Hinchey Gets Update From FTC On Price Gouging Investigation; Calls For Congressional Hearings On Gas Companies'

Hinchey Gets Update From FTC On Price Gouging Investigation; Calls For Congressional Hearings On Gas Companies'
Underpayment Of Royalties To Federal Government

January 27, 2006

Says Energy Companies Must Be Held Accountable For Excessive Profits
While Americans Struggle To Pay For Gas & Home Heating Oil

Washington, D.C. - Four and a half months after Congressman Maurice Hinchey (D-NY) led a group of 94 House members calling for a federal inquiry into whether oil companies engaged in price fixing and market manipulation at the pump in the wake of Hurricane Katrina, the Federal Trade Commission (FTC) this week informed the congressman that it has moved forward with much of its investigation. The FTC told Hinchey's office that the agency has already handed out more than 100 subpoenas for its price gouging investigation and hopes to conclude its case by May. On a separate but related front, Hinchey yesterday formally requested a House hearing on the underpayment of royalties to the federal government by oil and gas companies using public lands -- an issue made public earlier this week by The New York Times.

"Energy companies must be held accountable when they exploit Americans at the pump by artificially raising prices," Hinchey said. "The price jumps we saw in the wake of Hurricane Katrina were unjustified and I am very pleased to learn that the FTC is making progress in investigating this matter and hopefully, will expose the oil companies if they committed fraud against the American people. At the same time, Congress must probe oil companies who have been underpaying royalties to the U.S., mostly for natural gas. It is an outrage that at the same time energy companies are making record profits and receiving billions of dollars in subsidies and tax breaks from the Republican-controlled Congress that they continue to be allowed to underpay royalties. It's a slap in the face to the American taxpayers."

FTC staff told Hinchey's office this week that the agency's investigation has moved steadily, with more than 100 subpoenas issued to major oil companies to look at wholesale price gouging, the refinery chain to see if they have been spiking prices or holding back supply, as well as several retailers. The FTC is now in the process of collecting data from these companies with the goal of releasing its findings in May.

Hinchey yesterday also formally called on the House Resources Committee to hold formal hearings to investigate the reported underpayment of royalties from energy companies to the federal government, which may have cost taxpayers $700 million this year alone. As reported in The New York Times, since 2001, natural gas prices have doubled, but royalties for the use of public land that holds that natural gas, has decreased from $5.35 billion to $5.15 billion. As energy companies look for ways to avoid paying fully royalties, the Bush Administration has helped them get away with it by cutting back on audits of those companies.

"It seems highly peculiar that oil and gas royalty collections today are roughly the same as they were five years ago, when the prices of these products have doubled," Hinchey wrote to House Resources Committee Chairman Richard Pombo (R-CA) and Ranking Member Nick Rahall II (D-WV). "Both the questionable auditing practices of the Interior Department and the equally questionable payment practices of the energy companies need to be fully and formally examined, to be sure that the taxpayers are not being cheated out of their money."

In addition to calling for congressional hearings, Hinchey is also joining a group of House members who will be calling for a Government Accountability Office (GAO), the investigative arm of Congress charged with examining matters relating to the receipt and payment of public funds, to conduct an inquiry into the underpayment of royalties. Additionally, Hinchey is the chief sponsor of the Energy for Our Future Act along with Congressman Christopher Shays (R-CT), which is a sweeping energy reform bill that includes provisions to repeal many of the royalty relief provisions that the Bush Administration and Republican-controlled Congress are currently giving away to energy companies. Finally, Hinchey indicated that he plans to use his seat on the House Appropriations Interior Subcommittee to question Interior Secretary Gale Norton on royalty relief when she appears before his committee in the coming months for a hearing on the agency's budget.

Hinchey's letter to the Chairman and Ranking Member of the House Resources Committee follows:

January 26, 2006

Chairman Richard W. Pombo Ranking Member Nick J. Rahall, II
House Resources Committee House Resources Committee
1324 Longworth House Office Building 2307 Rayburn House Office Bldg.
Washington, DC 20515 Washington, DC 20515

Dear Chairman Pombo and Ranking Member Rahall:

As you know, The New York Times reported on Monday that energy companies appear to be significantly underpaying their royalties to the U.S. government. Chairman Pombo, I was pleased to see that you have ordered the Interior Department to immediately provide "all relevant data" to the committee, to ascertain whether the public is getting full compensation for oil and gas development on public taxpayer-owned lands.

Beyond this important first step, I would respectfully request that the Resources Committee hold formal hearings to thoroughly investigate this issue, which may have cost the taxpayers $700 million this year alone. It seems highly peculiar that oil and gas royalty collections today are roughly the same as they were five years ago, when the prices of these products have doubled. Both the questionable auditing practices of the Interior Department and the equally questionable payment practices of the energy companies need to be fully and formally examined, to be sure that the taxpayers are not being cheated out of their money.

Thank you for your attention to this important issue. I hope you look favorably upon my request for hearings and I look forward to your response.

Sincerely,

Maurice D. Hinchey

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