Rep. Garret Graves of Louisiana is calling on the Trump administration to implement a suite of “market-based” measures to help the oil industry recover from a historic price crash caused by the coronavirus pandemic and “economic warfare” from Russia and Saudi Arabia.
“It is in the national interest to sustain the oil and gas industry to fend off this economic warfare coming from nation-states and a decrease in demand globally because of coronavirus,” Graves told the Washington Examiner in an interview. “There needs to be a national response. We can’t just dump this all on the lap of industry.”
Graves said he planned, with other Republican Gulf Coast allies, to ask the Interior Department to use its authority to issue a short-term reduction in the royalty rates that oil and gas companies pay for drilling on federal lands and waters.
“While we can generally pull oil out of the ground cheaper than Russia in many instances, Saudi Arabia can pull it out of the ground at a much lower barrel cost than us, and part of that is because of our royalty rates,” Graves said. “We should be taking a fresh look to see if short-term reductions are necessary based on the low price of energy.”
Graves is also pushing Congress to appropriate money to implement President Trump’s order for the Energy Department to buy low-priced oil to restock the nation’s emergency Strategic Petroleum Reserve. Graves is calling for Congress to authorize the agency to suspend planned sales of oil from the SPR beyond this fiscal year, which expires Sept. 30. The Energy Department last week postponed a sale of 12 million barrels of oil that had been scheduled for this month, which was intended to be part of a regular series of drawdowns required by Congress as a way to raise revenue for the federal government. Graves said that move does not go far enough to prevent the United States from worsening a glut of global oil.
And he is advocating for Congress to authorize the creation of an emergency reserve stock of gas, in addition to oil.
Combined, the measures stop short of a wholesale “bailout” to help oil and gas companies, in contrast to what Republicans have envisioned for other industries such as airlines and hotels to limit damages from the coronavirus.
Graves is following the line of oil and gas trade groups, such as the American Petroleum Institute, that have pushed back on the call by some smaller companies for more forceful government intervention.
“No one wants to give away the farm,” Graves said. “I hope some of the market-based proposals we throw out are sufficient. But it would be a mistake for us to take anything off the table.”
But Graves acknowledges the measures would still provoke opposition from Democrats reluctant to help fossil fuels, which are the predominant contributor to climate change.
“Anyone out here who is saying we don’t have to help the energy industry absorb this are completely uninformed,” said Graves, who is also the top Republican of the House’s select climate change committee.
Other Republicans, such as Rep. Dan Crenshaw of Texas, are backing Graves’s proposals, and they are expected soon to circulate a congressional letter for signatures to send to the Interior Department to push for lower royalty rates.
Oil and gas companies currently pay a royalty rate of 18.75% for drilling in deep waters in the Gulf of Mexico.
The royalty rate for onshore leasing stands at the statutory minimum of 12.5%, but the Interior Department can defer payments on a short-term basis.
Democrats have opposed lowering royalty rates, arguing doing so would prevent the federal government and states from claiming billions of dollars in revenue.
Graves said lawmakers should also be “engaging with” the renewable energy industry, which is threatened by the coronavirus outbreak with supply chains for wind and solar potentially disrupted. But he said oil and gas were suffering the “biggest direct hit” from current energy market conditions.
He also encouraged Trump to be open to proposals to lift oil prices, despite the president’s usual preference for low prices that help drivers and energy consumers.
“If you destroy the American energy industry, you are then subject to the whims of OPEC and the wild volatility that goes into that,” Graves said. “You can’t look at these things exclusively, and the president understands markets enough to appreciate that.”
