Stop Excessive Energy Speculation Act of 2008 - Motion to Proceed

Floor Speech

STOP EXCESSIVE ENERGY SPECULATION ACT OF 2008--MOTION TO PROCEED -- (Senate - July 21, 2008)

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Mr. DURBIN. Madam President, this is an interesting debate because it is really coming down to some different points of view. As both sides present their cases, I am sure the American people will listen carefully because there is hardly an issue we can discuss that hits each and every family and each and every person so personally. This is the sign that you see in front of the gas station every morning when you drive to work, every weekend when you start to fill up. This is what you face when you go to fill up that car or truck and reach into your wallet for your credit card or cash and realize this is the most you have ever paid for gasoline in your life.

This is real. This isn't some theoretical possibility that it may affect your life. This debate is about reality. So it is important that the people who are following this debate understand there are two very different points of view.

The view expressed by the Senator from New Mexico is one that I think most Republicans now espouse. It is this: if we could just drill more oil, we would have a larger supply, and it would bring down the cost. If the cost goes down, then the price of gasoline goes down and, thank goodness, we will get some relief at the gasoline pump.

It is a good theory, and it is their starting point, but it has some weaknesses. The first weakness is, if you take a look at all of the oil the United States has within its boundaries and offshore, all of this, the estimate of all the oil we could reach at any given time in the United

States represents 3 percent of the world's supply of oil. Most of our oil comes from other places--Canada, Nigeria, Saudi Arabia. Our oil, U.S. oil, is 3 percent of the world's total. How much oil do we consume in the United States? We consume 25 percent of the world's production. We cannot drill our way out if we drill every drop of oil available to us anywhere, onshore and offshore. We could not meet the clear demand of the largest economy in the world.

Simply, drilling does not answer the challenge. It ignores the reality that China, India, and many other countries which, for the longest time, didn't use as much oil as the United States, now are starting to use more--more cars, more trucks, more industry. Their demand for that same world oil supply is putting a strain on the market. There is no question about it.

The second question, obviously, is, is there a place, someplace in the United States--either onshore or offshore--where there is the answer to our prayers immediately, where we could say: For goodness sake, clear the decks, stop the regulators, get the derricks out, and let's drill. Bring out that oil and, for goodness sake, bring down the price of gasoline. Is there such a place?

The answer is no, honestly, because those who are involved in the industry tell us anytime we decide to drill on another acre of land, it is a decision which will lead to production of oil anywhere from 8 to 14 years from now--8 to 14 years. Why? They have to go in and map the land. They have to figure out where the oil might be. They have to do some testing. They have to find some equipment.

Incidentally, all the oil equipment for offshore drilling right now is in use. There is nothing like an inventory waiting to be dragged out and put in just the right spot. It is not there. It takes years to get in the queue, to bring these oil exploration operations on line. Once they are on line, production starts slowly and builds. And that is the reality that explains the 8 to 14 years.

So we do not have any oil in the United States to take care of ourselves indefinitely, and we don't have this mother lode of oil somewhere that if we could just tap it tomorrow, it is going to answer our prayers.

Then there is the third issue. The third issue is the Federal Government, which controls a lot of land within the United States and off our shores, continually offers to the oil and gas companies the opportunity to lease that land and explore it for gas and oil. If you listen to the other side, you would think we are squandering--holding back all of these oil and gas assets from oil and gas companies and daring and defying them to go forward with exploration and production. That is not the case.

President Bush and the Republicans and the oil companies want to greatly expand the available areas for drilling. But is it responsible? The Federal Government already offers tracts of land in offshore regions for oil and natural gas development. In fact, nearly 94 million acres of U.S. territory--that is a larger landmass than the size of the State of Utah--is currently under lease to the oil and gas companies who believe there is oil and gas to be found. That is twice the size of the State of Pennsylvania currently under lease.

It is not as if access has been restricted. The Government leases millions of new acres every year. An additional 4.6 million acres of Federal land was leased in 2007. The Bureau of Land Management has held 21 onshore lease sales already this year. Last week a sale was held for nearly 63,000 acres. BLM has 18 more lease sales scheduled through this year. Offshore lease sales have proceeded at an even faster pace.

Since the beginning of 2007, the Minerals Management Service has held six lease sales for open areas off the Outer Continental Shelf in the Gulf of Mexico and in Alaska's Chukchi Sea.

How much offshore oil land has been offered? It is 115 million acres that has been offered to the oil and gas companies for a lease on which to drill. How big a territory is 115 million acres?

Most people, certainly in my State and around the country, know Interstate 80.

It starts over here in New Jersey and ends in California. If you were to take a 628-mile swath along Interstate 80 from New Jersey to California, that would represent 115 million acres. That is what we have offered to the oil and gas companies to lease; land they can look at and explore and find oil and gas and produce it.

The oil companies, that said they do not have enough land to look at for future oil and gas, have responded by saying they would like to have 12 million acres, that is the amount of seabed the oil companies put bids on, barely 10 percent of what we offered them.

In my I-80 comparison, that would take you from New Jersey to Pennsylvania, about 310 miles. Look at the big stretch they are not interested in bidding on. We hear from the Republicans: There is no place for them to turn. But when we offered them the land, they turned it down. They are not using the leased land they currently have either. This next chart shows there are 68 million acres of Federal land currently leased to the oil and gas companies. What you see is kind of a shot of the Western part of the United States. The leased land that is under production is the dark areas, the black areas.

The red areas represent leased land by the Federal Government to the oil companies that they pay for--they do not force them to take it, they pay for it, they pay an annual lease for the right for oil and gas production. The red areas represent areas they lease and are currently not exploring or producing on.

So you see the argument that there is not enough land out there for them to look at defies explanation. When we open it for bid, they will not bid on it. When they do lease it, they do not explore it and use it. Does that sound like there is a lack of supply here of land that they can turn to? That is the Republican argument.

They do argue that there is one little spot, one spot in the United States of America where they can find oil, the Arctic National Wildlife Refuge, 1.56 million acres. Now how much is there? I do not know. But I will tell you that next door to the ANWR is the National Petroleum Reserve of Alaska, which has been established specifically for oil and gas development.

There are 23 million acres of land there available. We have held four lease sales in that area since 1999. So far they have leased 3.6 million acres out of the 23 million. We are going to try to lease some more there to see if there is any interest. All this talk about Alaska being the answer to our prayers, they do not explain as well that it is 10 or 12 years away, if there is any production, and when, if it ever came in, even at the wildest estimates, it would not have any impact of more than pennies or nickels on the actual cost of oil and the price of gasoline.

I joined with Senators Dodd and Menendez to charge oil companies a fee for every acre they lease but do not use for production. I have heard critics on the other side say that is unfair to the oil companies. Why should they be able to tie up the land if they are not going to use it? Should not we make it available to oil companies that might explore and might produce on that land? Is that not what we need? Even the Republicans would have to agree with that argument.

When it comes to offshore drilling, I mentioned the 68 million acres. The red areas are Federal offshore land leased to oil companies which they are currently not exploring or producing on. The dark acres, they are. There is a lot of land available.

I wish to say a word about speculation too. We have offered to the Republicans the following. We have a bill, a bill which I was at least partially responsible for writing, which says we need more regulators to keep an eye on speculation when it comes to oil and its prices.

I think that is something that is eminently reasonable. This is a good indication. In the year 2000, 37 percent of the oil futures market was for speculators. These are basically investment companies, investment banks. And 63 percent represented companies that were actually hedging the price of oil, because they used oil, such as airlines.

Look how that has changed in the last 8 years. Seventy-one percent of the oil futures market is in the hands of speculators who literally never take control of the oil they are bidding on, and only 29 percent represent companies that use it for the purpose that most of us would agree it should be intended.

So we know speculation is growing when it comes to oil, and we know the transactions have gone up 600 percent in the last 8 or 10 years. The size of the agency that regulates it has not; in fact, it has declined. We want to put 100 more regulators, overseers, in this agency to keep an eye on this energy futures market to see if there is excessive speculation or even manipulation and do something about it.

The bill I introduced, and the one that is included in the Democratic plan, would increase by 100 the number of full-time employees involved in regulation. We would also put more money into computer technology so they can follow these markets even more closely. We would have more transparency when it comes to these markets so we understand who is trading what and when, so if we see big movements in the market, our people who are keeping an eye on it can look more closely.

I think most agree we want to bring more markets into regulation, not just NYMEX in New York but the ICE exchange in London. They are agreeable to this regulation. We would also like to bring in, if we can, the over-the-counter markets, which frankly we do not even know the size of. There are companies that are involved in swaps and over-the-counter trades, done almost on a private basis with no disclosure. We do not know what is going on in these markets. I think we should.

So this kind of disclosure and transparency is part of it. We also try to make sure that as we do, in many other commodities, that we limit the size of trades. If you are involved in this futures market, because your airline needs to make certain that you are not burned by future oil prices, we want you to be able to trade. That is a so-called commercial use of the futures market, a healthy thing. Southwest Airlines has proven that. But for those in the market simply to play the game, to speculate, we think there ought to be a limit on how far they can go.

I think that may be one of the major differences between the Republican and Democratic positions. But the point I wish to make is that speculation itself is not inherently evil. Excessive speculation should be followed carefully to make sure that it is not getting out of hand. Manipulation is absolutely unacceptable.

Now, some on the other side--Senator Kyl of Arizona--got up and said what is happening in futures, as a matter of fact, is give and take, supply and demand, things happen, and people try to guess whether they are going to impact the price of oil.

Well, there are a lot of experts who take a look at the future price of oil. This chart tells you that one of the Federal agencies that is involved in this, that we spend a lot of money on, has been giving its estimate since May of 2007 of what would happen to the price of oil.

Here it was starting at $65 a barrel. They said in May of 2007, it was likely to go below $60. Then, in July of 2007, they made a new estimate. They said: Well, it is now $67, $68 a barrel, it will probably be going down to $66 a barrel, and so forth. So you can see the lines of their predictions. These are the experts hired by the Federal Government who took a look at market conditions, supply and demand, and made the flowing estimates on where the prices could go.

This red line, incidentally, reflects what happened to the prices. This is how much they missed it. They did not see that it was headed north of $125 a barrel and did not even expect that to happen. They did not find any market conditions that would drive it up that high. That is why some of us want to ask the question: How much of today's current price of oil and price of gasoline has to do with market speculation?

There are a lot of different points of view. Here is Secretary Bodman's point of view, June 11 of this year: The reason we are looking at these very high prices for oil is strictly supply and demand.

That is the administration's position. No surprise. Our President and Vice President come from the oil industry.

The oil industry has done pretty well under their watch. The people they have appointed to the Cabinet think this is the market at work.

But there are others on the outside who see it a little differently. The New Jersey Star Ledger, January of this year: Experts, including the former head of Exxon, say financial speculation in the energy markets has grown so much over the last 30 years that it now adds 20 to 30 percent or more to the price of a barrel of oil.

And here is a specific individual, Stephen Simon, a senior vice president at ExxonMobil, testifying under oath before the House of Representatives, who said: The price of oil should be about $50 to $55 per barrel.

It is more than twice what it ought to be. So when we want to have more resources to look at speculation in the energy futures market, I do not think it is unreasonable. I think we can protect the legitimate commercial application of the futures market for airlines and others, those that need it, and still do our best to slow down excessive speculation and manipulation that lead to higher prices.

We have been trying to get an agreement with the Republicans about how to proceed because I think the worst thing that can occur is that we do nothing. We want to do something.

First, address speculation with the Democratic bill. We have said to Republicans: Offer your version. If you do not want to offer a bill, vote against ours if you wish. But we offer you this opportunity to put your amendment on the floor on speculation, whatever it happens to be. We will go head to head, one amendment against the other. We will have a pretty good debate, I am sure. We will have the same vote requirement for both. We will let the Senate work its will. It is a 51 to 49 Senate. It takes 60 votes to pass a measure of this complexity. Let's see what happens. I think that is fair. How can they argue? They get to write their own version of their amendment. If they do not think speculation is an issue, they do not have to offer anything.

The second thing we offered them is: Prepare the Republican approach to dealing with the energy crisis, put it in a package. You write it, we have nothing to say about it, as long as it is clearly about energy. Put yours on the table. We will put ours on the table. Let's debate both of them. Let's vote on both of them. Let's have the same vote requirement for both of them. At the end of the day, let's see who prevails. I do not think that is unreasonable.

Now, there are some on the other side, the Senator from New Mexico mentioned earlier, who want to offer more amendments. I am not opposed to more amendments. But there is a reasonable limit to this. We would like to end this in a timely fashion, so we can actually get something done.

If there are those who want to filibuster or run out the clock on either side of the aisle, then I cannot say I am going to support that point of view. This could be worked out. It should start this week. This ought to be an issue we can resolve, at least the debate, before we leave next week. We can do it. I think if we have a meeting of the minds, and a fair approach, we can see that done in the very near future.

I yield the floor.

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