Small Business Lending Fund Act of 2010

Floor Speech

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Mr. CORNYN. Madam President, I wish to speak for a few minutes on the subject of energy. Particularly I wish to contrast the approach that has been taken by the administration with regard to the blanket moratorium on drilling in the Gulf of Mexico for at least 6 months--but who knows how much longer that will slip--and a better approach that I think will provide a way of promoting safety but also not kill jobs in the Gulf of Mexico, particularly in the Gulf States, including Louisiana, Texas, Alabama, and Florida.

There is no secret about the fact that the blanket moratorium, which has been struck down by a Federal judge as unjustified by the rationale given by the administration, is now being appealed, so drilling activity has essentially halted--new drilling activity in the Gulf of Mexico. I think there is a better way to approach this. These ideas are actually included in the alternative we will be considering I hope as early as tomorrow. I think there is a better way to approach this.

A few weeks ago I had the opportunity to fly from Sugarland, TX, 200 miles offshore into the Gulf of Mexico to a drilling rig called the Noble Danny Adkins. This drilling rig was sitting in 9,000 feet of water, and of course it was idle as a result of the drilling moratorium. When fully operational, it employs up to 200 people, but of course they weren't working because there isn't any drilling going on. This particular rig was scheduled to drill in more than 12,000 feet of water to a depth of 37,000 feet. It is one of dozens of rigs not doing any work today because of the uncertainty caused by the moratorium. I had a chance to talk with a number of the professionals who work on that rig, and I have to tell my colleagues my impression of being on an offshore rig was like my first experience going to NASA. It is that technically advanced and that impressive.

The offshore drilling industry is a highly technologically advanced operation in which many very skilled professionals are working. These are typically high-paying jobs, as my colleague from Louisiana knows. My fear is that the blanket moratorium imposed by Secretary Salazar of the administration, unless it is modified in a more rational way, will destroy 50,000 jobs and up. We already know that the moratorium has caused two drilling rigs, offshore rigs--which cost an incredible amount of money to lease, and, of course, you can't afford to have them sit idle and not do what they are designed to do. What happens is with the moratorium attached, two of these rigs we know of moved to Egypt and one to the Republic of the Congo. Of course, with the departure of the rigs, the workers go too, and it is a big question as to whether those rigs and the jobs associated with them will ever return.

But it is not just the people who work on the rigs such as the Noble Danny Adkins and the other rigs that are idle now as a result of the moratorium; it is the associated businesses that support the oil and gas industry in the Gulf of Mexico, such as Sunbelt Machine Works Corporation. This is a small family-owned business I visited which manufactures many of the tools that are actually used in deepwater rigs such as the one I visited in the gulf. We need to think of not just the impact on the people who work on these rigs but also everybody who supports those efforts, including the people who supply food, people who supply the machinery, people who fly, the people who work on those rigs. Everyone is impacted negatively by a blanket moratorium.

My colleagues don't have to take my word for it. The Energy Information Administration recently projected that in addition to killing jobs, it will actually cost a lot more than that in terms of the domestic production of oil and gas that we will have to make up for by importing it from abroad. The dependency we have in this country, which is a true national security problem, would be exacerbated by this moratorium, because as long as America is going to continue to consume oil and gas, until we are able to develop new forms of energy in the future, as I hope we will, we are going to continue to consume oil and gas in this country. Right now, about 30 percent of the oil consumed in America comes from the Gulf of Mexico--30 percent.

The Energy Information Administration recently projected that domestic production will decline as a result of the moratorium by an average of 31,000 barrels a day in the fourth quarter of 2010 and then by an average of 82,000 barrels a day in 2011. By December 2011, monthly oil production in the Gulf of Mexico will decrease by an average of 100,000 barrels a day. Assuming the economy picks up, as I hope it will, we know there is going to be demand for that oil which will need to be replaced and, of course, where does that come from but places which I know most of us would rather not have to do business with: Venezuela, to mention one.

The Louisiana Mid-Continent Oil and Gas Association estimated last May that the impacts of the moratorium were estimated to be 80,000 barrels of production loss per day . That is what they estimated for 2011. They estimate up to 37,000 jobs will be lost, and $7.6 billion in future government revenue will be put at risk. That is the effect of this blanket moratorium.

I wish to talk about a better solution, I believe, that was offered in the energy legislation Senator McConnell introduced last Thursday which incorporates this approach.

I also wish to talk for a minute about the attempts to basically make it impossible for independent oil and gas companies from working in the Gulf of Mexico. How do you do that? Well, it would be by raising the liability cap, or by removing it entirely, thereby making it impossible for independent oil and gas companies to work in the Gulf of Mexico because they, frankly, can't afford the insurance for unlimited liability. Under the current regime, there is a limit of individual liability up to $75 million and, above that, 8 cents on every gallon of oil imported into the United States or produced in America goes into an oilspill trust fund which is then used to pay for anything not covered by the $75 million liability for the company.

Well, if, as some of my colleagues have proposed, we eliminate that cap, it makes it impossible for smaller companies--these independent oil and gas companies--to operate in the Gulf of Mexico or anywhere else. They simply will go out of business or take their operations elsewhere if they can.

Let me give my colleagues an idea of what the job impact on that would be. In 2009, independents accounted for more than 200,000 jobs and $10 billion in State and Federal taxes and royalty payments. As my colleague from Louisiana knows, because she was one of the principal negotiators, we were able to get royalties which actually go to the Gulf Coast States for the incidental impact of oil and gas operations in the Gulf of Mexico. Of course, all of that income will be lost, together with the royalty that would be paid to the U.S. Treasury, as a result of the moratorium and certainly by chasing off these independents. The study forecasted that by 2020 this would eliminate 300,000 jobs and cost $147 billion in Federal, State, and local taxes from the gulf region.

The study also concluded that if independent oil and gas companies are excluded from deepwater oil and gas operations, the job loss would be 265,000 by 2020 and $106 billion in lost tax revenues over the 10-year period. Of course, we know other countries are delighted with this moratorium because it means these rigs and these operators are moving to these other countries, creating jobs there and producing oil and gas from there.

For example, a recent Washington Post article reported that Brazil, Canada, Nigeria, Angola, and Libya are among the countries that are moving forward with drilling, lured by oil reservoirs they are discovering that are two to six times as big as the average Gulf of Mexico reservoir. As I mentioned, once these rigs leave the United States, leave the Gulf of Mexico, they go to places with far less stringent regulatory controls than we have here in the United States, so actually the risk of an environmental disaster is greater in these countries that have far more lenient regulatory regimes. In fact, the moratorium has the perverse effect on safety as the newest and most expensive and most technologically advanced rigs move overseas to work while the less-in-demand older rigs stay behind.

I mentioned there is a better alternative than a blanket moratorium such as the administration has proposed, and unlimited liability exposure which will basically chase off most of the independent oil and gas companies as proposed by the legislation that we will be considering tomorrow. My trip to this rig and my visits with these workers and these experts in producing this domestic energy source have made me even more convinced that it is an absolute mistake and really, frankly, not very smart, to essentially cut off our domestic oil and gas production from the gulf. Senators Vitter, Wicker, and I have introduced legislation which would lift the Obama administration's blanket moratorium and instead would require companies to go through new safety inspection requirements and then to be certified by third parties, after which the Department of the Interior would have to issue a permit for continued exploration and development of our domestic oil and gas reserves in the Gulf of Mexico.

Our legislation would essentially limit the moratorium and make it easier for good-faith and conscientious operators who are in compliance to get their permits approved quickly and keep the rigs and jobs here at home. Our approach would ensure that operators who are in compliance with safety guidelines have some deadline on when their permits would be considered and keep gulf coast residents, and particularly those who work in the oil and gas industry, at work, and continue to produce American energy and not make it necessary for us to continue to buy that additional amount, in addition to what we already are purchasing, from abroad.

Instead of reconsidering this devastating moratorium, though, I know the majority leader has introduced a bill that would have the Secretary of Energy publish a monthly study evaluating the effect of the moratorium. Well, I have to say we don't need a study to know what the effect of the moratorium is in Louisiana and in Texas, in Alabama and along the gulf coast, because we already know its devastating impact. I wish to invite my colleagues, any of them who wish, to come and talk to some of the folks who work in this industry and to look at the sophistication and the technological expertise that they employ in producing oil and gas in the Gulf of Mexico. I would be glad to help host them.

One example, though. A seismic company in Texas is spending $250,000 a day under a contract with the leaseholder to explore a potential area for oil and gas, but the seismic company can't even get a permit to do the work. I don't know how long they can hold on, how long they can continue to keep people on their payroll if they don't have any work to do. Something has to
give. These hard-working folks who live along the gulf coast don't want to wind up as another statistic on a monthly report on the impact of the moratorium, nor do they want to add to the 9.5 percent unemployment in this country, higher even in some parts of the country; as high as 14.2 percent in Nevada. They want to work. They don't want to collect unemployment benefits. They want to work, and they want to provide for their families. I think they deserve better from their elected officials than this blanket moratorium or job-killing policies which are going to basically move their jobs overseas.

The fact is we need to maintain our position in the gulf. Eighty percent of oil produced in the Gulf of Mexico comes from deepwater reserves now off limits due to the moratorium.

Without this activity, production will fall as much as 100,000 barrels a day by December 2011. To put this into perspective, the United States uses almost 20 million barrels of oil a day and produces nearly 5 million barrels a day, obtaining the rest from imports. The moratorium will not only destroy tens of thousands of jobs; it will leave us more dependent on foreign oil and gas, raising the cost of any products shipped and transported, not to mention travel.

I think Jay Leno basically had it right when he said:

President Obama said today he is going to use the Gulf disaster to immediately push a new energy bill through Congress. I've got an idea. How about first using the Gulf disaster to fix the Gulf disaster?

That ought to be our focus--preventing recurrences such as we have seen in the gulf--and I think we can do that by the safety inspection mechanism and third-party certification and let's get on with the production of oil and gas from American sources, rather than having to bring it in from abroad.

We need to focus on the problems and look at solving these problems and not use these disasters as a reason to exploit them and to grow government and kill jobs in the meantime.

America's energy security will continue to depend on oil and gas for the foreseeable future. As much as I like the idea that we are developing new energy resources--Texas, for example, produces the most electricity from wind sources of any State in the country--we know that developing these alternative sources of energy is still going to be a long time coming. We need to bridge into that new energy future, and that bridge will continue to consist of American-produced oil and gas.

The question is, Will it be to the benefit of the American people in the form of good-paying jobs and associated revenue or will the misguided policy, included in the bill introduced by the majority leader, ensure that we merely increase our imports that we need and send the good jobs and rigs overseas by this misguided policy?

I hope my colleagues will reconsider this misguided approach that would drive independent oil and gas producers out of the Gulf of Mexico by making it financially impossible for them to purchase the insurance they need in order to comply with an uncapped liability. We know the resources will remain there in the case of another disaster, which we hope and pray will never occur because of the oilspill liability trust fund--again, funded by 8 cents on every barrel produced in America, as well as every barrel imported from abroad. So this isn't eliminating a fund that will actually pay in the event of another catastrophe.

Certainly, we don't ground all airplanes in America or around the world when there happens to be a terrible airplane crash. We look at the problem and try to make sure we understand the reason why it happened, and then we move on and continue flying.

I think the oil and gas industry basically operates the same way. We need to make sure we understand what happened in this spill, do everything humanly possible to make sure it never happens again and make sure BP is held accountable and pays for all the cleanup that needs to be done as a result of this unfortunate incident. But the conclusion we should reach should not be let's shoot ourselves in the other foot by denying ourselves access to American energy and increasing our dependency on imports from abroad and, at the same time, kill jobs along the gulf coast in the oil and gas industry and all those companies and businesses that support the oil and gas industry during a time when unemployment is already at 9.5 percent.

We can do a lot better than what the majority leader's bill proposes and continuing job-killing policies. We can actually do it smarter and better and come up with a real solution rather than creating more problems.

I yield the floor and suggest the absence of a quorum.

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