Changes to a new lending program from the Federal Reserve has paved the way for the oil and gas industry to get government financing amid the pandemic.
The expanded criteria to qualify for the soon-to-be Main Street Lending Program follows requests from Sen. Ted CruzRafael (Ted) Edward CruzCruz to introduce bill blocking DOD help for studios that accommodate Chinese censors How the United States plans to make space exploration pay The Memo: Bully pulpit may be backfiring for Trump MORE (R-Texas) and an industry group for small and mid-sized oil producers who said financing was needed to save the industry from bankruptcy.
The guidelines released Thursday eased restrictions on borrowing for heavily indebted companies and also allows them to use the loans to refinance existing debts — a departure from the first set of criteria released by the board.
“Because of these restrictions, small- and medium-sized oil and gas companies, who desperately need liquidity because of massive demand disruption caused by COVID-19 and foreign oil aggressive overproduction and price discounts, are unable to access the short-term liquidity they need to avoid bankruptcy,” Cruz wrote in a letter to the Treasury Department and the Federal Resource Board last week.
The expanded program will benefit a number of industries.
Companies with 15,000 employees or $5 billion in annual revenue will now qualify, up from 10,000 employees and $2.5 billion in revenue. The minimum loan size ranges from $500,000 to $1 million — a move designed to make the program accessible to both small and medium-sized businesses.
But the potential for oil companies to benefit from the loan program has irked many Democrats, some of whom fought to ensure no coronavirus stimulus funds would go to fossil fuel companies. These efforts included blocking $3 billion in funds requested by the Trump administration in order to buy oil for the Strategic Petroleum Reserve.
Lawmakers on both sides of the aisle have since become avid correspondents with both Treasury and the board, penning multiple letters arguing both for and against assistance for oil companies as drop in demand and surge of supply has sent prices tanking.
“By hook or by crook, Big Oil is going to try to get a bailout while small businesses shutter,” Sen. Ed MarkeyEdward (Ed) John MarkeyHillicon Valley: Privacy hawks monitor contact tracing projects | Strike planned at Amazon, grocery delivery companies | Lyft cutting nearly 1K workers Pompeo renews calls for China to provide US access to Wuhan labs Democratic lawmakers, advocacy groups push for affordable internet access in next stimulus package MORE (D-Mass.) said in a statement following the new Main Street Lending Program guidelines.
“President TrumpDonald John TrumpTrump says China ‘will do anything they can’ to keep him from being reelected Teachers union blasts Trump administration for ‘bluster and lies,’ and for suggesting schools should ‘open soon’ Top Trump policy adviser Joe Grogan to leave post MORE’s fossil fuel cronies lobbied and are going to take money that was meant to help businesses survive the coronavirus pandemic in order to bail themselves out of $200 billion in existing debt. It is deplorable to spend good money after bad and waste taxpayer dollars on an industry that has been struggling for years due to bad business decisions….It’s unacceptable, unwarranted, and unjust, and we cannot let this stand.”
President Trump said Wednesday the White House is still considering a number of ideas to help the oil industry.
“Well we’re not gonna let our oil companies go and get in trouble. It’s not their fault that they got hit by 50 percent less volume in one day,” Trump said. “I think the oil industry is one of the top on the list.”