[Congressional Record Volume 154, Number 101 (Wednesday, June 18, 2008)]
[Senate]
[Pages S5736-S5739]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ENERGY PRODUCTION

  Mr. DORGAN. Madam President, I wish to talk some about energy. I know 
the President, this morning, my colleague, Senator McCain, and others 
have talked a lot today about additional production.
  I am one of the four Senators who initiated in this body several 
years ago, along with Senator Bingaman, Senator Domenici, and Senator 
Talent, the legislation that is now law that opened lease 181 in the 
Gulf of Mexico, where there are substantial oil and gas reserves. We 
opened that up on a bipartisan basis. In addition to cosponsoring that 
legislation, I have also introduced

[[Page S5737]]

legislation that would open more of the eastern Gulf of Mexico. I think 
it is a smart thing to do.
  Let me say that the refrain today coming from the President and some 
others is: Just drill, drill, drill--believing the only way to produce 
more energy is to sink a hole someplace. There are a lot of ways to 
produce energy in addition to drilling.
  We do need more production. We need more conservation. We need 
efficiency. We need renewable forms of energy. We need all of those 
things. But the discussion today is: Well, if we could just drill in 
ANWR--one of the pristine areas of our country that was set aside in 
legislation signed by Dwight D. Eisenhower as President of the United 
States--that 10 years from now we may have some oil, I guess.
  Let me make another suggestion. How about allowing U.S. companies 
access for drilling off the coast of Cuba? India is interested in doing 
that. Canada is there. Spain is there. But U.S. companies are banned 
from there. There's potentially more than 500,000 barrels of oil that 
could be produced in these Cuban waters, available for leasing by oil 
companies. Our oil companies cannot do it because this administration 
is obsessed with the embargo against Cuba.
  So I say to the President: You want to drill, drill, drill, and 
drill? How about drill down in this blue area, as shown on this map? 
Spain is there. Canada is there. China is looking at it. India is 
there. But, no, you have decided we are embargoed from having our oil 
companies look where there is potentially more than half a million 
barrels of oil a day.
  Or how about the eastern gulf? I have legislation in on this. But it 
is interesting--the minority side, when they introduced their proposal 
to produce more energy by drilling more, they left this out of their 
proposal. Why? Because a member of their caucus does not want this to 
happen. So, therefore, it is not a part of their proposal.
  So in my judgment, enough about drilling and drilling and drilling. 
If our solution to the energy issue is to drill and to dig, that is 
just yesterday forever. That is not a policy.
  Now, here is what has happened to oil prices. Oil prices have doubled 
in a year. Now, I do not have to tell anybody that. If you drive your 
car to the gas pump, you figure that out. If you are a farmer ordering 
a load of fuel, you understand that. If you are a trucker trying to 
figure out whether you are going to be able to run your trucking 
business next week because you cannot afford the fuel, you know this 
problem. If you are one of nine airlines that have gone bankrupt in 
recent times, you know this issue.
  Here is what has happened to the price of oil. Here is what has 
happened to speculation in the oil markets. It looks a lot like the 
price of oil, doesn't it? Speculation. This has nothing to do with 
people who want to buy oil. They want to buy paper back and forth and 
speculate. Look at what has happened to speculation. It looks like the 
same line with oil production. Will Rogers talked about speculators 
some nine decades ago. He talked about people who buy things they never 
get from people who never had it, trying to make money on both sides of 
the transaction. We have a futures market in energy because you must 
have a futures market. There are legitimate commercial reasons to hedge 
fuel prices, but when that market is broken and taken over by 
speculators, then it seems to me the Congress has a responsibility to 
deal with the broken market.

  I am going to talk about what we should do about this speculation in 
a moment, but first I wish to talk about this response to drill as the 
only response to produce additional energy. It is interesting that in 
1916 this country decided to encourage people to drill for oil and gas. 
If you could find oil and gas, we wanted to give you a big fat tax 
break in 1916. We made it permanent. I wasn't here at the time. We made 
it permanent and said, if you go looking for oil and gas and find it, 
God bless you. We are going to give you a large tax break.
  Compare that with what America has done with renewable energy; wind, 
for example, and solar energy. We put in place a tax incentive for 
people to produce electricity from wind energy--a production tax 
credit, it is called. It was put in place in 1992, a short term, kind 
of a shallow tax incentive. It was extended five times, all short term. 
It was allowed to expire three times. So it has been stutter, step, 
start, stop. It is a pathetic, anemic, and thoughtless approach for a 
country to say to those who are producing renewable energy: We are 
behind you. We ought not do that. We did almost a century's worth of 
permanent tax incentives for people looking for oil and gas. To those 
who are trying to do wind and biomass and solar and all of the 
renewable forms of energy, we said: Well, we are not going to tell you 
whether we are going to keep providing these incentives.
  I have a piece of legislation on energy production incentives that 
says let's decide to tell people that for the next decade, here is 
where America is going. Here is America's policy. We believe in wind 
energy. We believe in renewable energy. Count on it, because this is 
America's policy. That is what we ought to do.
  We have people who stand up here in the Senate all day today--and the 
President at the White House--who say, the only production that matters 
is production by drilling a hole. Well, I am all for drilling holes 
where there is oil and raising some oil. But what about being less 
dependent on oil and especially less dependent on imported oil? Seventy 
percent of our oil now comes from off our shores. What about being less 
dependent on that? How about deciding there are other ways to produce?
  Yesterday we had a cloture vote and that cloture vote would have 
extended--not by enough, in my judgment, but nonetheless would have 
extended--the tax incentives for renewable energy. Almost every Member 
of the minority voted against it. Why? Because it would have raised 
funds to pay for it by plugging a loophole that allows big hedge fund 
operators who get a billion dollars or a half a billion dollars a year 
in compensation to park that money overseas in a deferred account and 
avoid paying taxes to our country. So we were going to plug that 
loophole and the other side has an apoplectic seizure. It is 
unbelievable to me.
  We are about production. We are trying to say here are the tax 
incentives necessary to produce more energy. Yes, it is renewable 
energy. It is an important part of our production need. And the other 
side says no, we don't support that because you are trying to make 
hedge fund managers pay their taxes as everybody else does. Well, not 
quite pay their taxes as everybody else. We were trying to plug the 
loophole that allows them to defer paying their taxes. But even if they 
had to pay them on time, many are paying a 15-percent tax rate on their 
earnings called carried interest. That is another story. They are 
paying less than the receptionist in their office, which is pretty 
unbelievable.
  But my point is simple. We fought out here yesterday on the floor of 
the Senate to provide the tax incentives that will produce more energy, 
and all the way along, the minority is objecting. It is like a bicycle 
built for two. We are pedaling uphill and they are sitting on the 
backseat with their foot on the brake. Then they come out the next day 
complaining that somehow not enough is being produced and they get the 
President to say the same thing out of the White House. They try to get 
people to think that somehow by waving a wand and drilling a hole some 
place they are going to solve the problem of $4 a gallon gasoline or 
$140 for a barrel of oil. It is not going to happen.
  Production is not just drilling. I support drilling. In fact, the 
U.S. Geological Survey just issued a recoverable oil assessment in my 
state--because I had requested that 2 years ago they do a survey. They 
completed their work and announced the largest survey or assessment of 
recoverable oil they have ever found in the lower 48 States: 3.6 
billion barrels of recoverable sweet light crude. It is not as if we 
are not producing. We are. This is a new field called the Bakken shale 
field. But we are not doing enough with respect to renewables because 
of the attitude of the President and others in this Chamber who think 
the only way you produce energy is to try to sink a drill bit some 
place. There are a lot of ways to produce energy and we ought to be 
doing all of them. Instead we have dramatically shortchanged renewable 
energy.

[[Page S5738]]

  I wish to turn for a moment to a solution of this issue of what is 
happening in the market that has caused the runup in price. There is 
nothing in the fundamentals of supply and demand of oil that justifies 
what has happened to double the price of oil--nothing. Oh, I suppose 
you could make the case that we have a perverted market someplace where 
people talk about free market. There is no free market. What an 
absurdity. In oil? Are you kidding me? First you have the OPEC 
countries sitting around a table in a closed room with their ministers 
making decisions about production and price. Then you have the oil 
companies with two names because they romanced and got married: Exxon 
romanced Mobil and now it is ExxonMobil; Phillips liked Conoco, so they 
got married and now they have two names. Bigger, stronger, more muscle 
in the marketplace. Then there is the futures market which has become 
an unbelievable amount of speculation. So there is no free market.

  Let me quote some folks who have come to the Congress. This is Fidel 
Gheit, a 30-year veteran of the Oppenheimer Company. He is the top 
energy trader at Oppenheimer, a very respected organization. Here is 
what he says: There is no shortage of oil. I am absolutely convinced 
that oil prices shouldn't be a dime above $55 a barrel. I call it the 
world's largest gambling hall. It is open 24/7. Unfortunately it's 
totally unregulated. This is like a highway with no cops and no speed 
limit, everybody's going 120 miles an hour.
  If you don't believe Mr. Gheit, how about Mr. Clarence Cazalot, CEO 
of Marathon Oil: $100 oil isn't justified by the physical demand on the 
market. Steven Simon, senior vice president of Exxon: The price of oil 
should be about $50-$55 per barrel.
  So what has gone haywire here? What is the problem? Well, we have a 
regulatory agency called the Commodity Futures Trading Commission. They 
are supposed to be the regulators. We have a lot of people in 
regulatory bodies these days who think regulation is a four-letter 
word. They came to their jobs with an Administration that said, ease 
up. Soften up. We don't want you to regulate very much.
  So we have the Commodity Futures Trading Commission. The Acting 
Chairman of Commodity Futures Trading Commission testified yesterday. 
He doesn't have the foggiest idea of what percentage of the contracts 
being traded in these energy markets are contracts he can't see or can 
see, but he has already made a conclusion that excessive speculation is 
not the problem. Surprise, surprise.
  Well, here is what Mr. Lukken has said, the acting head of the 
Commodity Futures Trading Commission. This is the guy who is supposed 
to wear the striped shirts and call the fouls and be the referee: Based 
on our surveillance efforts to date, we believe energy futures markets 
have been reflecting the underlying fundamentals of these markets.
  July of last year. What is going on with the price of oil? ``Oh, it 
is just the fundamentals.'' That is what the head of the regulatory 
body says.
  In January, 6 months later, one word difference. He said: Based on 
our surveillance efforts to date, we believe that energy futures 
markets have been largely reflecting the underlying fundamentals.
  Nothing there, I guess, not from the acting head of the regulatory 
agency.
  In February: We are confident that the futures exchanges and 
clearinghouses are functioning well, especially during these turbulent 
times.
  No problem there. Be happy. Everything is working fine. Oh, the price 
of oil is doubling. We have an unbelievable amount of speculation going 
on, but don't worry, sleep well.
  On May 7 he says: We can say with a high degree of confidence that 
people are not manipulating the energy markets.
  Then at the end of May, this man had an epiphany. I don't know 
whether it was during his sleep or perhaps a staff meeting. He decided 
there might be something wrong: I am not willing to say there is 
speculation, but there might be something haywire here and oh, by the 
way, we have been investigating it for 7 months.
  I don't know. It is kind of hard if someone has been saying for 7 
months nothing is wrong and then says oh, by the way, we have been 
investigating it for 7 months. A curious way, for someone who is paid 
to be a regulator, to describe to the American people their regulatory 
responsibilities.
  I think the evidence is pretty substantial that there is something 
going wrong in this marketplace, and when markets don't work--and 
sometimes they don't--there is a responsibility to take some action.
  I used to teach a bit of economics. I think the market system is the 
best allocator of goods and services I know of. There are times, 
however, the market system breaks. It doesn't work. That is what has 
happened here. There is a bubble that has occurred with a wave and a 
rash of speculation into these markets that has driven up the price 
well beyond that which can be justified by the quantity of oil or the 
demand for oil. The fact is this: In 4 of the first 5 months of the 
year, crude oil stocks in this country--the inventory of crude oil 
stocks increased. In 4 to 5 months, we actually had more inventory of 
crude oil stocks. At the same time, demand was beginning to dampen. 
There was less demand, more supply, so one would think prices would 
come down. It didn't happen. Prices continued to skyrocket. Something 
is broken in this marketplace.
  I am going to introduce legislation, I hope early tomorrow--and I 
hope with bipartisan support. My legislation is called the ``End Oil 
Speculation Act of 2008.'' It is a rather simple piece of legislation 
that deals with a complicated area. It would be designed, as we have 
written it, to eliminate manipulation and excess speculation of the 
futures petroleum market. By the way, existing law already has a 
provision with respect to excess speculation. But one would not expect, 
in my judgment, the current Commodity Futures Trading Commission's 
chairman to take action to address that, at least based on what he has 
been saying, that there is nothing at all wrong.

  This proposal would restore the petroleum futures market to its 
original purpose and intent as a place for hedge transactions by 
commercial producers and purchasers involving actual, physical 
petroleum products for future delivery and their direct counterparts. 
That is legitimate hedge trading. I support it. That is as 
distinguished from trading that goes well beyond that; that is, people 
who are not interested in taking physical possession, people who are 
not in the oil industry but they are interested in trading paper based 
on a speculative interest in making money.
  I suggest we revoke or modify all prior actions that fail to 
eliminate or discourage all non-legitimate hedge trading by, for 
example, applying position limits to all non-legitimate hedge trading. 
This legislation will require the Commodity Futures Trading Commission 
to segregate the kind of trading that exists, the kind of trading for 
which the market was established--typical commercial hedging--and the 
trading that has nothing to do with that at all but is simply and 
purely speculative trading. To distinguish between legitimate hedge 
trading and all other trading is necessary for a piece of legislation 
such as this to work. It will require that the Commodity Futures 
Trading Commission do so and do so by a time certain.
  It would also provide that there would be regulation of all persons--
to the extent possible--who are engaged in trading in petroleum futures 
wherever the market is located unless and until there are regulations 
that are substantially identical to the Commission's regulations and 
that are fully and effectively enforced.
  The proposal would provide an increased margin requirement that I 
spell out in the bill for the non-legitimate hedge trading, and that 
increased margin requirement would be designed to try to soak out the 
speculation in these markets and make it more difficult for the 
speculators.
  The American people need some help here. They are the victims of a 
market that has the American consumer bobbing around at the bottom, 
watching these prices they can't afford go right to the top, day after 
day after day. How many more people are going to go to the gas pump and 
try to figure out how much can I put in and still buy the groceries I 
need? We had a man come to a meeting I held today who talked about the 
fact that a mother brought her

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daughter to his office because she was talking about committing 
suicide. She brought her daughter in to get some medical help, but she 
didn't have enough gas to get back home. The mother had enough gas to 
get in with her daughter to see a doctor, but didn't have enough gas to 
get home. The mother stopped in the office of Ron His Horse is Thunder 
who is the tribal chairman of the Standing Rock Sioux Tribe to ask for 
some gas to be able to drive back home. The story is much sadder 
because the young lady then committed suicide some weeks later.
  But think of the people around this country who are wondering, how 
can I afford the gas to go see the doctor, or to get to my job? Think 
of the owners of the trucking company that is trying to get by, which 
has been around for 30 years, but is thinking now that they can't 
continue. How about an airline that is struggling to make it and can't 
possibly afford to pay these jet fuel costs?
  Does any of this matter to anybody? It does to me. If a significant 
part of the problem results from speculation, it seems to me we have a 
responsibility to deal with it. When markets are broken, we have a 
responsibility to address it.
  My legislation will do just that. I don't claim that it is perfect or 
that it will be easy, but I do claim that it is not enough to come to 
the Chamber and talk about what we need to do is open ANWR. Ten years 
from now, good for us, we will have opened something that was one of 
the most pristine areas that we have set aside.
  Do you want to drill? There is a lot more oil in the Gulf of Mexico 
than in ANWR. So let's not use a hood ornament called ANWR to describe 
America's current problems with respect to oil development. It is not 
accurate, and it is not, in my judgment, thoughtful. There are other 
ways for us to address this issue.
  Mr. President, I am going to speak tomorrow, as well, as I introduce 
the legislation.
  I yield the floor.
  The PRESIDING OFFICER (Mr. Whitehouse). The majority leader is 
recognized.


                 Unanimous Consent Agreement--H.R. 6124

  Mr. REID. Mr. President, I ask unanimous consent that when the Senate 
receives from the House the veto message on H.R. 6124, it be considered 
as read, and that it be printed in the Record and spread in full upon 
the Journal and held at the desk; that the Senate consider the veto 
message at 5:15 p.m. today, Wednesday, June 18; that the time until 
5:30 p.m. be equally divided and controlled between the two leaders, or 
their designees; that at 5:30 p.m. the Senate proceed to vote on 
passage of the bill, the objections of the President notwithstanding, 
without further action or debate.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. REID. Mr. President, I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The bill clerk proceeded to call the roll.
  Mr. HARKIN. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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