Senate Judiciary leaders plan antitrust reform bill

Nick Snow
Washington Correspondent

WASHINGTON, DC, Mar. 15 -- As they convened a Mar. 14 hearing on oil and gas industry concentration and its potential impact on prices, Senate Judiciary Committee leaders said they plan to introduce legislation to increase federal antitrust authority and protect consumers.

Committee Chairman Arlen Specter (R-Pa.) and Ranking Minority Member Patrick J. Leahy (D-Vt.) said their bill would penalize oil and gas companies that divert or withhold supplies to create shortages and increase prices.

It also would create a joint federal-state taskforce to investigate information-sharing practices among oil and gas companies.

The bill also will contain the No Oil Producing and Exporting Cartels (NOPEC) provision that the committee has passed three times and that cleared the full Senate in 2005 but that Leahy said was killed by Republican House leaders and White House negotiators.

NOPEC aims to make price-fixing actions by overseas producers actionable, insofar as they affect US consumers, under US antitrust laws.

Sen. Mike DeWine (R-Ohio), who chairs the committee's antitrust subcommittee, said the provision is necessary because actions by the Organization of Petroleum Exporting Countries have the biggest impact on retail oil prices.

Several hours later, Specter concluded the hearing by asking executives from five integrated oil companies and the nation's largest independent refiner-marketer to provide their views on the proposed legislation at a later time.

"Let us know which sections you like and which sections give you heartburn," he said.

Representatives from two states' attorney general offices said federal antitrust reform is needed for energy.

"The dirty secret of antitrust jurisprudence is that it's increasingly difficult to prosecute companies in concentrated industries under Section 1 of the Sherman Antitrust Act," said Tom Greene, a California assistant attorney general and former National Association of Attorneys General antitrust taskforce chairman.

More than demand
Wisconsin Attorney General Peg Lautenschlager said: "We know that the upward volatility of natural gas prices can't be explained by supply and demand. We need to explore further. The financial markets are complex and lack almost completely any kind of transparency."

Congress should look at the trading markets themselves, she urged. "Some of the trading being done over the counter is not being reported. Commodities can change hands as much as 30 times before they reach market. The registering of traders and reporting trades would be a great help," she said.

Severin Borenstein, a business administration and public policy professor at the University of California at Berkeley and director of the school's California Institute of Energy, said it's important to differentiate between the crude oil market, which is global, and the natural gas market, which is continental.

"We're now at the cusp where more increases in US refining concentration could cause problems. But the real problem is crude oil prices, which essentially are controlled by Saudi Arabia," he said.

"The natural gas market is continental. It has historically been considered to be quite competitive. In the past few decades, it has become more concentrated," Borenstein added. He urged antitrust regulators to make companies seeking to merge quantify the savings they expect to pass on to customers.

Joseph M. Alioto, a San Francisco lawyer who was lead attorney for the plaintiffs in the Royal Dutch Shell PLC-Texaco Inc. antitrust case, said that when the two companies formed their western US downstream joint venture, Texaco's product prices quickly rose to Shell's levels, and then both brands' prices jumped 70% at a time when crude oil prices were depressed.

"These mergers are supposed to create efficiencies and pass savings on to the consumer. That, in fact, doesn't happen, and you can find that out if you question the chief executives. The efficiencies they're talking about are not the efficiencies of the market but the efficiencies of cartels," he said.

Alioto said US Supreme Court decisions are clear on mergers and potential market impacts. "What CEOs use are merger guidelines written by the Justice Department. The result is that the federal government comes in with the oil companies and testifies against my clients, judges listen and rule in their favor."

Responding to a suggestion by committee member Richard J. Durbin (D-Ill.) that federal antitrust regulators sound more like lap dogs, Greene said, "I have worked with people at the Justice Department and Federal Trade Commission who are very committed to enforcement. They do operate within a structure that restricts their options. Sen. Specter's proposals would be extremely helpful to them."

Alaska gas access
Another lawyer, David Boies, chairman of Boies, Schiller & Flexner LLP in Armonk, NY, charged that Alaska North Slope producers rejected proposals to build a natural gas pipeline to the Lower 48 states to control the market and maximize profits.

He said many proposals have been made to bring the gas to market, including one by a company he represents. "Every single one of them was refused. The reason is that this allows the oil companies to keep control. They know that by refusing, they prevent the development of a pipeline to bring gas to the Lower 48 states," Boies said.

Asked about this later in the hearing, ExxonMobil Corp. Chief Executive Officer Rex W. Tillerson responded, "It's regrettable that Mr. Boies decided to try his case in front of this committee. We believe his allegations are untrue and intend to defend it in court."

Regarding the pipeline project proposals that Boies mentioned, Tillerson said later, "Those proposals had a number of flaws in them that, in our view, made them nonfinanceable."

BP America Inc. Pres. Ross Pillari also denied Boies's allegations. "There is a very strong, high quality proposal sitting before the legislature in Alaska to bring that gas to market," he said.

He and the other oil company executives, who testified as a group following the first panel, argued that their companies need to be large enough to underwrite massive projects such as the planned Alaska gas pipeline.

Tillerson said, "It will be the largest construction project of any kind undertaken in North America. It will require an investment of $20 billion, but it will provide consumers with an important new source of natural gas."

ConocoPhillips Chief Executive Officer James J. Mulva said, "For companies to compete in this atmosphere where such large commitments have to be made, they have merged to create more efficient operations and leaner cost structures."

'More efficient'
Chevron Corp. Chief Executive Officer David J. O'Reilly said oil industry mergers over the past 2 decades have made US companies "more efficient in the production, refining, and marketing of energy supplies."

They also were necessary because foreign national oil companies, not publicly traded multinational firms, control most of the world's remaining oil and gas resources, he added.

"US companies had to develop economies of scale to compete in the world marketplace. Their investments have helped increase production outside OPEC," O'Reilly said.

Size also matters when it comes to refining and marketing, according to Valero Energy Corp. Chief Executive Officer William R. Klesse. Downstream independents have to be extra efficient because they don't have exploration and production units to offset refining and marketing slumps, he said.

"Improving refineries takes expertise and capital. Valero Energy has more of both because it is bigger than the companies from which we've purchased refineries," Klesse said.

Shell Oil Co. Pres. John Hofmeister said more attention needs to be paid to developing domestic oil and gas resources. "For the past 5 years alone, Shell has invested over $1 billion/year to develop offshore resources in the Gulf of Mexico," he told the committee.

But Shell is frustrated because many of its onshore drilling permit applications can't get processed because there aren't enough federal employees to handle them.

"It is ironic that some of the same voices that call for lower prices also continue to place off-limits supplies that can be produced in an environmentally safe manner using today's technology," Hofmeister said.

Contact Nick Snow at nsnow@cox.net.

Related Articles

PHMSA proposes pipeline accident notification regulations

07/02/2015 The US Pipeline and Hazardous Materials Safety Administration has proposed new federal oil and gas pipeline accident and notification regulations. ...

Quicksilver Canada gets LNG export approval

07/02/2015 Quicksilver Resources Canada Inc. has received approval from the National Energy Board of Canada to export 20 million tonnes/year of LNG from a pos...

FourPoint Energy to acquire Anadarko basin assets from Chesapeake

07/02/2015 FourPoint Energy LLC, a privately owned Denver company, plans to acquire oil and gas assets from Chesapeake Energy Corp. subsidiaries Chesapeake Ex...

Origin lets contract for Otway basin fields

07/02/2015 Origin Energy Ltd., Sydney, has let a $1.3 million (Aus.) contract to Wood Group Kenny for provision of a detailed engineering design for the onsho...

Puma Energy completes purchase of Murco’s UK refinery, terminals

07/02/2015 Singapore-based Puma Energy Group Pte. has completed its purchase of UK midstream and downstream assets from Murco Petroleum Ltd., a subsidiary of ...

BP to settle federal, state Deepwater Horizon claims for $18.7 billion

07/02/2015 BP Exploration & Production Inc. has agreed in principle to settle all federal and state claims arising from the 2010 Deepwater Horizon inciden...

MARKET WATCH: NYMEX oil prices plummet on crude inventory build, Iran deadline extension

07/02/2015 Oil prices plummeted more than $2/bbl July 1 to settle at a 2-month low on the New York market after a weekly government report showed the first ri...

API to issue recommended practice to address pipeline safety

07/01/2015 The American Petroleum Institute expects to issue a new recommended practice in another few weeks that addresses pipeline safety issues, but the tr...

Shell Midstream Partners takes interest in Poseidon oil pipeline

07/01/2015 Shell Midstream Partners LP has completed its acquisition of 36% equity interest in Poseidon Oil Pipeline Co. LLC from Equilon Enterprises LLC, a s...
White Papers

UAS Integration for Infrastructure: More than Just Flying

Oil and gas companies recognize the benefits that the use of drones or unmanned aerial systems (UAS) c...

Solutions to Financial Distress Resulting from a Weak Oil and Gas Price Environment

The oil and gas industry is in the midst of a prolonged worldwide downturn in commodity prices. While ...
Sponsored by

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by
Available Webcasts


Operating a Sustainable Oil & Gas Supply Chain in North America

When Wed, Oct 7, 2015

Short lead times and unpredictable conditions in the Oil & Gas industry can create costly challenges in supply chains. By implementing a LEAN culture of continuous improvement you can eliminate waste, increase productivity and gain end-to-end visibility leading to a sustainable and well-oiled supply chain.

Please join us for this webcast sponsored by Ryder System, Inc.

register:WEBCAST


The Resilient Oilfield in the Internet of Things World

When Tue, Sep 22, 2015

As we hear about the hype surrounding the Internet of Things, the oil and gas industry is questioning what is different than what is already being done. What is new?  Using sensors and connecting devices is nothing new to our mode of business and in many ways the industry exemplifies many principles of an industrial internet of things. How does the Internet of Things impact the oil and gas industry?

Prolific instrumentation and automation digitized the industry and has changed the approach to business models calling for a systems led approach.  Resilient Systems have the ability to adapt to changing circumstances while maintaining their central purpose.  A resilient system, such as Maximo, allows an asset intensive organization to leverage connected devices by merging real-time asset information with other critical asset information and using that information to create a more agile organization.  

Join this webcast, sponsored by IBM, to learn how about Internet of Things capabilities and resilient systems are impacting the landscape of the oil and gas industry.

register:WEBCAST



On Demand

Taking the Headache out of Fuel License and Exemption Certificates: How to Ensure Compliance

Tue, Aug 25, 2015

This webinar, brought to you by Avalara, will detail the challenges of tax document management, as well as recommend solutions for fuel suppliers. You will learn:

-    Why it’s critical to track business partner licenses and exemption documents
-    The four key business challenges of ensuring tax compliance through document management
-    Best practice business processes to minimize exposure to tax errors

register:WEBCAST


Driving Growth and Efficiency with Deep Insights into Operational Data

Wed, Aug 19, 2015

Capitalizing on today’s momentum in Oil & Gas requires operational excellence based on a clear view of what your business data is telling you. Which is why nearly half* of oil and gas companies have deployed SAP HANA or have it on their roadmap.

Join SAP and Red Hat to learn more about using data to drive process improvements and identify new opportunities with the SAP HANA platform running on Red Hat Enterprise Linux. This webinar will also show how your choice of infrastructure impacts the performance of core business applications and your ability to achieve data-driven insights quickly and reliably.

*48% use SAP, http://go.sap.com/solution/industry/oil-gas.html

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected