A new Treasury Department plan to save struggling oil companies would almost certainly face roadblocks from congressional Democrats who argue that no coronavirus relief money should go toward large fossil fuel extractors.
Treasury Secretary Steven Mnuchin said he is mulling a lending program for oil companies struggling as historically low prices persist in the midst of a bloated industry and weak demand as the coronavirus pandemic grounds economic activity around the world.
Mnuchin told Bloomberg News on Thursday he’s considering “a lending facility” and other options for oil companies, but hasn’t made any conclusions. He also would not rule out the federal government taking stakes in energy companies it helps.
“You can assume that’s one of the alternatives,” he told reporters Friday.
On Tuesday, President Donald Trump tweeted that he had directed the Treasury and Energy secretaries to find money to support oil companies. Those instructions followed the historic drop of oil prices to the negatives on Monday, meaning that oil companies running out of storage paid buyers to take the oil off their hands.
Treasury did not immediately respond to a request for comment on the plans and it wasn’t immediately clear if Mnuchin was considering tapping into already approved money or whether he would ask Congress to allow new money for the loans. That would be a tough sell in a divided Congress.
“The Trump Administration keeps trying to find new and novel ways to bail out its oil industry allies from a downturn that is partly of its own making,” House Energy and Commerce Chairman Frank Pallone of New Jersey told CQ Roll Call through an aide. “I wholeheartedly support assistance for every industry’s workers, as they’re the ones who both need and deserve it, but we should not be funneling billions in tax dollars to oil companies — period.”
West Texas Intermediate, the U.S. oil benchmark, was trading around $16.74 barrel early Friday afternoon, 75 percent below its price this time last year, and far below what is needed for companies to make a profit on sales.
Attempts so far by oil state lawmakers to enable the Energy Department to buy some of the oil and store it in the Strategic Petroleum Reserve have been thwarted by Democrats, who kicked such a provision from the second economic relief bill. A $483.4 billion relief bill passed this week did not include any direct support for oil companies.
“I support efforts to help working people across the board, and I see no reason to single out oil and gas corporations for special treatment,” House Natural Resources Chairman Raul M. Grijalva of Arizona, said. “Any money this administration lends out needs to be available to employees in all sectors of the economy and come with an ironclad guarantee that it won’t be used to buy back stocks or hand out executive bonuses.”
The last thing the “working people of this country need” he said, is “another blank check to Big Oil” at taxpayer expense.
Suggestion of loans
Mnuchin has also suggested oil companies could take loans from a Federal Reserve program meant to aid small and medium-sized companies that were in good financial standing before the coronavirus pandemic started wreaking havoc on the economy.
Earlier this week, oil-state lawmakers wrote to Mnuchin, Energy Secretary Dan Brouillette, and Federal Reserve Chairman Jerome Powell asking them to make available money for oil companies partly by changing some of the requirements to qualify for funds made available through Congress.
The Federal Reserve would take into account a company’s credit rating from early March to qualify for the loan program. The lawmakers asked the Federal Reserve to move its credit requirements to March 22, to take into account the start of the sharp declines in oil prices. Congress has given the Federal Reserve broad authority with the money and the central bank is soliciting public feedback on how it will disburse the funds.
“We face a real and present danger of seeing hundreds, if not thousands of oil producers shuttering, an event that will profoundly and negatively impact the industry, its financial partners and consumers for years to come,” wrote the Republican senators, including Kevin Cramer of North Dakota, Lisa Murkowski of Alaska, James M. Inhofe of Oklahoma and Cindy Hyde-Smith of Mississippi.
Without federal help, the lawmakers wrote, the U.S. faces the “unacceptable” prospect of “once again becoming reliant on oil imports.”
A Federal Reserve spokesperson acknowledged receiving the letters but did not comment on how it would respond.
In response, a group of Democratic senators wrote to the Federal Reserve, asking it to resist demands to change the terms of the Main Street Lending Program to assist oil companies.
“We must protect workers and communities affected by the oversupply of fossil fuels and the resulting downturn in oil and gas prices, but we can do that without carving out special rules for loans to fossil fuel corporations,” the Democrats, led by Sen. Edward J. Markey, of Massachusetts and Rep. Nanette Barragán of California, wrote in a letter Thursday.
Earlier this month, a group of nearly 40 House and Senate Democrats wrote a letter to Mnuchin urging him not to use coronavirus relief money to help oil companies, calling it a risky investment.
“Our government should not use public funds intended to combat a public health and jobs crisis to further the climate and financial crisis that will come from investment in troubled oil assets,” the lawmakers said.
Environmental groups have also opposed any aid for fossil fuel companies, which they blame for the greenhouse gas emissions that cause climate change.
“Our public dollars should be supporting families in need and funding a just transition for workers in the industry, not lining the pockets of greedy oil barons,” said Jamie Henn, a spokesperson for Stop the Money Pipeline, a coalition of more than 90 organizations opposed to the financing of fossil fuels.
While some oil companies have sought help from the government, the American Petroleum Institute, which represents hundreds of oil and gas companies, has maintained that credit lines for oil companies should come from private lenders, not the federal government.
Niels Lesniewski contributed to this report.