Mr. President, how much time remains on the two sides? Let me speak for a few minutes to give my view of the legislation. First, let me just say energy issues are very much on the minds of the American people. Rightly so. We have oil…
Mr. President, how much time remains on the two sides?
Let me speak for a few minutes to give my view of the legislation.
First, let me just say energy issues are very much on the minds of the American people. Rightly so. We have oil trading at above $75 a barrel. We have the price of gas at the pump above $3 in most parts of this country today. Clearly there are a lot of explanations for that, but that is part of the reason we should be focusing on this set of issues.
We have high and growing demand for energy in the world. We have high prices because not only do we have high demand, we have constrained supply, and we have great uncertainty in the world. All of that affects the price of oil and the price of natural gas as well. Whether the uncertainty is in the Middle East, whether it is in the Nigerian Delta, whether it is threats of curtailed imports from Venezuela--there are all kinds of reasons the price of oil is high.
We need to focus on how do we begin to pursue a strategy that helps solve these problems. The truth is, our country is on the wrong track when it comes to oil and gas. According to the Energy Information Administration Annual Energy Outlook, our projected future demand for oil and natural gas is going to far outstrip our domestic production capabilities, and that circumstance is getting worse, not better. All of the projections are that after the passage of this bill, it will continue to get worse, not better.
We have the opportunity, the Members of the Senate and Members of Congress, to try to make some decisions to get the supply/demand equation better into balance. How can we use oil and gas more efficiently and thereby need less than the projections would indicate we might wind up needing? How do we substitute the alternative fuels in our energy mix on a faster basis, on an accelerated basis? How do we produce more and how do we find ways to be more efficient?
A year ago this coming Saturday, we had final passage of the comprehensive Energy bill we passed last year, the Energy Policy Act of 2005. On balance, I believe--I still believe and believed at that time--that was a good piece of legislation. Mr. President, 74 Senators voted for it. We had a majority of Republicans voting for it. We had a majority of Democrats voting for it. The bill was put together on a bipartisan basis in the Senate Energy Committee under the leadership of its chairman, Senator Domenici, from my home State of New Mexico.
When the bill came to the floor, of course, Senators on all sides of the many issues in that bill were given an opportunity to bring their amendments to the floor, to debate those amendments, to have them voted on, and despite the broad sweep of that legislation, we completed that process in 2 weeks.
After passage of the bill, we went ahead and had a very fair and open and inclusive conference with the House of Representatives that resulted in a conference report that enjoyed broad, bipartisan support.
The Energy Policy Act addressed energy production. It addressed energy conservation. It addressed energy technology and renewable energy, and it addressed oil and gas and coastal impact assistance, including assistance to the States which are most interested in this legislation. It made significant strides in the right direction on a host of issues.
I had hoped, frankly, that we could continue to move forward in the energy policy area this year by acting on a series of measures to address the remaining issues. There are clearly remaining issues that need attention. One of those is the lack of effective steps to increase efficiency in the use of oil and natural gas.
We did not do what we should have done in last year's Energy bill to deal with that issue. The Senate version of the bill had some good ideas in it. Unfortunately, they were dropped in the conference. We were not able to persuade the House to agree to those. For that reason, this past May, I joined with a bipartisan group here in the Senate to introduce S. 2747, the Enhanced Energy Security Act. That bill addresses oil savings and alternative fuel infrastructure and provides for a renewable portfolio standard and various other efficiency and conservation measures.
Another energy measure I hoped we could act on this year is S. 2253. That is the bill which would have required the Secretary of the Interior to offer for lease lands within this original lease sale 181 area we have been discussing as part of this legislation. Early this year, I joined with Senator Domenici to develop and introduce the bill on a bipartisan basis. The bill would have opened portions of the original lease sale 181 area that had been proposed for leasing in 1997 by the Clinton administration. That proposal by the Clinton administration was made after negotiations with then-Governor Lawton Chiles, our former colleague here in the Senate, Governor Lawton Chiles from Florida.
Those areas had been taken off limits by a decision by the Bush administration. I think some may not realize that we would not even be here today talking about opening lease sale 181 for possible drilling if the Bush administration had followed through on the Clinton administration's schedule for leasing. They proposed to do that, and it was on their schedule when this administration came into office.
The bill Senator Domenici and I introduced did nothing to affect areas under congressional moratoria or areas that had been withdrawn by Presidential decree or order. No part of the area to be leased was closer than 100 miles from any point in Florida.
We have a map here that will give people an idea of what was involved with lease sale 181. This is the bill which was reported out of the Energy Committee with bipartisan support. You can see the line there, which is the 100-mile line, showing we are not getting within 100 miles of Florida and showing the additional area that would be open for leasing.
I should point out that between the time Senator Domenici and I introduced S. 2253 and the date our committee had a hearing on that bill, the administration published its own draft proposed program for oil and gas leasing for the period 2007 through 2012. That 5-year plan called for a lease sale in the 181 area in the fall of 2007. The area the administration proposed for leasing contained about 3.07 trillion cubic feet of natural gas and 620 million barrels of oil.
The current state of play under current law is that even if this legislation does not become law, the administration plans to open that area for leasing beginning in the fall of 2007. It was good news when we learned the administration intended to proceed to lease this new area. It meant that a substantial new development of oil and gas would take place even if we didn't succeed with the bill Senator Domenici and I introduced.
At the hearing we had on S. 2253, I asked the Director of the Minerals Management Service, which is the agency with responsibility for this leasing, Ms. Johnnie Burton, whether the administration's plans would wind up coinciding with what the bill envisioned if passage of the bill was delayed. She replied that that certainly would be the case.
After the Energy Committee reported the bill in early March, we received additional evidence that the plans for leasing new areas in this draft 5-year plan were on fairly solid ground, and the new evidence was that the Congressional Budget Office booked the expected revenues from royalties and bonus bids in the budget baseline for this 10-year period, 2006 through 2016.
Even though a good portion of the oil and gas contemplated in the original bill reported by the Energy Committee was incorporated into the developing plans of the Minerals Management Service, I thought it made sense that with the balance of the initial area
opened by S. 2253, we go ahead with the bill and try to enact it. Unfortunately, at least from my perspective, events since the committee reported the bill to the full Senate have changed the bill in very substantial ways. In my view, this is not the bill that we worked on in committee. Several of our colleagues in the Senate took the position that S. 2253 should not move forward without certain modifications.
My colleagues from Florida expressed a desire for a long-term moratorium off the coasts of their State. My colleagues from other Gulf Coast States indicated that they would object to S. 2253 being considered without those States receiving a fixed percentage of the revenues from the oil and gas produced in the Federal Outer Continental Shelf off their coasts.
Both of these demands, which were satisfied in this bill, which has now come to the Senate floor, S. 3711, in my view, have undermined the goals of the original bill. Because S. 3711, which is the bill now pending in the Senate, locks up vast areas of the Outer Continental Shelf off Florida, and because the bill provides for the ceding to 4 of our 50 States billions of dollars of Federal revenues, I find myself in the position of having to oppose the bill.
The chairman of the Energy Committee will point out that S. 3711 opens two new areas in the Gulf of Mexico. That is true. Beyond the area proposed for opening by the new 5-year plan that I talked about, Minerals Management Service, S. 3711 opens a triangular sliver in the area known as ``the bulge.'' You can see that sort of orange area on here. That is new under this legislation. The legislation also opens the so-called 181 south area, which is currently under a congressional moratorium that expires this September 30.
There is also a Presidential withdrawal for that area which is 181 south. That is the lighter orange area down below the area that we have been talking about.
In order to get these additional resources that are provided for in this bill, which amounts to 2.76 trillion cubic feet of gas, S. 2711 puts 21.83 trillion cubic feet of natural gas in the eastern Gulf of Mexico off limits until 2022.
I don't think it is a very good trade for the people of America for us to give up access to 21 trillion cubic feet of natural gas in order to gain access to 2.76 trillion cubic feet. Some of that 21 trillion cubic feet of natural gas that is being put under a 16-year moratorium in this bill is in areas that have never been controversial in Congress. These areas were part of the original lease sale 181 area that every annual congressional moratorium had exempted.
We are talking about this entire yellow area. I think this chart is very similar to the chart that the Senator from Florida, Mr. Martinez, has been using. It shows a very much larger area that is being subjected to this 16-year moratorium than we have ever put under moratorium before.
These yellow moratorium areas that are within the blue of the original lease sale 181 area shown on the chart, these three resource- rich areas are not now under moratorium. If Congress does not enact S. 3711, these areas could be leased under the next 5-year plan, if the administration decided to include them, instead of being locked up until 2022.
Let me, also, for a moment show a chart that our colleague, Senator Craig, was using earlier this afternoon. He has a chart showing what is happening south of the area that we are locking up for the next 16 years. This is the thatched area down near Cuba. I think looking at his chart sort of brings home the unfortunate handicap we are putting ourselves under with this legislation. In fact, Senator Craig's bill, of which I am a cosponsor, would allow U.S. oil companies to participate in the development of this thatched area, the oil and gas resources in this thatched area down near Cuba, some of which is as close as 50 miles from the State of Florida. But at the same time in this legislation, we are saying we are going to prohibit drilling for the next 16 years in areas as far as 230 miles from the State of Florida. To my mind, that doesn't make good sense.
It would be ironic if Cuba proceeded with drilling in its waters to extract at least 4 billion barrels of oil under its territory, while at same time we were passing legislation saying there would be no drilling in the waters we control through 2022. That is exactly what this legislation says.
Referring again to Senator Craig's statement, he talked about the ``no zone''--the large ``no zone'' all around the country, where nobody wants to allow drilling. I will say we are adding to the ``no zone'' very substantially with this legislation by putting in this yellow area areas that had not been subject to moratorium and certainly have not been subject to anything such as a 16-year moratorium, as we are about to enact here.
In addition to being bad energy supply policy for the long term, S. 3711 is also, in my view, bad fiscal and budgetary policy for the long term.
The bill directs, as I think many have mentioned, 37.5 percent of revenues from new leases to the four States, Texas, Louisiana, Mississippi, and Alabama. Starting in 2017, a second royalty diversion using the same percentage would be applied to new leases in existing areas of the Gulf of Mexico open to production.
We have a chart which makes the case as to what we are talking about. We are saying, in the western Gulf of Mexico and the middle Gulf of Mexico, that we are, in fact, going to cede 37.5 percent of the royalties from production on new wells in those areas to these four States as well; that those are funds which otherwise would go into the Federal Treasury.
In order to avoid a point of order under the Budget Act, S. 3711 purports to cap the revenue sharing, from 2016 to 2035, at $500 million per year. And then it has a very interesting provision. It says ``net of receipts.'' Rather than actually capping the revenue sharing, the bill allows receipts from the 181 and the 181 south area to be added to the $500 million cap. That makes the so-called cap, in my view, at least much higher. However, even with the cap, the amount flowing to the four Gulf States is estimated to be somewhere between $27.5 billion and $30.5 billion during this period. After 2056, the full entitlement comes into play with estimated losses to the Federal Treasury of between $12.5 billion per year and $15 billion in 2056 alone.
This underscores the point which people need to understand--that this legislation calls for this sharing of revenue or ceding of revenue to these four States in perpetuity. This is not in any way sunset. There is no time limit. This is from now on. The legislation says these States will be entitled to the money.
As many of my colleagues know, I have strongly opposed diverting revenues from the Outer Continental Shelf. It is clear to me, in reading the history of this country and the laws of this country, that this is a Federal asset and that ceding of these revenues to State and county treasuries of coastal States is bad policy. The resources of the Outer Continental Shelf belong to the entire Nation. Over the years, there have been several attempts by coastal States to assert some form of ownership rights over the Outer Continental Shelf. In the 1940s, coastal States tried to issue leases to oil companies in these Federal waters. That led to a landmark decision in our Supreme Court in 1947. The Supreme Court ruled in 1947 that offshore lands were, and always had been, owned by the United States as a feature of its national sovereignty.
Having been stopped by the courts, the States turned to Congress to request that it turn these so-called submerged lands over to the States themselves. President Truman strongly objected to this. He vetoed the legislation that was sent to him. Let me read the quotation from his veto statement. He said that he could not:
approve this joint resolution because it would turn over to
certain States as a free gift very valuable lands and mineral
resources of the United States as a whole; that is, all the
people of the country. I do not believe such an action would
be in the national interest. I do not see how any President
could fail to oppose it.
That was the basis for his very veto.
President Truman left office and Eisenhower took a different view. He signed the Submerged Lands Act of 1954 that granted the coastal States title to submerged lands within 3 miles of their coasts.
Later that year, Congress also passed the Outer Continental Shelf Lands Act, asserting Federal control over the subsoil and the seabed of the Outer Continental Shelf. The legislative history of
these acts is clear. They were intended as a final settlement of the issue of who owned what on the Federal Outer Continental Shelf.
In recent years, as the resources of State waters which were granted under the 1953 act have been depleted, and as the great resource potential of the Federal waters has come into full review, a new drumbeat has arisen. The claim is that coastal States should have a preferential share of the resources of the Outer Continental Shelf over and above other States that, under current law, are equally entitled to these receipts, and under the Supreme Court's view are entitled to these receipts.
We are not talking about trivial sums of money. Oil and gas receipts from the Outer Continental Shelf are the third largest source of income to the United States after taxes and Customs duties.
Over the next several decades, it is estimated that oil and gas royalties from the Outer Continental Shelf will exceed $1.2 trillion. As we look to the future, a future in which we will have large bills coming due at the Federal level, with the retirement of the baby boomer generation, it is unwise, in my opinion, to consider permanently diverting these revenues away from the Federal Treasury to these four coastal States.
I have often heard the argument that we ought to give a percentage of Federal royalties to the Outer Continental Shelf, to the nearby States because Western States, such as my own, New Mexico, receive a portion of the royalties from the Federal lands within their borders.
Let me address what I believe is a false comparison head on. The first obvious point is that the Mineral Leasing Act which has been adopted made provisions for my State to receive 50 percent of the royalties for production on Federal lands. This Mineral Leasing Act does not discriminate against Louisiana, Mississippi, or any other coastal State. To the extent that the Federal Government reduces oil and gas and collects royalties on Federal land within their borders, the Federal Government pays 50 percent of those revenues to the States just as they do in my State, just as they do in Wyoming, just as they do in every other State in the Union.
Indeed, according to the Minerals Management Service, between 1982 and 2003 the Federal Government distributed $14.8 million to Louisiana from onshore Federal leases under the Mineral Leasing Act. The reason Louisiana did not get more was because there is very little Federal land in Louisiana that produces oil and gas. Most onshore oil and gas development in Louisiana takes place on State or private land and not on Federal land.
Louisiana, like any other State, receives 50 percent of the royalties collected by the Federal Government from Federal oil and gas leases. Western States, such as New Mexico, and eastern States have very different histories when it comes to patterns of life ownership. A long time ago, in the 19th century, a large part of States such as Louisiana consisted of public land. But the laws at that time allowed that Federal land to be patented and bought into private ownership or given to the State where it now forms the tax base for those States. That explains why there is relatively little Federal land in a State such as Louisiana. The State enjoys the ability to levee taxes, including severance taxes on all the oil and gas that is produced within the State, which is considerable.
The development of the western States took a very different turn in 1920 when it became clear that there was a significant amount of Federal land that had oil and gas potential. Instead of allowing that land to be patented and brought into private ownership under the mining laws, as had happened in earlier years in States further east, Congress passed a new law--and that is the Mineral Leasing Act I was just referring to. This act forges a very different bargain.
In return for keeping the lands with rich oil and gas resources under Federal ownership, therefore, out of the State's tax base, the Federal Government agreed to give the States a share of the Federal royalties as compensation for the lost tax revenue involved. This compromise represented no injustice to any State that had previously had all of its Federal lands converted into private land through land patents. These eastern States already had what the western States were giving up; that is, the ability to tax all of the economic activity within their borders.
If you read the legislative history of the Mineral Leasing Act of 1920, it is clear that the split of revenues between the Federal Government and the State governments was in compensation for removing lands from the tax base of the States.
So when you recognize the reason for the 50-50 split of royalties on Federal lands within the boundaries of States under the Mineral Leasing Act, it is clear to me that transposing this system to the Outer Continental Shelf makes absolutely no sense. Federal ownership of the Outer Continental Shelf takes nothing away from the tax base of any coastal State. To the contrary, Federal development of national assets on the Outer Continental Shelf actually results in enhanced economic activity, increased tax revenues in adjacent coastal States.
One report that illustrates this fact is published in 2002 by Louisiana Midcontinent Oil and Gas Association. It is entitled ``The Energy Sector Still A Giant Economic Engine for the Louisiana Economy.'' That title is a pretty good thumbnail description of the true impact Outer Continental Shelf activity has on the Gulf Coast States. That activity is a giant engine for their economies.
Here are some of the facts in that report. The report says the energy sector has a $93 billion impact in Louisiana and employs 62,000 people. The energy sector in Louisiana supports $12.5 billion in household earnings. It pays $1.14 billion in State taxes. Workers employed by the offshore oil and gas industry can expect to earn salaries between $75,000 and $100,000 a year. That was in 2002 when the report was issued. Oil exploration and production value-added income already exceeds $17 billion and refined value-added income is nearly $5 billion.
The same facts can be told for each of the coastal States that border the Gulf of Mexico. They derive substantial economic benefit from their strategic location next to these oil and gas deposits that are still owned by the United States.
For these reasons, I cannot support the current proposal to set in motion a permanent and a very large diversion of Federal royalties from the Outer Continental Shelf to these four States. I am sympathetic to the environmental damage that has been caused over the years to coastal wetlands. Much of that damage in the past was from causes other than oil and gas activities. An important source of the future threat is from factors such as global warming.
Last year, in the Energy Policy Act, we enacted a Coastal Impact Assistance Program that directed $1 billion be paid as mandatory spending over 4 years to the Gulf Coast States. I strongly supported that measure. I have strongly supported funding for reconstruction of the gulf coast in the tragic aftermath of Hurricanes Katrina and Rita last summer.
The policy rationale for the permanent revenue diversion proposed in this bill, in my opinion, is highly flawed, just as the energy policy rationale for the bill is also flawed. If you want to have a strong and fiscally solvent Federal Government, you need to be very careful about new spending entitlements and claims on Federal revenues being created by the Congress. The provisions of this bill do not reflect that kind of concern.
If we are to cope with the rising demand for energy, and particularly for natural gas, we must also approach that matter. Strictly giving up, for the long term, access to 21 trillion cubic feet of natural gas just to obtain just over 2 trillion cubic feet is shortsighted, in my view. Undertaking to solve our long-term problems with natural gas supply and demand by focusing just on the supply side I also see as shortsighted.
Let me talk a little bit about the precedent of what we are doing. I see that as another and somewhat separate reason for opposing this legislation. S. 3711 sets bad precedent both in the energy policy area and in the fiscal policy area. There is no reason I can think of why coastal States up and down our seaboards will not demand the same kinds of treatment being demanded by the States that are insistent upon the provisions in this legislation.
Let me put up the chart that shows what we are talking about. The Outer Continental Shelf is the blue area surrounding the country. Of course, this bill just deals with the gulf. We all understand that. But let's just think about the precedent we are setting that will come back to haunt us when we have this issue revisited in the future.
My sincere concern is that if we take the steps that we are proposing to take in this legislation that lock up Florida until 2022, or the areas off the coast of Florida going out at least 125 miles until 2022, we are well on our way to making these other resources unavailable also until 2022.
We are also setting a bad precedent in the fiscal arena, as well. Where production is allowed, other States are likely to demand the treatment that we are here affording to Texas, Louisiana, Mississippi, and Alabama.
Take Alaska, for example. If you do a little reading on where our undeveloped natural gas and oil resources are, much of it is off the coast of Alaska. The Federal Outer Continental Shelf off the coast of Alaska covers a vast area, some 600 million acres. The Outer Continental Shelf off Alaska's coast is more than twice the size of Alaska itself.
To give an idea of the immensity of this OCS area, the onshore lands of the State of Alaska comprise some 366 million acres. The Federal Outer Continental Shelf off Alaska contains vast resources, an estimated 26.6 billion barrels of oil, and 132 trillion cubic feet of gas.
If we start down this road, as this bill does, in my opinion, with respect to the Gulf Coast States, we will certainly be asked to give 37.5 percent of the revenues of producing these Federal resources off Alaska's coast to the State of Alaska. In fact, such a proposal has already been developed. Other States are likely to follow. This is a precedent that I think we will all come to regret.
I know there are strong feelings on the other side of this issue. I understand the sentiments that some have, but I am persuaded this is bad energy policy for the country, that this is bad fiscal policy for the country, and I hope that we are able to make some changes in this legislation before we finally dispose of it so we can correct these problems.
I yield the floor.
Mr. President, could I just indicate for my colleague, I appreciate his comments. We do have a couple of Senators who are in opposition who are coming to the floor and will wish to speak, too, at some stage. I do not want to line up so many proponents that they are not able to make their statements within a reasonable period of time. So if we can fit them in at some stage in the proceedings, that would be great, as soon as they arrive.