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Congressional Energy Policy: Response to Rising Oil Prices (12-18-00)

The continuing climb in gasoline and heating oil prices has raised the eyebrows of Republicans and Democrats alike, as Members of Congress struggle to find a reasonable solution, if any, to the upward trends.  While some feel that the opening of the Strategic Petroleum Reserve is a quick fix to the problem, others argue that draining the vital resource would put the country even more at the mercy of the Organization of Petroleum Exporting Countries (OPEC) and other foreign oil sources. The Clinton Administration claims that diplomatic talks between Energy Secretary Bill Richardson and OPEC nations in the Middle East led to OPEC's agreement to increase crude oil production. However, Members of Congress criticize the administration's lack of a cohesive energy policy.  Some have called for increased domestic production through the opening of areas, such as the Arctic National Wildlife Refuge (ANWR), that have been closed to exploration and production.  On the other end, many members of Congress have taken this as an opportunity to call for more research regarding renewable energy resources.

Most Recent Action
The Senate Energy and Natural Resources Committee held an unusual lame-duck session hearing on December 12th, to discuss the current price spikes in natural gas and home-heating oil.  Senator Frank Murkowski (R-AK), Chairman of the Senate Energy and Natural Resources Committee, along with other members called on the next Congress and Administration to provide a national energy policy that is balanced and helps guard national security.  Witnesses included representatives from the Energy Information Administration, the National Association of State Energy Officials, the Natural Gas Supply Association, and the American Gas Association.  A summary of the hearing and links to testimony are available on the hearings summary website.   (12/18/00)

Current Congress
The Republican leadership in the Senate unveiled the National Energy Security Act, S. 2557 on May 16, 2000.  The comprehensive energy policy bill is designed to drastically reduce imports of foreign oil as well as discredit the Clinton Administration's energy policies.  The task force that drafted the plan consists of 10 Republican Senators including Majority Leader Trent Lott (R-MS), Sen. Frank Murkowski (R-AK), Sen. Larry Craig (R-ID), and Sen. Kay Bailey Hutchison (R-TX).  The bill aims to reduce the nation's dependency on foreign oil to 50% of the country's energy supply by the year 2010 through a series of measures, including:

The GOP's interest in natural gas is in line with Administrative initiatives to push the fuel as an alternative to oil and coal.  However, they are also pushing for federal land oil and gas leasing regulatory responsibilities to be handed over to the states.  To help move the bill along the legislative process, Lott had the group include provisions in the bill that would allow it to by-pass the committee hearing and mark up actions and go directly to the Senate floor for debate.

Even prior to the introduction of S. 2557, the focus of many congressional committees had shifted to the high cost of gasoline and heating oil.  Organized protests by several hundred truckers driving around Capitol Hill and a shortage of reasonably priced heating oil in the northeastern United States have spurred many legislators' concerns away from the plight of industry when prices were low and towards consumers. (5/16/00)

This Spring, the House Energy and Power Subcommittee has held National Energy Policy hearings, examining ways to ensure an adequate supply of natural gas and crude oil on May 24 before taking up coal and nuclear power last week.  At a June 8 hearing on the future of the U.S. nuclear and coal industries, several industry heads testified that both coal and nuclear power should continue to play an important part in a national energy strategy. "Today," William Magwood, Director of the Department of Energy's (DOE) Office on Nuclear Energy, Science and Technology, noted, "we are at a time of tremendous opportunity where the research and policies we engage in now will define the technologies that are deployed over the next 20 years when demand for energy is expected to increase substantially."  Unfortunately, the industry witnesses claimed, both the nuclear and coal industries have been neglected as of late.  Such neglect bodes ill not only for the coal and nuclear industries themselves but also for the health and welfare of the general public.  When the Center for Strategic and International Studies' Robert Ebel warned that the U.S. may soon fall behind its competitors if it fails to craft a clear energy policy mandate, many of the legislators took notice. Despite such dire predictions, though, many of those present were confident that coal and nuclear power can become cheaper, safer, cleaner forms of energy with continued investment in research and development. (6/8/00)

Bills and Hearings Addressing Solutions to Rising Oil Prices
Congress has been taking every chance it gets to express its discontent with the the current price of gas and heating oil.  Increased oil prices were the subject of recent hearings of the House International Relations Committee, the House Commerce Committee, the House Resources Committee, and the House Transportation and Infrastructure Committee.

At the February 24th hearing of the Senate Energy and Natural Resources Committee, many legislators called for new federal policy regarding the production of domestic petroleum.  Dr. John Cook, Petroleum Division Director for the Energy Information Agency of the Department of Energy  --  the only witness representing the administration  --  underwent many blows from Senators questioning the effectiveness of the Clinton Administration's energy policies. Other witnesses that provided testimony at this hearing, including former Cabinet member  James R. Schlesinger, attempted to explain what events actually led up to the oil price increases (see Background section for details) and what events will most likely cause the huge fluctuations in the commodities market to dampen.  Many legislators called for new federal policy regarding the production of domestic petroleum. (2/24/00)

Sen. Frank Murkowski (R-AK) introduced S. 2214 on March 8th with fellow Alaskan Ted Stevens (R).  This bill would open part of ANWR's Arctic coastal plain to oil and gas exploration and development.  In a press release from Murkowski's office, he noted:  "We are going to continue on this roller coaster of price shocks and economic disruption until we learn from our mistakes and take action to produce more energy here at home."  Like similar bills introduced during the Clinton Administration, Murkowski may have a hard time raising enough votes to override a presidential veto.  A press release from Secretary of the Interior Bruce Babbitt noted that he would recommend the President not support any bill opening ANWR to petroleum exploration:  "We will protect this last undeveloped fragment of America's arctic coastline for the thousands of caribou, polar bears, swans, snow geese, musk oxen and countless other species who use it to birth and shelter their young."
(3/8/00)

Senate Majority Leader Trent Lott (R-MS) tried in vain to bring S. 2285 to the floor on April 11th, before Congress went out of session the following week.  S. 2285 is Lott's plan to completely repeal the federal gas tax (18.4 cents/gallon) if gas prices reach the $2.00/gallon level.  The bill would also get rid of the excise gas tax (4.3 cents/gallon) for the rest of the year.  The Senate voted (43-56) not to bring the bill up for a vote.  Lott's attempt to attach a similar measure to the FY 2001 Senate Budget Resolution also failed.  Many Members of Congress, including several prominent Republicans, are against reducing the gas-tax and see Lott's plan as solely a political action.  These opponents argue that it would put the Highway Trust Fund, which is funded by the 4.3 cents/gallon excise tax, in jeopardy. (4/11/00)

On April 12th, the House Committee on Resources held an oversight hearing entitled, "Compromising our National Security by Restricting Domestic Exploration and Development of our Oil and Gas Resources."  The hearing allowed representatives from the private sector as well as Congress and the Administration to give testimony on the current oil market and how it relates to domestic exploration and production.  American Association of Petroleum Geologists President Ray Thomasson participated in the third panel with other professional association and industry representatives.  Thomasson provided the view of the petroleum geology community, noting that declines in domestic production of crude oil and flat levels of natural gas production are the result of declining opportunities for exploration but not because the resources are not there to be found.  A summary of the hearing is available on AGI's Summary of Hearings on Rising Oil Prices and Energy Policy.

Also on April 12,  H.R. 2884, which reauthorizes the Energy Policy and Conservation Act (EPCA), was passed by the House.  The bill reauthorizes the President to draw from the EPCA-mandated Strategic Petroleum Reserve (SPR) until the year 2003.  One amendment to the bill extends the authority of the President to draw from the SPR in regional emergencies instead of solely national emergencies.  Another amendment creates a home-heating oil reserve in the Northeast (Environment and Energy Daily, 4/12).  A similar bill, S. 1051, passed the Senate last year.  More information on EPCA and SPR is available on AGI's Energy Policy and Conservation Act Reauthorization and Strategic Petroleum Reserve Update. (4/12/00)

In addition to calls from Congress for more effective administrative energy policies, many members have introduced new legislation that might help prevent recurring price spikes in heating oil, diesel, and gasoline.  In the House, these bills include:

Bills introduced in the Senate include:


Specifically, H.R. 3822 was passed by the House on March 22, 2000. The final version is significantly different than the original bill, which called on the President to impose military sanctions on those countries guilty of petroleum price fixing.  Instead, the bill directs the president to attempt to fix the problem through diplomatic efforts  --  granting powers the president already has. (3/22/00)

The Senate Energy and Natural Resources Committee, chaired by Sen. Frank Murkowski (R-AK), held a hearing to address S. 2557, the National Energy Security Act of 2000, the Republican leadership's broad energy policy bill.  The hearing provided another opportunity for majority members to voice their concerns over the current administration's energy decisions.  While most of the former members of Congress, administration officials, and nongovernmental witnesses mainly spoke in support of S. 2557, several addressed the ever-increasing transportation sector oil demands that account for more than two-thirds of U.S. consumption.  Steve Plotkin, from Argonne National Laboratory's Center for Transportation Research, suggested that even if public lands are opened to exploration and production, decreased levels of petroleum consumption are necessary for the U.S. to meet future demand. (6/15/00)

Mid-August saw a rash of attention towards opening up federal lands for energy resource development.  The Department of Energy announced on August 17, 2000, that 45 percent of the natural gas held below the Rocky Mountain Basin is under restricted federal land.  If these lands were opened, DOE predicts that natural gas prices would drop over the next two decades.  At the same time, the Cambridge Energy Associates and the National Petroleum Council (NPC) both called for increased access to the 213 tcf of natural gas that is suspected to be under restricted public lands.   Furthermore, the National Association of Manufacturers (NAM) has been lobbying the presidential candidates to ease oil drilling restrictions and encourage the development of nuclear, coal, and hydroelectric energy sources.  A NAM representative said that the new administration must recognize that the nation cannot be dependent on only one kind of fuel.  He also recommended that the Alaskan reserves should be opened up to help to meet the heating oil and natural gas shortages predicted for the coming winter.

Following the relative stablization of gasoline prices, Congress turned its attention to predicted shortages of natural gas supply and potential price hikes this winter.  On July 26, 2000, the Senate Energy and Natural Resources Committee held a hearing on natural gas supply. Currently, the price for natural gas is over $3.00 per thousand cubic foot.  The committee heard testimony from administration officials, the National Petroleum Council, and industry firms.  Most witnesses agreed that the nation has sufficient natural gas reserves to meet future demand; however, some questioned whether predictions underestimated the rate of demand increases.  Either way, the U.S. will require serious financial investments in the natural gas industry's infrastructure, personnel, and access to currently restricted federal lands. G. Warfield "Skip" Hobbs of the American Association of Petroleum Geologists (AAPG) also encouraged federal regulatory and tax reforms to promote natural gas industry growth. (8/7/00)

Administrative Action
In response to the many assertions that the Clinton Administration lacks an effective energy policy, the White House released a plan of action to enhance national energy security on March 18th. The main components of this plan include:

According to the Oil and Gas Journal, the Clinton Administration also support tax cuts that would boost domestic production as a means of dealing with the fluctuating oil prices.  One bill would let producers write off the geological and geophysical costs of exploration and development, possibly adding 126,000 barrels/day of oil to domestic production.  The Clinton Administration would also support a law allowing producers to expense their delay rental payments.  While these bills may be introduced this year, it is unlikely that they will pass this session of Congress.

Energy Secretary Bill Richardson presented testimony at the House Committee on International Relations on March 1, 2000 that drew from his recent diplomatic trip to several oil producing nations including those in the Middle East, Europe, and Mexico.  While many members of Congress have their doubts, Richardson has noted that Mexico, Venezuela, and Saudi Arabia have all informally agreed to increase production in the near future.  The Clinton administration supports diplomatic efforts as a solution to the oil price problem and has the opinion that dipping into the SPR would do more harm than good.
(3/18/00)

On March 22nd, the US Geological Survey gave a preview of the findings of the USGS World Petroleum Assessment 2000 that will be released at the June 2000 World Petroleum Congress in Calgary.  A USGS news release noted that a reassessment of world petroleum (exclusive of U.S. resources) has identified 20% more potential global energy resources than calculated in a similar 1994 assessment.  While estimates of undiscovered oil volume have gone up from 539 billion barrels to 649 billion barrels, the report estimates the amount of undiscovered gas in the world to be considerably less than previously thought.  The report also speculates about worldwide reserves, which are estimated to be nearly the same size as undiscovered resources.
(3/22/00)

OPEC nations met in Paris on March 27th to discuss how they might change the low petroleum production levels that have resulted in the recent price increases.  After a bumpy start on the first day of negotiations during which, according to the Washington Post, "there was a clear difference of opinion between the leading producers over how much extra oil should be pumped and who should reap the additional benefits," the 11 nations came to an apparent agreement on the Tuesday, March 28th.  At a White House press briefing on the 28th, Secretary of Energy, Bill Richardson noted that OPEC countries had announced plans to increase oil production by 1.7 million barrels/day.  "We're also anticipating more oil from non-OPEC nations, leakage over the new quota levels, and increased production from Iraq," he said. (3/27/00)

Some Members of Congress doubt that OPEC's increases will actual help curb oil prices in the U.S.  "We got stiffed," noted Sen. Frank Murkowski (R-AK) at a March 28th joint hearing between the Senate Energy and Natural Resources Committee, which Murkowski chairs, and the Senate Foreign Relations Committee. At this hearing titled, America at Risk: U.S. Dependency on Foreign Oil, several senators took the opportunity to complain about how the administration has handled energy issues since President Clinton took office.  While Murkowski and others on the Energy and Natural Resources Committee frequently brought up the closure of ANWR and other public lands to exploration as factors in US dependence on imports, Sen. Jesse Helms (R-NC), Chairman of the Senate Foreign Relations Committee, and several of his colleagues added a new twist to things, noting the recent lifting of sanctions on several oil producing nations that have threatened U.S. security in the last two decades, including Iran, Libya and Iraq.  "The time has come for frank talk with the oil producing leaders, not tin cup diplomacy," said Helms. (3/28/00)

President Clinton stated that he could find "no economic explanation" for the ever-increasing gasoline prices since the beginning of June and has ordered the Federal Trade Commission to supoena major oil companies in an investigation into possible collusion, price-gouging, or antitrust violations.  Vice President Gore noted that major oil company profits have soared 500% in the first part of the year.  Several other theories circulating include a CRS report that attributed the higher Midwest gasoline price - about 50 cents more per gallon than the rest of the country - to five factors including higher crude oil prices, low inventories, pipeline problems and most importantly, the use of reformulated gas (RFG).  The report stated that the patented RFG process uses ethanol which raises the price of purification, may be responsible for approximately half of the Midwest's price increase.  Critics say that the reformulated gas only requires 9 cents more per gallon to produce.  House Science Committtee Chair James Sensenbrenner and other members of the House are hoping for a temporary lift of EPA regulations.  Other short-term remedies to lower gasoline costs include dipping into the Strategic Petroleum Reserve (SPR), or relying on the recent small increases in production that some Organization of Petroleum Exporting Countries have agreed to. (6/22/00)

Vice President Al Gore released a $125 billion energy plan for the next 10 years.  The plan appears to represent a serious committment to reducing pollution through the development and use of 'green technologies'.    The plan's five main goals include: reducing dependence on imported oil, creating jobs, saving energy, increasing electricity reliability, and reducing pollution and its contribution to global warming.  The proposal leans heavily on the mechanism of tax incentives for the use of enviromentally friendly cars, sport utility vehicles (SUVs), and trucks.  It also increases tax breaks or funding for energy efficient building equipment and homes, as well as funding for weatherization upgrading for low-income houses.  Economic incentives are extended for further natural gas exploration and increased contributions of renewable energy sources to electricity production.  Environmental groups are pushing a renewed committment to the Clean Air Act, while the Nuclear Energy Institute decries the exclusion of nuclear power from the plan. (6/28/00)

President Clinton has used his adminstrative authority to enact a home heating oil reserve for the Northeast, however, there are several hurdles to overcome before the reserve becomes active.  Although Republicans have withdrawn their objection to the President's decision, the administration will still have to win nearly $8 million in appropriations to give the reserve permanence.  Clinton's ability to draw on the Strategic Petroleum Reserve (SPR) expires at the end of FY 2000, so reauthorization is necessary to give him the authority to use the interim heating oil reserve in the winter months when it is most likely to be needed.  Sen. Frank Murkowski (R-AK), chairman of the Senate Energy and Natural Resources committee, and other members of Congress have expressed concern that without a definite 'heating oil crisis trigger' for opening heating oil supplies, the reserve could put the federal government in direct competition with private Northeast oil companies.  An potential impediment to SPR's reauthorization is Murkowski's desire to attach language from the Majority leadership's energy policy bill, S. 2557, to the Energy Conservation Policy Act (ECPA) reauthorization bill H.R. 2884.  Both bills reauthorize SPR and create a home heating oil reserve, but S. 2557 opens the Arctic National Wildlife Refuge (ANWR) to petroleum exploration and production.(7/12/00)

Energy has remained a hot topic in Washington and on the campaign trail.  After Vice President Al Gore urged President Clinton to help ease the tight market for heating oil by releasing reserves from the Strategic Petroleum Reserve (SPR), Clinton directed Secretary of Energy Bill Richardson to release 30 million barrels from SPR.  In the Department of Energy press release, Richardson claimed, "The temporary infusion of 30 million barrels of oil into the market will likely add an additional 3-to-5 million barrels of heating oil this winter, if refineries could match higher runs and yields seen in the past."  This announcement came as part of Clinton's larger plan to help ease forecasted high prices for home heating oils this winter, especially in the northeast, that couples the release of SPR oil with increasing funds available in Low Income Home Energy Assistance Program (LIHEAP) emergency funds -- more information on Clinton's actions from the press release(10/13/00)

Background
The current high price of gasoline is related to a series of events involving crude oil prices that date back to November of 1997.  At this time OPEC unwittingly increased production rates while the Asian economy experienced a serious financial crisis, causing the price of crude oil to drop to record lows.  Because OPEC nations suffered so much from this period of low prices, they are now extremely sensitive to price fluctuations in the petroleum market.  Political and economic disputes within and between oil producing nations did not allow for a decrease in crude oil production until late in 1998.  Production was drastically decreased in 1999 to counteract the effects of overproduction in 1998, driving the price back up to normal levels.  However, it now appears that OPEC may have over adjusted for the price dip, and produced too little to keep up with rising demands.  Refineries in turn decreased storage amounts, leading to the heating oil crisis in the North-east United States earlier this year and the unusually high gasoline prices consumers are currently experiencing.  Further information on this topic can be found on the web at:  http://www.api.org/



Sources:  EENews, US Geological Survey, Library of Congress, hearing testimony, Greenwire, US Senate website, and the US House of Representatives website.

Please send any comments or requests for information to the AGI Government Affairs Program.

Contributed by 1999-2000 AGI/AAPG Geoscience Policy Intern Alison Alcott; Margaret Baker, AGI Government Affairs; and 2000 AGI/AIPG Geoscience and Public Policy Interns Michael Wagg and Audrey Slesinger.

Posted March 30, 2000, last updated December 18, 2000


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