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Kohl's 'NOPEC' Initiative to Reduce Gas Prices Included in Senate Leadership's Energy Package

Press Release

Location: Washington, DC

Senate & House on record as supporting NOPEC with veto-proof majorities

U.S. Senator Herb Kohl's legislation to permit the Department of Justice to bring actions against foreign states -- such as members of the Organization of Petroleum Exporting Countries (OPEC) -- for collusive practices in setting the price or limiting the production of oil is included in the Senate leadership's "Consumer-First Energy Act of 2008," which was announced today. Kohl's bipartisan "No Oil Producing & Exporting Cartels Act (NOPEC)," was passed overwhelmingly last year by the Senate as an amendment to the Energy Bill and by the House of Representatives as a stand-alone measure, both with veto-proof majorities.

"Skyrocketing fuel prices have family budgets stretched to the breaking point and small businesses teetering on the brink of survival. Historic oil company profits are not the only culprit. We are powerless to stop OPEC from engaging in blatantly anticompetitive practices like collusion and price-fixing that leave us at their mercy as oil tops $120 a barrel. If private companies engaged in such an international price-fixing conspiracy, it would be illegal. The actions of OPEC should be treated no differently because it is a conspiracy of nations," Kohl said.

The Federal Trade Commission has estimated that 85% of the variability in the cost of gasoline is the result of changes in the cost of crude oil. As crude oil prices exceeded $100, then $110 and then $120 per barrel, retail prices of gasoline hovering near $4 per gallon have now become commonplace. While prices have temporarily receded from time to time, the general trend is consistently, and significantly, upwards.

In 1979, a federal district court found that OPEC's price-fixing decisions were "governmental" -- not "commercial" -- acts and accordingly they were protected by the Foreign Sovereign Immunities Act. Subsequently, in 1981, a federal court of appeals declined to consider the appeal of that antitrust case based on the so-called "act of state" doctrine, which holds that a court will not consider a case regarding the legality of the acts of a foreign nation.

Kohl's NOPEC legislation effectively reverses these decisions by making it clear that OPEC's activities are not protected by sovereign immunity and that the federal courts should not decline to hear such a case based on the "act of state" doctrine. It clears away these judicially-created roadblocks so the Department of Justice could bring an antitrust case against OPEC for its price-fixing behavior.

The proposal will force OPEC to begin pricing in a competitive, free market manner or face the possibility of being prosecuted for civil or criminal antitrust violations.

Kohl's NOPEC legislation was passed by the Senate as an amendment to the Energy Bill on June 19, 2007 by a vote of 70 to 23. It also won approval in the House of Representatives by a vote of 345 to 72 on May 22, 2007.

Kohl's legislation is cosponsored by Senators Patrick Leahy (D-VT), Arlen Specter (R-PA), Russ Feingold (D-WI), Chuck Grassley (R-IA), Charles Schumer (D-NY), Tom Coburn (R-OK), Richard Durbin (D-IL), Olympia Snowe (R-ME), Carl Levin (D-MI), Barbara Boxer (D-CA), Bernie Sanders (I-VT), Sherrod Brown (D-OH) and Joe Lieberman (ID-CT).

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