Via RT Business

The White House is considering a rescue package for the US shale industry, although the idea is getting pushback from so many sides that it faces challenging odds of passing into law.

According to the Washington Post, the White House warmed to the idea of aid for shale drillers after taking calls from oil executives “who have voiced concern and at times exasperation,” following the sudden crash in oil prices. Of note, Continental Resources’ Harold Hamm reached out to the Trump administration, though Hamm said he had not made “direct” contact. He has been a personal supporter of President Trump.

Hamm reportedly lost $2 billion personally on Monday from his 77 percent stake in Continental Resources. Hamm said the administration should consider “any action that the administration might take to protect and preserve American interests at this time from being unfairly disadvantaged by whatever government — and we’re talking governments here, whether it be Russia or Saudi Arabia,” according to the Post.




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The help would involve low interest loans to shale companies because access to credit has been largely choked off, the Post said.

Indeed, with much of the industry heavily indebted, access to capital is a critical issue. During the 2014-2016 downturn, so many drillers survived and returned to growth due to a nearly endless supply of credit and equity supplied by banks, investors and private equity. The major recapitalization effort revived shale drilling after a brief downturn.

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This time around, investors are no longer interested in financing unprofitable drilling. Trump wants the government to step in to prop up failing companies.

But the idea was met with howls of criticism immediately after the Post broke the story. The proposal was panned by Democrats, who Trump will need to pass anything.

“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,” Evan Hollander, communications director for the House Appropriations Committee, told Oilprice.com “No matter how many oil billionaires lose their shirts and call President Trump, House Democrats will stay focused on the real needs of the American people.”

Instead, he said the Democratic side wants any economic stimulus should focus on things like paid sick leave, enhanced unemployment insurance, food security, free coronavirus testing and affordable treatment. Not rescue packages for shale drillers.

But, perhaps more surprisingly, the proposed shale bailout was also met with skepticism from traditional allies of the oil and gas industry. The head of the American Petroleum Institute, the oil industry’s most powerful lobby group, shot down the idea. “We believe we shouldn’t be reacting to one day of a market downturn,” API CEO Mike Sommers said, according to the Washington Examiner.

Anne Bradbury, CEO of AXPC, an industry group representing 25 independent oil and gas producers, told the Post: “We believe in the free market system and will advocate for policies that support a level playing field to address geopolitical manipulation of the market,” Bradbury said. Reading between the lines, one could interpret “support” for a “level playing field” as support for government assistance, although the language is obviously vague. Bradbury later said in a follow-up interview with the Post that “we are not seeking a bailout.”

On Wednesday, Secretary of Treasury Steve Mnuchin said that aid to struggling industries, including airlines, cruises and the oil industry should not be described as a “bailout.”

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“I want to be clear: This is not bailouts. We are not looking for bailouts,” he said. “But there may be specific industries that are highly impacted by travel and have issues with lending.”




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There was skepticism elsewhere. “It sounds like a bailout to me,” Paul Winfree of the Heritage Foundation, a conservative think tank, told the Post. “We are going to have to see specifics, but when you are dealing with special treatment given to one industry or sector of the economy, that is, almost by definition, a bailout.”

Meanwhile, Bloomberg reports that oil lobbyists are pushing the Trump administration to buy up oil for the strategic oil reserve (SPR), in order to mop up some of the excess supply on the market. Bloomberg reported that the administration is also considering lowering royalty rates for drillers on federal land. Already, many in Congress on both sides of the aisle consider the royalty rates too low.

But help for the shale industry will be difficult. Even an anonymous “senior administration official” told the Post that political blowback might scuttle the idea.

This article was originally published on Oilprice.com