Senators Requesting Big Oil Bailouts Received Millions in Big Oil Donations
Trump’s Move to Suspend Enforcement of Environmental Laws is a Lifeline to the Oil Industry
Inside Climate News:
The American Petroleum Institute sought the EPA’s help for companies hurt by COVID-19. One former EPA official called the suspension “an open license to pollute.”
By Marianne Lavelle
Mar 27, 2020
The Environmental Protection Agency, led by Andrew Wheeler, is suspending enforcement of environmental laws amid the coronavirus pandemic. Credit: Mark Wilson/Getty Images
The Trump administration’s unprecedented decision to suspend enforcement of U.S. environmental laws amid the COVID-19 crisis throws a lifeline to the oil industry as it copes with the greatest threat to its business in a generation.
The decision, announced late Thursday by the Environmental Protection Agency, comes after a detailed call for help from the industry’s largest trade group, the American Petroleum Institute, five days earlier.
The EPA went further than meeting the oil industry’s request—announcing a blanket policy suspending enforcement and civil penalties for any regulated entity that can show COVID-19 was the cause of a failure to comply with the law. But it is clear that a primary beneficiary will be the oil industry, which sought suspension of its obligations under consent decrees over past air and water pollution violations at its refineries, deferral of requirements on handling of fracking wastewater and a pause in reporting its greenhouse gas emissions and other pollution.
On Friday afternoon, the EPA announced a separate action to relieve refineries of their legal obligation this year to produce “summer” blends of gasoline, designed to reduce smog-forming emissions.
Although the EPA sought to portray its suspension of enforcement activities as an action that would not pose a threat to human health or safety, experts are alarmed at the risks that the retreat poses, especially to the mostly poor and minority communities that have struggled with pollution from oil and gas operations in their midst.
“Air pollution leads to respiratory distress in downwind communities and respiratory distress in turn makes you more susceptible to the coronavirus,” said Betsy Southerland, a former EPA official who worked at the agency from 1984 to 2017.
|Table 2: Recent Oil and Gas Subsidies|
|Recent Subsidies||Estimated Value through 2015|
|Temporary 50% expensing for equipment used in the refining of liquid fuels||2,180,000,000|
|Amortization of all geological and geophysical expenditures over 7 years[i]||680,000,000|
|Natural gas distribution pipelines treated as 15-yr property||1,020,000,000|
|Natural gas gathering lines as 7-year property||16,000,000|
|Expensing of capital costs with respect to complying with EPA sulfur regulations||100,000,000|
|Exempt certain prepayments for natural gas from tax-exempt bond arbitrage rules||53,000,000|
|Determination of small refiner exception to percentage depletion deduction||160,000,000|
|Extension of suspension of taxable income limit for percentage depletion allowance||124,000,000|
|Sources: Joint Committee on Taxation, “Estimated Budget Effects of the Conference Agreement for Title XIII of H.R. 6, the ‘Energy Tax Incentives Act of 2005’”, July 2005; Staff of the Joint Committee on Taxation, “Estimated revenue effects of the conference agreement for the ‘Tax Increase Prevention and Reconciliation Act of 2005’”, http://www.house.gov/jct/x-18-06.pdf, May 2006; Staff of the Joint Committee on Taxation, “Estimated revenue effects of Title XV of H.R. 6, the ‘Clean Renewable Energy and Conservation Act of 2007’, as amended and passed by the Senate on December 13 2007”, http://www.house.gov/jct/x-117-07.pdf, December 2007; Staff of the Joint Committee on Taxation, “Estimated Budget Effects of the Tax Provisions Contained in an Amendment in the Nature of a Substitute to H.R. 1424, Scheduled for Consideration on the Senate Floor on October 1, 2008”, October 2008.|
The agency’s enforcement suspension demonstrates that as the oil industry faces an historic challenge—plummeting global demand that is driving it to a major shut-down of production—the Trump administration is positioning itself to sustain the business and assist in a rapid return to the fossil fuel status quo.
“This is an open license to pollute,” said Gina McCarthy, president and CEO of the Natural Resources Defense Council, who served as administrator of the EPA during the Obama administration. “The administration should be giving its all toward making our country healthier right now. Instead it is taking advantage of an unprecedented public health crisis to do favors for polluters that threaten public health.”
Judith Enck, who served as an EPA regional administrator from 2008 to 2017, calls the rules waiver “irresponsible” and fears that it will give the oil and gas industry carte blanche to pollute with little EPA accountability.
“This is a get out of jail free card, and don’t think that the industry won’t play it to their fullest advantage,” she said.
An API spokesman said that the group “welcomed” EPA’s action, stressing that the industry is “committed to prioritizing safe and reliable operations and is complying with requirements.”
“Unfortunately, in some locations there may be limited personnel capacity to manage the full scope of the current regulatory requirements due to social distancing, contractor availability, and other COVID-19 impacts,” the spokesman said. “Temporary relief from these requirements will allow operators and suppliers to prioritize their resources on those critical activities to enable the continued production of fuels and products.”
The Worst Industry Crisis Since the 1973 Arab Oil Embargo
The oil industry’s call for relief came amid what many analysts see as its worst crisis since the upheaval of the Arab oil embargo in 1973. Although in its request for help, API invoked the COVID-19 pandemic, the industry’s woes escalated sharply with Saudi Arabia’s March 7 announcement that it would begin increasing production, drawing on its prodigious spare capacity. The move caused oil prices to crash to less than half of what they were at the start of the year.
The point was to squeeze rival producer Russia, and by extension, frackers in the United States who had been stealing Saudi Arabia’s market share. The rating agency Moody’s expects a sharp increase in bankruptcies among U.S. frackers when the “staggering” amount of debt they used to finance their operations comes due.
On top of that pressure, stay-at-home orders across much of the country to slow the spread of the coronavirus have caused demand for oil to plummet. The oil consulting firm IHS Markit said that production will need to be shut down because the market is on track to produce far more oil than there is storage available to hold. The demand for gasoline in the United States could fall by more than 50 percent, an impact much greater than that of the 2008 recession.
Some oil and gas companies and their allies have sought massive federal government intervention. Some members of Congress and oil executives had reportedly called for direct financial support for the industry, perhaps through loans or trade actions against Saudi Arabia or Russia for boosting output.
Last week, a group of lawmakers called on the Trump administration to temporarily lower royalty rates for oil and gas extracted on public lands. Texas considered capping the state’s oil output to try to boost prices and Sen. Kevin Cramer (R-N.D.) asked the administration to place an embargo on oil from Russia, Saudi Arabia and other oil producing nations. But API, representing the largest industry companies, has opposed trade sanctions or production quotas.
The EPA announced its plan to suspend enforcement of environmental laws after Congress passed a stimulus package that did not include funding to fill the Strategic Petroleum Reserve or other direct aid to the industry.
EPA Administrator Andrew Wheeler, a former coal lobbyist, said the policy would not apply to criminal violations of the law. He said the agency “expects regulated facilities to comply with regulatory requirements, where reasonably practicable.”
“This temporary policy is designed to provide enforcement discretion under the current, extraordinary conditions, while ensuring facility operations continue to protect human health and the environment,” Wheeler said. He offered no projected timeline for lifting the policy.
It’s unclear whether the administration’s easing of environmental laws will provide significant financial relief for the oil industry. Most experts view a fall in U.S. oil production as now inevitable. Rystad Energy projected that U.S. output will decline this year as companies slash spending by up to $100 billion. It said oil producers may drill only about two-thirds as many wells as planned for the year.
The Public’s Exposure to Pollution Could Increase
Numerous former EPA officials from the Obama administration said the agency’s unprecedented enforcement suspension was not necessary, because the EPA always has discretion to waive penalties in cases of hardship.
“It can be appropriate to do so, provided [it’s] some narrowly constrained relief but imposing enforceable conditions that assure the public remains protected,” said Cynthia Giles, who served as head of EPA’s enforcement office during the Obama administration. “That’s not what they’ve done here. This is a nationwide moratorium on enforcing the environmental laws, and it does not contain the kinds of protections that are needed to ensure that there’s not unlawful air and water pollution and there’s not a collapse in monitoring.”
She added that the EPA’s action was “wildly over broad.”
“I am not aware of any instance when EPA ever relinquished this fundamental authority as it does in this memo,” Giles said.
Enck, who served as EPA regional administrator for New Jersey and New York, said officials dealt with crisis conditions during Hurricane Sandy in 2012 without suspending rules protecting the public.
In that case, requests for waivers were assessed individually, said Enck, now a visiting professor and senior fellow at Bennington College in Vermont.
“I wanted to hear from the lawyers and the scientists,” before we made any decisions,” Enck said. “Our first responsibility was to the public, not the industry to make the right decisions.”
Allowing a company to postpone the repair of equipment that leaks toxic gases into the atmosphere, as API has suggested, leaves the public exposed to those pollutants for longer periods of time, increases the risk of fire and explosion and is not just a paperwork concern, Giles and other former EPA officials and environmental organizations said in a letter of protest to the EPA.
Clean Air Act rules limiting hazardous air pollution, for example, require refineries to monitor benzene levels at their fence lines and to take corrective action whenever annual concentrations of this harmful pollutant exceed 9 micrograms per cubic meter.
Monitoring reports show that at least 10 refineries in Illinois, Louisiana, Mississippi, Pennsylvania, New Mexico and Texas exceeded this annual threshold in the fourth quarter of 2019, the environmental advocates said in their letter.
Pasadena Refining Systems in Texas reported that benzene levels along part of its boundary averaged 565 micrograms per cubic meter between Oct. 16 and Oct. 30 of 2019, or nearly six times the 10-hour exposure limit recommended by the National Institute of Occupational Safety and Health.
Rob Verchick, an environmental law professor at Loyola University and a deputy associate administrator for policy at the EPA during the Obama administration, said he would be particularly concerned about emergency releases from refineries and other petrochemical facilities during the regulatory suspension.
“These would affect poorer communities usually who are situated around facilities like this and those emergency releases are the kinds of things that send people to the hospital when they happen,” he said.
Verchick said emergency releases occur when pressure within a petrochemical plant builds to a dangerous level and the pressurized gases, which often include harmful pollutants, are released into the atmosphere. To avoid such releases, the plants could also shut down temporarily and wait for the pressure to subside. Such shutdowns, however, take time and carry a financial burden because of decreased productivity.
Verchick said the regulatory suspension could increase the frequency of emergency releases and decrease reporting of such releases to the agency and to surrounding residents.
For people who live in nearby communities, Verchick said, the EPA’s enforcement suspension would be “just open season on our population.”
Mustafa Ali, vice president of environmental justice, climate and community revitalization for the National Wildlife Federation and former head of the environmental justice program at the EPA, said tying the suspension to COVID-19 is “nonsensical.”
“We know that these are the communities where we have elevated levels of cancers and liver kidney, heart and lung diseases,” he said. “You’re going to put more pollution into these communities, then you’re also going to create more chronic health conditions which make you more susceptible to COVID-19.”
Ali added that in many instances, these are also medically underserved communities that will have a much more difficult time if their residents become infected.
David Uhlmann, director of the environmental law and policy program at the University of Michigan Law School, said it is important to remember that environmental laws rest on an honor system where companies are required to self-identify their pollution activities, self-monitor their compliance and self-report their violations. It might have been preferable to offer leniency on a case-by-case basis instead of a blanket waiver, he said, but the end result may not have been different.
“The Trump administration has such a deplorable record on environmental protection that the no-enforcement rule announced this week is immediately suspect,” he said. “But this policy may be less nefarious than the alarming environmental rollbacks that the Trump EPA continues to pursue, even as the nation is fighting the COVID pandemic.”
The Impact on Climate Change Could be Staggering
Whatever implications the enforcement suspension may have for the residents who live near refineries and other oil industry facilities, its impact on climate change could be staggering.
If an administration were in place that viewed action on the climate crisis as a priority, the slowdown in drilling could provide an opportunity to ease the economy into a clean energy transition that provides more stability for workers, analysts said.
“The fossil fuel industry is particularly capital-intensive,” said Gernot Wagner, an economist at New York University who is co-author of the book Climate Shock. “Installing solar panels on people’s roofs is famously labor-intensive. In a week when 3 million Americans have filed for unemployment, why not focus on actually helping those most affected by the crisis?”
Wagner was one of a group of academics who have called for Congress to address the COVID-19 crisis with a “green stimulus” package that addresses climate concerns at the same time it addresses the health and economic security of workers. The package Congress passed this week did not include any clean energy component, and the latest move by the Trump administration makes clear that is not part of its agenda.
“Loosening environmental restrictions is a particularly shortsighted way of attempting to stimulate economic activity,” said Wagner. “Doing so during a public health crisis magnifies the concerns.”
Sabrina Shankman contributed to this report.
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