Statement of Senator Ken Salazar on S. 3711, the Gulf of Mexico Energy bill

July 27, 2006

Mr. President, I rise to discuss S. 3711, the Gulf of Mexico Energy bill, which is before the Senate today.

I support authorizing additional oil and gas exploration and production in the Gulf of Mexico. As a member of the Energy and Natural Resources Committee, I voted in favor of S. 2253, bi-partisan legislation introduced by Chairman Domenici and Ranking Member Bingaman, which would open up Lease Area 181 and 181 South. I commend my good friends from the State of New Mexico, Senators Domenici and Bingaman, for their hard work on the bipartisan, Committee-passed bill.

Big Picture
But I also believe, Mr. President, that we should be pushing onto the Senate floor additional legislation that fully addresses the future of America’s energy policy, not just modest production increases in the Gulf of Mexico. With gas prices over $3 a gallon, growing instability in the Middle East, and a deepening dependence on foreign oil, today should be the day that we open a new chapter in our energy future.

Now is the time for new ideas. Now is the time for a real discussion of energy in this chamber. Now is the time to shape a new direction for America that gets us to energy independence.

Mr. President, I am proud of the bipartisan work we did last summer on the Energy Policy Act. I advocated then, and I believe today, that a sustainable energy policy in the 21st Century must have four cornerstones. Our energy future depends on the energy conservation, new technologies, renewable energy, and the development of our domestic resources.

Last year, the Energy Policy Act took some significant steps on each of these cornerstones. But we must do more and write an additional chapter on energy that builds on the positive steps of last year.

In the last year we have seen the painful reminders of the need for additional energy legislation:

• First, gas prices have jumped 25% in little over a year. 25%. And let’s not forget that they’ve doubled in the last three years.

• Second, Hurricane Katrina slammed into the Gulf Coast, showing the vulnerabilities of our oil and gas infrastructure to disastrous disruptions.

• Third, we have plunged into a deepening cycle of violence and confrontation in the Middle East, making even clearer the dangers of our dependence on foreign oil.

Today, we have an opportunity to raise the bar on our energy policy. The American people and a large, bipartisan group in this chamber share a vision for an energy independent America, powered by renewable energy and a new generation of clean and energy efficient technologies. But unfortunately, because we are not allowed to amend this bill, we will not have the chance to have a real discussion in this chamber about energy policy, to share new ideas that would improve vehicle efficiency, make biofuels widely available at filling stations, and create regional renewable portfolio standards. An honest debate over the nation’s energy policy should not be a partisan issue, but under the limited debate allowed by the majority these good ideas will remain locked in the closet, and will not see the light of day, at least in this Congress. That is unfortunate, Mr. President.

I want to briefly highlight four ideas that we should bring forward, today, in this chamber.

First, we should create a national renewable electricity standard. We passed a renewable portfolio standard less than two years ago in Colorado, requiring that 10% of the power that utility companies deliver come from renewable sources by 2037. This forward-thinking initiative has already spurred a boom in renewable energy production in our state, creating jobs, revitalizing rural economies, and encouraging the development of new technologies.

We can do the same thing on a national level. In fact, Senator Bingaman’s renewable portfolio standard passed in the Senate last year but was rejected in conference with the House. I believe we should have a flexible renewable electricity standard that accounts for regional differences, but there is no doubt that a renewable electricity standard would usher in a new era in renewable energy production across the country, reducing our dependence on fossil fuels.

Second, we should establish aggressive goals for reducing our dependence on foreign oil, and we should employ the full force of our policies to achieve them. S.2025, the Vehicle and Fuel Choices for American Security Act, which I and a large bipartisan group of Senators have introduced, establishes achievable goals of saving 2.5 million barrels of oil per day by 2015, 7 million barrels by 2026, and 10 million barrels by 2030.

Third, we need to put more biofuels and biofuel-powered vehicles on the road. Right now, the U.S. consumes around 20 million barrels of oil every day. Two thirds of the oil we consume is for transportation. We need to substitute this oil with biofuels, grown right here in our farms and fields. To do this, we need to bring more gallons of biofuels to market, give consumers access to alternative fuels at filling stations, and retool America’s vehicle fleet to run more efficiently and on alternative fuels. S.2025 does this, and we should bring this bill to the floor today as an amendment to this bill.

Fourth, we should have a candid discussion of how to improve the fuel economy of our vehicles. A number of proposals are circulating in this chamber that would, for example, raise CAFÉ standards or implement a feebate program. Last week, Senator Obama, Senator Coleman and others introduced a bill that takes a somewhat different approach to raising fuel standards – one that gets beyond the debate on CAFE.

Mr. President, there are many other great energy legislation initiatives circulating in this body. You see them in the Clean EDGE Act, the Vehicle and Fuel Choices for American Security Act, the Enhanced Energy Security Act of 2006, the Alternative Energy Refueling System Act and other bills that have yet to receive appropriate attention. Let’s bring them forward – it’s not as if they belong to one party or the other. The Roman philosopher Seneca once wrote: “The best ideas are common property.” So let’s get these good ideas out here, on the floor, where they belong.

It is time to write an additional chapter of our energy future.

Colorado’s contributions
Mr. President, the bill before us today will make available a modest supply of oil and gas for leasing, which is positive. Natural gas prices are spiraling out of control, hurting families and farmers across the country. Colorado farmers, for whom natural gas is an essential ingredient in their fertilizer, are already suffering under the weight of high diesel prices. Now they are also paying record prices for fertilizer. Needless to say, they are struggling to make ends meet.

Colorado is doing more than its fair share to help the country produce more natural gas. There are currently some 29,000 producing natural gas wells in Colorado, and industry estimates project that between 24,000 and 27,000 new domestic gas wells must be developed annually to meet our growing natural gas demand.

I am proud that Colorado is home to such a wealth of resources and that we can help the country through this energy crisis. But we have also paid a price for our contributions. Despite all we have done to develop our resources in an environmentally responsible way, the rapid pace of exploration and development is having a huge impact on Colorado’s land, water, and communities. The vast open spaces of the Rocky Mountain West are now home to pump jacks, pipelines, roads, and compressor stations. Hunters and anglers are seeing habitat loss and wildlife depletion. Local communities are fighting to protect their watersheds from lease sales that could jeopardize the safety of their drinking water.

While I am proud that Colorado can help satisfy the nation’s energy needs, we should also be pursuing balanced production of our resources in the Gulf of Mexico. As much as possible, the country should share the benefits and burdens of our energy production.

S.3711
As I said before, this bill makes some modest additions to our oil and gas supplies with additional leasing in the Gulf of Mexico. It is not, however, a perfect bill.

I deeply respect the concerns that Senator Bingaman and several of our colleagues have made about the fiscal implications of this bill. The new areas being opened for leasing, they point out, come at a high price: these leases will be on federal submerged lands on the Outer Continental Shelf, which belong to the taxpayers of all 50 states, yet 37.5% of the revenues from those leases will be paid directly to only four Gulf Coast states: Texas, Alabama, Louisiana and Mississippi. I have appreciated hearing Senator Bingaman’s thoughtful presentation on the fiscal repercussions of this revenue distribution and I applaud his work on the OCS issue, both in this debate and in the consideration of S.2253, the bipartisan bill we passed in the Energy and Natural Resources Committee.

LWCF Stateside
As I said, this bill is not perfect, but it does, for the first time, establish direct funding for the Land and Water Conservation Fund stateside grant program. It is truly historic that we are finally creating an honest to goodness conservation royalty for offshore leases. I appreciate Senator Alexander’s work on this initiative.

In 1964, Congress passed the Land and Water Conservation Fund Act, which said that if we are going to drill for oil and gas in the Outer Continental Shelf, we should be reinvesting a part of the revenues in parks, trails and open space for the use and enjoyment of the American people.

Congress’s initial vision was bold: it authorized $450 million a year for the Land and Water Conservation Fund stateside grants program, to be provided to states and local communities as matching grants, to help them build ball fields and trails, to help protect wildlife and open spaces.

Unfortunately, what was envisioned as a conservation royalty has been subject to the budgetary whims of Congress, meaning that this program has been consistently under funded. Year after year, Congress has appropriated far too little money – an average of $94 million over the program’s 42 year history – and the President has proposed eliminating the program the past two years.

With this bill, we finally create a permanent funding mechanism – a conservation royalty – that Congress envisioned in 1964. This is a new chapter in the history of the Land and Water Conservation Fund. It is the first step, I hope, toward securing full, permanent funding for this overwhelmingly successful program.

As it is drafted, this bill does not provide the level of funding for LWCF stateside that the program needs. [CHART]

The Congressional Budget Office estimates that LWCF stateside will receive an average of $15 million a year over the next 10 years. Divided among the 50 states, this is a pittance – an average of $300,000 per year for each state – well below the program’s historic funding level of $94 million a year, and dramatically below the authorized level of $450 million per year. Mr. President, I am deeply disappointed in this level of funding for stateside LWCF, and we will need to find other ways to supplement it.

The prospect for LWCF stateside funding after 2017 is less clear. Because spending after 2017 is outside the budget window, it is not included in CBO’s score of the bill. But based on available estimates of revenues and direct spending under the bill, it is likely that, beginning in 2017, stateside LWCF will receive at least $125 million per year. Indeed, it appears likely that beginning in 2018 – twelve years from now – stateside LWCF will receive additional funding from “new receipts” from areas 181 and 181 south, which would not count against the long-term spending cap. Eventually, this might be as much as $90 million per year, which would mean a total of $215 million/year ($90 million/year in new receipts plus the base amount of $125 million/year under the cap).

Even this funding level is less than half of what Congress envisioned in the authorization.

LWCF Amendment to S. 3711
Senator Alexander and I introduced a bill, S. 3562, that would fully fund stateside LWCF and I have prepared an amendment that echoes it. My amendment would provide at least $125 million per year of funding for the stateside LWCF program beginning in 2007 and at least $450 million per year beginning in 2017. My amendment would direct revenues from the re-negotiation of leases issued for the production of oil and gas from the Outer Continental Shelf that provide royalty relief without the necessary price thresholds.

The federal Treasury is owed billions of dollars for those leases, that mistakenly provide royalty relief without price thresholds, and it is only right to take a portion of those revenues and dedicate them to the Land and Water Conservation Fund. My amendment, with its $125 million annually between 2007 and 2016 and up to $450 million/year beginning in 2017, would ensure that stateside LWCF will be adequately funded.

Because Senators have been blocked from amending this bill, I can assure you that I will continue to fight to adequately fund stateside LWCF through other means. I am pleased to have Sen. Alexander as a partner in this effort and, given the success and popularity of this program, we are determined to succeed.

This funding mechanism for stateside LWCF does not bring us to our objective of full, permanent funding for the program, but it is a small step along the way. Through the appropriations process, and through future energy bills, we must take additional steps. Certainly when future offshore drilling bills come before this body, they should include a conservation royalty, so that what we are taking out of the ground is being reinvested in conservation programs.

Mr. President, I wish we were having a larger debate on our energy policy and I wish we were bringing some of the new ideas we have to the floor. The American people, I believe, deserve a great, public debate on our energy future. And they deserve a comprehensive, forward-thinking energy policy. But for now, it seems, we must satisfy ourselves with what is a hand: a bill that includes modest increases in production in the Gulf of Mexico and, I am proud to say, a conservation royalty.

Thank you Mr. President. I yield the floor and note the absence of a quorum.

• Office and Contact Information

For Press Inquiries, contact:

Cody Wertz, Communications Director
303-455-5999 (office)
303-350-0032 (mobile)

Andrew Nannis, Press Secretary
202-228-3630 (office)
202-674-7656 (mobile)