Fed's Corporate Debt-Buying Could Mean Billion-Dollar Big Oil Bailout
By Jessica Corbett
As calls for a People's Bailout in response to the coronavirus pandemic continue to grow across the United States, a new analysis warns that the country's Big Oil companies "stand to reap yet another billion dollar bailout" thanks to the Federal Reserve's plans to buy up to $750 billion in corporate debt.
The analysis (pdf), released Wednesday by the advocacy group Friends of the Earth (FOE), explains that this expected bailout for polluters relates to a controversial $500 billion corporate slush fund included in the Coronavirus Aid, Relief, and Economic Security (CARES) Act that Congress passed in March.
According to FOE's report, The Big Oil Money Pit:
Of that amount, Treasury Secretary Steven Mnuchin enjoys direct control over a comparatively small $46 billion reserved for aviation and industries deemed essential to "national security." But the remaining $454 billion went to the Federal Reserve, which will use the money to implement emergency lending programs for corporations and municipalities. Secretary Mnuchin must approve these lending programs and wields considerable power over their design, but the money itself will move through the Fed.
After weeks of unprecedented human suffering and an ongoing failure to support frontline workers, the Fed announced on April 9, 2020 how it would spend the first $195 billion of the slush fund. A full $75 billion would go to buy corporate debt. But because the Fed can leverage money appropriated by Congress, the real size of this program is $750 billion. Considering that a majority of the money from the first stimulus [is] still unspent, there is plenty of room for this program to grow.
FOE found that the fossil fuel giants ExxonMobil, Chevron, and Conoco "are together eligible for a maximum $19.4 billion in benefits, based on their credit ratings and outstanding long-term debt."
NEW ANALYSIS: Trump’s admin just announced a $750 billion corporate slush fund -- money that will enrich oil execs… https://t.co/9fz8NWZzDv— Friends of the Earth (@Friends of the Earth)1586967067.0
The Fed has hired BlackRock, the world's largest asset manager, to administer part of its debt-buying efforts related to the pandemic. "As BlackRock begins purchasing 'high yield' exchange-traded funds (ETFs) to bolster corporate debt markets," FOE warns, "energy companies (predominantly oil and gas) stand to benefit disproportionately as the largest single issuer of junk bonds, at 11% of the entire U.S. market."
Other key takeaways from the report include:
- There are 12 fracking-focused oil and gas companies that could potentially qualify for the new program. Together, they may be eligible for over $24.1 billion in potential benefits.
- Major fracking company Continental Resources, whose debt was recently downgraded to below investment grade by S&P, is potentially eligible for as much as $1.5 billion under new, weaker standards announced by the Federal Reserve.
Echoing climate campaigners' comments after President Donald Trump met with fossil fuel executives at the White House earlier this month, FOE senior policy analyst Lukas Ross said in a statement Wednesday that "oil company bailouts are simply throwing good money after bad."
"Congress and the Democrats must stop this endless stream of handouts to an industry that is exploiting a public health crisis for financial gain," Ross declared. "These potential payoffs to major campaign contributors are the least efficient way of re-starting the economy and will just serve to enrich oil executives."
"Oil companies are trying to punt the financial reckoning of their fracking debacle and Congress should not enable their addiction with public tax dollars," he added. "Instead of pumping money into an irresponsible industry that plays shell games with its debt, Congress should focus on providing direct support to workers and communities on the frontlines of coronavirus."
As the Trump administration has tried to spend billions of taxpayers dollars to "fill up" the country's Strategic Petroleum Reserve (SPR) and major banks are reportedly preparing to take over fossil fuel assets with CARES Act funding, climate action advocates have charged that "we need a people's bailout, not a polluters' bailout!"
Hundreds of community leaders, lawmakers, and groups—including FOE—have joined the demand for Congress to pursue a people's bailout guided by five key principles:
The response to one existential crisis must not fuel another. Let's not perpetuate the status quo of fossil fuel pr… https://t.co/VJPOCAFuxd— Sierra Club (@Sierra Club)1586888707.0
The new FOE report includes some specific calls to action directed at Congress:
- Prioritize direct aid to still neglected workers and communities on the frontlines of the crisis.
- Engage in aggressive oversight to ensure BlackRock does not benefit unfairly from purchasing its own products or needlessly bolster fossil fuel assets.
- Eliminate Secretary Mnuchin's authority to waive crucial protections banning companies receiving bailouts stock buybacks.
- Make future stimulus aid conditional on new and binding protections for workers and the environment.
- Make oil, gas, and coal companies ineligible for support from existing stimulus programs, unless it is conditioned on a phaseout of existing production and an iron-clad commitment to existing pension and environmental liabilities.
"Much more work needs to be done, both to support workers and families in the face of COVID-19 and to prevent a runaway bailout of the fossil fuel industry," the report says. "Congress cannot afford to wait."
Reposted with permission from Common Dreams.
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EcoWatch Daily Newsletter
By Dolf Gielen and Morgan Bazilian
John Kerry helped bring the world into the Paris climate agreement and expanded America's reputation as a climate leader. That reputation is now in tatters, and President-elect Joe Biden is asking Kerry to rebuild it again – this time as U.S. climate envoy.
Energy Is at the Center of the Climate Challenge<p>The <a href="https://science2017.globalchange.gov/chapter/1/" target="_blank">effects of climate change</a> are already evident across the globe, from <a href="https://theconversation.com/100-degrees-in-siberia-5-ways-the-extreme-arctic-heat-wave-follows-a-disturbing-pattern-141442" target="_blank">extreme heat waves</a> to <a href="https://science2017.globalchange.gov/chapter/12/" target="_blank">sea level rise</a>. But while the challenge is daunting, there is hope. Solar and wind power have become the <a href="https://www.irena.org/publications/2020/Jun/Renewable-Power-Costs-in-2019" target="_blank">cheapest forms of power generation globally</a>, and technology progress and innovation continue apace to support a transition to clean energy.</p><p>In the U.S. under a Biden administration, long-term national climate legislation will depend on who controls the Senate, and that won't be clear until after two run-off elections in Georgia in January.</p><p>But there is no shortage of <a href="https://www.bloomberg.com/features/2020-biden-climate-change-advice/" target="_blank">ideas for ways Biden</a> could still take action even if his proposals are blocked in Congress. For example, he could use executive orders and direct government agencies to tighten regulations on greenhouse gas emissions; increase research and development in clean energy technologies; and empower states to exceed national standards, <a href="https://www.reuters.com/article/us-autos-emissions-california/defying-trump-california-locks-in-vehicle-emission-deals-with-major-automakers-idUSKCN25D2CH" target="_blank" rel="noopener noreferrer">as California did in the past with auto emission standards</a>. A focus on a just and equitable transition for communities and people affected by the decline of fossil fuels will also be key to creating a sustainable transition.</p><p>The U.S. position as the world's largest oil and gas producer and consumer creates political challenges for any administration. U.S. forays into European energy security are often treated with suspicion. Recently, France blocked <a href="https://www.wsj.com/articles/frances-engie-backs-out-of-u-s-lng-deal-11604435609" target="_blank">a multi-billion dollar contract</a> to buy U.S. liquefied natural gas because of concerns about limited emissions regulations in Texas.</p><p>Strengthening cooperation and partnerships with like-minded countries will be critical to bring about a transition to cleaner energy as well as sustainability in agriculture, forestry, water and other sectors of the global economy.</p>
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We Need More Than Listening<p>By now we have all become sadly accustomed to the current administration sidelining scientists, most prominently Dr. Anthony Fauci, because the facts they provide do not fit with the political rhetoric of the moment.</p><p>I have <a href="https://www.csldf.org/2019/08/22/csldf-helps-climate-scientist-maria-caffrey-fight-for-scientific-integrity/" target="_blank">my own history</a> of filing a scientific integrity complaint with the National Park Service (which falls under the Department of the Interior) after senior ranking employees attempted to censor one of my scientific reports. I know all too well the damage and pain that these actions cause, not just for the individual scientist, but also because these <a href="https://www.ucsusa.org/resources/attacks-on-science" target="_blank" rel="noopener noreferrer">attacks on science</a> over the last few years have undermined sound, evidence-based decision making.</p><p>President-elect Biden has repeatedly said that he will <a href="https://thehill.com/homenews/521638-trump-biden-will-listen-to-the-scientists-if-elected" target="_blank" rel="noopener noreferrer">listen to the scientists</a>. While this is certainly a welcome change, listening can only take us so far. This past week Lauren Kurtz from the <a href="https://www.csldf.org/" target="_blank" rel="noopener noreferrer">Climate Science Legal Defense Fund</a> and my colleague <a href="https://www.ucsusa.org/about/people/gretchen-goldman" target="_blank" rel="noopener noreferrer">Gretchen Goldman</a> published <a href="https://www.scientificamerican.com/article/ten-steps-that-can-restore-scientific-integrity-in-government/" target="_blank" rel="noopener noreferrer">an article</a> listing 10 actions the new administration should implement to show their commitment to strengthening government science:</p><ol><li>Clearly prohibit political interference and censorship.</li><li>Protect scientists' communication rights.</li><li>Acknowledge that attempts to violate scientific integrity, even if ultimately not fruitful, are still violations.</li><li>Protect federal scientists' right to provide information to Congress and other lawmakers.</li><li>Commit to incorporating the best science as part of agency decisions.</li><li>Elevate agency scientific integrity policies to have the full force of law.</li><li>Publicly release anonymized information about scientific integrity complaints and their resolutions at every agency.</li><li>Institute an intra-agency workforce, potentially under the White House <a href="https://www.ucsusa.org/sites/default/files/2020-09/strengthening-science-and-si-at-ostp.pdf" target="_blank" rel="noopener noreferrer">Office of Science and Technology Policy</a>, to coordinate scientific integrity efforts across agencies, foster discussion of policy improvements, and standardize criteria for policies across agencies.</li><li>Strengthen whistleblower protections.</li><li>Ensure that policies cover all actors who will be dealing with science.</li></ol>
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<div id="da98c" class="rm-shortcode" data-rm-shortcode-id="478a197b7c59c92787c92bec92f1ac39"><blockquote class="twitter-tweet twitter-custom-tweet" data-twitter-tweet-id="1331662923710693376" data-partner="rebelmouse"><div style="margin:1em 0">Bristol Bay forever, Pebble mine never. #NoPebbleMine #SaveBristolBay https://t.co/CBQ9zuy8A5</div> — Save Bristol Bay (@Save Bristol Bay)<a href="https://twitter.com/SaveBristolBay/statuses/1331662923710693376">1606328156.0</a></blockquote></div>
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