"FOX NEWS SUNDAY" HOST CHRIS WALLACE: There is no bigger challenge to the country now than the soaring price of energy. What can be done about it?
Well, for answers we've assembled a roundtable of experts — two of the point people in the Senate on this problem, Byron Dorgan, Democrat of North Dakota, and Kay Bailey Hutchison, Republican of Texas, and Red Cavaney, president of the American Petroleum Institute.
And, all of you, welcome back to "FOX News Sunday."
SEN. KAY BAILEY HUTCHISON, R-TEXAS: Thank you, Chris.
SEN. BYRON DORGAN, D-N.D.: Thank you, Chris.
AMERICAN PETROLEUM INSTITUTE PRESIDENT RED CAVANEY: Thank you, Chris.
WALLACE: Let's start with the most obvious solution, domestic drilling. And as prices soar, public opinion is turning around on this subject. According to a recent Gallup poll, as you can see there, 57 percent now favor drilling in areas that are off-limits.
Senator Dorgan, if we started drilling in ANWR, the Arctic National Wildlife Refuge, if we started drilling offshore, if we started mining shale rock out West, over time we could dramatically reduce the price of energy and our dependence on foreign oil.
Why are Democrats blocking drilling as part of the mix of solutions?
DORGAN: Well, first of all, I don't believe that statement is true. I mean, we have opened up at least 181 in the Gulf of Mexico, substantial oil and gas reserves.
I and Senator Bingaman joined Senator Domenici and then Senator Talent as the four people that offered the legislation to open that up.
You started with ANWR, which everybody always starts with, but even John McCain has voted against drilling in ANWR. He said, "We ought not drill in the Everglades, we ought not drill in the Grand Canyon, we ought not drill in ANWR."
I believe we need to do a lot of things, including additional production, including offshore production, but we also need to move dramatically toward renewable energy as well.
And one final point. In North Dakota we have just had the largest assessment — North Dakota and Montana — in what's called the Bakken shale field, the largest assessment of recoverable oil reserves that was ever issued in the lower 48 — over four billion recoverable barrels of oil.
So there is a lot of drilling going on, and I hope that we see more in the right places.
WALLACE: I just want to follow up with you for a second before I bring in your colleagues here. ANWR — and let's take a look, because we have a map of ANWR.
In a refuge the size of the state of South Carolina, we're talking about drilling in an area the size of Washington's Reagan Airport. ANWR contains 10 billion barrels of oil. Can we really afford to put that off limits?
DORGAN: Well, there's far more oil in the Gulf of Mexico than in ANWR, far more oil there. And I'm someone who believes we ought to be drilling in a portion of that.
But as I said, even Senator John McCain has voted against drilling in ANWR. Don't lay that just at the feet of Democrats. That is a large area set aside in legislation signed by Dwight Eisenhower. To suggest that ought to be the hood ornament for what we do in terms of solving our energy problem is just wrong.
We need additional drilling. We need renewables. We need conservation, efficiency — all of those things in a very aggressive way.
WALLACE: Senator Hutchison, congressional Republicans are pushing for more drilling, but as Senator Dorgan pointed out, your presumptive nominee is against a lot of it.
He is against drilling in ANWR. He says that drilling offshore should be left up to individual states which in most cases, like Florida and California, have banned it. Is he wrong on such an important issue?
HUTCHISON: Well, let me first say that while Byron Dorgan has just said that he would support more drilling as part of a package, in fact, the Democrats are blocking any kind of increase in production. They are.
And if we don't increase the production in this country, we are not going to bring the price of oil down. We're not going to bring the price of gasoline at the pump down. And we're not going to become independent.
Now, Senator McCain has said that he believes ANWR should be off- limits, but he has embraced all of the other production areas, off the coast.
WALLACE: No, in terms of individual states, he says that it should be left up to the states.
HUTCHISON: Well, that's right. And that's what is in the plans. It is an incentive that Republicans put in the last piece of legislation, which many Democrats are trying to withdraw, for states to be able to get royalties if they explore and produce off their shores. It is a great incentive.
Let me just say that what we really must do if we are going to become independent, rely on ourselves, solve this problem and bring prices down, we have to have a myriad of proposals, including drilling in ANWR, drilling off the coasts on the outer continental shelf and the oil shale, which is — all of those have more reserves than all of the oil in the Middle East.
And in addition to that, we can do it environmentally safely. It seems like the environmentalists have gone on vacation since 1950. We have the ability to drill in ANWR, in this very small area that you pointed out, completely environmentally safely, and the same on the coasts.
WALLACE: Mr. Cavaney, Democrats point out that for all the talk of drilling, the big oil companies currently hold leases on 68 million acres of federal land, onshore and offshore, that you're not developing. Why not start there?
CAVANEY: Well, we are developing. And there's a big misunderstanding. If they understood the industry, they would appreciate the fact that we bid for those leases competitively in the open market. We pay the government to get them.
We have to pay annual lease fees on those particular leases. And at the end of the lease term — five years, six years, whatever it may be — if we haven't done anything on those leases, they go back to the government to be bid again.
What's going on is they — the first step in our industry is called exploration. In other words, the creator didn't put oil and gas on every plot of land. So we have to go and explore.
We're willing to put our capital at risk to find out whether or not there's oil and gas there. And there's been very few cases where there is oil and gas in amounts that are commercially usable. And those are the ones that you can develop.
The rest of them, why drill where you know there's no oil or gas? And let those things go back to the government.
WALLACE: Senator Dorgan, let me bring in another part of this equation, because the Democrats' big idea in this area is a windfall profits tax on Mr. Cavaney's employers, the big oil companies, to finance alternative energy as well as more conservation.
How does the government decide what's a reasonable profit and what is a windfall profit? And how do you answer the fact that back when this tax was imposed in the '80s, domestic production dropped and foreign imports increased?
DORGAN: Yeah. Well, let me talk about Exxon just for a moment. Last year, Exxon used $31 billion of profits to buy back their stock and only half as much for drilling and exploration.
I mean, you know, look. With respect to a windfall profits tax, it's constructed so if they're using that money to expand supply by drilling, they wouldn't pay it. I mean, that's the approach that makes sense to me.
But I want to talk about one other thing. This issue of production is a canard. We're producing more in this country. Some Democrats, including myself, have supported additional production as well.
But let me say this. There is nothing at this point that justifies the price of oil or gas in this country with respect to supply and demand. Every month since January our domestic crude supply has gone up. Demand is going down because the economy is slowing. And yet the price of oil and gas are going through the roof.
Why? Because there's an orgy of speculation going on in the futures markets, an unbelievable amount of speculation by hedge funds, investment banks and others, that are driving up prices for the American people.
And that ought to be one area at least where Democrats and Republicans can work together to say let's wring this speculation out of...
WALLACE: Well, let me just follow up directly on that, because there is talk you're blocked on — you want a windfall profits. They want more drilling. You're not going to be able to pass either of those, it appears.
Are you willing to separate out some federal action to stop oil speculation?
DORGAN: Absolutely. Absolutely. I proposed that. I think others have proposed it. We ought to get at this. There's nothing with respect to supply and demand that justifies the current price. This is all about a lot of speculators.
Will Rogers talked about that eight decades ago, people buying things they'll never get from people that never had it, making money on both sides. These are people that don't want to take delivery of oil. They want to speculate in the market, and they've driven up prices in a dramatic way.
WALLACE: Senator Hutchison, how big a problem is oil speculation? And maybe we can work out a deal right here in this studio. Are Republicans willing to agree with Democrats, separate out and go after the oil speculators?
HUTCHISON: Well, let me say that I think all of us would agree that we need transparency. We need to understand this.
But the way that we can stop the speculation is to show that we are going to do what we can, using our own natural resources and our own creativity, to increase the supply of oil and gas and renewables in our country.
And all of the Democratic proposals don't produce one ounce of a barrel of oil.
WALLACE: But to answer my direct question, would you agree to — legislation on oil speculation, separating it out.
HUTCHISON: Well, I think if you are talking about a cartel that speculates and fixes the prices, that is absolutely something that Republicans and Democrats would agree on.
But if you're talking about people going into the market of their own free will, not controlling anything, then it is a market issue. And I think transparency would be a good add, and I would work with Senator Dorgan on that.
I think we need to look at the whole issue and understand it. But if we bring up supply, we will bring down the price.
WALLACE: Mr. Cavaney, let me bring you into this, because Senator Dorgan brought up something that a lot of people talk about, and that is the huge amounts of money that big oil is making — $36 billion, the five oil companies in the first quarter of this year.
And it's not just Democrats who are going after big oil. Let's look at what John McCain said recently. Here it is.
(BEGIN VIDEO CLIP)
MCCAIN: I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made, but their failure to invest in alternate energy to help us eliminate our dependence on foreign oil.
(END VIDEO CLIP)
WALLACE: "Very angry," "obscene profits," and this is the Republican nominee talking.
CAVANEY: Well, there's a couple of facts that need to be entered into this. First of all, if you look at the last quarter, first quarter of this year, the profits the industry made was 7.4 percent. That's return on a dollar of sales. The Dow Jones industrial average made 8.5 percent. If you want to go back five years, 10 years, we make the oil industry average.
Now, our profits are large because over the last 30 years what's happened is the competitors, the publicly held oil companies, are foreign governments and they're national oil companies.
And these companies have to scale up to be the equivalent size to compete with them in order to get the oil on the global market to bring back to this country to run through our refineries. If we had more domestic production, we could reduce our reliance on imports.
And to the point we just discussed earlier, the problem we have right now globally is supply and demand are very, very close. That creates the platform for people to enter into these commodity markets on the expectation that other things are going to happen.
So just solving the speculation isn't necessarily going to take the price of oil where it could be. You need both production, which you get through access and refinery expansions, and then you need to look at the...
WALLACE: Senator Dorgan, let's look at what Barack Obama said last week about — or this week, rather, about the spike in gas prices. Here it is.
(BEGIN VIDEO CLIP)
QUESTION: So could these high prices help us?
OBAMA: I think that I would have preferred a gradual adjustment. The fact that this is such a shock to American pocketbooks is not a good thing.
(END VIDEO CLIP)
WALLACE: Senator Obama's gradual adjustment — he seems to be saying that the rise in gas prices may actually be helping us form a better energy policy.
DORGAN: Well, it certainly forces some conservation for people that can't afford to fill their tank. Let me say this.
WALLACE: So he favors...
DORGAN: No. No, he does not. But let me say this. You just heard him. Let me say this. We've had people testify before the Congress that says there's — excess speculation that's going on in these markets has increased the price of gas and oil by 20 percent to 30 percent.
We've got to wring that out. That's unfair to the American people to be paying this kind of a price because speculators are having a field day.
And one final point. We tap dance around this table talking about everything except that which we have to talk about, and that is change. We've got to address renewables in a very significant way. We can't drill our way out of this.
Yes, we should produce more. We should drill more. But you can't drill your way out of this. We have to have a different energy mix, because 60 percent of our oil now comes from off our shore. This is all about change.
WALLACE: Well, let me ask you about one aspect of drilling, Mr. Cavaney. There's a report this weekend that Saudi Arabia is prepared to start producing a half a million more barrels of oil a day. What would that do to prices?
CAVANEY: We can't say exactly, but clearly, more volumes of production is going to help put downward pressure on prices globally. And that's why increasing our access and production here in the U.S. would also help that equation.
WALLACE: And where do you see the price of gasoline headed over the course of the next year?
CAVANEY: It's difficult to say, but typically gasoline peaks right at the beginning of the driving season which we've just gone through.
And so if we get a regular pattern, hopefully, without any geographical or other problems like hurricanes coming in, we should see it, if it follows usual trends, taper down as we go through the summer.
WALLACE: But do you see it going down below $4 the rest of this year?
CAVANEY: We can't say because we don't control all those other factors.
WALLACE: And just very briefly — we've got less than a minute left — to the two of you, I've got to say, listening to the two of you, it doesn't sound like Congress is going to do anything about this in the rest of this election year.
DORGAN: I don't agree with that. I think that we are going to tackle speculation and get the speculators out of this market. And if we do, I think we will see reduction in prices.
And by the way, the Saudis, I think, are going to announce an 800,000-barrel increase a day. That should put some downward pressure on prices as well.
WALLACE: Senator Hutchison, you get the last word.
HUTCHISON: Well, I would just say if we're going to make a deal right here, it should be a balanced approach.
Yes, let's have more transparency on speculators, but the way to stop speculators is for Congress to act, for Congress to open up our own natural resources to produce. That would stop the speculators and it would bring the price of gasoline down.
WALLACE: Senator Hutchison, Senator Dorgan, Mr. Cavaney, thank you all so much for coming in today.