated exchange.

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  Six years after the California energy crisis, this bill is long 
overdue. As global oil and gas prices increase and as we work to reduce 
global greenhouse gas emissions, the American public needs reliable, 
transparent energy markets that are not subject to manipulation by 
traders.
  Specifically, the bill would: require traders who perform trades on 
electronic trading facilities such as the Intercontinental Exchange 
(ICE) to keep records and report large positions carried by their 
market participants in energy commodities for five years or longer. 
These are the same requirements that apply to traders that do business 
on NYMEX; require traders to provide such records to the Commodity 
Futures Trading Commission (CFTC) or the Justice Department upon 
request. Again, these are the same requirements for NYMEX traders; and 
require persons in the United States who trade U.S. energy commodities 
delivered in the U.S. on foreign futures exchanges to keep similar 
records and report large trades.
  The Western Energy Crisis in 2000-2001 provided a wake-up call about 
the extent to which energy traders can impact demand and drive up 
prices.
  California and the entire West Coast faced rolling blackouts and 
skyrocketing electricity costs, while companies like Enron, Duke, 
Williams, AES and Reliant enjoyed record revenues and profits.
  In California, the cost of electricity was $8 billion in 1999, $27 
billion in 2000, $27.5 billion in 2001, and $12 billion in 2002 after 
the crisis abated. Demand did not increase by more than 150 percent 
between 1999 and 2000. But prices did.
  Why? Because companies like Enron manipulated the market in order to 
drive the price of electricity up.
  As a result, Californians have been left with a $40 billion bill. 
This is an unacceptable burden.
  One of the main causes of the crisis is a loophole in current law 
that allows for energy commodities--such as natural gas, electricity, 
oil, and gasoline--to be traded on over-the-counter markets with no 
Federal oversight.
  While over-the-counter trades of all other commodities--pork bellies, 
soybeans, wheat and rice, for example--are regulated by the Federal 
Government, energy trades are not.
  Our country currently faces natural gas prices that have been 
extremely volatile, and oil prices that have gone through the roof.
  With gas prices reaching well above $2 per gallon across the country, 
and over $2.50 in my State of California, our constituents deserve to 
know why those prices are so high.
  The New York Times has reported that manipulation of electronic 
energy trades has pushed these prices higher and higher.
  Testifying at the Enron trial, the former Chief Executive Officer of 
Enron North America and Enron Energy Services, David Delainey was 
asked: ``Is volatility a good thing for a speculative trader?''
  His response: ``Yes.''
  When asked to explain his answer, he said: The higher the volatility 
that you have, the better--the higher the potential profit you can make 
from an open position you might have in the marketplace . . . if the 
price change is only a couple cents either way, you can't make a whole 
lot of money in trading.
  And if you have, you know, 50, 60 cents, dollar moves in price you're 
going to make a lot more money for--for every position you might have . 
. .
  Unfortunately, Enron's demise did not sound the death knell for 
unregulated over-the-counter energy trades. Instead, these trades now 
take place on the Intercontinental Exchange (ICE).
  Over-the-counter trades performed on ICE are exempt from Federal 
oversight. In other words, the CFTC cannot require traders on ICE to 
keep records or report trades in energy commodities. As a result, the 
CFTC does not have a complete picture of what occurs in the energy 
markets.
  The CFTC has recently asked ICE to provide information for certain 
electronically traded energy contracts. ICE has agreed to comply. I 
welcome these positive developments, but nonetheless believe that this 
legislation is necessary to remove any doubt as to the CFTC's authority 
to mandate these reports and to ensure these requirements are not 
administratively removed at some later date.
  In this request, the CFTC has only asked ICE to report those trades 
that are performed using NYMEX-established prices. NYMEX does not 
establish prices for electricity, so none of the electricity trades 
will be reported. This means that under current circumstances, the CFTC 
still will not be getting a full picture of the energy market from 
ICE's reports.
  Our bill will require reporting of all electronic over-the-counter 
energy trades and will provide legislative certainty that these trades 
will be reported.
  We learned the hard way that if there is no oversight of these 
markets, they are subject to manipulation.
  It is high time to fix this problem. Our bill will do just this.
  That is why I urge my colleagues to support this bill. The 
legislation will simply provide the CFTC with the data it needs to 
ensure that manipulation and fraud are not taking place on our energy 
markets.
  So who would be against this proposal?
  The traders who are making millions of dollars off of volatility in 
these markets. And some of these traders are people who learned their 
skills at Enron--like star-Enron trader John Arnold who made $75 to 
$100 million in 2005 at Centaurus Energy, a hedge fund investing in 
energy commodities.
  The other beneficiaries of high oil and natural gas prices are the 
energy companies themselves. Oil major Chevron made almost $13.4 
billion in the first 9 months of 2006--a 34 percent rise in profits 
over the same 9 months in 2005.
  The number 3 U.S. oil company, ConocoPhillips, reported a 25 percent 
surge in profits in the first 9 months of 2006, boosted by sharply 
higher crude oil prices. Net income in the first 9 months of 2006 rose 
to $12.35 billion from $9.85 billion in the same time period of 2005.
  And ExxonMobil made more money in 2006 than any company in history. 
All of these record profits are due to the fact that oil prices are so 
high.
  So while consumers are paying more than $2 a gallon at the pump, 
traders and oil companies are making out like bandits.
  I hope that we have enough consensus this year to pass this 
legislation in order to shine some light on our energy markets and 
determine if speculation, manipulation, or hoarding is occurring in the 
oil, gas, and electricity markets.
  I would like to thank the following organizations for their support 
of this bill: Agricultural Retailers Association, Air Transport 
Association of America, American Public Gas Association, American 
Public Power Association, Consumer Federation of America, Consumers 
Union, Industrial Energy Consumers of America, National Association of 
Wheat Growers, National Barley Growers Association, New England Fuel 
Initiative, Pacific Northwest Oil Heat Council, Petroleum 
Transportation and Storage Association, Petroleum Marketers Association 
of America, PG&E Corporation, Sempra, and Southern California Edison.
  I urge my colleagues to join me in supporting this legislation and I 
ask unanimous consent that the text of the legislation be printed in 
the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 577

       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 ``Oil and Gas Traders 
     Oversight Act of 2007''.

     SEC. 2. REPORTING AND RECORDKEEPING FOR POSITIONS INVOLVING 
                   ENERGY COMMODITIES.

       (a) In General.--Section 2(h) of the Commodity Exchange Act 
     (7 U.S.C. 2(h)) is amended by adding at the end the 
     following:
       ``(7) Reporting and recordkeeping for positions involving 
     energy commodities.--
       ``(A) Definitions.--In this paragraph:
       ``(i) Domestic terminal.--The term `domestic terminal' 
     means a technology, software, or other means of providing 
     electronic access within the United States to a contract, 
     agreement, or transaction traded on a foreign board of trade.
       ``(ii) Energy commodity.--The term `energy commodity' means 
     a commodity or the derivatives of a commodity that is used 
     primarily as a source of energy, including--

       ``(I) coal;
       ``(II) crude oil;

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       ``(III) gasoline;
       ``(IV) heating oil;
       ``(V) diesel fuel;
       ``(VI) electricity;
       ``(VII) propane; and
       ``(VIII) natural gas.

       ``(iii) Reportable contract.--The term `reportable 
     contract' means--

       ``(I) a contract, agreement, or transaction involving an 
     energy commodity, executed on an electronic trading facility, 
     or
       ``(II) a contract, agreement, or transaction for future 
     delivery involving an energy commodity for which the 
     underlying energy commodity has a physical delivery point 
     within the United States and that is executed through a 
     domestic terminal.

       ``(B) Record keeping.--The Commission, by rule, shall 
     require any person holding, maintaining, or controlling any 
     position in any reportable contract under this section--
       ``(i) to maintain such records as directed by the 
     Commission for a period of 5 years, or longer, if directed by 
     the Commission; and
       ``(ii) to provide such records upon request to the 
     Commission or the Department of Justice.
       ``(C) Reporting of positions involving energy 
     commodities.--The Commission shall prescribe rules requiring 
     such regular or continuous reporting of positions in a 
     reportable contract in accordance with such requirements 
     regarding size limits for reportable positions and the form, 
     timing, and manner of filing such reports under this 
     paragraph, as the Commission shall determine.
       ``(D) Other rules not affected.--
       ``(i) In general.--Except as provided in clause (ii), this 
     paragraph does not prohibit or impair the adoption by any 
     board of trade licensed, designated, or registered by the 
     Commission of any bylaw, rule, regulation, or resolution 
     requiring reports of positions in any agreement, contract, or 
     transaction made in connection with a contract of sale for 
     future delivery of an energy commodity (including such a 
     contract of sale), including any bylaw, rule, regulation, or 
     resolution pertaining to filing or recordkeeping, which may 
     be held by any person subject to the rules of the board of 
     trade.
       ``(ii) Exception.--Any bylaw, rule, regulation, or 
     resolution established by a board of trade described in 
     clause (i) shall not be inconsistent with any requirement 
     prescribed by the Commission under this paragraph.
       ``(E) Contract, agreement, or transaction for future 
     delivery.--Notwithstanding sections 4(b) and 4a, the 
     Commission shall subject a contract, agreement, or 
     transaction for future delivery in an energy commodity to the 
     requirements established by this paragraph.''.
       (b) Conforming Amendments.--Section 4a(e) of the Commodity 
     Exchange Act (7 U.S.C. 6a(e)) is amended--
       (1) in the first sentence--
       (A) by inserting ``or by an electronic trading facility 
     operating in reliance on section 2(h)(3)'' after ``registered 
     by the Commission''; and
       (B) by inserting ``electronic trading facility,'' before 
     ``or such board of trade''; and
       (2) in the second sentence, by inserting ``or by an 
     electronic trading facility operating in reliance on section 
     2(h)(3)'' after ``registered by the Commission''.
                                 ______