Gulf of Mexico Energy Security Act of 2006

GULF OF MEXICO ENERGY SECURITY ACT OF 2006 -- (Senate - July 27, 2006)

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Mr. ALEXANDER. Mr. President, I have enjoyed hearing my distinguished friend from Oregon, who is always an effective and enthusiastic advocate. We worked together on many things, and I hope we will on many more things in the future.

I want to talk a little bit about the price of natural gas and how we can get it down. We have an opportunity to do that next week in the Senate. The Senate is considering the Gulf of Mexico Energy Security Act of 2006. It directs new oil and gas leasing in 8.3 million acres of the Gulf of Mexico. It directs the Department of the Interior to begin oil and gas leasing in designated parts of what we call lease sale 181--that is just the name of a geographic area--no later than 1 year after the bill becomes law, and directs leasing in 181 south, an area below the one just described, as soon as practical.

From the revenues that come from that, we will deal with those in the traditional way. First, there is a royalty, and 37.5 percent of the royalty will go to the affected States, which I assume includes Louisiana and Mississippi and Alabama, and perhaps the Presiding Officer's State of Texas. Then 12.5 percent will go to the State side of the Land and Water Conservation Fund under an arrangement that has been in the law for 40 years, to take some of the money we use from offshore drilling and use it for State parks, soccer fields, city parks. The money goes to the States.

We do a lot of things here in the Senate, and some may sound more relevant than others. But this is legislation next week that will affect blue-collar workers in America, it will affect homeowners, and it will affect farmers. It could affect the price of gasoline. The price of gasoline is set by the world marketplace, as the natural gas price is as well. But the major effect, I think, will be on the price of natural gas. Let me explain for a few minutes why I am talking about natural gas instead of gasoline.

If you stop and think about natural gas, one could easily argue that an extraordinarily high price for natural gas has more of an effect upon the lives of Americans than an extraordinarily high price of gasoline. A year ago, when the price of natural gas was about $15 a unit--to put that into comparison, that would be about the same thing as if gasoline were at $7 a gallon. That would be about the same thing. Now, imagine that. What if gasoline were $7 a gallon across the United States? We would have revolutions from Odessa, TX, to Mountain City, TN, and North and South, and in every direction. People would say: We can't stand that.

Well, we were having a very hard time a year ago with the natural gas prices at $15 a unit. Now, fortunately, they are back down to a little below $7 a unit. But this economy of ours, this United States of America, was built on a natural gas price of about $2. So it is three times as high as we were accustomed to it being.

And what difference does that make? Well, if we pass this legislation next week, we can reduce--or at least begin to stabilize--the price of natural gas, and that helps American workers. A lot of speeches are made here--and the Presiding Officer has heard as many as I have--saying no more outsourcing. Let's not send jobs overseas. Don't let them go to Germany, India, and China. Why don't we adopt policies that stop that?

Here is a good way to stop jobs from going overseas. There are 1 million jobs in the chemical industry in the United States today. These are good, high-paying jobs. Most of them are blue collar, but many are white collar. These are manufacturing jobs in the United States of America, millions of them. A place like Eastman Chemical in Kingsport, TN, is an example. Eastman Chemical, as far as we are concerned in Tennessee, has been there about as long as the Great Smoky Mountains. My uncle used to work there. In the Appalachian part of Tennessee, where income has never been high, for a long time Eastman has paid a good, high, steady wage to families. It has transformed the area. There are good schools, good roads, strong families, and good communities, with 10,000, 12,000, or 15,000 jobs right there in that area. People drive 50 to 80 miles to go to work. Some have been working there three and four generations. Eastman makes chemicals. Out of what? The major raw material for chemicals at Eastman is natural gas.

The president of Dow Chemical testified before the Energy Committee that natural gas, used as a raw material, accounts for 40 percent of Dow's costs. So if the price of natural gas goes from $2 to nearly $7, as it is today, or to $15, as it was last year, what do you suppose happens? If Eastman is going to expand, or if Dow or another company is going to build another plant, are they going to build it in the United States? No, those jobs will go overseas, and they have been. There are maybe 100 chemical plants being built around the world. Only one is being built in the United States, and the major reason is the high cost of the raw material, natural gas.

So there is the first reason the vote we are having on Monday afternoon at 5:30 makes a difference to the average American and to all Americans. Well, none of us are average. We are all individuals. We like our jobs. There are a lot of jobs at stake, and it is not just the chemical industry that is affected by the high cost of natural gas.

A year ago, the Tennessee Farm Bureau joined me in sponsoring a roundtable on natural gas prices when they were at $15. One of those who was at the roundtable was the president of Saturn. The General Motors Saturn plant came to Tennessee when I was Governor. It is an innovative plant, and we are proud that they chose Tennessee. At the roundtable, the president of Saturn said to me: We have done about all we can, in terms of efficiency, to deal with this incredible cost of natural gas in our automobile plant. After this, it is going to begin to affect the cost of our cars.

If the cost of auto parts suppliers and the cost of automobiles that are manufactured in the United States goes up, the jobs go overseas. If you can put an engine plant in Germany, or some other kind of supplier in Mexico, they will do that because of the high cost of natural gas. So it affects manufacturing.

The Tennessee Farm Bureau was helping me host that roundtable because the high cost of natural gas affects farming. Farming uses a lot of energy and uses a lot of fertilizer. The biggest raw material in fertilizer is usually natural gas. So the price of fertilizer doubles when the price of natural gas goes up like that.

The rising price of natural gas affects millions of Americans--workers, farmers, and also those who are heating and cooling homes with natural gas. What do you suppose the local gas company does after a while when the price of natural gas goes from $2 to $15? What do you think that will do to your local bill? It is going to go right through the roof. For retired families, for low-income families, the high price of natural gas hurts. So the vote we are having on Monday is about blue collar workers, about farm families, and it is about all the families who heat and cool with natural gas. That is the importance of natural gas prices.

Now, I see my friend from Arkansas here. I assure him that I am not going to be too extensive in my remarks. I look forward to his. I have a few more things I would like to say.

The second point I want to make is that the bill we are dealing with Monday is part of a comprehensive plan. I have heard a few colleagues come here and say we cannot drill our way out of this big problem we have with oil. They are absolutely right about that. Everybody in this Senate knows that because we spent 10 years working on a comprehensive energy bill--the Energy Policy Act--which we enacted about a year ago after weeks and weeks of debate. It could have been called the ``Natural Gas Price Reduction Act.'' I am not going to stand here and say that bill is the reason the natural gas price has gone from $15 last summer to $7 today, but I hope it helped.

Market forces overrode all of that. But the Energy Policy Act surely put us on the right path, because to reduce the price of natural gas and to begin to stabilize the price of oil and make sure this big country of ours, which uses 25 percent of all of the energy in the world, has a steady supply of reliable, low-cost energy that is clean and as carbon-free as possible, we set this country on a different path by passing that comprehensive energy legislation a year ago, and we started with conservation.

We need to be more aggressive about conservation, and there may be a conservation bill that we ought to enact later this year or next year. We also aggressively moved to encourage nuclear power because nuclear power produces 20 percent of all of the electricity in America and 70 percent of the carbon-free electricity in America. That means it is our major weapon against global warming. If my friend and fellow Tennessean, Al Gore, were to do a sequel to ``Inconvenient Truth'' and call it ``Inconvenient Truth II,'' it would be about nuclear power. That is the solution to global warming.

So, first, we encouraged conservation. Then we began what is turning out to be a renaissance of interest in nuclear power.

Third, the Energy Policy Act included incentives for clean coal. We have a lot of coal. So if we make more electricity by nuclear power and more electricity by coal and we conserve to begin with, then there is less demand for electricity made from natural gas and the price goes down.

Almost all of our new electric powerplants over the last 10 years were made by natural gas. That is like burning antiques in the fireplace to heat your home. That is a pretty dumb way to go about the business of producing electricity.

Let's conserve, build nuclear powerplants, encourage the use of clean coal, recapture the carbon, deal with global warming, reduce the price of natural gas, and that is not all. We also made it easier in the bill last year to import liquefied natural gas from overseas. That is a complicated process. We don't want to get into the same shape in natural gas that we are with oil, where we get most of it from overseas, but we can increase imports of LNG. Bringing it into terminals here and piping it into our system helps increase our supply, and that lowers the price and, apparently, that has begun to work.

Renewables help. There are some things we can do in that area. We can make ethanol from corn. We can make biodiesel from soybeans. I held a roundtable in Tennessee on biodiesel the other day. I even heard in a hearing that a factory is opening in Oak Ridge that will make ethanol from coal. We can make fuels from other sources, but we need a lot of fuel for cars and trucks, and we need a lot of fuel for electricity in this country that uses 25 percent of all of the energy in the world.

One thing we did not do last year was take any significant step to increase the supply of natural gas that comes from the United States. I think any logical person would say if you are going to take a comprehensive look at the high price of gasoline and the high price of natural gas and its affect upon Americans, you would want to include increasing the supply while we are transitioning to other forms of energy production. This is going to take us 5 or 10 years. In the meantime, we don't want to pay $7 for gasoline and $15 for natural gas. One way to do it is to increase our supply.

That is why we are voting on Monday on deep sea exploratory drilling in one of the most promising areas in the world for more natural gas. That is what we call Lease Sale 181. Someone said on the Senate floor there wasn't much gas down there. I heard the Senator from Louisiana say the following, and I believe this is true: It is enough to heat 6 million homes for 15 years.

It is six times the amount of the liquefied natural gas that we are importing today in the United States. That is a lot of gas. It is more oil than we import from Saudi Arabia, our principal supplier of overseas oil. It is more oil reserves than Wyoming and Oklahoma combined.

So in our great big economy, where we use 25 percent of all the energy in the world, it may only be a small part of our overall needs, but it is a lot when you think about heating 6 million homes for 15 years. And I suspect that if we move ahead aggressively to tap this new supply of natural gas and oil, it will help to stabilize the price of natural gas and might even move it down a little and help the blue collar worker, the farmer, and the homeowner.

Some say that energy independence is not a real goal. I don't agree with that. What I mean by energy independence is that the United States will not ever again be held hostage by some other country. It doesn't mean we won't buy oil from Mexico or natural gas from Canada. But we don't want to have to do that if we don't want to. So that is why, in the comprehensive Energy bill last year, we accelerated research for hydrogen fuel cell vehicles and gave incentives for hybrid cars. We want to reduce our dependence of oil overseas and transform our economy permanently. We don't want to drill our way out of the problem. We all know we can never do that.

Over the next 5 or 10 years, we'd better make sure we use the oil and natural gas we have available in this country if we want people to be able to drive their cars, work their farms, keep their jobs, and pay their bills. That is what we will be voting about Monday at 5:30.

We have been extremely careful with the environmental impact of this bill. I am very proud of Senator Domenici and others for what they have done on this issue. These rigs will be 125 miles away from Florida. You can only see about 20 miles out to sea. So that is a long way out. They are out of the way of airplanes and military craft. The technology we have means there is more natural leakage of oil from the sea floor than from all these rigs out there. So the environmental damage is minimal. Plus, we are going to take half the revenues from this drilling and use it for environmental purposes. I think that is great. Mr. President, 37 1/2 percent goes for wetlands and other areas in the Gulf Coast heavily damaged by hurricanes, and 12 1/2 percent is an outdoor recreation and conservation royalty. It is not a lot of money, but it begins to say that we are going to have an environmental benefit. It is a balanced formula that a majority of Senators can easily support.

Mr. President, this is a focused bill. This is a little left over work that we didn't get done last year when we passed a comprehensive piece of energy legislation that put that ``freight train'' energy policy moving slowly down the track in the right direction, toward large amounts of clean, low-cost, reliable, domestic-produced energy.

We had in that bill conservation, nuclear power, clean coal, and we made it easier to import natural gas. We had extensive support for renewables, but we didn't do anything about domestic supply. This finishes the job. So that is why this is a focused bill.

There are many other great ideas about energy, and whenever we subject ourselves to an energy debate, it will take us a long time because we have many good ideas and opinions. But from time to time, we need to take a focused idea about which there is emerging consensus and do it.

Two years ago, you could not even mention the idea of offshore drilling here. Last year, we had a majority of votes in the Senate for it, but we could not get to 60. This year, we got 86 votes on the motion to proceed, and we have a broad bipartisan consensus. I suspect in future years we will find other ways to permit, say, Virginia, for example, if it chooses, to permit drilling for oil and gas in certain areas offshore where the rigs cannot be seen, and use some of those revenues from drilling to create a trust fund for education, use them to lower taxes, or use them to improve the coastlines of Virginia.

I know if I were Governor of a coastal State, I would do that in a minute. I would rather not have an income tax, and I would rather have the best and biggest trust fund for my university system. That is exactly what Virginia could do, but we are not doing that here. We will address that when there is a consensus about it. There is a consensus about this.

As we move toward the end of the week and as people begin to think about what the Senate is doing that affects their lives, if you are a manufacturing worker in this country, we are going to affect your life at 5:30 on Monday afternoon. If you are homeowner paying your bill for 105-degree heat with natural gas, we are going to affect our life at 5:30 on Monday afternoon. If you are a farmer and have seen the price of fertilizer double, we are going to affect your life at 5:30 on Monday afternoon. We are going to vote for you if we vote for the energy security bill on Monday.

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