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With help from Ben Lefebvre, Theo Meyer and Doug Palmer
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Quick Fix
— An expansion of the Fed's emergency lending program for coronavirus relief might offer help for some in the oil and gas industry.
— Exxon Mobil and Chevron will announce their first-quarter earnings today.
— Several Senate Democrats will send a letter to the Interior Department today opposing royalty relief for oil and gas companies.
GOOD MORNING, IT'S FRIDAY! I'm your host, Kelsey Tamborrino. Check out the POLITICO Energy podcast — all the energy and environmental politics and policy news you need to start your day, in just five minutes. Listen and subscribe for free at politico.com/energy-podcast.
Thursday's trivia question seemed to trip up a lot of you: A Senate session was staffed entirely by women for the first time back on Nov. 10, 1999. Here's the Congressional Record for that day. But as Kellie Donnelly, currently at Lot Sixteen and formerly the Senate Energy and Natural Resources Committee's chief counsel, noted, Sens. Lisa Murkowski and Susan Collins opened the Senate during a snow day back in 2016, where the parliamentarians, floor staff and pages were all women, too. Watch Murkowski's remarks from that day. For today: Who was the first president to fly in a jet specifically built for presidential use? Send your tips, energy gossip and comments to [email protected].
Driving the Day
DOWN ON MAIN STREET: The Federal Reserve announced an expansion of the size and scope of businesses that will be eligible for its "Main Street" emergency lending program. Though broad and not specifically intended for the oil and gas industry, the changes could benefit several of the industry's heavily indebted small- to medium-size companies, as Pro's Victoria Guida and Zack Colman report.
What the Fed did: Under the Main Street program, the Fed will buy the majority of a four-year loan made by a bank to mid-size and small businesses. Thanks to the changes announced Thursday, companies with up to 15,000 employees or up to $5 billion in annual revenue can now qualify for those loans — up from 10,000 employees and $2.5 billion in revenue, Victoria reports. The central bank is also lowering the minimum loan size to $500,000 from $1 million, and under the changes, lenders will be "able to apply their industry-specific expertise and underwriting standards to best measure a borrower's income."
How does oil factor in? The Trump administration has been weighing its options on how to help the struggling oil industry amid the coronavirus pandemic. Late last week, Texas Sen. Ted Cruz called on Treasury Secretary Steven Mnuchin and Fed Chairman Jerome Powell to immediately establish a new lending facility to provide emergency liquidity for oil and gas businesses. Cruz said at the time that the Main Street programs were not "sufficiently structured" to support oil companies, in part because it placed restrictions on the size of loans for businesses with large amounts of debt.
Sen. Dan Sullivan (R-Alaska) told POLITICO that the changes announced Thursday were "clearly a reflection on what we've been advocating for" to help the energy industry. "Whether it's the president or Mnuchin or his team, there's a clear recognition that this sector of the U.S. economy is not just important for Alaska or Oklahoma or North Dakota or Texas," he said. "This was unequivocally the sector of the U.S. economy that drove us out of our last recession."
Firms like Continental Resources, which last week reportedly invoked an "act of God" clause to skirt oil deliveries to a refiner, and Occidental Petroleum, whose debt fell below investment grade in March, could be eligible under the revised conditions, said Andrew Park, a financial policy analyst at Americans for Financial Reform.
In whose interests? Bharat Ramamurti, a former aide to Sen. Elizabeth Warren tapped for the congressionally appointed panel scrutinizing trillions of dollars in emergency lending, tweeted Thursday the expansion clearly lined up with the requests of the oil and gas industry. "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," he said. Ramamurti added to POLITICO: "A lot of the changes … seem to move this from temporary liquidity for companies hurt by Covid to a bailout of companies that were already in bad shape pre-Covid."
Oil and Gas
HOW LOW CAN IT GO? ExxonMobil and Chevron will announce earnings today, offering a deeper look at how U.S. oil companies are faring amid an unprecedented drop in fuel demand and oil prices. Oil production in the U.S. dropped to 12.1 million barrels a day as of April 24, according to the latest government statistics, down a million barrels from February and is all but certain to fall further in coming months as more producers shut in wells.
The numbers won't be great. ConocoPhillips on Thursday said it would cut production by 460,000 barrels a day starting in June after it reported a $1.7 billion loss for the quarter. And as bad as the numbers were, they still reflect a time in the first quarter when oil prices were still mainly in the relatively heady $40-$50 range and had yet to make their brief dive into negative territory.
There's also the question of what gets funded. European majors Shell and BP said they would slash spending on their oil programs amid steep earnings drops, but added they would continue plans to expand their renewable energy operations. Whether Exxon and Chevron make similar commitments remains to be seen. "The world has fundamentally changed," Royal Dutch Shell Chief Executive Ben van Beurden said in a video on the company’s website. Beurden told reporters after the earnings call that Shell does not expect a recovery of oil prices or demand in the medium term.
THIS TIME IT'S DIFFERENT? Economic downturns have weighed on oil demand in previous energy market busts, but no one was prepared for the coronavirus pandemic that wiped out 30 percent of the world's consumption. Now, with oil storage tanks around the world rapidly filling as producers race to shut down wells, there's little hope that the situation for companies will improve any time soon, Pro's Ben Lefebvre and Zack report this morning.
"It still remains a very complex system, but it does feel like this oil price crash is different," said Michael Webber, chief technology officer at Paris-based energy infrastructure company ENGIE and a professor of energy resources at the University of Texas-Austin.
WHEN ONE DROPS, THE OTHER RISES: As U.S. fuel demand has plummeted amid the coronavirus pandemic, crude oil inventories have risen sharply. Pro DataPoint's Patterson Clark breaks down petroleum product consumption vs. the crude oil held in tanks, transit and pipelines across the U.S.
View the full DataPoint graphic. Want to add DataPoint to your POLITICO Pro account? Learn more.
CANARY CEO ASKS TRUMP TO LIFT STEEL TARIFFS: A prominent Trump donor who is also head of one of the nation's largest independent oil field services companies is urging the president to help his hard-hit sector by lifting tariffs on steel and other manufactured goods. "The impact of such tariffs on the products we rely on has always been significant, but it is now increasingly worrying as our margins shrink exponentially," Canary chief executive Dan Eberhart said in a letter on Thursday to Trump. "Our company is spending roughly $80,000 a month in direct and indirect payments on tariffs, and the total will likely top $1 million in 2020."
'New reality': Eberhart, who also has contributed to Republican congressional campaigns, said Canary's monthly tariff bill accounts for about 20 percent of the increased payments it is making each month. The remaining 80 percent is the result of higher prices charged by its suppliers because of the duties Trump has imposed on steel and Chinese goods.
On the Hill
DEMS WARN AGAINST ROYALTY RELIEF: Senate Democrats, led by Sen. Tom Udall, are warning the Interior Department against seeking to provide relief from federal royalty payments for oil and gas production on federal lands amid the pandemic. "We adamantly oppose any plans to eliminate oil and gas operators' royalty obligations," said the senators, including Ed Markey, Ron Wyden and Cory Booker, in a letter to Secretary David Bernhardt today and shared with ME. "This 'relief' would gut the budgets of states that count on receiving 48 percent of those receipts to fund emergency response, infrastructure, education, and other critical state functions in the midst of a worsening public health and economic crisis."
The Democrats write that, should the department decide to move forward with a royalty relief program, it "should simultaneously enact a leasing moratorium to counteract the oversupply of oil and gas reserves." The letter lays out a series of questions for the department to respond to for the record, including how many operators have received relief and whether recipients committed to forgoing executive bonuses, shareholder dividends or other corporate payouts.
K STREET LAYS OUT RELIEF BILL PATH: The law and lobbying firm Hogan Lovells identified in a memo to clients this week that Trump, Mnuchin, House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell will be the "power players" who will need to respond to pressures from K Street and other lawmakers as they craft the next coronavirus relief legislation.
The oil and gas industry, for instance, "is likely to press for a federal rescue package in the wake of a dramatic decrease in the price of oil resulting from insufficient demand in the market and a dispute between OPEC and non-OPEC nations over production levels." House Democrats have their own priorities. "We expect the progressive wing of the caucus to push for concepts like a moratorium on mergers, as has been proposed by" Rep. David Cicilline (D-R.I.), the firm writes. "We also expect House Democrats to pursue pre-existing priorities such as federal spending on building infrastructure, deploying rural broadband, and fighting climate change."
Around the Agencies
I'M ON A VIRTUAL BOAT: Interior Secretary David Bernhardt is expected to attend a virtual conference later this month hosted by the National Marine Manufacturers Association. The NMMA said this week that Bernhardt will deliver the keynote remarks on Day 2 of the virtual "2020 American Boating Congress," which will be held May 13-14. Bernhardt "will outline steps the Trump administration is taking to reopen our nation's public lands and waters," according to a release.
Movers and Shakers
— John Morton, former senior director for energy and climate change on the National Security Council during the Obama administration, has joined new climate change advisory and investment firm Pollination. Morton will be a partner in the firm, building a team in D.C. and leading work on blended finance partnerships and innovative investments, "helping to mobilize institutional capital flows into climate and natural capital sectors." Most recently, Morton was architect and coordinator of the Climate Finance Partnership, an emerging markets climate investment fund.
— Former FERC Commissioner Cheryl LaFleur joined Columbia University's Center on Global Energy Policy as a distinguished visiting fellow.
The Grid
— "Trump administration won't be 'taking equity' in oil companies," via Washington Examiner.
— "Texas shale driller Concho rakes $12.6 billion charge, citing coronavirus impacts," via The Wall Street Journal.
— "Trump told Saudis: Cut oil supply or lose U.S. military support - sources," via Reuters.
— "FERC confirms Goldman Sachs ties to renewables company, opening door for push on corporate transparency," via UtilityDive.
— "When the flames go out, the Permian's methane problem worsens," via Bloomberg.
THAT'S ALL FOR ME!
"street" - Google News
May 01, 2020 at 09:00PM
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Down on Main Street - Politico
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