The Trump administration is planning soon to introduce a program to provide emergency loans to oil companies reeling from a historic price crash, likely on the condition that the government takes financial stake in the companies.
Three sources familiar with the plan confirmed that at least some form of the lending program, designed by Energy Secretary Dan Brouillette and Treasury Secretary Steven Mnuchin, would involve the government receiving equity, similar to the bailouts of automobile companies.
Brouillette recently hinted at imminent action, designed to help small- and medium-sized shale oil producers that are less diversified and vulnerable to a sustained period of low prices.
The U.S. benchmark oil price briefly traded below zero recently before recovering to the mid-teens, as demand has been crushed by the coronavirus causing people not to travel. Low prices have forced companies to shut down production, and more than 50,000 jobs have been lost, according to the Independent Petroleum Association of America, a group representing small-to-midsize oil producers.
“There are some in the industry who are more in need of these types of resources than others,” Brouillette said in a call to the North Dakota Petroleum Council Tuesday, a recording of which was posted on the group’s website. “I hope that we are within a day or two from being able to go forward with this program.”
Brouillette also posted a television interview to his Twitter account Wednesday in which he described recipients of government loans as “midrange.”
“They are not the companies that are going to diversify their risk, they are not multinational companies in most cases … these are very localized producing companies,” he said. “And it’s those people who are at risk at the moment because they may not have access to the same capital markets that the larger players have.”
President Trump, meanwhile, told reporters at the White House Wednesday that an announcement on a financial aid program would be coming “shortly.”
“This is not going to be a bailout of shareholders, but this is going to be supporting the national security issue,” Mnuchin said at a roundtable event with business executives hosted by Trump.
Oil lobbying groups representing larger companies, along with conservatives, have pushed back on the possibility that the lending program could involve the government taking stakes in companies.
The American Petroleum Institute, the largest U.S. oil lobby, opposes the idea, preferring the industry have access to broad-based lending facilities set up in the CARES Act passed by Congress, rather than being treated as special.
“This idea would be particularly objectionable from the broader industry and not something we would support,” Bethany Aronhalt, an API spokeswoman, recently told the Washington Examiner.
The American Exploration & Production Council, a group representing independent shale oil producers, also opposes the idea.
“We have concerns with a lending program that gives the government a stake in independent oil and gas companies or moves our industry toward nationalization,” CEO Anne Bradbury told the Washington Examiner.
Mike McKenna, a fossil fuel lobbyist who recently was deputy director of legislative affairs in the Trump White House, said he feared a future Democratic administration would inherit voting equity in government-backed oil companies and could use that power to compel carbon reduction efforts, or even force it to shut production.
“The whole thing is a terrible idea,” McKenna told the Washington Examiner. “Ask Venezuela.”
