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Donald Trump weighs aid for US shale companies

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Via Financial Times

Donald Trump is considering assistance for US shale energy companies that have been hit by plummeting crude oil prices, as his administration tries to persuade Congress to back a stimulus package to shield the economy from the fallout from the coronavirus outbreak.

One US administration official said Mr Trump was “considering federal assistance” for the shale oil and gas production industry, but that it would not amount to a bailout. The plan, first reported by the Washington Post, looked likely to face strong resistance from Democrats, who are already sceptical about some of the other ideas he has proposed to help the economy weather the impact of coronavirus.

Democrats have been critical of Mr Trump’s proposal for a cut in payroll taxes to offset economic damage from the coronavirus crisis, as the White House held testy talks over fiscal stimulus with lawmakers. Their resistance has cast doubt on Washington’s ability to rapidly coalesce around a big package to shield the US economy from the epidemic.

Shale energy is an important element of the economy in several states, particularly Pennsylvania, that will be critical in the November presidential election. But any effort to help shale producers was likely to face tough question from Democrats, particularly those without shale production in their districts.

“Instead of lining the pockets of Big Oil, Democrats are working on legislation to protect the financial security of working families affected by the spread of the coronavirus,” said Evan Hollander, spokesperson for House appropriations committee. 

Mr Trump promised to unveil “very dramatic” measures on Tuesday to mitigate the economic consequences of the coronavirus outbreak. But Democrats immediately balked at one of his main ideas — a cut in taxes paid by employers and workers on their salaries to fund government pensions and healthcare. 

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“The best way to prevent economic damage is to stop the spread of the virus. President Trump isn’t going to wriggle out of addressing this growing public health crisis with tax cuts,” said Ron Wyden, the top Democrat on the Senate finance committee, who added that it would not help workers without paid sick leave or who had lost shifts and tips. 

The Democratic opposition mounted as Mr Trump, along with Steven Mnuchin, his Treasury secretary, and other members of his economic team met Senate Republicans to discuss ideas for economic stimulus. While some GOP lawmakers have backed the call for payroll tax cuts, others have been more cautious. 

“I usually love tax cuts but I think it’s a little premature,” said John Cornyn, a Texas Republican senator.

Mr Mnuchin was upbeat after a meeting with Nancy Pelosi, the Democratic speaker of the House, following the meeting with Republican lawmakers. The pair last year negotiated a budget deal to fund the government and lift the US debt limit. 

“We’re having discussions about various different policies,” Mr Mnuchin said. “There’s a lot of interest on a bipartisan basis to get something done.”

While Mr Trump wants to help shale companies, it would likely spark jockeying among other energy industry players. John Berger, chief executive of Sunnova Energy, a Texas-based solar power company, said any assistance for the oil and gas industry had to be matched by help for renewable energy, such by preserving tax credits set to expire. 

Mr Berger said Vladimir Putin, Russia’s president, and Mohammed bin Salman, the de facto Saudi ruler, had conducted “state intervention” in the markets with their price war that warranted a US government response. “If they do that [however] they need to treat us the same because we are just as important national security-wise,” he said. 

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Although the US economy remained strong in February, the sharp rise in coronavirus cases across the country has led to fears that growth will sharply dip, as events and travel are cancelled, people work from home and consumer and business confidence wanes. 

Mr Trump is under pressure to contain the economic damage after facing criticism for downplaying the threat of the coronavirus.

Congressional Democrats are open to some forms of stimulus, and are crafting their own measures to tackle the crisis from an economic perspective, focusing on access to coronavirus testing, boosting jobless benefits and funding paid leave for workers. 

“This crisis demands a much more complicated series of solutions, it’s not just a matter of tax cuts,” Richard Neal, the Democrat who heads the House ways and means committee, which writes tax legislation, told the Financial Times. 

He said the committee was “working on emergency paid leave and unemployment insurance legislation, and we want to ensure that coronavirus testing can be obtained for free”. 

Mr Trump has faced scepticism from Democrats on another idea some officials have floated, namely targeted tax relief for certain industries affected by the outbreak, possibly including airlines, hospitality, cruise lines and energy. 

Democratic aides said their party would not be keen on supporting slashing corporate tax cuts, following the cuts Mr Trump already made in 2017. Instead, Democrats would rather see a big infrastructure package as stimulus, which they have often discussed with Trump administration officials in recent years without agreement.

“[Coronavirus] hit the world, and we’re prepared and we’re doing a great job with it,” Mr Trump said after his meeting with lawmakers. “It will go away, just stay calm.”

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Additional reporting by Lauren Fedor in Washington

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