The Energy 202: Trump administration dinged by government watchdog for pandemic relief for oil companies

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That royalty relief was supposed to go to wells that would have otherwise shut down because of the sharp decline in oil prices. The idea was to make sure that normally profitable wells were not plugged permanently because of the health crisis. 

But the GAO, in a report released Tuesday, said the Trump administration failed to properly take the economic viability of wells into account when deciding which wells got relief — and probably ended up offering aid to oil producers that did not need it, shortchanging taxpayers in the process.

“This is exactly the time the government should be spending money,” said Frank Rusco, the watchdog agency’s director of natural resources and environment. “But we’re about good government. And if you do it, do it in a smart way.”

When oil prices plummeted this spring, the Trump administration offered a 60-day reprieve on royalty payments in more than 500 cases in Western states.

The Bureau of Land Management, which oversees drilling on federally controlled lands, reduced rates from the agency’s usual minimum of 12.5 percent to an average of less than 1 percent between March 24 and June 11.  

Offering a break on royalty payments is not unusual, especially during economically challenging times. When deciding which wells got relief, officials on the ground in BLM’s state offices told the GAO they considered certain factors, such as transportation and refining costs, that may weigh heavily on low-margin producers during a price crash.

But the agency failed to analyze whether royalty relief was needed in the first place to keep wells operating during the pandemic, according to the GAO — and, in turn, to ensure “the government gets a fair return” for taxpayers on its oil and gas. 

Whether an application for royalty relief was approved varied wildly state by state, in part because local BLM officials interpreted guidance from headquarters differently, the GAO said. 

The majority of wells granted a break on payments were in Wyoming, with wells in Utah, Colorado and other places also getting some relief. But the approval rate in Wyoming was just 28 percent, while in BLM office covering Montana, North Dakota and South Dakota it was 95 percent.

The total cost to taxpayers was $4.5 million in forgone revenue in May and June — though the GAO said that estimate is “conservative.” The watchdog agency recommended the BLM evaluate the effectiveness of the relief program and update its guidance for it.

The Trump administration denounced the watchdog agency for not working with it “in good faith.”

Derrick Henry, a BLM spokesman, defended the agency’s royalty relief program, saying it was legal and has been done under other presidents.

“No special circumstances were granted to anyone,” he said, adding that relief was granted only “when it was legally permissible, in the best interest of the United States, and when it would encourage the greatest ultimate recovery of our natural resources.” 

Although the watchdog agency did talk to local BLM staffers, it was not granted interviews with anyone in headquarters, Rusco said. 

The royalty relief efforts during the pandemic generated some controversy from the start.

Detractors saw it as an unnecessary bailout for the politically connected oil industry — one that came as many Americans suffered from lost jobs and income. President Trump, a petroleum industry ally, said he did not want “to lose our great oil companies” to the pandemic.

The GAO report was done at the request of Raúl Grijalva (D-Ariz.), chair of the House Natural Resources Committee and a frequent Trump critic. The panel held a hearing about the report Tuesday, but the Trump administration declined to make anyone available to testify.

Rep. Alan Lowenthal (D-Calif.), head of the panel’s subcommittee on energy and mineral resources, called the Trump administration’s royalty relief efforts “wildly haphazard.”

“They said they were doing this to protect taxpayers. But it turns out that Interior wasn’t telling the truth,” Lowenthal said. “The Trump administration acted for the benefit of fossil fuel companies that regularly exploit America’s public lands.”

“Protecting taxpayers was never the actual goal,” he added.

Still, the oil sector is among the hardest hit by the pandemic as Americans drive and fly less to prevent transmitting the virus. 

The situation was only made worse by a petroleum production war between Saudi Arabia and Russia that sent the price of crude into a tailspin in April, when the price of West Texas Intermediate oil briefly went negative.

Kathleen Sgamma, head of the Western Energy Alliance, an industry lobbying group, said the federal government was able to get a lot of bang for its buck with the royalty relief — saving many jobs by forgoing just $4.5 million in revenue.

“It is a very small rounding error in comparison with what we provide in return back to the American taxpayer,” she said. 

Power plays

Oil and gas companies cashed in on Cares Act funding.

Large companies, and energy companies in particular, have been taking advantage of a little-known provision of the act that can amass large windfalls in the form of tax returns, without requiring companies to show that they will keep people employed or invest in the business. 

“[W]hile the bill did not say anything explicit about a fossil fuel bailout, as many as 30 percent of publicly traded oil and gas companies said in corporate filings they planned to use this tax provision, according to researchers at the University of Chicago who reviewed hundreds of filings made between March and May,” Butler, Mufson and McMillan report. “Oil and gas companies were substantially more likely to use the credit than other companies, the researchers found.”

Marathon Petroleum, for instance, plans to cash in an extra $411 million in tax refunds this year, even as it announced last week that it intends to lay off 2,000 workers. And pipeline company Antero Midstream got a $55 million tax refund that helped it maintain its cash dividend payments.

JPMorgan Chase pledged to work toward global net-zero emissions by 2050.

The biggest U.S. bank pledged to use its financing to push clients to align with the Paris climate accord and invest in technologies to reduce climate emissions, the Wall Street Journal reports.

“Climate activists have called on JPMorgan for years to bend its lending power to help the environment,” the Journal reports. “JPMorgan has some $40 billion in lending exposure to oil-and-gas companies, and the Rainforest Action Network considers it the world’s biggest financier of fossil fuels.”

JPMorgan has not said how it will achieve its goal, and it doesn’t have plans to jettison fossil fuel companies in the immediate future. The bank has committed, however, to improved metrics of its clients’ carbon emissions and said it will disclose a preliminary 2030 target for emissions reductions next year.

The Sierra Club revoked its endorsement of Rep. Jeff Van Drew.

The environmental organization said it would no longer support the lawmaker for New Jersey’s 2nd Congressional District, instead throwing its weight behind Democratic challenger Amy Kennedy, InsiderNJ reports. 

The Sierra Club accused Van Drew of abandoning South Jersey’s “conservation values,” citing his votes to strip funding for the U.N. Convention on Climate Change and his support for a Trump executive order that the group claims will undercut environmental safeguards when it comes to mining and leasing on public lands.

Van Drew won his seat as a Democrat in 2018 but announced that he was switching parties this year over his opposition to impeachment proceedings against the president.

Montana has asked the courts to throw out major Bureau of Land Management decisions.

A Montana-based U.S. District Court judge ousted William Perry Pendley from his role as acting head of BLM last month, ruling that the Trump administration’s practice of repeatedly extending Pendley’s leadership was illegal and subverted constitutional requirements for Senate confirmation, the Associated Press reports.

Montana Gov. Steve Bullock (D), who brought the lawsuit, asked the judge on Monday to block major land use plans authorized under Pendley’s tenure that would have opened up more public lands to oil and gas drilling.


Category 4 Hurricane Delta is expected to hit Louisiana this week.

Delta rapidly intensified from a 40 mph tropical storm to a 130 mph Category 4 hurricane in just over 27 hours. The storm is expected to hit Cancun and the Yucatán Peninsula on Wednesday and then weaken somewhat before barreling into Louisiana later this week, our colleagues Matthew Cappucci and Jason Samenow report.

“The 2020 hurricane season continues to smash and obliterate records, the oceans cranking out tropical storms and hurricanes like a factory,” Cappucci and Samenow write. “When Delta makes landfall, it will break the record for most named storms to strike the United States in a calendar year, surpassing the nine that came ashore in 1916.” 

It’s not all bad

MacArthur Foundation awarded environmental health advocate Catherine Coleman Flowers.

Flowers, the founding director of the Center for Rural Enterprise and Environmental Justice in Montgomery, is among the foundation’s ‘genius grant’ recipients for her work uncovering inequalities in access to sanitation and clean water. Flowers has documented how a lack of access to clean water exacerbates poverty and harms health, particularly in predominantly Black communities in America’s rural South. 

Chemical engineer Paul Dauenhauer was also among the fellows. Dauenhauer is working on developing technologies to convert renewable, organic biomass into chemicals commonly used in consumer plastics, rubbers and detergents. His research could provide more sustainable alternatives to petroleum-based materials.

All hail 747.

That massive brown bear was crowned champion of Katmai National Park’s annual Fat Bear Week contest, which celebrates the park’s bears as they pack on pounds before hibernation.

With nearly 70,000 votes cast, 747 beat out rival Chunk, bear number 32, by a two to one margin. Chunk’s big belly and gentle streak were no match for the truly gargantuan and aptly named 747, who was estimated last year to weigh 1,400 lbs, according to our colleague Natalie B. Compton.

“Many staff who’ve worked at Katmai for many years say that [747] is the biggest bear they have ever seen,” Naomi Boak, the Alaska park’s media ranger, said. “It’s pure coincidence that he has the same name as a jumbo jet, but he is the size of a jumbo jet.”

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