Changes made to a federal lending program last week could open up loans to Wyoming oil and gas firms left reeling from volatile oil prices and low fuel demand during the pandemic.
The Federal Reserve released new guidelines Thursday for its Main Street Lending Program, geared to provide an additional layer of financial relief to small to midsize companies, including some heavily indebted firms with low credit ratings, during the COVID-19 pandemic.
“Wyoming’s oil and natural gas industry is overwhelmingly comprised of small and mid-sized operators, but some of those were not eligible for the Payroll Protection Program (under the federal coronavirus relief package),” Ryan McConnaughey, communications director at the Petroleum Association of Wyoming, said in a statement. “This program allows companies the ability to free up cash in the short-term to keep their doors open and Wyomingites employed due to the massive demand drop outside of their control.”
The loans will give oil and natural gas companies access to federal aid “just like any other employer in the country,” he added. U.S. businesses — not just energy companies — with fewer than 15,000 employees or less than $5 billion in annual revenue could now qualify, according to the central bank.
A previous lending program required firms to have under 10,000 employees or revenue below $2.5 billion, parameters that industry lobbyists said blocked a number of energy firms from accessing the aid.
The central bank will invest $75 billion to back the program, using funds appropriated through the federal coronavirus relief bill. The program has yet to launch, but once it does, loans will be available until Sept. 30 and are not forgivable, according to the Federal Reserve. Companies are also required to make “commercially reasonable efforts to retain employees,” based on the terms of the loan.
For over two months, Wyoming operators have been pummeled by a global price war and a precipitous drop in demand catalyzed by the COVID-19 pandemic.
The price for oil remains devastatingly low for producers, with West Texas Intermediate, the U.S. benchmark for oil, at just over $20 a barrel Monday. The realized price for Wyoming sweet crude falls even lower than West Texas Intermediate. For now, the price for oil and gas is still too low to make extraction in even the most lucrative plays feasible. And a full recovery in energy markets appears far away.
In Washington, debate has raged over whether to extend support to the battered oil and gas industry. Some Democrats swiftly chastised the Treasury Department, calling the decision to expand access to emergency capital through the lending program a bailout for energy companies.
“President Trump is rushing to bail out big oil companies after their CEOs donated millions to the Trump campaign, while so many Main Street businesses are still waiting to get help,” Sen. Chuck Schumer, D-N.Y., said in a statement.
Several environmental groups also expressed disdain over the Federal Reserve’s decision. Senior policy analyst Lukas Ross with the environmental group Friends of the Earth also called the expanded lending program a “bailout” won through aggressive lobbying by the shale industry.
Wyoming public officials and energy leaders applauded the new aid. The state is the eighth-largest producer of oil and natural gas in the country and heavily depends on the industry for both tax revenue and jobs.
“The Federal Reserve’s Main Street Lending program gives Wyoming’s oil and gas workers a critical lifeline to maintain operations,” Wyoming U.S. Sen. John Barrasso told the Star-Tribune. “Wyoming energy has suffered a one-two punch. There is a lack of demand due to the pandemic and there is an oversupply of oil due to Saudi Arabia and Russia flooding the market. These Wyoming workers need our help today so that they are ready after this health crisis is behind us.”
Paul Ulrich, vice president of government and regulatory affairs at Jonah Energy, is not aware if the company — a leading natural gas producer operating in Wyoming’s Green River Basin — will qualify or apply for the new loan, but he said any help extended to the industry is welcomed.
“The state depends on the oil and gas industry, but so do thousands and thousands of families,” Ulrich said. “This is how we make our living, this is how we feed our families, and the impact (of the pandemic) has been severe, to say the least. So, anything and everything to provide some relief to thousands of families that are struggling and need those jobs, that’s got to be highlighted.”
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