Deficit Reduction Act of 2005--Conference Report

DEFICIT REDUCTION ACT OF 2005--CONFERENCE REPORT

BREAK IN TRANSCRIPT

Mr. WYDEN. Mr. President, I thank the distinguished Senator from North Dakota.

I have come to the floor this afternoon to bring to the Senate's attention a new development with respect to the Arctic Refuge--a development that has taken place in the last 24 hours that I think has great implications for the budget work the Senate is doing here this week. It also speaks volumes about the lack of consumer protection we are seeing in our country generally.

We have heard a lot in the past few days----

Mr. GREGG. Mr. President, will the Senator yield for a question? I want the body to know, to the extent people are listening outside, the ANWR language is not in this bill. The Senator is speaking to another bill which will follow. Is that correct?

Mr. WYDEN. Mr. President, the distinguished Senator from New Hampshire is correct in a technical sense. But I am going to discuss something that will have, in my view, great ramifications for the Federal budget generally, and I am going to outline that briefly this afternoon.

We have heard a lot during the past few days about the rights of Alaskans as an argument to justify drilling for oil in the Arctic National Wildlife Refuge. But yesterday, the Alaska Gasline Port Authority, an Alaska state-chartered agency, charged two of the companies that have drilling rights in the Arctic Refuge with conspiring to manipulate the State of Alaska's energy market. The Alaska Gasline lawsuit charges that ExxonMobil and BP withheld supplies of natural gas to gain market power over supply. This is a very significant development with, in my view, great implications for Arctic oil drilling.

If these allegations are correct--that ExxonMobil and BP withheld Alaskan gas supplies from the market--what would stop these companies from withholding oil from Arctic drilling from the market? If Alaskan oil supplies are withheld from the market, that does nothing to reduce our Nation's dependence on foreign oil. It also produces no revenue to the Federal Treasury that supporters of Arctic oil drilling claim fund hurricane relief and other programs.

These serious charges about oil company manipulation of Alaska's energy supplies are not made by some leftwing group but by an agency chartered by the State of Alaska.

An article in today's Wall Street Journal quotes Walter Hickel, a former Republican Governor of Alaska, as saying the lawsuit against these major oil companies ``reveals a story of extreme corporate greed that has abused Alaska and punished the American consumer.''

I ask unanimous consent that a copy of this article be printed in the RECORD.

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

An Alaska state authority charged that BP PLC and Exxon Mobil Corp., the world's largest publicly traded oil companies, are conspiring to withhold natural gas from U.S. markets and reinforce their market power over North Slope supplies.

In an antitrust suit filed late yesterday in federal court in Fairbanks, the Alaska Gasline Port Authority alleged that a series of illegal agreements and acquisitions by the companies has choked the flow of the state's vast gas reserves. It seeks to stop the companies' alleged collusion through a court injunction and unspecified damages.

Exxon and BP spokesman both denied the accusations that the companies were trying to delay exports of gas from Alaska. ``This is another sobering reminder of our litigation-crazed society. This suit is frivolous and it's totally without merit,'' says Exxon spokesman Russ Roberts.

The lawsuit is the latest twist in a 30-year effort to move the estimated 37 trillion cubic feet of natural gas within Alaska's sprawling oil field, enough to satisfy two year's worth of U.S. demand. There is currently no significant natural-gas production in the North Slope; gas now produced by oil wells is injected into underground reservoirs. The dispute comes at a time when U.S. natural-gas prices are soaring.

The port authority, created in 1999 to build a gas pipeline, says it has $18 billion in federal guarantees and the permits to build a pipeline from the North Slope to Valdez in the southern part of the state, where gas would be liquefied and loaded onto tankers. But BP and Exxon favor an alternative, longer pipeline through Canada, a pipeline over which they would have more control, the authority charges.

Talks between the state and producers on building the longer pipeline have stalled. BP and Exxon Mobil, which produced a combined 1.7 trillion cubic feet of gas last year in the U.S., about 9% of the domestic total, have balked at the state's terms; a third producer ConocoPhillips, agreed to the state's basic terms in October. The natural-gas pipeline disputes aren't related to the battle in Congress over opening the Arctic National Wildlife Refuge to oil and gas exploration.

The Alaska Gasline Port Authority said that BP's refusal to agree to ship its natural gas and Exxon Mobil's failure to develop its huge fields amounts to ``warehousing'' a desperately needed resource in an effort to drive up prices. ``Gas prices are at record highs, and big oil companies still won't move the gas to market,'' authority Chairman Jim Whitaker said in a statement.

BP and Exxon Mobil argue a pipeline through Canada to the Midwest would increase the value of the gas by delivering it directly to gas-hungry markets. They say that the alternative, shorter route to Valdez--which allows for a spur to send gas through Canada--would generate less revenue and expose the $20 billion project to greater risk. BP and Exxon also expect to have a bigger financial stake in the longer pipeline than the one favored by the Alaska Gasline Port Authority.

BP spokesman David MacDowell said, ``We are working as fast as we can to get a clear and durable fiscal contract with the state of Alaska so that this natural-gas project can move forward to the next stage.'' As for the Valdez option, he said, ``we've spent millions of dollars over the years trying to make an Alaskan LNG [liquefied natural gas] project work, but it doesn't work.''

He defended producers' ownership of pipelines, saying that ``no one else is as motivated as the resource owners to build the lowest cost, most efficient transportation system possible.''

Exxon says negotiations have been continuing for months and are in an advanced stage. ``This is one of the largest, most complex industrial projects ever considered by any industry,'' says Mr. Roberts, the Exxon spokesman, and negotiations over the voluminous details should run their course, rather than be litigated in the courts.

The delays in exploiting Alaska's natural gas have become a political issue from Alaska to Washington. Walter Hickel, a former Republican governor of Alaska and former U.S. Secretary of the Interior, said the authority's suit ``reveals a story of extreme corporate greed that has abused Alaska and punished the American consumer.''

Mr. Hickel, a longtime supporter of Alaska gas development, said that ``the producers have conspired for years to delay the export of Alaska liquefied natural gas.''

House Speaker Dennis Hastert has said he expected energy companies to ``do their part to help ease the pain'' of high oil and gas prices, and specifically cited BP and Exxon Mobil's failure to come to terms with Alaska over the proposed pipeline.

The authority's legal team includes David Boies, of Boies Schiller & Flexner in New York, and Charles Cole of Fairbanks, the former Alaska attorney general.

In a news conference last night, Mr. Boies said the two companies had illegally conspired to refuse to deal with the authority, as part of a broad effort ``to preserve the scarcity that has driven natural-gas prices to historic highs.''

Mr. WYDEN. Mr. President, the legislative rider attached to the Defense appropriations conference report that would open the Arctic Wildlife Refuge to drilling gives the same two companies the Alaska Gasline Port Authority charges with colluding to withhold Alaskan gas supplies a tremendous sweetheart economic deal.

In addition to being an abuse of the legislative process, attaching this rider to the Defense appropriations bill, in my view, is bad environmental policy, bad budget policy, and most particularly bad energy policy. As a result of this rider, the Defense spending bill, which contains money critical for our troops, is getting held hostage for special interest legislation for the oil industry. The rider that was grafted onto the Defense bill provides unprecedented waivers for Federal environmental and other laws, including the National Wildlife Refuge Act, the National Environmental Policy Act, and the Federal Mineral Leasing Act.

The Arctic drilling legislation also overrides current law to reduce the State of Alaska's share of the revenue produced by Arctic oil drilling.

Under current law, 90 percent of those receipts would be paid to the State of Alaska and the remaining 10 percent to the U.S. Treasury.

The rider that was plucked from the budget reconciliation spending bill and grafted onto the Defense appropriations conference report changes the allocation in current law to permit the Federal Government to retain 50 percent of the receipts. The State of Alaska has threatened to sue to get the full 90 percent of the revenues. If that lawsuit succeeds, then 40 percent of the revenues that the Defense spending bill assumes will be available for hurricane recovery, LIHEAP, and other purposes will not be there at all.

If the State loses, then its rights will have successfully been overridden. One way or another, either the State of Alaska or the Federal taxpayer is going to end up getting shortchanged.

Most importantly, if the charges we have heard in the last 24 hours of withholding gas supply are true, there would be nothing to stop the same oil companies the Alaska Gasline Port Authority is charging with gas market manipulation from manipulating Alaskan oil markets. Nothing in the rider on the Defense bill would in any way prevent the companies from engaging in the same conduct they have been charged with by an Alaska-chartered agency with respect to oil drilling in the Arctic.

The actions of the Alaska Gasline Port Authority this week against ExxonMobil and BP, in my view, raise a host of fundamental questions. First, whose rights is the Arctic drilling rider supposed to uphold? The State of Alaska? Or the major oil companies? How will drilling in the Arctic truly affect our Nation's energy security? What are the real budget revenues that Arctic drilling will produce?

The Congressional Budget Office's revenue estimates for Arctic oil drilling assume that the oil companies will move quickly to develop oilfields in the Arctic Refuge. These assumptions do not factor in the prospect of oil companies choking off the flow of oil, as the Alaska Gasline Port Authority alleged is being done by ExxonMobil and BP now with Alaskan gas supplies.

The other question that begs to be asked about the Alaska Gasline lawsuit is where in the world was the Federal Government, particularly the consumer protection regulators, who are supposed to be policing the kind of collusion that is alleged in the lawsuit of the Alaska Gasline Port Authority this week? What has the Federal Trade Commission, the so-called consumer watchdog agency, done to stop what former Alaska Governor Hickel has called ``extreme corporate greed that has abused Alaska and punished the American consumer.''

The response is, unfortunately, the same as what we have seen from the Federal Trade Commission over the last few years when it comes to oil company mega mergers, price gouging at the gas pump and other anticompetitive practices. The consumer watchdog seems to be taking a long winter nap when it comes to energy. This is yet another example of the Federal Trade Commission's perpetual hibernation when it comes to protecting the consumer who is getting clobbered by escalating energy costs.

If an agency of the State of Alaska, with no more than a handful of lawyers, is able to take action against collusion by the world's largest oil companies, why isn't the Federal Government's premier consumer protection agency, with scores of lawyers, able to protect consumers?

Last week I spoke at length on this issue. In fact, the distinguished Presiding Officer of the Senate was in the chair at that time. He is very much aware I intend to continue to raise my concerns about why the Federal Trade Commission keeps ducking this critical consumer protection issue.

This latest news about the Alaska Gasline Port Authority bringing an antitrust action against major oil company collusion in energy markets, in my view, is especially troubling. It calls out for further investigation by both the Congress and the Federal Trade Commission. In my view, it is the Congress's job to investigate whether the claims made by the advocates of Arctic oil drilling hold up, given what the Alaska Gasline Port Authority is alleging this week about two of the oil companies that hold Arctic drilling rights.

I yield the floor.

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