Hurricane Katrina

HURRICANE KATRINA -- (House of Representatives - September 06, 2005)

The SPEAKER pro tempore. Under the Speaker's announced policy of J anuary 4, 2005, the gentleman from New Mexico (Mr. Pearce) is recognized for 30 minutes as the designee of the majority leader.

Mr. PEARCE. Mr. Speaker, we have seen unprecedented suffering in this Nation in the last weeks. No one in this country has been able to comprehend the size and scope of the destruction. To put it into perspective, one of my colleagues pointed out that the size of the area affected is the size of Wyoming. Another pointed out that the size of th e area affected was equal to the nation of Great Britain. So as we talk about our failures and our successes, I think it is important that we really discuss Katrina in an overall view.

I know that from my perspective there are going to be three major challenges. We have to deal with the human suffering that is felt by every one of the families who have lost loved ones but also by those people who are displaced. So the human suffering in terms of jobs lost and regaining jobs of any sort, regaining an inc ome in order to pay for current expenses, some way to access the safety nets that this Nation is providing, that is one challenge of the problem.

The second challenge is rebuilding the entire gulf coast region, and that is going to be a long and arduous task and one that is going to require the dedication and commitment of the entire Nation.

But the third thing that I think we must be aware of as leaders and as the House of Representatives is the effect on our economy.

So tonight I am joined by the gentleman from Kentucky (Mr. Davis). We would like to discuss the effects of Katrina that we see and the things that we think the Nation should be aware of as we move into the days ahead. I would like to discuss some of the responses that we have seen and some that we have not seen.

But at this point, I yield to the gentleman from Kentucky (Mr. Davis) to talk about his perceptions of the disaster and the destruction that we have seen.

BREAK IN TRANSCRIPT

Mr. PEARCE. Mr. Speaker, I thank the gentleman from Kentucky for his comments and for his heartfelt expressions of what this Nation is about.

I wanted to discuss bri efly the fact that there is great concern about the responses of our Nation, and we were treated tonight to an unprecedented, unprecedented in my tenure here in this Congress, 3 hours from administrative Cabinet-level Secretaries being here to address this House of Representatives and answer questions and be accountable. The information shared was extremely timely and was poignant.

I would point out that one of the most impressive things to me was the responses of our military, and again, as we talk about the numbers of military, keep in mind that they may sound like a lot, but spread over 90,000 square miles, spread over the entire region of Great Britain, then we begin to understand just the proportions of responses that were actually required.

Before the hurricane ever struck, a state of emergency was declared by the President. So we had a couple of days of lead time before Katrina actually begins to hit and move. This is a time line from August 26, 27, 28 and on, so we have Katrina hitting Florida about this point. We have already at that point activated troops in both Louisiana, listed in blue, and then Mississippi, listed in green. So we have activated troops prior to the hurricane actually moving into the Gulf.

As it moved closer and closer into New Orleans and actually strikes New Orleans at this point, we can see that the troop level is now at 5,000, most of those troops in Mississippi; about half in Mississippi and about 40 percent in Louisiana. Then, the next day, we have an increa se then to almost 8,000. Within 24 hours, now we are up to 10,000 troops, and we can see that the increase of troops has gone to where we have now 60,000 troops mobilized and on scene in this 90,000-square-mile region. Tomorrow, there will be an additional 10,000 troops. We will have at that point about 70,000 uniform personnel. About 43,000 of those are National Guard members, and about 17,000 of the ones on duty today are active duty military.

But we also have to understand that the Coast Guard was ab le to be activated, and the Coast Guard rescued more people, about three times more people in this 1-week period than they normally rescue in about a 1-year period. About 60 percent of the helicopters available to the Coast Guard were actually activated and being used.

And one of the problems that we faced is that c ommunications throughout the region were just almost nonexistent; and especially as you went deeper into the highly populated area of New Orleans, the flood waters obliterated most of the communications systems. The wireless communications were not available. Cell phone communications were not available. The regular telephone communications were not available. So even if we had people there and on-site, they could not necessarily be directed right to the points where the problems were.

But the responses that many are finding inadequate, and we have to admit as a Nation, the President, I think, said it best, that he appreciated the strength of responses, but they did not result in the kind of results we would have wanted to have.

But once we get past that, we must evaluate what we should do in the future, not just try to point fingers in the current circumstance. I would point out that there is still much work to be done. So as we in this city begin to concentrate on recriminations and asking for resig nations, what we are actually doing is distracting from those people who are actually on-site and trying to go through their jobs.

There will be plenty of time to give consideration to the problems and the flaws that we did face. But at the current point I think that our administration is focused correctly on what we should be doing currently to ease the suffering of those people who have been displaced, to regain the control of the city's infrastructure, to re-establish the infrastructure in the city a nd in the rural areas that surround New Orleans, but also dealing with the misery of lost lives.

The one thing that I think is extremely important for us to address with respect to New Orleans is the economic impact that we are going to face just from the loss of refining capacity.

I have had good questions that are raised by constituents and friends of mine about why the price of gasoline would be jumping as it relates to this emergency, and so I would like to go through just a brief discussion abo ut the components of production and the price of gasoline.

We, first of all, need to be aware that gasoline is the end product, that we actually get it as a refined product of crude oil. To get crude oil, the first thing that we must do is to drill wells. And so, as I just put up here the basic sequence of getting refined gasoline, the first thing that we have to do as a Nation is drill oil wells or gas wells. And be aware when we are talking gas we are talking natural gas, not gasoline. But we drill. A nd when we drill successfully, we have oil that then must go through pipelines, and so we have got a transportation question here.

Once the pipelines conduct the oil, usually it is carried to refineries, and so we have got the refinery then accepts the oil, and from the refinery then we get to usually a series of products. But the ones that most of us would be familiar with would be that we get either gasoline, which we get at the pump, or we get diesel which, again, many of our trucks going across the highways would use.

Finally, then jobbers, these are independent, usually, operators who would go to the refinery and pick up gasoline in 10 or 12,000 lots and deliver it to service stations. So we then have the trucking from the refinery and finally to the service station.

Now, that entire process is very complex. Just the drilling of the oil well might take 30 to 50 days, even for shallow oil wells. For the deep ones like you see offshore from New Orleans, we are talking billions of dollars and ye ars to literally put these facilities into place.

But then the conducting of the oil through the pipelines. Again, we put it in the refinery. It is at that point we begin to extract the oil or the gasoline or the diesel from the basic crude oil that comes from the oil well, and then the trucking to local service stations; and at that point, then you, as consumers, would drive up to the service station and access the fuel.

And what we see over here as a price, generally, the average price across the country has dropped a couple of cents in the last couple of days. But basically right now the retail price average for the Nation is about $3.04.

If we consider the source of that $3.04, where does that number come from, we have got a couple of charts that are extremely instructive. And the first one would show that when we have $3.04 of gasoline at the pump, that a $1.70 of that is created from the cost of crude oil itself. Refining creates $0.79 of the $3.04, and then the taxes that we add on top of t hat are the equivalent of $0.55.

Now, you can see that the cost of crude oil is the dominant component. About 55 percent of the price that you pay at the pump is going to come from the price of oil. So as we talk about the price of oil nationwide, it is in the high $60 range, and then has recently peaked up almost into the 70 or maybe into the $70 range, and then has decreased back down. And you would ask what effect is Katrina going to have on the price of gasoline at the pump, and why would it have th e effect.

The chart that I have got here shows the track of Katrina coming in. It came across Florida, swung down into the gulf. Actually as it cleared through Florida, it decreased to about a Category 1 storm, and the speculation was early that it would simply bring rain across the southern gulf coast. But what it actually did was circulate out south into the gulf, pick up energy from the systems that were already in the gulf, and then it swung back toward the gulf coast here.

And what is depicted right here in the dark zones are the oil platforms off the coast of southern U.S. there and the Gulf of Mexico. Also, we have got refineries that are listed here.

So two things happened that are going to affect the price of gasoline as far as this storm is concerned. One is we lost some production from these platforms off in the Gulf of Mexico. But then secondly, we lost almost all of the refining capacity here in this region around Mississippi, Alabama, and Louisiana. Now, that represents about 25 perc ent of our Nation's refining capacity.

We heard testimony tonight from the Secretary of Energy that much of that refining capacity is shut down simply temporarily. We have got about four of the 13 refineries that are going to suffer long-term damage, and it is still unknown. But let us say that we lose about 20 percent of our refining capacity. Then we can see that what we are doing is we are going to limit the amount of gasoline that is produced, and it is going to drive the price higher.

We have got several things that are driving the price of gasoline higher right now worldwide. One of the factors that we tend not to think of, we understand as a Nation we have increased population and we have increased the amount of driving, and so we know that we, as a Nation, are demanding more petroleum products, more gasoline.

ANNOUNCEMENT BY THE SPEAKER PRO TEMPORE

The SPEAKER pro tempore (Mr. Westmoreland). The gentleman from New Mexico (Mr. Pearce) is recognized for the remaining 30 minutes.

Mr. PEARCE. The thing that we do not often think about that drives this price higher is the fact that the emerging nations, China and India and the other emerging nations, are demanding tremendous high quantities of fossil fuels because that is the fuel of emerging economies. It is the fuel of our economy.

So worldwide, the demand for oil and gas is spiraling up, and yet we have limited supplies. Now, we as a Nation have made decisions that limit, first of all, the supplies of gasoline because we have not permitted new refineries in the past 30 years. It has been almost 30 years since we have built a new refinery. And only this year, earlier this year, did we even permit a new refinery, and it has not yet been built.

So one of things that is escalating the price of gasoline is that we have reached our capacity in refining. Not only is the price of crude oil going up, it has gone from $25, 3 or 4 years ago now, to $67, so that you can see the dominant cost of a price of gasoline coming from crude oil about 55 percent, we would expect that that would drive the price of gasoline higher. But then we have arbitrarily as a Nation chosen to limit our productive capacities because of the unnecessarily complex regulatory procedures that affect the p ermitting of new refineries.

Now, those are choices that we have made, and we are at the absolute capacity of our Nation to produce gasoline so that, for the first time in our Nation's history, we began to get gasoline in through imports, and that is not a good sign for the future of our economy because our economy, again, is built on affordable energy. We, now, then, again with Katrina coming in to the Gulf Coast region, we have lost somewhere between 5 and 20 percent of our refining capacity. That is going to then drive down the supply of gasoline available at the pump which is going to drive this price up. Now, the effect on our offshore platforms will not be such a large effect.

This Nation uses approximately 21 million barrels a day. The Gulf Coast region produces about 1.5 million barrels of crude oil a day, and so you can see that less than 5 percent of our productive capacity comes from this region. So even though we suffered some damage as a percent of our overall supply of crude oil, it is n ot going to be that large of an effect. Again, the largest effect coming from the restrictions to our refining capacity that we are going to find.

Now, as a side note, we as a Nation have chosen to limit the amount of crude oil that we produce so that we import more crude oil today than ever before in our Nation's history. We import about 13 million barrels a day, most of it coming from the Middle East, from Saudi Arabia, Kuwait and those nations. We also get oil from Mexico. We also get oil from Venezu ela.

Now, another factor that is going to very much affect the price of gasoline that we pay at the pump will be that Venezuela is currently talking to the nation of China, and China is trying to talk them into a 100-year contract with all of the production from Venezuela going to China for the next 100 years.

Now, we as a Nation get 15 percent of our imported oil from Venezuela. So you can imagine that, if that contract goes through with China, taking away the production that we currently get from Venezuela, sending it to China, that we are going to see possibly a 10 or 15 percent jump in prices.

Now, we have made choices to limit the amount of drilling that we do in this Nation so that we will be more immune to price manipulation from overseas from those countries that would import or export into us, and some of those choices are, for instance, in ANWR. Back in 1995, this Congress, both House and Senate, voted to drill in ANWR. That is an oil preserve, a wildlife preserve in Alaska. And there wa s a piece set aside strictly to do this drilling which has been stalled out by extremists. And so we as a Congress, both House and Senate, passed a bill which would allow drilling in ANWR, and President Clinton then vetoed that. If we had passed that bill and had it signed at that point, we would be experiencing about a million and a half barrels a day of production which would come down to this area.

Now, again, that is about the amount that we have gone in the past, and when we would get price spikes, we would go to the Saudi Arabians and ask them if they would increase production by a million and a half barrels a day to help us lower the price of gasoline at the pump and keep our economy on sound footing. But we instead did not pass that bill that would allow the drilling in ANWR, and we as a Nation now are facing these $3.04 averages. That is an average price. Actually, some places are paying a much higher price, but we are experiencing these prices of gasoline because of past decisions that we have m ade to limit drilling. This is ourselves. We as a Nation are limiting our drilling, but we also have limited our refining capacity.

Now, the energy bill that we passed recently, people would ask exactly what effect is that going to have on the price of gasoline at the pump. I would tell you that mostly what we did are things that would, long term, begin to limit our need for mostly natural gas. Natural gas is used to produce electricity, and we had great stimulation in the bill which would affect nuclea r. We have also had great stimulation for many other renewables, both solar, wind, bio-mass and other forms of renewables energy. But those are long term.

The only thing that really would affect the price of gasoline today is to increase the amount of crude oil production; that is drilling for more wells or to increase our refining capacity. Either one of those could have an effect on the price of gasoline today. But again, we, as a Nation, politically have decided in the past not to do that. And those are questions that we need to be asking ourselves right now.

How high is the price of gasoline going to go before we think that we as a Nation should permit more refineries to be built? I think that we have passed that point.

Now, my office, I am going to introduce in the coming week, we are proposing legislation that would in response to Katrina take the Federal excise tax off of gasoline. Currently, again, referring back to our chart, the price of gasoline is about $3.04; 55 cents of that $3.04 is made up of taxes. About 18.4 cents is a Federal tax. And our suggestion is that we as a Nation consider limiting that tax for a period of 6 months, so that the price of gasoline would fall immediately by 18.4 cents. And so you can see that we would be back under $2 a gallon for gasoline. But that is merely a short-term solution.

In the long term, if we want to affect the price of gasoline, we must increase refining capacity or we must increase drilling. In the past, we have implemented different method s of or different measures which would restrict our capabilities or voluntarily restrict our use, but what we found is, as we got more mileage in cars, then people simply drove more because they are going to spend a certain amount of their budget for mobility. That is the way we as Americans are. Now we can agree or disagree with it, but we found that those measures that were designed solely to increase the mileage of our cars in the past actually did not lower the demands for gasoline, but simply we drove more miles demanding more gasoline.

Now, one of the effects that I would like to visit about briefly before we finish is this trucking. Now, in my chart here, again we have got drilling, pipelines, refining, trucking to our local community and then the service station. But if we think of trucking in addition to not only trucking the gasoline from the refinery to a service station, then putting it in tanks at the service station, if we think about the trucking of all the goods and services along the high ways; when you are driving along and you see the motorcades of hundreds of thousands of 18 wheelers moving along, those are taking goods that have been produced across this Nation and delivering them to the points of use or marketing and that those truckers are experiencing extremely high cost increases because they demand a lot of energy.

They demand a lot of diesel, and the price of diesel is extraordinarily high right now.

So we have tremendous downward pressure on our economy. It is one of the reasons that we are suggesting that the Federal taxes could be deleted for a period of 6 months to give us a chance to evaluate just what the effect of this storm Katrina is going to be, but in addition, it allows us to begin to have this debate on how complex do we have to make it for ourselves to build new refin eries.

I think we know the elements of refining that would create difficulties in our environment. No one is going to watch as our environment is spoiled, but right now, we are limiting ourselves arbitrarily, even though we know the safety standards that we need to implement. I, for one, feel like we can do both. We can have safety and create new refineries at the same point. Likewise, we have limited drilling for the same purpose. I think that we can drill in an environmentally safe manner, and we are going to either have to do that or watch as the price of our energy increases. Katrina has simply accentuated the pressures that already existed inside our economy, and it is time for us, as a Nation, to look at the effects of our decisions in the past.

I would like to conclude my statements this evening by saying that, again, our hearts and our prayers go out to the people who have been suffering tremendously from this storm. We have seen the hearts of the Nation open up and accept these people who hav e been dislocated and have been taken in all across the Nation, into homes and into churches and into the Astrodome in Texas. I think that speaks so well of the compassion of this Nation and of our willingness to give of ourselves at a point where someone else is suffering.

I think that in the days ahead we are going to see this Nation pool its resources, to pool its ingenuity together. We are going to see people really begin to buckle down to approach the problems that we, as a Nation, are facing right now, and in a unified fashion, I think that we will see New Orleans cleaned up. I think that we will see a rebuilding effort across the entire Gulf Coast region. I think that we will see those economies come back into those States and communities that have been devastated by these current situations.

Again, we, as a Nation, owe it to ourselves to understand the full ramifications of what we face, and we owe it to ourselves to reinvest in those areas that have been so prolific and are so important to th is Nation's economy. New Orleans not only has the refining capacity, they not only have the offshore platforms through Louisiana, offshore from Mississippi and Texas, but they process many, many of our grain crops on the way outbound as we export them. Many of the imports coming in come through New Orleans. It is an extremely vital and important part of this Nation, and I join with the rest of my colleagues on both sides of the aisle saying that we feel like that the days ahead will see the most magnificent responses to some of the most deeply felt problems this Nation has ever seen, from either a natural or unnatural disaster.

Mr. Speaker, I thank the Chair for allowing me to address the situations that have occurred in the Gulf Coast.

http://thomas.loc.gov