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Senate drops $3B oil reserve funding from final coronavirus bill, senator says

The U.S. Senate's $2 trillion deal to respond to the coronavirus outbreak does not include $3 billion to fill up the nation's oil reserve, according to a letter from Senate Minority Leader Chuck Schumer to his colleagues.

The Trump administration requested $3 billion from Congress to purchase 77 million barrels of domestically produced crude oil to fill up the Strategic Petroleum Reserve, or SPR, which serves as the nation's emergency stash of oil. A version of the coronavirus bill from Senate Republicans included the funding, but Democrats said they have since removed that provision.

Schumer, D-N.Y., wrote in a March 25 letter to his colleagues that Democrats had "eliminated $3 billion bailout for big oil" from the final bill. This funding could be included in future legislation.

In requesting the funding, the Trump administration indicated it wants to take advantage of historically low oil prices while sending a strong economic signal to the industry, said U.S. Energy Secretary Dan Brouillette on a March 19 call with reporters. The U.S. Department of Energy recently announced a solicitation to purchase an initial 30 million barrels of U.S. crude oil.

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"Corporations often buy back their stock, and what that does is it signals to other investors that they have extreme confidence in their operations," Brouillette said. "That's what we're doing here as well."

Some also saw the reserve funding as a way to prop up small and midsize companies struggling in the low-price environment brought on by decreased global demand amid the coronavirus outbreak coupled with a price war between Russia and Saudi Arabia.

However, the industry noted that it did not ask for such assistance. The reserve was created to ensure a reliable energy supply during national emergencies, said Frank Macchiarola, senior vice president of policy, economics and regulatory affairs with the American Petroleum Institute.

"We appreciate DOE's effort to be responsible stewards of the SPR, however, we did not advocate for these purchases," Macchiarola said.

Omitting the funding for the oil sector from the bill "is likely to dent confidence in future support for the traditional energy industry," Height Securities LLC analysts wrote in a March 25 report. The analysts expect the Trump administration to find a way to add oil to the reserve, whether through emergency authority, repurposing other funds or later congressional actions.

"However, risk will remain high until a clear strategy is enumerated," the analysts wrote.

After several days of closed-door negotiations and political bickering on the Senate floor, leadership announced early March 25 that the chamber had struck a deal on the massive spending bill. The Senate convenes at noon and is expected to pass that legislation. It is not clear whether the U.S. House of Representatives will pass the bill or offer its own version.