WASHINGTON (Dow Jones)--As oil prices continue to trade at economy-damaging levels, U.S. Senate Republicans Friday blocked a vote on legislation to rein in speculation in the energy markets. Instead, the minority is calling for a series of votes that would expand domestic petroleum production and new nuclear power.
In a 50-43 vote, Democrats failed to gain enough support to bring the bill forward for consideration on the Senate floor and now face another week of energy debate as Republicans threatened to hold up the measure to hammer home their "drill more, use less" policy.
The Democrats' legislation would require the Commodity Futures Trading Commission to set limits on the amount of speculative trades participants who aren't hedging delivery of the actual commodity can make, including in over-the-counter markets and other exchanges that are exempt from the same oversight as the New York Mercantile Exchange, a unit of Nymex Holdings Inc.
(NMX).
"There's clearly nothing more important in the country for Congress to deal with...than the price of gas at the pump," said Sen. Mitch McConnell, R-Ky. The Minority Leader said his party would continue to hold up business on the Senate floor until Democrats allowed them to offer a series of amendments on expanded offshore drilling, oil shale development, nuclear power and other energy solutions.
"We're not getting off this bill very quickly," said Sen. Pete Domenici, R-N.M., ranking Republican on the Senate Energy and Natural Resources Committee.
Republicans have been trying to use a swell of public support for increased petroleum production - including areas currently closed on the Outer Continental Shelf - to break Democrats' opposition to lifting a decades-old drilling moratorium.
Senate Majority Whip Richard Durbin, D-Ill., said the Republicans' strategy boiled down to pure politics.
"They believe they have a winning hand, they believe the 'drill now' is the winning message to take into November,"he said.
"They want that message to continue to be hammered away," he said.
The spat over the number of amendments that would be allowed to the Democrats' energy bill fits within the general tone of debate over the legislation. Both sides have repeated that acting to bring down the price of crude oil is their No. 1 priority, but both sides also have acrimoniously accused the other of failing to take the issue seriously.
Senate Majority Leader Harry Reid, D-Nev., said he has offered to the Republicans to have separate votes on drilling, oil shale and nuclear, but Republicans have so far declined to accept the offer.
The GOP, meanwhile, says it hasn't received a formal offer.
Durbin said "there's always a chance" for a deal to be reached, but "so far, it hasn't been very encouraging."
The House of Representatives is also considering an energy market anti-speculation proposal, but it gives the regulator more discretion to set trading limits and exercise new power.
The legislation would extend the CFTC's oversight to previously exempt over-the-counter markets, according to House Agriculture Committee Chairman Collin Peterson, D-Minn. It also calls for a new full-time CFTC staff to "improve enforcement, to prevent manipulation and to prosecute fraud," he said.
The House Agriculture Committee approved the bill Thursday, and the legislation is set to go to the floor of the House for a vote next week.
Specifically, the bill would codify actions taken recently by the regulator, forcing position limits on the designated contract markets such as the Nymex and foreign-based exchanges such as IntercontinentalExchange's (ICE) ICE Futures Europe.
It would also give the regulator discretion to impose position limits for pure speculators - those participants that aren't hedging for physical delivery of products - in the over-the-counter markets if the CFTC believes the trading is disrupting liquidity or price discovery, causing a severe market disturbance, or otherwise helping to create a price that isn't based on supply-and-demand fundamentals.
Source: Ian Talley, Dow Jones Newswires; 202-862-9285; ian.talley@dowjones.com