Energy secretary accuses banks of ‘redlining’ oil and gas industry
Energy Secretary Dan Brouillette is accusing major U.S. banks of discriminating against the oil and gas industry, comparing their refusal to finance Arctic drilling projects to tactics used to prevent minorities from buying homes.
In an interview with Axios published Monday, Brouillette charged that some of the largest banks were “redlining” the oil and gas industry by declining to finance new drilling in parts of northeast Alaska.
Goldman Sachs, JPMorgan Chase, Wells Fargo, Citibank and Morgan Stanley — five of the eight largest U.S. banks — have said they will not provide loans or credit that support oil and gas drilling in the Arctic National Wildlife Refuge. The 2017 tax-cut law lifted a decades-long ban on drilling in the region, drawing praise from the fossil fuel industry and criticism from Democrats and environmentalists.
Brouillette said the moves by major banks were similar to the systemic discrimination from the financial sector faced by nonwhite families throughout U.S. history.
“We didn’t want banks redlining certain parts of the country. We don’t want that here. I do not think banks should be redlining our oil and gas investment across the country,” said Brouillette, a former vice president of financial services firm USAA.
Throughout the 20th century, banks would often decline to extend home loans and other credit products to applicants from majority-minority areas, typically drawing red lines on maps around neighborhoods under the discriminatory assumption that they were too risky to serve.
That practice, known as redlining, is now illegal, but it prevented millions of nonwhite families from reaping the full benefits of the post-World War II economic boom and the federal government’s support for homeownership. Experts say redlining reinforced segregation long after it was deemed illegal and created a stark racial wealth gap that continues to widen.
While it is illegal for banks to reject customers based on their race, ethnicity or sex, financial firms have wide legal latitude to choose which industries they serve. Even so, Brouillette has accused banks of discriminating against oil and gas producers as the industry faces a crisis driven by low energy demand and high levels of preexisting debt.
Brouillette said in April that he would work with Treasury Secretary Steven Mnuchin to ensure banks and lenders don’t make “discriminatory decisions” against oil and gas companies when issuing coronavirus relief loans. He also told Bloomberg TV last week that he had asked the Federal Reserve to expand the terms of an emergency lending program for small businesses to cover oil and gas firms that held too much debt to qualify initially.
“This is, incredibly, not the first time he has compared shunning financially shaky business to discrimination,” tweeted Graham Steele, former chief Democratic counsel on the Senate Banking Committee.
Energy Department spokeswoman Shaylyn Hynes said in a statement that Brouillette “has zero tolerance for discrimination of any type, and he was not in any way equating the plight of minority communities to that of energy companies.”
“What he did do is make the powerful point that historically there had been discrimination practiced by some in the financial services industry, a custom he and many others worked hard to eliminate and continue to oppose,” Hynes added.
Brouillette is among several Republicans, including Trump, to have accused banks of discriminatory conduct against the oil and gas industry.
After Sen. Dan Sullivan (R-Alaska) said in an Oval Office event last month that “starting to discriminate against American energy companies,” Trump responded that he liked “the idea of looking into that.”
“They’re afraid of the radical left. You shouldn’t be afraid of the radical left,” Trump added. “You cannot be discriminating against these great energy companies.”
Sullivan and nearly 40 other GOP lawmakers wrote a letter to the White House in May urging the Trump administration to “use every administrative and regulatory tool at your disposal to prevent America’s financial institutions from discriminating against America’s energy sector while they simultaneously enjoy the benefits of federal government programs.”
Banks have faced growing pressure from environmental activists and Democratic lawmakers to pull back on support for oil and drilling projects amid the mounting toll of climate change. The precarious financial state of the industry has also repelled some banks and investors, imperiling communities that depend on oil and gas production to support their local economies.