Senate Energy Committee Chairman Lisa Murkowski said Thursday she was “not a fan” of an idea that was floated by the Trump administration to have the federal government take stakes in oil companies receiving emergency loans.
Murkowski, an Alaska Republican, acknowledged in an interview with the Washington Examiner that the CARES Act passed by Congress provided “a fair amount of discretion” for Treasury Secretary Steven Mnuchin to design emergency loan programs.
But she said she opposed conditioning loans on the government receiving equity in companies, a concept Mnuchin had said the administration was considering as part of a pending financial aid program for the reeling oil industry.
After the interview published, the Energy Department said the idea was dead: “The Trump Administration is not taking equity positions in or nationalizing energy companies,” Shaylyn Hynes, an Energy Department spokesperson, told the Washington Examiner. “Media reports to the contrary are categorically false.”
Murkowski, however, said she does support financial aid programs for small- and medium-sized oil companies, despite the position of lobbying groups such as the American Petroleum Institute downplaying the need for industry-specific help.
“I appreciate where they are coming from, but I also recognize the intent of the loan programs, whether we are talking oil and gas or anything, is to address the devastation these businesses have seen as a result of this pandemic,” Murkowski said.
She said it’s unfair to suggest that smaller, indebted companies that have limited access to private capital are undeserving and risky bets for government help.
The financial problems of these companies, she said, are “not through any fault or mismanagement of an individual company.”
“This was a pretty dang healthy industry,” Murkowski said, before the coronavirus caused a historic crash in oil prices by cutting off travel.
“When you think about where the industry was a year ago, we were moving so fast, and we were on top of the world,” Murkowski said. “We were No. 1 in everything. The financials couldn’t have looked better. In Alaska, we were coming into this season as hot as any.”
Alaska, a top oil-producing state, has been especially hit hard by the oil market collapse, Murkowski said. Only one company, ConocoPhillips, the state’s largest producer, is operating on the rich North Slope, and it has scaled back its production by about 100,000 barrels per day for June — about half of its oil output in the state.
The company that runs the state’s trans-Alaska pipeline recently announced plans to cut oil flow through it by about 50,000 barrels a day, or 10%.
“It’s not like Exxon is calling me and saying we need help right now, but the smaller, midsize companies are very worried,” Murkowski said. “It has just been extraordinary what has happened on the North Slope in the past six weeks or so. These are companies that would definitely see a net benefit [from financial aid], but right now, there is no end in sight.”
But Murkowski suggested there could be circumstances in which the government should reject a loan if a company’s financial status and performance were poor before recent months.
“In fairness, there may be some on the margins, and maybe you look at them on a case-by-case basis,” she said. “We have seen this on eligibility for the PPP program [the small business paycheck protection program]. We were seeing folks who shouldn’t have taken advantage of those loan options. The same holds true for the oil and gas sector.”
The Federal Reserve on Thursday altered a coronavirus lending program in ways that would allow more indebted oil companies to qualify for funding.
Industry groups, and some Republicans, have lobbied the Trump administration to adjust its Main Street lending program for “midsize” businesses.
The Fed announced it was expanding the Main Street program to help companies with up to 15,000 employees, up from the previous guidelines of 500 to 10,000 employees, and $5 billion in revenue, double the earlier amount.
The changes also enable lenders to give out loans to more indebted companies that could use the money to pay off prior loans.
These changes are broad and not limited to oil companies, but Democratic critics and environmentalists accused the Trump administration of favoring oil.
“The major changes announced today mirror the top requests of the oil and gas industry,” said Bharat Ramamurti, a former aide to Sen. Elizabeth Warren appointed to an oversight panel reviewing the Fed and Treasury Department’s emergency lending program. “That raises questions about how the changes promote the broader public interest — especially when these companies will still have no real obligation to retain or rehire their workers.”
