section 2, title II, section 204 and we actually page 10 under section 204, item C. And I will read this, will find this stunning that it is actually in print. That transfers item C, line 4, page 10: A lessee shall not be eligible to obtain any economic benefit of any covered lease or any other lease.
So President Clinton’s team had negotiated bad leases, and now our friends are saying that those bad leases must be stopped. We simply need to stop them. We don’t need to unravel them. We don’t need to go through the thorny process of making it right for both sides as we unravel. We simply are going to punish you by not allowing you to derive any economic benefit from this type of installation. I will tell you, that undermines the full faith and credit of the United States. If we cannot depend on the word of the United States, then what do we have? I would draw parallels to things that other countries have done. In Venezuela, Hugo Chavez in 2001 raised the royalty rates from 1 percent to 16 percent just like that. Now, I will tell you as a business guy, if you know that a cost is going to be 1 percent or 16 percent, it is sort of irrelevant, but you must know that the cost is steady. When he raised those rates just at a single point with no ability to redesign these types of infrastructures, then he severely limited the interest of people to invest in that country, and certainly
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H782] GPO’s PDFthat is exactly what is happening. Foreign firms are already curtailing their investments in that country.
So in Venezuela we see that there is an attempt to change existing contracts, very similar to the way that we changed yesterday on the floor of this House of Representatives, and it has affected the desire of people to invest in Venezuela.
In Bolivia we have the same thing. The Bolivian government threatened to expel oil companies from that country in 2006 if they did not agree to new government terms on existing contracts. What has happened? I think you could forecast what has happened. What is done is that foreign investors are now beginning to reconsider whether or not they will actually be a part of the Bolivian economy or not. This is the thing that all shareholders, they will live with any certainty in life, but they will not live with uncertainty. And when we begin to change the contracts, they begin to pull their investments out and go to places where certainty is more of a potential.
In Russia we have seen the same thing. Companies such as Shell, Exxon, BP have had valid oil and gas leases in Russia for years. President Putin had a number of government agencies threaten to pull these leases for a number of suspect reasons. By threatening to pull these leases, Shell was forced to give up assets that were worth billions of dollars. So we see in Russia this attempt to maneuver contracts, to manipulate contracts much as what we did yesterday, and the effects are very bad. Long term, Russia will not have people who are willing to come and invest in that country.
In 2001, I had the opportunity to go as a company; my wife and I had a small company that dealt in oil and gas, repairs of oil wells. Russia was looking for such capability. So in 2001, I went with a team of people who did various different projects. We were the ones who did down hole repairs on oil wells. They took me, they showed me files of maybe 6,000 or 8,000 wells that were simple to correct, yet they in their technology in 2001 did not have access to even the basics that my father had seen here in the United States in the early 1950s when he was working in the same industry. My father retired from Exxon; his whole life was work.
So when I went back, I showed him the videos of the equipment that was in Russia in 2001. He said, “Son, in 1950 we were more advanced than what we are seeing here.”
When countries are unwilling to allow people to have stable returns, it doesn’t have to be high returns, low returns, but there must be stability and there must be predictability. When countries do not allow that, there will be no investments. And so here Russia was with over 6,000 wells asking me in 2001 to come and fix because they did not have anyone that was capable of fixing them.
I determined that the environment was very, very unsettling in Russia, so we actually opted not to become a part of the team that went there. There was a company that was about 10 times our size located in Abilene, Texas. They did go. That was about maybe a $50 million company, maybe a $100 million company. Within 2 years, they were selling everything at bankruptcy because the Russians, as you can predict, said, “No. These assets are going to belong to us.”
So this contracting problem that was attempted to be cured yesterday in legislation I think is going to be, instead of a fix, is going to cause prices to be higher at the pump, investments to be less, and at the end of the day we are going to wonder if maybe we did not empower a bunch of enthusiastic amateurs to go around and make commitments on behalf of the Federal Government. We shall see. I wish my friends well.
I would say that I am not the only one who wonder about the contracts. Just day before yesterday the Washington Post had an editorial which declared that these elements that are included in the bill, the ones that begin to undo the contracts that we voted on yesterday and pushed by the majority in this House, the Washington Post declared those solutions to be ones that Russia and Bolivia would be proud of.
who cares as long as no more money is given to big oil. it doesnt matter that more us based business will go over seas, it doesnt matter that jobs in the US will be lost, it doesnt matter that gas prices will go up, it doesnt matter that our foreign need for oil will go up, it doesnt matter that the money coming from the cuts will be put into a fund for no specific purpose, it doesnt matter that we broke contracts signed by the clinton adminitstration, it doesnt matter that business will be hesitant to invest in us based businesses, it doesnt matter that the small oil producing companines will be shutting their doors, as long as big oil doesnt make money nothing else matters.