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U.S. Senator: Inspector's Reports Reveal Government Ties to Oil Industry

Press Release

Location: Washington, DC

U.S. Senator: Inspector's Reports Reveal Government Ties to Oil Industry

The federal office that oversees offshore drilling is plagued by sordid ties to the oil industry, U.S. Sen. Bill Nelson charged today, based on a yet-to-be-released report by the Interior Department's inspector general.

Nelson said about a dozen people in an office of Interior's Minerals and Management Service ( MMS ) are under scrutiny by investigators.

The Florida Democrat said the inspector general's report is expected to be made public in a matter of days. It will cite improper and unethical behavior by some officials in the office that oversees offshore drilling - and the collection of billions of dollars of in-kind royalties from companies that lease

The report would come as Republican members of Congress try to use the final days of the administration and a hotly contested presidential election to ram through an unprecedented expansion of leasing for offshore drilling. Nelson said the oil companies want to start drilling in the country's most protected and populated coastal areas, even though they're sitting on 68-million untapped acres.

Problems inside the MMS program began surfacing in two other inspector general reports [ attached in pdf form ], one issued in September 2007, the second one this past May. In those reports, investigators found that officials "had inappropriate relationships with industry that could compromise their objectivity." Some officials were said to have allowed companies to belatedly alter bids, potentially costing taxpayers millions of dollars.

"This all shows the oil industry holds shocking sway over the administration and even key federal employees," said Nelson, a staunch opponent of expanded offshore leasing, though a backer of more domestic drilling. "This is why we must not allow big oil's agenda to be jammed through Congress."

The industry has been pushing for expanded leasing - especially off the coast of Florida - as a means of bolstering its bottom line. This summer, the GOP adopted a pro-industry mantra of "drill, baby, drill," claiming new leasing would lead to lower gas prices and American energy independence - two claims that many energy experts dispute.

The real solution to America's dependence on oil is getting off oil with the rapid creation of alternative fuels and cars and trucks powered by batteries or hydrogen, not petroleum, Nelson said. He said that's why he's told Senate leaders he'll filibuster any Senate bill aimed at expanding offshore leasing. And in a speech [ below ] on the Senate floor Monday, he said he wouldn't allow Florida to be a "sacrificial lamb" in the drilling debate.

Largely left out of the public debate of late is the fact that the oil industry hasn't even sunk the first well on the 68 million acres of federal land it already has under lease, including more than 30 million offshore acres in the Gulf of Mexico.

Meantime, leading energy experts, including at MIT, say [ in an attached pdf report ] that speculators and traders of oil contracts are largely responsible for the recent run up in the price of oil and gasoline. Nelson has joined other lawmakers in filing legislation [ attached ] intended to ban people from buying oil just to flip it for a profit.

Mr. NELSON of Florida. Mr. President, last week we heard chants, slogans--as if those slogans were going to solve the energy crisis--of drill, baby, drill. I think it is more appropriate to use the words of Tom Friedman: Innovate, baby, innovate. If we are going to solve this energy crisis, we have to have a comprehensive solution, and we need to unleash what America can do best, which is our intellectual capacity, our creativeness, our ingenuity. We need to unleash that capacity of America to get out and whip the energy crisis where we are addicted to oil. In fact, in this Senator's judgment, the single greatest threat to our security may well be our dependence on oil , not foreign oil but oil.

We all have been hearing from our constituents about what is the possible path for us to break this addiction, and we need to break the addiction and become energy independent in 10 years.

I caution against misguided rhetoric and hollow chants, as we have heard--of drill, baby, drill--as a seemingly swift and simple solution to high gas prices. It doesn't have any basis in reality. Remember the words of President Kennedy:

Real solutions are not easily or cheaply obtained, nor are they quickly and simply explained.

So as we approach it in a comprehensive way, it is not easily and simply explained. Common sense ought to tell us, since the United States has only 3 percent of the world's oil reserves, and yet uses 25 percent of the world's oil production, we can't drill our way out of the problem. Indeed, there are 65 million acres leased by the oil companies from the Federal Government, not one of which has been drilled. In the Gulf of Mexico itself--where the so-called gang of 10 that is now called the gang of 16 seems to want to pick on my State of Florida and wants to drill all the way up to within 50 miles of the coast--there are 32 million acres under lease by the oil companies, and not one of those acres has been drilled. Yet they are leased from the Federal Government. As a matter of fact, that includes 8.3 million acres on which this Senator worked a compromise to try to solve this problem and got it into law 2 years ago, 8.3 million new acres kept away from the military mission line where we do our testing and training off of Florida, kept away from the shores of Florida. Not 1 acre of that 8.3 million has been drilled since it was offered for lease.

More leasing would not stabilize Iraq or guarantee Saudi Arabia's long-term friendship, nor would it end the unregulated speculation that drove oil prices to over $147 a barrel and pushed pump prices to more than $4 a gallon. More leasing of Federal lands will only delay America's freedom from oil . If we do drill, baby, drill, we will dirty and destroy Florida's economy. Even worse, if this so-called gang of 16 puts it all the way up to 50 miles off of Florida, it will cut the heart and lungs out of the last area of unfettered military training for the U.S. military, the largest testing and training for the U.S. military in the world, which is the range in the Gulf of Mexico, all off of the coast of Florida.

No matter what anybody says, when the United States only has 3 percent of the world's oil reserves but uses one-fourth of the world's oil supply, drill, baby, drill is not going to work.

Now, that is what this Senator has been saying for years. By the way, now even a Texas oilman is saying the same thing. T. Boone Pickens has all of these commercial ads on TV, and he says we cannot drill our way out of this problem.

As a matter of fact, the White House report from 5 months ago that I have shared with the Senate several times says the same thing: That drilling in the Outer Continental Shelf of the United States will not change the price of gasoline one whit until the year 2030.

So what do we do? Well, for the short term, we need to keep bringing gas prices down by not wasting so much oil and by banning the greedy speculation on the part of the oil traders and the profiteers. We have a Senate investigation that has reported that there is lax Federal oversight of these traders, and that is as a result of a loophole that was slipped in in the dead of night in December just before Christmas in the year 2000 at the behest of the infamous Enron Corporation. BP, Amoco, Goldman Sachs, and Morgan Stanley also were instrumental in getting this so-called Enron loophole through Congress. Afterward, the price of both oil and natural gas skyrocketed, despite reports that oil supplies were mostly adequate.

Links between soaring oil prices and vast sums of money flowing into these unregulated commodities have been uncovered by the Senate Commerce Committee and the Homeland Security Committee. As a matter of fact, just last week, a report by the Washington Post pointed out, unbelievably, that of all the futures contracts for the oil commodities, 81 percent of all that trading was done by people who do not intend to use that oil . If true, done by the speculators: 81 percent.

We have had testimony in Congress by an ExxonMobil executive. We have had testimony from a Shell Oil Company executive who said that under normal supply and demand oil ought to be at $55 a barrel.

But by any measure, this Enron loophole, which exempts the traders of energy contracts from Federal oversight, was an ill-conceived public policy. That is why a number of us have filed legislation to fully close that loophole and to stop the unchecked runups in speculation of crude oil and gasoline prices.

Now, what do I mean by ``unregulated futures commodities markets''? I mean that a governmental entity, if it were regulated, would require them to put a substantial downpayment on the contract for future oil --to put their money where their mouth is--or a regulated market would be that they would require the bidder for that future oil contract to be somebody who was going to use the oil instead of just speculating on the price and running up the price. So if we do not do something about speculation, they can drive that up again, and we have to fully close that loophole.

About 50 percent of the oil we use goes into our cars and trucks. So it should not take a rocket scientist to realize this ought to be where we ought to focus. It took us in the Congress more than 30 years to raise mileage standards to a paltry 35 miles per gallon, to be phased in over the next 15 years--35 miles a gallon. It was 25 miles a gallon back in the 1980s. But, oh, by the way, that exempted light trucks and SUVs. It is interesting that American car manufacturers sell cars in Europe and the cars over there already get 43 miles a gallon. Japan is approaching 50 miles per gallon. In other words, we are wasting billions of gallons of oil here at home. To stop it, we must enact serious conservation measures, such as 40 miles per gallon for our vehicles. We must provide bigger tax incentives for people to buy hybrid cars and plug-in hybrids.

Now, what I have shared with you are not simple chants, simple slogans. They are real solutions for the short term. But for the long term, we need to unleash that American ingenuity and to rapidly build cars that run on batteries or hydrogen, not petroleum. We need to develop alternative fuels such as ethanol from things we do not eat.

Our Government, led by the next President, must enact a national energy program to transition us from petroleum to alternative and synthetic fuels. It needs to be leadership by the next President in the memory of President Kennedy, when we had only flown Alan Shepard in suborbit, and President Kennedy had the vision and said: This Nation is going to go to the Moon and back in 9 years. That is the kind of leadership we need, and we now have to act with the same urgency.

So we are going to have to pay attention to how we power our homes and industry. We are going to need to develop solar, wind, and thermal energy and safer nuclear power. We have a lot of innovative work.

I see some colleagues are in the Chamber who wish to speak, and I will conclude.

Let me say that I want everybody to know, including the Senator who is just walking onto the floor, this Senator is not going to allow Florida to be a sacrificial lamb for whatever is struck as an energy compromise, nor is this Senator, who has been protecting the interests of the U.S. Department of Defense for 25 years, ever since I was a young Congressman representing the east coast of Florida, going to allow drilling to cut the heart and the lungs out of the military mission area, which is our largest testing and training area, nor to threaten the interests of the State of Florida, by people succumbing to the simple slogan of ``drill, baby, drill'' when it ought to be ``innovate, baby, innovate.''

Mr. President, I yield the floor.

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