Big Oil drives Trump's pandemic response
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When the financial crisis struck in 2008, corporate America got bailed out while Main Street got left behind.

This year’s pandemic-related government rescues are following the same script.

The last time, Wall Street titans received billions in government bailouts, while millions of homeowners lost their homes to foreclosures that federal assistance programs failed to prevent.

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Six months into COVID-19, the $1,200 checks have been spent and the expanded unemployment insurance has expired. The government’s support for municipalities and small businesses is limited or nonexistent. Nevertheless, the fossil fuel industry has had no problem capitalizing on an unprecedented string of federal bailouts.

Even before the crisis, oil and gas companies were shrinking, drowning in debt, and losing ground to renewables. But thanks to the U.S. government’s emergency-funding largesse, oil companies may have found an escape from billions in debt coming due. This is another chapter in the hundred year history of oil and gas depending on taxpayer assistance.

Backed by an infusion of taxpayer money to absorb potential losses, the Federal Reserve has made massive purchases of risky corporate debt. That soothed panicky financial markets last spring. But it also provided undeserved benefits to the tattered dirty-energy sector.

As the Fed’s intervention shaped a more favorable borrowing environment, many oil companies started taking advantage of rock-bottom interest rates to issue new debt and postpone upcoming repayment deadlines.

Our organizations, working with BailoutWatch, identified nearly $100 billion in bonds sold by 56 oil and gas companies since the Federal Reserve launched its unprecedented debt-market bailouts last March. The first three-quarters of the year has recorded the highest energy sector bond issuance of any year since at least 2010. The third quarter’s corporate bond issuance was the highest on record, with highly rated and junk bond issuers recording a blockbuster quarter.

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Our research found that the 19 oil and gas companies in the Fed’s purchase portfolio have issued over $60 billion in new bonds since the intervention began. Many of these companies’ finances were already on shaky ground, and 12 have been downgraded by credit rating firms this year.

The borrowers are drillers, integrated and independent refiners, pipelines, and oilfield service companies. Some may not have survived without drastic help, such as Forum Energy Technologies, an oilfield service company that in July told investors bankruptcy was on the table without new financing. The federal bailout didn’t just assist companies having a hard time due to the pandemic; it artificially propped up oil and gas companies who were facing dim prospects — and, in some cases, bankruptcy — even before the pandemic.

Martin Midstream, a gas pipeline operator, raised nearly $400 million as part of a debt restructuring designed to avoid seeking bankruptcy protection. Two weeks later, it awarded three top executives “retention bonuses” of $100,000 each.

It is no secret that President Donald TrumpDonald John TrumpIvanka Trump, Jared Kusher's lawyer threatens to sue Lincoln Project over Times Square billboards Facebook, Twitter CEOs to testify before Senate Judiciary Committee on Nov. 17 Sanders hits back at Trump's attack on 'socialized medicine' MORE has close friends and supporters in the oil industry, such as Oklahoma billionaire and campaign donor Harold Hamm, the founder and executive chairman of Continental Resources, Inc. Hamm’s company is benefitting directly from the Fed‘s bond purchases, even though its debt was downgraded to junk in March.

Even as the Fed was finalizing the rules of its rescue programs — and oil and gas companies were furiously lobbying for more favorable terms — Trump promised to “make funds available so that these very important companies and jobs will be secured long into the future!”

With priorities like these, it is no surprise that the Fed is becoming a vehicle for a pro-fossil fuel agenda. Chairman Jerome Powell is a former executive at the Carlyle Group, the hyper-connected Washington, D.C.-based private equity firm. Powell has so far dragged his feet on joining an international network of financial regulators working to mitigate the impact of climate change.

European officials are taking important steps to use central banks to boost the market for sustainable investing, but Powell has so far ignored powerful calls to stop subsidizing fossil fuels.

More than six months into this crisis, Senate Republicans have been deeply resistant to another round of stimulus checks to help struggling families pay rent or to keep millions of small businesses from going under as their customers fear leaving their homes.

The fossil fuel bailout gets even bigger when you look beyond just the Fed. Thanks to the stimulus in March, $300 billion in corporate tax breaks passed largely unnoticed. One minor change to the tax code allows businesses to claim major refunds for losses suffered from before the pandemic. This is a major gift for oil and gas companies that couldn’t turn a profit even before the crisis. One company, the refiner Marathon Petroleum, is exploiting the new loophole to the tune of $1.1 billion.

Big Oil didn't just get a bailout — it got a lifeline to keep burning fossil fuels with impunity, pushing us closer to unfixable global warming. With wildfires raging across the American West, destroying communities, blocking out the sun, filling the air with illness-causing soot, and inflicting immense economic damage, why in the world is the Fed fueling climate catastrophe?

Robert Weissman is president of Public Citizen. Erich Pica is president of Friends of the Earth.