Fed's expanded lending program opens funding to oil and gas industry

Fed's expanded lending program opens funding to oil and gas industry

Changes to a new lending program from the Federal Reserve have paved the way for the oil and gas industry to get government financing amid the pandemic.

The expanded criteria to qualify for the soon-to-be Main Street Lending Program follows requests from Sen. Ted CruzRafael (Ted) Edward CruzThe Hill's Campaign Report: COVID-19 puts conventions in flux  Ted Cruz bashes Oprah for 'lecture' on race: 'What utter, racist BS' Senate Democrats prepare seven-figure spending spree in Texas MORE (R-Texas) and an industry group for small and mid-sized oil producers who said financing was needed to save the industry from bankruptcy. 

The guidelines released Thursday eased restrictions on borrowing for heavily indebted companies and also allows them to use the loans to refinance existing debts — a departure from the first set of criteria released by the board.

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“Because of these restrictions, small- and medium-sized oil and gas companies, who desperately need liquidity because of massive demand disruption caused by COVID-19 and foreign oil aggressive overproduction and price discounts, are unable to access the short-term liquidity they need to avoid bankruptcy,” Cruz wrote in a letter to the Treasury Department and the Federal Resource Board last week. 

The expanded program will benefit a number of industries.

Companies with 15,000 employees or $5 billion in annual revenue will now qualify, up from 10,000 employees and $2.5 billion in revenue. The minimum loan size ranges from $500,000 to $1 million — a move designed to make the program accessible to both small and medium-sized businesses.

"The Federal Reserve’s announcement today sends a clear signal to IPAA members that the Administration is willing to address some of our recommendations for assuring that producers have access to the Main Street Lending Program," the Independent Petroleum Association of America, which lobbied for the changes, said in a statement to The Hill. 

But the potential for oil companies to benefit from the loan program has irked many Democrats, some of whom fought to ensure no coronavirus stimulus funds would go to fossil fuel companies. These efforts included blocking $3 billion in funds requested by the Trump administration to buy oil for the Strategic Petroleum Reserve.

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Lawmakers on both sides of the aisle have since become avid correspondents with both Treasury and the board, penning multiple letters arguing both for and against assistance for oil companies as drop in demand and surge of supply has sent prices tanking.

“By hook or by crook, Big Oil is going to try to get a bailout while small businesses shutter,” Sen. Ed MarkeyEdward (Ed) John MarkeyThe Hill's Campaign Report: Even the Post Office is political now | Primary action tonight | Super PACS at war Markey offers apology to family of unarmed Black teen amid criticism The Hill's Campaign Report: Biden's latest plan on racial inequality MORE (D-Mass.) said in a statement following the new Main Street Lending Program guidelines. 

President TrumpDonald John TrumpLincoln Project ad dubs Jared Kushner the 'Secretary of Failure' Pence: Chief Justice Roberts 'has been a disappointment to conservatives' Twitter bans Trump campaign until it deletes tweet with COVID-19 misinformation MORE’s fossil fuel cronies lobbied and are going to take money that was meant to help businesses survive the coronavirus pandemic in order to bail themselves out of $200 billion in existing debt. It is deplorable to spend good money after bad and waste taxpayer dollars on an industry that has been struggling for years due to bad business decisions. ... It’s unacceptable, unwarranted, and unjust, and we cannot let this stand.”

President Trump said Wednesday the White House is still considering a number of ideas to help the oil industry. 

“Well we're not gonna let our oil companies go and get in trouble. It's not their fault that they got hit by 50 percent less volume in one day,” Trump said. “I think the oil industry is one of the top on the list.

Senate Minority Leader Chuck SchumerChuck SchumerGroup of GOP senators back more money for airlines to pay workers GOP super PAC launching August ad blitz Schiff, Khanna call for free masks for all Americans in coronavirus aid package MORE (D-N.Y.) on Thursday said the president was motivated by his ties to the industry.

“President Trump is rushing to bail out big oil companies after their CEOs donated millions to the Trump campaign, while so many Main Street businesses are still waiting to get help," he said in a statement.

"It’s outrageous that small businesses are fighting for limited funds, while the Trump administration is bending over backwards to shower these oil companies with billions of taxpayer dollars." 

Updated at 6:08 p.m.