Electric Transmission Property Depreciation

ELECTRIC TRANSMISSION PROPERTY DEPRECIATION -- (Senate - June 23, 2005)

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Mr. ALLEN. Mr. President, as we move forward on Energy legislation crucial for our country's national security, jobs, and competitiveness, I wish to raise an issue which is threatening global energy security. The surging demand for energy in developing countries coupled with the dynamic rise in power and influence of government operated energy companies is changing the global energy market. Specifically, I am concerned about the role of the People's Republic of China with its national oil companies, and the potential adverse effects on U.S. energy supplies. I am also concerned about our ability to compete for energy assets.

China's surging demand for energy is impacting the world. China has now emerged as the second largest consumer of energy, and demand could double by 2020. According to the U.S. Energy Information Administration, China is consuming 7.2 million barrels of oil per day and this is expected to rise to 7.8 million barrels of oil per day by next year. China alone has accounted for 40 percent of growth in oil demand over the last 4 years. According to recent studies, China's growing demand for oil is one of the significant factors driving oil prices to record high levels. With such growth in the Chinese economy, it is understandable why there is greater demand for energy in the form of coal, oil, and nuclear power as well as materials ranging from cement to steel.

With limited domestic resources, China has embarked on an aggressive program through its national energy companies to secure energy and in doing so has proposed acquisition of energy assets around the world, including assets of U.S. based companies. It has become increasingly difficult for private companies in the U.S. to compete against these government-owned energy companies, such as the Chinese state-owned company known as CNOOC. The inherent advantage that these state-owned companies have is that they can operate under non-market terms and conditions for the purchase of energy supplies and assets, including accepting very low rates of return. Thus, private entities in free countries are disadvantaged in competing for energy assets.

China in the past year has signed deals for oil reserved in Africa, Iran, South America, and now Canada. Today, one of China's largest state-controlled oil companies made a $18.5 billion unsolicited bid for Unocal, signaling the first big takeover battle by a Chinese company for a U.S. corporation.

Energy is a global issue and we need to understand the implications for American interests on how these energy shifts may impact us as well as the rest of the world.

It is important that we have a comprehensive review which would include a full assessment of the types of investments China is making in international and U.S. based companies, a better understanding of the relationship between the Chinese energy sector and the Chinese government, and what we can do to ensure a level playing field and flexibility in the global market. Perhaps most importantly, we need to understand how we can better work cooperatively to pursue energy interests as well as work together on conservation, energy efficiency, and technology.

It is nice to talk about working cooperatively with China, but I am concerned that we may be headed on a collision course. Energy is the lifeblood of economic growth and we are beginning to see an imbalance occur. I look forward to hearing from the administration to gain a better understanding of the issues and how the U.S. can best proceed to secure our future energy needs.

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