Frank Murkowski

Mr. MURKOWSKI

Mr. MURKOWSKI. The Senator is happy to yield for a question from the Senator from California.

Mr. MURKOWSKI. Mr. President, I will be happy to respond. It is my understanding the Senator from Missouri [[Page S6665]] is a subcommittee chairman of the Banking Committee. The question of jurisdiction has been addressed by him in the subcommittee context, and I wonder, for the Record, if he could give us some background with regard to the manner in which they have studied that. Is it not, indeed, the fact that that particular jurisdiction under the Banking Committee, as well as other prohibitions on the export of Alaska oil, such as the Mineral Leasing Act, the Export Administration Act, and others, were presented in such a way, once the proposal was made with the substantiation falling to include the sale of the two generating plants in Alaska, that the Chair ruled that it was appropriate that it be under the jurisdiction of the Energy and Natural Resources Committee, and it is my understanding that ruling of the Chair still stands. I ask the Chair if there is any reference to anything to the contrary to that? I am sorry; I guess the Chair was preoccupied. But the issue that we have before us is the jurisdiction potentially of the Banking Committee, and the Alaska oil export ban is not in the jurisdiction of the Senate Banking Committee because the Alaska oil export originated in the Trans-Alaska Pipeline Authorization Act, the bill that is strictly within the jurisdiction of the Energy Committee. The Energy Policy and Conservation Act, which is EPCA, includes a provision that generally restricts crude oil exports. This bill is also within the jurisdiction of the Energy Committee. The bill was introduced but did not reference the Export Administration Act. Furthermore, the Export Administration Act expired, so it no longer governs the export of Alaskan crude oil. And that is the understanding of the Senator from Alaska with regard to the jurisdiction of this matter before the Senate being referred to the Energy and Natural Resources Committee.

Mr. MURKOWSKI. The Senator yields the floor.

Mr. MURKOWSKI. Evidently, it is understood--I certainly anticipated the Senator from Washington, inasmuch as she initiated the quorum call this morning, I assumed she would speak during that time until noon. But that is her right and I respect that right. I look forward to hearing her statement and that of my other colleagues at this time.

Mr. MURKOWSKI. Does the Senator care to indicate that? It would be appreciated, simply from the standpoint of expediting the process. If not, that is certainly the right of the Senator from Washington.

Mr. MURKOWSKI. I thank my friend from Kentucky. My purpose in making the inquiry was simply to try to determine whether the Senator from Washington would require the Senator to invoke cloture on the measure.

Mr. MURKOWSKI. If I may respond?

Mr. MURKOWSKI. I am happy to yield without losing my right to the floor.

Mr. MURKOWSKI. Sure.

Mr. MURKOWSKI. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. MURKOWSKI. Mr. President, I ask unanimous consent to adopt the pending amendment.

Mr. MURKOWSKI. Mr. President, what is the pending business?

Mr. MURKOWSKI. The Senator from California is absolutely correct. That is in the bill.

Mr. MURKOWSKI. In response to the Senator from California, it is my understanding, Mr. President, that indeed it is still in effect. I should point out, however, as I know the Senator from California is aware, British Petroleum, being a foreign corporation, cannot own U.S.- flag, U.S.-documented vessels. So British Petroleum contracts with private U.S. owners that own the U.S. vessels. It is my understanding that since they basically--in the sense of having a long-term charter agreement--have dictated this position that they will move BP's oil and, for that matter, all the other oil that would flow between Alaska and any other American port in a U.S.-flag vessel. But BP itself is precluded by our maritime laws from owning the vessel outright.

Mr. MURKOWSKI. I am happy to yield without losing my right to the floor.

Mr. MURKOWSKI. I thank my senior colleague from Alaska regarding his comments on this very vital issue, which is important not only to our State but to the Nation as well.

Mr. MURKOWSKI. Let us see what we have next. These are some rather interesting charts. I talked some time ago about refined gasolines and the price relative to the east coast and west coast. Of course, the east coast is dependent on oil coming in from various places around the world. Virtually no Alaskan oil comes on the east coast. It is oil that comes from Central America, Venezuela, the Mideast, and other places. What we have is the average wholesale price of unleaded regular gas from California versus New York. We notice in 1985, California was slightly higher than New York; in 1986 the margin was again substantially higher, 4 cents a gallon; in 1987 it equalized; in 1988 it equalized. Then, in 1989 we found that New York was higher. In 1990 we found New York was higher. In 1991 we found New York was higher. One would expect the east coast to have higher costs simply because of longer transportation to market, bringing that oil in through the Mideast and other areas. Then, in 1992 we saw a rather curious change. In 1992, we saw New York at 66 and California at 69. When I say California, I am talking about the entire west coast average as opposed to a specific State. When we are talking about New York, we are talking about the entire east coast. In 1993, we saw a differential gain where it was more expensive on the west coast than on the east coast. In 1994, again we saw 57 compared to 60. So the point is that California was higher in the wholesale price of unleaded regular gasoline. When one considers that we have had a surplus of oil on the west coast, during that time that we have close proximity from the standpoint of Alaskan oil coming down to the refiners, one may begin to question why that is the case. This chart attempts to compare--unfortunately, we could not get more current figures than 1993--the refiner growth margins in 1992 dollars per barrel. This chart was a consequence of information that was provided us by the Department of Energy. It lists PADD V average, which are the distributors of the west coast U.S. refiners. It shows their growth margins vis-a-vis the U.S. average. As one can see, the west coast gross profit margin per refiner is rather interesting in comparison to the rest of the country. I have no hesitation to what the traffic will bear. But it is interesting to see comparisons of one part of the country vis-a-vis another. This chart actually belonged to the one earlier when we were comparing New York and California or the east coast vis-a-vis the west coast. But as you can see, the spread lengthened over here in 1992 when California wholesale price exceeded that of the east coast price. Maybe we will have a chart that will give us a little further explanation. I would like to defer a little bit to address a concern that we have in Alaska. It is evident as we address future years. Clearly, you can see the projections of Alaskan North Slope production. We are here in 1995, and we are somewhere around 1.6 million barrels per day. That production, if you will look at the light gray, continues to decline. So this shows how, if we can significantly reduce the decline in the Trans-Alaska Pipeline oil production, the pipeline will be economically viable for a longer period of time. That is what we are talking about here, trying to bring this margin of reserves on line and provide more jobs and import less oil, all of which I think everyone would agree makes good sense and is in the national interest of our Nation. We have had discussions that would suggest that Alaska North Slope exports will increase consumer prices at the gas pump. The reality dictates otherwise. The Department of Energy I think carefully studied the issue and found that the consumers would not see any discernible increase in the price at the gas pump. The Department of Energy showed that the west coast refiners, as I have shown on the chart--this is the Department of Energy talking--enjoyed the widest refiner growth margin in the country. West coast refiners are buying crude oil for less per barrel than anywhere in the country. Yet, they are selling their gasoline and other refined products for more than anywhere else in the country. Wholesale gasoline prices, as I have said, in California are consistently 3 or 4 cents higher than in New York. Some say that energy production will not go up, that Alaska North Slope exports will not increase oil production in California and Alaska. Again, I would defer to the Department of Energy report which carefully studied the issue and concluded that oil production would increase by 100,000 to 110,000 barrels per day by the end of the decade. Both California independents and British Petroleum testified on March 1 that they expect substantial production increases in California and Alaska. Some believe that there will be an increase in oil spills if ANS crude is exported. The reality is that the DOE carefully studied the issue and found that the exports will actually reduce tanker traffic in U.S. waters, especially in California as a result of the increased on- shore production. Furthermore, any tankers exporting ANS oil exported from Alaska will proceed as I have said to cross the ocean and not along the shore. Mr. President, I think the Senator from Alaska--I would be happy to yield to the Senator from Alaska, if I may retain my right to the floor.

Mr. MURKOWSKI. Mr. President, in view of the objection, it would be my intent to announce to the body that I would move to table. I want to accommodate my friend from Washington, but I will suggest that at 2:30 I will move to table the committee amendment at that hour. Mr. President, let me begin with my opening statement relative to S. 395. Mr. President, on February 13, the senior Senator, Senator Stevens, and I introduced Senate bill 395. Title I of this bill provides for the sale of the Alaska Power Administration--known as the APA--the assets of that and the termination of the Alaska Power Administration once the sale occurs. Further, title II would allow exports of Alaska's North Slope oil, referred to as ANS crude oil, when carried only on U.S.-flag vessels. It is my understanding that Senator Feinstein and Senator Kyl later cosponsored S. 395. On March 1 the committee heard testimony from the administration, from the Lieutenant Governor of Alaska, the State of California, the California independent producers, maritime labor, and other proponents of Senate bill 395. The administration testified in support of lifting the Alaska North Slope crude oil export ban, and they indicated that the bill should be amended to provide for an appropriate environmental review to allow the Secretary of Commerce to prevent anticompetitive behavior by exporters and to establish a licensing system. And then on March 15, after agreeing to work with the administration on these concerns prior to bringing the bill to the floor, the committee adopted Senate bill 395 by an overwhelming vote. The vote on that was 14 to 4. So it was truly bipartisan support relative to the merits of S. 395. Further, Mr. President, Senator Johnston and I were pleased to offer a committee substitute. We propose that now as in the original bill. Title I would provide for the sale of the assets of the Alaska Power Administration and title II would authorize exports of Alaska North Slope crude carried on American flag vessels with changes to satisfy some Members and administration concerns. Title I of S. 395 provides for the sale of the Alaska Power Administration's assets and the termination of the Alaska Power Administration once the sale is completed. Further, I am pleased to state that the Department of Energy has testified in support of the Alaska Power Administration's asset sale and agency termination. In addition, on April 7, 1995, the administration submitted legislation to Congress substantially similar to title I of S. 395. The transmittal letter says: This legislation, which is proposed in the President's FY 1996 budget, is part of the administration's ongoing effort to reinvent the Federal Government. The Alaska Power Administration is quite unique among the Federal power marketing administrations. First, unlike the other Federal power marketing administrations, the Alaska Power Administration owns its power-generating facilities, which consist of two hydroelectric projects. Second, these single-purpose hydroelectric projects were not built as a result of the water resource management plan as is the case or was the case with most other Federal hydroelectric dams. Instead, they were built to promote economic development and the establishment of essential industries. Third, the Alaska Power Administration operates entirely in one State, the State of Alaska. Fourth, the Alaska Power Administration was never intended to remain indefinitely under Government control. That is specifically recognized in the Eklutna national project authorizing legislation. The Alaska Power Administration owns two hydroelectric projects, one near Juneau at Snettisham and the other near Anchorage at Eklutna. Snettisham is a 78-megawatt project located 45 miles from Juneau to the south. It has been Juneau's main power supply since 1975, accounting for up to 80 percent of its electric power. Eklutna is a 30-megawatt project located 34 miles northeast of Anchorage. It has served the Anchorage and Matanuska valleys since about 1955 and accounts for 5 percent of its electric power supply. The Alaska Power Administration's assets will be sold pursuant to the 1989 purchase agreement between the Department of Energy and the purchasers. Snettisham will be sold to the State of Alaska. Eklutna will be sold jointly to the municipality of Anchorage, Chugach Electric Association, and the Matanuska Electric Association. For both, the sale price is determined under an agreed upon formula. It is the net present value of the remaining debt service payments that the Treasury would receive if the Federal Government had retained ownership of the two projects. The proceeds from the sale are currently estimated to be about $85 million. However, the actual sales price will vary with the interest rate at the time of purchase. S. 395, in a separate formula agreement, provided for the full protection of the fish and wildlife in the area. The purchasers, the State of Alaska, the U.S. Department of Commerce, U.S. Marine Fisheries, and the U.S. Department of the Interior, have jointly entered into a formal binding agreement providing for postsale protection, mitigation and enhancement of fish and wildlife resources affected by Eklutna and Snettisham. The agreement makes that legally enforceable. [[Page S6653]] As a result of the formal agreement, the Department of Energy, the Department of the Interior, and the Department of Commerce will all argue that the two hydroelectric projects warrant exemption from FERC licensing under the Federal Power Act. The August 7, 1991 purchase agreement states in part that The National Marine Fisheries Service, the U.S. Fish and Wildlife Service, and the State agree that the following mechanism to develop and implement measures to protect and mitigate damages, to enhance fish and wildlife, including related spawning grounds and habitat, obviate the Eklutna purchaser and the EAE to obtain licenses. This agreed upon exemption from the Federal Power Act's requirements to obtain a FERC license will save the purchasers and their customers as much as $1 million in licensing costs for each project plus thousands of dollars in annual fees. The Alaska Power Administration has 34 people located in my State of Alaska. The purchasers of the two projects have pledged to hire as many of these as possible. For those who do not receive offers of employment, the Department of Energy has pledged that it will offer employment to any remaining Alaska Power Administration employees although the DOE jobs are expected to be in other States. Let me turn to title II, Mr. President, the Trans-Alaska Pipeline Amendment Act of 1995. Title II of S. 395 would at long last allow exports of Alaska's North Slope crude oil when carried on U.S.-flag vessels. This legislation will finally allow my State to market its major product in the global marketplace and let the marketplace determine its ultimate usage. The export restrictions were first enacted shortly after the commencement of the 1973 Arab-Israel war and the first Arab oil boycott. At that time, many people believed that the enactment of the export restrictions would enhance our Nation's energy security. Indeed, following the major oil shock of 1979, Congress effectively imposed a ban on exports. Well, Mr. President, much has changed since then. In part, due to conservation efforts and shift to other fuel sources, total U.S. petroleum demand in 1993 actually was lower than in 1978. However, in the last 2 years, our consumption of oil has significantly increased and our productive capacity has declined. Our dependence on foreign oil sources has now gone up. We now produce almost 3 billion barrels a day less than we did in 1973. Employment in the oil and gas production industry has fallen by more than 400,000 jobs since 1982. Production on the North Slope has now entered a period of sustained decline. Throughput in the Trans-Alaska pipeline has dropped from 2.2 million barrels a day in 1989 to about 1.5 million barrels a day currently. In California, small independent producers have been forced to abandon wells or defer further investments to increase production. By precluding the market from operating normally, the export ban has had the unintended effect of discouraging, discouraging, Mr. President, oil production in California and Alaska. Lifting the ban on Alaska North Slope crude oil exports is the first step, the first step toward stopping the decline of this Nation's oil production. ANS oil exports will increase our oil production capacity by opening new reserves to production. This is oil production that our country can count on if it needs it. With an efficient market brought about by exports, we would not have this increased production and resultant increase in energy security. With this market distortion eliminated, producers will make substantial investments, will make investments in California, they will make investments on the marginal field on the North Slope that will lead to additional production. Every barrel of additional oil produced in California and on the North Slope is one less that would have to be imported from the Mideast or elsewhere in the world. In an effort to quantify the likely production response and to evaluate benefits and costs of Alaska oil exports, the Department of Energy has concluded a very comprehensive study last year on the matter. In its June 1994 report, the department concluded ``Alaska oil exports would boost production in Alaska as well as California by approximately 100,000 to 110,000 barrels per day by the end of the century.'' The study also concluded ANS exports could create up to 25,000 jobs. These are new jobs that will be created in California and to a lesser degree Alaska. Now, Mr. President, some Senators have expressed concern that lifting the ANS oil export ban will jeopardize the supply of ANS crude on the west coast. This is just simply not the case. Washington and California are and will remain the natural markets for ANS crude. Washington and California ports are the closest to Alaska and the ANS crude will continue to be supplied to those refineries. The economics simply dictate that as the closest point from Alaska and the closest point to significant distribution capability because of the populations in those areas near those west coast refineries. Furthermore, the only major refinery that opposes lifting the ban is one that has a 5-year contract with British Petroleum to keep their refinery supplied. It is my understanding there is still approximately 4 years left on that contract, so there is no immediate suggestion that this or any other refinery is about to have its operation jeopardized by this action. Further, the lifting of the oil export ban would relieve pressure that forces some of the ANS crude oil down to Panama, where it is unloaded, transported across Panama via a pipeline, and then reloaded onto vessels to take it to the gulf coast. It simply makes no economic sense to handle the oil that many times and transport it that long distance. That oil is the oil we are talking about, the available oil from 75,000 to 200,000 barrels a day that would be exported. The market in our opinion should determine the price and destination of the ANS crude oil. Mr. President, there has been a long concern in the domestic maritime community that lifting this ban would force the scrapping of the independent tanker fleet--these are U.S.-flag vessels that make up the significant portion of the U.S. maritime fleet under the American flag--and this lifting of the ban would destroy employment opportunities for merchant mariners who remain a vital contributor to our national security. In recognition of this concern, the proposed legislation before this body would require, and I emphasize require, the use of U.S.-flag vessels to carry the available oil that would be exported. This is not the first time the law was changed. Some would suggest that this is an issue of precedent, but it is not. The law was changed to allow the export of ANS crude oil in 1988 when Congress passed legislation to implement the United States-Canadian Free-Trade Agreement. It agreed at that time to allow the 50,000 barrels a day of ANS crude to be exported to and subject to the oil being carried on Jones Act, that is U.S.-flag, vessels. Mr. President, we have been trying to lift the oil export ban for some time. In the past, maritime unions opposed our efforts because they believed it would increase job losses in that industry. Last year, the maritime unions came to the realization that their unions were facing virtual extinction if Alaska oil production continued to decline; in other words, there would be no oil to haul and, as a consequence, no ships to man. So they initiated support for lifting the ban to help both Alaska and California production if--and I want to emphasize this--if it were transported on U.S.-flag vessels with U.S. crews. Mr. President, this current ban no longer makes economic sense. For far too long, it has hurt the citizens of my State. It has severely damaged the California oil and gas industry and has precluded the market from functioning normally. In other words, you have a free market out there. It should function as a free market. If this ban is left in place any longer, there is no question that it will further discourage energy production. It will destroy jobs in California, or the prospects for jobs, as well as in my State of Alaska, and it will ultimately be the end of our seafaring mariners, the independent U.S. tanker fleet and, as a consequence, the shipbuilding sector of our Nation because, under the current law, these vessels are required to be built in U.S. shipyards. And, clearly, if there is no oil to haul, you are not going to need any ships, regardless of the mandate that they be U.S. vessels with U.S. crews. [[Page S6654]] I am sure we are going to hear from some of our colleagues today expressing concerns that prices will go up, gas prices, gasoline prices, on the west coast, if exports of ANS oil are authorized. Well, Mr. President, there is no indication that this is the case. The Department of Energy carefully studied this issue and concluded that consumers would not see a discernible increase in the price at the gas pump. The DOE showed that west coast refineries enjoy the widest refiner gross profit margins in the country. Some would ask: Why? Well, we will get into that later on in the debate, I am sure. In other words, the west coast refineries have been able to buy crude oil for less per barrel than anywhere else in the country because of the proximity of the refiners to the origin of the oil in Alaska, yet they are selling the gasoline or other refined products for more than anywhere else in the country. In 1993, the refiners' gross margin on the west coast was more than $4 higher than the U.S. average, according to the Department of Energy. Wholesale gasoline prices in California are consistently 3 or 4 cents higher than in New York, despite the fact that California refiners are purchasing cheaper crude than the foreign crude oil shipped into the east coast. One wonders why. Another concern we will probably hear today is ANS oil exports will create environmental hazards, including increased chances of oilspills. However, the DOE study has taken that into consideration and found that exports of Alaskan oil will actually decrease tanker traffic in U.S. waters. And this is the simple reality. Furthermore, any tankers exporting ANS oil exported from Alaska will proceed some 200 miles off our coast and stay 200 miles or more off our coast while proceeding overseas. In other words, this oil, a small amount, in excess, will move from the Port of Valdez and go straight across the ocean, we assume, to refiners in perhaps Japan, Korea, and Taiwan, as opposed to this oil going down to the west coast of Alaska, the west coast of British Columbia, the west coast of the State of Washington, the State of California, and Oregon, as well. So to suggest that there is an increase in environmental hazards of oil spills is simply not true because we are simply not moving this oil down the west coast. It is much safer, as a matter of fact, to transport it across the ocean than down the west coast of the United States. It is interesting to point out, Mr. President, that this oil, this excess oil, would ordinarily have gone all the way down the west coast beyond California and into the pipeline at the Pacific isthmus in Panama, where it would have been unloaded, gone across Panama in the pipeline, and then again reloaded on smaller United States-flag vessels to be delivered to the refineries in the gulf coast. The economics of this double handling is the reason this is no longer a viable alternative and why we have this excess oil on the west coast. Now there are other concerns that exporting ANS crude will decrease work for the U.S. shipyards. However, in my opinion, it will have the reverse effect, simply because more tankers will be needed to trade, it will be necessary to bring a few more ships out. The lay-up fleet will provide significantly more jobs in the maritime market. The reason for that is you are moving the oil further and when you move it further, it takes more time and, as a consequence, you need more ships. Now, the question that somehow this will result in tankers being repaired overseas if the ban is lifted, I think bears some examination. Because if Alaska crude oil production continues to decline, in part because of the depressed prices caused by the export ban, there will be more tankers put in lay-up and unavailable for repair. And I would further advise the Chair that, as far as the threat of tankers being lifted overseas, there is a 50-percent surcharge that must be paid to the U.S. Government for tankers that are lifted in foreign yards. So, Mr. President, the reality is that it simply makes no sense to continue this ban at this time. And the lifting of the ban will, in my opinion, increase jobs, certainly increase domestic oil production without any cost to the country. It will be of great benefit to the country. Mr. President, I would like to refer a little bit to a little of the history relative to this matter and try and put into perspective the situation in the State of Alaska as it exists today. We are all aware that Alaska was a pretty good bargain when we purchased it from Russia and we paid a favorable price for it. But, you know, we are a little unique in having come into the Nation of States in 1959. We have a population of some 560,000 people spread out over a vast area roughly one-fifth the size of the United States. Until a few years ago, we had four time zones in our State; now we have three, simply to make it simpler living in Alaska. We have some 33,000 miles of coastline. We have a unique ownership of our land. We have 365 million acres. But if you look at the ownership of that land, you find that the Federal Government still owns over 65 percent of that land. Our State of Alaska, the State government itself, has about 28 percent. The native people, the aboriginal people of our State, have some 12 percent, and the private ownership in our State is somewhere in the area of 3 to 4 percent. Our State has been producing nearly 25 percent of the Nation's total crude oil for the last 16 or 17 years. That production was as high as 2 million barrels a day. Now it is about 1.6 million barrels a day. Coming into the Union in 1959 with the State of Hawaii, while we had camaraderie and a friendship, we in many ways did not have much in common. We were a large land mass federally owned; Hawaii, a much smaller island land area. We were separated by the Nation of Canada from the continental United States and, as a consequence, as we began to develop, a rather curious set of circumstances came about. We found ourselves subject to pretty much the whims of the Federal Government with regard to development, because the wealth and resources of our State, unlike many other States, were not controlled by private individuals or private groups in residence. We found ourselves subject to outside ownership and outside control. So, as we look at Alaska today, we really have to look at what constitutes the ownership of our resources, what contributes to our economy, where they are domiciled, where our jobs come from in relationship to the development of those resources. As we look at who owns Alaska today, setting aside the 65-percent Federal Government ownership, and identify our industries, we first look at our oil industry and find that our oil industry, which is such a significant factor, is not an Alaska-based industry. It is based in Texas, it is based in California, it is based in England, as a consequence of large international companies and not independents domiciled in our State. Our second-largest industry, fishing, for all practical purposes, is controlled by interests out of the State of Washington, primarily in Seattle, and Japan, where a large percentage of the ownership is concentrated. Very little of our fishing industry, as far as the processing is concerned, is domiciled with ownership in our State. We have a significant number of fishing vessels in our State, but many of the fishing vessels that fish in our State are domiciled in other States. Timber, which is our third-largest industry, is primarily controlled by the Japanese and interests in the State of Oregon and, to a lesser degree, in the State of Washington. Mining, which is a tremendous resource potential for Alaska, is primarily situated in British Columbia, in England, and in Utah. Our airlines, Mr. President, our largest carrier, Alaska Airlines, is domiciled in the Washington State area in Seattle. We are serviced by Delta, Northwest, United. As a consequence, the point I am making is virtually everything that comes in or goes out of Alaska goes through the State of Washington. Even our shipping, and virtually everything we use in our State, comes through the State of Washington. Sea-Land is associated in the Seattle area, yet it is a New Jersey corporation. Tote, which is a carrier that brings two to three ships a week in Alaska, is also domiciled in the State of Washington. Previous to that, Steamship Co. Some of the more senior Members will undoubtedly recall the ongoing debate that occurred for many years between the late Senator Gruening and the Alaska Steamship Co. which he claimed had a vice grip on Alaska, its transportation system and, as a consequence, controlled, to some degree, the level of Alaska development. As we look at everything we consume in Alaska--virtually everything-- our foodstuffs, our beverages, our mattresses, our light bulbs, our toilet paper, everything comes up through the State of Washington. We find many of our oil rigs or activities on the North Slope relative to oil and gas production are fabricated in the State of Louisiana and brought up. We have our own transportation system, a ferry system, which sails out of Bellingham, WA, to Alaska. It has been estimated that as much as 20 percent of all the economic activity in the State of Washington is directly associated with activities in Alaska. So one can say anything that happens in Alaska stimulating the economy also has a multiplying factor on the State of Washington. Even our oil tankers that haul oil go to shipyards, not in Alaska, but shipyards in Portland and San Diego, and those ships are not crewed with Alaskan crews, but rely on crews supplied from Washington, Oregon, and California. Our cruise ships that come up to our State during the summer months sail out of Vancouver, BC, where they are supplied and crewed. They are owned by Florida and British interests. So as we look at Alaska coming into the Union after all the rest of the States have established their land patterns, and so forth, we found that we had a rather curious set of circumstances. We have the reality that we are dependent, in a sense, for supply by our States to the south. The benefits are primarily concentrated in the State of Washington. I think perhaps a little further history is appropriate as we look back on how some of these policies developed, and it is fair to say that back in the twenties there was a fear from the State of Washington, the Seattle area, that perhaps Vancouver, BC, or Prince Rupert, BC, might begin to supply the frontier country of Alaska. To ensure this profitable business activity generated through the State of Washington was not lost, there was an action by the Washington State delegation. That delegation was basically responsible for getting the Jones Act passed. This was a rather interesting piece of legislation that said that goods and services that moved between two U.S. ports had to go in U.S. vessels with U.S. crews, built in U.S. shipyards. This action basically eliminated the British Columbia supplying Alaska goods originating in the United States and carrying them to ports in Alaska. The question is, Who was Jones? You may have guessed it. He was a U.S. Senator from the State of Washington. He served in this body 23 years, from 1909 to 1932. Some would say, why, he was doing his job, as some of the opponents today of this legislation can certainly justify, but we have to question, if you will, in Alaska that we were theoretically at that time denied an opportunity to let the market dictate the transportation modes to our State. I wonder how the Senator from Alaska would be treated today if I were up here suggesting Washington and Oregon not be allowed to export their timber products to the markets of the world or that Boeing would not be allowed to sell their airplanes outside the United States or perhaps people in the State of Washington have to eat all their own delicious apples. This is a part of the issue as some of us in Alaska see it. Our Washington State opponents say oil export of Alaska's surplus oil that has been on the west coast, formerly went through the Panama Canal, would harm Washington State because the excess oil on the west coast would not make it favorable for one of their major independent refiners in that area to be able to buy this oil at perhaps a favorable price that is pending. They say the refinery jobs are threatened. I really think this argument has no foundation in reality. As I stated earlier, this refinery in question has 5-year contracts and 4 years remaining with British Petroleum to supply the amount of oil that it needs to that refinery. Perhaps we will get into refinery returns a little later in the debate. But it is fair to say the consumers of Washington State are not benefiting by the abnormally high rate of return on investment in comparison to the refining industry as a whole in this area. In other words, the profits are not necessarily passed on to the consumer. That is really a case for the Washington delegation to address. But it certainly appears that way from the information supplied us by the Department of Energy, which I will make a part of the Record at a later date. Further production of Alaska oil will always find its natural markets in the nearest area where there is a refining concentration simply because of the costs of transportation; and that equates to the existing refineries on the west coast, which are the closest source of Alaskan oil. Oregon's opposition is a little different. Washington State does not have, as I understand it, shipyards with the capacity of lifting many of the larger U.S.-flag tankers. Several years ago, the Portland area, on the basis of the assumption that there would be perhaps more oil produced in Alaska, floated a public bond issue and bought a large dry dock from the Columbia River and solicited business of hauling out and dry-docking Alaskan tankers that were in the Alaskan trade as well as other commercial shipping. As we look at the merits of the volume of oil, a quarter of all U.S. production, except a small amount, goes to the Virgin Islands--I might add, in foreign vessels--that is exempt, and it goes in in these U.S. tankers moved down from Alaska to ports in Washington, California, and Panama. The Oregon delegation fears that some of this excess oil that used to move through the Panama Canal, now with the proposed legislation that would allow it to move into foreign markets, the free market, even though it would still have to move in U.S. ships with U.S. crews, these ships might be dry-docked in foreign shipyards, even though there is a more, I think, protective piece of legislation in place that addresses this. As I have said before, this requires U.S. owners to pay a 50-percent penalty to the U.S. Government on top of the foreign shipyard bill. So what we have here is understandable sensitivity. But not much is said by our Oregon neighbors as to where their shipyard was built. It was built in Japan. That is obviously a question that they saw fit to purchase that yard there rather than build it in the United States. Unfortunately, that shipyard has had its ups and downs. It has been out of work from time to time. And in making some inquiries, we found that most of the tanker traffic that used to be repaired in Portland is now being repaired in San Diego because we can only assume that yard appears to be more competitive, even though, at our urging, the tanker industry has contracted for the repair of two tankers in the Portland yard recently, and we will continue to support that yard as much as possible. I hope that we can address the concerns of the Oregon delegation because we are quite sensitive to the fact that they floated a bond issue and those bonds are still being retired, and without an adequate volume of business, the ability to retire those bonds is questionable. So we want to assist in every way possible, and we are working with the Oregon delegation at this time to try to work out some accord. I do not want to mislead the President about the real issue. There is an effort to stop Alaska from exporting its excess oil, and I wanted the Record to reflect on the real story and the reasons why. Now, the issue of why excess oil on the west coast needs relief now deserves a brief, expanded explanation. When we were at an all-time high of our production--some 2 million barrels a day--we simply had to move this excess oil because the west coast refineries could not consume it; the markets were not big enough. So a pipeline was built, and it was very interesting. I went down for the opening of it. It was built by the Government of Panama in partnership with Northfield Industries, which is an east coast firm, and Chicago Bridge & Iron. It was built to move the excess oil, so the oil would go down from Valdez to the Pacific isthmus in U.S.-flag vessels, unloaded, and moved in the pipeline. I might add, [[Page S6656]] that pipeline was simply a cat trail in the jungle, and the pipe, for the most part, was on the surface. But it did the job. In any event, once the oil was unloaded, the Pacific isthmus went through the pipeline, reloaded on U.S. small ships and was taken into the Houston refineries in the Gulf of Mexico. Well, as one can easily ascertain, the economics of that double handling is no longer efficient. As a consequence, they can bring in oil in the gulf and Houston refineries from South and Central America, offshore Louisiana, and Mexico as well, so they are not interested in taking the volumes of the United States oil which is no longer competitive in that market. That is the reason we have this excess on the west coast today. Now, letting the Pacific rim market absorb the excess oil also deserves a brief explanation. First of all, we are not talking about very much oil. The excess is estimated to be somewhere between 75,000 to 200,000 barrels per day. The rest of our 1.6 million acres is consumed on the west coast refineries and will continue to be. So if one looks at the economics of this excess oil, it is a pretty tough set of facts, because it will have to compete on some rather difficult terms. I ask the Chair to just compare the costs of marketplaces such as Korea, Japan, and Taiwan, to take the oil from Alaska, shipped in United States-crewed tankers that operate at obviously much higher costs, when those same countries can bring in oil much cheaper in foreign tankers than they can bring in oil from the Mideast. So there you have an analysis of the economics associated with the merits of getting some of this excess oil off the west coast. But the real concern is the stimulation of oil production in California and bringing on the small producers that have been down for some time. And once this excess is removed, you have the capability of this relatively large volume of small producers being able to bring their oil in because of the close proximity and reduced transportation costs associated with bringing that oil into the California refiners. So there you have the real issue before this debate. Alaskans, of course, are sensitive to the significance of sovereignty as it applies to what a State produces in the free market system, having the capability of making a determination of just where those resources will be utilized. Furthermore, Mr. President, I have some more detail that I would like to present to substantiate our concerns over this legislation. I think the best way to do it is to go into some detail relative to the background associated with the support for this legislation. Last year, for the first time, imports met more than half of our domestic consumption because the domestic production has drastically declined. By precluding the market from operating, the export ban has had an unintended effect of discouraging further energy production. With this market disorientation eliminated, producers would make substantial investments in California and the North Slope that would lead to additional production. Every barrel of additional oil produced in California and on the North Slope is one less than would have to be imported from the Middle East or elsewhere in the world. As I have said before, Mr. President, Washington and California are the natural markets for crude. Washington and California ports are closest to Alaska, and the ANS crude will continue to be supplied to their refiners. It simply no longer makes economic sense to handle the oil as many times and transport it the long distance that has previously been the disposition of that oil on the west coast of the United States. That is the oil that we are talking about. That is the excess. Let me refer to a report from the Department of Energy that addresses this issue. Lifting the Alaska crude oil export ban would, one, add as much as $180 million in tax revenue to the U.S. Treasury by the year 2000. It would allow California to earn as much as $230 million during the same period. It would increase U.S. employment, U.S. jobs, by some 11,000 to 16,000 jobs by 1995 and 25,000 new jobs by the year 2000. It would preserve as many as 3,300 maritime jobs. It would increase American oil production by as much as 110,000 barrels a day by the year 2000. It would add 200 to 400 million barrels to Alaska's oil reserve. Now, Mr. President, these are not figures that have been put together by the Senator from Alaska. These are figures released by the Department of Energy. Mr. President, as we address further consideration of the issues covering Alaska's oil export, I think we have to again rely on the credibility of the information. I was very pleased that the Department of Energy did such an exhaustive study relative to this issue, before the administration took a position. I am pleased to say that the President of the United States supports this legislation because this legislation is good for America. It is good for America because it decreases our dependence on foreign imports. By so doing, we basically keep our dollars home and keep our jobs home. As a consequence, Mr. President, we find that this report by the Department of Energy, in substantiating our efforts, keeps America in a position of ensuring that we can, through the incentives offered by this legislation, keep our production again flowing from marginal wells that previously have not been capable of being competitive in the marketplace. I am told that several fields in Alaska adjacent to Prudhoe Bay that are currently marginal at this time would be brought into production. When one begins to add up all the benefits of this, why, clearly, it benefits the maritime industry as well. As a consequence, Mr. President, I note that the maritime unions, without exception, support this legislation. As a consequence, they are urging Members to evaluate the merits of the legislation before this body. I have already addressed at some length the issue of increased oil production. I want to talk very briefly now as to the position of the administration in supporting the lifting of the North Slope crude oil export ban. Inasmuch as their indication that the bill, as proposed, should be amended to provide for an appropriate environmental review, now the question of an environmental review would be to allow the Secretary of Commerce to address anticompetitive behavior by exporters, and to establish a licensing system of some kind. We have addressed those concerns in the committee amendment. Before making his national interest determination, the President would be required, under this legislation, to complete an appropriate environmental review. In making his national interest determination, the President could impose conditions other than a volume limitation. The Secretary of Commerce then would be required to issue any rules necessary to implement the President's affirmative national interest determination within some 30 days. If the Secretary later found that anticompetitive activity by an exporter had caused sustained material oil shortages or sustained prices significantly above the world level, and that the shortages or high prices caused sustained material job losses, he could recommend appropriate action by the President against the exporter, including modifications of the authority to export. Under Senate bill 395, the President would retain his authority to later block exports in an emergency. In addition, Israel and other countries, pursuant to an international oil sharing plan, would be exempted from the United States flag requirement. The compromise also would retain a requirement of an annual report by the President on the ability of the refiners to acquire crude oil, and a GAO report assessing the impact of ANS exports on consumers, independent refiners, shipbuilders, and ship repair yards. Now, Mr. President, let me be specific on some of the principal benefits. The principal benefit, of course, is increased oil production. The Department of Energy, as I have stated, projects Alaska and California production will increase by 100,000 to 110,000 barrels per day by the end of the decade. Thus, by the end of this decade, exports would stimulate an additional 36.5 million to 40 million barrels per year. And it would create energy sector jobs. Specifically, some 25,000 jobs on [[Page S6657]] the west coast, as well as an undetermined number in Alaska. Revenues for the Federal Government, according to the Congressional Budget Office scoring, raising $55 million to $59 million over 5 years. It would raise State revenues. Using different assumptions, the Department of Energy concluded that the ANS exports would generate up to $1.8 billion in revenues for California and Alaska by the end of the decade. It would decrease net import dependence. It would reduce, as I stated, tanker movements by stimulating onshore production in California. Enactment of the bill would actually reduce tanker movements off the California coast, and it would preserve repair opportunities by helping preserve the independent fleet that otherwise would be laid up for scrap. The bill would provide shipyard repair work for shipyards in Portland, California, and others, that would be lost with the death of the fleet. So, the importance of continued production from Alaska is absolutely vital to the continuity of America's merchant marine. And the fact that this legislation would provide relief for the excess oil speaks for itself. Let me now draw your attention to some charts that I think explain this in detail, so we will have a little better understanding of just what the issues are before us. This is the area in Alaska. I wonder if I could have the staff provide me with a pointer, if there might be one available at this time, so I can continue my presentation? I think it will be a little more beneficial to have it. What we have here is a chart that depicts in detail the disposition of Alaska's north shore crude oil. Let me give this to my associate over here and perhaps he can point out where the oil begins, the production area in Prudhoe Bay, which went into production in the 1970's. An 800-mile pipeline was built across the breadth of Alaska. At that time that pipeline was one of the engineering wonders of the world. It was first estimated to cost somewhere in the area of $900 million. By the time it was completed, it was somewhere in the area of $7 to $8 billion. There are numerous pump stations along the 800 miles of pipeline. The terminus is the Port of Valdez, and that port handles 25 percent of the total crude oil that is produced in the United States. Let us look at the destination of this oil. Alaska, my State, consumes 70,000 barrels a day in three relatively small refineries. That oil is used in our State for jet fuel, for heating oil, diesel, gasoline, and other purposes. Then, first of all we ship from Valdez to our neighboring State of Hawaii directly, in U.S.-flag vessels, some 60,000 barrels per day. That is utilized in the refinery outside of Honolulu. The second route is a rather curious one. This was by congressional action, where we authorized a small amount of oil to go in foreign-flag vessels to the Virgin Islands, to the refinery at St. Croix, that is the Amerada Hess refinery in the Virgin Islands which is currently under U.S. flag, obviously, but is not considered a U.S. port in the interpretation of the Jones Act. Some 90,000 barrels of oil go that great distance around Cape Horn, the southern point of land of South America. Then we go to the next half circle. This is the oil we are talking about allowing free market flow, to be exported. This is oil that moves down to Panama. The reason it moves to Panama is, simply, these tankers cannot go through the Panama Canal, so they built a pipeline across Panama, and it goes to the gulf coast. As a consequence of developments in Colombia, which is down below, developments in Venezuela and other areas, including Mexico, the economics of moving this Alaskan oil this great distance, unloading it, moving it across the pipeline and loading it again, and taking it into the gulf coast, when other oil is available, as I have stated, from Central America, South America, and Mexico to the gulf coast--it is simply no longer competitive. So we have this excess of some 75,000 to 200,000 barrels a day. Let us look at where this oil goes, remaining, in the larger areas. The State of Washington receives some 440,000 barrels per day from Alaska. A good portion of Washington--I would say somewhere in the area of 95 percent of Washington's consumption is Alaskan oil--as it should be because of the proximity. The rest of the west coast, down in California where we have, in the San Francisco area and Los Angeles area, large accumulations of refined product. I am told California is currently consuming about 770,000 thousand barrels a day. I am very pleased to note the Senator from California, Senator Feinstein, is with me on this legislation to allow this export, because she and other Californians recognize the significant impact of relieving this excess, what it would do to stimulate the small operators, and for the creation of new jobs. So that is where the oil goes. I just want to make one more point. As Alaska oil declines, the obvious alternative is for these areas to look toward imported oil. That imported oil would not be in U.S.-flag vessels. It would come in, in foreign vessels, as some of it currently does to California and, to a smaller extent, the State of Washington. So that is where the oil goes. It goes in U.S.-flag vessels. What we are talking about, if this legislation is approved by this body, and we do move that surplus out, is a chart very similar to the this one, although you will note there is no oil moving through the Panama Canal. We should have included the Virgin Islands as continuing to receive their oil, which they will. But the point is the west coast--Washington, Oregon, California-- clearly are going to receive the same amount of oil. Hawaii will receive the same amount of oil. And this excess that previously went down here is going to be available in the Pacific rim. We have no idea what the dictate will be, other than it will have to go in U.S.-flag vessels and we have reason to believe that those countries have an interest in this oil because of its viscosity and it will be acceptable in the marketplace. Mr. FRIST assumed the chair.

Mr. MURKOWSKI. Mr. President, the Senator from Washington and I have been in discussion. It is my understanding that the Senator from Washington has agreed to taking up the debate on the bill at this time. I ask the Chair for unanimous consent that the committee amendment be adopted and considered to be the original text for further amendment.

Mr. MURKOWSKI. The Senator from Wyoming is correct. These two power marketing associations are separate. They are not connected. The distance between Snettisham and Juneau and Anchorage is 600, 700 miles, so they are not dependent on one another. The provision for the sale-- unlike other Federal marketing administrations, the Alaska Power Administration owns its power-generating facilities and hydroelectric projects. It was never contemplated that these two relatively small projects remain under Federal determination. It was the considered opinion that once they were up and operating, the contribution to utilize the tremendous hydro potential, even though it is a very small percentage, that they be disposed of, and as a consequence, we have been working with the administration in the State of Alaska to achieve this. We feel that the support base is there and, of course, the fact that the Department of Energy and the administration support this, I think, is evidence that we have a constructive proposal here.

Frank Murkowski

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