Wall Street and some top oil and gas lobbyists expect a fossil fuel bailout in the next coronavirus stimulus package as part of a tradeoff in which renewable energy companies get tax credits, according to an internal Morgan Stanley report obtained by The Young Turks.
Climate-change activists criticized the potential deal, calling it “terrible.”
The report describes and links to audio of an April 22 conference call between Morgan Stanley and Akin Gump, one of the top lobbying firms in Washington. Akin Gump’s team consisted of a lawyer and four lobbyists, two of them former members of Congress, the other two former Republican staffers.
Akin Gump represents numerous oil and gas interests, lobbying-disclosure forms show. In the first quarter of this year, Akin Gump lobbyists received $100,000 from two of the biggest oil companies in the world: ExxonMobil and Chevron.
On the other end of the call were North American oil and gas analysts and a strategist from Morgan Stanley. The $80 billion investment bank has billions invested in fossil fuels and was the top broker of oil industry mergers and acquisitions in 2018 — $49 billion worth.
During the call, Akin Gump lobbyists laid out what reads like a behind-the-scenes game plan for the fossil fuel industry to pursue in Congress. Morgan Stanley’s internal report summarized a number of paths for “potential…financial support for the [fossil fuel] industry,” referring to “a likelihood” that Congress would authorize a bailout in the form of purchasing oil for the government’s Strategic Petroleum Reserve (SPR).
With the Senate back in session, and the House discussing how to resume its legislative work, members in both chambers are already debating billions of dollars of spending in the next stimulus plan, which has come to be known as 4.0. Any bailout would ostensibly be to save jobs, but as TYT previously reported, much of the industry had been focused on reducing headcount even before the pandemic.
One Akin Gump lobbyist explained why the fossil fuel industry failed to get a bailout in the CARES Act coronavirus stimulus package. “It fell apart because there was not a companion benefit for the renewable space of a similar scale,” said Akin Gump Senior Advisor Ryan Thompson, a former aide to Sen. Jim Inhofe (R-OK).
The report says, “Today we hosted a call with members of the law firm Akin, Gump to discuss government support for the US Energy industry in the midst of low prices and Covid-19 demand headwinds. Federal action has been limited thus far, and may continue to be challenged due to lack of bipartisan support.”
Former Sen. Joe Donnelly (D-IN), now an Akin Gump partner, said on the call, “For the oil and gas industry to benefit, it is likely that there’ll be a request, requirement that there be a significant renewables package in there as well.” Reaction was frank from Jamie Henn spokesperson for Stop the Money Pipeline Coalition.
“This is clear evidence of the unholy marriage between big oil and big finance. This is why it’s so important for Congress to keep a close eye on Wall Street to make sure that the billions of dollars that should be going to the American people are not getting sucked up by big oil companies.”
The private report, sent to high-asset clients, was titled, “How Might the White House & Congress Support the Energy Sector?” Akin Gump and Morgan Stanley did not dispute its authenticity or respond to TYT’s requests for comment.
The report describes the unfavorable situation for oil and gas companies and says that no money is expected from the next stimulus package. But the lobbyists see some possible tactics. An oil bailout, it says, “could be coupled with renewables tax credit extensions, while regulatory support could be in the form of SPR purchases, relaxation in regulations, and diplomatic support from negotiations with other oil producing countries.”
In other words, quid pro quo bartering.
Akin Gump Senior Consultant Lamar Smith, former Republican congressman from Texas, said, “I am hopeful in the 4.0…there will be some provisions in there that will be helpful to the energy industry. One: There may be more money for storage, I think specifically there’s gonna be a big effort made to get loans to at least mid-size energy companies that are not necessarily qualifying for loans right now.”
The report says that the Akin Gump “panel saw action regarding the SPR as the most immediate and likely solution.” The fossil fuel industry will likely ask Congress to lease out space in the SPR because the oil glut and low demand means just storing oil has become a huge problem for the industry. Morgan Stanley predicted in the discussion that commercial oil storage space will run out in mid-May and all storage space, including the SPR, will run out in July.
President Trump has said the US would buy oil for the SPR, but Democrats blocked that and he opted for storage instead. But that too has stalled.
Lobbyists also anticipate Trump cutting more oil and gas regulations. Some oil billionaires like Harold Hamm have requested tariffs on foreign oil to raise the price of oil here. All this and the only offer to Democrats and environmentalists would be to give back tax credits for renewable energy companies that were ended by the Trump administration.
Tyson Slocum, an energy specialist at the advocacy group Public Citizen called this, “A terrible deal for taxpayers and the climate …The renewable energy industry is less reliant on tax policy for market deployment and the public should not [bail out] the failed business models of the oil and gas sector ” This insider report elaborates on what Republicans might agree to in order to gain Democratic support for an oil bailout.
“Options for clean energy support include tax credits for wind and solar and backing for CCS (“Carbon Capture and Storage”). Carbon taxation may be more challenging to achieve necessary levels of support.”
The report gets blunt on which party will help the oil industry, noting, “November elections are key to future legislative action. In a divided government (a Democratic House and a Republican Senate), the prospects for significant legislation is more limited. In the event of the legislature and the Presidency being held by the same party, there could be more significant legislation – with energy industry support more likely under a Republican majority and renewables support more likely under a Democratic majority.” Translation: a Republican president and Congress will help fossil fuel companies and Democrats overall will not.
Morgan Stanley’s report addressed other federal help fossil fuel may get. “Under The Main Street Lending Program,” the report says, “while the Fed has not yet finalized its guidance, the Department of Energy (DOE) is asking for an increased lending limit, currently at $150mm, to provide further relief to oil and gas companies.”
Morgan Stanley analysts also said that there is bipartisan support for congress to purchase $3 billion of oil for the Strategic Petroleum Reserve. They also suggested tax credits for renewables would be a good compromise. They concluded that a bill from Sen. Lisa Murkowski (R-AK), the American Energy Innovation Act, “…which contains 50 bipartisan objectives, including significant focus on renewables and carbon storage… in whole or in part, could be adopted.”
Thanu Yakupitiyage, head of U.S. communications for the environmental activist organization 350.org, was not surprised by the revealing internal report, but called it “angering and frustrating.” She said, “While hundreds of thousands of people are impacted by the Coronavirus, oil executives are [focused on keeping] their paychecks fat….For us it’s pretty simple: no polluters should be bailed out by the stimulus.”
This story originally appeared in TYT and is republished here as part of Covering Climate Now, a global journalism collaboration strengthening coverage of the climate story.
Ti-Hua Chang is an award-winning investigative reporter who current writes for TYT.