A day after US light crude futures took an unprecedented dive into negative territory, President Donald Trump promised to deliver federal relief to domestic oil and gas producers just like the US Congress had approved for airlines and a host of other industries as the pandemic wreaked havoc on the US economy.
"We will never let the great US Oil & Gas Industry down," Trump said April 21 on Twitter. "I have instructed the Secretary of Energy and Secretary of the Treasury to formulate a plan which will make funds available so that these very important companies and jobs will be secured long into the future!"
No direct aid has materialized yet, and analysts expect Democrats in Congress to block any further attempts, as they did when the Department of Energy (DOE) sought $3 billion to buy US crudes to fill the Strategic Petroleum Reserve (SPR).
But that doesn't mean the White House isn't finding ways to sweeten the outlook for the industry, whose workforce he wants to vote for him in November.
Perhaps the biggest aid to the sector was Trump's involvement in the March talks between Saudi Arabia and Russia to end their oil supply brinkmanship that was hammering oil prices already beset by freefalling demand. The OPEC+ leaders eventually agreed to cut oil supply by nearly 10 million b/d through at least June.
"We saved the energy industry," Trump boasted at a June 5 White House briefing, referring to the OPEC+ talks. "That would have been catastrophic to lose it, and now [oil prices are] up to almost $40/b. People would have said that's impossible, but we got Saudi Arabia, Russia and others to cut back very substantially."
Shortly after Trump promised to help the oil sector, the Federal Reserve expanded its "Main Street" lending program to allow small to mid-size oil and gas drillers to apply for government-backed loans, even if they are already heavily indebted.
DOE also opened up the SPR to oil companies to store 23 million barrels of their own supply in the government-owned caverns while domestic storage options are limited. Energy secretary Dan Brouillette said DOE may seek to negotiate additional rental contracts with oil producers.
SPR stocks had grown by 12.8 million barrels from April to 647.8 million barrels as of May 29, according to the Energy Information Administration data. With current authorized capacity of 714 million barrels, the stockpile has room for another 66.2 million barrels.
Push on infrastructure approvalsTrump has also sought to use emergency executive powers to waive long-standing environmental regulations in order to speed up federal approval of energy pipelines, mines, highways and other infrastructure.
Presidents have often used emergency powers to respond to natural disasters, but rolling back regulations to respond to an economic emergency could tread new legal ground.
The June 4 order directs the Environmental Protection Agency, Interior Department, Army Corps of Engineers and other agencies to report within 30 days projects that can be expedited through waivers and exemptions of regulations. It takes aim at National Environmental Policy Act (NEPA), Endangered Species Act, Clean Water Act and other bedrock US environmental rules.
Trump said the order builds on his administration's efforts to roll back regulations on industry.
"The need for continued progress in this streamlining effort is all the more acute now, due to the ongoing economic crisis," Trump said. "Unnecessary regulatory delays will deny our citizens opportunities for jobs and economic security, keeping millions of Americans out of work and hindering our economic recovery from the national emergency."
Trump has signed several executive orders in the past aimed at speeding up pipeline approvals, but major projects like TC Energy's Keystone XL heavy crude pipeline remain mired in court challenges.
The latest executive order is sure to draw lawsuits if projects get greenlighted as a result of it.
"It is far from clear that the president has the legal authority to do this," said Joel Mintz, a former EPA enforcement attorney and law professor at Nova Southeastern University College of Law.
NEPA "is a clear directive from Congress to federal agencies that the president cannot ignore or change unilaterally," Mintz added.
"This is also very bad public policy. Pipelines and other infrastructure can do great environmental harm. Their impact should be carefully examined, as NEPA requires, before they are allowed to go forward," he said.
These efforts by the Trump administration to support US energy producers underscore how the November presidential election is looming over all policy discussions.
Rapidan Energy Group projected that US onshore oil production would drop by 1 million b/d by 2023 if Democratic presidential candidate Joe Biden beats Trump in November's election, but the gap would shrink considerably under a weaker price/demand recovery scenario.
"Shale returns faster under Trump than Biden, but even Trump can't help shale in a weak macro environment," Rapidan said.
The Trump administration has rolled back regulations on the fossil fuel sector and taken credit for a surge in US oil production that stopped in February as the world locked down to prevent the spread of the coronavirus pandemic. Still, the Obama-era policy of ending restrictions on US crude exports is seen as the greatest driver of the US oil boom.
Biden has promised to ban new oil and natural gas permits on federal lands and waters, tighten methane emissions limits, use fuel economy targets to aim for 100% electrification in light-duty vehicles and move the US to net-zero carbon emissions no later than 2050. He has also promised to cancel TC Energy's permit to build the Keystone XL pipeline from Canada.
Energy issues are expected to play a key role in the November election in states like Pennsylvania and Colorado.
"The metaphor is not really a pendulum swing ... but more of a catapult launch towards a very different direction if the Biden campaign wins," Kevin Book, managing director of ClearView Energy, said on a recent Platts Capitol Crude podcast.
More than 2.2 million b/d of US oil production was shut in response to low prices and weak demand amid the pandemic, US Secretary of Energy Dan Brouillette said May 21.