With Congress funneling a piece of its $2.2 trillion relief package through the Fed, the oil and gas sector finds itself in the relatively new position of lobbying the independent central bank and its chairman, Jerome H. Powell, after years of dealing mostly with agency appointees who report to President Trump.
The oil and gas interests, along with some Republican lawmakers, are arguing the Fed's proposed structure for some of its loan programs is not well suited for companies pummeled by the pandemic as hard as the U.S. oil industry. The price per barrel on the global market sank by around 65 percent since the start of year as people around the world hunker down and avoid driving and flying.
Oil-state senators are calling for a deadline change that would help Occidental Petroleum.
Last week, 11 Senate Republicans, led by Sen. Kevin Cramer (N.D.), wrote a letter to Powell asking him to tweak a deadline for two of its programs in a way that would help the major Permian Basin producer qualify for relief funds.
According to the Fed's current term sheets, a company needs to have a high enough bond score from two of the main ratings agencies as of March 22 for the Fed to back the purchase of its corporate bonds.
The senators would like the deadline moved to early March — before the Organization of the Petroleum Exporting Countries rocked global markets by not agreeing on oil production cuts in response to the pandemic. “Changing the date means company ratings would predate market manipulations from the Saudi Arabia and Russia oil dispute,” Cramer's office said.
Though the letter did not mention Occidental by name, the $13.6 billion Houston-based oil producer in particular would be prevented from partaking in the program under the proposed deadline. Two ratings agencies, Moody's and Fitch, downgraded its bonds right before March 22.
“It's pretty clear Occidental is the only one that benefits from this potential change,” said Andrew Park, an analyst at Americans for Financial Reform, which advocates for banking reform.
Cramer said he wrote the letter without Occidental specifically in mind. Speaking at an online town hall with Energy Secretary Dan Brouillette on Tuesday, the senator said he made the request “without talking to a single company because I never want to get into a position of picking a winner.”
Occidental, which employs around 14,400, has been hit particularly hard by the crash in oil prices.
Last year, it spent $38 billion to buy Anadarko Petroleum, a move activist investor and Occidental shareholder Carl Icahn called “hugely overpriced.” Its stock price has fallen by about 60 percent since the beginning of January. It even recruited its employees to send letters to members of Congress, according to Bloomberg News.
“With 20/20 hindsight, it was not a well-timed decision,” Pavel Molchanov, an oil analyst at Raymond James, said of the Anadarko acquisition. But, he added, “the situation in the oil market will look very different a year from now.”
Occidental spokeswoman Melissa Schoeb declined to comment.
Smaller, independent oil companies want help paying down their debt, too.
In another lobbying effort, the Independent Petroleum Association of America, which represents small-to-midsize oil producers, is trying to convince Powell to allow companies to restructure their debt burdens using loans from another coronavirus initiative from the Fed — the “Main Street Lending Program.”
Under the Fed's current proposal, companies would not be able to use Fed-backed loans to pay off their existing debt. But IPAA, in an April 15 letter, argued that restriction unnecessarily prevents indebted oil producers from stabilizing their balance sheets through refinancing.
“It doesn't make sense to be able to borrow money and not be able to take the financial most sensible step with it,” said Lee Fuller, IPAA's executive vice president.
But now is no time to bail out a polluting industry that took on more debt than it could handle to expand oil production during the hydraulic fracturing boom while prices were high, according to Lukas Ross, a policy analyst at Friends of the Earth.
The industry "wants a new set of rules so it can get as much of our money as possible,” Ross said. “This is a bailout in slow motion.”
The Fed is weighing its options, but its hands are tied.
None of the bank's plans are final, and the lender of last resort is emphasizing that it wants “input from lenders, borrowers, and other stakeholders to make sure the program supports the economy as effectively and efficiently as possible.” A Fed spokesman acknowledged it received the Cramer letter and plans to respond.
The Fed is limited by law in how it can adjust its lending programs.
Since the passage of the Dodd-Frank Act in 2010, the criteria for the Fed's emergency credit programs must be “broad-based” and cannot benefit any one firm.
That restriction may have led Treasury Secretary Steven Mnuchin to suggest the Trump administration may create a government lending program specifically for U.S. oil companies.
“One of the components we’re looking at is providing a lending facility for the industry,” Mnuchin told Bloomberg News on Thursday. “We’re looking at a lot of different options, and we have not made any conclusions.”
Lockdowns have had an impact on pollution.
Los Angeles had its longest stretch of good air days in decades, in part a positive side effect of the stay-at-home orders.
But the coronavirus is not the only reason for the improved air quality.
“While there is no question the restrictions to stem the pandemic have reduced air pollution, the coronavirus lockdown does not bear full responsibility for the weeks of clean air Californians have enjoyed,” the Los Angeles Times reports. “Dramatic reductions in vehicle and industrial emissions contributed to lower smog levels, air quality experts say, but much of the improvement was also due to stormy spring weather.”
The streak of clean air was an example of what the city could experience with more zero-emissions cars on the road. But that streak is already over. A recent heat wave “generated unhealthy smog levels across Southern California. Air quality officials are predicting more bad air days to come, even with public health restrictions in effect, as the region enters a hotter, drier time of year.”
A shift toward telework could keep emissions in check.
Workplace experts say the pandemic could make working from home more popular, a change that could mean fewer commutes and reduced vehicle emissions, E&E News reports.
“The pandemic has prompted a number of societal changes — from a rise in bicycle commuting to a relaxation on regulations for telemedicine,” per the report. “None of those shifts, however, has the climate potential of taking cars off the road. Transportation accounts for about a quarter of U.S. greenhouse gas emissions. And the vast majority of employees around the country — 86% — commute to work in a private vehicle, according to the U.S. Census Bureau.”
Al Gore says the coronavirus and the climate are connected.
The former vice president said the pandemic calls attention to long-standing environmental justice concerns and the climate crisis.
“This climate crisis and the covid-19 pandemic are linked in some ways,” Gore said in an interview on MSNBC. “The preconditions that raise the death rate from covid-19, a great many of them, are accentuated, made worse, by the fossil fuel pollution. Not the CO2 which causes the climate crisis, but the particulates, the soot.”
“We also see it with the horrendous differential mortality rates among African Americans and to some extent Hispanic Americans and Native Americans as well,” he added.
He compared the disproportionate impact of the pandemic on black communities across the country to higher asthma-related death rates for black children compared with white children.
The animals have always been there.
Wildlife experts say a higher volume of calls to animal control agencies in the Washington area are a result of more people at home noticing the animals, not an increase in wildlife.
“In the District, officials at the Humane Rescue Alliance said they saw an 18 percent jump in calls last month compared to March 2019 about wildlife sightings or animal encounters. Spring is typically the busiest time of year, officials said, as baby birds, rabbits and other animals emerge,” Dana Hedgpeth reports. “ … Wildlife groups and animal control officials also have received fewer calls about animals being struck by vehicles, probably stemming from fewer cars on the road. Her group usually receives many calls about geese or foxes being hit while looking for food or a mate in the spring, but that hasn’t been the case this year.”
Global warming watch
Some areas in the desert Southwest are set to experience record heat waves.
In Las Vegas, temperatures are set Wednesday to hit triple digits for the first time in April. Phoenix is expected to hit 106 degrees later this week, another record there for April, Jason Samenow reports.
“These extreme temperatures this early in the season will likely bring significant heat impacts and precautions should be taken to limit exposure to the heat,” said the National Weather Service forecast office in Phoenix.
Will heat waves push people out of isolation?
Cities in Southern California and Phoenix opened some cooling centers during recent hot spells to aid residents who may not have air conditioning. But the ongoing pandemic could mean gathering in cool public spaces to escape one risk carries another.
“Now, with heat wave season swiftly approaching, public health experts are urging cities to think carefully about how to protect vulnerable populations as the pandemic rages on,” E&E News reports. “These are life-or-death considerations. Extreme heat is one of the leading causes of weather-related fatalities in the United States, killing hundreds of people each year. And the risks are only growing as the climate warms.”
Cities are worried about deadly heat waves this summer.
Even before the coronavirus crisis, local health departments in the largest and most densely populated cities across the country were nervously awaiting heat waves that sicken tens of thousands each year.
“But as summer approaches, local officials are being forced to consider how they will protect residents as the coronavirus crisis collides with the potentially deadly consequences of being poor, disabled or elderly during the hottest days of the year,” Jada Yuan, Tim Craig and Holly Bailey report.
Many residents in low-income city neighborhoods in the Northeast and Midwest lack air conditioning or limit their use to keep electricity bills low. That means residents normally gather outdoors. But with beaches, public pools, playgrounds and recreational centers potentially shuttered as social-distancing orders stay in place, there are even more hurdles for people trying to keep cool.
Lawmakers are still eyeing PFAS regulation.
More than 80 lawmakers signed a bipartisan letter to leaders of the House Transportation Committee calling for future infrastructure legislation to include measures to address a dangerous class of man-made chemicals known as polyfluoroalkyl and perfluoroalkyl substances, or PFAS.
“The long-term economic dislocation caused by this pandemic will require significant action by Congress, and we believe infrastructure should be a focus of future legislation as we seek to rebuild our country's economy and put people back to work,” reads the letter led by Rep. Chris Pappas (D-N.H.).
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