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Rahall Statement on Strategic Petroleum Reserve Bill (H.R. 6022) |
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May 13, 2008
CONTACT: Allyson Groff or Blake Androff, 202-226-9019
Washington, D.C. - House Natural Resources Committee Chairman Nick J. Rahall (D-WV) today released the following statement on the "Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act of 2008", which includes provisions under the jurisdiction of the Committee:
"Mr. Speaker, I rise in support of H.R. 6022, the ‘Strategic Petroleum Reserve Fill Suspension and Consumer Protection Act of 2008.'
"At a time when crude oil is over $120 a barrel, it makes absolutely no sense for the federal government to continue purchasing massive quantities of oil in order to stick it in a hole in the ground for safe-keeping.
"Under the current situation, the federal government is buying oil at record-high prices to fill the Strategic Petroleum Reserve (SPR) at the rate of 70,000 barrels a day. These daily purchases create additional pressure on demand and further inflate prices at the pump. The SPR is roughly 97 percent full right now. We do not need to pay a premium to the oil companies just to top it off.
"In addition to the obvious economic reasons to suspend filling the Reserve now, the federal government should not use oil taken as a ARoyalty-In-Kind@ (RIK) from oil and gas production in the federal waters of the Gulf of Mexico to fill the Reserve. By way of background, RIK is one of two methods used by the government to collect the taxpayer=s share of production from the Nation=s substantial oil and gas mineral assets. The other method is good old-fashioned cash.
"I have been arguing for years that the RIK program is a bad idea. Under the pretense of ‘enhanced transparency' and ‘reduced litigation,' the oil industry, with a little help from its Republican friends in Congress and the Administration, snookered folks into believing that taxpayers would get a better deal if federal oil and gas royalty payments were made ‘in-kind' instead of paying in cash. Despite report after report, investigations and potentially even criminal indictments, the Minerals Management Service (MMS) has forged ahead with this misbegotten program. Today, the RIK Program is selling over 800 million cubic feet of natural gas per day and over 150,000 barrels of crude oil per day on the open market.
"The MMS reports that revenues from sales of RIK oil and gas in fiscal year 2006 were approximately $4.1 billion. However, we have no way of knowing if it got the best price or even broke even. Even the MMS itself estimates that the RIK program only increased royalty revenues by a meager 0.3 - which according to the Government Accountability Office during a recent Natural Resources Committee hearing, could not be confirmed.
"As further evidence of the problems with RIK, earlier this year, the Inspector General for the Department of Energy found chronic mismanagement in the transfer of oil between the Department of the Interior and the Department of Energy. During a brief four-month period of oil transfers between the two agencies, approximately 32,000 barrels of oil were lost or could not be accounted for - that is almost $4 million worth of oil that is simply gone. The GAO also concluded that the current method for filling the Reserve is not cost-effective.
"The bottom line - the RIK program should not be used to fill the Strategic Petroleum Reserve. Not now, not ever.
"Mr. Speaker, this bill is an important first step in reducing the pain Americans are feeling at the pump. It cuts off the flow of Royalty-in-Kind oil to the Strategic Petroleum Reserve at a time when that flow is neither necessary nor prudent. I believe we need to pass this bill and then take a closer look at the RIK program overall to see if that, too, is costing the American taxpayer more that it is worth."
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