The Trump administration is eyeing new strategies to support a struggling oil and gas sector, which may include freeing up funds or facilitating access to lending programs under coronavirus economic relief efforts, even as millions of Americans remain unemployed and with coronavirus testing and personal protective equipment in short supply.

On Tuesday morning, April 21, President Trump took to Twitter to announce that he is ordering what amounts to a bailout for the oil and gas industry.

We will never let the great U.S. Oil & Gas Industry down. I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!

— Donald J. Trump (@realDonaldTrump) April 21, 2020

The vague directive for the Secretaries of Energy and Treasury “to formulate a plan which will make funds available” comes after U.S. crude prices, particularly futures trading for West Texas Intermediate, took an unprecedented nosedive into negative territory on April 20. Prices have recovered a bit since then, though the economic situation remains grim for oil and gas, with a historic supply glut along with depressed demand and massive debts. Smaller producers are particularly imperiled, with many facing potential bankruptcy.

The Independent Petroleum Association of America (IPAA), the trade group representing those producers, sent a letter to Federal Reserve Chairman Jerome Powell last week requesting an adjustment to the newly created Main Street Lending Program. IPAA said it wants “flexibility” regarding a provision that prevents loan recipients from using the loan to repay other existing debts.

In other words, oil and gas producers are aiming to leverage a federally funded lending program to help pay debts that were mounting long before the pandemic hit. According to an analysis by Friends of the Earth, the entire fracking industry had accumulated $106 billion in debt by the start of 2020, and 27 companies with negative free cash flow (i.e., no profits) for the last three years owe over $26 billion in debt and liabilities this year.

The IPAA letter even says that oil and gas companies are plowing any cash flow they have into more production, not repaying these ballooning debts. “A recent analysis has shown that independent producers are investing 150 percent of their U.S. cash flow back into American oil and natural gas development to enhance their already aggressive efforts to find and produce more energy,” the letter states.

CNBC’s Jim Cramer, who infamously said fossil fuels were “in the death knell phase” back in late January, recently pointed out the absurdity of this unrestrained production strategy. “The oil producers are totally disconnected from reality,” he said. “They just kept pumping and pumping pretty much the same record amounts they were pumping last year, roughly 13 million barrels a day. That’s astounding, and it’s ridiculous. When your product’s in glut you stop producing.”

Because petroleum producers have largely not scaled back production, they are now seeking federal coronavirus-related assistance, even though the oversupply and debt issues were mostly of their own making. A new report by the Center for International Environmental Law details how the financial problems faced by this industry preceded the pandemic and will not be solved by short-term funding or bailout measures. 

#BigOil companies have lost 45% of their value since the start of 2020… but their decline has been a long time coming. Our new report reveals why long-term trends spell disaster for the failing oil, gas, & petrochemical industries: https://t.co/HAyM9sGajP pic.twitter.com/QqrXHZfwLP

— CIEL (@ciel_tweets) April 16, 2020

Nevertheless, the oil and gas producers are insisting that they should be able to use the Main Street Lending Program to help shore up their debts. “Oil and natural gas producers are not looking for a government handout; they are seeking a bridge to help survive this economic disruption,” the IPAA letter states. “Allowing the use of loans provided by the Main Street New Loan Facility to pay off outstanding debts coming due before this crisis subsides will be the bridge to recovery for businesses that would have otherwise been able to meet their debt obligations, were it not for the virus.”

U.S. Secretary of Energy Dan Brouillette is on board with this strategy. “I’m going to work closely with Secretary of Treasury [Steve] Mnuchin to see what we might to do to look at the laws and facilities that Congress has directed us to create, the lending facilities, the Main Street Lending Program, other types of facilities … to ensure that those are available to the energy industry as well,” he told BloombergTV anchor David Westin.

In another interview on CNBC’s Power Lunch program, Brouillette said he wants oil and gas producers to have access to the liquidity provided by Congress and the U.S. Treasury. He also said banks should not “discriminate” against fossil fuel players in their lending decisions.

Climate Activists Slam Oil Bailout Plan

Banks lending to fossil fuel firms are precisely what a new coalition of climate activist groups called Stop the Money Pipeline is targeting. Organizations under this coalition criticized the idea of using the Main Street Lending Program to help indebted oil producers.

Oil & gas companies want to hijack the Fed’s Main Street Lending Program in order to pay off skyrocketing debt they were wracking up long before the #COVIDー19 pandemic hit.

Environmental groups are NOT having it: https://t.co/KAxEtqJdrd

— Moira Birss (@moira_kb) April 21, 2020

“This is nothing more than a greedy grab of the people’s bailout by some of the wealthiest corporations in the world,” said Tamara Toles O’Laughlin, North America Director of 350.org. “Government support should go directly to people losing jobs, wages, and suffering from lack of access to healthcare, not to help pay the debts of billionaires.” 

“The fossil fuel industry wants us to believe its financial woes are just the result of COVID-19, but that’s a lie — these problems have been mounting for years as oil companies and banks made ever-riskier bets on extraction projects hurting communities and wrecking the climate,” added Collin Rees, Senior Campaigner at Oil Change International. “The only special treatment the Fed or any other bank should give the oil and gas industry is an automatic hard pass.”

Main image: President Donald Trump at the Conservative Political Action Conference (CPAC) in 2018. Credit: © Zach D. Roberts