Copyright 2000 eMediaMillWorks, Inc.
(f/k/a Federal
Document Clearing House, Inc.)
FDCH Political Transcripts
June 27, 2000, Tuesday
TYPE: COMMITTEE HEARING
LENGTH: 27602 words
HEADLINE:
U.S. REPRESENTATIVE BENJAMIN GILMAN (R-NY) HOLDS HEARING ON OIL AND GAS PRICES;
HOUSE INTERNATIONAL RELATIONS COMMITTEE
LOCATION: WASHINGTON, D.C.U.S. REPRESENTATIVE BENJAMIN
GILMAN (R-NY), CHAIRMAN
BODY:
HOUSE COMMITTEE ON
INTERNATIONAL RELATIONS HOLDS HEARING ON OIL
AND GAS PRICES
JUNE 27, 2000
SPEAKERS: U.S. REPRESENTATIVE BENJAMIN A.
GILMAN (R-NY),
CHAIRMAN
U.S. REPRESENTATIVE WILLIAM F. GOODLING
(R-PA)
U.S. REPRESENTATIVE JAMES A. LEACH (R-IA)
U.S.
REPRESENTATIVE HENRY J. HYDE (R-IL)
U.S. REPRESENTATIVE DOUG BEREUTER
(R-NE)
U.S. REPRESENTATIVE CHRISTOPHER H. SMITH (R-NJ)
U.S.
REPRESENTATIVE DAN BURTON (R-IN)
U.S. REPRESENTATIVE ELTON GALLEGLY
(R-CA)
U.S. REPRESENTATIVE ILEANA ROS-LEHTINEN (R-FL)
U.S.
REPRESENTATIVE CASS BALLENGER (R-NC)
U.S. REPRESENTATIVE DANA
ROHRABACHER (R-CA)
U.S. REPRESENTATIVE DONALD A. MANZULLO (R-IL)
U.S. REPRESENTATIVE EDWARD R. ROYCE (R-CA)
U.S. REPRESENTATIVE
PETER T. KING (R-NY)
U.S. REPRESENTATIVE STEVE CHABOT (R-OH)
U.S. REPRESENTATIVE MARSHALL "MARK" SANFORD (R-SC)
U.S.
REPRESENTATIVE MATT SALMON (R-AZ)
U.S. REPRESENTATIVE AMO HOUGHTON
(R-NY)
U.S. REPRESENTATIVE TOM CAMPBELL (R-CA)
U.S.
REPRESENTATIVE JOHN M. MCHUGH (R-NY)
U.S. REPRESENTATIVE KEVIN BRADY
(R-TX)
U.S. REPRESENTATIVE RICHARD M. BURR (R-NC)
U.S.
REPRESENTATIVE PAUL GILLMOR (R-OH)
U.S. REPRESENTATIVE GEORGE P.
RADANOVICH (R-CA)
U.S. REPRESENTATIVE JOHN COOKSEY (R-LA)
U.S.
REPRESENTATIVE TOM TANCREDO (R-CO)
U.S. REPRESENTATIVE SAM GEJDENSON
(D-CT),
RANKING MEMBER
U.S. REPRESENTATIVE TOM LANTOS (D-CA)
U.S. REPRESENTATIVE HOWARD L. BERMAN (D-CA)
U.S. REPRESENTATIVE
GARY L. ACKERMAN (D-NY)
U.S. DELEGATE ENI F.H. FALEOMAVAEGA (D-AS)
U.S. REPRESENTATIVE MATTHEW G. MARTINEZ (D-CA)
U.S.
REPRESENTATIVE DONALD M. PAYNE (D-NJ)
U.S. REPRESENTATIVE ROBERT
MENENDEZ (D-NJ)
U.S. REPRESENTATIVE SHERROD BROWN (D-OH)
U.S.
REPRESENTATIVE CYNTHIA A. MCKINNEY (D-GA)
U.S. REPRESENTATIVE ALCEE L.
HASTINGS (D-FL)
U.S. REPRESENTATIVE PAT DANNER (D-MO)
U.S.
REPRESENTATIVE EARL F. HILLIARD (D-AL)
U.S. REPRESENTATIVE BRAD SHERMAN
(D-CA)
U.S. REPRESENTATIVE ROBERT WEXLER (D-FL)
U.S.
REPRESENTATIVE STEVEN R. ROTHMAN (D-NJ)
U.S. REPRESENTATIVE JIM DAVIS
(D-FL)
U.S. REPRESENTATIVE EARL POMEROY (D-ND)
U.S.
REPRESENTATIVE WILLIAM D. DELAHUNT (D-MA)
U.S. REPRESENTATIVE GREGORY W.
MEEKS (D-NY)
U.S. REPRESENTATIVE BARBARA LEE (D-CA)
U.S.
REPRESENTATIVE JOSEPH CROWLEY (D-NY)
U.S. REPRESENTATIVE JOSEPH HOEFFEL
(D-PA)
BILL RICHARDSON, U.S. ENERGY SECRETARY
*
GILMAN: We're very pleased to welcome Secretary Richardson back to our
International Relations Committee for a hearing this morning on OPEC's policies'
threat to our U.S. economy, and to note that later on this week, Secretary
Richardson will speak on similar topics before at least three other committees
in the House and Senate.
Sounds like you have a busy week, Mr.
Secretary.
And I want to welcome former Senator Howard Metzenbaum,
who's joined us today.
Welcome, Senator.
Today's hearing is
the third in our series on the impact of the price fixing schemes of the
Organization of Petroleum Exporting Countries on the American homeowner, on the
small businessman, on our commuters, on our aviation industry, on the truck
drivers, and the policy-maker who sits in your seat and must manage this uneasy
and very troubled relationship.
We look forward to holding
additional meetings of our committee to explore additional issues related to the
energy crisis facing the American people, including a sustainable energy
strategy and a review of the profits of the major oil companies that are up some
$7 billion over the past year, and the OPEC nations whose revenues have doubled
over the past two years.
I'd also note that the General Accounting
Office released a report over the weekend reviewing areas where existing
controls over foreign travel of our nuclear scientists can be and should be
strengthened.
I would ask our good secretary if he'd make a brief
comment on that issue during the course of the morning. And I realize that these
incidents occurred before your watch at the department.
In regard to
our topic today, I can't help but conclude that our policy toward OPEC is hard
to discern and harder still to explain to the average American who's seen his
gasoline prices rise some 60 cents over the past year and a half to record
levels in the Northeast and Midwest.
Our vice president has called
for an investigation by the Federal Trade Commission into possible price gouging
by the oil companies. And I think many of us agree that that would be
appropriate. But certainly that's not enough, and it's certainly not a forward
looking policy that will lead to lower gas prices in the future.
Oil
prices today are higher than at any time since the Iraqi invasion of Kuwait.
Continued high prices for gasoline and other fuels are now beginning to stunt
our own economic growth and to curtail global growth prospects as well. In
addition, they are stoking the flames of inflation, inducing bankers to raise
their rates and curtail lending.
How has the administration reacted
to this growing threat to our pocketbook and to our prosperity? Remarkably
passive in the face of OPEC's continued assault on our free market system and
our antitrust norms. This administration is still firing blanks when it should
be making an all-out attack on the production allocation systems which has kept
oil at $30 barrel for much of this year.
The oil producers are in
clover with multi-billion dollar profits while the consumers are in hock to a
cartel that's turning our economy's soft landing into an abrupt free-fall with
apparently no rip cords left to pull.
We're still waiting for the
answers that we raised in our first hearing: What has the administration done to
systematically review our policies toward OPEC and its member states? Why has
the administration failed to weigh in strongly enough with OPEC last year to
prevent a continuation of production cutbacks? And how can we begin to take
effective action against this continued production cut- backs and price fixing
behavior?
The administration's laissez-faire approach has sent the
clear signal to OPEC that price fixing is OK by us, that production cutbacks are
not so bad after all, and that as long as you keep trying to aim at a reasonable
price for crude oil, you can overshoot your mark with $30 a barrel for oil with
not so much as a slap on the wrist.
Our government has become the
victim of the manipulation of the oil market by OPEC.
The
legislation I introduced last week, the Foreign Trust-Busting Act and the
International Energy Fair-Pricing Act of 2000, will ensure that this
administration adopts a consistent and a comprehensive policy of opposition to
OPEC and to other similar cartels.
In the ongoing energy crisis
facing our nation, it could help keep the spotlight where it belongs: on this
international energy cartel.
GILMAN: With the enactment of this
measure, the administration will no longer be able to go back to business as
usual in supporting any back-room arrangements and cartel-like behavior.
The first measure would allow lawsuits to be brought against foreign
energy cartels. Our second measure would specifically direct the president to
make a systematic review of its bilateral- multilateral policies and those of
all international organizations and international financial institutions to make
certain that they're not directly or indirectly promoting the oil price fixing
activity policies in any of the OPEC programs.
It would require the
administration to launch a policy review of the extent to which international
organizations recognize and/or support OPEC, and to take that relationship into
account in assessing the importance of our relationship to those organizations.
It would also set up a similar review of the programs and policies of the Agency
for International Development to ensure that that agency has not indirectly or
inadvertently supported OPEC programs and policies.
And finally, it
would examine the relationship between OPEC and the multilateral development
banks and the International Monetary Fund and mandates that our U.S.
representatives to those institutions should be using their voice and vote to
oppose any lending or financial support to any nation that provides support for
OPEC's activities in manipulating our fuel prices.
I now turn to our
ranking minority member, the gentleman from Connecticut, Mr. Gejdenson, for any
opening remarks.
GEJDENSON: Mr. Chairman, the failure to act about
our energy independence really starts here in the Congress. And if you think of
the initiatives of the Republican-led Congress over the last six years, I think
one of its earliest initiatives was simply to abolish the Energy Department. But
it got worse.
When we take a look at where we are today as a nation,
this Congress has continuously prohibited the administration from increasing the
standards of the efficiency on automobiles. This is not simply as bad as living
with the status quo, because as Americans moved from cars to trucks, it actually
reduced our overall fleet average. And if you want to create new energy and you
want to do it quickly and efficiently, one mile per gallon -- just increasing
our fleet average by one mile per gallon -- would save 12.5 million barrels of
oil per year.
For those of you who think that this would somehow
infringe on our personal freedoms, think about this: When I was a teenager, a
Corvette got 9 miles to the gallon. Today that same car, more powerful and
faster, gets 27 miles to the gallon because Congress and the administration,
after the energy crisis, forced the automobile industry by increasing
CAFE standards, not as this Congress has done, by blocking the
administration from increasing CAFE standards. One mile per
gallon -- one mile per gallon -- 12.5 million barrels of oil, that is an impact
that clearly would help us towards energy independence.
We also have
a problem here with oil company mergers. The oil companies keep running to us
with new mergers arguing they are increasing efficiency. The only efficiency
that seems to be gotten from these mergers is the oil companies are more
efficient at ripping off the American people. The first quarter profits, before
the most recent increases in gasoline profits, indicated that some of these
companies had increased profits of as much as 500 percent. And while we can
complain and rightly so about oil supply from other nations, these American
corporations are taking advantage of America and damaging its economy in a
conspiracy that will hurt all of us.
We are in a difficult situation
in the Northeast, and the one place where I think the administration has not
moved fast enough, Mr. Secretary, is last year in February when we hit that cold
snap, and suddenly New England saw escalating energy costs.
GEJDENSON: I said then that the heating oil crisis of that
winter would become a gasoline crisis of this summer. And I can tell you now, as
sure as we're all here, that this gasoline crisis is still going to become a
heating oil crisis.
Now today, or at least yesterday, when I took a
look, or the day before, there was about a $6 difference between the spot market
and the futures market on oil. Even though the Senate -- and Mr. Lott has sat
for 76 days on reauthorization of the SPRO, the House passed reauthorization of
the Strategic Petroleum Reserve, whose legislative authority had expired.
The Senate has sat on that legislation for 76 days, as Mr. Lott and
others make speeches about this crisis. We ought to be dumping SPRO, trading
SPRO, increasing the short-term supply to drive prices down. And we ought to
make sure that there's a Strategic Petroleum Reserve in the Northeast.
The House rejected that by two votes just recently, 193 to 195. This
just on time delivery by these handful of larger merged oil companies will leave
our Northeast citizens again in the dark and in the cold if we're not careful.
Congress and the administration needs to move quickly to make sure there is a
Strategic Petroleum Reserve.
You can drive less possibly, if there
are high gasoline prices. You may be able to car pool. But when heating oil
prices get to the point where citizens can't afford to heat their homes, we
endanger their lives and security.
Again, from my Republican
colleagues often we hear the solution to higher energy prices is take away
environmental protection laws, cut the standards by -- of emissions into the
atmosphere. That's unacceptable. We need to make sure that we invest in
alternative energy that will give us clean energy and make this country
independent.
We have squandered the 20-some years since the last
energy crisis.
GEJDENSON: Let's hope we have a wake up call here
that we can leave this, you know, kind of hearings of the week that we're
having, and move on to legislative action by the Congress.
The
Congress ought to pass a new CAFE standard, demanding more
efficient automobiles for trucks and cars. The Congress ought to provide the
funds for research and development in alternative energy, even when oil prices
are low, so that we can't be blackmailed when oil prices are high.
You know, the first hearing that the Republicans had on energy
happened about a year and a half ago. And it was interesting, a number of the
members at that hearing were complaining that the administration was at fault.
They were complaining the administration was at fault because oil prices were
too low, that oil prices were $10, $12, $13 a barrel and they thought oil prices
needed to be $25 a barrel. Well, again, we're here and it's the administration's
fault.
Well, it seems to me, Congress, before it puts the blame on
the administration, ought to take the initiative and do the things we can do. We
ought to get Mr. Lott to get out of the way so we can reauthorize the Strategic
Petroleum Reserve. We ought to make sure there are tax credits for alternative
energy. Everyone one mile per gallon gives us 12.5 million barrels of oil, just
as if you drilled a hole in the floor here and came up with that oil.
Increase the CAFE standards. Help alternative
energy. Help weatherization. And we'll make this country more independent and
strong.
Thank you, Mr. Chairman.
GILMAN: Thank you, Mr.
Gejdenson.
And permit me to remind my colleagues and Mr. Gejdenson
that today we'll be looking at the issues we raised -- we'll be looking at the
issues Mr. Gejdendson raised, but we'll also be focusing on OPEC and our failed
policies toward that cartel.
I remind my colleagues that a recent
CRS report included that 80 percent of the recent rise in gasoline prices is
attributable to the higher crude prices, and that's attributable to OPEC.
Any the other members seeking recognition?
Mr. Bereuter?
BEREUTER: Thank you, Mr. Chairman.
I want to welcome our
former colleague, Secretary Richardson. He and I were next door neighbors for
four years in the House of Representatives. Visited a lot of dangerous and
unpopular places like Angola together. I think perhaps the secretary is a little
nostalgic for the days when he could be asking the questions up here.
I would say to our colleague from Connecticut, I've never complained
about low oil prices, that's for sure.
In Secretary Richardson's
home state and my home state, people have to travel long distances to conduct
the daily affairs of life and to get to their jobs, and a very high proportion
of those population -- of the people have, in fact, that situation.
So I would have liked the FTC to move beyond looking at the problems
in Illinois and Wisconsin to the upper Great Plains. Just to give you one
example, at a time when we had very low commodity prices, we have the worst
drought conditions in the 115-year history of climatology in our state. Perhaps
some of you who are air travelers have noticed those green circles in the
western half of the United States. Those have nothing to do with alien space
ships; those are center pivots, and they are particularly need now. And today,
it is costing our farmers, when they really need to move those center pivots, 50
percent more in fuel every time they revolve around the field than it did a year
ago.
So we're very concerned if, in fact, the administration
intervened early enough, energetically enough with respect to OPEC, and what we
can do to make sure that we are not subject to their price setting by oil
production limitations.
So that's why we're here. I hope we'll focus
on these issues, and we're looking for some answers.
Thank you, Mr.
Chairman.
GILMAN: Thank you, Mr. Bereuter.
Mr. Lantos?
LANTOS: Thank you, Mr. Chairman.
I want to welcome our
good friend and former colleague, Secretary Richardson, who seems to be the
designated victim of the week. And I would like to pay public tribute to his
long and distinguished public service, both in the Congress and in the
administration at the United Nations and the Department of Energy.
I
was rather amused, Mr. Chairman, when you accused this administration of
pursuing a laissez faire-policy, because unless I'm mistaken, laissez-faire
policies have been the hallmark of the Republican Party for a long time. And I
am not sure as of this moment whether you have used the phrase laissez faire as
a pejorative or as a laudatory statement concerning the administration.
But, be that as it may, I do not believe that it will be successful on
the part of anyone on this committee or in the other body, to place the blame of
responsibility for the current high prices of energy on the shoulders of this
administration.
LANTOS: As my colleague indicated earlier, the
Republican majority began its energy policy by recommending the abolition of the
Department of Energy, which is a hell of a way of crafting an energy policy for
the one remaining superpower on this planet. That idiotic notion has now been
abandoned, but I would not like to embarrass my colleagues by having a roll call
of all my Republican colleagues in both the House and the Senate, including some
presidential candidates, who joyfully called for the abolition of the Department
of Energy as their first step in crafting an intelligent energy policy for the
nation.
I also think it's important to realize that it is the
majority which has had for a long time -- a long, long time -- an incredibly
chummy relationship with the giant oil companies. Now for us to hold a hearing
on high energy prices and not to recognize that the American people currently
are being gouged by the oil companies, where the profit margins have increased
to absolutely obscene proportions, would indeed by naive in the extreme.
But I would like to focus in on two or three specifics, Mr.
Chairman, if I may. Funding for energy research and development during the three
Congresses where your party was in the majority. Just a quick examination of the
energy and water and interior appropriations for fiscal years 1996 through 2001,
the period in which you controlled the budget, clearly demonstrate that the
majority has repeatedly failed to invest the resources necessary to improve our
energy independence. This has occurred at the very same time when the
Clinton-Gore administration requested higher levels of investment in this
crucial field every single year. Every single year, the majority cut the request
by hundreds of millions of dollars.
For energy supply research and
development at the Department of Energy, the major account, Mr. Chairman, that
supports R&D to develop alternative fuels and renewable energy technologies,
the cumulative cut below the administration request is $1,970,291,000.
Now some members of the majority are accusing this administration of
not doing enough to encourage the development of the domestic oil and natural
gas industries. The FY 2001 bill recently approved by the committee, the
majority cut funding by $84.5 million below the president's request.
I want to spend a moment if I may, Mr. Chairman, on funding for
conservation. It's self-evident that we can dramatically improve our energy
security by boosting conservation efforts. Every action we take that reduces the
consumption of a barrel of oil means we have to import one barrel of oil less.
Once again, the Republican record when it comes to investing in conservation is
abysmal. In fiscal year 1996, the first year the new majority wrote the
appropriations bills, that investment was slashed to $552 million by the House,
a reduction of $202 million below the year-earlier level.
LANTOS: In the first year, your majority cut by $202 million
investment in conservation. Between fiscal year 1996 and 2001, the cumulative
reduction below the administration's request for energy conservation exceeds $1
billion, Mr. Chairman. So we are not going to sit here quietly and listen as to
how the administration's laissez- faire policies brought us to where we are.
My colleague has talked about CAFE standards.
Current standards have been in place now for a long time, and you don't have to
be a rocket scientist to recognize that increasing CAFE
standards would dramatically enhance our energy security.
My view of the administration's failure is really concentrated in
two areas where I think the administration, as indeed the previous
administration, deserves criticism.
GILMAN: Mr. Lantos, I'm going to
ask you if you would be brief so that we can have an opportunity to hear the
secretary.
LANTOS: Yes.
GILMAN: And I'm going to ask any
further opening remarks be limited...
(CROSSTALK)
ROHRABACHER: Mr. Chairman, I would like to make some opening
remarks, and I...
GILMAN: We will limit them to five minutes.
ROHRABACHER: I appreciate that, Mr. Chairman.
LANTOS: Do
you want me to make my criticisms of the administration or not, Mr. Chairman?
(LAUGHTER)
GILMAN: I would just ask you to be -- to
summarize, if you would, Mr. Lantos, so other members will have an...
(CROSSTALK)
LANTOS: I'll be happy to.
This
administration, as the previous Republican administrations, have not been
forceful enough in dealing with OPEC. The two key countries of OPEC, Saudi
Arabia and Kuwait, are today countries because we went to the Persian Gulf to
protect them. Had we not put a half million American military into the Persian
Gulf war, the king of Saudi Arabia would be living on the French Riviera and the
emir of Kuwait would have a villa next to him.
I think both the
Republican administrations and this administration should have exerted far more
effective policy measures vis-a-vis OPEC, particularly the two countries whose
very survival we ensured less than a decade ago.
Secondly, I am one
of those who has advocated for a long time dramatically increasing our Strategic
Petroleum Reserve. Had we done so, we would now be in a much more comfortable
position of releasing significant supplies. I still believe that under present
circumstances, releasing supplies from the Strategic Petroleum Reserve, once the
legal possibility is open, should be done.
Thank you, Mr. Chairman.
GILMAN: Thank you, Mr. Lantos.
I'm going to ask our
further speakers to please be brief so that members will have an opportunity to
hear Secretary Richardson.
Mr. Rohrabacher.
ROHRABACHER:
Thank you very much, Mr. Chairman.
And I certainly agree with Mr.
Lantos on a couple of things he said, but on some others I have some
disagreement.
First of all, I agree with Mr. Lantos in welcoming
Bill Richardson here. He's got a man of impeccable credentials and a fine record
of public service.
And I will not be using him as a punching bag,
even though he's got the punching-bag suit on, to take the blows for
administration policies that he, of course, as a member of the administration
has to be the advocate of.
So with that said, welcome, Bill.
And again -- and the other thing I agree with Mr. Lantos on is that
this administration has not used -- the Clinton-Gore administration has not used
the leverage that it has on members of OPEC, especially Saudi Arabia and Kuwait,
to keep oil prices under control. And the American people are suffering because
of that. It is the Clinton-Gore administration that has not used this leverage.
ROHRABACHER: It's not Congress, it's the Clinton-Gore
administration. Now, why haven't they used that leverage? Why haven't we told
our Saudi allies and Kuwaiti allies that we have to have some stability in the
price of oil, rather than these gouging and major increases that we're suffering
under today. It's because the Clinton-Gore administration supports higher prices
for gasoline.
Now, all of the political rhetoric we hear from the
other side of the aisle can't hide the fact that Vice President Gore has made it
very clear. He wrote a book about it. He wants higher prices for gasoline. He
blames the American consumer for the fact that the United States is contributing
to the global warming problem, supposed global warming problem.
And
what is his solution? His solution is pay more money. Have the people of our
country pay more money for gasoline, as if it's not going to affect their
standard of living. It's this administration, the Clinton-Gore administration,
that is pushing for these Kyoto protocols that, again, what's the purpose of
those Kyoto protocols? To raise the price of gasoline.
There's no
political rhetoric on the other side of the aisle that's going to disguise this.
You can talk about some of the proposals the administration has made for
conservation, which are aimed at lessening the pain suffered by the American
people. But the fact is, the Clinton-Gore administration blames the American
consumer, blames the victim, rather than using its leverage against the OPEC
cartel and rather than trying to expand America's supply of energy.
Mr. Chairman, I think that Congress and this administration should
be working together to increase the supply of oil so that our people won't
suffer. And we must quit playing these political games which we've heard about,
heard today, in which we're trying to blame Congress, for Pete's sake, on this.
We've got an administration spokesman to talk to and let's be serious about it.
Thank you very much.
GILMAN: Thank you, Mr. Rohrabacher.
Mr. Ackerman?
Please be brief, all of my colleagues.
ACKERMAN: I ask unanimous consent to put the full text of my remarks
in the record.
GILMAN: Without objection.
ACKERMAN: Mr.
Chairman, I want to echo the sentiments of Mr. Gejdenson and Mr. Lantos in their
entirety. And also, add my personal welcome to our former colleague Bill
Richardson who has shown tremendous courage and determination all over the world
in spreading humanitarian and human values in doing acts that I think all of us
would recognize are heroic, and for doggedly sticking to the task of trying to
bring some reason and responsibility to America's energy policy.
Having said that, I can't help but comment on the politics that's
going on here. First, in the construct of the hearing.
ACKERMAN:
I find it incredible that we're having a hearing on how oil prices are affecting
the American economy and providing a safe haven by excluding the appearance of
the oil companies at this hearing.
GILMAN: Mr. Ackerman, if would
pause a moment and let me interrupt? We will be conducting a further hearing
with the oil company representatives.
ACKERMAN: When would this be,
Mr. Chairman?
GILMAN: As soon as we can put it on the schedule.
ACKERMAN: Would it be...
GILMAN: The staff is working on
it now.
ACKERMAN: Would it be within the next few weeks?
GILMAN: We would hope to get it out as quickly as possible.
ACKERMAN: Does that mean in the next few months?
GILMAN:
No. It would be as quickly as possible, Mr. Ackerman.
ACKERMAN:
Would that be before the November election?
GILMAN: Possibly into
the next tenure, if you're going to pursue this. We're going to have it as
quickly as possible.
ACKERMAN: We're prepared to wait as long as
hell freezes over in the Northeast, Mr. Chairman, because that's the...
GILMAN: Mr. Ackerman, we have a limited period of time. Let's...
ACKERMAN: Mr. Chairman, I will use my time the way I see fit. Nobody
interrupted your 25-minute oratory.
Thank you, Mr. Chairman. I think
all the members deserve the same courtesy.
The rest of the politics
in blaming the Clinton-Gore administration for high oil prices is also absurd,
or haven't we taken a look at where all the Texas oil money is pouring into
whose campaign? It poured into the campaign of Mr. Bush and Bush the sequel. It
doesn't seem to be going to the Clinton-Gore administration, so a little bit of
reality here, Mr. Chairman, would serve us well.
I think I've said
my piece, and I don't need the rest of my five minutes and yield back the
balance of my time.
GILMAN: Thank you.
Mr. Brady?
BRADY: The inescapable fact is America's addicted to foreign oil and
we're falling deeper into addiction every day. Many have chosen to blame OPEC,
the dealers of the oil, for not selling to us at a fair street price which is
ludicrous. America needs to kick its habit, its dependence on foreign oil, and
that is one of the questions that Secretary Richardson needs to answer today,
why we failed to address real problems.
America's oil and gas
production is at its lowest in 50 years. We've walled off reserves of clean
coal, Alaskan Gulf coast oil. The president's vetoed efforts by Congress to
increase our independence. There is no responsible, sensible energy policy to
decrease dependence.
And so far our energy policy with this
administration is summed up like this: Buy fewer Ford Explorers and more
longer-lasting light bulbs. That's why we have higher fuel prices today.
Others, as you've heard on this dais, have tried to divert blame by
pointing fingers at the oil companies. Well, the lack of a comprehensive,
responsible energy policy has resulted in a loss of 100,000 American jobs this
decade in the energy industry. That's 10 times more than steel, and it's every
bit as many jobs as we've lost in agriculture.
Since this
administration took credit for the low fuel prices, it's important that they
take the deserved blame for the higher fuel prices.
And, finally,
Mr. Chairman, one of the key questions today deals with conflict of interest. Do
the current high fuel prices promote this administration's environmental goals?
Do we have a conflict of interest between the environment and affordable fuel
for homeowners?
Thank you, Mr. Chairman.
GILMAN: Thank
you, Mr. Brady.
Mr. Royce will be our last intervener, and then
we'll go on with the secretary's testimony.
Mr. Royce.
(CROSSTALK)
ROYCE: Thank you, Mr. Chairman, I appreciate
that.
We've heard a defense of the Department of Energy after the
disastrous guarding of our nuclear secrets, after we've seen the inability of
the Energy Department to formulate an energy strategy.
And let me
just say this for the record, it's not for the lack of spending. We spent $17.8
billion over in the Department of Energy. Is this really the record we wish to
defend?
The answer we've heard here is to raise taxes, to spend
money on new subsidies for alternative fuels. The world is awash in oil reserves
and it's a matter of using our diplomatic clout to increase production out of
OPEC, and yet what we have here is a call for more funds into the Department of
Energy.
I just want to share with you my observation.
ROYCE: This administration has been able to push up the gas
taxes to the point where they're 66 cents a gallon, state and local, that's the
hit now.
And I just want to share with you the words -- a quote,
"The United States should start by gradually imposing a higher gasoline tax,
hiking it by one or two cents per month, until gasoline costs $2.50 to $3 per
gallon, comparable to prices in Europe and Japan." That's what Paul and Ann
Ehrlich said in their book. And this is what Vice President Al Gore said: The
time for action is due and past due. The Ehrlich's have written the
prescription.
Now, it was Vice President Gore who was the chief
advocate of the energy tax, arguing that it was good for the economy, good for
the environment. And I would urge you to read George Stephanopoulos' book, "All
Too Human," about that. This administration has pursued this goal.
What we would like to do, what the chairman of this committee would
like to do, is get some focus on the question of OPEC and getting some leverage
on OPEC to break that cartel.
And I would just like to say, as
chairman of the Africa subcommittee, I have listened to the Nigerians explain
that they would like to double their production of oil. I think this would be
wise for the administration to get behind that effort.
You know, new
technology is allowing for deeper offshore drilling. West African is one of the
top regions for oil prospecting. Frankly, their known reserves dwarf anything in
the Caspian Sea.
We need to have a focused energy policy on breaking
up this OPEC cartel and taking those countries that want to develop more
production on their reserves, and encouraging them to do so.
And I
hope we end today's hearing with some commitment that we will focus on the
pieces of legislation the chairman of this committee has introduced in order to
try to go after that OPEC cartel and break it up.
Thank you, Mr.
Chairman.
GILMAN: Thank you, Mr. Royce.
Mr. Menendez?
MENENDEZ: Thank you, Mr. Chairman.
Mr. Secretary, let me
just first say I was appalled at how the headhunters over at Mount Olympus,
which is the Senate, treated you. We, however, have a different view. We
understand of and recognize your service here in the House of Representatives.
We recognize your service as our UN ambassador. And we recognize the tough
issues your facing at the Energy Department, and we want to give you the
opportunity to fully explain those issues as they develop. And so, we appreciate
your service, and I want you to know that.
On this issue, let me
just say, that, as we enter this season, not only are gas prices a concern, but
I'm even more concerned about home-heating oil costs this coming winter. The
current inventory of home-heating oil on the East Coast is 40 percent lower than
at this time last year.
Mr. Chairman, this is not the first time we
are having this discussion. Many of the steps we can take are already before us.
Certainly, OPEC should be persuaded that collusion now in the effort to gain
high prices in the short-term could come back to haunt the cartel in the
long-term. This country should not be underestimated and its ability to develop
alternative energies if we work towards them.
Now, the vice
president's announcement this week of a bold new energy policy should be read as
a welcome sign to America's consumers and a warning sign to OPEC's producers.
Now, I've joined a large number of my Democratic colleagues in
calling for urgent action on several fronts. We have asked the Federal Trade
Commission to expedite its investigation into price gouging on the part of the
oil companies. Major oil companies have nearly tripled their profits as a result
of these price increases, from $4.5 billion in profits in the first three months
of '99 to more than $12 billion in the same period this year.
We
have also urged the leadership in Congress to unblock efforts to renew the
Strategic Petroleum Reserve.
MENENDEZ: And once given that
authority, we hope the president will release some of and/or exchange some of
the reserves from the SPRO. And finally, we call again on Congress to authorize
the Northeast oil reserve as passed by the House but languishing in the Senate.
And lastly, let us not forget, Mr. Chairman, that the leadership of
this Congress shares a responsibility to act now. The Republican leadership has
failed to provide Americans with energy security. It has failed to reauthorize
the Strategic Petroleum Reserve. It continues to send Alaskan oil to Japan,
despite our current domestic price hike. And most damaging, it has failed to
fund research and development into alternative fuels and energy efficiency.
In fact, over the past five years, Republicans in Congress have
funded only 12 percent of the administration's request for new investments in
renewable sources of energy and energy efficiency initiatives. This measly and
irresponsible level of funding has been nearly $2 billion dollars short of the
Clinton administration request.
I don't think it's appropriate to
claim here that today that the administration has no energy policy. Republicans
have not only failed to build up the Strategic Petroleum Reserve when fuel was
cheap, but before we face this conflict and the difficulties we're having now,
they proposed getting rid of the Energy Department and selling off the reserve,
policies that would have been extremely detrimental if carried out as proposed.
And when they're not trying to abolish the department, they're starving it.
So if we allow the oil companies a slight reduction in price,
settling at still higher than necessary prices, we may very well affect our
surplus forecast for the future.
So, Mr. Secretary, I hope that when
we're finished here at the end of the day we can agree on taking some steps now,
action now, here in the Congress now, hoping the Republican leadership will put
their actions against their words so that the American economy and American
consumers this summer, this winter, will have some relief before we face a
winter of discontent.
Thank you, Mr. Chairman.
GILMAN:
Thank you, Mr. Menendez.
Ms. McKinney?
MCKINNEY: Thank
you, Mr. Chairman.
I'd like to join my colleagues in welcoming the
secretary to our hearing today. And I'm glad that the secretary isn't going to
be the punching bag, that it sure sounds like he's been so far.
I
have some concerns that I'd like to express. My first concern, Mr. Secretary, is
it appears that the old Standard Oil Trust is reassembling itself. And we are
being supportive with repeated mergers and consolidation. And that's happening
on our own shores and not thousands of miles away. And I haven't heard much of
an outcry about that.
Also, Mr. Secretary, I'm concerned at reports
that have been produced, saying that oil prices as high as they are -- gasoline
prices as high as they are, are higher in black and minority neighborhoods than
they are in white neighborhoods, probably a new manifestation of driving while
black.
I am also concerned, Mr. Secretary, that racial
discrimination and racial harassment at Savannah River Site. The poor employees
have to foot their own legal bills when they fight back. But the multi- billion
dollar Westinghouse Corporation can tap taxpayer funds and fight the employees.
And there, we've got situations where -- such as an example where black -- one
black employee was surrounded by white co-workers who were dangling nooses. And
yet, the Westinghouse can proudly say that they're going to use taxpayer funds
to defend themselves when black employees try to fight back.
I'm
also concerned that oil companies have given hundreds of thousands of dollars in
campaign contributions and probably no telling how much they've given to these
527 organizations that have no disclosure requirements whatsoever. And quite
frankly, they've given more money to George Bush than they've given to Al Gore,
although I do have problems with Al Gore's association with Occidental in
Colombia, as it affects the U'wa people.
But finally, I would just
like to say that I think it's a travesty that given what's happening in the oil
industry, that we don't have anyone from the oil companies here at this hearing
today. But I do want to welcome the secretary.
GILMAN: Thank you,
Ms. McKinney.
And again, I want to remind you, we will be conducting
a further hearing in the near future with our oil company experts here.
Mr. Manzullo?
MANZULLO: Thank you, Mr. Chairman.
Welcome, Mr. Secretary. We were here several months ago, and I asked
the secretary what the administration's policy, if any, would be towards the
international criminal conspiracy where people got together, decided to fix the
price of oil. Where if that had been done by domestic companies, those people
would have been jailed, the secretary advised that diplomatic talks were
underway and that's about the best that he could give us. That may be about the
best that the secretary can give us, absent a clear direction from the president
or from the United States Congress.
MANZULLO: But I guess what
bothers me is that I represent an area, one of whose counties is in the Chicago
metropolitan area, where the price of gasoline is $2.50 gallon. This hurts
farmers, this hurts the trucking industry. These costs are being passed down to
the consumer.
And were it not for the fact that the cost of energy
is excluded from the core index for inflation, it probably would be reflected in
higher interest rates, which in fact may be the case, if in fact the Fed decides
to raise those interest rates. Maybe they'll ignore the core index rate and take
energy into consideration. Let's hope not.
But I think what bothers
me more than anything is an attempt to try to get at the cause of the problem.
The Congressional Research Service says that 48 cents of every dollar increase
in gasoline is attributable to OPEC; 25 cents for every gallon is attributed to
the energy policy of the administration and prior administrations on the new
formula for gasoline to be used in non-attainment areas -- 25 cents per gallon,
it's a problem of distribution caused by the new mixing, that's at $1 per
gallon.
We have three reasons here to go after OPEC and to make EPA
accountable. But I just wanted to add this, that the people that have tried to
make this political -- and Ms. McKinney talked about it -- is that the vice
president's portfolio of Occidental has doubled in value from between $250,000
and $500,000 to $500,000 to $1 million as result of his being influential in
privatizing some oil fields that were formerly owned by the federal government.
So the Gore -- or the ox goes both ways in this situation.
But I would say let's not politicize anything. Let's ask the
secretary what his views on this proposed legislation are, because I think, in
all defense to the secretary, absent clear direction from Congress and from the
administration, he's doing what he can under the circumstances, and it's been
very limited. The authority he's been given is very limited.
Thank
you.
GILMAN: Thank you, Mr. Manzullo.
We would like to
ask the secretary, very shortly, what his views are.
Mr. Delahunt
will be our last speaker.
I've been told the secretary must leave us by
12:30.
Mr. Delahunt?
DELAHUNT: Yes, thank you, Mr.
Chairman. I'll be very brief.
To pick up on the observation by Mr.
Manzullo, regarding his desire not to politicize, that despite the fact that he
did make a reference to the vice president and his holdings in Occidental.
I think in response to that, it behooves me to enter into the record
the fact that while Vice President Gore has accepted $100,000 in oil and gas
PACs, in fact, the present -- the campaign of Governor Bush has accepted in
excess of $1.5 million from oil and gas PACs. I think it's important to set that
record straight so that we can have a context here.
While this
hearing is entitled "OPEC policies," I can't believe that OPEC's policies in and
of themselves, unless the major oil companies in this country are part of OPEC
-- and maybe, Mr. Secretary, you can amplify the relationship between the oil
companies and OPEC for our benefit.
But I simply can't believe that
the cost of home heating oil and gasoline at the pump is totally unrelated to
the fact that in this quarter, the first quarter of 2000, as compared to 1999,
the profits for these following companies has increased by in this quarter, the
first quarter of 2000, as compared to 1999, the profits for these following
companies has increased by these percentages: Texaco, 473 percent over 1999, the
same quarter; Conoco, 371 percent; BP Amoco, 296 percent; Chevron, 291 percent;
Phillips, 259 percent; Arco, 136 percent; Shell, 117 percent, and Exxon-Mobil,
108 percent.
DELAHUNT: I just thought I would read those figures
into the record to provide some context. And I yield back.
GILMAN:
Thank you, Mr. Delahunt.
We're pleased to welcome the secretary
before us today. Mr. Richardson is of course well-known to all of us. For eight
terms as a congressman, he represented the 3rd District of New Mexico. And from
1997 to 1998, Mr. Richardson ably served as our ambassador to the United
Nations. And in August of '98, Mr. Richardson was sworn in as our ninth
secretary of energy. He has also served as the president's special envoy to many
of the world's troubled areas. And I'm pleased to welcome Secretary Richardson
today as a leading energy troubleshooter.
Mr. Secretary?
RICHARDSON: Thank you very much for your very gracious and
supportive comments that many of you made.
Let me just start out
with hopefully what we see in the short term as good news, but we can't yet call
this a trend. But heading into the Fourth of July, this is good news, and
hopefully -- and I say "hopefully" -- we're turning a corner on gasoline prices.
We're examining a trend in the last week. Nationally, conventional
regular gasoline dropped 3 cents. In the Midwest, conventional regular gasoline
dropped 7 cents. In the Midwest, reformulated gasoline dropped 12 cents, to
$1.88, in the last week.
Prices are still unacceptably too high. We
are working vigorously to bring them down. And my main message here is that we
have to do this in a bipartisan fashion, that we need to take some steps and the
Congress needs to take some steps, and we have to resolve these problems
together.
Mr. Chairman, any actions we take in the Clinton-Gore
administration on energy are based on a number of steadfast principles. This is
what they are:
Number one, market forces, not artificial pricing.
Diversity of supply and strong diplomatic relations with energy-
producing countries.
Number three, improving the production and use
of traditional fuels through new technology development.
Number
four, diversity of energy sources with long-term investment in alternative fuels
and energy sources.
Fifth, increasing efficiency in the way we use
energy.
And, lastly, maintaining and strengthening our insurance
policy against supply disruptions, and that's the Strategic Petroleum Reserve.
Mr. Chairman, I addressed you in the spring at what I thought was a
very productive hearing, regarding actions by the administration to counter
tight markets, low worldwide oil stocks and gradually increasing prices. At that
time, we were taking specific actions to address an untenable imbalance between
supply and demand, one that risked negative repercussions in the world economy.
We continue to believe that markets should set prices, but while we
import 22 percent less oil from OPEC today than we did around our last gas
crunch, which was in 1977, it remains clear that actions by major oil-producing
nations still significantly affect oil supply. That is why this spring I spent a
great deal of my time talking with energy ministers and leaders from the
oil-producing nations Saudi Arabia, Kuwait, Mexico, Norway and Venezuela, often
getting great criticism from one side that I wasn't tough enough, from the other
side that we were too pressure oriented.
RICHARDSON: Each of
these nations is well-aware of the special economic and energy relationships
between their country and the United States as well as to other importing
countries. Each of these nations agrees that stability is our common goal and
that volatility in the oil markets is undesirable.
We met with some
success at that time. In February, all OPEC governments were quoted as saying
that production increases were unnecessary. But on March 28, OPEC and announced
their decision to increase production and other producers joined them. We saw
some trimming of crude prices then and some slight easing on gas prices. They
did go down for a while. But very low stocks and soaring demand have boosted
prices still higher since that increase.
So I've continued to keep
producing nations abreast of our situation and made our position clear. With
prices staying high since spring, we needed to do more. I urged OPEC to keep an
open mind.
Now it's worth remembering that OPEC is a consensus
organization and not all governments in OPEC are friendly towards the United
States. Still the consensus that came about when the OPEC leaders met in Vienna,
Austria, last week increases its output by roughly 3 percent, about 708 barrels
per day, and Mexico will provide an additional 75,000 barrels a day, Mexico
being a non-OPEC country. We also anticipate an additional small increase from
other non-OPEC producing countries soon.
Overall, we believe that
OPEC's decision is a testament to the fact that those governments responded to
the concerns that we raised. While this recent lift is modest it is an important
step.
Mr. Chairman, since this time last year we have seen nearly
3.5 million barrel per day increase in production. This is substantial and it is
not only good for America, but it is good for Asia, Europe and all the world
economies.
I'm pleased to report that in the past week, as I said,
we have seen some positive movements in the market. This base from the Energy
Department's Energy Information Administration, reporting, as I said, that
conventional regular gasoline has dropped 3 cents per gallon over the past week
nationwide. And in the Midwest, where we are seeing very high prices, EIA sees a
drop of 7 cents per gallon on conventional regulated. Reformulated gas is down
12 cents a gallon in the Midwest. We can't yet, as I said, call this a trend,
but heading into the Fourth of July this is good news.
But we are still
not seeing the greater price decreases, both per barrel of oil and per gallon of
gas that we might have hoped for. The reason for this is quite simple -- demand.
The world's thirst for oil is steadily rising. Other than 1997, the second
quarter of this year may show the strongest year over year growth, 2.1 million
barrels per day, ever.
When combined with our need to build
inventories from historically low levels, even large supply increases of 3
million barrels per day are not enough, and demand will continue to grow. We
need to encourage methods to temper that need.
We are not relying on
other governments for those answers, and, certainly, not to ensure our energy
security. As I mentioned, our nation has a firm energy policy that serves as a
foundation ensuring that we have the energy resources we need. And beyond that
policy, the administration has also made some aggressive, short-term moves to
cool off particular hot points.
You remember that we had a heating
oil short-fall in the spring. In response the president released almost a third
of billion dollars in funds in the spring so that low-income households could
pay their heating bills. He asked for $600 million more in low-income housing
energy assistance funds, and the president is seeking an additional $19 million
from Congress for low-income home weatherization.
We address the
issue of supply through increase support for tankers, small business loans for
distributors and other small businesses impacted by high prices, and encourage
refiners increase production. We also re-established an office of energy
emergencies at the Energy Department to coordinate with the states and other
federal agencies regarding any energy-related crises. This move is helping us
right now as we assess the demand for power during a very hot summer.
We are also seeking to turn around domestic production of oil via
where we are seeking some -- seeing some good results, developing alternative
sources of energy and increasing energy efficiency.
RICHARDSON:
And energy efficiency, one of our most exciting prospects, is our work in the
Partnership for a New Generation of Vehicles, PNGV, where we're looking to
develop a car that will get 80 miles per gallon.
While Congress has
eliminated all our funding for PNGV via a recent amendment, we remain committed.
We need your help on this.
You've likely read of the new release of
Honda's Insight, which is nearing our miles-per-gallon target. These vehicles
are not just of the moment; they will be part of the lasting solutions we can
commit to today for tomorrow.
We're also looking to help independent
oil producers test new production technologies and a give hand to small
producers in existing fields. And we're helping refiners deal with the new EPA
tier-two rules through our ultra-clean fuels program.
And I think,
to the congressman that talked about domestic production, we are interested in
marginal well relief for small independents for G&G (ph) expensing, steps
that we think are important for domestic oil and gas producers.
But
still, we remain concerned about oil supply. There is significantly more oil on
the market today than there was prior to OPEC's March meeting.
And
domestic production is turning around, but we need to ensure that supply is
sufficient enough to meet demand and to build stocks both worldwide and here at
home. This will help the market operate within a comfortable margin of safety
for the remainder of the year.
Still, facing the imminent Fourth of
July weekend, America cannot declare independence from the gas pump. This is
peak driving season, and refineries in the U.S. are already operating at 96
percent utilization and at 99 percent in the Midwest.
When levels
are that high, it clearly indicates that demand is the driving factor. So I
don't think that the production boosts are going to immediately push prices
lower, but I think we are close to turning the corner.
We remain
very concerned about gasoline prices in the Midwest, especially around Chicago
and Milwaukee. President Clinton is very concerned about this. And there's no
question, drivers in those cities and other parts of the Midwest are angry.
We're looking for solutions, but questions remain. While we did have a
regional pipeline problem in the spring that left supply hobble, our experts are
talking to the Environmental Protection Agency to see what we can do in the near
term to bring some relief to consumers.
And while there was some
easing of prices at the pump in the past few days, as I mentioned in the
opening, the FTC, the Federal Trade Commission, continues its investigation of
pricing practices in the region, probing for unfair or illegal activity. We hope
to hear from the commission some time in July.
We took several other
steps, Mr. Chairman, in the past two weeks to meet some rather unexpected
issues. On June 15, I ordered a limited exchange of crude oil from the Strategic
Petroleum Reserve's West Hackberry site to two refineries after a commercial
dry-dock collapse near Lake Charles, Louisiana. Our response came within hours
and shows our commitment to responding quickly. The Army Corps of Engineers has
since worked overtime to dredge a new channel, so oil traffic is moving once
again. And when there was a pipeline problem near St. Louis, we granted a waiver
that postponed implementation to the new EPA rule on reformulated gasoline until
the problem was solved.
But there's more we can do together to get
relief to consumers. And these are the kinds of long-term solutions we need to
embrace, to ensure that we get out of lasting cycles with prices pegged at one
extreme or another.
Last week, President Clinton sent a letter to
the Senate majority leader and the speaker, urging that the Congress work with
us to enact the president's energy proposals without delay. One central
component of the president's energy initiative is a $4 billion tax package of
tax incentives to encourage domestic oil and gas production, and for consumers
to purchase more efficient cars, homes and consumer products. This package has
languished here on the Hill for two years.
The president has also
consistently asked for increased investments to meet our energy needs. In the FY
2001 budget, the president proposed a $1.4 billion investment for Energy
Department programs and energy efficiency, renewable energy, natural gas,
distributed power systems. We need the Congress to support these critical goals.
RICHARDSON: And unfortunately, it has approved only 12 percent
of the increases over the past seven years. We're also concerned about the
deletion in the FY 2001 budget for energy efficiency below last year's level. As
I mentioned, a recent House amendment cut virtually all of the department's
funding for the Partnership for a New Generation of Vehicles, where we work with
the Big Three to develop more fuel efficient cars.
The House has
added a rider to the transportation appropriations bill prohibiting the
department from even studying increases in CAFE standards.
We've also had perhaps what is -- we consider the most harmful action, delaying
extending the Energy Policy Conservation Act, which authorizes two programs at
the core of our nation's energy security -- I know the House has acted, but it's
still languishing -- and that is the Strategic Petroleum Reserve and our
participation in the International Energy Agency.
Mr. Chairman, the
Strategic Petroleum Reserve authorization expired on March 31, and we need to
work together to get this done. The president also submitted a comprehensive
electricity restructuring bill two years ago. We have not enacted a bill with
latest failure last week in the Senate when they failed to report comprehensive
legislation.
To better ensure our energy security this last year,
the president also has called for the establishment of a regional home heating
oil reserve in the Northeast.
And Mr. Chairman, we need action on
this because we are concerned about stocks of home heating oil. We're talking
about 2 million barrels. We're talking about a modest effort only to be used for
emergencies, and we are concerned about those supplies.
We also need
a replenishment of the low-income energy assistance program emergency funds,
which we needed to tap during the heating oil shortfall last year.
In conclusion, Mr. Chairman, we simply cannot ensure America's
energy security with such a lacking commitment to its energy future. We have to
act expeditiously together. I would urge the Congress to act so that we can
establish the home heating oil reserve in time for next winter. Nobody wants to
see people in the Northeast next winter debating whether they can afford to eat
or stay warm. It is a devil's choice, and Americans should not have to live that
way.
Mr. Chairman, we have viable options before us to improve
America's energy security and do so in ways that are cleaner and more economical
than ever before. I appreciate again this opportunity to explain to you what
I've done as energy secretary to bolster that confidence. I again thank every
member for their courtesies. And I urge the Congress to work with us to do its
part and act on the critical energy proposals before us. Thank you.
GILMAN: Thank you, Mr. Richardson. Because of the short time
remaining for the secretary's appearance, I'm going to ask our members to
cooperate and to be limited to -- limit their questions to three minutes each so
each member may have the opportunity to be heard. And I will be calling on those
who have not had an opportunity to make an opening statement first before we get
on to the entire list.
Mr. Secretary, Congressional Research Service
issued a paper earlier this month, on the very sharp rise of gas prices in the
Midwest, noted the gasoline prices nationwide had increased 60 cents a gallon
over the past 18-months with 48 cents of that increase attributable to higher
crude oil. Do you agree that OPEC and its member states have been playing the
decisive role in our domestic energy price crisis?
RICHARDSON: Mr.
Chairman, we agree with Congressional Research Service that high crude prices
are a factor. But we also believe that transportation problems, refinery
problems, high demand, low inventory, contributed to these Midwest price spikes.
We also agree that RFG costs five to eight cents more than conventional gas. We
don't agree in that report that ethanol RFG accounts for 25 cents of the 48
price differential, 48 cent price differential, between RFG-2 and conventional
gasoline.
We could not totally account for the price differential
after we did a supply assessment. And this is why we asked for an FTC
investigation.
RICHARDSON: In other words, Mr. Chairman, we
believe the causes are higher demand in the Midwest than the national average, 3
percent compared to 1.6 percent. Gasoline inventories were low going into the
summer driving season; 15 percent lower than last year. Thirdly, as I said,
RFG-2 was introduced into the Milwaukee-Chicago market. And then there was a
pipeline problem, the Explorer pipeline, in the Chicago-Milwaukee area,
contributed to a loss of net 6 million barrels.
But the main
question that needs to be answered is, why is there such a high price
differential between conventional gasoline and reformulated gasoline? We believe
that pollution-controlling devices do not cause that price spike. Yes, it's
maybe three, four cents more, but 30 cents?
And this is why the
Federal Trade Commission is investigating. They should have a response by the
end of the July. The oil companies have some explaining to do. The refineries
have some explaining to do. But, again, let's await the results of this
investigation.
But all of these factors, Mr. Chairman, should not be
attributed solely to the price differential that has occurred.
GILMAN: My time has expired.
Mr. Gejdenson?
GEJDENSON: Thank you, Mr. Chairman.
Mr. Secretary, we
look at the estimates in the Northeast to be 22 percent below last year's level
for home heating oil. Any kind of cold snap at the beginning of the year could
be deadly, if people's houses catch fire as they turn to alternative heating,
obviously the impact of really cold homes. And I would hope that you would
continue to vociferously press this Congress to get that home heating oil
reserve established in the Northeast. This is a life and death issue.
Secondly, I think that the investigation of the oil companies, we
haven't seen the second quarter profits yet, but my sense is they're going to be
even larger than the first quarter profits of almost 500 percent increase over a
year earlier. You've got to use your bully- pulpit and stay after them just like
you stay after OPEC.
And the last thing I'd say is, again, that swap
or sale, you've got a $6 differential between the spot market and the futures
market. You ought to dump that out. Even if the Saudis and everybody fulfill
their commitment, there's a gap in getting it here. There's obviously a shortage
that exists already. Get that product out there. You're going to make a profit.
You can put in more into the SPRO afterwards with the extra money you get, so
you could end up with more oil in SPRO. You could end up helping the supply
problem.
So I hope you take these messages very seriously.
And the only other question that I'd have for you, is what do you
think the capacity is of non-OPEC countries for increased production? Mexicans
and others, where do they stand and where do some of the major OPEC countries
stand?
RICHARDSON: Congressman, first, I share your view about the
Northeast reserve. We need this, and we need to work with you to make this
happen. We are concerned about home heating oil in the Northeast. If we can work
together to get this legislation passed -- the House has passed it -- it's tied
up in the Senate. Although I am informed that there is an amendment to the
energy and water appropriations today in the House and I hope it gets the
support, because what we're talking about, Congressman, is not an effort to deal
with prices. We just want a regional reserve for the Northeast off the docks of
New York and New Jersey. We can lease the space. We don't have to build
anything. Two million barrels for emergencies, not for pricing. We worry about
what might happen in the Northeast. We also had some difficulty getting some
reprogramming funds to get it moving, about $8 million. We need your help on
that.
Looking at what options the president uses, Congressman, for
the future to deal with this problem, let me just say that we have to continue
monitoring the gasoline situation. A big problem is low crude oil stocks and low
gasoline stocks in this country and worldwide, too. Unusually high demand, this
is happening right now. We are hopeful that there won't be any more refinery or
more pipeline problems. Transportation problems you can't always account for,
but we're working on this.
Your last point was on?
GEJDENSON: Last point was on the OPEC nations and non-OPEC
nations. Are there particular countries that have capacity and are some
countries at capacity?
RICHARDSON: Most non-OPEC countries,
Congressman, are producing at capacity. We do predict small increases from
non-OPEC countries. As I mentioned to you, in March, Mexico announced that they
would do 50,000 barrels more per day. In the last meeting, in March -- in June,
which just happened, they have said they're going to do 75,000. Norway is
another non-OPEC country that contributed 100,000 in March, and may be making a
decision shortly about increased production in March. This is good, but, again,
they have to go through their parliament.
The other countries that
were involved in increases in production, non-OPEC, one was Oman, and we don't
know where they may be in this cycle, and Russia was another one. But basically,
most non-OPEC countries are producing at capacity.
GILMAN: The
gentleman's time has expired.
Mr. Chabot?
CHABOT: Thank
you, Mr. Chairman.
Mr. Secretary, consumers in my district,
Cincinnati, and throughout the Midwest are getting gouged, or perhaps I should
say "gored," at the gas pumps. Working families are being priced off the
highways. Small businesses are feeling the squeeze. And, frankly, your
administration is rapidly losing credibility.
In February, when our
constituents felt the first major spike in gas prices, you said, and I quote,
"It is obvious that the federal government was not prepared. We were caught
napping. We got complacent," unquote.
Now it's late June, and those
taxpayers are still waiting for relief. Many of my constituents have asked me if
there isn't something the Clinton administration can do when it engages in
dialogues with the price-fixing oil cartels. After all, it hasn't been so long
ago that American servicemen and women laid their lives on the line for some of
those oil-producing nations that are now threatening our economy with cutbacks
and production and higher prices.
I've got to ask the same question:
What goes on in those meetings? I note that you traveled to Saudi Arabia in
February of 1999; oil was then selling for $12 a barrel. In March, you went to
the OPEC meeting in Vienna; the price jumped to $14.68 per barrel. In July, you
hosted the Western Hemisphere Energy Ministers' Conference, and the cost of oil
per barrel soared to $20. In August, a trip to Nigeria; $21 a barrel. By
December, 1999, when you hosted the African Energy Ministers' Conference, the
price went to $26 a barrel. After you traveled to Saudi Arabia, Kuwait, Mexico,
Norway, and Venezuela in February this year, the price of oil rose to nearly $30
a barrel.
Apparently whatever our government was doing during those
meetings wasn't working very well. Do you think it's perhaps time for the
Clinton administration to take a different approach? Do you think perhaps we can
send a strong message to the price-fixing oil cartels that we take a dim view of
this criminal behavior and that our president will finally respond to this
crisis by exercising the authority he has as chief executive? Can we tell them
to look elsewhere for assistance, perhaps in the area of arms sales?
Mr. Secretary, the working people of my district in Cincinnati and
all over the Midwest and in fact all over the country are growing angrier by the
day. They want their government, the government they pay for, to lend them a
hand. The time for complacency is over.
Would you care to comment?
RICHARDSON: Congressman, I really do care about your constituents.
This is -- this is an agonizing problem for all of us.
And let me
just talk about OPEC, because there are a lot of members here that have a lot of
negotiating experience; this is the International Relations Committee.
We are always very firm with OPEC. We started out in this effort,
OPEC was not going to increase production. In March, they went close to 2
million barrels per day.
RICHARDSON: They were not going to
increase production this last time, and they're close to 800,000 or 900,000
barrels per day.
Now, what we say to OPEC is: What the international
community needs is stability. There's too much volatility. A good American
economy is good for everybody. The developing world -- Asia, Europe -- needs
price stability, and prices are too high.
Now, when I went out to
those nations that you mentioned, it was very visible. And I was criticized on
the one hand for being too visible and pressuring, and on the other hand for not
being strong enough and I think using some of the measures that Congressman
Gilman and others have advocated.
OPEC did increase production, so
whatever actions we took worked.
Now, that is not sufficient. We've
got some gasoline problems in the Midwest that I've outlined, gasoline demand
problems. There's problems relating to pipelines, there's problems related to
refineries, there's problems related to low stocks, increased demand.
And I think, Congressman, what we are looking at in your region is,
why is it -- and I don't know the type of RFG -- I wish EPA were with me --
reformulated gasoline that's in Cincinnati.
But this why I think we
have to get the facts. Why is there such a high price differential in
conventional and reformulated gasoline? Why in some districts of some of your
colleagues prices are substantially lower?
I think we have to get at
the facts.
I believe our policy of engagement with OPEC is working.
Now, let me just tell you a little bit about OPEC, and you know this
very well. There's some countries there in OPEC that we don't have strong
relations with: Iraq, Iran, Libya. There are other countries that we have strong
relations with: Saudi Arabia, Kuwait, Venezuela, Nigeria -- I know Congressman
McKinney's been there many times -- Indonesia.
OPEC operates by
consensus. And I engage them, every minister, intensively. I did not travel this
last time, but telephoning incessantly, making our case, saying keep an open
mind. And we think that the results were positive. They were modest but
positive.
Now, everybody here knows that you don't want to -- you work
with your friends in an institution like that where you have nations that don't
want to increase production, that like the prices high. And what we're doing is
trying to find ways that -- you balance your diplomatic efforts.
And
my point, Congressman, is that I think our diplomatic efforts of quiet
diplomacy, engaged diplomacy, is working. There are other factors that we need
to deal with, too. That doesn't mean we don't continue dealing with OPEC. But
it's better to engage them in a way that produces results. And we believe that
we can have some -- in their September meeting, you know, playing it cool,
working with them, we can continue the progress we've made.
Congressman, I think that in Cincinnati you were affected by that
pipeline I mentioned, the Wolverine pipeline. You get conventional there, as I
understand it, and that pipeline problem was one of the reasons for this
disruption.
GILMAN: The gentleman's time's expired.
CHABOT: Mr. Chairman, if I could just respond, and I won't talk
long, but we did...
GILMAN: The time's expired...
CHABOT: We don't have reformulated gas; we were affected by that
pipeline.
GILMAN: Ms. Danner.
DANNER: Thank you, Mr.
Chairman.
Welcome, Mr. Secretary. I would like to follow through on
two questions, based on what my colleagues have talked about.
You
talked about, and I quote, "anticipated increase in output from some of the
non-OPEC countries." I'm particularly interested in Russia because, you know,
we've talked about all that we have done for the OPEC countries with regard to
the Gulf War, but let's talk about the fact that we are sending literally tens
of billions of dollars into Russia, according to the Congressional Research
Service. What, particularly, is Russia planning to do to increase their output?
They certainly have the supply availability.
RICHARDSON:
Congresswoman, Russia has enormous resources. The problem with Russia is not
that they don't want to do it; they have some infrastructure problems. We are
trying to get Russia to do what is called more production-sharing agreements
with American companies, with Western companies, so that they can increase their
production.
So their production capability is the problem. It's not
a lack of will.
I think in the years ahead, you will see Russia
concentrate extensively on improving that productive capacity.
DANNER: And I might say that in all the years that I have been
traveling between Kansas City, Missouri and Washington, D.C., for the first time
ever, gasoline prices are less expensive in Shirlington than they are in Kansas
City, Missouri. And that certainly is something that has impacted my
constituents, and that's the increase in gasoline prices.
My husband
tells me that last week, overnight the prices went down 15 cents per gallon. The
interesting thing and one of the things that I have inquired of the FTC, and I
hope that in your conversation with them you will pursue it too, is the
interesting fact that I think that we're talking about some collusion between
the gasoline companies within areas.
For example, if one of my -- if
one of my -- if one of the gasoline stations located in my district raises its
price, every price goes up throughout that area exactly the same amount
overnight. It's almost as they have a telephone tree. It seems strange to me
that with different base prices, based on real estate, co-branding, all of those
things, that they all happen to have the same price to charge for all of my
motorists.
And for those of us who live in the less populated part
of the country, the middle west, it is a surprise to me that we're the ones with
all the reformulated gasoline when the traffic here in Washington area is
certainly much more heavier than it is north of the river in Kansas City,
Missouri.
RICHARDSON: Congresswoman, on that FTC investigation,
they're going to be issuing subpoenas and they expect to complete their action,
at least a preliminary report, by the third week of July. Their objective is to
find out the high-price differential, as you mentioned, from formulated and
conventional and non-reformulated. The price differential 30 cents, 40 cents,
has caused significant questions to be asked, and the oil companies have not
adequately explained it.
Now, again, the issue of price-fixing will
be examined. That's the purpose of this.
GILMAN: Gentlelady's time
has expired.
DANNER: Thank you, Mr. Chairman.
Thank you,
Mr. Secretary.
GILMAN: Mr. Salmon?
SALMON: Thank you.
Secretary Richardson, it's good to have you here today. We're
neighbors from the same part of the country. I actually lived in New Mexico for
four years, four of the best years of my life.
It's interesting,
about 15 months ago, my constituents and your former constituents -- I guess
they're always your constituents -- were really getting gouged at the gas pumps.
In Arizona, the price of a gallon a gas went up about 35 percent over the course
of two weeks. And 15 months ago, I started calling for hearings. It fell on deaf
ears, Mr. Chairman. Nobody wanted to even talk about it 15 month ago.
Then a strange thing happened, and I think you see the same
phenomenon, when the northeast started feeling like it was getting gouged, then
there was a big hue and cry, and everybody wanted to take a look at this thing.
What an interesting phenomenon, what a difference a day makes. But I really
believed if we had been ahead of the curve 15 months ago, and started these
hearings back then when I started to call for these hearings, maybe we could be
on top of this thing by now.
I find myself being very, very
frustrated with the way that we all in government has handled this situation. A
month or so ago, a couple of months ago, the House passed a measure, which I
think would have been about as beneficial as a Hallmark card to send to the OPEC
countries and tell them how dissatisfied we are with what's going on, because I
don't really feel it had any teeth. But we had an opportunity to put some teeth
in it.
And one of the ideas that I was planning on, including had
it, the bill that we passed, really had some teeth, was to give the president
the power of seizing the assets of those OPEC nations if we found out that
price-fixing was occurring.
Could I get your comments on that? And
if that isn't something that we could look at doing, is there anything else that
we in the Congress can give the president so that he has more tools in his tool
belt when it comes to dealing with these problems, because a lot of us really do
believe in our hearts, even though we haven't proven it yet, that there is some
price-fixing going on, and that there is some skull-duggery going on with these
OPEC nations.
So what can we do for you guys, to give you more
arsenal to deal with these problems that we perceive are happening?
RICHARDSON: Well, Congressman, let me first commend you, because
you've been a leader on renewable energy, and that is very important, that is
key to improving our energy security.
Secondly, you're also, like I
was, from the oil patch, and we have some initiatives -- the president does --
to help marginal well -- tax credits and oil producers, some of the small oil
producers that even though prices are high now, it still has taken them a long
time recover when they were $10 a barrel. Regions in your part of the world and
my part of the world were hurting, because energy is so important.
Congressman, I think the way you engage OPEC is through effective
diplomacy, and I believe we're doing that. Now, we can support the chairman's
bill of sanctions. Now, the second bill, and I don't know if that's the one that
you're referring to, the Justice Department and the State Department are
reviewing it. Is that Chairman Gilman's bill, the asset...
SALMON: It's the one that we passed about 45 days ago, 30 to 45
days ago. And more -- I believe it was just a resolution.
RICHARDSON: Congressman, I would say that we would oppose that bill,
because we believe in engaging OPEC. And if you look at the record -- for
instance, Saudi Arabia has been forthcoming. They have been leaders in
increasing production. Kuwait has also. And I think Chairman Gilman effectively
made a case with Kuwait earlier and was helpful.
So there have been
countries -- Algeria is another country that has taken some surprising positive
positions in increases in production. What we try to do with OPEC is engage
them, convince them, make our arguments on economic grounds, not political
grounds. It doesn't pay, I have found, to coerce or threaten, but to be
forceful. And as you know, a lot of OPEC countries were not happy when I made
those visible trips and when I advocated very strongly for our position.
This last time, we took a more low-key approach. But it still
involved a number of telephone calls and quiet visits that took place. That's
how I think we should deal with OPEC. OPEC is a reality. They're going to be
around.
And as a nation, we need to reduce our reliance on imported
oil. I think that is message number one. And this is where, together, in a
bipartisan fashion, we can deal with renewable energy and those tax credits and
the home heating oil reserve and helping domestic oil and gas production.
GILMAN: Secretary, the gentleman's time's expired.
Ms.
Lee?
LEE: Thank you, Mr. Chairman, and let me also thank you, Mr.
Secretary for your forthright testimony, and also for the success that you're
having, though not complete success, but some success.
And let me
just ask you a couple of things. In your opening statement, you did mention the
fact that prices have dropped in some parts of the country. I don't believe you
mentioned the West Coast. And, as you know, in the West Coast, we've had huge,
high prices for a couple of years now.
And, Mr. Chairman, in fact,
I'd like to insert for the record -- I'd like unanimous consent to put this GAO
study in California gasoline price behavior...
GILMAN: What's the
date of that?
LEE: The date is April 2000.
GILMAN:
Without objection.
LEE: Thank you, Mr. Chairman.
But let
me just ask you in terms of the discrepancies in terms of prices in California
and in the West Coast versus the rest of the country. We know California is
really the third largest consumer of gasoline in the world, behind the United
States and Japan. Gas prices in the Bay area, Oakland-San Francisco in
particular, are higher than any area in the state and probably in the country.
So now we're still dealing with this with no real relief in sight.
Secondly, let me just ask you, in terms of the explanation by the
oil companies, have they actually explained to you a rationale for how they see
the increase in prices? And do you see a correlation between their huge windfall
profits and the soaring prices of gasoline and home heating oil?
RICHARDSON: Congresswoman, as you know, California has some
particular features that probably occasion higher gasoline prices for consumers.
Number one, there's higher state and local taxes, as you know,
almost total taxes as much as 10 cents per gallon above the national average.
This is in taxes.
Number two, product quality, in other words, it
costs more to make reformulated gasoline in California than it does -- 5 to 8
cents per gallon more to produce than conventional gasoline.
Thirdly, the Rocky Mountain region, there's some transportation
problems, some logistical problems, that have taken place that prices in the
region have been more independent than in other regions. There's been some
pipeline problems, specifically the shutdown of the Olympic pipeline that took
place in June of '99 because of -- and some gasoline markets in Washington and
Oregon were also affected.
So California has those particular
problems that we have been trying to address. I've been out there, trying to
find ways to reduce that gasoline price there. And there has been a slight drop,
but again we're monitoring it very closely.
GILMAN: The gentlelady's
time's expired.
Mr. Smith?
SMITH: Thank you, Mr.
Chairman.
First of all, I want to say to my good friend, Mr.
Richardson, Secretary Richardson, welcome. And I remember our good times working
on the Helsinki Commission together. And I want him to know that I have a great
deal of respect for him.
Let me just say that I -- and I also think
you are trying. It's a very difficult process.
But let me just raise
an issue, because I am deeply concerned that the administration while you're
pushing hard in one area, may be deeply conflicted on the issue of gas prices.
And the impact on my constituents in New Jersey and in my district,
I hear about it all the time. People are concerned. They're paying more. They
don't like it. And it is impacting upon their lives.
We saw not so
long ago a deep conflict on the issue of MFN, most favored nation status for
China. And there is a correlation here. When the linkage was there with trade
and human rights during Mr. Clinton's first couple of years in the White House,
there was a mega- effort made by people inside the White House to delink. There
was a conflicted White House. There were people who had, particularly in the
Commerce Department, a decidedly negative and jaundiced view as to whether or
not human rights ought to be linked. And sure enough, one year later, there was
a total delinking and there was a total unraveling of that policy.
I'm afraid that there may be a disconnect here as well.
SMITH: I haven't read Vice President Gore's book, "Earth in the
Balance." I've seen the quotes -- some of the people today have quoted it. But I
have read "The Population Explosion" by Paul Ehrlich; I also read the previous
book, "The Population Bomb." It is a book of pseudo-science, extreme
exaggeration, a book filled with worst-case scenarios. As a matter of fact, I
went back and looked at some of the things with "The Population Bomb." They
haven't happened. And yet, that was used to drive policy for years. And yet,
those worst-case scenarios were nothing but worst-case scenarios that didn't
even come close to happening. And hyperbole like that is very dangerous when it
has such an impact on policy.
Now, in looking at "The Population
Explosion," there is a quote -- and again, I read the book, so you know, I am
very well-acquainted with it. But one pulled quote from it, "The United States
could start by gradually imposing a higher gasoline tax, hiking it by one or two
cents per month until gasoline costs $2.50 to $3.00 per gallon, comparable to
prices in Europe and Japan." That's on page 219 to 220.
As we all
know, the vice president wrote the promo for that and said, and I quote, "The
time for action is due and past due. The Ehrlichs have written the
prescription." If that's not an endorsement of higher gasoline prices, I don't
know what is.
And I would just ask you respectfully, Mr. Secretary,
can you not understand why reasonable people, looking at the vice president's
many utterances and writings on this, would not at least feel that the
administration might be conflicted?
You are pushing for lower
prices. But there may be other people who say, hey, if it goes up, it goes up.
It will be good for the environment. You know, I'll never forget how Justice
Bork was skewered by his writings. He had so much in written form that members
of the Senate could go back and look at and said, we don't like this opinion, we
don't like that. And I think, you know, we should be held accountable for what
we say and for what we write.
And the vice president has clearly
made it clear that he would like to see higher prices as a way of mitigating
consumption as an environmental issue. So, you know, why is that not
unreasonable for those of us who look at those writings to conclude there could
be a problem here?
I yield to my friend.
RICHARDSON:
Well, first of all, the congressman is, as usual, awfully skillful, and I admire
your work on human rights and diplomacy and et cetera. Let me just say,
Congressman, I have been -- and by the way, the vice president is making a
speech today on his views on energy in Philadelphia. In fact, this morning, he
may have already done so.
This is what we want to see: We want to
see tax credits for fuel efficiency, for spurring domestic oil and gas industry,
for renewable energy. We want to see federal investment in domestic sources of
energy. I've been -- not necessarily in your district, Congressman, but I know
the transportation problems of some of the truckers there.
We need
to really revive this Partnership for New Generation of Vehicles. I know that
the vice president cares about how we can make automobiles and trucks more fuel
efficient and still ensure that Americans have a free choice in buying them. I
just heard today that SUVs, the sale is dramatically increasing in the last two
weeks, more than ever, the most-sold automobile. And we want to see a more
creative policy on natural gas on distributed generation systems...
SMITH: I just asked...
RICHARDSON: That's what I know
the vice president believes in.
SMITH: But his previous...
GILMAN: The gentleman's time has expired.
SMITH: ... $3
deal, and that's where we're heading.
RICHARDSON: I thank you.
GILMAN: Mr. Crowley?
CROWLEY: Thank you, Mr. Chairman. I
ask unanimous consent to revise and extend my remarks in the record.
GILMAN: Without objection.
CROWLEY: First of all, let me
welcome you, Mr. Secretary.
Again, the more things change, the more
things seem to stay the same. We were here just last March, as you mentioned
earlier, to discuss the issue of home heating oil and the price.
And
I'd just point out for my colleagues from the West and the Southwest that the
issue of home heating oil was of greater importance, in my opinion, because it
was life and death in the Northeast. There was concern that people would not
have the ability to heat their homes. And I'd just make that distinction.
And I believe that if our chamber doesn't work together with this
administration to solve some of the problems, we'll be back here again next
winter trying to figure out what we can do to reduce the cost of home heating
oil as well.
Gas prices in my district have gone up over 75 cents
since last summer. And I represent a working-class district in Queens, in the
Bronx, in New York City. They're working people, working-class people, many
senior citizens who are living on fixed incomes and fixed budgets. They're
paying their mortgages, they're setting aside funds for their kids' education,
and they're also attempting to save a little bit to go on vacation this year. It
just seems that they may have to save a bit more now in order to do that.
Therefore, again, I implore the secretary, once again, because of
this, to open up the SPRO to provide immediate relief to my constituents. We all
know what happened back during the Gulf War when then-President Bush opened up
SPRO. It reduced the price of oil by $10 a barrel overnight.
I'm not
going to go into my comments about OPEC. I'll leave for those for the record as
well. A lot has been stated already.
But having stated all that, I'd
like to address just momentarily the partisan bickering that is taking place,
not so much today. I have to commend my colleagues for not being as partisan
today as they were last week, and not necessary this house, but particularly the
other house.
While I disagree with the administration on their
policy regarding the opening of SPRO, my Republican colleague are wrongly, I
believe, blaming the president of this administration for every problem under
the sun. This administration has advocated the creation of a home heating oil
reserve for the Northeast, but my Republican colleagues refuse to fund that. No
funding in the Interior appropriations for the Sanders amendment for $10 million
for this reserve, which failed this year by 193 to 195 in our House.
The administration had continually worked for the reauthorization of
SPRO, but again, the Republican Congress has blocked that as well.
This president has worked for greater energy efficiency and
alternative sources of power, all to see his worked destroyed by the Republican
majority in this House.
And lastly, this Congress has voted
yesterday to cut the funding for the Federal Trade Commission -- the people who
investigate price fixing here in the United States -- by $30 million from the
president's request, and $10 million from last year's enacted appropriation.
This Congress has been fiddling while Rome burns, and then has
called the president an arsonist.
Mr. Secretary, I just have one
question, because my time is actually out of -- I'm running out of time. In your
opinion, why is it that we as a Congress have not reauthorized SPRO at this
point in time?
RICHARDSON: Well, Congressman, my most urgent plea
here is that regardless of anyone's position on whether we use the Strategic
Petroleum Reserve or not, and there are arguments on both sides, we have
hesitated to use it because we -- the law says it should be an emergency supply
disruption and not a price problem. But ultimately, the president makes those
decisions.
We need the full authority to use the Strategic Petroleum
Reserve, and we don't have it right now. We have limited use of it. As I
mentioned earlier, I used it last week with a dry dock problem in Louisiana. And
basically 500,000 barrels of oil were exchanged with some energy companies that
dealt with the disruption. That was a swap.
But we need that full
authority. I'm not going to ascribe any motives. I think there was some dispute
because in the House, the home heating oil reserve was attached to it; in the
Senate, it was clean. There was some stripper-well provision that I believe was
in the House that was added that quite frankly we didn't think was that bad.
My main point, Congressman, is we just need this SPRO authority
passed. And the sooner you can do it the better. I don't want to ascribe any
motives, but the fact that it's not there hampers our ability to deal with the
potential crisis.
GILMAN: The gentleman's time's expired.
CROWLEY: Thank you.
GILMAN: Ms. Ros-Lehtinen?
ROS-LEHTINEN: Thank you, Mr. Chairman.
(SPEAKING IN
SPANISH)
Thank you, Mr. Richardson.
First, following up
on Mr. Smith's question, I don't think that we got a response on whether Vice
President Gore has abandoned his commitment for higher gas prices in order to
save the environment. I'd like to get an answer to that.
But I
wanted to ask you also about the dismantling of the OPEC cartel, Mr. Secretary.
With real oil prices at its highest level since '85, is the administration doing
anything to put into place a long-range strategy for the dismantling of the OPEC
cartel?
The inability of OPEC to predict world demand for oil before
and after the Asian financial crisis and its single-minded focus on the
importance on the importance of rising demand for gasoline in the U.S. has yet
again clearly demonstrated that it cannot fulfill the purpose of this
organization without damaging the interest of the consumer countries, such as us
here in the United States.
So please describe in detail, if you
could, the efforts of the administration to show that its demand projections
were flawed and its quota system was harmful to the global economy.
And contrary to your statement, Mr. Secretary, OPEC I think has
consistently failed to bring stability to the market. The Saudi oil minister, as
you know, has admitted that OPEC was caught flat-footed by the revival of the
Asian economies following the economic downturn in that region in '98. And he
has back-pedaled on his earlier claims that demand for gasoline in the U.S. was
the key factor in driving prices up. And OPEC, in short, is not capable of
engineering a soft landing for oil prices.
So if you could address
those concerns, beginning with Vice President Gore, the dismantling of the OPEC
cartel and OPEC's commitment to price stability.
RICHARDSON: And
thank you for your nice opening words.
Congresswoman, let me start
with OPEC, and then I'll deal with the second issue.
I remember
going to Saudi Arabia when prices were $10 a barrel. And there was great concern
in Saudi Arabia, there was great concern in America's oil patch, in New Mexico,
in Texas, in California and Arizona, many other states, Louisiana, because our
domestic oil and gas industry was hurting.
RICHARDSON: And our
policy has been to say that $10 is too low, $30 is too high. It's now over $30
-- $31, I think -- and we're saying it's too high.
Now, given that,
what has been our policy with OPEC? Our policy with OPEC has been to forcefully
engage it. When they had the production cuts, we expressed strong concerns. We
are against artificially set prices; we think the market should dictate. Now,
the last two decisions OPEC has made to increase production, we think is good
for us and good for the world economy. We have advocated that.
Our
preference, Congresswoman, and you've been very successful in this arena too, is
to forcefully engage them, to explain our position, not to coerce and pressure.
And I believe we've been getting solid results.
There are other
factors. Increased demand. The low stocks, the low stocks of gasoline and crude
oil that exist; pipeline and refinery problems; reformulated gasoline. All of
these factors have contributed to the spike at a time when after OPEC took those
decision, you recall, prices started going down.
Now, on the second
question, no, I've never read that book of the vice president's. I can tell you
that he wants to see an energy policy where there's a balance, where there's a
balance for renewable energy, where there's a balance for economic growth. You
know, he will outline his policy today. But, as I mentioned before, he has been
very...
ROS-LEHTINEN: With all respect, Mr. Secretary, the question
had to do with the vice president's commitment for advocating in favor of higher
gas prices in order to bring a more livable future for our generation.
GILMAN: Gentlelady's time has expired. The secretary's given us 10
additional minutes, and we'll try to make good use of it for those who haven't
been called on.
Mr. Meeks?
MEEKS: Thank you, Mr.
Chairman. And I want to thank the secretary also.
Let me just say
maybe something that might not be as popular to say, but I think that we just
need to be mindful and I always believe in counting our blessings, that we are
going through a crisis here in America right now with reference to oil and gas
prices. Still, as I was walking over here with my intern, she mentioned to me,
you know, aren't we still getting gas and oil cheaper than anyplace else in the
world? And that is probably true. And we should count our blessing for that. But
it does not mean that we should be easy and take it easy. And there's enough
blame to go around with reference to the crisis that we're currently in.
Clearly, I agree with Mr. Brady, for example, whereas there's blame
on the consumers' part. We have not been smart consumers. There's blame on the
administration. There's blame on Congress. And we can sit here until we're blue
in the facing blaming one another and pointing fingers at one another and not
resolving an issue here of trying to make sure that we reduce the oil and
heating prices.
And I want to thank you, Mr. Secretary, for rising
above the fray. I mean, you've been attacked personally and politically for a
long period of time, but yet, as I sat here and listened to you, you still
continued to want to work in a bipartisan manner, trying to work together so
that we can make sure that we solve some of the problems that the American
people are concerned about.
They're not concerned whether or not
it's a Democratic or a Republican administration; they're concerned about
someone working together to resolve some of the issues that they have that's
confronting them now with the oil and the heating prices.
MEEKS:
And particularly, for those of us who live in the Northeast, you know, it is
going to be a matter of life and death for some of them, you know, making the
decision of whether or not they could eat or whether they have to have enough
oil so that they could have heating.
Let me ask this question, then
just -- I just wanted to pick up on something that Mr. Royce said, and I've
heard some -- I think some meaningful suggestions and recommendations that's
coming from both sides of the aisle here. But something that Mr. Royce had
talked about with the increase of production of oil in Nigeria, but not only in
Nigeria, but in all of West Africa. What can we do -- or what are we doing to
look that we can increase the oil production in West Africa? And how would that
affect us and how would that help us with some of the crisis that we have here
in America?
RICHARDSON: Well, Congressman, and I think Congressman
Royce knows Africa very well, since he chairs that subcommittee. We think
Nigeria has enormous potential for more oil and gas production. And we're
working with them to bring more technology, to bring more American investment.
We've got substantial investment there. They've had some infrastructure
problems, as you know, because of some of the political issues that have been
affected there. There was a lot of corruption, instead of revenues coming in
from energy production for other capacities, they went elsewhere.
And what we want to do is develop -- we have a three-prong strategy.
Develop oil and gas resources in three key regions: in Africa, in Latin America
and in the Caspian. We think that if we bring our leadership in that area,
especially in Nigeria, where there's a pro-market, pro-democracy government that
is doing the best it can to get the economy back and bring some true democracy
and is having some good effects. We are very bullish about Nigeria, the problem
still is their infrastructure, their pipelines.
We also support a
West Africa gas pipeline. We've been very involved in spurring the production of
that with both some energy companies and some of the governments there in Chad
and Nigeria and other nations that are key to that. So we think that Africa is a
real untapped resource, not just for itself but for our country.
And
I thank you for your very constructive comments.
GILMAN: Thank you,
Mr. Meeks.
Mr. Payne.
PAYNE: Thank you very much.
It's good to see you, Secretary. I'd like to once again say our work
together in Congress, your work on getting hostages freed in dangerous places,
your work with the United Nations, our trip together to the Democratic Republic
of Congo, all these things really -- and, of course, your work here as secretary
of energy.
When I was listening to the Senate last week, one thing
for sure they are certainly bipartisan. They're not very partisan. They are
equal opportunity bastards. I don't know if any one side was any worse than the
other. But your head was bloody, but it was unbowed. And that's the secretary I
knew well.
I would just like to say that I think the work that
you've done, bringing the African energy ministers to the United States some
time ago, perhaps had something to do with Nigeria saying we want to pump more
oil, because we know we have a friend in our energy secretary.
PAYNE: And so, I'd like to compliment you on a number of the
initiatives.
And I couldn't agree more with Mr. Brady. You know, we
keep pointing to everyone else. And we're looking for the enemy, and the enemy
is us.
Housing prices go up, so we're not bringing in the National
Home Builders Association and bashing them. It's gone up because the demand is
exceeding the supply. The same way in my state of New Jersey. It's just common
sense. The cost of higher education is going through the roof. Why? Because the
demand is outstripping the supply. Health care is the same thing.
And so, I don't like it either. I don't like our prices to go up,
but I can't understand why Americans and our political leaders here are so
surprised that somebody's got something that they can -- that's the American
way. They got something you want, and they're going to shoot the price up to
maximize the profit.
I think what we need to do is to stop being so
dependent. I think what we need to do is stop buying all those sports vehicles,
as you've mentioned. Ever since the crisis got here, the jump has gone through
the roof. So we're blaming other people.
I think that we need to
have alternative energy sources. We need to talk about ways to reduce the
consumption of these gas guzzlers that have been re-introduced into our country.
And I believe that what we need to do is to start looking at ourselves, to see
how we can come about.
Let me just ask a quick question. There were
a number of initiatives that were introduced, that were not passed by the
Congress. In your opinion, if some of these initiatives that were mentioned
earlier, initiatives made by the administration but the Republican-controlled
Congress felt that we shouldn't spend the money that way, do you think that we
should re-visit those initiatives and perhaps that could be an alternative plan
of trying to become less energy dependent and more frugal in the manner in which
we guzzle up energy?
Mr. Secretary, maybe you could respond to that.
RICHARDSON: Congressman, we need the following, and we hope the
Congress acts in a bipartisan fashion: $4 billion in tax incentives for fuel
efficiency, tax incentives in the domestic oil industry and renewable energy.
Secondly, we need to pass the Strategic Petroleum Reserve authorization, the
full power. This is critically important.
We need also to pass what
is called electricity restructuring legislation that's before the Commerce
Committee. There are brownouts and blackouts in the country. I've been going
around the country warning that our grid is hurting, that we need to modernize
our grid. I was in your district, your state. We need to do that. There's some
outage problems, possibly soon, that are taking place in the West Coast and in
the Northeast that we're concerned about.
We need to get that
program restored for the Partnership for a New Generation of Vehicles, for more
fuel efficient vehicles. We need domestic energy funds for more investment in
solar, wind and biomass and bioenergy. We think it's important to fund the
weatherization program to its full capacity, the low-income energy assistance.
We would like to also look at a number of other initiatives that the president
has put forth that are emergency measures. The home heating oil reserve for the
Northeast, we think that needs to happen.
My main message,
Congressman, is that we need to do this together. We need to stop blaming each
other and move forward and find ways that we can act on some of these measures,
because you can't have energy policy problems blamed on one factor, OPEC or
whatever. There's a number of factors that we have to play with.
And
one that you've been very aggressive and positive on is developing countries,
having shared market partnerships with the Nigerias, with the Congos of the
world, and we've been trying to do that.
GILMAN: The gentleman's
time has expired.
Mr. Brady?
BRADY: Mr. Secretary, is
Governor Bush responsible for our current high fuel prices?
RICHARDSON: George Bush? No.
BRADY: Governor Bush isn't
responsible for our current high fuel prices. And I think we can agree that some
of the comments earlier today by my Democratic colleagues can be dismissed as
just partisan inaccuracies. You may not describe it that way, but I think that's
the point.
It's true that oil prices have gone up and we have -- are
working together to bring them down. But it's important to remember that rent
has increased 10 times the amount that fuel has over the last 20 years. The
dental services, things we all need for our kids, 20 times. And we don't launch
investigations into apartment owners or to dentists.
The fact of the
matter is that, as George Foreman, world championship boxer and one of my
constituents, once said, you have to do your own road work. And in this case, I
agree with the gentleman, Mr. Payne, and others who recognize that we have to
take responsibility for our own energy needs.
We talk about Africa,
Caspian Sea and Latin America, but why aren't we doing more to significantly
increase the responsibility America takes for our energy needs. Is it the
conflict between our environmental goals and our energy goals? Is it the
unwillingness to stand up to special interests and say we've got to have a
long-term energy policy that allows us to be more independent? What is it going
to take to get a responsible energy policy that all of America is engaged in?
RICHARDSON: Well, Congressman, first of all it's going to have to be
a, I think, a bipartisan effort because a lot of these measures can't be
approved without the support from your side and our side. I think that's number
one.
Number two, I think we have to stop blaming each other. I
mentioned that I don't believe Governor Bush is to blame, neither is our
administration or the vice president. I think our energy policy has been laid
out. It's had successes, and right now our biggest challenge is high gasoline
prices.
How do we achieve that? I've given you our measure. I think
a key component is we cannot forget our domestic producers. We cannot forget,
not just oil and gas, we've got to help our own, our coal people. We've got to
help our other industries that are fossil fuels. Renewable energy, we have to
invest. But in particular, what we have is a balanced package, a balanced
package in fuel efficiency and tax incentives for a number of measures to make
homes and buildings and automobiles more fuel efficient. But also, an effort to
help our own domestic production with marginal well assistance and other
factors, which I think is essential. We need to get these approved and passed.
BRADY: My only correction to that, I agree with that you said is
that you said, in your role as secretary of energy, our president and vice
president have been at the helm for 7.5 years. It's fair to ask, how did we get
here? What are we going to do to get out? It's not a factor of blaming, it is a
way of looking to see what we ought not do in the future, so that we don't end
up here with people in tough situations another eight years from today.
And Mr. Secretary, I appreciate the efforts you're making, too, on
our domestic production and our smaller independent producers.
GILMAN: The gentleman's time has expired.
Mr. Rothman?
ROTHMAN: I thank the chairman.
Mr. Secretary, a pleasure
to see you again. And I certainly agree with you that we need to work as a
Congress with the administration, Democrat and Republican, in reducing our
reliance on imported oil and developing alternative sources of energy. And I
hope we can -- the Congress, my Republican friends -- as long as -- along with
my Democratic colleagues can pass the host of initiatives that this
administration has put before the Congress pleading with Congress to pass, to
help address, the oil crisis in America -- price crisis in America.
And I hope, in particular, being a congressman from New Jersey, a
region which is also suffering very high gasoline prices and who suffered with
the dangerously high home heating oil prices of last winter, that we do pass the
Strategic Petroleum Reserve reauthorization, and create, as the Clinton
administration is pleading for Congress to create, the home heating oil reserve.
But I cannot avoid the feeling that there is extraordinary price
gouging going on by the oil producing nations of the world and the oil companies
located here in America.
ROTHMAN: I believe if you examine all
of the figures of increased oil production that have occurred in the last 12
months and that are occurring now -- the increase in oil production -- we're not
seeing a commensurate drop in price. It is inescapable to me the certainty that
there is price gouging going on by the oil companies and these oil-producing
nations.
Now, we introduced some legislation here in Congress
recently to prevent arms sales to those oil-producing nations that were price
gouging, or we certainly tried to get it out of committee.
But I
want to know what we can do about these oil companies that are price gouging.
Now, you can say, this is the marketplace, and they've got a commodity that
people want and they can set their own price. Well, that's true. But this
government has the ability to create laws that can get the attention of these
oil companies so that they understand that they cannot double and triple the
price of their produce whenever they feel like it, even if there's no -- just to
create double and triple size profits when the American consumer is suffering.
Enough is enough, oil companies. And the United States Congress, in
conjunction with this administration, I believe, has the tools to send a clear
message.
And I'm asking you, Mr. Secretary, what can we do to let
the oil companies know that we will not forget their greed? The greed that is
causing them to gouge prices on our consumers at the very height of our oil
demands of this summer.
RICHARDSON: Congressman, we are
investigating the oil companies for potential price-fixing. The Federal Trade
Commission will conclude in late July their unexplained price differentials in
the Midwest, unaccounted for price spikes, conventional versus reformulated
gasoline of as much as 30 to 40 cents.
There are other factors that
are involved. You mentioned the production supply. There is increased demand,
unusually high demand. Low stocks. There's been transportation problems. There's
been refinery problems. There's been pipeline problems. There's been
reformulated gasoline, in some cases, the differential is slight, 2 to 3 cents,
maybe a little more. So that doesn't account for 30 cents. So I think the burden
is on the oil companies to explain why this has happened. This is why the FTC is
investigating.
GILMAN: Gentleman's time has expired.
Mr.
Rohrabacher?
ROHRABACHER: Thank you very much.
Again,
Bill, welcome and just let me note that there's been no one on this committee
that, in this hearing, has raised any objections to your job, and no one has
used you as a punching bag. We respect you. We like you. You are our friend and
our former colleague, but we do have some fundamental questions about
administration policy.
And let me just say that when you talk about
responsible policy and what we see from this side is that the Clinton-Gore
administration, it seems to us, has not had a responsible energy policy and
perhaps this is due -- and we can't overlook this possibility -- to the fact
that it is being unduly influenced by loony environmental ideas that have been
espoused by the vice president for decades. The vice president has been the
number one advocate of higher gas prices in order to achieve his environmental
goals for decades.
Now, are you or are you not here telling us that
the vice president has or has not abandoned his commitment to dramatically
raising the price of gasoline in America?
RICHARDSON:
Congressman, the vice president does not favor higher gasoline prices for
consumers. Let me just state that...
(CROSSTALK)
ROHRABACHER: He has always advocated that. This is not...
(CROSSTALK)
RICHARDSON: That's not the case.
ROHRABACHER: That's not even debatable, Bill.
RICHARDSON: He has advocated -- he wants to see tax credits for
families to purchase fuel efficient...
ROHRABACHER: No, no. He has
advocated in his writing, he has advocated in speeches, that Americans -- that
we're at fault because we want to use our cars too much, because the price of
gas is too low.
Does that mean the administration has backed off of
its commitment to higher gas prices through the Kyoto agreement? Has the
administration backed off of that?
RICHARDSON: Congressman, we've
never been for that. Let me jut tell you what the vice president wants to do.
You mentioned automobiles. He is the author, it's through him that
the big three and the Department of Energy and other agencies are trying to make
SUVs more fuel efficient, 40 miles per gallon, 80 miles per gallon. That is his
objective. He believes that there should be freedom of choice for the American
people and any vehicle they...
(CROSSTALK)
ROHRABACHER:
Are you trying to tell us today that he never advocated higher prices for
gasoline?
RICHARDSON: Yes.
ROHRABACHER: As a means of
achieving his fundamental goals?
RICHARDSON: Yes. And I also
object...
(CROSSTALK)
ROHRABACHER: That goes against --
goes against...
(CROSSTALK)
RICHARDSON: I've never heard
him say that.
(CROSSTALK)
ROHRABACHER: We're just
mistaken.
GILMAN: Mr. Rohrabacher, give the witness an opportunity
to respond.
RICHARDSON: Congressman, there are a number of
initiatives that we need that require legislation and appropriations. I've
pointed them out. We need to do this together. I think that just try to engage
in the dialogue you and I've had, even though we're friends and I know you have
to establish your position, I don't think it's productive.
I think
what we need to do is -- there are some emergency measures that we need to deal
with this problem. I've outlined those. There are a number of tax credits that
are needed. There are a number of initiatives that I think many on your side
could support, like the domestic oil and gas incentives. We need to just move
forward.
ROHRABACHER: Thank you.
GILMAN: The gentleman's
time has expired.
Ms. McKinney?
MCKINNEY: Thank you, Mr.
Chairman.
First of all, I'd like to thank you for allowing those of
us who have stayed throughout the entire hearing to get a second round. And I'd
like to thank the secretary for staying here to respond to all of our questions.
I'm going to change the subject a little bit, but I want to bring
something that I feel is very, very important to your attention, that I'm sure
you're not aware of, and it has to deal with the situation of African American
workers at Savannah River site. I just want to list some of the things that have
alleged to have taken place there. There is a work area where African Americans
primarily work. That area is referred to as Coonsville. Nooses have been placed
on African Americans' work stations, and electricians brought a noose to the
site and demonstrated the historical value of a noose. The "N" word is
reportedly regularly used by both management and staff.
African
Americans at the Savannah River site have 1.7 to 1.8 times the exposure to
radiation than their white counterparts. African-American employees feel that
management places African Americans in the work sites to get the radiation.
Twenty percent of the total work force at Savannah River Site is African
American, yet 40 percent of the staff in the areas of exposure to radiation are
African American. Two percent of the upper management at Westinghouse are
African Americans. There has never been an African American vice president at
Savannah River site. A machine named the manipulator is referred to as the slave
master.
And then finally, I would just like to say, that I had the
president of Westinghouse, Savannah River site, in my congressional office, Mr.
Buggy (ph). And while there, Mr. Buggy (ph), actually used the "N" word in my
presence, in my office. That is the kind of leadership that exists at Savannah
River site Westinghouse under contract by DOE.
MCKINNEY: Now, I
also have a letter from Mary Ann Sullivan (ph), general counsel, dated May 15,
2000, from the Department of Energy, where she says that litigation expenses are
considered to be cost of doing business.
My question to you, Mr.
Secretary, is why should the U.S. taxpayers foot the bill for litigation
expenses against poor employees who have already been victimized by that kind of
management and that kind of an environment? And why should that be condoned by
the Department of Energy?
RICHARDSON: Congresswoman, I'll get back
to you on these issues.
Let me just say that after that "60 Minutes"
report came out -- and I think you're aware of that -- I sent a team down there
to look at some of those allegations. I also sent my ombudsman, somebody who I
appointed in the department to find problems of racial profiling. We've had some
problems with Asian-Americans in the suspect case at Los Alamos. And I wanted to
send a message that we don't tolerate racial profiling.
I will have
somebody come see you, or I'll come to see you myself, to look into some of
these issue that you've raised with me.
GILMAN: The gentlelady's
time's expired.
MCKINNEY: Thank you, Mr. Secretary.
GILMAN: Our last intervener will be Mr. Royce.
And I
want to advise my colleagues that Senator Metzenbaum has been patiently awaiting
to testify, and he'll follow Mr. Richardson.
RICHARDSON: Mr.
Chairman, I would also like three minutes to explain -- you asked that question
about that GAO report.
GILMAN: Yes, we'd welcome your comments.
RICHARDSON: So at the end, if I could do that.
GILMAN:
Thank you, Mr. Secretary.
Mr. Royce.
ROYCE: Thank you,
Mr. Chairman.
And, Mr. Secretary, I want to say that I'm glad that you
recognize the potential for West African oil production. And I'd mention also
the Chad-Cameroon gas pipeline that's about to get underway.
I think
we should be pressuring OPEC, as I said earlier, to increase production. And
you've told us today about some of the things you've worked on in the past to do
that.
And my question is: What does a secretary of energy bring to
that task that the secretary of state or the secretary of defense couldn't do
with more leverage?
I think that Cabinet colleagues of yours would
bring more leverage to the table. And I am reminded of a conversation I had once
with Caspar Weinberger, the former secretary of defense, and he said: Frankly,
the security issue over our nuclear secrets should be handled by the Department
of Defense as it was in the past before the creation of the Department of
Energy. He said that the culture, the culture in the Department of Energy, can't
be changed. The Department of Defense will safeguard these secrets. And that's
why he backed a measure -- a piece of legislation I introduced in the past.
And the reason I am raising these points is because in many ways, in
my view, you have been saddled with a responsibility through the creation of a
separate Cabinet-level position of energy that, in my view, should be done by
other sectors. Department of Defense, I believe, should be handling the security
as it once did.
The issue of leveraging OPEC I think, frankly,
Department of Defense or Department of State, you know, our secretary of state,
probably could do that with more leverage. And this goes to the issue that
you've been saddled with a responsibility here that's very difficult.
The concept that was dreamed up that we would develop these
alternative energy sources with subsidies, rather than go through the market,
I'm reminded of the oil shale project where we spent $1 billion and never
developed a drop of oil out of that.
And I think some of it goes to
the original way in which we invented this separate Cabinet-level position, and
in many ways it's unfortunate. And I think that in many ways it is an outdated
and duplicative boondoggle, as many critics have charged.
ROYCE:
Every year we get reports about inefficiency, corporate welfare, failure to
respond to high gas prices and so forth. And I'm not sure this, in fact, can be
handled the way we created this agency. And I wanted to give you a chance to
respond to those critics who raised these points.
RICHARDSON:
Congressman, first of all, while I have shouldered the principle discussions
with OPEC and have traveled and have phoned these ministers and worked them very
hard and, in fact, have good working relationships with, I think, is key, I have
not been the only actor. The secretary of state has made phone calls and visits
that have been extremely helpful. The vice president, the president has made
calls. I have had the principle responsibility because energy -- this is a task
that other energy secretaries' discussions with OPEC have had.
I
think you're absolutely right, how do you maximize the full leverage of the
United States, the full economic political relationships. And I believe we have
done that, not just through my visits but through other interventions by others.
And I can assure you -- and I can go into more detail.
On the issue
of energy and the nuclear weapons, civilian agencies have always handled our
nuclear weapons. What we are doing right now, Congressman, is, with our nuclear
weapons complex, a semi-autonomous agency headed by General Gordon, who I met
with yesterday, deputy director of CIA, that basically streamlines a lot of the
nuclear weapons responsibility into this semi-autonomous entity that reports to
me but basically has its own structure, and that's what we are looking at now
and I'm giving it my full support.
But I'd be very pleased
especially to work with you on so me of the Africa issues you mentioned and go
into more detail as to how we have interacted with OPEC.
GILMAN: The
gentleman's time has expired.
Mr. Secretary, we welcome your
comments on the GAO report.
RICHARDSON: Mr. Chairman, I would like
to have Ed Curran join me here. He's the director of our counterintelligence
program.
GILMAN: Please, Mr. Curran.
RICHARDSON: Mr.
Chairman, you mentioned, even though this report covered a period of time when
-- '95 to '98, where I was not secretary of energy. Nonetheless, I think the
report shows the success of our program. As you know, we cooperated extensively
with the GAO, provided the data on some of these counterintelligence issues.
Ed Curran is the best counterintelligence person we have in our
government. He broke the Ames case, the Aldridge case, who knows how many
others, but he has now been the director of counterintelligence in the
Department of Energy. And I might add, too, that we have the most effective
brief and pre-brief and post-brief programs, we believe, of any agency in
government, and I think it's reflected in this report which we believe shows our
commitment to security and to protecting our scientists.
Let me just
say that even the GAO said there's no evidence that any espionage was obtained.
So I want to state that for the record and I'd like to defer to Mr. Curran.
EDWARD J. CURRAN, DIRECTOR OF COUNTERINTELLIGENCE, DEPARTMENT OF
ENERGY: Thank you, Mr. Secretary.
I'd just like to explain it in a
very short...
GILMAN: Mr. Curran, identify yourself for the record.
CURRAN: I'm Edward J. Curran. I'm the director of
counterintelligence for the Department of Energy. I'm a current FBI employee who
was detailed over to the department by the FBI two and a half years ago as a
result of the Presidential Decision Directive 61 signed by President Clinton in
February 1998.
My assignment was, first of all, to review the
counterintelligence program within DOE, prepare a 90-day study with
recommendations and improve the counterintelligence program.
GILMAN:
Thank you, Mr. Curran. Please proceed.
CURRAN: I think it's
important to state that after our findings almost two and a half years ago as a
result of PDD-61, there were -- 46 recommendations came out of my office to the
secretary. I'm not going to go over all those recommendations, but basically
what we found two and a half years ago is the counterintelligence program at the
Department of Energy was almost non-existent. It did not even meet minimal
standards. We said that, and we said we have a lot of things to do here. The 48
recommendations were very controversial within the department and the
laboratories. There's a great deal of resistance to any of those
recommendations.
We broke them down to tier recommendations -- tier
one, tier two and three. The ones, tier one, was those recommendations that we
need to do right now to fix the problem at DOE.
One of those
recommendations was to enhance our pre-brief and debriefing programs of our
scientists who are traveling overseas. And we acknowledged two years ago they
are targets of foreign intelligence service, just like anybody else in the
government, DOD or other government agencies, including private industry.
The results of this GAO study, we worked very closely with them in
the past eight months while they were preparing this. We gave them complete
access to our database that we include where we put the information on our
pre-briefings. These are pre-briefings that the secretary has approved in
November. Despite the resistance, he approved all 48 of these recommendations.
We considered pre-briefs of our scientists, which was basically
non-existent before, as a critical area to prepare our scientists to interface
with their counterparts overseas, especially those from sensitive countries.
Today, two and a half years later, rather than having a counterintelligence
program that meets minimum standards, I believe it is equal to all
counterintelligence agencies within the government and better than most. And
basically, it's because this man sitting next to me had the courage to go forth
and approve the recommendations that we made, despite tremendous resistance.
The only difference where we have with the GAO study -- and it's not
a major difference -- is that they say we're not spending enough time looking at
the threat from non-sensitive countries. We agree totally that all our
scientists are at risk no matter where they are outside the United States,
whether because of economic espionage, proprietary information.
What
we have to first address though are those countries from the sensitive countries
that have a track record, have been identified as activities by those
intelligence services that threaten immediately our national security.
Our scientists get pre-briefs, all of them, personal briefings,
before they go overseas. We gather this type of information. We know what
countries do what to us. And it's a defensive mechanism that whether we do this
or not, that targeting is going to take place overseas.
CURRAN:
We feel that to have a structured program to prepare these people to go over is
of tremendous interest to the counterintelligence. If I could just read from the
GAO study, just one paragraph, which was unfortunately leaked to the news media
last week. And I think some elements of the news media believe that anything
that's leaked is critical to the Department of Energy. I think you need to read
it thoroughly though to see that this is not a critical report.
On
page three of the GAO study it says, "DOE and its laboratories have instituted
several national security controls over official foreign travel by laboratory
employees. They include threat assessment and analysis provided by DOE's Office
of Counterintelligence, security and counterintelligence awareness training, a
review and approval process for foreign travel requests, face-to-face or written
pre-travel briefings, classification review of publications and presentations,
and face-to-face or written post- travel debriefings and trip reports prepared
by our traveler. All official contractor travel is subject to these controls."
So, I think in whole, we agree with the GAO study.
GILMAN: Mr. Curran, did you have any report of any important secure
information being given by any of the lab scientists when they were overseas?
CURRAN: No, sir. What we try to do is, if you do these pre-
briefings early, we can come up with a determination whether a particular
employee is being targeted or singled out, whether because of the science he
happens to be working on, or whether he may show some vulnerabilities. Once we
determine that, if we consider an employee to be in harm's way or being
unusually targeted by, we will take him out of that country.
GILMAN:
And do you properly brief your scientists before they go overseas?
CURRAN: Every scientist within DOE that travels to a foreign country
is required to have a pre-brief with the counterintelligence office. Every
employee that goes overseas is required by the secretary to have at least an
annual briefing on awareness training and counterintelligence, security issues.
GILMAN: And are those pretty thorough briefings?
CURRAN:
Yes, they are, sir. This is where we get this type of information. And we have
to have the confidence of the scientists who are willing to come forth and share
this with us. The only thing we said to DOE is that you cannot identify these
employees or attribute it to a certain laboratory. Is that -- if they don't have
the confidence to come in and share this information with us, we're not going to
get it.
GILMAN: Do any colleagues want to inquire about this?
Mr. Payne?
PAYNE: No, I'd just like to thank the
gentleman for bringing that information to our -- making it public here. And we
certainly will -- I have not taken the time, it hasn't been brought to my
attention, this study, but I certainly will have staff, and I will certainly
look into the recommendations. But I thank you for bringing this to light.
GILMAN: And let me state that we will have a further hearing with
regard to the security situation at a later date. And we'll ask Mr. Richardson
and yourself to attend.
Mr. Sherman, a very brief statement because
the secretary is beyond his time limit.
SHERMAN: Well, I thank the
secretary for his indulgence. We're being told that oil prices would lower if we
just got rid of all environmental concerns, drilled everywhere, eliminated any
attempt to reduce air pollution. And nothing could be further from the truth.
And I want to thank the administration and the secretary for standing firm on
environmental concerns.
What we should instead focus on is the fact
that we went to war in the gulf, we could have experienced thousands of
casualties. And we had an opportunity to turn to Saudi Arabia and to turn to
Kuwait and say, in return for your continued existence as countries, we insist
that you leave OPEC and produce oil at a reasonable economic rate. Instead, we
returned Kuwait to its sultan or its emir. And let's face it, Saudi Arabia would
not be an independent state today had we not acted, without asking for a single
concession for the American consumer or motorists. And in doing so, we not only
failed to overthrow Saddam Hussein, we failed to, at that point -- and that was,
I think, the only point we could have -- to break OPEC.
Those who
blame the environmentalists should recognize that if it wasn't for
environmentalists' concerns, we'd be getting 12 miles a gallon in our cars and
eight miles a gallon, or six miles a gallon in our trucks and SUVs. And I think
that we need to go further if we want to break OPEC toward fuel efficiency
standards and toward fuel efficiency research.
We're told that
America is a addicted to foreign oil and so the solution is huge subsidies for
big producers of oil domestically.
SHERMAN: And yet, we, as
motorists, pay the same price whether we are buying the oil from Saudi Arabia or
from Texas. Domestically produced oil sells for no less. And so when OPEC forces
the price of oil up, the producers in Texas do just as well as those in Kuwait.
And yet we're told we're suppose to give more subsidies, more tax breaks, to
those who are already getting huge prices for their oil.
The key is
not foreign oil versus domestic oil. It's just total world supply of oil.
Focusing on that, Mr. Secretary, I have a number of questions, and I
don't know if you'll choose to answer them here, where I know you're time is
limited, or furnish these answers for the record.
The first regards
our...
GILMAN: Mr. Sherman. The gentleman's time has expired.
We had to cut back on time so that we could wind up. I'm going to
suggest you submit your questions in writing.
SHERMAN: Then, Mr.
Chairman, if I could just have 30 seconds?
GILMAN: Without
objection.
SHERMAN: You had commented early in your testimony that
Mexico is producing another 50,000 barrels of oil per day, I believe was the
figure. What I'd like to know is how much oil could Mexico produce beyond what
it's producing now if they had, over the last several years and currently, been
produced oil as quickly as they could in as large a quantity as they could
instead of cooperating with OPEC? How much oil do we save each year because of
our fleet deficiency CAFE standards? And finally, what is the
total additional money flowing to domestic oil producers as a result of the
recent OPEC run up in price...
GILMAN: The gentleman's time has
expired. One question to be responded to, Mr. Secretary.
RICHARDSON:
The statistics, Congressman, is Mexico in the March OPEC flow, as a non-OPEC
nation, increased their production by 150,000 barrels per day. And in this last
meeting in June, they agreed to 75,000 per day more. We believe that they're at
full capacity, and in these discussions Mexico has been helpful.
I
would only point out one thing, Congressman, and that's we have had a period of
unprecedented economic growth in this country. The economy has grown enormously
in the last seven years, and there's been a dramatic decrease in sulfur
emissions. So I think what we're trying to achieve is a balance between economic
growth and environmental goals which you espoused.
GILMAN: Thank
you, Mr. Secretary. And if the gentleman wants to submit any statements for the
secretary, I'm sure he will be pleased to respond.
We thank you for
being patient for extending your time, and this portion of the hearing is
completed.
RICHARDSON: Thank you, Mr. Chairman.
GILMAN:
Thank you, Mr. Secretary.
Now we're pleased to hear from former
Senator Howard Metzenbaum, who's been very patient. Howard Metzenbaum is the
chairman of the Consumer Federation of America. He's more widely known, of
course, as the former Democratic senator from Ohio, where he served for three
terms ending in 1995. He was the chairman of the antitrust subcommittee and the
Senate Judiciary Committee when he served in the Senate. A native of Cleveland,
Ohio, he served as a state legislator, a businessman and a lawyer. He was the
author of the Age Discrimination Act of 1988 and the Civil Rights Act of 1991.
Howard Metzenbaum serves on a myriad of boards of directors of
charitable and educational institutions across our nation. A common word applied
to Senator Metzenbaum was scrappy. We're delighted to have you here today,
Senator.
Would you please press your button on the mike. Just the
middle portion there.
METZENBAUM: Is it working?
GILMAN:
Yes, indeed.
METZENBAUM: Thank you, Mr. Chairman. I know the hour is
late, and I will not be lengthy.
It is a privilege to appear before
your committee. I'm particularly pleased to see Mr. Payne sitting as ranking
member today. I remember him well from the trip that we made together.
I represent the Consumer Federation of America, an organization
consisting of 240 separate organizations, representing in excess of 50 million
people. I am a non-paid chairman of the Consumer Federation of America. And when
I left the Senate, I felt that I wanted to be able to continue the -- my
advocacy position in connection with certain issues, and this has given me an
opportunity to do so.
I'm concerned about the oil situation in this
country, as I was concerned when I was in the Senate. I'm concerned that we
aren't releasing oil from the Strategic Petroleum Reserve when we could and
should be doing just that.
Now, the Strategic Petroleum Reserve was
established about 25 years ago, and it provided that when there was a serious
disruption of oil supply that there could be a release of oil from the Strategic
Petroleum Reserve. Realistically speaking, there has not been a serious
disruption. But the fact is the president does have the authority to release oil
if he so determines.
And I believe that, under the circumstances, if
he were to release two million barrels of oil a day -- we have about 573 million
barrels of oil in the Strategic Petroleum Reserve -- if we to release 2 million
barrels of oil a day, at least during the summer months, we're talking about
approximately 90 -- 180 million barrels of oil in a three-month period.
The Strategic Petroleum Reserve would be down as low as 400 million
barrels, which would not be a serious threat to our nation's security. It -- but
I believe that what's happening now is a serious threat, not to our nation's
security, Mr. Chairman, but to the lives and the economic welfare of literally
millions of Americans.
The price of gasoline may not matter much to
those who have the wherewithal, but the price of gasoline is a very serious
threat to working people who have to use their automobiles to get to work, to
mothers who have to leave their children at a baby clinic -- at a child clinic
-- so that their child may be safe while the mother is working. And it is a
challenge for many who are living on a very meager existence to try to be able
to get along with the extra costs brought about by reason of increased gasoline
prices.
It is just unfair. It's unreasonable. It's illogical for us
not to be releasing oil from the Strategic Petroleum Reserve.
On
March 6, I wrote to the president to this effect. On June 20, I wrote to the
president a second time. It is my opinion that this would be an extremely
helpful move in the right direction, as far as our economy is concerned. It
would certainly mean much to many people in this country, not those who are
making the millions of dollars in the market these days, but to average
Americans who are working hard to eke out an existence.
And so I
consider it a privilege to appear before this committee, in order that I might
voice the concerns of millions of consumers who are disturbed about what's
happening and what's not happening. And what's not happening is hurting their
economic existence, and we need support across the board.
Thank you,
Mr. Chairman.
GILMAN: Thank you, Senator Metzenbaum.
Senator, in your role as antitrust subcommittee chairman of the
Senate Judiciary, do you think that we could do something more than we're doing
to make the OPEC nations subject to our jurisdiction with regard to their
monopolistic controls?
METZENBAUM: I'm not sure that we could make
the OPEC nations more responsive. I do believe that we could do something
through antitrust with respect to the oil companies, who we all know are now
exploiting these shortages to their own economic benefit. They're ripping off
the American people. I've read somewhere where some of their profits are up on a
five times basis, five times over what it's been in the past. I think we could
use antitrust there, and I would hope the antitrust department would move.
But, realistically speaking, the antitrust department or the FTC,
whichever one sees fit to move -- and I think the FTC is about to conduct some
hearings on this subject -- the procedure has to be a slow one, and it can't be
a very rapid one, whereas releasing oil from SPRO would be a much more rapid
one. I don't think we could use antitrust against the oil-producing nations.
GILMAN: Well, we do have a measure in, that I've introduced, to
explore that possibility of whether we can gain jurisdiction over them, and
we're taking a good hard look at that, Senator.
Mr. Payne.
PAYNE: Thank you very much. Very good to see you again, Senator.
METZENBAUM: Nice to see you.
PAYNE: And I missed your
company on our trips; they're not the same anymore.
Let me say that
the Consumer Federation of America certainly is very fortunate to have you as
their spokesperson and as a leader. I think it's very important that there is an
advocate for the people that you talked about, those who are really being
impacted by the high cost of fuel, people who, as you know, are struggling with
the minimum wage as many of them don't have cars, but they do car pooling with
someone who does, and they pay in sharing the costs of the gasoline and things
of that nature. And so it's really having a tremendous impact on people who are
struggling to manage and to make it.
And also, as we saw in the
Northeast, there was not too much sympathy from the rest of the country during
this winter when the Northeast was hit with the fuel shortage. It only hit the
states of New Jersey and New York and Massachusetts, and we found very little
concern about the rest from the rest of the country, but now the other part of
the country is hit by the high oil fuels. And so I think that the more that we
remember that we're one nation indivisible, and that what impacts negatively on
one part of the country -- the other parts of the country should have a concern
about it, and we should have a more united approach to our problems.
The numbers I heard you mention, that 2 million barrels a day were
released from the 573 million-barrel reserves, that it would use 180 barrels
during the course of the summer and would keep the reserves at about 400 million
barrels. Now, in your letters to the administration on March 6 and on June the
20th, when you wrote to the president, what responses have you received from
them? And if in your letter did you suggest the use of the Strategic Petroleum
Reserve, and what was the response?
METZENBAUM: I specifically
requested a use of the Strategic Petroleum Reserve, and, I might say, I sent a
copy of that original letter, March 6, to Secretary of Energy Richardson. I
received a response from the president some weeks after the original letter was
sent, indicating that he was inclined to do so, and in a nice way saying, no.
But the fact is I didn't get very far. So I decided to go back on June 20th, and
I did go back on June 20th -- the second letter -- and I have not received an
answer. And that letter is yet, of course, is just very recently.
I
think there's a crying need to do something about this. And I think the little
people are being hurt, the oil companies are getting richer, and I think that
the economy, itself, is being negatively impacted.
PAYNE: Thank you
very much. I couldn't agree with you more. I was shocked at the -- Congressman
Delahunt as he read off the eight or nine companies -- oil companies and the
profits starting at 600 percent. Now, they were making profits all along. I
mean, that's on top of what was going on. And that's this -- that's egregious.
I mean, that is absolutely -- here we're all bashing OPEC and we
should, but no one, especially from the other side -- who've all left -- oh, we
do have a member -- no one's talking about what's happening with these oil
companies.
And the mergers, which is happening in banking, which is
happening in transportation, which is happening the airlines, we're going right
back to the Standard Oils of the turn of the century with the robber barons and
the big mega-companies that are there. And they're so large that it's -- they're
almost too big for the government to even have an impact on. And so, I think
there's enough to go around.
I do think, too, that it's really being
naively optimistic to think that we can do something to make OPEC change. I
mean, how -- people say we need to bust-up OPEC. I'd just like to know how do
you bust OPEC up? We should bust-up the diamond cartel, as a matter of fact.
They take diamonds of civil wars and bandits and dictators, and continue to sell
them. And we ought look at busting that up too. It's great to say that, but how
do you go about breaking up a group that comes together.
I think
that we need to have alternative sources; we need to stop being dependent. As
long as we go to bigger cars and more gas guzzlers, and more disregard for the
regard that we had 10-15 years ago when we went to smaller cars and people were
more fuel-efficient, but we've gotten to -- back to the way we were, and our
habits of consumption -- that is just going on and on and on.
Until
we have alternative energy sources, until we have fuel- efficient cars, until we
really have electric automobiles on the road, these things make sense. We need
to put our investment into those. We should really have funds made available and
tax credits for these alternative sources of energy. That's the competition that
OPEC would need.
When we reduce our dependence on them, they'll
simply reduce the prices. That will weaken the cartel. And that's the only way,
I think. that we're really going to have a real impact on it.
I do
believe that our friends that we did defend should have a little more respect
for us -- the Saudis and the Kuwaitis, and those who we put half a million,
500,000, troops on the line for -- to defend their countries, seems like, it
would simply be a show of good faith and appreciation to maybe raise the issue
in the cartel. Maybe they would be outvoted, but, at least, they -- maybe we're
doing a little bit too much.
No one complained when it was $9 a
barrel, but now that its gone back up to the other, $31 -- we see the tremendous
-- so I think we've got to have balance. We've got to figure out what it ought
to be moved towards that whole $17, $18, $19 a barrel thing, and I think that
the stability in the world will all benefit.
Thank you very much.
I really appreciate having the opportunity to see you again.
METZENBAUM: I think that history will record that probably the
failure to have some sense of appreciation from Saudi Arabia and Kuwait is
probably one of the most ungracious, ignominious acts of any nation, one to the
other.
We were there when they needed us. We were there with our
men, women, went there to save those countries. The Kuwaiti leadership left the
country while our men and women were there, saving them from being overtaken by
the Iraqis. And in appreciation, what comes about? Highest priced oils,
restricting the production of oil. They ought to be ashamed of themselves.
GILMAN: Mr. Chabot.
CHABOT: Thank you, Mr. Chairman.
Senator, we welcome you here today. And I agree with you completely
about the ingratitude of both the Kuwaitis and Saudi Arabia in the fact that we
sent our men and women in harm's way over there, and this is a real slap in the
face to the United States, that they have cooperated in this collusion -- in
this unholy alliance of countries withholding oil from the market, and driving
up these gas prices to the extent that they have been, particularly in the
Midwest, where we live.
And I agree with you, also, that it is the
little people especially that are being hit hardest at the gas pump. It's the
people that can least afford it that are paying these outrageous prices.
And I was over in your predecessor's -- your successor's office,
Senator DeWine and Senator Voinovich, this past week. We were over there in a
bipartisan fashion. Congressman Sawyer and Congressman Tony Hall and I believe
Marcy Kaptur and some other Democrats were there, as well as Congressman Portman
and myself, and a number of Republican members of the House were there. And we
were there with the head of the FTC, requesting that the FTC do an investigation
to determine if there has been any antitrust violations by the oil companies, if
there's been any collusion, any price-fixing going on here, to determine if that
has played a role in this.
And I believe we should leave no stones
unturned, that a full investigation ought to be done. He indicated that we would
probably have an interim report back within four to six weeks. And they claim
that's pretty fast, but I hate to see these oil prices remain as high as they
are for any length of time, because people really are being hurt.
And I really do appreciate your being here. You had a very long and
distinguished career in Ohio. Our times -- I came in as you were going out, and
I'm sure politically we would have been at odds many times. I know you were...
METZENBAUM: We would have gotten along.
CHABOT: I'm sure
we would have gotten along personally. But I do very much appreciate you being
here today.
You mentioned the Strategic Petroleum Reserve, and I
also believe that the administration should have pursued this to a greater
degree. They seem to just off-handedly rejected this.
What I wanted
to ask you -- one thing I wanted to ask you was, if -- and I know we have 500
and some million barrels of oil there, and if you put out on the market, say, 2
million barrels or so a day, how long do you think it would take for that to
have a real impact at the pumps? How long do you think we'd have to continue to
put that oil on the market? And are you satisfied that that would not put us
into any sort of disadvantage, as far as our defenses in this country?
METZENBAUM: Let me answer the last part first. I am totally
satisfied it wouldn't put us at any disadvantage as far as our defenses are
concerned. Nobody says you need 575 barrels or you need 475 barrels or -- I've
never seen any figures saying how many barrels we actually need to have in
reserve, but certainly the way our military situation is, and our world
situation is today, I don't think there's any real threat.
And so I
think we certainly could afford to bring down the Strategic Petroleum Reserve
200 million barrels without jeopardizing our security in any way.
The other part of your question was how long do I think it would
take to have an impact upon oil prices. My opinion is that once we started to
release the oil, it would have an immediate impact. I think that when the OPEC
nations raise the price of oil, it has an immediate impact here; when they lower
the price, it has an immediate pact here.
I think if you put 2
million barrels a day more into the pipeline, it isn't a matter of how long it
will take to get from the pipeline to California or to get to Ohio or to get to
New York, because once it's in there, it has an immediate impact upon the
pricing mechanism.
And I think that it would just be within days --
hours or days before the prices would start to come down, if we started to
release oil from OPEC.
CHABOT: Thank you, Senator. I appreciate your
time.
GILMAN: Thank you, Mr. Chabot.
Mr. Delahunt.
DELAHUNT: Yes, thank you, Senator.
I never had the
pleasure to serve with you either. I came only -- this is my second term. But
I've always admired and respected your work here.
METZENBAUM: Thank
you.
DELAHUNT: You know, the subject of today's hearing is OPEC's
policies, a threat to the U.S. economy. But the more I listen, and particularly
your observation, and my own, about the remarkable increase in terms of oil
company profits from the first quarter of 1999 to the first quarter of 2000,
which is approximately triple. And we should be reminded, or we should note,
that in 1999, it was an extremely profitable year for the major oil companies.
I think what we should be doing is to examine -- and I would be
interested in your observation -- to examine the relationship between the OPEC
countries and the major oil countries. I think we try to separate and
distinguish between OPEC, and I think that conjures up a vision primarily of
Middle Eastern nations, such as Kuwait and the oil emirates and Saudi Arabia on
the one hand, and the major oil companies, whether it be Amoco or Texaco or
Exxon-Mobil, on the other.
DELAHUNT: But I presume that in the
marketplace, there really is a commercial relationship between the major oil
companies and the OPEC nations that really hasn't been revealed in any of the
hearings that I've attended.
I'd be interested in your comment, as
far as that's concerned.
METZENBAUM: I think you're right on target,
Mr. Delahunt. I think there's no question about the fact that the oil companies
and the oil-producing nations are in bed together. They do not fight oil price
increases. The Arab nations want to increase, the OPEC nations want to increase
their prices, so be it. And I don't think -- it isn't a matter of being an
arm's-length relationship.
DELAHUNT: If you know, Senator, if I can
interrupt...
METZENBAUM: Sure.
DELAHUNT: I presume that
there are strategic alliances where, for example, an American company will work
with a state-owned entity in one of the OPEC countries, and there'll be an
equity relationship where either the state-owned entity or the major oil company
will have 50 percent or 51 percent of the equity in a particular enterprise. Am
I correct when I say that?
METZENBAUM: I think you're 100 percent
correct. And frankly, I don't believe that the OPEC nations, in the main, would
have been able to develop their oil without the financial assistance or the
engineering assistance, and the intelligence portion of putting it together and
seeing to it that the oil gets up out of the ground and into the pipes.
I think perhaps at this time they're able to do that. But for many
years, I think that American ingenuity, and some European ingenuity as well,
made it possible for the oil-producing nations to get the oil out of the ground
and get it to market.
And I think that the oil companies probably
originally had a pretty good go of it, as far as they were concerned. But right
now, I think that it's not an arms'-length transaction. I think that they...
DELAHUNT: But they're working in tandem.
METZENBAUM:
They're in bed together.
DELAHUNT: Because it's -- if you take a
look at the profits that have just exploded...
METZENBAUM:
Absolutely.
DELAHUNT: I mean, clearly the cost of doing business for
the oil companies did not escalate so substantially during the course of a
single year that would have allowed those kind of profits to occur.
METZENBAUM: No way did their costs increase. And I think -- it may
be a bad pun, but the fact is, I think the oil companies grease the way for the
Arab nations to take advantage of this situation.
They didn't fight
it. They didn't try to find some alternate way of dealing with it...
DELAHUNT: They benefited from it.
METZENBAUM: They went
along. Sure, they went along.
DELAHUNT: They benefited from it,
so...
METZENBAUM: Look at the profit margins. It's just incredible,
unbelievable.
DELAHUNT: Right. So what we have are the OPEC nations
-- and you justifiably noted what we in this nation did in terms of saving the
regimes -- and let's call them really what they are. They're regimes, because
they're not democracies...
METZENBAUM: That's right.
DELAHUNT: ... in Kuwait, in Saudi Arabia, because of our oil
interests, by the way. We didn't do it, I would suggest, out of any democratic
impulses, but it was because of oil. And here we are, you know, 10 years later,
you know, dealing with another crisis.
But I would hope that in our
next hearing that the chair would consider a panel that would describe in detail
for us the relationship between the OPEC nations and the major oil companies.
Because what I see happening is, on this side of the aisle, among Democrats,
there's a lot of talk about the major -- about the major oil companies, silence
on the other side.
And, again, I'm not ascribing, you know, any
particular motives. But there is enough culpability in responsibility to go
around here, to really examine once and for all these interlocking relationships
that are not just benefiting the OPEC nations, but major oil companies, to the
detriment of the consumer.
PAYNE: Would the gentleman yield for a
moment?
DELAHUNT: Certainly.
PAYNE: I just think
that that's an excellent presentation and an area we ought to move in. But I
might even -- you know, as you probably know as well as I do, when the British
ended colonialism, particularly around the Red Sea, the Horn, Qatar, the
emirates and those small countries, one of the reasons that they were broken up
into many states was that it made it easier for the major oil companies that
deal with one sultan or someone. And so the whole question of the division of
those states were based on oil, and based on the colonial oil companies wanting
to have the direct tie because of the sharing of the profits by the investment
from them, to the oil there.
So I yield back.
GILMAN:
And just to respond to Mr. Delahunt, we will be inviting major oil companies to
the next hearing.
Mr. Delahunt?
DELAHUNT: And I thank
the chairman. And I'm not here to simply bash the major oil companies, but I
think in terms of an honest and thoughtful examination of the subject, that it's
very important and critical to examine these relationships.
Mr.
Payne's comment about, you know, the early decades of this century when Britain
was an imperial power -- and he is so correct when he says that it was much
easier dealing with a sultan or an emir rather than nurturing democracy. And you
know, nothing has really changed in the course of, you know, 100 years as far as
the Middle East is concerned in the nurturing of democracy, other than the state
of Israel.
But, again, it would lead one to wonder why we haven't
been more aggressive in terms of, again, promoting democracy. But maybe there's
an answer somewhere in this mix of big oil and the OPEC nations that are
enjoying, you know, this spike in prices.
GILMAN: Thank you, Mr.
Delahunt.
And Senator Metzenbaum, in closing, I'd like to note for
the record that Senator Cole and Senator DeWine are both calling for antitrust
action against the OPEC nations. I think we should try to find a method for
doing that, and I've introduced some legislation. I'm going to submit it to you,
and we'd welcome your reviewing it and to think about how best we could
accomplish this with all of your experience in antitrust work.
Our
hearing stands adjourned.
(UNKNOWN): Mr. Chairman?
GILMAN: Mr. Chairman.
(UNKNOWN): I did come with some
questions, but if the hearing needs to end, I'll understand.
GILMAN:
Well, one question, if you would -- and then we're really over-extending our
time. Senator Metzenbaum has been here for a couple of hours.
(UNKNOWN): Senator, I thank you for your patience.
I was
talking to one of our colleagues from rural Wisconsin who points that they're
paying more in rural Wisconsin for non- reformulated gas, for the old-fashioned
gasoline than they are even in Milwaukee and Chicago for the reformulated gas. I
don't know if you've had a chance to look at this, either in Ohio or in the
Midwest in general, but does this reformulated gas really have much to do with
the spike in prices, or is it other factors?
METZENBAUM: I don't
think that's really the cause for the spike in prices. I think it's just a
question of what they can get they're going to get, and they're doing it very
well, to the detriment of the American people.
GILMAN: Thank you
again, Senator Metzenbaum. We appreciate your patience to be with us this long,
and we wish you good health and continued good service.
METZENBAUM:
Thank you very much, Mr. Chairman. It's very gracious of you to permit me to be
heard and thank you, Mr. Payne, and nice to see all the rest of you here this
morning -- this afternoon, I guess it is. Thank you very much.
GILMAN: The committee stands adjourned.
END
NOTES:
Unknown - Indicates speaker unknown.
Inaudible - Could not make out what was being said.
off mike -
Indicates could not make out what was being said.
PERSON: BENJAMIN A
GILMAN (94%); WILLIAM F GOODLING (72%); HENRY J
HYDE (57%); DAN L BURTON (56%); ILEANA
ROS-LEHTINEN (55%); ELTON GALLEGLY (55%); DANA
ROHRABACHER (54%); CASS BALLENGER (54%); PETER T
KING (53%); CHRIS JOHN (51%); PAUL E
GILLMOR (50%); RICHARD M BURR (50%); KEVIN
BRADY (50%);
LOAD-DATE: June 28, 2000