$3 Billion 'Bailout' for Oil Producers Dropped From Economic Stimulus Package

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Bucking President Trumpโ€™s directive for buying oil to fill up the Strategic Petroleum Reserve (SPR), Senate Democrats last week nixed what they say was a $3 billion bailout for oil producers from the coronavirus economic stimulus bill that passed the Senate on March 25. An earlier version of the $2 trillion relief bill favored by Senate Republicans allocated $3 billion for filling up the SPR to aid a struggling oilย sector.

With oil prices crashing, Trump announced a few weeks ago he planned to have the government purchase โ€œlarge quantitiesโ€ of crude oil to add to the emergency stockpile. โ€œWeโ€™re going to fill it right up to the top,โ€ he said. The Strategic Petroleum Reserve was created in the 1970s to reduce disruptions in oil supply and it currently holds 635 million barrels ofย crude.

Several U.S. senators sent a letter to the President at the time of his announcement, opposingย this โ€œbailoutโ€ of the oil industry. โ€œUsing federal assistance โ€” including low-interest loans, royalty relief, tax breaks, or strategic petroleum reserve purchases โ€” in order to prop up oil companies would be a wasteful misuse of government resources that would exacerbate the climate crisis,โ€ Senators Ed Markey (D-MA), Jeff Merkley (D-OR), and Bernie Sanders (I-VT) wrote.

Strategic Petroleum Reserve
Oil tanks at the St. Jamesย Strategicย Petroleum Reserve Terminal in Louisiana. Credit: Julieย Dermansky

But the Trump administration, which has a track record of bending to the whims of the oil and gas industry, signaled its resolve to bend once again with the announcement of an initial solicitation to purchase 30 million barrels of crude oil. The Department of Energy (DOE)ย issued a press release saying the purchase is intended to throw a lifeline to the ailing oil industry with a focus on small to midsize producers. The plan is to fill up the reserve with 77 million barrels, but that would typically require additional funding allocation fromย Congress.

โ€œThe Department is working with Congress to finalize the funding to support the purchase of the full 77 million barrels of oil, consistent with the Presidentโ€™s directive,โ€ the DOE press release stated.

For now, this funding has been dropped from the stimulus bill following intense negotiations between Senate Republicans and Democrats. Senate Minority Leader Chuck Schumer (D-NY) included the elimination of the โ€œ$3 billion bailout for big oilโ€ in a list of what he termed โ€œsignificant improvementsโ€ย he made to the bill first proposed by Senate Majority Leader Mitch McConnell (R-KY).

Senator Markey also noted this exclusion in his statement on the economic relief package. โ€œA bailout Iโ€™m glad to see missing from this package? It does not include a $3 billion direct bailout for the oil industry, which I have led the fight against,โ€ he said.

Environmental organizations responded positively to the elimination of the $3 billion earmarked to prop up oil producers. โ€œThe defeat of $3 billion exclusively for Big Oil is an important victory,โ€ Michelle Chan, VP of programs with Friends of the Earth, said in a statement. โ€œSenators are finally listening. Weโ€™re glad to see them abandon the idea of โ€˜filling upโ€™ the Strategic Petroleum Reserve at Trumpโ€™s request,โ€ said Greenpeace USA Senior Climate Campaigner Jackย Shapiro.

As DeSmog has documented in its series, The Finances of Fracking, the fracked oil and gas industry has long grappled with massive debt and nonexistent profits, problems that predate the current pandemic and oil priceย war.

Trump Administration Still Loyal to Bigย Oil

While it appears senators on the Democratic side have stopped this latest attempt at a bailout for oil producers, it likely wonโ€™t stop President Trump from trying to find some way to boost the industry that is spending millions of dollars on his reelection. The President tweeted March 26 that the oil and gas industry โ€œis under siege,โ€ saying that things will turnย around.

As Reuters reported, the Trump administration is looking into ways to fill up the SPR without funding from Congress, such as โ€œexploring whether it can find money in the U.S. Department of Energyโ€™s budget.โ€ An energy analyst said the DOE already has enough money in its SPR modernization fund to support the initial purchase of 30 million barrels ofย oil.

Lukas Ross, senior policy analyst with Friends of the Earth, explained in a recent article that there isnโ€™t much leeway when it comes to finding the money for SPR oilย purchases.

โ€œIf Trump truly means to โ€˜fill upโ€™ the SPR, he would either need to demand more money from Congress or find some way to divert emergency funds to oil purchases,โ€ Ross wrote. He does, however, describe another method used previously whereby oil producers pay royalties to the government in petroleum itself rather than cash, a program known as โ€œroyalty-in-kind.โ€ This program, according to Ross, has been โ€œnotoriously complexโ€ and โ€œnotoriously corrupt,โ€ but it could be a way for the Trump administration to get its way without help fromย Congress.

โ€œUnfortunately, royalty-in-kind is still written into the regulations governing SPR oil acquisitions and could likely be revived through executive order,โ€ Ross wrote. โ€œThis would be logistically very complicated but not illegal. No congressional approval would be required, and if there was ever an interior secretary to revive a program like this, it would be industry shill [Interior Secretary] Davidย Bernhardt.โ€

Another ex-fossil fuel industry employee turned leaderย in the Trump administration, Environmental Protection Agency (EPA) Administrator Andrew Wheeler, aย former coal lobbyist,ย announcedย late on March 26ย a โ€œtemporary policyโ€ย to relax EPA enforcement of civil violations, essentially allowing polluters to regulate themselves. This policy to excuse environmental compliance during the pandemic follows requests the American Petroleum Institute made to the President and Administrator Wheelerย just daysย earlier.

โ€œThis is an open license to pollute,โ€ said Gina McCarthy, current head of the Natural Resources Defense Council and former EPA head under Obama, according to InsideClimate News.ย 

Main image:ย A cemetery near oil tanks at the St. Jamesย Strategicย Petroleum Reserve Terminal connected to Bayou Choctaw, one of four strategic reserve sites on the Gulf ofย Mexico. Credit: Julieย Dermansky

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Dana is an environmental journalist focusing on climate change and climate accountability reporting. She writes regularly for DeSmog covering topics such as fossil fuel industry opposition to climate action, climate change lawsuits, greenwashing and false climate solutions, and clean transportation.

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