Pete Domenici

Mr. DOMENICI

Mr. DOMENICI. Mr. President, I ask unanimous consent for 3 seconds to ask the Senator a question.

Mr. DOMENICI

Mr. DOMENICI. Mr. President, for the information of all Senators, at approximately 4 p.m.--it looks like it will be a little bit after that--today, the Senate will begin what has been fondly called a ``vote-arama.'' Some might not want to say ``fondly''; they may have other words to describe it. I choose that today for no particular reason. If all Senators will remain in the Chamber and refrain from insisting on rollcall votes on their amendments, all Members will survive this cruel process and the Senate can conduct the final vote on this resolution within 3 or 4 hours after 4 p.m. I understand that is wishful thinking, I say to my fellow Senators. Nonetheless, I urge my colleagues, once we start the ``vote-arama,'' to remain here in an attempt to work with us on the amendments that they may have to be included in the ``vote-arama'' or be disposed of otherwise. We still have a lot of amendments that we have not reached agreement on that might end up in the ``vote-arama.'' We are making some very significant headway. We started today with 72 amendments. We have worked to clear a number of those. Today, I think, with the amendments we will shortly adopt by voice vote, we are probably down to about 30 amendments that will fall into the ``vote- arama,'' and we have not had a chance on each of them to discuss them with the Senators. Perhaps a significant number of those will not require votes. I yield so that my distinguished friend, the ranking member, can address the Senate.

Mr. DOMENICI. Thank you very much.

Mr. DOMENICI. I thank everyone for their patience and in particular staff on the Republican side and the Democrat side for the marvelous work they have done. Let me say we are going to vote on this shortly. I feel rather proud. What we are going to do is move in a strong direction toward saving Medicare, saving Social Security, a significant tax cut, increases in education, and increases in criminal justice, the National Institutes of Health and programs of that sort. Yet we have not broken the caps and we will have balanced budgets for quite some time if we follow this format as we implement it during the year. Once again I thank everyone in that regard.

Mr. DOMENICI. The Senator from New Hampshire should know that we do not have any assumptions in the Budget Resolution, before the Senate, that in any way changes or reduces the fees collected by the SEC.

Mr. DOMENICI. I fully understand your concern, and the agriculture community's concern, about the current position of MAP in the Budget Resolution. During the Conference on the Budget Resolution we will have an opportunity to take another look at this issue. In that event, I will commit to working with you to find alternatives. I want to assure you, the Committee went to great lengths to identify offsets for highway spending. As you know, we included MAP because it is one of several export programs through USDA.

Mr. DOMENICI. The assumed increase exceeds the $1.5 billion increase for NIH in FY 1999 and is intended to fund other initiatives as well, such as IDEA.

Mr. DOMENICI. The Freeze Baseline already includes spending previously approved by the subcommittee, including forward funding and advance appropriations.

Mr. DOMENICI. First, I would like to state for the record that 302(b) allocations for the Committee on Appropriations are solely within the purview of that committee. The Budget Resolution is an expression of the Senate's priorities, and as such, makes recommendations to committees. However, the Budget Resolution assumptions do not bind the Appropriations Committee to any particular course of action, other than meeting the discretionary caps. That being understood, the Budget Resolution assumes a substantial increase over the Freeze Baseline for the Labor-HHS subcommittee. The Freeze Baseline levels are based on FY 1998 appropriations action.

Mr. DOMENICI. Mr. President, I am not making such an argument. If I and other members of the Budget Committee believed that, we would have eliminated all current funding for energy efficiency and renewables technology programs in this budget resolution. I do have some concerns about the efficacy of the Kyoto Protocol, but the report language that you cited is intended to convey that additional funding for these programs is very difficult under existing budget limitations.

Mr. DOMENICI. That is correct, the surplus public land sales assumed in the resolution are restricted to excess Bureau of Land Management lands, and would not in any way slow progress with recovery of the Everglades. The lands proposed in the resolution would be lands that have not been designated for another purpose.

Mr. DOMENICI. Mr. President, I ask unanimous consent that all other pending amendments be withdrawn.

Mr. DOMENICI. Mr. President, we have one last thing, amendment No. 2219, by Senator Dorgan. Would you call that up? Here we are going to voice vote it. Let me make sure everybody understands, this amendment is supposed to fail. And there has been concurrence on that point as we deliberated on this subject.

Mr. DOMENICI. I thank the Chair. Vote On Amendments Nos. 2271, 2238, 2180, 2243, 2265, 2272 and 2252, En Bloc

Mr. DOMENICI. Mr. President, I ask we agree to vote--to have a voice vote en bloc on the amendments that are on the list that I sent to the desk. I send that to the desk now. It is the list that we submitted which starts with No. 2271 and ends with No. 2252. I ask unanimous consent that those amendments be voted en bloc, and that they be voice voted. There is an expectation that the ayes will prevail here. I call that to the attention of the Chair.

Mr. DOMENICI. Mr. President, let me just say there are no more amendments that we have to have rollcall votes on before final passage. I ask for the yeas and nays on final passage.

Mr. DOMENICI. Everybody should recall that the Republican budget says unless and until the Congress of the United States produces legislation with 60 votes that does otherwise, we allocate whatever Federal moneys we receive from any cigarette settlement to the Medicare fund, which is the fund most entitled to it because it's the fund that is most abused by smoking--$25 billion a year. So what we have now is an attempt to say, no, let's change it just a little bit, let's add another use to that fund. I don't believe we should do that. I make a point of order that this amendment violates the Budget Act because it is not germane.

Mr. DOMENICI. Of course. Mr. ROBB addressed the Chair.

Mr. DOMENICI

Mr. DOMENICI. Mr. President, I ask unanimous consent that the Subcommittee on Administrative Oversight and the Courts of the Committee on the Judiciary, be authorized to hold an executive business meeting during the session of the Senate on Thursday, April 2, 1998, at 2:00 p.m., in room 226 of the Senate Dirksen Office Building.

Mr. DOMENICI. Mr. President, I ask unanimous consent that the Committee on Labor and Human Resources be authorized to meet for a hearing on Metered Dose Inhalers during the session of the Senate on Thursday, April 2, 1998, at 10:00 a.m.

Mr. DOMENICI. Mr. President, I ask unanimous consent that the Committee on the Judiciary, be authorized to hold an executive business meeting during the session of the Senate on Thursday, April 2, 1998, at 10:00 a.m., in room 226 of the Senate Dirksen Office Building.

Mr. DOMENICI. Mr. President, I ask unanimous consent that the Committee on Banking, Housing, and Urban Affairs be authorized to meet during the session of the Senate on Thursday, April 2, 1998, to conduct a hearing on the implications of the recent Supreme Court decision concerning credit union membership.

Mr. DOMENICI. Mr. President, I ask unanimous consent that the Committee on Agriculture, Nutrition, and Forestry be allowed to meet during the session of the Senate on Thursday, April 2, 1998 at 9:00 a.m. in SR-328A. The purpose of this meeting will be to examine recently proposed animal waste legislation.

Mr. DOMENICI

Mr. DOMENICI. Mr. President, the current royalty system is an elaborate after-the-fact game of ``Gotch ya.'' Producers are put in the unenviable position of being second-guessed, some times years later, by the Minerals Management Service (MMS). This current system is unfair to oil and gas producers. It is expensive and inefficient for the federal government. Under the current system, only the lawyers benefit. It results in a lot of law suits and big legal bills. The MMS tried to fix the system by proposing a ``producer is always the loser rule.'' Under the proposed rules, (now abandoned) the producers would have always lost. The MMS tried a rule tying the fair market value to the NYMEX. If producers sold their production for less than the NYMEX price, they would have had to pay the royalty on the ``phantom'' income i.e. the difference between the price they actually received and the NYMEX price. If, on the other hand, they sold their production for more than the NYMEX, they would have had to pay the royalty on the amount they actually received. This would have been a very unsatisfactory approach. Fortunately, most independent producers don't have to use that approach. However, the existing valuation formula for calculating fair market value is complicated, fraught with exceptions, and hard to administer. The question: What is fair market value for oil is not as simple as it sounds. Some of the variable factors include the quality or refinery value of crude oil; the transportation costs necessary to move that oil to a refiner; relative access to various refineries or markets which may value a particular type of crude oil differently; the supply, vis-a- vis, the demand for certain types of oil or alternative supplies, and whether the contract is a long-term or short-term commitment made by either the refiner or the producer. Other factors that influence value include: the volume of the crude oil produced at the lease. This could affect the unit logistical costs; seasonality; and service requirements of the producer. Another question more complicated than it sounds is this: What are the appropriate, allowable, deductible expenses? Under the current system it costs the MMS about $60 million annually to debate this question and to administer our royalty collection program. It takes several hundred employees, many of them auditors, to oversee the current royalty program. In contrast, royalty-in-kind programs in Canada need only 33 employees to administer their approach. With a royalty-in-kind system, the producer would give some of its production from the federal lands as a royalty-in-kind payment. A royalty-in-kind program is an accurate way to determine a fair market value. The federal government would sell its share of the oil on an open and competitive market. What you can sell it for is, per se, fair market value. That is the essence of what the ``Royalty-in-Kind'' Program, along with the use of the Qualified Marketing Agents (``QMA''), would allow. The goal should be treating the producers fairly, maximizing revenues for the federal government, and distributing an accurate amount of royalties to the states. The bill being introduced today by Senator Nickles, Murkowski, Hutchinson and I would provide a better way for the federal government and the Minerals Management Service (MMS) to collect, with certainly, a fair value for its crude oil. provisions of the bill The federal government would take its royalty ``in kind'' at the applicable delivery point for each federal onshore and offshore lease. Title of the royalty share taken in-kind would be in the name of the federal government. The U.S. would contract with qualified marketing agents (QMAs). The federal government would select a QMA for each lease on a competitive bid basis. States entitled to revenues under the net receipts sharing provisions of the Mineral Leasing Act or Section 8(g) of the Outer Continental Shelf Lands Act would be allowed to elect to select the QMA. In selecting a QMA, the State would act for the mutual benefit of the State and the federal government. The payment from the federal government to any State for its share of royalty taken in-kind from federal leases within a State's boundary would not be subject to cost deductions under the net receipts sharing provisions of the applicable statutes. The lessee must tender the royalty share at the delivery point. This would completely satisfy the lessee's royalty obligation. The lessee would bear the costs of place royalty oil and royalty gas in a merchantable condition at the delivery point. The lessee would be responsible for gathering costs. Transportation costs would be borne by the federal government. Mr. President, this is an excellent approach. My only concern is that the final legislative product adequately address the problem of the marginal well that produces a few barrels a day and is in an isolated area. The legislation needs to make sure that there is a workable mechanism for these isolated wells. I also note that some, including the New Mexico state lands commissioner, have suggested a multi-state pilot program prior to moving to the nation-wide royalty-in-kind program. I respect those views. I hope, that as we move through the hearing process the Committee can take testimony on whether to proceed with a multi-state pilot program or whether existing pilots have provided sufficient information for us to implement a national program. I want to recognize Senator Nickles for his leadership on this issue and look forward to working with him, Senator Murkowski and Senator Hutchison on moving this legislation through the process so that we can start a royalty-in-kind program in the near future.

Mr. DOMENICI

Mr. DOMENICI. Mr. President, the current royalty system is an elaborate after-the-fact game of ``Gotch ya.'' Producers are put in the unenviable position of being second-guessed, some times years later, by the Minerals Management Service (MMS). This current system is unfair to oil and gas producers. It is expensive and inefficient for the federal government. Under the current system, only the lawyers benefit. It results in a lot of law suits and big legal bills. The MMS tried to fix the system by proposing a ``producer is always the loser rule.'' Under the proposed rules, (now abandoned) the producers would have always lost. The MMS tried a rule tying the fair market value to the NYMEX. If producers sold their production for less than the NYMEX price, they would have had to pay the royalty on the ``phantom'' income i.e. the difference between the price they actually received and the NYMEX price. If, on the other hand, they sold their production for more than the NYMEX, they would have had to pay the royalty on the amount they actually received. This would have been a very unsatisfactory approach. Fortunately, most independent producers don't have to use that approach. However, the existing valuation formula for calculating fair market value is complicated, fraught with exceptions, and hard to administer. The question: What is fair market value for oil is not as simple as it sounds. Some of the variable factors include the quality or refinery value of crude oil; the transportation costs necessary to move that oil to a refiner; relative access to various refineries or markets which may value a particular type of crude oil differently; the supply, vis-a- vis, the demand for certain types of oil or alternative supplies, and whether the contract is a long-term or short-term commitment made by either the refiner or the producer. Other factors that influence value include: the volume of the crude oil produced at the lease. This could affect the unit logistical costs; seasonality; and service requirements of the producer. Another question more complicated than it sounds is this: What are the appropriate, allowable, deductible expenses? Under the current system it costs the MMS about $60 million annually to debate this question and to administer our royalty collection program. It takes several hundred employees, many of them auditors, to oversee the current royalty program. In contrast, royalty-in-kind programs in Canada need only 33 employees to administer their approach. With a royalty-in-kind system, the producer would give some of its production from the federal lands as a royalty-in-kind payment. A royalty-in-kind program is an accurate way to determine a fair market value. The federal government would sell its share of the oil on an open and competitive market. What you can sell it for is, per se, fair market value. That is the essence of what the ``Royalty-in-Kind'' Program, along with the use of the Qualified Marketing Agents (``QMA''), would allow. The goal should be treating the producers fairly, maximizing revenues for the federal government, and distributing an accurate amount of royalties to the states. The bill being introduced today by Senator Nickles, Murkowski, Hutchinson and I would provide a better way for the federal government and the Minerals Management Service (MMS) to collect, with certainly, a fair value for its crude oil. provisions of the bill The federal government would take its royalty ``in kind'' at the applicable delivery point for each federal onshore and offshore lease. Title of the royalty share taken in-kind would be in the name of the federal government. The U.S. would contract with qualified marketing agents (QMAs). The federal government would select a QMA for each lease on a competitive bid basis. States entitled to revenues under the net receipts sharing provisions of the Mineral Leasing Act or Section 8(g) of the Outer Continental Shelf Lands Act would be allowed to elect to select the QMA. In selecting a QMA, the State would act for the mutual benefit of the State and the federal government. The payment from the federal government to any State for its share of royalty taken in-kind from federal leases within a State's boundary would not be subject to cost deductions under the net receipts sharing provisions of the applicable statutes. The lessee must tender the royalty share at the delivery point. This would completely satisfy the lessee's royalty obligation. The lessee would bear the costs of place royalty oil and royalty gas in a merchantable condition at the delivery point. The lessee would be responsible for gathering costs. Transportation costs would be borne by the federal government. Mr. President, this is an excellent approach. My only concern is that the final legislative product adequately address the problem of the marginal well that produces a few barrels a day and is in an isolated area. The legislation needs to make sure that there is a workable mechanism for these isolated wells. I also note that some, including the New Mexico state lands commissioner, have suggested a multi-state pilot program prior to moving to the nation-wide royalty-in-kind program. I respect those views. I hope, that as we move through the hearing process the Committee can take testimony on whether to proceed with a multi-state pilot program or whether existing pilots have provided sufficient information for us to implement a national program. I want to recognize Senator Nickles for his leadership on this issue and look forward to working with him, Senator Murkowski and Senator Hutchison on moving this legislation through the process so that we can start a royalty-in-kind program in the near future.