On The Hill

U.S. Oil & Gas Industry

On Monday (Apr. 20), oil futures plunged below zero to the lowest level in U.S. history, to -$36.63 per barrel. Monday’s price collapse was caused by the expiration of the May futures contract, because speculative traders and companies were rushing to unload contracts for May delivery. Oil production cuts are beginning to address low prices, but demand for crude has been drastically reduced in the face of coronavirus lockdowns. Storage in Cushing, Oklahoma, and other tank farms will likely be full within three to four weeks. More than 2.4 million barrels of crude is set to be delivered to Cushing next month.^[1] 

In response to the oil crash, President Trump tweeted his support for the industry, and urged the Energy and Treasury Departments to formulate a plan to make funds available to oil and gas companies. U.S. companies have asked the White House for direct financial aid as it deals with the oil glut caused by the COVID-19 pandemic, but aid to the industry will likely be unpopular.

On Friday (Apr. 24), prices stabilized but there is a lingering concern that the recent recovery will be short-lived. Analysts warn that the worst is not over yet for oil prices, and the fundamentals still point to a weak picture.^[2] 

Treasury Secretary Steve Mnuchin is seeking a mechanism to lend money to oil companies. “One of the components we’re looking at is providing a lending facility for the industry,” Mnuchin told Bloomberg news Thursday (Apr. 23).^[3] 

“We’re looking at a lot of different options, and we have not made any conclusions,” he added.

 

Clean Water Act

On Thursday (Apr. 23), the Supreme Court ruled that pollution traveling indirectly to rivers and streams can be covered by the Clean Water Act’s permitting requirements. The high court set a standard for the reach of federal regulation that is narrower than the one endorsed by the 9th U.S. Circuit Court of Appeals.^[4] 

In an opinion drafted by Justice Stephen Breyer, the court concluded that a permit is required if the pollution that travels from a point source through groundwater to a larger river or stream is “the functional equivalent” of a direct discharge. “Many factors may be relevant to determining whether a particular discharge is the functional equivalent of one directly into navigable waters,” the opinion states.

Companies are bracing for a new era of regulatory uncertainty from court rulings and potential changes at the Environmental Protection Agency if Democrats take back the White House. ^[5] 

 

COVID-19 Stimulus Update

On Friday (Apr. 24), President Trump signed a $484 billion bipartisan measure to deliver urgent relief to small businesses, hospitals, and testing. The Senate moved the legislation by unanimous consent on Tuesday (Apr. 21), and the House passed the package on Thursday (Apr. 23).

The latest round of emergency stimulus, referred to as ”CARES 3.5,” includes:

Small Business

• $310 billion for the Paycheck Protection Program, including $60 billion for smaller banks and community development financial institutions to help traditionally underbanked urban neighborhoods and rural areas
• $10 billion for Emergency Economic Injury Disaster Loans (EIDL)
• $50 billion for other SBA disaster loan programs

Hospitals

• $75 billion for hospitals and healthcare providers

Testing

• $25 billion for virus testing

House Democrats and President Trump have said they want to launch negotiations on a fifth bill that could top a $1 trillion. The next bill could include assistance to state and local governments, major infrastructure investments, and more stimulus checks. Senate Majority Leader Mitch McConnell (R-KY) has vowed nothing will move through the Senate before May 4, when Congress is set to return.^[6] 

Five energy-state Republican senators have demanded that any assistance for the renewable energy sector in future relief packages be paired with accompanying benefits for the fossil fuel sector. Senator Kevin Cramer (R-ND) led the group, and said in a letter to McConnell that any move along the lines of clean energy credits must be paired with compensation to coal and nuclear facilities; enhanced carbon capture and sequestration credits; and extension of the refined coal tax credit; and legislative action to reduce the timelines for permitting reviews.

To view the letter to McConnell, click here.

 

Infrastructure Bills

On Tuesday (Apr. 21), leaders of the Senate Environment and Public Works Committee released a pair of draft bills to boost the country’s water infrastructure. “America’s Water Infrastructure Act of 2020” or AWIA 2020 would authorize around $17 billion for infrastructure projects and reauthorize EPA’s Clean Water State Revolving Fund. The “Drinking Water Act of 2020” would provide roughly $2.5 billion in authorizations, including the Safe Drinking Water Act emergency fund and $300 million in grants for cleaning drinking water of emerging contaminants.^[7] 

To view a summary of the two bills, click here.

 

References

^[1] Meyer, Gregory. “Oil world zeroes in on Cushing, Oklahoma.” Financial Times, 23. Apr. 2020. https://www.ft.com/content/51d2f6a5-1a71-4c1c-b022-8768fdb72519

^[2] Sardana, Saloni. “Oil’s rally in recent days is just a ‘dead-cat bounce,’ analysts warn after Trump stoked tensions with Iran.” Markets Insider, 24. Apr. 2020. https://markets.businessinsider.com/news/stocks/oil-price-rally-dead-cat-bounce-analysts-warn-2020-4-1029126149

^[3] Wolff, Eric. “The SCOTUS water muddle.” Morning Energy, 24. Apr. 2020. https://www.politico.com/newsletters/morning-energy/2020/04/24/the-scotus-water-muddle-787099

^[4] Snider, Annie. “Supreme Court rules sets new test for Clean Water Act permitting.” Politico Pro, 23 Apr. 2020. https://subscriber.politicopro.com/article/2020/04/supreme-court-rules-sets-new-test-for-clean-water-act-permitting-1919756

^[5] King, Pamela. “Clean Water Act test ‘will be litigated for years to come.’ E&E News PM, 23 Apr. 2020. https://www.eenews.net/eenewspm/stories/1062953253/search?keyword=clean+water+act

^[6] Emma, Caitlyn. “Trump signs $484B rescue deal for small businesses, hospitals, testing.” Politico Pro, 24 Apr. 2020. https://subscriber.politicopro.com/article/2020/04/trump-signs-484b-rescue-deal-for-small-businesses-hospitals-testing-3979753

^[7] Snider, Annie. “Senate EPW unveils draft water infrastructure bills.” Politico Pro, 21 Apr. 2020. https://subscriber.politicopro.com/article/2020/04/senate-epw-unveils-draft-water-infrastructure-bills-3979630