Quantcast
Environmental News for a Healthier Planet and Life

Fed's Corporate Debt-Buying Could Mean Billion-Dollar Big Oil Bailout

Politics
Fed's Corporate Debt-Buying Could Mean Billion-Dollar Big Oil Bailout
A gas flare from the Shell Chemical LP petroleum refinery illuminates the sky on August 21, 2019 in Norco, Louisiana. Drew Angerer / Getty Images

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."

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 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.

A group of climate activists that have been cycling from the North of the country in stages to draw attention to the climate case are arriving to the Court of Justice on the day that the climate lawsuit against Shell starts in The Hague, on December 1st, 2020. Romy Arroyo Fernandez / NurPhoto / Getty Images

By Julia Conley

Representing more than 17,000 claimants who support climate action, the international organization Friends of the Earth on Tuesday opened its case against fossil fuel giant Shell at The Hague by demanding that a judge order the corporation to significantly reduce its carbon emissions in the next decade.

Read More Show Less

EcoWatch Daily Newsletter

Eat Just, Inc. announced that its cultured chicken has been approved for sale in Singapore as an ingredient in chicken bites. The company has developed other cultured chicken formats as well. Eat Just

As concern mounts over the environmental impacts of animal agriculture, Singapore has issued the world's first regulatory approval for lab-grown meat.

Read More Show Less

Trending

Wildfires are seen burning out of control on November 30, 2020 on Fraser Island, Australia. Queensland Fire and Emergency Services / Getty Images

The world's largest sand island has been on fire for the past six weeks due to a campfire, and Australia's firefighters have yet to prevent flames from destroying the fragile ecosystem.

Read More Show Less
A plane sprays pesticide over the Wynwood neighborhood in the hope of controlling and reducing the number of mosquitos, some of which may be capable of spreading the Zika virus on Aug. 6, 2016 in Miami, Florida. Joe Raedle / Getty Images

By Jessica Corbett

A national nonprofit revealed Tuesday that testing commissioned by the group as well as separate analysis conducted by Massachusetts officials show samples of an aerially sprayed pesticide used by the commonwealth and at least 25 other states to control mosquito-borne illnesses contain toxic substances that critics call "forever chemicals."

Read More Show Less
Prime Minister Jacinda Ardern plants a tree as part of Trees That Count, a project to help New Zealand make a positive impact on climate change, on June 30, 2019 in Wellington, New Zealand. Hagen Hopkins / Getty Images

The government of New Zealand declared a climate emergency on Wednesday, a symbolic step recognizing the Intergovernmental Panel on Climate Change (IPCC) predictions of substantial global warming if emissions do not fall.

Read More Show Less