Bucking President Trump’s directive for buying oil to fill up the Strategic Petroleum Reserve (SPR), Senate Democrats last week nixed what they say was a $3 billion bailout for oil producers from the coronavirus economic stimulus bill that passed the Senate on March 25. An earlier version of the $2 trillion relief bill favored by Senate Republicans allocated $3 billion for filling up the SPR to aid a struggling oil sector.

With oil prices crashing, Trump announced a few weeks ago he planned to have the government purchase “large quantities” of crude oil to add to the emergency stockpile. “We’re going to fill it right up to the top,” he said. The Strategic Petroleum Reserve was created in the 1970s to reduce disruptions in oil supply and it currently holds 635 million barrels of crude.

Several U.S. senators sent a letter to the President at the time of his announcement, opposing this “bailout” of the oil industry. “Using federal assistance — including low-interest loans, royalty relief, tax breaks, or strategic petroleum reserve purchases — in order to prop up oil companies would be a wasteful misuse of government resources that would exacerbate the climate crisis,” Senators Ed Markey (D-MA), Jeff Merkley (D-OR), and Bernie Sanders (I-VT) wrote.



Oil tanks at the St. James Strategic Petroleum Reserve Terminal in Louisiana. Credit: Julie Dermansky

But the Trump administration, which has a track record of bending to the whims of the oil and gas industry, signaled its resolve to bend once again with the announcement of an initial solicitation to purchase 30 million barrels of crude oil. The Department of Energy (DOE) issued a press release saying the purchase is intended to throw a lifeline to the ailing oil industry with a focus on small to midsize producers. The plan is to fill up the reserve with 77 million barrels, but that would typically require additional funding allocation from Congress.

“The Department is working with Congress to finalize the funding to support the purchase of the full 77 million barrels of oil, consistent with the President’s directive,” the DOE press release stated.

For now, this funding has been dropped from the stimulus bill following intense negotiations between Senate Republicans and Democrats. Senate Minority Leader Chuck Schumer (D-NY) included the elimination of the “$3 billion bailout for big oil” in a list of what he termed “significant improvements” he made to the bill first proposed by Senate Majority Leader Mitch McConnell (R-KY).

Senator Markey also noted this exclusion in his statement on the economic relief package. “A bailout I’m glad to see missing from this package? It does not include a $3 billion direct bailout for the oil industry, which I have led the fight against,” he said.

One of Republicans’ top priorities in responding to #COVIDー19? Bailing out the oil industry with a hidden $3 billion in their corporate relief bill that goes right to oil companies—all while ignoring the tens of thousands of renewable energy workers at risk of losing their jobs. — Ed Markey (@SenMarkey) March 23, 2020

Environmental organizations responded positively to the elimination of the $3 billion earmarked to prop up oil producers. “The defeat of $3 billion exclusively for Big Oil is an important victory,” Michelle Chan, VP of programs with Friends of the Earth, said in a statement. “Senators are finally listening. We’re glad to see them abandon the idea of ‘filling up’ the Strategic Petroleum Reserve at Trump’s request,” said Greenpeace USA Senior Climate Campaigner Jack Shapiro.

As DeSmog has documented in its series, The Finances of Fracking, the fracked oil and gas industry has long grappled with massive debt and nonexistent profits, problems that predate the current pandemic and oil price war.

Trump Administration Still Loyal to Big Oil

While it appears senators on the Democratic side have stopped this latest attempt at a bailout for oil producers, it likely won’t stop President Trump from trying to find some way to boost the industry that is spending millions of dollars on his reelection. The President tweeted March 26 that the oil and gas industry “is under siege,” saying that things will turn around.

Our great Oil & Gas industry is under under seige after having one of the best years in recorded history. It will get better than ever as soon as our Country starts up again. Vital that it does for our National Security! — Donald J. Trump (@realDonaldTrump) March 26, 2020

As Reuters reported, the Trump administration is looking into ways to fill up the SPR without funding from Congress, such as “exploring whether it can find money in the U.S. Department of Energy’s budget.” An energy analyst said the DOE already has enough money in its SPR modernization fund to support the initial purchase of 30 million barrels of oil.

Lukas Ross, senior policy analyst with Friends of the Earth, explained in a recent article that there isn’t much leeway when it comes to finding the money for SPR oil purchases.

“If Trump truly means to ‘fill up’ the SPR, he would either need to demand more money from Congress or find some way to divert emergency funds to oil purchases,” Ross wrote. He does, however, describe another method used previously whereby oil producers pay royalties to the government in petroleum itself rather than cash, a program known as “royalty-in-kind.” This program, according to Ross, has been “notoriously complex” and “notoriously corrupt,” but it could be a way for the Trump administration to get its way without help from Congress.

“Unfortunately, royalty-in-kind is still written into the regulations governing SPR oil acquisitions and could likely be revived through executive order,” Ross wrote. “This would be logistically very complicated but not illegal. No congressional approval would be required, and if there was ever an interior secretary to revive a program like this, it would be industry shill [Interior Secretary] David Bernhardt.”

Another ex-fossil fuel industry employee turned leader in the Trump administration, Environmental Protection Agency (EPA) Administrator Andrew Wheeler, a former coal lobbyist, announced late on March 26 a “temporary policy” to relax EPA enforcement of civil violations, essentially allowing polluters to regulate themselves. This policy to excuse environmental compliance during the pandemic follows requests the American Petroleum Institute made to the President and Administrator Wheeler just days earlier.

“This is an open license to pollute,” said Gina McCarthy, current head of the Natural Resources Defense Council and former EPA head under Obama, according to InsideClimate News.

Main image: A cemetery near oil tanks at the St. James Strategic Petroleum Reserve Terminal connected to Bayou Choctaw, one of four strategic reserve sites on the Gulf of Mexico. Credit: Julie Dermansky