Mr. President, I rise today to oppose the Baucus amendment and urge my colleagues to vote against cloture. There are only two things wrong with the Baucus amendment: One, it raises taxes in the wrong places; and, secondly, it spends these…
Mr. President, I rise today to oppose the Baucus amendment and urge my colleagues to vote against cloture.
There are only two things wrong with the Baucus amendment: One, it raises taxes in the wrong places; and, secondly, it spends these taxes on the wrong policies. I want to make two points upfront before I start my remarks.
When we speak of American big oil, let me remind people that America's five big oil companies hold less reserves than Hugo Chavez, the state-owned company of Hugo Chavez in his country.
My second point is, very seldom does the United States tax businesses that are in competition overseas. Let me repeat that. We in America hardly ever tax American businesses that are in competition overseas. Of course, that is exactly what we have done here, and what is going to happen is not going to be good. It is not going to help the American consumer one bit.
There are only two things, as I indicated, that are wrong with the Baucus amendment. I would repeat: It raises taxes in the wrong places, and then it spends them on the wrong policies.
I cast this vote, and I think it is an informed vote based on my experience. It is with a deep sense of responsibility to do what is right, with a keen interest and understanding of energy policy, because I have been forced to work on it with many who know a lot about it. With a real appreciation of the importance of this vote, I will oppose cloture.
The tax provisions in this bill will increase the cost of gasoline at the pump for Americans, increase electricity bills for families, and work severe hardship on our natural gas supply. Additionally, this amendment could seriously harm our economy. The Federal Reserve Chairman, Ben Bernanke, recently noted that: A significant increase in energy prices can simultaneously slow the economy, and raise inflation.
I cannot vote for that consequence. I urge that my colleagues not do so either. I do not cast this vote lightly, and I arrive at the decision after a great deal of reflection. There are many good and important provisions contained in this amendment. In the area of renewable energy, while there may be questions about how long certain tax credits should be extended, there should be no doubt that in the past I have supported renewable energy.
In the Energy Policy Act of 2005, with Senator Bingaman, we passed the largest tax incentives for renewable energy, a variety of renewable energies, than we ever have in American history. My friend and colleague Senator Alexander has often referred to the bill that we passed as the ``Clean Energy Act.'' He is right. In 2005, in the Energy Policy Act we provided renewable energy production tax credits, automobile tax credits, and we can keep going. We provided tax credits for energy efficient improvements, biodiesel, and for ethanol. We included tax credits for installing alternative refueling property, tax credits for the installation of solar. The world demanded cleaner energy, and the Energy Policy Act answered the call.
Between 2004 and 2006, global private capital investment in clean energy rose from around $30 billion to $60 billion a year. It rose because we set the framework into law, and it was invested on the private side. In the public market and in venture capital and in private equity, in corporate research, development, and demonstration, and government research and development and asset financing, the answer has been the same. Both the private and public sector are excited about the future of clean energy, and they are busy, under our 2005 act, investing heavily in it.
The weakness is in the amendment I am talking about. Without question, some of the tax incentives in this bill could have a positive impact on the landscape of American energy future. To deny that would be to debate unfairly the merits of this amendment.
Cellulosic ethanol production credits, plug-in hybrid vehicle credits, and clean coal energy bonds are smart financial incentives, and those tax policies complement many of the goals we have sought to achieve in the previous legislation. I think that is good.
Supporting the great things that we accomplished together in the Energy bill 2 years ago made us all feel good. However, the tax incentives in this bill focus on too narrow a field of energy policy. The Finance Committee has reported this amendment with a pricetag of $32.1 billion, a very large tax increase. In a few minutes I will speak about the troubling revenue-raising proposals in this amendment.
But, first, I ask myself and I ask others, so our people would get a feeling of what $32.1 billion is, what it can be better used for or what it might be used for in the American economy if it were free to be invested or other things bought with it: $32.1 billion would purchase 15 biorefineries, 16,000 barrels-per-day coal-to-liquid refineries, 5 gasoline refineries, and 4 nuclear powerplants, 10 bio-energy research centers, and 500 miles of transmission lines.
Now, I am not suggesting we would buy them with this bill, but I am suggesting that everyone should know the huge size of this tax, taken out of the economy, and what it would invest in similar dollars, that it could invest in the American economy. I just told you what they were.
We could use this money for commercial demonstrations in oil shale, fund demonstrations for energy from coal using IGCC, and we all know we must do that. We do not have any money to do them, and we are having difficulty getting loans from the Government, and here we are taking $32 billion and not providing anything for these kinds of investments that we must do if we are going to keep pace with China, which is going full speed ahead with all of those things, including nuclear power, and nuclear powerplants in this country. We must get there also.
But in the meantime, we are taking an awful lot of revenue flow out of the economy, right away from the energy companies that know how to invest it, where to invest it, how to pick up reserves, and how to keep the price of oil as much within bounds as the world market will permit.
Without question, the revenue-raising proposals in the amendment will increases the cost of exploring for and producing our Nation's oil and gas and natural gas. As a result, Americans will pay higher prices for gasoline at the pump, and we will suffer increased electricity costs as our Nation's natural gas supply is weakened. We will pay higher prices, obviously, for natural gas.
The excise tax on oil and gas exploration increases taxes $10 billion over 10 years on producers on our Nation's Outer Continental Shelf. Frankly, I believe that entire tax is wrong. We should not be taxing the most productive--the places where more money is being put for exploration than anywhere else, the Outer Continental
Shelf. Yet one-third of the taxes here come from imposing a fee, a very high fee, on the Outer Continental Shelf. Who would have thought it? The place in America where we have a chance of producing, we have imposed a heavy tax. Proponents of this amendment claim these tax provisions only affect the five largest U.S. oil and gas companies. Not true. But I have already told you who they are and what they represent in the world markets.
In fact, there are 40 lessee companies. Nearly 75 percent of all entities leasing on the OCS hold leases that would be subject to a 13- percent punitive tax. I hardly thought I would see that on the floor of the Senate. Yet here it is, bragged about as a very big source of money that we can do other things with, without regard to the prices the American people are going to pay in the increased prices for oil and gas coming from the shelf.
This is the lifeblood of our domestic oil and gas production. It makes absolutely no sense to advocate for independence from foreign oil, and then turn right around and raise taxes on our domestic companies that are producing America's oil and natural gas. It will mean higher prices for consumers.
Oil and gas production in the Outer Continental Shelf amounts to approximately 1.7 million barrels of oil per day, and 12\1/2\ billion cubic feet of natural gas. Annually, this production equals approximately 600 million barrels of oil per year and 4.7 trillion cubic feet of natural gas per year.
Now, that is good. They are doing fine. So why don't we put a tax on them of 13.5 surtax? It makes no sense. The price will go up, production will come down. These amounts produce 30 percent of our domestic oil production per year, and 23 percent of our domestic natural gas. Placing a punitive tax on this production is serious business backed by very serious facts, and I say serious consequences.
Activities on the OCS provide an average of over $6 billion a year in revenue to the Treasury. In the future the offshore will be even more important. The Minerals Management Service estimates about 60 percent of the oil and 40 percent of the natural gas resources estimated to be contained in remaining undiscovered fields in the United States are located where? Where might you guess? In the Outer Continental Shelf, upon which we are going to place a very stiff, very high tax.
Furthermore, the intent of the OCS excise tax and the effect of this tax is crystal clear. The provision charges 13 percent of the removal price of taxable crude oil and natural gas, with a credit available to those who have price thresholds on their oil and natural gas leases. In plain English, this amendment seeks to legislatively breach valid contracts from 1998 and 1999, because the Clinton administration failed to include a term in these agreements.
In other words, there was no fault of the companies. The Clinton administration either made a mistake or did not want to put the fee on; it just didn't happen. So for those 2 years, we have royalty leases with no royalty thresholds.
Congress cannot rewrite contracts after the fact merely because we do not like the contracts or the results. I predict when we are all finished, the courts of the land are going to say: This part of this tax is illegal and unconstitutional, and out the window will go a very large portion of this tax because the rights are clearly there. We have to think about it and think about what we are doing.
I do not like the idea of the United States of America going back on its contracts. It sounds and looks and smells like some foreign country. But we are close to doing it here in the name of some new answer, and at the same time saying it is going to yield revenues for us to use for various things in this bill.
As we consider this amendment, the Senate should be on notice that legal precedent would not be on our side. The U.S. Supreme Court and Federal circuit court precedents suggest that the Government cannot avoid the obligations of its contracts by using its taxing power to take back benefits it has given up pursuant to an agreement. I suggest to the Senate that a Federal court will recognize this tax for what it is and, therefore, this $10 billion we are counting on in this bill will be lost.
The Department of the Interior has already testified before Congress expressing its concern about protracted litigation over this issue and the potential for a loss of billions in revenue as well as the delay of oil and gas production.
There are 2 other provisions among the revenue raising proposals that are very troubling. One provision would amend the Job Creation Act of 2004, which created tax relief for more than 200,000 U.S. corporations and businesses. This proposal increases taxes by almost $10 billion over 10 years.
Instead of the Jobs Creation Act, we could call this provision the Jobs Destruction Act.
Finally, the increase in taxes by the U.S. Government on American companies competing overseas--through the foreign oil tax provision-- increases taxes $3.1 billion over 10 years.
This amendment also attacks American interests and cedes control to foreign interests. It says we would rather buy energy from the likes of Hugo Chavez in Venezuela than produce it ourselves.
To put the proper context on this, Saudi Aramco, the Saudi Arabian state-owned oil company, has nearly 3 times more daily output per million barrels per day than the largest U.S. oil company and holds nearly 10 times the oil and natural gas reserves.
To make it more difficult for American companies to compete overseas for this global commodity at a time when oil prices are nearly $70 per barrel is simply wrong. The Senate should reject this political expediency that will hurt American businesses, and the American consumer.
I began my remarks by conveying to this Senate the seriousness with which I cast this vote.
In my judgment, this amendment will have significant negative consequences on America's energy security. The Baucus amendment will increase the cost of producing oil and gas in America and will undermine the ability of American businesses to compete against state- owned oil companies run by foreign governments. The result for our Nation will be a greater reliance on crude oil from hostile regions of the world and an increase in the price of gasoline for the American people.
That is an unacceptable consequence and not what the American people expect of us.
For the reasons that I have stated, I must vote no on the motion to invoke cloture on the Baucus amendment, and I urge my colleagues to do the same.
Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
Mr. President, I wonder, while the Senator is still standing, if I could ask him a question. I was standing someplace where I caught an echo on your last 2 or 3 minutes. Could you maybe repeat it, because it hit my ear wrong. I did not quite get it. What did you talk about when it went to the House and came back and what?
When is that? When you come back from the House?
The same people who voted here will vote again then, will they not? Are you expecting some Senators to leave in the meantime from this side?
I see.
I see. Well, it would be good if you would add to that there might be a little opportunity to work together on that, too, you know. If you get a few people a little anxious, you might find you could not get cloture again. That could happen.
Yes.
Well, you are inviting some of us not to approve anything tonight, to have another cloture, and you have nothing going to conference.
Senator, you know, you and I have been here long enough that we go through these tragedies every now and then. But they get worked out. Then as long as you do not try to defy reality--there were a lot of people who didn't want this to happen; a lot of people did. That is the Senate. Now we will see.
So do I.
Well, there is no doubt in my mind we are going to move ahead. We have had some terrific movement ahead in the past 3\1/2\, 4 years. Some of us who are questioning how you think it is going to happen have been part of that over the last couple of years. We are not--nobody is going to sit here and say: There is one way, only one group of Senators knows how to do this. We did our share in this pretty good bill you voted for a couple of years ago. Had we implemented the provisions of that with financing that went with it, we would already be a long way toward the development of both supply and conservation; supply of the type you want, and supply of the type some others want. We would already have that going. Instead, we do not, because we haven't financed it. We should have. You were with us on the financing. It should have happened.
Mr. President, we have reviewed the amendments and cleared them on our side. We have no objection.