1 00:00:01,720 --> 00:00:05,240 Speaker 1: Well, after a chaotic twenty four hours, this bill passed 2 00:00:05,280 --> 00:00:08,400 Speaker 1: the House in under a minute with a chorus of 3 00:00:08,480 --> 00:00:27,800 Speaker 1: voice votes supporting the two trillion dollar historic resc It 4 00:00:27,960 --> 00:00:31,960 Speaker 1: is Friday, March twenty seventh, twenty twenty, and the United 5 00:00:31,960 --> 00:00:36,199 Speaker 1: States Congress has just passed the largest stimulus bill in 6 00:00:36,240 --> 00:00:39,680 Speaker 1: its history. It keeps being reported as a quote unquote 7 00:00:39,680 --> 00:00:43,760 Speaker 1: two trillion dollar stimulus bill. Sounds like a lot of money, 8 00:00:43,840 --> 00:00:46,800 Speaker 1: but a fairly meaningless amount. We'll go to taxpayers. The 9 00:00:46,840 --> 00:00:51,839 Speaker 1: big winners here are corporations and big industry. Oil execs 10 00:00:51,960 --> 00:00:54,920 Speaker 1: have got to be clicking their damn heels right now. 11 00:00:55,080 --> 00:00:58,520 Speaker 1: We're going to explain why. In this episode, in season three, 12 00:00:58,560 --> 00:01:02,040 Speaker 1: we trace the creation of big Oil's big propaganda machine, 13 00:01:02,080 --> 00:01:04,880 Speaker 1: and now we have a perfect example of why they 14 00:01:04,920 --> 00:01:09,039 Speaker 1: spent so much effort and money and years building it. 15 00:01:09,360 --> 00:01:12,920 Speaker 1: Only an industry that has convinced both political leaders and 16 00:01:12,959 --> 00:01:16,040 Speaker 1: the public that it is an essential part of the economy, 17 00:01:16,319 --> 00:01:20,120 Speaker 1: national security, and really what it means to be American 18 00:01:20,440 --> 00:01:23,760 Speaker 1: could get away with what big oil is doing right now. 19 00:01:25,080 --> 00:01:36,440 Speaker 1: Welcome back to Drill. I'm Ami Westerwald. There are three 20 00:01:36,800 --> 00:01:39,039 Speaker 1: key things to know about what was happening with the 21 00:01:39,080 --> 00:01:44,440 Speaker 1: oil and gas industry. Long before the coronavirus pandemic hit first, 22 00:01:45,080 --> 00:01:48,720 Speaker 1: shale gas companies, also known as fracking companies, had racked 23 00:01:48,800 --> 00:01:51,720 Speaker 1: up tens of billions of dollars of debt, and those 24 00:01:51,760 --> 00:01:55,760 Speaker 1: loans are all coming due soon, somewhere between twenty twenty 25 00:01:55,800 --> 00:01:59,560 Speaker 1: and twenty twenty seven. That's a huge problem for an 26 00:01:59,600 --> 00:02:04,840 Speaker 1: industry that's never turned a profit, never turned a profit. 27 00:02:05,760 --> 00:02:07,960 Speaker 1: More on that in a minute. The second thing to 28 00:02:08,000 --> 00:02:10,840 Speaker 1: know is that oil and gas companies of all kinds 29 00:02:10,960 --> 00:02:15,560 Speaker 1: have been stacking up debt around what's called asset retirement obligations. 30 00:02:15,960 --> 00:02:17,960 Speaker 1: When a company gets a permit to drill for oil 31 00:02:18,000 --> 00:02:20,959 Speaker 1: or gas, they need to take on these obligations, basically 32 00:02:21,000 --> 00:02:23,960 Speaker 1: agreeing to cap wells and clean up drill sites once 33 00:02:24,000 --> 00:02:27,079 Speaker 1: they're done using them. But no one's enforcing this. It's 34 00:02:27,120 --> 00:02:29,320 Speaker 1: really easy for companies to say, you know what, we're 35 00:02:29,360 --> 00:02:31,399 Speaker 1: not sure we're done with that. Well, we might come 36 00:02:31,440 --> 00:02:33,520 Speaker 1: back to it if the price of oil increases, so 37 00:02:33,639 --> 00:02:37,120 Speaker 1: it's not technically retired. They've all been doing this with 38 00:02:37,240 --> 00:02:40,519 Speaker 1: thousands of wells for years, so at this point they've 39 00:02:40,560 --> 00:02:43,920 Speaker 1: stacked up billions of dollars worth of cleanup costs on 40 00:02:44,040 --> 00:02:48,639 Speaker 1: their ledgers, and third, prices in the industry have been 41 00:02:48,680 --> 00:02:53,320 Speaker 1: going down since about twenty sixteen. That's because demand has 42 00:02:53,360 --> 00:02:56,680 Speaker 1: been decreasing. So despite all those things the oil industry 43 00:02:56,680 --> 00:03:00,240 Speaker 1: tells us about how they're just fulfilling a demand, not so. 44 00:03:01,000 --> 00:03:04,320 Speaker 1: The industry's entire business model is built around the idea 45 00:03:04,400 --> 00:03:07,200 Speaker 1: of one hundred dollars a barrel oil. The price has 46 00:03:07,280 --> 00:03:11,280 Speaker 1: been between fifty and seventy dollars since about twenty sixteen, 47 00:03:11,639 --> 00:03:14,160 Speaker 1: and then this recent price war hit, which we're going 48 00:03:14,200 --> 00:03:16,000 Speaker 1: to talk about in a minute. Now, it's all the 49 00:03:16,000 --> 00:03:18,480 Speaker 1: way down at about twenty five. All of this stuff 50 00:03:18,560 --> 00:03:22,200 Speaker 1: was causing real financial trouble for the industry before the 51 00:03:22,200 --> 00:03:25,960 Speaker 1: coronavirus pandemic sent to Man shooting downward. That decreased demand 52 00:03:26,040 --> 00:03:28,760 Speaker 1: has exacerbated all of this, of course, but the idea 53 00:03:28,800 --> 00:03:32,519 Speaker 1: that they need a bailout because of coronavirus is bullshit. 54 00:03:39,520 --> 00:03:42,680 Speaker 2: The fracking industry is cash negative right now. 55 00:03:43,320 --> 00:03:46,960 Speaker 3: The fracking industry has not produced a return on capital 56 00:03:47,040 --> 00:03:49,520 Speaker 3: in excess of the cost of capital since its inception. 57 00:03:49,840 --> 00:03:52,520 Speaker 4: This is an industry that has never succeeded in producing 58 00:03:52,640 --> 00:03:53,360 Speaker 4: pre cash flow. 59 00:03:53,560 --> 00:03:57,280 Speaker 1: Never Okay, first let's talk about the absolute ponzi scheme 60 00:03:57,320 --> 00:04:00,560 Speaker 1: that is and always has been, the fracking industry. 61 00:04:01,080 --> 00:04:07,040 Speaker 4: These companies spend more cash than they actually produce. That 62 00:04:07,240 --> 00:04:09,200 Speaker 4: is the negative free cash flow. 63 00:04:09,640 --> 00:04:13,280 Speaker 1: That's Clark Williams Dairy. He's an energy finance analyst with 64 00:04:13,320 --> 00:04:17,640 Speaker 1: the Institute for Energy Economics and Financial Analysis who's spent 65 00:04:17,720 --> 00:04:21,640 Speaker 1: twenty years researching energy finance. In an early stage business 66 00:04:21,720 --> 00:04:24,640 Speaker 1: like an Internet startup, for example, spending more money than 67 00:04:24,680 --> 00:04:27,200 Speaker 1: you make is pretty common. It's not that weird, but 68 00:04:27,279 --> 00:04:29,880 Speaker 1: it usually doesn't last for more than ten years. And 69 00:04:29,920 --> 00:04:32,039 Speaker 1: that's what's happened in the fracking industry. 70 00:04:32,520 --> 00:04:35,240 Speaker 4: This is an industry that has never succeeded in producing 71 00:04:35,320 --> 00:04:38,719 Speaker 4: pre cash flow. Never individual companies may produce it from 72 00:04:38,720 --> 00:04:40,720 Speaker 4: time to time. There are a few companies that have 73 00:04:40,760 --> 00:04:43,640 Speaker 4: sort of standouts. They produce modest, pretty cash flows, but 74 00:04:43,720 --> 00:04:46,919 Speaker 4: for the most part, the fracking sector is unable to 75 00:04:46,960 --> 00:04:48,839 Speaker 4: produce cash. 76 00:04:48,920 --> 00:04:52,200 Speaker 1: So on its surface, it makes no financial sense to 77 00:04:52,320 --> 00:04:55,720 Speaker 1: bail out the fracking industry. Why prop up an industry 78 00:04:55,760 --> 00:04:59,000 Speaker 1: that's never turned a profit and that creates an endless 79 00:04:59,000 --> 00:05:03,799 Speaker 1: amount of costly environmental problems from pipeline leaks to climate change. 80 00:05:04,760 --> 00:05:07,040 Speaker 1: Because it's not just about the economics. 81 00:05:07,600 --> 00:05:10,520 Speaker 2: Economics aren't going to keep fossil fuels in the ground. 82 00:05:11,160 --> 00:05:12,560 Speaker 2: Only politics can do that. 83 00:05:13,160 --> 00:05:16,520 Speaker 1: This is Lucas Ross, a senior policy analyst with Friends 84 00:05:16,560 --> 00:05:17,120 Speaker 1: of the Earth. 85 00:05:17,720 --> 00:05:22,039 Speaker 2: It is very dangerous for climate activists to assume that 86 00:05:22,320 --> 00:05:25,760 Speaker 2: just because the fossil fuel industry is financially hurting, it 87 00:05:25,800 --> 00:05:30,039 Speaker 2: is in the process of diet. It badly misunderstands the 88 00:05:30,080 --> 00:05:34,440 Speaker 2: political realities that have kept this industry afloat for the 89 00:05:34,560 --> 00:05:35,400 Speaker 2: last century. 90 00:05:35,720 --> 00:05:38,920 Speaker 1: If you want to better understand those realities, go back 91 00:05:38,960 --> 00:05:41,640 Speaker 1: and listen to season three. But there's an important bit 92 00:05:41,680 --> 00:05:44,920 Speaker 1: of recent politics to understand in the context of what's 93 00:05:44,960 --> 00:05:48,920 Speaker 1: happening today too. Greg Rogers, a legal and accounting expert 94 00:05:49,000 --> 00:05:52,400 Speaker 1: who's been researching environmental liabilities in the fossil fuel sector 95 00:05:52,440 --> 00:05:54,640 Speaker 1: for about twenty years, is going to walk us through 96 00:05:54,680 --> 00:05:57,479 Speaker 1: that price war I mentioned earlier. You might have heard 97 00:05:57,480 --> 00:06:00,919 Speaker 1: it mentioned in the news lately, the Russia Saudi oil 98 00:06:01,080 --> 00:06:01,640 Speaker 1: price war. 99 00:06:02,000 --> 00:06:04,960 Speaker 3: Okay, So what I think is behind the price war 100 00:06:05,240 --> 00:06:11,560 Speaker 3: is that the US is stealing market share from the 101 00:06:11,600 --> 00:06:18,120 Speaker 3: Saudis and the Russians in the form of type shale oil, 102 00:06:18,200 --> 00:06:19,719 Speaker 3: or title oil as they call it. 103 00:06:21,240 --> 00:06:23,760 Speaker 1: Okay, So tight oil is a type of crude oil 104 00:06:23,800 --> 00:06:26,800 Speaker 1: that fracking companies realized they could also get from shale 105 00:06:26,880 --> 00:06:29,400 Speaker 1: rock a few years back. They started out just drilling 106 00:06:29,440 --> 00:06:32,080 Speaker 1: for natural gas. Then they discovered this tight oil, and 107 00:06:32,120 --> 00:06:34,320 Speaker 1: that's what really put them on track to compete with 108 00:06:34,360 --> 00:06:38,320 Speaker 1: the big global oil producers Russia and Saudi Arabia. This 109 00:06:38,360 --> 00:06:41,760 Speaker 1: little tidbit is important to understanding why the government and 110 00:06:41,839 --> 00:06:44,960 Speaker 1: various banks would continue to fund an industry that doesn't 111 00:06:45,000 --> 00:06:49,240 Speaker 1: generate cash. Remember this from Trump's twenty seventeen State of 112 00:06:49,279 --> 00:06:50,200 Speaker 1: the Union address. 113 00:06:50,520 --> 00:06:55,640 Speaker 5: We have unleashed a revolution in American energy. The United 114 00:06:55,760 --> 00:06:59,719 Speaker 5: States is now the number one producer of oil and 115 00:07:00,040 --> 00:07:02,920 Speaker 5: natural gas anywhere in the world. 116 00:07:06,000 --> 00:07:08,640 Speaker 1: He's made similar statements in every State of the Union, 117 00:07:08,720 --> 00:07:12,679 Speaker 1: since there are political reasons for continuing to produce oil 118 00:07:12,720 --> 00:07:15,239 Speaker 1: and gas even when there's a glut and the prices 119 00:07:15,280 --> 00:07:18,680 Speaker 1: are low and the economics just don't work. Here's Greg 120 00:07:18,760 --> 00:07:19,400 Speaker 1: Rogers again. 121 00:07:19,600 --> 00:07:22,200 Speaker 3: The US has gone from being a large importer of 122 00:07:22,280 --> 00:07:26,280 Speaker 3: oil from largely from Saudi Arabia, to being the number 123 00:07:26,280 --> 00:07:28,880 Speaker 3: one producer of oil and gas in the world and 124 00:07:28,920 --> 00:07:33,080 Speaker 3: actually exploiting oiled to foreign markets. So we're a competitor. 125 00:07:33,400 --> 00:07:36,640 Speaker 1: There's a climate change wrinkle here too. Basically, no one 126 00:07:36,640 --> 00:07:38,960 Speaker 1: wants to be the guy left holding a bunch of 127 00:07:39,120 --> 00:07:42,280 Speaker 1: valueless oil barrels when the music stops. 128 00:07:42,880 --> 00:07:45,400 Speaker 3: I think they would say that if climate change in 129 00:07:45,440 --> 00:07:48,880 Speaker 3: the energy transition means that oil is to be left 130 00:07:48,880 --> 00:07:51,080 Speaker 3: in the ground, it's not going to be our oil. 131 00:07:51,280 --> 00:07:54,560 Speaker 3: It goes unburned. That's what the Russians in the Saudis 132 00:07:54,560 --> 00:07:55,040 Speaker 3: would say. 133 00:07:55,360 --> 00:07:55,800 Speaker 1: But if you. 134 00:07:55,880 --> 00:08:00,200 Speaker 3: Accept that the world is eventually going to heal to 135 00:08:00,560 --> 00:08:03,520 Speaker 3: the scientific warnings that we can only put so much 136 00:08:03,560 --> 00:08:07,360 Speaker 3: more carbon dioxide into the atmosphere without incurring the worst 137 00:08:07,520 --> 00:08:11,760 Speaker 3: effects of climate change, then that means only so much 138 00:08:12,480 --> 00:08:16,120 Speaker 3: oil is going to be pulled from the ground and burned. 139 00:08:16,800 --> 00:08:21,240 Speaker 3: And the Saudis and the Russians have enough oil to 140 00:08:21,320 --> 00:08:25,600 Speaker 3: supply the world's needs under that scenario just between themselves, 141 00:08:26,520 --> 00:08:29,360 Speaker 3: so they have a lot of reserves. And they're also 142 00:08:29,920 --> 00:08:34,760 Speaker 3: they're the lowest cost suppliers in the world. So if 143 00:08:34,800 --> 00:08:38,240 Speaker 3: you start to think that there's only so much more 144 00:08:38,280 --> 00:08:43,160 Speaker 3: oil that's going to be burned, and logically the lowest 145 00:08:43,200 --> 00:08:47,960 Speaker 3: cost suppliers should be the ones that provide the oil 146 00:08:48,040 --> 00:08:51,840 Speaker 3: that the world is going to consume, it would be 147 00:08:52,000 --> 00:08:56,000 Speaker 3: Russia and Saudi Arabia, so why would they want the 148 00:08:56,080 --> 00:09:01,960 Speaker 3: Americans essentially taking you know, their market share. 149 00:09:02,920 --> 00:09:05,800 Speaker 1: Which brings us to the coronavirus and the price war. 150 00:09:06,080 --> 00:09:09,240 Speaker 1: As soon as the virus started making headlines, Russia began 151 00:09:09,360 --> 00:09:13,960 Speaker 1: pushing back on OPEX production limits. OPEK brings the thirteen 152 00:09:14,000 --> 00:09:17,880 Speaker 1: oil producing countries together to set production and pricing, which 153 00:09:17,960 --> 00:09:21,160 Speaker 1: creates stability in the world oil market. On March sixth 154 00:09:21,200 --> 00:09:25,280 Speaker 1: Russia pulled out of OPEX production agreement, prompting Saudi Arabia 155 00:09:25,360 --> 00:09:28,760 Speaker 1: to set super low prices on its oil. Russia countered 156 00:09:28,800 --> 00:09:31,679 Speaker 1: by upping its production even more, and between that and 157 00:09:31,760 --> 00:09:35,679 Speaker 1: the pandemic driving demand down, oil prices took an epic fall. 158 00:09:35,800 --> 00:09:38,800 Speaker 1: They're now under twenty five dollars a barrel, which isn't 159 00:09:38,840 --> 00:09:42,640 Speaker 1: great for Saudi Arabia or Russia, but their production costs 160 00:09:42,640 --> 00:09:45,440 Speaker 1: are way way lower than the US. For American oil 161 00:09:45,480 --> 00:09:48,960 Speaker 1: and gas companies, these prices are catastrophic, So now all 162 00:09:48,960 --> 00:09:52,199 Speaker 1: of a sudden, politicians can say, we're not bailing out 163 00:09:52,200 --> 00:09:56,160 Speaker 1: of feeling industry, We're saving American companies from attacks from 164 00:09:56,160 --> 00:09:57,599 Speaker 1: the Russians and the Saudis. 165 00:09:58,000 --> 00:10:02,559 Speaker 3: I would imagine that would be a lot of political 166 00:10:02,960 --> 00:10:08,599 Speaker 3: pressure and uh and and some inclination by US politicians 167 00:10:08,640 --> 00:10:12,600 Speaker 3: to support the domestic coil and gas industry, and especially 168 00:10:12,640 --> 00:10:16,600 Speaker 3: when you tie that back into concerns about national security. 169 00:10:16,880 --> 00:10:20,920 Speaker 3: So I think the proposition that that the Saudis and 170 00:10:21,000 --> 00:10:24,319 Speaker 3: the and the Russians are going to provide the oil 171 00:10:24,520 --> 00:10:27,160 Speaker 3: energy needed by the world as we phase out this 172 00:10:27,320 --> 00:10:31,680 Speaker 3: industry is not very appealing to US politicians, and so 173 00:10:32,320 --> 00:10:35,480 Speaker 3: again reasons to bail out the industry, The question is 174 00:10:35,760 --> 00:10:39,400 Speaker 3: can they afford it? I mean that the cracking industry 175 00:10:39,800 --> 00:10:44,439 Speaker 3: has been you know, it has not produced a return 176 00:10:44,559 --> 00:10:47,920 Speaker 3: on capital and excessive the cost of capital since its inception. 177 00:11:02,840 --> 00:11:05,080 Speaker 1: Okay, that brings us to this other big issue I 178 00:11:05,160 --> 00:11:08,360 Speaker 1: mentioned up top, asset retirement obligations. 179 00:11:08,720 --> 00:11:14,600 Speaker 3: So asset retirement obligations are areas are an accountant's term 180 00:11:15,400 --> 00:11:19,839 Speaker 3: for legal obligations associated with the retirement of a long 181 00:11:19,880 --> 00:11:23,880 Speaker 3: lived asset. So we're talking about tangible assets. In this case, 182 00:11:23,920 --> 00:11:26,680 Speaker 3: we're talking about oil and gas wells. Plugging abandon the 183 00:11:26,760 --> 00:11:28,880 Speaker 3: costs right for the industry, none of that's being factored 184 00:11:28,880 --> 00:11:32,160 Speaker 3: in the industry. Wasn't cash flow positive before you accounted 185 00:11:32,160 --> 00:11:35,040 Speaker 3: for that it's probably been. I could probably count they 186 00:11:35,480 --> 00:11:39,480 Speaker 3: plugged horizontal fracking wells on my fingers and toes in 187 00:11:39,520 --> 00:11:41,960 Speaker 3: the United States since the industry started. 188 00:11:42,559 --> 00:11:46,480 Speaker 1: Unplugged wells can leak all sorts of chemicals and toxic fluids, 189 00:11:46,520 --> 00:11:49,880 Speaker 1: including oil or natural gas itself, into the water, air, 190 00:11:49,920 --> 00:11:54,679 Speaker 1: and soil. They're also a major source of fugitive methane emissions, 191 00:11:54,720 --> 00:11:58,480 Speaker 1: which contribute to climate change. The industry has been shirking 192 00:11:58,480 --> 00:12:02,120 Speaker 1: its duties on this front four years, creating a massive 193 00:12:02,360 --> 00:12:05,560 Speaker 1: financial and environmental disaster waiting to happen. 194 00:12:05,880 --> 00:12:09,880 Speaker 3: Specifically for oil and gas wells, every state in the 195 00:12:09,920 --> 00:12:13,959 Speaker 3: federal government requires that in order to get a permit 196 00:12:14,120 --> 00:12:17,359 Speaker 3: to drill an oil and gas well, that the operator 197 00:12:18,200 --> 00:12:25,240 Speaker 3: has to commit to properly decommissioning that well at the 198 00:12:25,240 --> 00:12:27,840 Speaker 3: individuical life, so at the point where they well is 199 00:12:27,840 --> 00:12:29,400 Speaker 3: no longer economic operate. 200 00:12:29,920 --> 00:12:33,080 Speaker 1: If companies did this pretty soon after they stopped using 201 00:12:33,120 --> 00:12:34,960 Speaker 1: a well, it wouldn't be that costly. 202 00:12:35,920 --> 00:12:38,520 Speaker 3: Sort of backup of the envelope estimate of the cost 203 00:12:38,640 --> 00:12:43,720 Speaker 3: to decommission and these assets would be roughly five to 204 00:12:43,760 --> 00:12:46,600 Speaker 3: six percent of the cost to create them. 205 00:12:46,920 --> 00:12:49,120 Speaker 1: But they don't do it right away. They put it off, 206 00:12:49,520 --> 00:12:50,720 Speaker 1: sometimes for decades. 207 00:12:51,120 --> 00:12:53,440 Speaker 3: The problem is, and why the numbers get so big, 208 00:12:54,240 --> 00:12:59,880 Speaker 3: is because oil companies, to the greatest extent they can, 209 00:13:01,000 --> 00:13:04,040 Speaker 3: want to defer those costs in others, they build up 210 00:13:04,120 --> 00:13:09,600 Speaker 3: bigger and bigger inventories of these asset retirement obligations. Rather 211 00:13:09,679 --> 00:13:13,560 Speaker 3: than properly plugging and abandoning wells as soon as they 212 00:13:13,600 --> 00:13:18,680 Speaker 3: become non economic, they let those well sit idle, sometimes 213 00:13:18,679 --> 00:13:23,440 Speaker 3: for decades. So we have very large inventories of debts 214 00:13:23,480 --> 00:13:24,440 Speaker 3: that have piled up. 215 00:13:25,679 --> 00:13:28,199 Speaker 4: Where is the money going to come from to clean 216 00:13:28,320 --> 00:13:31,199 Speaker 4: up after the oil and gas party is over? I mean, 217 00:13:31,320 --> 00:13:34,840 Speaker 4: there's already large segments of the oil and gas industry 218 00:13:35,080 --> 00:13:36,720 Speaker 4: that are functionally insolvent. 219 00:13:36,920 --> 00:13:40,640 Speaker 1: Clark Williams dry again. He's also concerned about the asset 220 00:13:40,720 --> 00:13:42,120 Speaker 1: retirement problem. 221 00:13:42,280 --> 00:13:45,760 Speaker 4: You know, how is that industry ever going to produce 222 00:13:45,880 --> 00:13:49,280 Speaker 4: enough money to pay for this massive amount of clean 223 00:13:49,360 --> 00:13:52,200 Speaker 4: that has to happen all across the oil patch. All 224 00:13:52,240 --> 00:13:54,200 Speaker 4: of those that wells have to get cleaned up, the 225 00:13:54,240 --> 00:13:58,000 Speaker 4: pipelines that few them, the underground storage tanks, above ground 226 00:13:58,000 --> 00:14:02,040 Speaker 4: storage tanks, any that are related to oil gas. Eventually, 227 00:14:02,080 --> 00:14:04,400 Speaker 4: somebody tell that somebody who had to pay for cleaning 228 00:14:04,440 --> 00:14:07,400 Speaker 4: that stuff up, and you know, the only death industry. 229 00:14:08,080 --> 00:14:11,320 Speaker 4: You know, if it were a robust and profitable industry, 230 00:14:11,800 --> 00:14:13,439 Speaker 4: you could say, maybe they had the money to clean 231 00:14:13,480 --> 00:14:15,880 Speaker 4: it up, think they'll pay care for someday. But what 232 00:14:15,880 --> 00:14:19,120 Speaker 4: we're seeing now is an industry that is financially collapsing. 233 00:14:19,200 --> 00:14:22,680 Speaker 4: It is unable to produce enough cash just to play 234 00:14:22,720 --> 00:14:25,840 Speaker 4: down as basic debts, let alone to pay for cleanup. 235 00:14:26,200 --> 00:14:28,840 Speaker 1: If they can't pay for it, states will be left 236 00:14:28,880 --> 00:14:31,200 Speaker 1: with that bill, and many of them won't be able 237 00:14:31,200 --> 00:14:33,880 Speaker 1: to afford cleanup either, which means the public could be 238 00:14:33,960 --> 00:14:35,800 Speaker 1: dealing with this mess for years. 239 00:14:36,160 --> 00:14:38,320 Speaker 4: I think it's high time for the state regulators to 240 00:14:38,440 --> 00:14:41,760 Speaker 4: realize that they had a looming financial crisis on their hand, 241 00:14:41,840 --> 00:14:43,560 Speaker 4: because they're the ones two of that have to pay 242 00:14:43,600 --> 00:14:44,160 Speaker 4: for cleanup. 243 00:14:44,480 --> 00:14:47,920 Speaker 1: A really good example of this is the California Resources Corporation, 244 00:14:48,320 --> 00:14:50,760 Speaker 1: which happens to own most of the oil wells in 245 00:14:50,800 --> 00:14:53,960 Speaker 1: the county. I grew up in Fintura County, the fastest 246 00:14:53,960 --> 00:14:57,360 Speaker 1: warming county in the lower forty eight. California Resources Corporation 247 00:14:57,720 --> 00:15:01,440 Speaker 1: was spun off from Occidental Petroleum back in twenty fourteen, 248 00:15:01,680 --> 00:15:04,960 Speaker 1: and according to some recent research from the ro Working Group. 249 00:15:05,200 --> 00:15:08,240 Speaker 1: It looks very much like Occidental spawn a whole bunch 250 00:15:08,240 --> 00:15:11,800 Speaker 1: of asset retirement obligations into a new company so it 251 00:15:11,840 --> 00:15:15,880 Speaker 1: doesn't have to account for them. Now California Resources Corporation 252 00:15:16,280 --> 00:15:19,280 Speaker 1: is staring down the barrel of bankruptcy, which would leave 253 00:15:19,320 --> 00:15:38,520 Speaker 1: California with billions of dollars in cleanup costs. The stimulus 254 00:15:38,560 --> 00:15:42,680 Speaker 1: announced today doesn't earmark anything specifically for the oil and 255 00:15:42,760 --> 00:15:45,920 Speaker 1: gas industry, but it kind of doesn't have to. The 256 00:15:45,920 --> 00:15:48,840 Speaker 1: Trump administration has been a big friend to big oil 257 00:15:48,920 --> 00:15:52,000 Speaker 1: all along, and one of the first things Treasury Secretary 258 00:15:52,040 --> 00:15:55,520 Speaker 1: Steve Minuchin talked about publicly with respect to the pandemic 259 00:15:55,560 --> 00:15:58,600 Speaker 1: and financial aid was supporting the fossil fuel industry. Here 260 00:15:58,640 --> 00:16:01,240 Speaker 1: he is on Fox Business in early March. 261 00:16:01,960 --> 00:16:04,520 Speaker 6: Now, as it relates to the oil markets, I mean, well, 262 00:16:04,600 --> 00:16:06,200 Speaker 6: let me let me just say this could not have 263 00:16:06,240 --> 00:16:08,840 Speaker 6: occurred at a worse time, That this has nothing to 264 00:16:08,880 --> 00:16:14,280 Speaker 6: do with the coronavirus whatsoever. So there there's no question 265 00:16:14,440 --> 00:16:19,600 Speaker 6: that there's both supply problem as well as the demand problem. 266 00:16:19,720 --> 00:16:21,840 Speaker 6: You know, I'm going to tell the President that my 267 00:16:21,960 --> 00:16:24,600 Speaker 6: recommendation is that he goes to Congress and asks for 268 00:16:24,720 --> 00:16:28,280 Speaker 6: a lot more money to fill the strategic reserve. At 269 00:16:28,920 --> 00:16:32,720 Speaker 6: twenty two dollars for WTI crewed, we should be filling 270 00:16:32,840 --> 00:16:36,480 Speaker 6: up the reserve for the next ten years. So you know, 271 00:16:36,600 --> 00:16:40,280 Speaker 6: we are energy intendent. Obviously at these prices, we're going 272 00:16:40,360 --> 00:16:43,800 Speaker 6: to have issues producing energy. So let's go out and 273 00:16:43,840 --> 00:16:45,880 Speaker 6: buy ten or twenty billion dollars of oil. 274 00:16:46,160 --> 00:16:49,120 Speaker 1: The American Petroleum Institute made it very clear to me 275 00:16:49,240 --> 00:16:52,520 Speaker 1: that they have not asked for any money. Instead, they 276 00:16:52,560 --> 00:16:56,560 Speaker 1: sent President Trumpe letter with their deregulatory wish list. First 277 00:16:56,560 --> 00:16:58,440 Speaker 1: on the list was a request to have oil and 278 00:16:58,480 --> 00:17:03,080 Speaker 1: gas sides designated as infrastructure. Here's Lucas Ross with Friends 279 00:17:03,080 --> 00:17:04,000 Speaker 1: of the Earth again. 280 00:17:04,320 --> 00:17:06,520 Speaker 2: As part of this stimulus bill, there is a five 281 00:17:06,600 --> 00:17:10,240 Speaker 2: hundred billion dollars slush fund. But within that slush fund 282 00:17:10,240 --> 00:17:14,240 Speaker 2: you actually have four separate buckets. Twenty five billion in 283 00:17:14,320 --> 00:17:19,440 Speaker 2: lending support or commercial airlines, four billions lending support for 284 00:17:19,600 --> 00:17:24,199 Speaker 2: aviation cargo carriers, and then you've got seventeen billion for 285 00:17:24,320 --> 00:17:28,399 Speaker 2: industries deemed essential to national security. Now, if you know 286 00:17:28,480 --> 00:17:31,600 Speaker 2: what that means, you're smarter than I am. It is 287 00:17:31,760 --> 00:17:37,119 Speaker 2: totally unclear what an industry national security is. There is 288 00:17:37,160 --> 00:17:39,800 Speaker 2: a broad understanding that this is likely a carve out 289 00:17:39,880 --> 00:17:44,400 Speaker 2: for Boeing and the aerospace sector has given how often 290 00:17:44,560 --> 00:17:50,000 Speaker 2: and how stubbornly the oil and gas industry has insisted 291 00:17:50,320 --> 00:17:53,160 Speaker 2: it is essential to national security. It would not shock 292 00:17:53,280 --> 00:17:55,680 Speaker 2: me at all if they tried to get a hold 293 00:17:55,760 --> 00:17:57,159 Speaker 2: of some of that seventeen billion. 294 00:17:57,400 --> 00:18:00,240 Speaker 1: They'll also have access to the larger pot of money, of. 295 00:18:00,160 --> 00:18:03,280 Speaker 2: Course, when you're looking at a four hundred and fifty 296 00:18:03,320 --> 00:18:06,520 Speaker 2: four billion dollars slush fund, the largest single pot of 297 00:18:06,600 --> 00:18:10,720 Speaker 2: money associated with the stimulus bill that big oil is 298 00:18:10,760 --> 00:18:13,880 Speaker 2: going to have clear access to. A lot of these 299 00:18:13,920 --> 00:18:18,159 Speaker 2: companies were hurting well before the coronavirus started, and a 300 00:18:18,160 --> 00:18:22,080 Speaker 2: fresh injection of subsidized credit from Trump's pal Steve Manus 301 00:18:22,720 --> 00:18:25,160 Speaker 2: is probably looking really entice it right now. 302 00:18:25,760 --> 00:18:29,959 Speaker 1: Most importantly, Secretary Manus will have full discretion over what 303 00:18:30,040 --> 00:18:33,480 Speaker 1: to do with these funds. The few guardrails that are 304 00:18:33,520 --> 00:18:36,160 Speaker 1: in place can be waived whenever he wants. 305 00:18:36,960 --> 00:18:42,000 Speaker 2: The discretion that Steve Mnus has in implementing the stimulus 306 00:18:42,400 --> 00:18:47,399 Speaker 2: is unprecedented. There are two main conditions associated with companies 307 00:18:47,520 --> 00:18:51,000 Speaker 2: receiving aid as part of this slush fund. The first 308 00:18:51,080 --> 00:18:54,040 Speaker 2: one is a ban on stock buybacks until a year 309 00:18:54,080 --> 00:18:57,840 Speaker 2: after the loan is satisfied. The second one is a 310 00:18:57,880 --> 00:19:02,000 Speaker 2: requirement to maintain a current workforce, or at least ninety 311 00:19:02,000 --> 00:19:06,239 Speaker 2: percent of it, until one year after the loan is satisfied. So, 312 00:19:06,400 --> 00:19:10,920 Speaker 2: in theory, there are controls in place that we keep 313 00:19:10,920 --> 00:19:14,280 Speaker 2: a company from taking a loan out from the federal 314 00:19:14,320 --> 00:19:19,159 Speaker 2: government and then just firing their entire workforce, or taking 315 00:19:19,200 --> 00:19:21,680 Speaker 2: the money and just plowing it right back into stop 316 00:19:21,760 --> 00:19:24,680 Speaker 2: buy backs to boost the price of their shares at 317 00:19:24,720 --> 00:19:28,040 Speaker 2: the same time. One of the most frightening things about 318 00:19:28,080 --> 00:19:32,480 Speaker 2: this stimulus bill is the broad authority it gives to 319 00:19:32,560 --> 00:19:37,200 Speaker 2: Secretary of MINUSI to waive those provisions. He is free 320 00:19:37,280 --> 00:19:40,600 Speaker 2: to do so if he determines it is in the 321 00:19:40,640 --> 00:19:43,359 Speaker 2: interest of the federal government to do so. The only 322 00:19:43,440 --> 00:19:47,560 Speaker 2: requirement associated with his using that waiver authority is that 323 00:19:47,600 --> 00:19:52,320 Speaker 2: he has to appear before Congress to explain himself. So conceivably, 324 00:19:52,400 --> 00:19:56,679 Speaker 2: we could be in a situation where Excellon gets a 325 00:19:56,720 --> 00:20:00,280 Speaker 2: fifty billion dollars loan and all Steve Manusian gets is 326 00:20:00,320 --> 00:20:01,240 Speaker 2: a bad news cycle. 327 00:20:01,840 --> 00:20:05,920 Speaker 1: So to recap, the federal government has prioritized helping industry 328 00:20:06,000 --> 00:20:10,120 Speaker 1: over helping the public. It's given a longtime oil industry 329 00:20:10,160 --> 00:20:13,679 Speaker 1: ally carte blanche and doling out funds and waving conditions 330 00:20:13,720 --> 00:20:16,760 Speaker 1: whenever he feels like it, and the industry has access 331 00:20:16,800 --> 00:20:19,840 Speaker 1: to close to five hundred billion dollars even though it 332 00:20:19,920 --> 00:20:24,000 Speaker 1: is financially unstable. We'll be facing an ongoing price war 333 00:20:24,760 --> 00:20:28,480 Speaker 1: and is offloading all of its environmental impacts onto taxpayers. 334 00:20:29,040 --> 00:20:45,879 Speaker 1: Ah the free market at work. That's it for this time. 335 00:20:46,280 --> 00:20:48,359 Speaker 1: I was going to take a break after season three, 336 00:20:48,480 --> 00:20:50,960 Speaker 1: but right now I think it's really critical to keep 337 00:20:51,000 --> 00:20:54,520 Speaker 1: reporting on climate accountability, so expect a lot of regular 338 00:20:54,600 --> 00:20:57,720 Speaker 1: updates in your feed. If you'd like to support this reporting, 339 00:20:57,840 --> 00:21:00,320 Speaker 1: please go to our Patreon page. It's link in the 340 00:21:00,359 --> 00:21:04,560 Speaker 1: show notes and it's patreon dot com slash drilled. Thanks 341 00:21:04,560 --> 00:21:23,280 Speaker 1: for listening, and we'll see you soon. Drilled is produced 342 00:21:23,280 --> 00:21:27,320 Speaker 1: and distributed by Critical Frequency. The show is reported, written, 343 00:21:27,400 --> 00:21:31,600 Speaker 1: and produced by me Amy westerveldt Our editorial advisor is 344 00:21:31,720 --> 00:21:35,600 Speaker 1: Rika Murphy. Music in this episode is from Martin Wissenberg. 345 00:21:36,000 --> 00:21:39,240 Speaker 1: Special thanks to the ro Working Group and Tharren Horton 346 00:21:39,400 --> 00:21:42,680 Speaker 1: for research provided for this episode. We'll link to all 347 00:21:42,720 --> 00:21:45,440 Speaker 1: sorts of resources in the show notes. If you want 348 00:21:45,440 --> 00:21:48,320 Speaker 1: to follow up on this a bit more. You can 349 00:21:48,359 --> 00:21:51,000 Speaker 1: find Drilled wherever you get your podcasts, and please remember 350 00:21:51,040 --> 00:21:53,560 Speaker 1: to leave us a waiting or review. It helps us 351 00:21:53,560 --> 00:21:57,040 Speaker 1: find new listeners. We're also reporting on this issue on 352 00:21:57,080 --> 00:22:00,400 Speaker 1: our website, drillednews dot com, so go there for more, 353 00:22:00,640 --> 00:22:03,320 Speaker 1: and you can follow us on Twitter at we are Drilled. 354 00:22:03,560 --> 00:22:05,240 Speaker 1: Thanks again and we'll see you next time.