December 14, 1979
Page 36022
Mr. MUSKIE. Mr. President, I rise to speak in support of the amendment that is before us. It was arrived at after long and diligent negotiations by all concerned. It represents an accommodation of principles, but not a sacrifice of principles. There were those of us who believed that it was important to increase the revenues raised by the windfall profit tax so that the higher prices that consumers would pay in any case, would be recycled in public uses — tax cuts and public services. And there were those among us who believed that production incentives must be guarded in the interest of energy independence. I believe that this compromise strikes an appropriate balance between these two concerns.
Mr. President, I am a cosponsor of the proposed amendment, and I would like to say at the outset that this amendment is not the optimum, from my point of view, which is that part of the cost imposed upon our economy and our consumers by decontrol should be shared equitably with the consumers who are paying the price.
I have been listening to the argument, on the floor and in the negotiating room, that this is a proposed tax on industry. Well, Mr. President, just this week several of the oil-producing countries, including Saudi Arabia, which has been disposed to be relatively friendly toward the United States, increased their price by $6 a barrel. Now, that adds approximately $35 billion to this country's oil bill.
That is not a tax on the oil companies. That increase in price is a tax on the consumers. And when decontrol is completed, that full increase will be paid to American oil companies as well as to the oil-producing countries abroad.
That is where the tax is, and that $6 does not represent a single penny of increased cost to the American oil companies, which will benefit from the increased price. It is a price arbitrarily set by the oil-producing countries for their own purposes, and obviously they will pursue their national purposes as they see them.
So this windfall profit tax is designed to restore to the American consumer, who will be paying that price, an equitable share of the amount of the burden that is imposed on the economy. The direct burden is $35 billion. This does not count the ripple effect that will move through the economy, increasing the price of every product produced in this country, generating movement behind labor's demand for more pay, generating movement behind demands on the part of those who are dependent upon the Government for income — our older citizens, poor citizens, unemployed people, people employed by the Government — and all of these ripple effects will add tens of billions of dollars to that.
That is what we are talking about. What fair share of that increase in prices that is generated by OPEC, by the spot market overseas, ought to be returned to the American people? That is what the issue is, pure and simple.
This debate has been going on for some 4 weeks, Mr. President. I and other Senators have been involved in negotiations over much of that 4 weeks, in an attempt to find a middle ground between those who oppose the windfall tax in principle and those who support it. There have been many proposals advanced from one side and the other, and as of this moment no agreement has been reached.
As I recall the discussions, and they have been lengthy, I think they have been relatively free of acrimony. All sides and all points of view have been free to express their position, and have been listened to. We are at the point where we must decide whether or not there is a middle ground, or we must fight the battle out on the floor until the issues are finally resolved.
The amendment that has been introduced today by the majority leader and others, including myself, in my judgment represents just such a middle ground. If it is not accepted as an agreement, then Senators will pursue their own convictions as to what would be a fair settlement through the parliamentary snarl that will then develop on the floor of the Senate.
We will be voting shortly on cloture. Whether or not we get cloture today has still not been determined.
The ACTING PRESIDENT pro tempore. The Senator's 5 minutes have expired.
Mr. ROBERT C. BYRD. Mr. President, I yield 2 more minutes.
Mr. MUSKIE. Whether or not we get cloture today, I am convinced that we will get cloture today or next week. When we do, each Member's parliamentary rights and opportunities to debate and offer proposals will be protected. That, I think, will increase the possibility that the Senate can finally reach a result without any agreement on the part of the opposing forces.
I think we can cut that process short, and I think we can do so by supporting the pending amendment; I think it represents a reasonably equitable resolution of the very wide differences that separate the two sides.
Mr. President, this amendment raises the total revenues in this bill to $180.4 billion for the period 1980-90 — $25.7 billion above the revenues raised by this bill before this compromise was reached. This is a significant move toward the objective of equity for consumers buffeted by soaring oil prices. It also helps to raise revenues toward the target voted by the Congress in the second budget resolution.
This amendment imposes some tax on the previously exempt categories, newly discovered, tertiary recovered, and heavy oil. I believe that this is appropriate. Supply estimates from the CBO study suggest that much of the oil to be produced in these categories over the coming decade would have been produced even with continued controls:
Sixty-three percent of the heavy oil which we could expect to be produced from 1980 to 1990 would have been produced under continued controls.
Sixty-seven percent of all newly discovered oil, we could expect, would have been produced under continued controls.
Similarly, 90 percent of expected tertiary production would occur under continued controls.
Hence, taxing these categories of oil captures some of that windfall.
At the same time, Mr. President, it must be recognized that these are the types of oil with the highest production costs and the greatest responsiveness to production incentives. If we were to impose a tax on these categories of oil so great as to significantly discourage production we could be contributing to higher future world prices and greater dependence on foreign sources.
Therefore, Mr. President, we have agreed to tax heavy oil and tertiary recovered oil — oil much of which has already been discovered but which will be produced at high costs — at the relatively favorable rate of 20 percent so as to allow for the high production costs.
Oil yet to be discovered is the most sensitive to price incentives. If we had taxed newly discovered oil also at the 20-percent rate, experts have estimated that we might have lost as much as 100,000 barrels per day of production in 1990. Therefore, we decided to lower the tax rate on newly discovered oil substantially to 10 percent. This should assure virtually no production loss from this amendment.
The principal issue involved here is not only the amount of revenue to be generated, but the so-called tax on new oil.
Mr. President, the argument is made that because this new oil has not been discovered yet, there cannot be any windfall associated with it.
From my point of view, that argument is false, for two reasons: In the first place, a large part of that new oil would be developed if there had been no decontrol. To the extent that that is so, that oil is benefitting from these arbitrary increases in prices imposed upon the American consumer, and consequently benefitting from a windfall.
But secondly, if these upward pressures by OPEC are increasing the price of oil, then new oil that is discovered, whether or not it would have been discovered anyway, is benefitting from a price that is higher for no reason associated with cost to the American producer. The price is higher because of OPEC. Prices have been increased, since decontrol began, by 110 percent. That increase in prices is in no way attributable to the higher cost of production. It is largely attributable to the fact that we are at the mercy of the spot market worldwide, at the mercy of OPEC, and that is producing profits for oil companies here that are unearned in the traditional sense of the term; and it is our responsibility, as I see it, to recover a share of those increases in behalf of the American consumer.
Mr. President, this is a compromise amendment arrived at by genuine efforts on both sides. We lay it before the Senate as a new formula for accommodation that should receive every Senator's careful consideration. I believe that it will advance the objectives that we all seek. It will permit higher oil revenues to be returned to those who pay the price. It will do so while recognizing that oil is not all alike but that distinctions are required between categories of oil if we are to preserve production incentives and to advance the cause of energy independence.
A vote on this amendment will allow the Senate to proceed with action on this important bill. It will allow the Senate to move forward with its business — the business of the public.
I urge the Senate to move to a vote on this amendment and I hope that Senators will give it a favorable vote.
Several Senators addressed the Chair.