Tax Relief Act of 2005

TAX RELIEF ACT OF 2005

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Ms. CANTWELL. Mr. President, my amendment is based on S. 1735 which has been sponsored by about 29 of my colleagues. I certainly appreciate the fact that this amendment is being cosponsored by Senators BAYH, SCHUMER, BOXER, CARPER, and LIEBERMAN. I thank my colleagues for paying attention to what I believe is a very important issue for us to address before we adjourn; that is, the issue of price gouging and the fact that the Senate should say loud and clear that we think price gouging should be a Federal crime. That is exactly what my amendment does. It creates a new Federal statute to make sure that consumers are protected from price gouging.

How did we arrive at this point? While my colleagues, I am sure, would like to adjourn and continue to think about the complications and challenges, the American economy is being hurt by the high price of gasoline, as we saw this summer prior to Katrina. Certainly, we are anxious about the winter months and home heating oil and the costs that consumers are going to pay when they get their bills in the next couple of months.

It is important to note that Americans will spend over $200 billion more on energy this year than they did last year. That is hundreds of billions of dollars coming directly out of family budgets and the bottom lines of businesses across the country. The airline industry is expected to spend $30 billion more on fuel alone this year, which is twice what they spent in 2003. In fact, if you look at what the airline industry is expected to lose this year, it is about $9.5 billion. If you look at the increase in the expense of fuel costs for the airline industry, it is $9.2 billion.

For the airline industry, there is a high correlation between their actual loss and the amount they are paying in higher fuel costs. For the trucking industry, where diesel fuel accounts for almost a quarter of their operating expenses, each penny increase in diesel fuel costs the trucking industry $350 million a year. And what about our farmers who are obviously on low profit margins--about 5 percent--and their challenge? Well, they have had a combination of record diesel fuel costs and price increases of fertilizer of more than 20 percent. So it makes it very challenging for the American farmer to be competitive in this kind of environment.

What about the Air Force? I know the Presiding Officer is interested in the Air Force. The Air Force energy budget is expected to increase 50 percent this year, costing taxpayers another $400 million. Even the Postal Service is paying higher fuel prices, expecting to add another $300 million to the Postal Service transportation costs.

And what about the taxpayers? Well, they pay every week at the pump for higher fuel costs and they want us to protect them. But I don't know if they know that the taxpayers are even paying more for the President's travel. According to reports, the per-hour fuel cost for the travel of Air Force One has increased from $3,974 to now $6,029.

The cost of energy integrated into our economy is costing us all more money and at a time when we are seeing oil companies reach record profits and billions are being sent to countries such as Saudi Arabia, Iran, and Venezuela. I guarantee you do not have our interests at heart.

I am offering an amendment today to say that price gouging is a Federal crime and we should pass this before we adjourn.

Why is it so important to pass new Federal legislation? First, there are 28 States in America, the District of Columbia included, Gulf States such as Louisiana, Mississippi, Alabama, Florida, and Texas, that currently have price-gouging statutes on the books. These States have taken legal action to try to make sure that gas distributors or service stations or oil companies are investigated when allegations of price gouging have occurred, and certainly when you have a state of emergency as we have had after hurricanes. So these State statutes are the very statutes we are saying ought to be in Federal law.

As to examples of how these have been prosecuted at the State level, retailers have been charged with unconscionable pricing attributed to an increase in unreasonable wholesale gasoline prices or because gasoline, oil, or fuel commodities in general are raised to what is an unconscionable price. We based this on what is a New York statute that has been upheld in court. I think it is very important to note that the Federal court system has taken this term of unconscionable pricing and has Federal case law related to it.

Why did we get to this point? We got to this point primarily because current Federal law and the focus of the FTC has been whether there has been collusive pricing activities by these oil companies, collusive meaning whether they got together and fixed the price.

That Federal statute gives very little room to investigate and examine what I believe are key issues about supply and demand. We hear a lot from the oil industry that this is about simple economics and supply and demand.

I guarantee you we ought to be demanding more information about the possible manipulation of supply and why supply was exported out of the United States at a time when it was so needed for American consumers.

We need to pass a Federal price-gouging law to make sure that the current law on the books does not leave us emptyhanded when coming to pursue this issue and to make our point in protecting the American consumers.

This last week we heard from attorneys general at a joint hearing of the Senate Commerce Committee and the Senate Energy Committee talking about this issue. One attorney general from New Jersey, Peter Harvey, who has utilized his own statute on antiprice gouging, told us:

We need a Federal price gouging statute that applies nationwide to the sale of essential goods and services.

I am also pleased that the attorney general from New York--as I said, we have based this statute on New York law--has also championed this legislation in a letter of support that I ask unanimous consent to have printed in the RECORD.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

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Ms. CANTWELL. Attorney General Spitzer says:

Accordingly, there are levels in the chain of distribution where Federal assistance would be both helpful and appropriate .....

Currently, the FTC can act against such companies if they unlawfully agree to fix price, but cannot act if unfair practices occur simultaneously but without collusion.

I think the Attorney General of New York has it right as to why we need this Federal statute.

We also want to make sure we are recognizing in the next several months what further damage is going to happen to the economy if we do not act, that is, if we leave here without getting a good Federal statute on the books.

For example, in my home State a farmer from Lamont, WA, wrote to tell me that his fertilizer prices have gone up 75 percent since May and 100 percent since last year, and fuel costs have gone from $2 to $3.15. Another eastern Washington farmer told me he is paying more for a gallon of fuel than he received for a bushel of grain. So these farmers are looking at this issue, and as Senator Roberts said the other day, the agricultural industry is facing something like a category 5 fuel and fertilizer hurricane. We can't leave these farmers emptyhanded this winter as we go away, without enacting a good, strong Federal statute.

Home heating oil is another issue in which consumers are going to feel an impact. For an American family, it is believed that they will pay an average of $306 or 41 percent more this winter than they did last winter. So we certainly want to implement the Federal statute to protect them during these winter months. I can tell you people are worried in my State. Unfortunately, our local jurisdictions are doing their best, but I think it shows what kind of anxiety Americans have about being able to keep warm this winter.

In my State, in Whatcom County, after the Whatcom County Opportunity Council advertised last week they would take up the low-income energy assistance applications but would only take 200 walk-ins or the first 400 phone-ins, they had over 200 people line up outside their doors, some people standing outside all night long, just to receive assistance from this program, and the local phone service, Verizon, called to say that the unusual volume of incoming calls trying to get energy assistance basically crashed the system for the entire area. I can tell you consumers are anxious about these high fuel costs.

We are dealing in the Senate with airline bankruptcies and pensions. I can tell you the airline industry has been hardest hit by the increase in fuel costs. As Southwest Airline CEO Steve Kelly told the Seattle Times recently:

We are now facing energy prices that no airlines can make money at, at least with today's [ticket prices].

I want to make sure we do not have other pensions that are defaulted on, other people losing their jobs or their life savings because we have not enacted tough legislation saying that price gouging is a Federal crime.

The amendment I am offering today does a couple of things. First, it creates a ban on price gouging during a national emergency declared by the President of the United States. As I said earlier, the antiprice gouging standard is based on the successfully tested New York State statute.

Second, it gives the FTC and AGs and, because it creates criminal penalties, the Department of Justice the authority to levy civil and criminal penalties for proven price gouging of up to $3 million and 5 years in jail. Additionally it puts in place a new ban on market manipulation and falsifying information to the Federal Government about fuel prices, which is based on a provision of the Energy bill we passed here this year related to electricity and natural gas, trying to stop the market manipulation that happened in response to Enron and the market manipulation in the western energy crisis.

In addition, the bill gives additional remedies available to the FTC to levy fines up to $1 million for violation of market manipulation and false information.

I am very satisfied that this bill has the teeth in it that we need in a strong Federal statute to over the next several months give the Federal Government, attorneys general, and others the ability to prosecute market manipulation of energy prices.

Why do I think this is so important? My colleagues have been on the floor talking about the questions that were asked to oil company executives this week, the questions about whether they cared about tax incentives or tax breaks, whether they participated in energy meetings. My questions were more about the supply of fuel here in the United States and whether we have a greater understanding about the protection and possible manipulation of that fuel supply.

Now for my colleagues in the West who have been out on the floor, we have reeled from an energy crisis on electricity, and my colleagues, Senators WYDEN from Oregon and FEINSTEIN from California, all had economies that were very hurt by the manipulation of the electricity market. In fact, there are some cases in Federal courts now talking about the manipulation of natural gas prices. So I guarantee you with five refineries in the State of Washington, we are doing our part at refining fuel, but we still have some of the highest gas prices in the Nation and had those prior to Katrina, so my constituents want to know what are we going to do to make sure the prices are not manipulated.

Mr. President, I ask unanimous consent to have printed in the RECORD a letter from attorneys general across the country who are also supporting my legislation.

There being no objection, the material was ordered to be printed in the RECORD, as follows:

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Ms. CANTWELL. I am also submitting this letter for the RECORD because I think the attorneys general who are chief law enforcement officers across the country for their individual States said it well. If there is no market manipulation going on, then no harm, no foul. It does not mean this is an automatic incrimination; it simply means we have a good Federal statute in place. I certainly appreciate the support of those attorneys general who have signed this letter in support of this legislation.

What we found in our hearings--and the attorney general of Arizona brought this up--is over the last several years the oil industry has moved to a new inventory prop called ``just-in-time inventory.'' Just-in-time inventory is a great idea for the oil industry because it actually saves them dollars because they don't have the same amount of inventory they used to. It used to be that oil companies had a 20 to 30-day supply inventory. Now they only have about 3 to 5 days of supply. You can imagine if you only have 3 to 5 days of supply versus 30 days of supply, the price is going to be different.

Here is what Attorney General Terry Goddard said:

Just in time delivery almost leaves no cushion when supplies are delayed.

He testified that:

The entire oil industry has moved to this just in time delivery system vastly reducing the number of refineries available on a nationwide basis and minimizing inventories at stage site. The effect is a constant and precarious supply-demand balance which is exceedingly beneficial to the industry in lowering operating costs but harmful to consumers so that supply is set at a fragile stage where price spikes can occur.

I applaud the attorney general from Arizona for pointing out how important this inventory issue is and how it ought to be investigated. The Energy Department itself had a similar analysis. It found in a 2003 study:

The reduction of spare capacity has helped drive up the price at the pump and leaves the market vulnerable to shortages caused by plant breakdown or other unpredictable events.

So even the Department of Energy knows the supply issue is what can drive price spikes. But what we want to know is whether oil companies are purposely exporting product. I asked a question at the hearing I thought was very important; that is, have oil companies ever exported oil products to foreign countries for a cheaper profit than they would have gotten if they would have kept the supply in the United States?

The reason I asked this question is because I wanted to know if they were artificially trying to limit supply in the United States just to drive up the price. One would think that is not something they would do. They, obviously, want to sell in the United States. There is one case in the West that we have been very sensitive to, according to the Oregonian newspaper that has reviewed what had been secret reports and documents basically found that BP/Amoco systematically jacked up west coast oil prices by exporting Alaskan crude oil to Asia for less than it could have sold it to U.S. refineries. So there is a specific example where an oil company exported product for cheaper profits just to have less supply in the United States to drive up the overall market. That, I think, is exactly what my amendment is trying to get at.

According to the Department of Energy, between January and August of this year, over 48 million barrels of refined product was exported out of the United States. As my friend, the Senator from Wisconsin, Mr. Kohl, points out, that is 24 times the amount that is stored in the Northeast heating oil reserve, a critical safety net in times of shortage.

One can imagine that my colleagues want answers to why they would export 48 million barrels of refined product at a time when, if you would have kept it in a heating oil reserve for the Midwest, it might actually keep prices down in the Midwest this winter.

As I said, I have already had enough of this as it relates to Enron. In 2001 I sat in a lot of hearings in the Energy Committee and heard from a lot of different people testifying that the electricity market had nothing to do with manipulation. It was all about the fact that some environmental laws prevented us from building enough supply.

After 3 1/2 years of investigation, we found out there was a lot of manipulation going on that terms such as Fat Boy, Get Shorty, and Ricochet were schemes perpetrated on the consumers of the western energy market just to manipulate supply. So you can bet we want to know whether supply is being manipulated in a similar fashion in oil markets today, and we want answers.

The only way to get answers is to put a new Federal statute on the books that says price gouging is a Federal crime and to give the Federal agencies the tools to prosecute that crime.

I feel very strongly that this body needs to act on this legislation before we adjourn. We need to get this to the President's desk and get it signed.

I know my colleagues are going to offer amendments about various tax proposals and tax incentives, whether the oil industry wants those or doesn't. But I care about what is happening to the consumer, to the American farmer who is really getting squeezed out of his family farm, to those flight attendants and pilots who are losing their pensions because we have seen a 293-percent increase in jet fuel costs over 5 years, and to the small businesses in my State that can't exist on low profit margins when they see a 50-percent increase in home heating and fuel costs. So I want to protect consumers, not just now, but if this crisis happens again in the future, I want consumers to be protected.

I hope we can pass this legislation in a good bipartisan effort, that my colleagues will support every effort right now to protect consumers as we head toward the winter months, and we act responsibly in giving Federal regulators the statutes they need to prosecute these crimes.

Mr. President, I also would like to add Senators Clinton and Salazar as cosponsors of the amendment.

The PRESIDING OFFICER. Without objection, it is so ordered.

Ms. CANTWELL. I reserve the remainder of my time.

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Ms. CANTWELL. My amendment makes price gouging a Federal crime. It does two things. It implements what is in 28 different States the law to make sure consumers are protected from price gouging, and it gives the FTC, the Department of Justice, and State attorneys general the ability to look at market manipulation as a Federal crime when energy markets are manipulated. I urge my colleagues to support, at a time when we are going home to high heating oil prices, something that will protect consumers by giving new tools to the Federal statute.

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