01.24.06

Cantwell Demands Answers Following Reports of Under-the-Table Giveaways to Energy Industry

While Americans’ Energy Prices Skyrocketed, Administration Undercharged Energy Companies, helped Profit-Rich Corporations Short-Change Americans

WASHINGTON, DC – Tuesday, U.S. Senator Maria Cantwell (D-WA) demanded answers following reports in The New York Times that while American consumers struggled with skyrocketing energy prices, the administration undercharged energy companies for their use of public lands. Despite the fact that these companies have seen soaring profits recently, the Interior Department collected the same amount in royalty payments from natural gas companies as they did five years ago.

"Big energy companies are getting a free ride while Americans’ home heating costs go through the roof," said Cantwell, a member of the Senate Energy and Natural Resources Committee. "Loophole-laden regulations and lax enforcement by an administration that puts big oil companies first may have short-changed American taxpayers by more than $700 million dollars last year alone. The American people demand answers, honesty, and transparency."

Today, several other senators joined Cantwell in a letter to Secretary Gale Norton to demand answers from the Department of the Interior, which oversees the federal leasing program. The senators, led by Cantwell, also expressed concerns over reports that companies provided differing reports of natural gas costs to two separate federal agencies.

"With natural gas costs busting American family budgets and harming our economy, it seems likely that these forgone revenues were not passed on to consumers, but rather, padded the profit margins of the oil and gas industry," the senators wrote. "Particularly at a time of soaring budget deficits, this situation is unacceptable."

Recent reports reflect an ongoing pattern of dishonesty by large gas and oil companies. In November, executives from major oil companies spoke to the Senate Energy and Commerce Committees about nationwide concerns of gas price gouging. Cantwell is a member of both committees. Soon after the hearing, The Washington Post published an article which cast doubt on the truthfulness of their testimony, specifically regarding the companies’ participation in Vice President Dick Cheney’s 2001 Energy Task Force.

Before that hearing, Cantwell led a group of Democratic senators in requesting that oil company executives testify under oath when they appeared before the Committees to explain their pricing and exporting practices and the recent run-up in American fuel prices. That request was denied. Following the hearing, in addition to questions being raised about the truthfulness of their testimony, a number of the oil companies failed to provide necessary information about their fuel inventories, trading activities, and exports, despite commitments made by CEO’s to Cantwell.

Cantwell is the chair of the Senate Democrats’ Energy Independence 2020 national campaign, working to break America’s overdependence on foreign oil, to protect working families from skyrocketing energy costs, and to stop unfair market manipulation by energy companies. Cantwell is fighting to stop price gouging, provide relief from high home heating costs, and invest in reliable sources of affordable fuel.

[Cantwell’s Letter to Secretary Norton Follows Below]

January 24, 2006

The Honorable Gale Norton Secretary U.S. Department of the Interior 1849 C Street, NW Washington, DC 20240

Dear Secretary Norton:

We write in response to allegations in yesterday’s New York Times article, As Profits Soar, Companies Pay U.S. Less for Gas Rights, which implies the Department of Interior has been grossly negligent in its duty to ensure Americans receive fair compensation for the use of their public lands for natural gas development.

Specifically, a three month New York Times investigation found that even though energy costs have skyrocketed under the Bush Administration, the Department of Interior collected about the same amount of royalty payments from profit-rich companies as they did five years ago. The Times estimates that just last year, the Administration’s lax enforcement and loophole-laden regulations may have short-changed American taxpayers by more than $700 million dollars.

With natural gas costs busting American family budgets and harming our economy, it seems likely that these forgone revenues were not passed on to consumers, but rather, padded the profit margins of the oil and gas industry. Particularly at a time of soaring budget deficits, this situation is unacceptable.

Yesterday’s report highlighted a series of steps the Interior Department can take to remedy this situation, such as reinstating the full audits that have been scaled back during the Bush Administration—a step that has been criticized by the Interior Department Inspector General. Another initiative would require enforcement of existing rules, such as those requiring companies to start paying royalties when market prices reach a "threshold" level. Given the billions of dollars of lost revenue at stake, we hope the Department will take immediate action to remedy this situation on behalf of the American taxpayer. We would be willing to work with the Department to enact supportive legislation such as requiring greater transparency of oil and gas industry revenues, or support funding for additional auditors.

In addition, we are troubled by the suggestion that companies involved in the federal leasing program have made differing representations of average natural gas costs to the Securities Exchange Commission and Department of Interior—both of which are federal agencies. In order for Congress to carry out its own oversight responsibilities and probe the magnitude of these discrepancies, we respectfully request that you provide us with the average sale price of natural gas reported to the Department of Interior over the past five years, by each individual firm participating in the leasing program with revenues of over $500 million.

We look forward to working with you on this matter, which is so crucial in ensuring a fair and transparent result for American taxpayers.

Sincerely,

Maria Cantwell United States Senator