[Congressional Record Volume 154, Number 77 (Monday, May 12, 2008)]
[Senate]
[Pages S3997-S4004]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                             ENERGY PRICES

  Mr. ALLARD. Mr. President, I come to the floor again to talk about 
energy prices. Each week we must finally be at the tipping point where 
Democrats are at least willing to address high energy prices. 
Unfortunately, although energy prices remain at an all-time high, it 
seems we are not there yet. The average American uses 500 gallons of 
gasoline every year, with the average gas price at $3.61 per gallon. 
That means the average American will spend more than $1,800 this year 
on gasoline. That is almost $300 more than they would have spent a year 
ago. But let's look at a slightly longer period. Let's look at the 
period since Democrats took control of the Congress and insisted that 
they had all the answers.
  On January 4, 2007, a gallon of gas cost $2.33. That means the 
average American has spent $960 more on gasoline in the year and a half 
since Democrats took over. The question is, Why are we not producing 
the domestic oil available in the Arctic National Wildlife Refuge known 
as ANWR? The U.S. Geological Survey estimates that the potential oil in 
ANWR would exceed that which is currently being produced in the lower 
48 States. We hear a lot of moaning about how we should not open ANWR 
because that oil would not be available for 10 years. But I remember 
hearing that exact same argument about 10 years ago. If we had opened 
ANWR to domestic oil production 10 years ago, we would be less reliant 
on foreign sources for about 1 million fewer barrels each and every 
day.
  The question is, Why are we not producing in the Outer Continental 
Shelf? Currently, 58 percent of this area is off limits to production. 
The National Petroleum Council estimates if congressional restrictions 
were lifted, we would have access to more than 300 trillion cubic feet 
of natural gas. This is enough gas to meet all of the current U.S. 
needs for more than 13 years. Current levels of production in the Outer 
Continental Shelf employ over 45,000 people. To those of us concerned 
about employment figures, opening additional areas offshore will lead 
to more jobs in addition to increased domestic energy.
  The question is, Why are we not producing domestic oil from oil shale 
in Colorado, for example? The Democrats ensured that BLM could not 
write commercialization regulations by placing a spending prohibition 
in the fiscal year 2008 omnibus bill which is being applied this year 
from last year's action. Commercialization regulations do not authorize 
production or even lease. These regulations simply allow the department 
to set out the rules of the road for companies so they can make 
investment decisions--matters such as the length and requirements for 
oil shale leases, the royalty rate, and reclamation requirements that 
would be set by commercialization regulations.
  Considering there is well over 1 trillion barrels of oil locked in 
the shale beneath Colorado, Utah, and Wyoming, this is not an 
inconsequential amount of energy. One trillion barrels of oil would 
provide for the current consumption levels of 20 million barrels a day 
for over 136 years. If the numbers seem staggering, that is because 
they are. The question is, Why are we not addressing the restrictive 
policies on the construction of new refineries that have led to no new 
refinery capacity in this country since the 1970s?
  We must encourage companies to build new refineries so not only can 
we produce more oil domestically, but we can refine it into a usable 
product as well.
  The law of supply and demand tells us with high demand and low 
supply, prices will increase. This seems to have escaped the notice of 
the Democrat-controlled Congress, however. Oblivious to prices at the 
pump, this Congress is failing in its duty to the American public.
  Each attempt to implement commonsense solutions to current energy 
problems is met with loud and vehement objections. At this point, these 
objections can only mean Democrats want energy prices to continue to 
increase. I can think of no other explanation.
  The facts are rather simple. The Congress has blocked efforts to 
produce trillions of cubic feet of natural gas, trillions of barrels of 
oil, and prevent the construction of new refineries, nuclear 
powerplants, and hydroelectric facilities.
  The longer we deny access to domestic supplies, the more our current 
energy shortages will climb. And the less energy we produce 
domestically, the more we will rely on foreign--and possibly hostile--
sources for it.
  It is time--it is time--for Congress to step to the plate and ensure 
this country remains one of the safest and most prosperous nations on 
Earth. That means increasing domestic energy production and decreasing 
our dangerous reliance on foreign energy sources.
  We will vote in a very short time on whether to increase domestic 
energy production or whether to maintain the status quo. I can only 
hope each of us does the right thing and votes in favor of the 
McConnell amendment to stop the status quo and to ensure we can produce 
more of the energy we need right here at home.
  Mr. President, I yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from Michigan.
  Mr. LEVIN. Mr. President, have I been assigned a specific amount of 
time?
  The ACTING PRESIDENT pro tempore. The Senator has been assigned 20 
minutes.

[[Page S3998]]

  Mr. LEVIN. I thank the Presiding Officer.
  Mr. President, day after day, record-high oil and gasoline prices are 
hurting millions of American consumers and businesses. Unless something 
is done to make energy more affordable, the record-high prices will 
continue to reverberate throughout our economy, increasing the prices 
of transportation and food and manufacturing and everything in between. 
Skyrocketing energy prices are a threat to our economic and national 
security, and the time is long past for action.
  My Senate Permanent Subcommittee on Investigations has conducted four 
separate investigations into how our energy markets can be made to work 
better. Most recently, last December, we had a joint hearing with the 
Senate Energy Subcommittee on the role of speculation in rising energy 
prices. As a result of these investigations and hearings, I have been 
advocating a variety of measures to address the rampant speculation and 
lack of regulation of energy markets which have contributed to sky-high 
energy prices.
  Some of those measures are: First, put a cop back on the beat in the 
energy markets to ensure these markets are free from excessive 
speculation and manipulation, and that cop has to be a regulatory 
agency; stop filling the Strategic Petroleum Reserve until prices are 
lower; develop alternatives to fossil fuels to lessen our dependence on 
oil; and impose a windfall profits tax on oil companies that have 
profited from the massive price increases.
  Now, there is not much we can do about some causes of these sky-high 
gas prices, but there are a number of causes that can be addressed. One 
key factor in the price spikes of energy is rampant speculation in the 
energy markets. Traders are trading contracts for future delivery of 
oil in record amounts, creating a paper demand that is driving up 
prices and increasing price volatility, solely to take a profit. 
Overall, the amount of trading of futures in oil on the New York 
Mercantile Exchange has risen sixfold in recent years.
  As this chart shows, from 500,000 contracts for future delivery of 
oil to 3 million contracts just since 2001. Now, much of this increase 
in the trading of futures has been due to speculation. Speculators in 
the oil market do not intend to use crude oil. Instead, they buy and 
sell contracts for crude oil just to make a profit from changing 
prices.
  The number of futures and options contracts held by speculators has 
gone from around 100,000 contracts in 2001--which at that time was 20 
percent of the outstanding futures and options contracts--and has risen 
to 1.2 million futures contracts currently held by speculators. That 
represents now about 40 percent of the outstanding futures contracts in 
oil on the New York Mercantile Exchange.
  That increase can be seen on this chart: the doubling in the 
percentage of futures contracts, which is represented by purchases by 
speculators on the New York Mercantile Exchange, from this level--15 to 
20 percent in January of 2001--to almost double that amount currently. 
That is a massive increase in speculation.
  As a matter of fact, as this next chart shows, there is now 12 times 
as much speculation as there was in 2001, while the purchase of 
nonspeculative futures is up but three times. This chart shows the 
difference. As shown on this chart, these are the purchases of 
contracts for future delivery of oil bought by speculators versus 
nonspeculators.
  As shown on the chart, the speculator increase in purchases is that 
white line, with that dramatic increase, starting in 2003, going all 
the way up to where it is currently; and the relatively flatter yellow 
line represents the purchases of future delivery of oil by the 
nonspeculators since 2001.
  Now, not surprisingly, this massive speculation the price of oil will 
increase has, in fact, helped increase the price of oil to a level far 
above that justified by traditional forces of supply and demand.
  Let me quote some experts about the role of speculation. Some people 
say: Well, speculation does not have much of an effect. Well, listen to 
some of the experts.
  The president and CEO of Marathon Oil said recently:

       $100 oil isn't justified by the physical demand in the 
     market. It has to be speculation on the futures market that 
     is fueling this.

  Mr. Fadel Gheit, oil analyst for Oppenheimer & Company, describes the 
oil market as ``a farce.''

       The speculators have seized control and it's basically a 
     free-for-all, a global gambling hall, and it won't shut down 
     unless and until responsible governments step in.

  In January of this year, as oil hit $100 a barrel, Tim Evans, oil 
analyst for Citigroup, wrote the following:

       [T]he larger supply and demand fundamentals do not support 
     a further rise and are, in fact, more consistent with lower 
     price levels.

  At the joint hearing I made reference to on the effects of 
speculation we held last December, Edward Krapels, a financial market 
analyst, said the following:

       Of course financial trading, speculation affects the price 
     of oil because it affects the price of everything we trade. . 
     . . It would be amazing if oil somehow escaped this effect.

  Dr. Krapels added that as a result of this speculation, ``there is a 
bubble in oil prices.''
  A fair price for a commodity is a price that accurately reflects the 
forces of supply and demand for the commodity, not the trading 
strategies of speculators who only are in the market to make a profit 
by the buying and selling of paper contracts, with no intent to 
actually purchase, deliver, or transfer the commodity.
  As we all too often have seen in recent years, when speculation grows 
so large that it has a major impact on the market, prices get distorted 
and stop reflecting true supply and demand.
  Excessive market speculation is a factor that we can and should do a 
better job of controlling. There are other long overdue actions as well 
that, if taken as part of a comprehensive plan, can combat rising 
energy prices.
  But as to reining in the speculators, the first step is to put a cop 
back on the beat in all of our energy markets to prevent excessive 
speculation, price manipulation, and trading abuses.
  In 2001, my Senate Permanent Subcommittee on Investigations began 
investigating our energy markets. At the time, the price of a gallon of 
gasoline had spiked upwards by about 25 cents over the course of the 
Memorial Day holiday. We subpoenaed records from major oil companies 
and interviewed oil industry experts, gas station dealers, antitrust 
experts, gasoline wholesalers and distributors, and oil company 
executives. We examined thousands of prices at gas stations in 
Michigan, Ohio, California, and other States. In the spring of 2002, I 
released a 400-page report and held 2 days of hearings on the results 
of the investigation.
  The investigation found that increasing concentration in the gasoline 
refining industry, due to a large number of recent mergers and 
acquisitions, was one of the causes of the increasing number of 
gasoline price spikes. Another factor causing those spikes was the 
increasing tendency of refiners to keep lower inventories of gasoline. 
We also found a number of instances in which the increasing 
concentration in the refining industry was also leading to higher 
prices in general. Limitations on the pipeline that brings gasoline to 
my home State of Michigan was another cause of price increases and 
spikes in Michigan. The report recommended that the Federal Trade 
Commission carefully investigate proposed mergers, particularly with 
respect to the effect of mergers on inventories of gasoline.
  In March of 2003, my subcommittee released a second report detailing 
how the operation of crude oil markets affects the price of not only 
gasoline but also key commodities such as home heating oil and diesel 
fuel. The report warned that U.S. energy markets were vulnerable to 
price manipulation due to a lack of comprehensive regulation and market 
oversight.
  Following this report, I worked with Senator Feinstein on legislation 
to put the cop back on the beat in the energy markets that had been 
exempted from regulation pursuant to an ``Enron loophole'' that was 
snuck into other commodities legislation in December of 2000. For 2 
years, we attempted to close that ``Enron loophole,'' but efforts to 
put the cop back on the beat in these markets were unsuccessful, due to 
opposition from the Bush administration, large energy companies, and 
financial institutions that trade energy commodities.
  In June of 2006, I released another subcommittee report called ``The 
Role

[[Page S3999]]

of Market Speculation in Rising Oil and Gas Prices: A Need to Put a Cop 
on the Beat.'' This report found that the traditional forces of supply 
and demand no longer accounted for sustained price increases and price 
volatility in the oil and gas markets. The report determined that in 
2006 a growing number of energy trades occurred without regulatory 
oversight and that market speculation had contributed to rising oil and 
gasoline prices, perhaps accounting for $20 out of a then-priced $70 
barrel of oil.
  The subcommittee report I released in June of 2006 again recommended 
new laws to increase market oversight and stop market manipulation and 
excessive speculation. I again coauthored legislation with Senator 
Feinstein to improve oversight of the unregulated energy markets. Once 
again, opposition from the Bush administration, large energy traders, 
and the financial industry prevented the full Senate from considering 
that legislation.
  In 2007, my subcommittee addressed the sharp rise in natural gas 
prices over the previous year and released a fourth report, entitled: 
``Excessive Speculation in the Natural Gas Market.'' Our investigation 
showed that speculation by a single hedge fund named Amaranth had 
distorted natural gas prices during the summer of 2006 and drove up 
prices for average consumers. The report also demonstrated how Amaranth 
had traded in unregulated markets to avoid the restrictions and 
oversight in the regulated markets, and how the price increases caused 
by Amaranth could have been prevented if there had been the same type 
of oversight in the unregulated markets as in the regulated markets.

  Following that investigation, I introduced a bill, S. 2058, to close 
the Enron loophole and regulate the unregulated electronic energy 
markets. Working again with Senators Feinstein and Snowe and with 
members of the Agriculture Committee in a bipartisan effort, we finally 
managed to include an amendment to close the Enron loophole in the farm 
bill that was then being considered by the Senate. The Senate 
unanimously passed this amendment to close the Enron loophole last 
December. Last week, the House and Senate conferees on the farm bill 
reached agreement to include our legislation in the final farm bill, 
and we hope the Congress will finally pass that important legislation 
soon.
  Although our legislation to close the Enron loophole is vitally 
important for the energy market oversight as a whole, and for our 
natural gas markets in particular, because energy traders have recently 
moved a significant amount of United States crude oil and gasoline 
trading to the United Kingdom, beyond the direct reach of United States 
regulators, we have to address that second loophole now as well.
  The key energy commodity market for United States crude oil and 
gasoline trading is now located in London, regulated by the British 
agency called the Financial Services Authority. However, the British 
regulators do not have any limits on speculation as we do here in the 
United States, and the British do not make public the same type of 
trading data we do. That means traders can avoid the limits on 
speculation in crude oil imposed on the New York exchanges by trading 
on the London exchange. It also makes the London exchange less 
transparent than the New York exchange. The legislation I introduced in 
2007 would have required United States traders on the London exchange 
to provide United States regulators with the same type of trading 
information they are already required to provide when they trade on the 
New York Mercantile Exchange. Unfortunately, this provision was dropped 
from the ``close the Enron loophole'' legislation in the farm bill.
  The Consumer First Energy Act, which the majority leader and others 
introduced last week to address high gas prices and reduce speculation, 
includes a provision to stop speculation and to increase our access to 
timely and important trading information and to ensure there is 
adequate market oversight of the trading of U.S. energy commodities no 
matter where the trading occurs. This legislation that was introduced 
last week, and which I am proud to cosponsor, would require the 
Commodity Futures Trading Commission--the CFTC--to ensure a foreign 
exchange imposes comparable speculative limits and comparable reporting 
requirements on speculators that the CFTC imposes on U.S. exchanges 
prior to allowing traders in the U.S. trading U.S. energy commodities 
direct access to that exchange through a terminal located in this 
country. So the bill introduced last week will close that second 
loophole which I have identified.
  I believe this issue is so important that I have also introduced that 
section to close that second loophole as a separate bill. Senator 
Feinstein is a cosponsor of that bill. I ask unanimous consent that a 
summary of the bill be printed in the Record after my statement.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  (See exhibit 1.)
  Mr. LEVIN. In addition to finding that the energy markets needed 
better regulation and oversight, the report issued by my subcommittee 
in 2003 also found that the Bush administration's large deposits of oil 
into the Strategic Petroleum Reserve--SPR--were increasing prices but 
not overall U.S. energy security. We found that in 2002, the Bush 
administration, over the repeated objections of its own experts in the 
Department of Energy, had changed its policy and decided to put oil 
into the SPR regardless of the price of oil or market conditions. By 
placing oil into the SPR while oil prices were high and oil supplies 
were tight, the administration's deposits into the SPR were reducing 
market supplies and boosting prices, with almost no benefit to national 
security, given the fact that the SPR is more than 95 percent filled. 
The DOE experts believed that in a tight market, we are better off with 
keeping the oil on the market rather than putting it into the ground 
where it cannot be used.
  Following the issuance of this report, in early 2003 I asked the 
Department of Energy to suspend its filling of the SPR until prices had 
abated and supplies were more plentiful. DOE refused to change course 
and continued the SPR fill without regard to market supplies or prices.
  After DOE denied my request, I offered a bipartisan amendment with my 
colleague Senator Collins to the Interior Appropriations bill, which 
provides funding for the Strategic Petroleum Reserve program, to 
require DOE to minimize the costs to the taxpayers and market impacts 
when placing oil into the SPR. The Senate unanimously adopted our 
amendment, but it was dropped from the conference report due to the 
Bush administration's continued opposition.
  The next spring, I offered another amendment, also with Senator 
Collins, to the budget resolution, expressing the sense of the Senate 
that the administration should postpone deliveries into the SPR and use 
the savings from the postponement to increase funding for national 
security programs. The amendment passed the Senate by a vote of 52-43. 
That fall, we attempted to attach a similar amendment to the homeland 
security appropriations bill that would have postponed the SPR fill and 
used the savings for homeland security programs, but the amendment was 
defeated by a procedural vote, even though the majority of Senators 
voted in favor of the amendment, 48-47.
  The next year, the Senate passed the Levin-Collins amendment to the 
Energy Policy Act of 2005 to require the DOE to consider price impacts 
and minimize the costs to the taxpayers and market impacts when placing 
oil into the SPR. The Levin-Collins amendment was agreed to by the 
conferees and is now law.
  Unfortunately, passage of this provision has had no effect upon DOE's 
actions. DOE continues to fill the SPR regardless of the market effects 
of buying oil, thereby taking oil off the market and reducing supply by 
placing it into the SPR. In the past year, no matter what the price of 
oil or market conditions, DOE has consistently found that the market 
effects are negligible and no reason to delay filling the SPR.
  Currently, at the same time the President has urged OPEC to put more 
oil on the market to reduce supplies, the administration is continuing 
to take oil off the market and place it into the SPR. The DOE is 
currently depositing about 70,000 barrels of crude oil per day into the 
SPR, much of it high-quality crude oil that is ideal for refining into 
gasoline. It simply defies common sense for the U.S. government

[[Page S4000]]

to be acquiring oil at $120 barrel, in a time of tight supply, just 
before the peak driving season, and put it into the SPR. That is why I 
have co-sponsored Senator Dorgan's bill to suspend the SPR fill for 1 
year, or until prices fall to more acceptable levels, whichever comes 
first. Passing this legislation will save the taxpayers money and 
relieve some of the pressure on the oil markets that is driving prices 
relentlessly higher. A similar provision is also included in the 
Democrats' Consumer-First Energy Act.
  The recent SPR fill has exacerbated yet another problem in our oil 
markets--the fact that the standard NYMEX futures contract that sets 
the benchmark price for U.S. crude oil requires a particular type of 
high quality crude oil known as West Texas Intermediate, WTI, to be 
delivered at a particular location--Cushing, OK. The standard NYMEX 
contract price, in turn, has a major influence on the price of fuels 
refined from crude oil such as gasoline, heating oil, and diesel.
  Because the price of the standard contract depends upon the supply of 
WTI at Cushing, OK, the supply and demand conditions in Oklahoma have a 
disproportionate influence on the price of NYMEX futures contracts. 
That means when the WTI price is no longer representative of the price 
of U.S. crude oil in general, the prices of other energy commodities 
are also thrown out of whack. In other words, we have an oil futures 
market that reflects the supply and demand conditions in Cushing, OK, 
but not necessarily the overall supply and demand situation in the 
United States as a whole.
  I have long called for reform of this outdated feature of the 
standard NYMEX crude oil contract. In 2003, the PSI report recommended 
the CFTC and NYMEX to work together to revise the standard NYMEX crude 
oil futures contract to reduce its susceptibility to local imbalances 
in the market for WTI crude oil. The subcommittee report suggested that 
allowing for delivery at other locations could reduce the volatility of 
the contract. It is truly disappointing that since our report was 
issued, no progress has been made for allowing for delivery at other 
places than Cushing, OK. As the price of oil has increased, the 
distortions and imbalances caused by the atypical nature of the 
standard contract have gotten worse. It is essential NYMEX repair its 
crude oil contract.
  Putting the cop on the beat in our energy markets, strengthening 
access to key oil trading information, stopping the SPR fill, and 
fixing the NYMEX crude oil contract all focus on problems caused by 
rising energy prices. These consistently rising gas prices also 
underscore the need to develop advanced vehicle technologies and 
alternative energy sources that will significantly reduce our 
dependence on foreign oil.
  I have long advocated advanced automotive technologies such as hybrid 
electric, advanced batteries, hydrogen and fuel cells and promoted 
development of these technologies through Federal research and 
development and through joint government-industry partnerships. We need 
a significant infusion of Federal dollars into these efforts to make 
revolutionary breakthroughs in automotive technologies. Such an 
investment will make technologies such as plug-in hybrid vehicles 
affordable to the American public, and reduce our dependence on oil and 
reduce prices at the pump.
  We need an equally strong investment in development of alternative 
fuels that can replace gasoline. I have strongly supported efforts to 
increase our production of renewable fuels and to do that in a way that 
will also reduce our greenhouse gas emissions. We need a strong push 
toward biofuels produced from cellulosic materials, which requires a 
significantly greater Federal investment in biofuels technologies. 
Cellulosic ethanol has enormous potential for significant reductions in 
greenhouse gas emissions but additional Federal support is required to 
make this technology financially viable. We need expanded Federal 
research and development grants as well as increased tax incentives and 
Federal loan guarantees to make cellulosic ethanol a viable replacement 
for gasoline. The Federal Government must do its part first to develop 
these technologies so that they will then in turn be within reach of 
the American public.
  One more point. The burden of higher energy prices is not being 
shared equally. To the contrary, it is falling hardest upon those who 
can least afford it. Large oil companies are reaping record profits at 
the expense of the average American who ultimately bears the full 
burden of these price increases. At the same time that average 
Americans are having to devote a greater and greater portion of their 
income to pay for basic necessities, such as gasoline, household 
utilities, and food, the major oil companies are reporting record 
profits, and their executives are taking home annual paychecks of 
hundreds of millions of dollars. Many of these profits have been 
generated without any additional investments into energy production. 
Rather, these companies have seen their profits rise with the flood of 
speculation. What is a high tide of profits for the oil companies, 
though, is a tsunami that is overwhelming millions of Americans.
  And what are these oil companies doing with these record profits? Are 
they investing in new technologies? The answer is that the oil 
companies are not increasing their exploration and development 
investments by nearly as much as their profits are increasing. Instead, 
they are devoting large amounts of their profits to acquiring other 
companies and buying back their own shares. On May 1 of this year, the 
Wall Street Journal reported that in the first quarter of 2008 
ExxonMobil spent $8 billion to buy back company shares, which ``boosted 
per-share earnings to stratospheric levels,'' whereas it spent less on 
exploration and actually reduced oil production.
  For these reasons, we need to institute a windfall profits tax on the 
oil companies. We should incentivize big oil companies to invest their 
windfall profits into things that will increase our own domestic energy 
production by reducing the amount of the tax for such investments. If 
they don't make these investments, a portion of that profit should be 
recouped by the public to help offset the outrageous prices they are 
facing at the pump.
  I have supported a windfall profits tax numerous times when we have 
voted on it in the Senate. The Consumer-First Energy Act imposes a 25 
percent tax on windfall profits of the major oil companies. Windfall 
profits invested to boost domestic energy supplies would be exempt from 
the tax, which would encourage investments in renewable facilities and 
the production of renewable fuels such as ethanol and biodiesel. It 
would also encourage oil companies to increase their domestic refinery 
capacity. Proceeds from the tax would be put toward measures to reduce 
the burdens of rising energy costs and increase our energy independence 
and security.
  Mr. President, let me summarize. Skyrocketing energy prices are tying 
our already weak economy in knots and causing financial pain to working 
families throughout this country. Congress cannot just stand by. We 
should act now to stop the pain.
  Immediate steps include putting the cop back on the beat in our 
energy markets, strengthening our access to key oil trading data in 
London, fixing the key NYMEX crude oil contract, stopping the senseless 
filling of the Strategic Petroleum Reserve, investing in advanced 
vehicle technologies and alternative energy sources, and imposing a 
windfall profits tax on the oil companies. Longer range steps include 
fixing the fiscal policies undermining the strength of the U.S. dollar, 
including by eliminating tax cuts for the wealthiest among us, reducing 
the $12 billion a month spending that is taking place in Iraq, closing 
the tax loopholes such as the use of tax havens to avoid payment of 
taxes to Uncle Sam. Those tax havens and that loophole that allows the 
use of those havens is costing the Treasury in the range of $100 
billion a year. We can fight back against exorbitantly high energy 
prices, but it will take all of our energy and determination to do it.

                Summary of Oil Trading Transparency Act


                                Summary

       The Levin-Feinstein Oil Trading Transparency Act would 
     direct the Commodity Futures Trading Commission (CFTC) to 
     ensure that any foreign exchange operating a trading terminal 
     in the United States for the trading of a U.S. energy 
     commodity meets two regulatory requirements that already 
     apply to U.S. exchanges: (1) imposition of speculative 
     trading limits to prevent price

[[Page S4001]]

     manipulation and excessive speculation, and (2) the mandatory 
     daily publication of trading information from the exchange to 
     ensure market transparency. The bill would also require the 
     CFTC to obtain information from the foreign exchange to 
     enable it to determine how much trading in U.S. energy 
     commodities is due to speculation.


                               Background

       Currently, a key foreign exchange (ICE Futures Europe) that 
     recently began trading trades futures contracts for crude oil 
     produced in the United States is allowed by the CTFC to 
     operate trading terminals in the United States.
       ICE Futures Europe is owned by the Intercontinental 
     Exchange (ICE), a U.S. company based in Atlanta, Georgia, 
     which also operates the largest electronic energy trading 
     platform in the United States outside of the NYMEX exchange 
     in New York.
       ICE Futures Europe trades two types of crude oil, Brent 
     crude oil produced in the North Sea, and West Texas 
     Intermediate (WTI) crude oil produced in the United States. 
     It is the only foreign exchange that trades U.S. crude oil. 
     ICE Futures Europe bases the settlement price of its WTI 
     contract price on the settlement price of the WTI contract 
     traded on the NYMEX exchange, so the price of both WTI 
     futures contracts are virtually identical.
       For a number of years the CFTC has allowed ICE Futures 
     Europe to operate trading terminals in the United States. At 
     first, only Brent contracts could be traded on U.S. 
     terminals, but in 2006 ICE began trading WTI contracts in 
     London. This 2006 development allowed U.S. traders to trade 
     WTI futures contracts in London as well as in New York. This 
     means that crude oil produced and used in the United States 
     can be traded by U.S. traders on an exchange that is beyond 
     the reach of U.S. regulators. Approximately 30 to 40% of WTI 
     futures trades--which are key to setting U.S. oil prices--now 
     occur in London, beyond U.S. oversight.
       Although the CFTC has a data sharing agreement with the 
     U.K. regulatory authority, the Financial Services Authority 
     (FSA), to obtain trading data from the London exchange, the 
     FSA does not collect or provide data that would enable the 
     CFTC to determine how much WTI futures trading is due to 
     speculation. Absent this information, CFTC weekly reports on 
     speculation in U.S. crude oil futures are incomplete and 
     inaccurate. The FSA also does not impose position limits on 
     traders to limit speculative trading. The absence of these 
     position limits means that a U.S. trader can avoid U.S. oil 
     speculation limits on U.S. exchanges simply by routing its 
     trades through London.
       The bill would correct these market deficiencies by 
     disallowing the operation of foreign exchange terminals in 
     the United States, unless the foreign exchange meets 
     comparable requirements for market transparency and 
     speculative limits as now apply in the United States.

  Mr. LEVIN. Mr. President, I yield the floor.
  The PRESIDING OFFICER (Mr. Cardin). The Senator from Alaska is 
recognized.
  Ms. MURKOWSKI. Mr. President, it is so important that we as Members 
of the Senate, Members of the Congress, are on the floor discussing the 
No. 1 issue--the No. 1 domestic issue certainly in the minds of 
Americans--and that is the price of energy. The folks back home want to 
know: What are you going to do to fix it? What is the Congress going to 
do?
  Tomorrow we are going to have an opportunity to vote on a couple of 
different proposals. I rise this afternoon in support of the passage of 
the American Energy Production Act. This is a comprehensive energy bill 
that was introduced last week by the ranking member of the Energy 
Committee, Senator Domenici.
  Americans are at a point where I think their patience is wearing 
thin, their frustration is showing, but it goes beyond just 
frustration. I think it is fair to say that many across the country are 
in true economic distress over the prices they are paying now for 
gasoline, for their home heating oil, many for their natural gas that 
they are seeing coming into their home and, unfortunately, the 
prognosis for the future doesn't look much more consoling to the 
consumer. All estimates indicate these prices will continue to rise in 
the future.
  Look at some of the events of last week in terms of what was 
happening around the world. The rebel disturbances in Nigeria, concerns 
about the relations with Iran and production disruptions over there, 
production disruptions in Iraq--all of this plus many other factors, 
including the price of the dollar, and what is happening with the 
Chinese and Indian economies in terms of additional consumers coming 
on. So many of these factors keep driving the price of oil to the point 
where last week's closing crude oil price topped out at $126, down to 
$125 per barrel over the weekend. That hike in price is going to 
continue to drive the retail prices for refined product even higher, 
above the $3.62 national average for unleaded regular we reached last 
week; 52 cents higher than last year.
  Talking to the folks back home, it is literally one horror story 
after another in terms of what people are paying. I know there are many 
places in the country today where fuel is hovering right at $4 a 
gallon, but in Alaska we are looking at prices that are much higher 
than that. In Athaca, fuel was costing $8.65 a gallon last week. This 
is about a dollar higher than the folks there were paying last year. 
They are used to paying high prices, but I am here to tell you 8 bucks 
and 65 cents a gallon is really high. In the community of Kiana, it is 
$6.25 a gallon. It is exactly $1 higher than they paid last year. At 
these prices, Alaskans and all Americans are having great difficulty 
making ends meet. Americans need relief from high fuel prices and they 
are asking for it now.
  I have so many opportunities, coming from a State such as Alaska that 
is a producing State, a lot of opportunities to talk about how we can 
produce more as a nation. But I also am very insistent when we talk 
about an energy policy for this country that we also focus on promoting 
energy conservation, we also focus on greater energy efficiency and 
developing the alternative energy so critical for this Nation.
  But we also have to make sure when we talk about an energy policy, we 
recognize there are different components. I liken it to a three-legged 
stool. You have the conservation and efficiency, you have the 
renewables and alternatives, but you also have increased production and 
increased production in traditional energy sources that are done in an 
environmentally sensitive manner.
  The amendment Senator Domenici has introduced, the American Energy 
Production Act, does that in many ways. It proposes to open a couple 
thousand acres, 2,000 acres--I don't come from a farming State 
necessarily, but my colleagues from South Dakota and some of the big 
farm States tell me that 2,000 acres is pretty much the size of a small 
farm there--of the Arctic Coastal Plain to oil and gas development. We 
believe this area, the 1002 area of ANWR, is the site with likely the 
largest onshore oil and gas deposits left in North America. We know if 
we were to act today to open ANWR tomorrow, it is not going to bring 
new North Slope oil to the markets tomorrow, but it will affect the 
psychology of the oil markets. It will show that America is getting 
serious--finally getting serious--about producing the 40 billion 
barrels of oil and the hundreds of trillions of cubic feet of natural 
gas we believe exist in the current moratoria areas.
  I think we need to recognize--and so many of my colleagues have 
stated this already on the floor--ANWR is about the long term. I can't 
tell my colleagues how many times I have heard on this floor: If we had 
only opened ANWR 10 years ago when President Clinton vetoed it, we 
would have that pipeline today. That pipeline would now be full instead 
of half full as we currently see it. But ANWR is about the bridge, if 
you will. It is a bridge to an energy future that can get us to the 
alternatives and to the renewables we keep talking about, and those who 
are so focused on making sure we have a solid environment and a solid 
environmental base. This is what so many of my Democratic colleagues 
are talking about. We need to get to the future of energy, which I 
agree is absolutely the alternatives and the renewables. But you can't 
flip a switch and have this Nation powered 100 percent by wind or solar 
or geothermal or ocean energy. We have to allow for that transition, 
and ANWR, the oil from ANWR, can help us to do that.
  We have had many hearings in the Energy Committee on the issue of 
production. But earlier this year we heard from witnesses who said the 
current runup in world oil prices is due to so many of the factors I 
mentioned a few minutes ago; clearly, the hike in world demand for oil 
is led by China and by India; what is happening with the weakening of 
the U.S. dollar, which is used to pay for all of the oil sales; and oil 
becoming the new gold--a commodity of interest to investors because of 
the tightness of the world supplies.

[[Page S4002]]

  Essentially, what it comes down to--so much of the discussion we are 
talking about--is supply and demand. I suggest that as we look to all 
these factors that are influencing price right now, one of the ways we 
can deal with that, one of the ways we can tell the American consumer 
we are working on this is to produce more energy from non-OPEC nations, 
to help increase our global supplies, and to help drive down world 
prices.
  Robert Samuelson, a columnist, said in a column, which I will submit 
for the Record, that we need to exert long-term influence on the global 
balance of supply and demand for energy.
  I ask unanimous consent that the column be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                             Start Drilling

                        (By Robert J. Samuelson)

       What to do about oil? First it went from $60 to $80 a 
     barrel, then from $80 to $100 and now to $120. Perhaps we can 
     persuade OPEC to raise production, as some senators suggest; 
     but this seems unlikely. The truth is that we're almost 
     powerless to influence today's prices. We are because we 
     didn't take sensible actions 10 or 20 years ago. If we 
     persist, we will be even worse off in a decade or two. The 
     first thing to do: Start drilling.
       It may surprise Americans to discover that the United 
     States is the third-largest oil producer, behind Saudi Arabia 
     and Russia. We could be producing more, but Congress has put 
     large areas of potential supply off-limits. These include the 
     Atlantic and Pacific coasts and parts of Alaska and the Gulf 
     of Mexico. By government estimates, these areas may contain 
     25 billion to 30 billion barrels of oil (against about 30 
     billion barrels of proven U.S. reserves today) and 80 
     trillion cubic feet or more of natural gas (compared with 
     about 200 tcf of proven reserves).
       What keeps these areas closed are exaggerated environmental 
     fears, strong prejudice against oil companies and sheer 
     stupidity. Americans favor both ``energy independence'' and 
     cheap fuel. They deplore imports--who wants to pay 
     foreigners?--but oppose more production in the United States. 
     Got it? The result is a ``no-pain energy agenda that sounds 
     appealing but has no basis in reality,'' writes Robert Bryce 
     in ``Gusher of Lies: The Dangerous Delusions of `Energy 
     Independence.' ''
       Unsurprisingly, all three major presidential candidates 
     tout ``energy independence.'' This reflects either ignorance 
     (unlikely) or pandering (probable). The United States imports 
     about 60 percent of its oil, up from 42 percent in 1990. 
     We'll import lots more for the foreseeable future. The world 
     uses 86 million barrels of oil a day, up from 67 mbd in 1990. 
     The basic cause of exploding prices is that advancing demand 
     has virtually exhausted the world's surplus production 
     capacity, says analyst Douglas MacIntyre of the Energy 
     Information Administration. Combined with a stingy OPEC, the 
     result is predictable: Any unexpected rise in demand or 
     threat to supply triggers higher prices.
       The best we can do is to try to exert long-term influence 
     on the global balance of supply and demand. Increase our 
     supply. Restrain our demand. With luck, this might widen the 
     worldwide surplus of production capacity. Producers would 
     have less power to exact ever-higher prices, because there 
     would be more competition among them to sell. OPEC loses some 
     leverage; its members cheat. Congress took a small step last 
     year by increasing fuel economy standards for new cars and 
     light trucks from 25 to 35 miles per gallon by 2020. (And 
     yes, we need a gradually rising fuel tax to create a strong 
     market for more-efficient vehicles.)
       Increasing production also is important. Output from older 
     fields, including Alaska's North Slope, is declining. 
     Although production from restricted areas won't make the 
     United States self-sufficient, it might stabilize output or 
     even reduce imports. No one knows exactly what's in these 
     areas, because the exploratory work is old. Estimates 
     indicate that production from the Arctic National Wildlife 
     Refuge might equal almost 5 percent of present U.S. oil use.
       Members of Congress complain loudly about high oil profits 
     ($40.6 billion for Exxon Mobil last year) but frustrate those 
     companies' desire to use those profits to explore and produce 
     in the United States. Getting access to oil elsewhere is 
     increasingly difficult. Governments own three-quarters or 
     more of proven reserves. Perversely, higher prices discourage 
     other countries from approving new projects. Flush with oil 
     revenue, countries have less need to expand production. 
     Undersupply and high prices then feed on each other.
       But it's hard for the United States to complain that other 
     countries limit access to their reserves when we're doing the 
     same. If higher U.S. production reduced world prices, other 
     countries might expand production. What they couldn't get 
     from prices they'd try to get from greater sales.
       On environmental grounds, the alternatives to more drilling 
     are usually worse. Subsidies for ethanol made from corn have 
     increased food prices and used scarce water, with few 
     benefits. If oil is imported, it's vulnerable to tanker 
     spills. By contrast, local production is probably safer. 
     There were 4,000 platforms operating in the Gulf of Mexico 
     when hurricanes Katrina and Rita hit. Despite extensive 
     damage, there were no major spills, says Robbie Diamond of 
     Securing America's Future Energy, an advocacy group.
       Perhaps oil prices will drop when some long-delayed 
     projects begin production or if demand slackens. But the 
     basic problem will remain. Though dependent on foreign oil, 
     we might conceivably curb the power of foreign producers. But 
     this is not a task of a month or a year. It is a task of 
     decades; new production projects take that long. If we don't 
     start now, our future dependence and its dangers will grow. 
     Count on it.

  Ms. MURKOWSKI. That means we have to actually produce more energy in 
this country. How do you get from here to there in increased energy 
production?
  I wish to take a few minutes this afternoon and talk about ANWR. ANWR 
has 10 billion to 16 billion barrels of economically recoverable oil, 
according to the USGS estimates, and 10 trillion cubic feet of natural 
gas. We recognize that, by itself, that infusion into the energy market 
is not going to change the world's energy equation. But pair it with 
the other things we are talking about in this energy legislation 
Senator Domenici introduced and pair it with the additional barrels 
that could come from OCS development in current moratoria areas, and 
the 80 to 100 trillion cubic of natural gas there, and pair it with the 
fuel from coal-to-liquids development and the oil from U.S. oil shale 
deposits. Together, all these can start to break the stranglehold OPEC 
has on us and help to lower the prices.
  Now, back to ANWR. I had said that--and I have said this throughout 
my public life--if opening ANWR was going to come at the expense of our 
environment and our wildlife, I would have to oppose it. But we have 
technology we have utilized up north in the past 30 years, since we 
have been in active production pulling oil from the North Slope, that 
has truly revolutionized what happens in the Arctic when it comes to 
development of our resources.
  This chart is a New York Times science chart. It is essentially 
outlining some of the latest drilling technology in an effort to reduce 
environmental damage from the oil drilling. Directional drilling. It 
used to be that you would sink your drilling rig and drill straight 
down. Under the new directional drilling, what you are literally able 
to do is you sink it but you ``spider'' out, or ``spaghetti'' out 
underneath the surface. And you can take this in a direction of up to 
almost 8 miles in every direction around you, with no disturbance to 
the surface. So you don't see what is going on down below the caribou 
that are wandering around and are oblivious to the activity up top. But 
it is a technique that is in place in the Arctic that helps to 
literally provide about 100 square miles of habitat for the caribou and 
musk oxen that are between the well pads.
  This technology has made the difference for us not only in Alaska in 
Arctic conditions but truly as we develop our technology for oil 
exploration around the country. It is difficult to see a lot of the 
descriptions on this chart, so I will use other maps to show you the 
ice roads, the pads on the ground, how you utilize a crossing over a 
river, the 3D seismic technology, how we have been able to reduce the 
well pads paths.
  Initially, when drilling in the 1970s, the well pads were about 13 
acres in size. Through the use of this technology, you can limit that 
footprint to about 5 acres. I wish to show you a picture of how we 
travel across the tundra so we don't disturb it, you don't see man's 
footprint or the trucks that are going over it. This is a composite mat 
that is literally laid on top of the tundra in the summer months, so 
you don't damage the fragile tundra below. Look at a picture of the ice 
roads. We do not explore in the summer months. Exploring is in the 
wintertime. This is a picture of exploratory drilling in Alpine in the 
winter. You will see around the exploration site--you cannot see the 
ice road from here, but there are no roads around this. There are no 
roads that will take you to this site. The way you get there is you 
build out roads on the ice. It is like a big Zamboni machine making an 
ice road that will take you across the tundra in the wintertime only--
you cannot go out there during the summer--and lay down the

[[Page S4003]]

ice road, so when summertime comes, you have this.
  This is Alpine during the summer months. The photo is grainy, and I 
apologize for the quality of it. You can see you don't have any roads 
that lead to the exploration site in the tundra there. This is a 
picture that was taken in the fall. This white box is the well site 
that is awaiting actual development.
  We have a picture of rendezvous well No. 2. This is located in the 
National Petroleum Reserve Alaska. This is done in the winter. You can 
see this is the ice road I am talking about, which literally goes 4 
miles, connecting this site to a road system miles away. We have a 
picture of the same site. This is in the summer, the same site. We have 
capped off and removed the rig. So the first one was the exploration, 
and then once the exploration is complete, they cap it off. There is no 
sign of impact to the area except for this ``Christmas tree'' valve 
stem that can be removed if, in fact, there is no production that is 
ever likely in that area.
  Again, you may look at this and say: How do you get there? We get 
there because we are utilizing techniques that allow us and require us 
to protect the environment, so the impact is as minimal as absolutely 
possible.
  The last picture I wish to put up in this series is this one. 
Everyone talks about the caribou. I think no picture of ANWR is 
complete unless we have a picture of the caribou wandering around at 
Point McIntyre Field while drilling is underway. The caribou--the 
wildlife--have learned to coexist with the level of development that 
goes on in the area there.
  Again, I think it is important to point out we have gotten smart over 
the past 30 years. We figured out how to utilize technology so we can 
gain access to a resource, while at the same time preserving and 
protecting an area, a part of the country that we know is fragile. That 
tundra is fragile territory, and we have to treat it right, with 
respect, and be able to allow a level of subsistence harvest for the 
Natives who live up there and live off the land. We have to figure out 
how we balance it. We have worked very hard to do that.
  The chairman of the Energy Committee, a colleague for whom I have a 
great deal of respect and who has worked very hard on so many energy 
issues spoke a little while ago, and he made the point that to the west 
of the Prudoe fields, and to the south, we have an area that is known 
as the National Petroleum Reserve-Alaska. His point was, why do we need 
to open ANWR if we have all this area that is potentially available for 
oil exploration and development? There are a couple things going on 
with NPRA. It is a huge area. It is larger than the ANWR area itself. 
As a consequence, the pockets of oil--the areas that would be conducive 
for exploration and drilling--are further from the infrastructure, the 
existing pipelines. So that adds enormous costs to already very 
expensive operations up north.
  You also have some very environmentally sensitive areas in the NPRA, 
around the Shirukak Lake, where you have a great deal of waterfowl that 
come through. So we are sensitive to making sure we are not disrupting, 
to the furthest extent possible, the wildlife, the waterfowl. That, 
too, is a point of concern. We also recognize the potential in ANWR for 
greater intensity, in terms of the oil finds, is that much more real. 
It is estimated that in ANWR we could get approximately 6,860 barrels 
per acre as opposed to only 480 barrels per acre in the NPRA. Those are 
factors to consider when we are talking about NPRA and ANWR.
  I think it is helpful to put up a map of ANWR, so people can put it 
into context. The ANWR portion of this bill limits exploration to 2,000 
acres of the 19.6 million acres of wildlife refuge. This is just one 
10,000th of 1 percent of the refuge. It allows the establishment of 
critical habitat zones. It requires the use of the best commercially 
available technology to produce the oil, no matter what the cost is to 
the company. We believe, truly, this new technology can limit the 
environmental impact in the north.
  Look at what we are talking about, the refuge itself. When people 
talk about ANWR, some might get the impression we are talking about 
developing in all of the wildlife refuge, all the 19.6 million acres. 
That is incorrect. The area we are talking about developing is within 
the ANWR Coastal Plain. That acreage is 1.5 million acres. Still, look 
at what you have within the refuge. You have a wilderness area, which 
has absolutely no development of anything at all, 8.5 million acres 
that is fully established in the wilderness area. In the balance is 
about 10 million acres and it is the refuge area. So this is the area--
the 1002 we are talking about opening for potential exploration and 
development. Of that, this tiny little red dot on this map represents 
2,000 acres out of the 1.5 million acres. So it is important to put 
that into context.
  We have not had the ANWR debate in some months, so I think it is 
always nice to refresh people's memories of what ANWR is. You will 
notice ANWR itself is about the size of the State of South Carolina. We 
are talking big territory here.
  The amendment that was offered by Senator Domenici and members of the 
Energy Committee does more than just open ANWR. ANWR is not the sole 
answer to the high price of oil. ANWR is not the sole answer to a 
balanced energy policy. ANWR is just one piece of that puzzle.
  The amendment also permits revenue sharing with States that decide to 
allow OCS development off their coastlines. For the States that do not 
want it, this also provides new moratoria powers to prevent drilling, 
powers that could be gone in just 4 years. This is actually a plus for 
those who are somewhat concerned about OCS development off their coast.
  With the new technology we have, the old fears of well blowouts from 
offshore development should be satisfied. The fear of subsea pipeline 
leaks should be alleviated by the performances we saw in the Gulf of 
Mexico during Hurricanes Katrina, Rita, and Wilma in 2005, category 5 
hurricanes, which resulted in no major spills. The fear of water 
contamination by drilling rigs should be resolved since nontoxic 
chemicals can now be used.
  The amendment also removes the moratorium that is imposed on oil 
shale production in the West. There is great new technology that 
permits production from in situ piping, not requiring open-pit mining 
of the oil shale. We recognize we have so much oil shale in this 
country. They say America is the Saudi Arabia of oil shale, holding 2 
trillion barrels of potential oil production.
  Also, the provision in the legislation regarding coal-to-liquids sets 
a goal of America producing 6 billion gallons of such fuels by 2022, 
one-sixth of what we theoretically will produce from biofuel by then. 
But it requires that the fuel not produce more life-cycle carbon 
emissions than gasoline and allows for waivers to protect the 
environment. Given that Alaska alone holds the world's largest 
potential coal deposit and that America contains about 60 percent of 
the world's total reserves of coal, it is vital that we find some way 
to utilize the fuel. Coal is the only fossil fuel we can develop where 
we know we have the technology currently to capture and store any 
carbon produced and to keep it out of the atmosphere.
  We believe that bill could produce another 24 billion barrels of 
oil--enough to meet our Nation's total needs for 5 years. That will 
dampen world prices. But if we don't take these steps, we will continue 
to be in this exact same position of being held hostage by the world's 
oil cartel for decades until we have new alternative technologies. We 
have to stop letting ourselves be held over the proverbial barrel by 
the world's nationally owned oil companies.
  We understand in this country that there is no good reason, with our 
technology, our environmental advancements, not to be producing more of 
the energy that it needs.
  I do want to add a caveat because I have been talking about ANWR, 
offshore, and coal-to-liquids, that by passing this amendment, it does 
not mean we shouldn't move full speed ahead to promote noncarbon-
emitting nuclear power, that we shouldn't do everything possible to 
produce more power from wind, biomass, hydropower, solar, geothermal, 
ocean energy, and all the other technologies. We need them all. What it 
does mean is America will finally show the world that we are willing to 
do our part in meeting our energy needs.

[[Page S4004]]

  There used to be a mantra, if you will, that nations should think 
globally but act locally. In this country, we should produce more of 
the energy we consume rather than expect other nations to supply it to 
us. We have the ability to reduce our dependency on imported energy 
sources. We just need to get on doing it. I think this amendment will 
help us cut our prices now, but especially looking out for the long 
term, help us to avoid higher prices for the years to come.
  Over the weekend, I was reading through the local columnists in the 
Anchorage paper. One guy had it right. He said: I think the Republicans 
need to be more supportive of alternatives and renewables, the 
Democrats need to be more supportive of increased domestic production, 
and the American consumer needs to just conserve more. Sounds like 
pretty sage and wise advice to me.
  With all of those components--increased domestic production, focus on 
the future of energy, which is renewables and alternatives, and focus 
on conservation and efficiency--we have ourselves the start of a pretty 
good energy policy for this country.
  I appreciate the time of my colleagues. I yield the floor.
  The PRESIDING OFFICER. The Senator from North Carolina.

                          ____________________