Subscribe today to the Washington Examiner magazine and get Washington Briefing: politics and policy stories that will keep you up to date with what’s going on in Washington. SUBSCRIBE NOW: Just $1.00 an issue!
MNUCHIN ‘STUDYING’: Treasury Secretary Steven Mnuchin confirmed Friday the Trump administration is considering taking stakes in oil companies to rescue them from the historic price crash.
“You can assume that’s one of the alternatives, but there’s many of them,” Mnuchin told reporters in the Oval Office.
A subsequent remark Mnuchin made on the Sunday shows suggests the administration is confronting roadblocks as it tries to devise a strategy for financial aid.
“We will consider, again, loans to companies in a proper scenario with strategic importance, but no bailouts. No shareholder bailouts,” he said on Fox News Sunday. Mnuchin said the administration is looking “carefully” at loans to oil companies. “The secretary of Energy and I are studying it and we’re looking at it very carefully.”
Hurdles to action: The Federal Reserve, however, seems likely to reject creating an oil-specific lending program, Bloomberg reported Friday.
Their story notes that Fed Chairman Jerome Powell has said that direct financial support to industries from the central bank is something that “falls to elected officials.” Congress seems unlikely to approve new authorities for the Trump administration to subsidize oil companies, given Democrats’ reluctance to support a smaller measure to buy low-priced oil to stash in the emergency Strategic Petroleum Reserve.
Another problem is that the Fed only makes loans eligible to companies that were investment grade as of March 22, because of its lack of authority to help businesses that are insolvent.
Republican oil-state senators have asked the Fed to move that date earlier, since many oil companies were already reeling before then, not just from the coronavirus demand hit, but also because of the Saudi-Russia price war. The Fed has not indicated it intends to change the date.
Time crunch: If it doesn’t change, the cutoff date could be too late for some oil producers, such as Occidental Petroleum, which had its debt cut to junk by Moody’s on March 18, Bloomberg notes.
Occidental Petroleum is the biggest producer of oil in the Permian Basin. Nonetheless, the company has asked policymakers to “provide liquidity to the energy industry through this period of unprecedented demand destruction and unsustainable pricing until normal economic conditions return.”
Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Josh Siegel (@SiegelScribe) and Abby Smith (@AbbySmithDC). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.
US REFINERS IN HARM’S WAY IF TRUMP BLOCKS SAUDI OIL: President Trump could make things harder for refiners if he fulfills the wishes of some oil-state Republican senators and blocks a deluge of tankers from Saudi Arabia.
The refining industry has a strong presence in swing states such as Pennsylvania and Ohio, whereas the shale industry is dominant in red states.
“It would seem to be more politically perilous to ignore the refining issues,” Joe McMonigle, a former Energy Department chief of staff in the George W. Bush administration, told Josh.
The problem for U.S. refiners: Many were built to run medium-and-heavy crude of the type that Saudi Arabia makes, and can’t only rely on shale producers that specialize in light, sweet oil.
Lobbying groups for refiners oppose a blockade of Saudi oil coming into the United States because it would disrupt the global energy market, narrow their options for imports, and raise their prices, which would be passed to customers.
“Our concern is if you did a restriction, be it with tariffs or up to an embargo, that would make our refining much less competitive worldwide. It would be a whole lot of pain for not a lot of gain,” said Derrick Morgan, senior vice president of federal and regulatory affairs for American Fuel & Petrochemicals Manufacturers, the top U.S. refining lobby.
Only 3% of the oil used by U.S. refineries last year came from Saudi Arabia, a portion trending downward over recent years as domestic shale became dominant.
But if Trump were to block the oil or interfere with agreed-to contracts, he’d risk upsetting the relationship between U.S. refiners and Saudi Arabia, while giving up business to other countries that would absorb the crude planned for the U.S.
“We will need foreign sources of oil for the foreseeable future, and we need to make sure we are not destroying those relationships when it’s not going to help, and the real problem is the demand problem,” Morgan told Josh.
AS TANKERS TRAVEL TO US, SAUDIS START CUTTING PRODUCTION EARLY: The tankers left for the U.S. before Saudi-led OPEC and Russia agreed to a deal to cut oil production by nearly 10 million barrels per day beginning in May. While the Saudis still could reroute some of the oil coming here, the Kingdom has begun to cut production ahead of schedule.
Saudi Aramco began last week cutting production from about 12 million barrels per day to 8.5 million, according to Bloomberg.
The Russian energy ministry, meanwhile, told oil companies last week to cut production there to 8.5 million barrels to meet the OPEC+ deal. But Russian companies are mainly targeting mature oil fields where production is already falling, Reuters reported. Russia is reluctant to shut down wells indefinitely and is rather focused on halting production from wells needing repairs. Russia, you’ll recall, has a poor history of complying with terms of previous OPEC+ agreements.
HARVARD AIR POLLUTION STUDY UNDER FIRE FROM TRUMP ALLIES: Trump administration appointees to the EPA’s science advisory panels are raising questions about the study, which found areas with higher levels of air pollution will experience higher death rates from the coronavirus.
Why does this matter? The study has already made waves in policy discussions, increasing public pressure on the EPA in recent weeks and threatening the agency’s deregulatory agenda on air pollution rules. The criticism also comes as the EPA has set up a “rapid review” science advisory panel to help the agency address human health and environmental effects from the coronavirus. That panel first meets Thursday.
Critics say the Harvard study is “fundamentally flawed”: As an example, Tony Cox, a risk analyst who chairs the EPA’s Clean Air Scientific Advisory Committee, said the Harvard study’s model doesn’t control for enough confounding variables. One of the biggest, he said, is the “urban-rural continuum,” which takes into account local-level population density as opposed to county averages.
“Everything in the Harvard paper to me appears to be completely consistent with the hypothesis that crowding matters, but there’s nothing to suggest, other than wishful thinking perhaps, that [fine particulate matter] has any effect at all,” Cox said.
The study’s author said such criticisms aren’t accurate: The researchers adjusted for population density and conducted separate analyses for urban counties and rural counties, which had “very similar” results, said Francesca Dominici, a senior author on the study who co-directs Harvard’s Data Science Initiative.
“It’s much harder to provide rigorous science at the time of a pandemic than criticize the science,” she told Abby.
WOTUS LAWSUITS OFFICIALLY BEGIN: Two clean water groups, the Chesapeake Bay Foundation and ShoreRivers, officially launched their challenges Monday to the EPA’s repeal and replacement of the Obama administration’s signature clean water regulation.
The groups are suing separately over the EPA’s repeal of the Waters of the U.S., or WOTUS, rule and the agency’s replacement, known as the Navigable Waters Protection rule, which sets a narrower of which waters are protected federally. The lawsuits were filed in federal district court in Maryland, and by no means will be the last legal challenges to the Trump rule. Massachusetts Attorney General Maura Healy, a Democrat, has already said she’s also preparing to sue “to protect our wetlands, streams & drinking water from Trump’s dangerous attack on the Clean Water Act.”
BIG NAMES ENTER LEGAL FIGHT OVER EPA POWER RULE: More than 70 House Democrats, including Speaker Nancy Pelosi, and several Democratic senators said in amicus briefs Friday the EPA’s repeal of the Clean Power Plan is unlawful. Eight former commissioners on the Federal Energy Regulatory Commission, including five former chairmen, are also weighing in to defend the Obama EPA’s rule, saying it didn’t conflict with the energy regulators’ authority.
The brief from House Democrats, led by New York Congressman Paul Tonko and California Congressman Jared Huffman, said the Clean Power Plan was a “reasonable exercise” of the agency’s authority. The Trump administration’s repeal relies on an “unreasonably constrained” interpretation of the Clean Air Act, they argued.
Five Democratic senators, led by Sheldon Whitehouse of Rhode Island, argued in their brief the EPA’s replacement rule — the Affordable Clean Energy rule — is an “illegal delegation of the agency’s rulemaking authority” to the fossil fuel industry.
REPUBLICANS FUME OVER BANKS ‘DISCRIMINATING’ AGAINST ARCTIC DRILLING: Republican oil-state senators are accusing big banks of discriminating against oil and gas companies by refusing to finance fossil fuel projects in the Arctic. And they are taking their case to Trump, even though there seems to be little he can do about it.
“They want the federal government to help support them and then they discriminate against a critical sector of the U.S. economy. I don’t think they should be allowed to do that, sir,” said Sen. Dan Sullivan of Alaska in comments to Trump in the Oval Office Friday, according to a pool report of an unrelated signing ceremony for a bill providing loans to small businesses.
Trump responded by saying, “I like the idea of looking into that.” He also accused Wall Street of being “pushed by the radical left” into taking green positions at the behest of pressure from activists.
Sen. Kevin Cramer of North Dakota made a similar attack Friday after Morgan Stanley became the latest big bank to say it won’t fund new oil and gas drilling in the Arctic. Several other U.S. banks have changed their policies on Arctic drilling, including Goldman Sachs, JPMorgan Chase, Wells Fargo, and Citigroup.
Cramer, in a tweet, accused the banks of “picking winners & losers in energy markets,” and warned he would consider “any appropriate action we can take” against the banks as a member of the Senate Banking Committee.
The Rundown
Politico Biden wants a new stimulus ‘a hell of a lot bigger’ than $2 trillion
E&E News Sunrise Movement, a critic of Biden, met with his team
Wall Street Journal Storage crisis worsens for glut of crude caused by coronavirus
Bloomberg Exxon shareholders seek board change, lobbying disclosure votes
Calendar
MONDAY | APRIL 27
Neither the Senate nor the House is expected to meet before May 4.
