Senate, House approve bills to suspend SPR oil purchases

The US Senate and House overwhelmingly approved bills on May 13 to suspend crude oil purchases for the Strategic Petroleum Reserve through the end of 2008 unless prices fall below $75/bbl for 90 days.

May 14th, 2008

Nick Snow
Washington Editor

WASHINGTON, DC, May 13 -- The US Senate and House overwhelmingly approved bills on May 13 to suspend crude oil purchases for the Strategic Petroleum Reserve through the end of 2008 unless prices fall below $75/bbl for 90 days.

It was not clear what would happen next since the bills might need to be reconciled in a joint conference. But the margins of approval (97 votes to 1 in the Senate, 385 to 25 in the House) showed that there was more than enough support to override an anticipated presidential veto.

Discussion in both chambers emphasized that each measure was a small, but immediate, effort to reduce exceptionally high crude oil prices. "When the American consumer is being burned at the stake, his government should not be carrying wood for the fire," said Byron L. Dorgan (D-ND), who introduced the Senate bill on Feb. 6.

Republicans in the House and Senate said efforts by Democrats to put less crude in storage and more onto the open market belatedly acknowledged that supplies are important. "I want to thank the majority for bringing this bill to the floor and saying we should bring on more supplies. But we shouldn't stop at 70,000 b/d. Let's support coal-to-liquids research and opening more of the Outer Continental Shelf," said Rep. John M. Shimkus (R-Ill.).

But the Senate rejected a bill which would have done just that, as well as authorizing leasing on the Arctic National Wildlife Refuge's (ANWR's) coastal plain, by a vote of 56-to-42 immediately before it began to debate Dorgan's bill. Mary L. Landrieu (D-La.) was the single Democrat to support the measure, which Pete V. Domenici (R-NM), the Energy and Natural Resources Committee's ranking minority member, introduced on May 1.

A gathering storm
During floor debate on his own bill, Domenici said that suspending SPR purchases while prices are so high was a good first step but hardly constituted an energy policy. "Make no mistake: A growing and gathering storm is swirling around this nation. It's centered around our dependence on foreign oil," he warned.

Democrats questioned the need to open more domestic federal tracts to the oil and gas industry when many tracts that have been leased already have not been developed. Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) said it may be necessary to begin charging leaseholders who don't move promptly to begin drilling. "We need to get more of this domestic oil and gas out of the reserves column and into the production column," he said on May 12.

Bingaman also responded to Republican charges that Democrats have made energy a fiercely partisan issue. "The president set the tone for the debate 2 weeks ago in his Rose Garden press conference with his remarks about high oil and food prices. Unfortunately, in the time since, he has not been willing to sit down and try to develop a bipartisan strategy on either of these issues," he said.

But Majority Whip Carl M. Levin (D-Mich.) said that Congress also should be prepared to curb rampant oil market speculation, regulate energy commodity trades more closely, and tax major oil companies' windfall profits as outlined in the Senate Democrats' bill. "We can fight back against excessively high energy prices, but it will take all of our energy to do it," he said.

Republicans maintained that efforts will be futile unless domestic oil and gas production climbs. "Congress has turned a blind eye to affecting supply. All it talks about is a windfall profits tax. Let's not talk about things that won't work. Let's talk about things that will, such as increasing our domestic supplies," said Kay Bailey Hutchison (Tex.).

Pursue all options
Dorgan suggested that all options need to be pursued. "Yes, we need additional production. We need renewables. We need more energy efficiency. At least, we should increase the margin requirements for energy commodities. The fact is we have hedge funds, investment banks, and other speculators in the markets like never before," he said.

"If we keep cool heads and try to find common-sense solutions, we'll do what needs to be done. This bill is a quick first step toward addressing higher energy prices," said Rep. Nick Lampson (D-Tex.), an early cosponsor of the House bill that Rep. Peter Welch (D-Vt.) introduced.

But Rep. Joe Barton (R-Tex.), the Energy and Commerce Committee's ranking minority member, led opposition to the measure not so much because he disagreed with its concept but because it came to the floor without going through a hearing and markup in the committee and that it arrived under suspension, which prevented its being amended.

Barton said that he also thought Welch's bill was vague because it did not specify what would happen to royalties-in-kind, which represent most of the current SPR purchases, if the measure became law. He also said that the bill would bring only enough oil onto the market to reduce gasoline prices by about 2¢/gal at the most.

Supporters responded that Congress needed to start somewhere. "The question before us today is whether taking a small step that this president, his father, and President [Bill] Clinton each took will help bring prices down. History tells us that when we've used the SPR and suspended purchases, it actually has," Welch said.

"It astonishes me to hear so many of my colleagues say it is the president's fault. Clearly, this is something we need to work on together. I've voted against opening ANWR to leasing, but I also realize that conservation and alternatives won't be enough and we'll need to produce more oil and gas elsewhere," said Rep. Christopher Shays (R-Conn.).

"There is plenty of blame to go around. This is a short-term alleviation that will give us time to take more decisive actions. This administration denied the benefits of conservation and alternatives for years, and we're paying the price now," said House Democratic Caucus Chairman Rahm Emanuel (Ill.).

Contact Nick Snow at nicks@pennwell.com.

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