Mr. President, I rise today to talk about the FAA reauthorization bill and a crucial issue that affects not only the entire airline industry--and is, therefore, at the center of this effort--but also it dramatically affects every Louisiana…
Mr. President, I rise today to talk about the FAA reauthorization bill and a crucial issue that affects not only the entire airline industry--and is, therefore, at the center of this effort--but also it dramatically affects every Louisiana family, every American family struggling to pay its bills; that is, sky-high energy prices, including dramatically increasing prices at the pump.
I was very much looking forward to bringing up this issue with others and bringing up Vitter amendment No. 4648 to the FAA reauthorization bill to try to move forward in solving this issue. It is really a shame, in my opinion--and I think I am joined by many others in that conclusion--that the majority leader has filled up the amendment tree and shut down all amendments to this important bill.
This is an important matter: FAA reauthorization, the health of the airline industry and aviation. This is an important issue: sky-high energy prices. Of course it affects the aviation industry, but it affects all of Americans' pocketbooks as well.
In that context, I think it is particularly a shame the majority leader would shut down all amendments and shut down this important and healthy debate. But even though my amendment, and so many others germane to this topic, will not be able to be heard and voted upon, I did want to take the floor to outline those amendment ideas and to try to further the important discussion and debate.
When we think about energy prices, how to stabilize them, how to lower
them, I start with economics 101. I start with the very first rule of economics I ever learned, the very basic rule that all of us think of in economics; that is, the law of supply and demand. So as with the price of any other commodity, if you are talking about energy, a good way to try to stabilize prices and bring them down over time is to work on two things: decreasing demand and increasing supply.
Again, economics 101 would tell you if you can do that--if you can shift both of those curves, shifting the demand curve by decreasing demand, shifting the supply curve in the opposite direction by increasing supply--you not only stabilize but you bring down prices.
It seems to me we should all be coming together in a bipartisan spirit to do both. I am eager to do both. I support proposals to do both.
There are at least three fundamental ways to help decrease demand on oil and gas specifically; that is, to conserve, to increase efficiency, and to move toward alternative fuels. Our energy picture is so dire, so challenging, we cannot pick one of the three. We need to do all three aggressively, just as we also need to work aggressively on the supply side.
So I support and will continue to aggressively support measures that make sense in terms of conservation, in terms of increasing efficiency, and in terms of promoting, moving toward alternative fuels. Those all lessen the demand on oil and gas.
But too often we get in this stale debate in the Congress, this stale deadlock, where one side of the political fence only wants to attack one side of the problem, and the other side of the political fence only wants to attack the other side of the problem, when our energy picture is so dire we clearly need to do both. So as we attack that demand side, let's not ignore the supply side either. As we move to a new alternative energy future, let's not ignore the fact that we will be dealing with oil and gas and depending on it significantly for many years to come. So let's turn to the supply side too, to increase our supply as we try to decrease demand to stabilize and bring down prices.
My amendment, Vitter amendment No. 4648, would do just that. I will outline that in a minute.
Before I do, though, let me express regret that so many of the suggestions, so much of the push, at least rhetorically in political debate and campaigning on the Democratic side, seems to ignore all these lessons, seems to not think or care about demand, not think or care about supply, not think or care about the issue and doing something about it. It just seems to be designed to go after the easiest and biggest political target in sight, which is the big oil companies, specifically by proposing dramatic tax increases on big oil.
Now, if some dramatic tax increase on big oil would move us down the path of solving our energy challenge, I would look at it very seriously. The fundamental problem I have with it is that it does not solve anything and, in fact, it almost certainly makes the problem worse.
There are two versions of this same political push to just attack the easiest and the biggest political target in sight. First of all, there is a proposal that we have actually voted on several times, and we have blocked several times, that would do away with certain incentives for oil companies to go into deep water, explore, and produce more energy. It would also do away with certain royalty relief designed to do the same thing.
Now, make no mistake about it, these tax incentives are in place to push companies--small, medium, and large--to go into deeper water, more difficult terrain, and extract more energy from the ocean bed to supply us with more energy. It seems beyond debate, in my opinion, that doing away with those incentives and that royalty relief will heighten the bar, will make it more difficult for any company--small, medium, or large--to do just that. So as we are trying to increase supply, this would do just the opposite and decrease supply.
Maybe it makes some people feel good because we are whipping up on some oil companies. Maybe it earns votes and earns favor with voters, particularly in an important primary election season. But I think around here we should perhaps ask the question: Does it do anything to solve our energy picture? And the answer is no. The answer is also no because there is nothing to prevent companies from passing on that tax increase to consumers. So just while we are trying to give consumers some relief at the pump, we would almost certainly be passing a tax increase that would be passed on to them in part or in whole and up the prices at the pump.
Now, the other popular version of this same political attack is a very old idea, dusted off, and apparently given new life this election season; that is, the windfall profits tax. Oil companies make way too much money. They have exorbitant, outrageous profits, so the argument goes, so we are going to attack, we are going to tax that windfall profits.
Just as an example, the leading Democratic candidate for President, our colleague, Senator Barack Obama, has such a proposal to tax the profits made based on a price of oil over $80 a barrel. So we figure what that is on the part of any oil producer. That affects a lot of companies, not just big oil but medium and smaller producers, and for any profit associated with the price of oil over $80 a barrel, we are going to stick a big tax on that and bring that into the Federal Treasury.
Well, again, the fundamental problem with that, in my mind, is it does nothing to solve our energy problem and almost certainly makes that energy problem worse. It does nothing to increase supply. It almost certainly does something to decrease supply by making it less productive, less profitable for energy companies to go after more supply.
There are other problems as well. The first problem is the misnomer, windfall profits tax. The reported profits of the major oil companies are enormous for a very simple and basic reason: the size of the companies and the size of their activity is enormous. But, of course, as any economist would tell you, if you want to analyze a level of profit, you need to define it as a percentage of sales, as a percentage of assets--some percentage number like that--not a gross number which, of course, is going to be very large if you are dealing with an entity or a set of activities that is very large.
The fact is, when you look at that issue, when you look at oil and gas companies' profits as a percentage, it is very much in line with American business. The last figures we have are for the full calendar year 2007. In that calendar year 2007, oil and gas companies' profits were 8.3 percent.
Now, how does that compare? Well, for all of the U.S. manufacturing sector--a sector we always decry as in decline and being outsourced and in decline historically--that profit was 7.3 percent for 2007. If you take out U.S. auto companies--which are hurting, which have a much lower figure--then U.S. manufacturing was 8.9 percent. So, in fact, oil and gas companies are almost exactly in between all U.S. manufacturing, and all U.S. manufacturing except auto. It is reasonable to take out auto because they are in such dire circumstances. So they are not windfall profits at all.
Another important question to ask is, where these profits--whether they are normal or anything else--go because if we are going to stick a big tax on them, perhaps we should ask whom we are really taxing.
There is some notion out there, fueled by these political attacks and this pandering in an election year, that, well, of course, the only folks we are affecting are the executives at the big oil companies. But, of course, the facts are fundamentally different.
As this chart shows, profits of energy companies, oil and gas, go to a wide array of Americans, which today, thanks to the growth and vibrancy of our stock market and our investment opportunities, affects almost every single American. Yes, of course, corporate management owns some of their companies--about 2 percent. Most of the rest is owned by a wide array of Americans through IRAs, through other institutional investors, through mutual funds, and, perhaps most significantly, through pension funds--27 percent. That means about 129 million pension fund participants own these companies and would be taxed and attacked by these proposals. Those accounts are worth an average of $63,000. Twenty-
eight million of those pension fund accounts are for public employees-- that includes teachers and police and fire personnel, soldiers, government workers--and each of those accounts represents a public servant who owns part of that energy industry. A good example is the New York State Teachers' Retirement System. They report that 6.6 percent of their domestic equity holdings were in energy companies in 2004, the last year for which we could get figures. That includes $1.5 billion in Exxon and $500 million in Chevron. That is in large part 27 percent who own these big, bad companies that some would attack and try to tax into oblivion--average Americans all across America through pension funds, through mutual funds, through IRAs, through other institutionalized investment.
Now, again, let me return to the basic point. If we want to try to really solve our energy picture, stabilize and bring down the price, including the price at the pump, maybe we should focus on that economics 101 lesson. Maybe we should decrease demand with a more sensible policy to conserve, to increase efficiency, to move to alternative fuels, and at the same time maybe we should increase supply. That is what my amendment, the Vitter amendment No. 4648, is all about--to attack that very important supply side. We need to do both. We need to do all of these things at the same time, but we cannot exclude one side of the equation or the other.
The Vitter amendment to this FAA bill would pose a very simple solution to attack the supply side and increase supply domestically in a far more aggressive fashion. The amendment would establish a trigger in the law pegged at a certain level of the price of oil per barrel. That level would represent a 190-percent increase in the price per barrel since 2006. That comes out to just short of $126 per barrel. Now, unfortunately, of course, the price has been rising dramatically for many months, and we are not too shy of that right now. We are roughly at $120 per barrel. But at this trigger, under the Vitter amendment, if we reach and pass the trigger--about $126--then certain aspects of our Federal law would change.
Specifically, we would allow exploration and production in Federal waters, the Outer Continental Shelf off any State that wants to get into that activity. I want to emphasize that last phrase because it is very important. We would allow that activity in the Outer Continental Shelf but only if the host State--the State off whose shores the activity would happen--wants that activity to happen. Then and only then, if the Governor, with the concurrence of the State legislature, says, yes, we want to allow this activity, we would allow energy production in those waters.
We would also demand something else that is very important in terms of fairness and equity and good Federal policy. We would expand upon the revenue-sharing precedent we set about a year and a half ago when we opened new waters in the eastern gulf. That was a very important precedent, a very good energy policy, in my opinion, upon which we should build and expand.
So under this Vitter amendment, if the trigger is pulled, if States say, yes, we want to allow this oil and gas activity, we would allow that to happen. But the host State would recoup a very significant percentage of the revenue to stay in that State's coffers; specifically, 37.5 percent. That is precisely the figure we passed into law for new areas of the gulf that are being developed now because of the action we took about a year and a half ago.
In addition to that 37.5 percent, we would also have revenue sharing for the Federal fund for conservation--12.5 percent. That is an important part of the revenue-sharing precedent we set a year and a half ago as well.
Finally, the Vitter amendment would allow host States to distinguish, if they would like, between exploration production activity for natural gas and exploration production activity for oil. Some States, particularly on the eastern seaboard, would probably act immediately to allow that activity for natural gas. But there is still concern about environmental issues with regard to oil. While I might disagree with them, while I might disagree with those concerns because I believe we have the technology in place to do all of that in a very careful, sensitive, and responsible way, we should leave that up to the States so those host States can, in fact, make the choice and they can choose natural gas or they can choose oil or they can choose both under the Vitter amendment.
Now, unlike these other proposals--mostly tax proposals that have nothing but political motivation behind them and that do nothing at all to change the supply picture for the better, to change the demand picture, and to actually stabilize and bring down energy prices--this proposal would do something to improve that situation.
Resource estimates in those areas of the Outer Continental Shelf that are now off limits, that the Vitter amendment could open up if the host State wants that activity to happen, those resource estimates are staggering: the Atlantic OCS, 3.82 billion barrels of oil and 36.99 trillion cubic feet of natural gas; the central and eastern Gulf of Mexico which is now off limits, 3.65 billion barrels of oil and 21.46 trillion cubic feet of natural gas. That is not counting what we have recently put on the table. The Pacific Outer Continental Shelf, 10.37 billion barrels of oil and 18.02 trillion cubic feet of natural gas. That is enormous total resources of almost 18 billion barrels of oil and 76.5 trillion cubic feet of natural gas. That is enough oil to power 40 million cars and to heat 2 million households for 15 years. It is enough natural gas to heat 16 million households for almost 20 years. Now, that would actually do something about our energy picture. That would actually expand supply and therefore help stabilize and bring down price.
Is it the only thing we need to do? Absolutely not. As I said at the very beginning, our energy challenge is so great that we need to break out of this stale debate where one side of the political fence wants to do one set of things only--basically, to decrease demand--and the other side of the political fence wants to focus on one set of policies only--to increase supply. The simple fact is we need to do all of the above. We need to start immediately. We need to do it aggressively because it is only doing all of these things at once that will adequately address our energy challenges, that has a chance to stabilize and bring down prices, including the prices that rocked the airline industry and are a huge factor in aviation--we are talking about the FAA bill here on the floor now--and, of course, including the prices all Louisianans and all Americans pay at the pump.
For once, let's come together as a Senate and do all of those things. Let's really think about what can actually have an impact on price. Let's move beyond the politics of the moment, which is always to beat up on an easy and big political target such as the oil companies, and let's ask the question: Does that have any impact for the consumer? Does that have any impact in terms of our energy future? Let's do the sorts of things, such as the Vitter amendment, that can actually help the consumer and increase our energy independence.
Again, it is with great regret that I realize I am not able to actually call up this amendment to the FAA reauthorization bill right now. This is a vitally important topic. Whatever you think about it, whatever proposal you put out, certainly we can all agree that energy prices are enormously important for all Americans, for the country, and certainly we can all agree that it is an enormously important issue that goes to aviation as well as other sectors of our economy.
In that light, I think it is particularly regrettable that Senator Reid, the majority leader, has filled the amendment tree and therefore shut down the entire amendment process before it even began on a major bill on the Senate floor. The Senate floor is supposed to be renowned for an open amendment process. Yet we have amendments about the key issue facing Americans today--energy prices--and we can't offer a single one. There is something wrong here. There is something out of kilter. That is not the Senate I was told about with an open amendment process, open debate, with great, virtually unlimited opportunity. That is not what the American people expect of Congress--to actually debate
and act on real issues that they care about, and certainly that includes energy prices. So it is regrettable that we don't have a fair opportunity on the FAA bill to do just that. I hope we will have those opportunities very soon.
I understand there may be an energy bill that is moved to the floor soon on the Senate side, perhaps as early as next week. I hope that will yield an open, fair opportunity for the sort of open debate and open amendment process that is supposed to be the hallmark of the Senate. If we are given that open, fair opportunity then, as it is being denied now, I will certainly bring this proposal forward again because, unlike a lot of the rhetoric flying around, unlike the tax increase proposals which I believe will increase the price at the pump and decrease supply, I believe these proposals I have presented could do just the opposite. They could be an important step forward in addressing our energy future and the more immediate need to stabilize and bring down energy prices for all Americans.
With that, Mr. President, I yield the floor, and I note the absence of a quorum.