[Congressional Record (Bound Edition), Volume 152 (2006), Part 7]
[Senate]
[Pages 8801-8803]
[From the U.S. Government Publishing Office, www.gpo.gov]




                  NEEDLESS SUBSIDIES TO OIL COMPANIES

  Mr. WYDEN. Madam President, a couple of weeks ago, I stood in this 
spot for almost 5 hours because I wanted to prosecute an important 
cause, the cause of cutting needless subsidies to oil companies when 
the price of oil is over $70 a barrel. Today the price of oil is still 
about $70 a barrel, but there is a prospect of some good news. Late 
last night, the House of Representatives did something that seemed 
unimaginable in the Senate a couple of weeks ago. They actually had a 
vote on whether profitable oil companies should get taxpayer-funded 
royalty giveaways at a time when our citizens are paying record prices 
at the gas pump.
  When I spoke on the floor several weeks ago, all I was trying to do 
was get an up-or-down vote on exactly what the House of Representatives 
voted for last night. In fact, I spoke in this spot for more than 4 
hours before any Senator of either political party raised any concern 
about the proposal I was advancing. But despite that extended effort, I 
was unable to get an up-or-down vote on my proposal to stop ladling out 
tens of billions of dollars of unnecessary subsidies to the oil 
industry.
  Last night, the House of Representatives not only voted, but they 
voted overwhelmingly, on a bipartisan basis, to put a stop to this 
extraordinary waste of taxpayer money.

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  I remind the Senate and those who may be following this debate that 
the Government Accountability Office has said that a minimum of $20 
billion will be spent on this program. There is litigation involving 
this program underway. If the litigation is successful, and we are not 
able to roll back this subsidy, this program could cost taxpayers $80 
billion.
  Fortunately, the House voted last night to prohibit funding for new 
offshore oil and natural gas production leases if companies do not pay 
royalties based on fair market prices. The House vote aims to get oil 
and gas companies to renegotiate Federal contracts signed in 1998 and 
1999 that included royalty relief for companies at a time when crude 
oil prices were considerably lower than they are now. If the companies 
wish to continue to get new leases in the future, they would have to 
renegotiate the old leases and pay royalties based on current market 
conditions. This is very much along the lines of what I sought, after 
an extended discussion, to have the Senate vote on just a few weeks 
ago.
  Some have argued that this approach would be essentially like 
blackmailing the companies by denying new leases unless they 
renegotiated the old ones. These opponents have argued that, instead, 
Congress ought to keep in place these giveaway contracts at a cost of 
billions of dollars to our citizens.
  I also point out, as we did several weeks ago on this floor, that 
this was a bipartisan ripoff. Mistakes were made during the Clinton 
administration in 1998 and 1999. Secretary Norton sweetened the pot 
early on, during the President's term, administratively. Then in the 
summer of 2005, in the conference between the House and the Senate, 
these subsidies were made still sweeter. So the sugar just kept coming 
at a time when the program was already way too sweet for the taste of 
taxpayers.
  No one has a constitutional right to get new leases to drill on 
Federal lands at giveaway prices. Congress can set new terms and 
conditions for new leases at any time. In fact, the Congress did just 
that less than a year ago in passing the Energy bill. The House of 
Representatives did the same thing in their vote last night. I still 
believe the Senate ought to have an opportunity to debate and to vote 
on the oil royalty issue as well, and I will tell the Senate today I am 
going to do everything in my power to get this issue back on the floor 
of the Senate as soon as possible. This is a ripoff of our taxpayers. 
It is an outrage, at a time when middle class folks show up at a gas 
station in Georgia and Oregon and elsewhere around the country, pay 
huge prices, and then on top of it their taxpayer dollars are being 
used to subsidize the companies with these giveaway contracts.
  This is too important an issue for the Senate to duck. Too much 
taxpayer money is at stake for the Senate to duck. I do not see how the 
Senate can explain away not voting on this after the discussion we have 
had thus far and after the House of Representatives has now voted, in a 
bipartisan way, to do what was the subject of extended debate on the 
Senate floor.
  The oil companies are supposed to pay royalties to the Federal 
Government when they extract oil from Federal lands. But in order to 
stimulate production of oil in our country, the Federal Government, 
over the last decade, has been discounting these royalty fees. These 
discounts now amount to billions of dollars. The royalty relief that is 
given to the oil companies is now the granddaddy of all the oil 
subsidies.
  There has been a lot of debate on the floor of this body over the 
last few weeks about tax breaks for the oil companies. The President, 
in my view, to his credit, has indicated that he understands that these 
tax breaks are no longer needed. I was very pleased to see that. I was 
pleased to hear the President's comment because when the chief 
executives from the major oil companies came to the Energy Committee 
last November, I literally went down the row and asked them if they 
continued to need all of these tax breaks.
  The oil executives said they don't need the tax breaks. But the 
Congress decided to keep ladling them out. So on top of the oil 
companies' record profits, on top of record prices, on top of record 
tax breaks, what we have seen is record amounts of royalty relief 
granted to the oil companies as well.
  With prices in the stratosphere, I do not see how anyone can justify 
this multibillion-dollar subsidy. The point of my amendment several 
weeks ago was to get rid of these special oil company discounts, the 
special breaks that amount to billions of dollars, unless the price of 
oil comes down or unless the Bush administration determines that 
royalty relief is necessary to avoid supply disruption.
  There is, in my view, a growing bipartisan chorus saying that royalty 
relief is not needed. For example, as another showing of bipartisanship 
in this cause, a distinguished Member of the other body who chairs the 
Resources Committee, Congressman Richard Pombo, said in a newspaper 
interview that there is no need for this particular incentive. He said 
there is not any need for what the Congress has been ladling out and 
has said it is not necessary at a time of these prices.
  In addition, Mr. Michael Coney, a lawyer for the Shell Oil Company, 
not exactly a place where you would look for somebody to gratuitously 
bash the industry--he basically said the same thing. He said in this 
kind of climate you can't make a case for a multibillion-dollar 
subsidy.
  The architect of the program, the author of the program, a very 
respected, very esteemed former colleague of many of us here, Senator 
Bennett Johnston of Louisiana, has said what has taken place with 
respect to the royalty relief program is not at all what he had in mind 
when he wrote the law.
  Last night, the House of Representatives took a landmark step towards 
reforming this program to reflect current market conditions. I pay a 
special congratulations to two long-term friends from the other body, 
Congressman Ed Markey and Congressman Maurice Hinchey. They both spent 
an enormous amount of time on this issue. They focused on building 
bipartisan support for their effort. And what Congressman Markey and 
what Congressman Hinchey were able to do last night was a real 
breakthrough in terms of protecting the interests of taxpayers. I 
congratulate those two for building a bipartisan coalition on behalf of 
this cause.
  What I proposed in the Senate was a similar approach to getting the 
royalty program back on track. I said we ought to roll back these 
royalty relief subsidies. Let's make sure we are sensitive to the 
prospect of conditions that can't be anticipated now. If the President 
says there is going to be a supply disruption or problems are taking 
place, then we would have a chance to look at it again. Previously, 
there had been a particular provision in the royalty relief program 
that said when the oil prices shot up, when they went above a certain 
level--then it was considered above $34 a barrel--the companies would 
have to, once again, start paying these royalties. But the problem the 
Senate and now the House has been looking at stems from the fact that 
some in the Clinton administration weren't watching the store. They 
weren't watchdogging this program. They weren't watchdogging the 
interests of taxpayers as they should have. So they did not put in this 
clause, the clause that protects taxpayers by setting the price level 
when you cut off the subsidies, and they didn't include the clause that 
protects the taxpayers in a number of the leases.
  As a result, what has happened is taxpayer money has been wasted and 
there has been a litigation derby, with scores and scores of lawsuits, 
with companies still asserting the right to get more cash out of the 
taxpayer till. The Government Accountability Office has estimated that 
at minimum the Federal Government is going to be out $20 billion. This 
is the biggest subsidy of them all in the energy area.
  I recall when I was on the Senate floor earlier our colleague from 
Florida, Senator Nelson, raised an important concern with respect to a 
oil subsidy program that he was troubled by. It costs the taxpayers $1 
billion. Senator Nelson of Florida was spot on, in

[[Page 8803]]

terms of trying to protect taxpayers and deal with another area where 
taxpayers' interests have not been well served. But Senator Nelson was 
talking about something that was relatively small potatoes compared to 
the money that is involved with royalties.
  Suffice it to say, with the subsidies going out the door now and the 
prospect that the litigation is successful, there is a very real threat 
that the cost of the subsidy will go still higher, and there are some 
independent experts in this field who have said that the cost of this 
program could come in at $80 billion.
  Under the Energy bill signed into law last summer, the oil companies 
were given new subsidies in the form of reduced royalty fees for the 
oil and gas they extract from Federal land, including offshore drilling 
in the Gulf of Mexico. This particular new subsidy in the summer of 
2005 was signed into law when the companies were already reporting 
extraordinary profits. We were already seeing the consumer getting 
pounded at the gas pump, and it would have been an ideal time, in that 
summer of 2005, for the Congress to do what members of both political 
parties have been talking about, and that is roll back these 
unnecessary expenses, these unnecessary costs to taxpayers. It should 
have been done in that conference in the summer of 2005.
  It was wrong that Senators and Members of the other body agreed, in 
the summer of 2005, to expand a program which has lost any sensible 
philosophical foundation, a program that began in a time when oil was 
around $16 a barrel, and now is one that has been reconfigured into one 
that gives out subsidies when the price of oil is $70 a barrel.
  Back when that energy conference got together in the summer of 2005, 
those Members of the Senate and the other body should have said: This 
is the time to draw the line. This royalty relief program does not pass 
the smell test. It makes absolutely no sense to be dispensing billions 
and billions of dollars of royalty relief to the oil companies on top 
of everything else they already receive.
  What I hope now, with the promising action that was taken in the 
House of Representatives late last night, is I hope it is possible for 
some common sense, some practical action on behalf of taxpayers, to win 
bipartisan support in the Senate. That is what caused me to come to 
this floor several weeks ago and stay in this spot for almost 5 hours.
  I am about done now because I think we have made the point, and I 
don't think we need to spend 5 hours on it today. But I will tell you 
that a program like this, which was useful back when prices were low, 
makes no sense, no sense at all anymore.
  You can argue for government subsidies at a time when, for example, 
oil prices are low, and when we are talking about the need to stimulate 
production, when the American economy needs a shot in the arm. But you 
certainly don't need billions of dollars of royalty relief for 
companies at a time when you have record profits, record costs, and 
record tax breaks.
  I am very hopeful that when the Senate comes back next week, we will 
begin a bipartisan effort to put in place legislation very much along 
the lines of what passed the House of Representatives late last night. 
There will be an opportunity to support the kind of commonsense reform 
I have been talking about, which passed the House last night, when the 
Interior appropriations bill comes to the floor.
  I also appreciate particularly the efforts of Senator Kyl of Arizona 
who has worked with me on this cause. He was a very active colleague 
during the debate, and since then has worked with me to try to find a 
way to advance this cause in the Senate.
  We now have a new opportunity to protect the interests of taxpayers 
and to modernize our energy policy.
  Talk about not keeping up with the times. How can you argue in favor 
of a program that began when oil was $16 a barrel? That is what we are 
dealing with. We are subsidizing the price of this commodity at a time 
when it hovers around $70 a barrel using a program that began decades 
ago when the price of oil was $16 a barrel. It makes no sense.
  I am going to be back on this floor at the first possible opportunity 
to see if it is possible, on a bipartisan basis, to accomplish what I 
and Senator Kyl were not able to do on a bipartisan basis a couple of 
weeks ago. I hope in the Senate there will be a new interest in saving 
our taxpayers' money and promoting fiscal responsibility by reining in 
further royalty relief for oil companies. We ought to stipulate that if 
the price goes down, or America faces some kind of supply disruption, 
we could revisit it. But until then, we ought to roll back this oil 
company royalty relief and save our citizens' hard-earned taxpayer 
dollars for more worthy causes.

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