The Honorable Jonathan Leibowitz
Chairman
Federal Trade Commission
600 Pennsylvania Avenue, NW
Washington, DC 20580

Dear Chairman Leibowitz:

I am writing to request the Federal Trade Commission investigate whether agreements exist among Canadian oil shippers that violate U.S. antitrust laws.  The agreements involve transportation of tar sands oil via the proposed Keystone XL pipeline, which will span the length of the continental U.S. and allow tar sands crude to bypass existing Midwest refineries.  It has been brought to my attention that documents and testimony indicate that at least seven Canadian oil shippers have agreed to incur increased near-term shipping costs on the new pipeline in order to impact market supply in the existing markets so as to drive up the overall price of their product for U.S. refiners.  Because of the potential impact on US gasoline consumers and because of the long-term impacts that such arrangements and the construction of the Keystone XL pipeline could have on U.S. oil supplies, markets and energy security, I am requesting the FTC investigate whether anti-competitive practices violating U.S. antitrust laws have occurred in relation to the proposed pipeline project and related shippers’ agreements.

On October 8, 2008, the U.S. Federal Energy Regulatory Commission (FERC) approved Transportation Service Arrangements (TSAs) between TransCanada Keystone Pipeline, LP and shippers to utilize, or pay for, capacity on the Keystone pipeline system. While the Order does not expressly state who these shippers are, it is my understanding they are members of the “Keystone Shippers Group,” which includes: Canadian Natural Resources Limited, Conoco Phillips Canada Marketing & Trading ULC, EnCana Corporation, Shell Trading Canada, Total

E & P Canada Ltd.’ and Trafigura Canada General Partnership.  Although these TSAs were approved by FERC, they remain secret, and were granted confidential status by FERC and by the Canadian National Energy Board (NEB) in a Sept. 14, 2009 NEB Order. Thus, it is my understanding the exact terms of the TSAs remain hidden and the complete nature of the agreements among these shippers has not received full public scrutiny.

While the full nature of the arrangements agreed upon by the Canadian shippers is unclear, there is clear indication that there is a coordinated “strategy” among Canadian suppliers to gain higher prices. According to TransCanada, the proposed Keystone XL pipeline can be used by Canadian oil shippers to add up to $4 billion to U.S. fuel costs. Testimony taken on September 17, 2009 before the NEB indicates that the Canadian companies intend to incur higher pipeline tariff costs using the Keystone XL pipeline to bypass PADD II refineries in the Midwest.  This will have the effect of manipulating supply levels allowing prices of oil refined in PADD II to rise and ultimately benefitting the Canadian companies with higher prices.  This comes to the fore in this exchange between Mr. T. Wise of Purvin and Gertz on a panel for TransCanada Keystone Pipeline GP Ltd. and Mr. D. Davies of Enbridge Pipelines Inc.:

3715. MR. DAVIES: Okay.

3716. And if we go back to Adobe page 35 of your evidence, you say that the test of reasonableness does not apply because — and I’m quoting from Line 6:

“A producer who supplies a committed volume on the Keystone XL Pipeline may expect to receive a lower net-back price on this volume but this strategy would be intended to raise the price in PADD II and raise the average net-back price.”

3717. Do you see that?

3718. MR. WISE: I do.

3719. MR. DAVIES: So, first of all, this “strategy” as you call it, would be intended to raise the crude price not only in PADD II but also in Ontario; right?

3720. MR. WISE: Yes, it would raise it in Ontario and in Western Canada.

3721. MR. DAVIES: And, to be clear, the strategy is that a producer who supplies a committed volume on XL would be prepared to take a financial hit on that volume in order to raise crude prices in PADD II and Ontario; right?

3722. MR. WISE: Yes.

3723. This goes to the idea of a one price on a committed barrel — call it “a term price” if you like — versus a spot price.

3724. MR. DAVIES: And is it your view, Mr. Wise, that a single producer could use this strategy to raise the crude prices in PADD II and Ontario or would it take a number of producers pursuing this strategy together to increase the PADD II and Ontario prices?

3725. MR. WISE: I think it pertains to the committed barrels which total 380,000 barrels per day and represented by seven shippers.

3726. So —

3727. MR. DAVIES: So seven —

3728. MR. WISE: In this case, the answer is seven.

3729. MR. DAVIES: So seven shippers or seven producers are, in your view, pursuing this strategy in order to increase the PADD II and Ontario prices. Do I have it right?

3730. MR. WISE: We gave a sample calculation a few — a page earlier in this same evidence which shows how — shows how that would work.

3731. But if some of — if a minority of the barrels were sold at the Gulf Coast at a Gulf Coast price, that that would have the effect of raising the price not only in the Midwest and Ontario but in Western Canada thus reduce — increasing the net-back price for producers.

3732. MR. MILLER: May we have a moment, please?

3733. MR. DAVIES: I think you should take one.

— (A short pause/Courte pause)

This “strategy” apparently relates to an attempt to reverse the recent relative lowering of pricing that has occurred in Midwest refineries.  The reasons for the price decrease in the Midwest are complex, but they can be reversed by Canadian shippers agreeing to bypass PADD II refineries and sending their crude to PADD III.  Construction of KXL would open the Gulf Coast to tar sands crude.  This would reduce total oil flows to the Midwest, in turn reducing the current crude supply and causing prices to rise in PADD II.  Midwestern refiners would pass this rise in price on to consumers.

The Canadian oil shippers appear to cooperate to use the new pipeline capacity to expand tar sands operations in Canada and then transfer some of the flows to the Gulf Coast, resulting in higher per barrel costs in the Midwest on all crude oil pipelines.  The increase would be $3.00 per barrel overall and $6.55 per barrel sold in Midwest markets. This could increase revenue for the Canadian producing industry by $2-3.9 billion per year.

The proposed pipeline will likely also encourage the eventual export of crude oil derived from tar sands from North America.  Substantial investments have been made in Canadian production by foreign firms, including China National Petroleum Corporation, the Chinese state-run oil company.  While it does not appear that SINOPEC or the other Chinese companies are currently included in the group of already committed shippers, the proposed pipeline expansion far exceeds the initial committed capacity.  As a result, other Canadian production will likely utilize the Keystone expansion, including projects supported by foreign investment.  Current pipeline capacity does not, on its face, warrant the kind of additional foreign investment that is occurring and strongly suggests that exports outside of North America are ultimately envisioned by these investors.  Canadian oil would then not only bypass PADD II refineries, but also PADD III refineries in the Gulf Coast; the avowed purpose of the pipeline.

It is therefore critical to determine whether the increased prices expected to be incurred by U.S. consumers and the potential for significant redistribution of crude oil supplies now destined to U.S. refineries due to the proposed construction of this pipeline is the result of anti-competitive practices that violate U.S. laws through agreements among the proposed shippers.  For these reasons, I urge the FTC to investigate the proposed Keystone XL pipeline and related agreements.

Thank you for your prompt attention to this important matter.

Sincerely,

RON WYDEN
United States Senator

London papers reported today that BP hoped to assure its shareholders that they would continue to get dividend payouts, as the stock declined 15 percent yesterday when the company’s “top kill” effort to seal the leak failed over the weekend. The company’s liability could be as high as $37 billion, Credit Suisse said, and Schumer and Wyden want BP to know what it owes to American citizens and taxpayers before remitting funds to shareholders.

The threat to BP from high liabilities and a falling shareprice might be existential. Reuters blogger Felix Salmon notes, “The most likely fate for BP at this point isn’t death but rather takeover. There’s been a lot of speculation along those lines, and with BP’s leadership looking even weaker than its stock price, the rest of Big Oil is surely salivating at the prospect of picking BP up without much difficulty. What’s more, BP could easily be broken up, like ABN Amro, and divvied up according to its various geographical units.”

BP has spent around $1 billion on cleanup and economic hardship payments to Gulf residents and workers thus far. But today, analysts said that the leak might last until Christmas — six months from now. And in the best-case scenario, BP hopes to plug the leak no sooner than August.

Here is Wyden and Schumer’s letter to Tony Hayward, BP’s chief executive officer:

Dear Mr. Hayward,

We write to you out of concern that you will be announcing a dividend to your shareholders prior to fully covering the cost of the cleanup for the oil spill in the Gulf of Mexico.  Today, several media outlets are reporting that you are expected to hold a conference call this week pledging to maintain BP’s dividend.

We find it unfathomable that BP would pay out a dividend to shareholders before the total cost of BP’s oil spill clean-up is estimated.  The total cost of the clean-up estimates could reach $37 billion if the well leaks until relief drilling is completed in August, according to Credit Suisse Group AG.  While we understand the need to reassure shareholders that the disaster in the Gulf will not substantially impact BP’s long term financial health, we are concerned that such action to move money off of the company’s books and into investors pockets will make it much more difficult to repay the U.S. government and American communities that are working around the clock to stem the damage caused by this devastating oil spill.

We urge you to reconsider your dividend pledge until accurate costs of clean-up and liability claims can be estimated. We are certainly not opposed to BP paying dividends after the well is capped, clean-up has been completed, and the victims have been justly compensated. But the families of those who have perished in this disaster, the industries that have been devastated from the ecological damage along the coasts, and the individuals who are sacrificing their health and safety to stem the damage deserve to know that BP will fulfill its obligations to them before its shareholders.

Sincerely,

U.S. Senator Charles E. Schumer

U.S. Senator Ron Wyden

“It’s heartwarming to see that Transocean, the same company that rushed to limit its liability in the Deepwater Horizon rig explosion, seemed not to hesitate at all when it came to the decision to distribute its profits,” one maritime expert wrote of the plan.

Today, 18 Senate Democrats took the scrutiny a long step further, asking the Justice Department to investigate whether those payouts are appropriate “at a time when [the company] may be responsible for financial damages related to the massive oil spill in the Gulf of Mexico.”

“Transocean’s stockholders,” the lawmakers wrote in a letter to Attorney General Eric Holder, ”should not take huge profits from polluting our country’s Gulf Coast.”

We are concerned that such action to quickly move money out of corporate coffers to individual investors may make it more difficult to pursue liability claims against the company.  Families of those who died in the disaster, the fishing industry that has been devastated by the oil spill and the governments that have worked full-time to clean up this spill deserve better.  Transocean has also reported that it expects to make a $270 million profit on its insurance policy for the Deepwater Horizon, since the rig was insured for more than it was worth.

The letter, spearheaded by Sen. Ron Wyden (D-Ore.), also drew the support of Democratic Sens. Pat Leahy (Vt.), Charles Schumer (N.Y.), Tom Harkin (Iowa), Robert Menendez (N.J.), Mark Begich (Alaska), Byron Dorgan (N.D.), Patty Murray (Wash.), Jeanne Shaheen (N.H.), Bill Nelson (Fla.), Mark Pryor (Ark.), Mark Udall (Colo.), Jeff Merkley (Ore.), Max Baucus (Mont.), Amy Klobuchar (Minn.), Michael Bennet (Colo.), Blanche Lincoln (Ark.) and Robert Casey (Pa.).

Of note, Transocean is not exactly known for its corporate citizenship. Until recently, the company was based in Houston, but officials moved the headquarters to Switzerland “to avoid paying higher corporate taxes.“

Some Guardsmen from the 41st Infantry Brigade Combat Team, while still called up on active duty, found themselves getting rushed through Lewis-McChord’s medical facilities. So they contacted their members of Congress to alert them to what they considered alarming anomalies between their treatment and that given to active-duty soldiers. Staffers for two Oregon legislators, Sen. Ron Wyden (D) and Rep. Kurt Schrader (D), visited Lewis-McChord on May 11. They quickly found that “this was more than a couple of isolated incidents,” said Wyden spokeswoman Jennifer Hoelzer.

Interviews with base staff and members of the 41st IBCT eventually led the congressional aides to discover a PowerPoint presentation at the base that clearly placed reservists and active-duty soldiers on two different tracks for medical attention. The PowerPoint, assembled by the family practice department at the base’s Madigan Army Medical Center, indicated that the goal for active-duty soldiers was to “RUSH” attention for an acute illness or infirmity to a unit medical provider. For reservists, the goal for most demobilizing soldiers was “GET HOME NOW.” For Guardmen and Guardswomen getting ready to deploy, it was “Get acute issues resolved and be eligible to deploy.” Feel confident about that standard of care?

The PowerPoint itself carried a flip — to the Oregon Guardsmen, offensive — illustration of the bifurcation. I’ll put the slide below:

In a letter to Wyden and Schrader, the chief of the Army’s Medical Command, Lt. Gen. Eric Schoomaker, “apologize[d]” for what he called the “insensitive and offensive depiction of Reserve Component Soldiers in this presentation.”

That’s not good enough for Wyden and Schrader. They’ve written to Army Secretary John McHugh asking for a full investigation of whether members of the 41st were treated as “second-class soldiers” and ensuring that the Guardsmen get “all the medical, pay and other benefits to which they are entitled.” Wyden spokeswoman Hoelzer expects McHugh in for a discussion about next steps later this week.

CQ reports:

The bill would require television, cable and radio outlets to offer the Republican National Committee, the Democratic National Committee and other political party committees the same deeply discounted price  – the “lowest unit rate,” in industry jargon  – that television stations are now required to offer only to political candidates. Although advertising rates fluctuate dramatically, veteran media buyers estimate that candidates’ campaigns often pay two-thirds of the retail price that regular television advertisers such as McDonald’s and Coca-Cola pay.

“NAB is reviewing the bill,” spokesman Dennis Wharton said in a statement April 29. “We would have concerns with provisions in the legislation that would expand the lowest unit rate discounts now afforded federal candidates to political parties and political committees.”

What’s strange about that position is that, while the Democrats’ bill would force reduced rates for some groups, broadcasters, post-Citizens United, remain in a position to reap enormous profits from an increase in political ads from companies and interest groups — organizations that will be paying the full price for the air time.

While we’re on the topic of corporate influence over Congress, it’s worth noting that the National Association of Broadcasters is now headed by Gordon Smith, former GOP senator from Oregon.

In the same statement, Sen. Carl Levin (D-Mich.) said the policy was now “somewhat more humane” but urged Gates to go further and simply “suspend discharges based solely on sexual orientation” until a Pentagon-ordered study of how to repeal the ban is complete. Sen. Roland Burris (D-Ill.) was more sanguine in the statement, calling Gates’ move “a major shift in thinking, and tangible progress toward the elimination of this discriminatory policy.” Sen. Ron Wyden (D-Ore.) added that the group “won’t rest until ‘Don’t Ask Don’t Tell’ is repealed.”

In the House, a man who wants to join them, Rep. Joe Sestak (D-Pa.) — a Senate hopeful and retired three-star admiral — said in a separate statement that while he was encouraged by Gates’ revisions,

“it is my firm conviction that these new procedures do not go far enough.  If unfortunately we are to spend a year studying the impact of repeal, our military and troops cannot be left in limbo throughout this process. President Obama should sign an executive order — relying on the same ‘stop-loss’ authority used to extend tours of duty — to halt all dismissals under this policy.”

As the deadline nears, state agencies will begin to send out notices for the termination of benefits, re-program their benefit systems, and develop contingency plans for handling claimants whose benefits are terminated.  If Congress does not act to extend benefits now, agencies that administer benefits and families who depend on them will have these essential safety nets pulled out from under them.

Though they don’t specify a timeframe in their request, both Wyden and Merkley were a part of last month’s Democratic push to extend the UI filing deadline through the end of 2010. Their motivation is clear: Oregon’s unemployment rate, at 11 percent, is well above the national average.

Senators Ron Wyden (D-Ore.), Dick Durbin (D-Ill.) and Russ Feingold (D-Wis.) wrote a letter today — which you can read in full after the jump — calling on Attorney General Eric Holder to “immediately” give Congress a copy of OLC’s retroactive immunization.

The Honorable Eric H. Holder, Jr.
Attorney General
United States Department of Justice
Washington, DC 20530

Dear Mr. Attorney General:

We are greatly concerned by the Department of Justice Office of Inspector General (OIG) report entitled “A Review of the Federal Bureau of Investigation’s Use of Exigent Letters and Other Informal Requests for Telephone Records,” which was issued yesterday. The report documents what appears to be several years of rampant illegality in the FBI’s methods of obtaining telephone records. As you know, we have been urging changes to the Patriot Act that would protect national security as well as the rights of Americans, and we believe this report further highlights the need for legislative changes.

We write specifically because we believe the Department should immediately provide to Congress a copy of the January 8, 2010, Office of Legal Counsel (OLC) opinion that is referenced in the OIG report and that apparently interprets the FBI’s authority to obtain phone records. Although much of the information about the OLC opinion is redacted in the public version of the OIG report, the opinion appears to have important implications for the rights of Americans. The report states that “the OLC agreed with the FBI that under certain circumstances [REDACTED] allows the FBI to ask for and obtain these [phone] records on a voluntary basis from the providers, without legal process or a qualifying emergency.” (p. 264) It further states that “we believe the FBI’s potential use of [REDACTED] to obtain records has significant policy implications that need to be considered by the FBI, the Department, and the Congress.” (p. 265) And finally, it states that the OIG recommends “that the Department notify Congress of this issue and of the OLC opinion interpreting the scope of the FBI’s authority under it, so that Congress can consider [REDACTED] and the implications of its potential use.” (p. 268)

In light of the OIG’s recommendation, please provide Congress with the January 8 OLC opinion immediately. We appreciate your attention to this important issue.

Sincerely,

Russell D. Feingold Richard J. Durbin
United States Senator United States Senator

Ron Wyden
United States Senator

Thus, the competitive activities of health insurers and medical malpractices insurers remain effectively unchecked.  While there are divergent views on the best way to introduce choice and competition into health insurance market, we can surely agree that health and medical malpractice insurers should not be allowed to collude to set prices and allocate markets.

They should have addressed their concerns to Sen. Ben Nelson (D-Neb.). Why? Well, the House health-reform bill already includes a repeal of the anti-trust exemption, and the Senate bill would have, except that Reid was forced to scrap it to satisfy Nelson, a former insurance industry executive.

Thursday’s letter was signed by Democratic Sens. Pat Leahy (Vt.), John Kerry (Mass.), Jay Rockefeller (W.Va.), Joe Lieberman (Conn.), Dianne Feinstein (Calif.), Russ Feingold (Wis.), Ron Wyden (Ore.), Mary Landrieu (La.), Charles Schumer (N.Y.), Maria Cantwell (Wash.), Frank Lautenberg (N.J.), Bernie Sanders (Vt.), Claire McCaskill (Mo.), Sheldon Whitehouse (R.I.), Roland Burris (Ill.), Ed Kaufman (Del.), Kirsten Gillibrand (N.Y.), Michael Bennet (Col.) and Al Franken (Minn.).

There are some powerful folks on that list, which represents nearly a third of the Democratic caucus. Cruelly, however, it just takes a single “no” vote from Nelson to sink the entire bill. That means that if Nelson insists that the provision is out, then the provision will be out.

Under the Senate legislation as it is currently written, Americans with employer-provided coverage, whose income is below 400 percent of the federal poverty level and whose premiums are between 8 and 9.8 percent of their total income will be exempt from having to purchase health coverage but will not be able to access the exchange to qualify for government assistance to purchase insurance.  The agreed to amendment will make it possible for these individuals to convert their tax-free employer health subsidies into vouchers that they can use to choose a health insurance plan in the new health insurance exchanges.

Critics contend that the proposal will cause a flood of young, healthy workers to flee employer-sponsored plans, hiking rates for the older, sicker folks who remained. But a number of Senate Democrats had recently joined Wyden in urging adoption of the so-called “free-choice” amendment.

The Congressional Budget Office estimates that the change will cover an additional 1 million people, Wyden says.