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Oil and gas companies continue to pump the government for cash. Bloomberg Law News reported that the Administration has granted 76 royalty waivers to oil and gas companies who are drilling for oil on federal land in Utah — lowering the rates from 12.5% to as low as 2.5%. And E&E News reported that the government agency that manages these royalties has received more than 1,000 applications — some companies are requesting royalty rates lowered down to 0.5%. The Washington Post likewise reported on another 21 companies that are using Paycheck Protection Program loans to keep their doors open even though they could not qualify for conventional bank loans because they have been experiencing “sharp stock declines, millions of dollars in losses over the past year,” with no market for their product given large global surpluses of oil, coal, and gas.
Why This Matters: The giveaways to oil and gas companies in the name of saving jobs just keep coming. But these companies are taking public money that could be better spent on jobs that will last into the future in the renewable energy sector, which truly has been deeply harmed by the pandemic. The renewable energy industry is angry and beginning to criticize the Democrats for not helping them despite repeated requests.
PPP Loans For Companies Already on Life Support
The Paycheck Protection Program loans do not need to be paid back if 75% of the money is spent on “wages and benefits.” The loans were supposed to be for small businesses of 500 employees or less, but oil and gas companies have a special higher employee limit, and of the 21 companies receiving these funds, 11 got more than $5m each, which puts them in the top .25% of all loans. The Post tells the story of several of them. Companies like Rhino Rhino Resource Partners, a company whose stock price had dropped 65% before the pandemic hit, that operates coal mines in Appalachia, Illinois, and Utah, which is losing money badly due to the low price of natural gas and a sharp drop in demand for coal. They got the maximum loan amount — $10m — despite the fact that they had unpaid fines of $411,000 last year for 191 health and safety violations last year.
Royalty Relief for Worthless Oil
It is no wonder oil and gas companies want royalty relief — because the oil and gas are not profitable anyway — and they were threatening to stop production. The industry had requested a blanket royalty waiver for all leases on federal “onshore” lands and for leases in the Gulf of Mexico, but the government said no to that. Instead, the government promised expedited reviews of requests and granted all of them for Utah leases. The waivers are being reviewed by individual state offices of the agency that manages the leases. The process for royalty relief for offshore leases in the Gulf of Mexico is longer and more difficult.
President Trump trumpeted his trade deal with China, but so far it has been a bust, according to The Wall Street Journal — the Chinese have not purchased nearly the amount of energy (in terms of total dollars) as they promised — only $2B in oil and gas purchases against a commitment of $25B for this year.
A federal judge in Washington, DC ruled yesterday that the Dakota Access Pipeline must shut down and empty all its oil until the government completes an environmental review of the pipeline’s impacts, giving the Standing Rock Sioux Tribe, whose reservation lies downstream, a huge victory. Similarly, late in the day, the Supreme Court refused to overturn the order of a district judge that shut down construction of parts of the Keystone XL pipeline so it is also blocked for now.
Why It Matters: The Dakota and Keystone XL news is greatly tempered by the fact that numerous other pipeline projects can go ahead despite their inadequate permit unless they are individually challenged in court and blocked.
Yesterday, Dominion Energy and its partner, Duke Energy, announced they were ending a 600-mile natural gas project that would have cost at least $8 billion to complete. As the Richmond Times-Dispatch wrote, Dominion and Duke canceled the construction of the Atlantic Coast Pipeline in the face of mounting regulatory uncertainty caused by a federal court […]
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