Bingaman, Domenici spar on energy

(Photo by Flickr/Robby Garbett)

ALBUQUERQUE -- As many may have noticed, there's a big fight brewing between congressional Democrats and Republicans over what can be done to bring down high gas prices. If anything.

And New Mexico has a front row seat.

Democratic Sen. Jeff Bingaman and Republican Sen. Pete Domenici are their respective parties' top lawmakers on the Senate Energy and Natural Resources Committee.

And each at times has acted as an eloquent spokesman for his party's general stances on how to address the high price of gas, like the back-and-forth that occurred in the days leading up to the Senate debate that began Tuesday.

One thing the Democrats want to do is stop what they call excessive speculation in the oil futures market, which they believe is responsible for 20 to 30 percent of the rise in oil prices. They've put forward the Stop Excessive Energy Speculation Act of 2008 this week to do that.

Republicans, though, say they'll try to block the bill if it doesn't also include a measure to lift congressional moratoria on off-shore oil drilling.

In a recent interview with El Paso-based KFOX-TV, Domenici said he's "tired of the opposition and others out in America" not wanting to produce to the maximum. The American public will be "incensed," he told the station, when they realize prime oil production areas in the outer continental shelf have been locked up for decades by both executive and congressional moratoria.

This effectively permits the U.S. to utilize "...on behalf of our people only 15 percent of the off-shore product that's ours," he said. "We're hearing a much stronger clarion song: drill, it’s ours, let's develop it and use it."

Domenici's remarks seem to imply that any oil drilled in the outer continental shelf or in other areas currently protected from oil production would remain in the United States and not be subject to the global oil market, which sets the price of oil.

Matt Letourneau, spokesman for Domenici, clarified this, acknowledging that new drilling in areas currently off-limits would not remove that oil from the global oil market, which sets the price even if the oil physically stays in the United States.

But, he said, there’s anxiety in the market right now about where oil will be coming from in the future, which is why oil prices are going up. So opening up the outer continental shelf to production would have a psychological effect on the oil futures market, bringing down the price in the short term.

In the long term, he also disputes that the amount of oil available in the U.S. is just a drop in the bucket, despite what many experts say. Letourneau said we really don’t know how much is available off-shore, but past projections point to at least 14 billion barrels.

Letourneau told the Independent that Domenici wasn’t opposed to doing something about speculation, but that he'll oppose a speculation-only bill because the outer continental shelf needs to be opened to oil drilling at the same time. And, so far, Republican efforts to pass bills that open such areas to drilling haven't been successful.

Senator Jeff Bingaman, though, told KFOX that oil companies already have land on which to drill and that it's a knee jerk reaction to offer more.

And Bingaman’s spokeswoman, Jude McCartin, told the Independent that using Letourneau's logic, spurring oil companies to actually produce on leases they already own would have an even greater psychological effect on the oil futures market than opening pristine areas currently off limits.

There are millions of acres available to be offered for leases already, plus many more that are currently leased and not being produced, she said.

“We’d like to know why these companies sought the leases and aren’t drilling. They’ve asked for the leases, and have asked for extensions on leases which means they suspect oil is available in these areas,” McCartin said. “In 2005, Senator Bingaman was against extending production leases by decades because he wants diligent production. Senator Bingaman doesn’t see our protected areas as the solution when areas already offered aren’t being produced."

As to Letourneau's point about environmental impacts, McCartin said he's right that technology has improved and that means the impact in areas that are under development has been lessened, but not eliminated. But there are still some places, she said, that have been taken off the table because they are so special. She also said that other measures, such as stopping excessive oil futures speculation, should be debated on their own merits without adding controversial amendments that would make them "dead in the water."

Speaking from the floor of the Senate on Tuesday, Bingaman laid out his argument for why oil speculation is a problem more specifically. He said the run up in prices can be attributed in part to what some experts refer to as “new fundamentals” in energy markets. This refers to nontraditional investment flows into financial markets as people seek to hedge against inflation and the decline in the value of the dollar, creating what Bingaman referred to as “paper barrels" -- essentially, people purchasing oil on paper, with no intention of ever taking delivery of it.

Paper barrels are impacting the “fundamental price discovery function” those financial markets are intended to perform, he said. For this reason, he urged support of the bill, saying it will give much needed oversight authority to the Commodities Futures Trading Commission.

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