Senate Democrats introduce Consumer-First Energy Act

Nick Snow
Washington Editor

WASHINGTON, DC, May 9 -- US Senate Democrats presented their legislative response to record high oil prices on May 7, introducing their energy bill 6 days after Republicans introduced theirs.

The primary difference between the two measures was apparent in their titles. Republicans called their bill the American Energy Production Act. Democrats named theirs the Consumer-First Energy Act of 2008 and incorporated provisions similar to several in HR 5351, which the House passed by 236 to 182 votes on Feb. 27 largely along party lines.

Those provisions include moving $17 billion in financial incentives from major oil companies to alternative and renewable energy programs, authorizing federal investigation and prosecution of price gouging allegations during a national emergency, and making it possible for the Department of Justice to prosecute foreign oil producers for violating US price-fixing laws.

But the Senate Democrats' measure also would impose a 25% windfall profits tax on oil companies that do not invest in increased capacity or renewable energy sources. It would suspend federal purchases of crude for the Strategic Petroleum Reserve through December unless the 90-day average price fell to $75/bbl or less. And it would attempt to limit oil futures market speculation by keeping traders from routing transactions through offshore exchanges to avoid disclosure, and by substantially increasing margin requirements for oil futures purchases.

'Same failed policies'
"Even as it costs Americans more every day to fill up their [gasoline] tanks, Bush Republicans only offer more of the same failed energy policies that brought us to this point," said Majority Leader Harry M. Reid (D-Nev.) at a press conference about the Senate Democrats' bill. "But with this bill, Democrats are protecting consumers. Instead of helping Big Oil make more money at the expense of average Americans, we are forcing oil companies to change their ways. We will hold them accountable for unconscionable price gouging and force them to invest in renewable energy or pay a price for refusing to do so," he said.

Reid was joined by Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM), Finance Committee Chairman Max Baucus (D-Mont.), Joint Economic Committee Chairman Charles E. Schumer (D-NY), and Energy and Natural Resources Committee members Maria Cantwell (D-Wash.), Byron L. Dorgan (D-ND), and Bernard Sanders (I-Vt.).

"Startling gasoline prices are making it harder and harder for working American families, farmers, and small businesses to make ends meet," Bingaman said. "At a minimum, Senate Democrats are determined to take the short-term steps necessary to send the right signals to energy markets, and to ensure that proper safeguards are in place to protect the American consumer."

Baucus said it was time to repeal tax breaks for major oil companies, while Schumer said a windfall profits tax would force "Big Oil to pay its fair share" while helping to spur innovation. Dorgan, who introduced his own bill to suspend SPR purchases in February, addressed that provision. Cantwell, who for years has pushed for increased federal authority to investigate oil price gouging allegations, said it is time for Congress to pursue vigilant oversight of energy markets "to ensure Americans aren't the victims of a few rogue traders."

Sanders declared, "Record-breaking oil and gas prices are a crisis not only for commuters going to work, especially in rural areas, but also for family farmers, small businesses, truckers, airlines, grocery stores, restaurants, hotels, tourists, and indeed every sector of our economy. The bottom line is this: Congress and the president can no longer sit idly by while Americans are getting ripped off at the gas pump, the economy deteriorates, and ExxonMobil [Corp.], greedy speculators, and [the Organization of Petroleum Exporting Countries] are allowed to make out like bandits pushing oil and gas prices higher and higher."

Initial reactions
Robert B. Reich, who was secretary of the US Department of Labor during former president Bill Clinton's administration, issued a statement saying the measure is not a gimmick. "It will genuinely help cut the price of gas at the pump, and it's exactly what hard-pressed Americans need right now," he said. Representatives of a consumer group, Public Citizen, and a liberal think tank, the Center for American Progress, also endorsed the bill.

But the measure also quickly attracted strong criticism.

"New taxes targeting the US oil and natural gas industry would discourage investment in domestic fuel production, threaten US jobs, and penalize the millions of retirees and workers whose pension funds, individual retirement accounts, and 401K investments are invested in oil and natural gas stock," the American Petroleum Institute said in a statement.

"Windfall profit taxes have been roundly criticized as being detrimental to supply," said National Petrochemical & Refiners Association Pres. Charles T. Drevna. "The price gouging provision itself would result in real market manipulation on the part of the federal government, and using the SPR in an attempt to drive prices down fails the nation's security at a time when regional instability threatens global oil supplies. The only people who stand to gain from approval of this bill are state-owned oil entities. With 'solutions' like these, the alleged problems would be better left alone," said Drevna.

Pete V. Domenici (R-NM), the Senate Energy and Natural Resource Committee's ranking minority member and primary sponsor of the Republicans' bill, said, "The Democrats' plan to reduce gas prices is running on empty. Americans don't need more taxes and more investigation—they need more oil and lower energy prices. Yet nothing in the Democrats' plan will produce a single drop of oil," he said.

Republican bill contrast
The Republican-sponsored bill, on the other hand, would allow governors of states on the Atlantic and Pacific coasts to petition for federal offshore leasing, which would include revenue shares for the states, authorize federal leasing within the Arctic National Wildlife Refuge, grant the US Environmental Protection Agency authority to accept consolidated applications for permits required to construct new refineries, and repeal three provisions inserted into the Omnibus Appropriations Bill late year imposing drilling permit fees, reducing states' share of revenues and royalties from federal production within the states' borders, and delaying funding formulation of regulations for commercial oil shale leasing for one year.

It also would grant the US Environmental Protection Agency authority to accept consolidated applications for permits required to construct new refineries, suspend crude oil purchases for the SPR for 180 days, and repeal Section 526 of the 2007 Energy Independence and Security Act which bars federal agencies from contracting for alternative fuels with longer greenhouse gas life cycle emissions than the conventional fuels they would replace.

Minority Leader Mitch McConnell (R-Ky.) offered the Republicans' bill as an amendment to a flood insurance bill on the Senate floor soon after Reid and the Democrats announced their bill. Noting that Schumer last week said that another 500,000 b/d on world markets would bring relief at the gasoline pump, McConnell said he agreed, but added, "The difference is [that]I believe we should produce those additional barrels of oil right here in America, with American jobs, to bring prices down.

"The fact is, if President Clinton had not vetoed a bill to open [ANWR] 13 years ago, 1 million bbl of oil would be flowing from ANWR to American consumers every day, twice what the senior senator from New York said would bring relief at the pump," McConnell said.

Wayne Allard (R-Colo.) said the Republicans' bill was a dramatic contrast to the Democrats' measures. "Democrats in both chambers appear beholden to the environmentalist agenda, an agenda that wholly disregards America's economy…. The Congress has stymied efforts to produce trillions of cubic feet of natural gas [and] billions of barrels of oil and prevented the construction of new refineries, new power plants, and new hydroelectric facilities. This is bad economy," he said.

By the end of the Senate's May 7 session, however, it appeared likely that McConnell's amendment and the Democrats' bill would both require 60 votes for approval.

Contact Nick Snow at

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