As the COVID-19 pandemic spread across the United States, Americans were ordered to stay home and restricted from travel to stem the spread of the virus.
The mandate weakened fuel demands as more cars sat idle and fewer planes took off, and led to an historic drop in price of oil never seen before. By April, about a month after the pandemic was in full force in the U.S., the price of domestic crude plummeted below $0 per barrel – the first time in history it had fallen into negative territory.
The drop led to shut in wells, deactivated drilling rigs, bankruptcies and layoffs from northern North Dakota near the Canadian border to southeast New Mexico mere hours from the U.S. border to Mexico.
The federal government, to save the U.S. economy began offering financial relief to some of its major industries including oil and gas.
Since such relief began in March, oil and gas companies issued almost $100 billion in new bonds backed by the Federal Reserve and U.S. Treasury Department, per a report conducted by Friends of the Earth, Public Citizen and BailoutWatch.
The groups are all non-profit watchdog organizations focused on environmental and financial issues.
In total, 56 oil and gas companies issued the bonds, the report read, while the Federal Reserve purchased the debt of 19 companies for about $60 billion in new bonds issued and about 60 percent of energy debt issued since March.
Some of New Mexico’s biggest producers received billions in relief funding, records show, with Chevron issuing $12 billion in bonds and ExxonMobil issuing $9.5 billion.
Occidental Petroleum issued another $5 billion in bonds, per the report.
So far this year, oil and gas companies issued a total of $129 billion in bonds, the report read, the highest since 2010.
Co-author of the study Lukas Ross, program director at Friends of the Earth said the oil and gas industry was “exploiting” the COVID-19 crisis to make money.
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He said the industry was provided with financial assistance that should have been afforded to the average, working American.
“Big Oil is exploiting COVID-19 to go on an unprecedented borrowing binge, and the Trump administration is to blame,” Ross said. “Polluters are getting a $100 billion lifeline while most Americans are being left behind.”
Alan Zibel, research director at Public Citizen said the government assistance for the industry represented a “bailout” for fossil fuel companies and that the money should be used to assist small businesses, local governments and people struggling to make ends meet amid the public health crisis.
“When consumers take on too much credit card debt, they can be forced into bankruptcy and face financial ruin. But when the oil and gas industry accumulates too much debt, it gets a bailout on the backs of taxpayers,” Zibel said.
“Instead of bailing out climate-destroying fossil fuel companies we must assist small businesses, local governments and individuals facing dire financial straits.”
Kathleen Sgamma, president of the Western Energy Alliance said relief for the industry was warranted to protect one of the nation’s top economic drivers and to protect national security by maintaining America’s energy independence.
She made her arguments during a Tuesday hearing before the U.S. House Natural Resources Subcommittee regarding royalty relief granted to oil and gas companies by the U.S. Department of the Interior.
Sgamma said the relief granted amid the pandemic was a “small reduction” that could prevent the industry from slipping further into financial ruin brought on by the health crisis and subsequent recession.
“The targeted, temporary relief granted by the Interior Secretary, using the power given him by Congress, enabled some producers to ensure the solvency of their leases over a few months so that they can generate royalties years into the future,” Sgamma said.
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She also argued that the federal government gave more than “a trillion dollars” in COVID-19 relief to companies in all sectors and it would be unfair to exclude the oil and gas industry amid the pandemic.
“When over a trillion dollars of COVID relief was directly given to companies across all sectors of the economy in response to the global pandemic, why would Congress begrudge one industry a relatively tiny amount of temporary tax reduction?” Sgamma said.
“Rather, Congress should recognize the contribution of the oil and natural gas industry responding to and providing solutions for this health crisis, rather than singling it out for exclusion.”
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To congresspeople who support bans on fracking and oil and gas leasing on federal land, including former-Vice President and Democrat Presidential Candidate Joe Biden, Sgamma said such an action would generate no revenue for the nation while providing financial support to the industry would allow it to remain an economic leader for decades.
“Those in Congress who support efforts to ban leasing and development of oil and natural gas on federal lands, which would ensure no future royalty revenue at all, are worried about temporary, emergency royalty relief,” she said.
“That relief, like CARES Act direct assistance, was a response to the unprecedented COVID pandemic lockdowns and ensuing economic collapse, not a nefarious ‘giveaway.’”
Adrian Hedden can be reached at 575-628-5516, email@example.com or @AdrianHedden on Twitter.
This article originally appeared on Carlsbad Current-Argus: Study shows billions of government relief dollars to oil and gas amid COVID-19
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