This op-ed was originally published on DeSmog Blog.
Right now, we are beginning to experience a world that climate scientists have long warned we were risking. Raging wildfires and worsening storms are destroying homes, decimating communities, and polluting the air and water, all during a pandemic which disproportionately affects those living in polluted areas.
Even amid the pandemic, the U.S. fossil fuel industry has continued what it has always done: advance its own interests at the expense of people and the planet. The U.S. response to COVID-19 has enabled an insidious pattern of fossil fuel companies receiving government handouts, despite struggling long before the pandemic. Big Oil executives have walked away with millions of dollars in bonuses while the industry has lost over 100,000 jobs from February to August.
The hard truth is this is business as usual. The fossil fuel industry has long relied on public funds to prop it up, masking its true costs and destabilizing the global climate in the process.
Bailouts, bankruptcies and CEO bonuses
Polluting companies that were struggling long before the pandemic have been able to access COVID-19 relief through various obscure and complex mechanisms, from tax refunds to Federal Reserve lending programs that lack oversight and transparency. Some companies have been able to access pandemic relief while declaring bankruptcy and laying off staff, even as their executives walk away with millions of dollars.
Take Diamond Offshore Drilling, Inc, for example.
The Houston, Texas-based global offshore oil and gas drilling contractor filed for bankruptcy in April 2020 after reporting a mass layoff affecting 102 employees and with 2,500 jobs at risk. The company cited the “unprecedented” impact of the oil price war and coronavirus pandemic.
Amid these dire financial straits, Diamond was able to get a $9.7 million handout from taxpayers in the form of a tax refund in the CARES Act, the $2.2 trillion stimulus package passed by Congress and billed as protecting American workers and families from the economic fallout of the pandemic. Yet the tax provision comes with no strings attached, and in July 2020, a bankruptcy court approved the company’s decision to award exactly $9.7 million as bonuses to Diamond’s executives, despite outcry from the company’s own creditors and other bankruptcy lawyers.
This single tax provision has been a multi-billion-dollar bailout to the industry. According to an analysis by the watchdog research group Documented for Sierra, at least 50 oil and gas companies publicly reported claiming a combined $3.2 billion in write-offs as of August, including the likes of Occidental Petroleum and Marathon Petroleum.
Diamond’s maneuvering was not an isolated event. Consider Whiting Petroleum, a Denver-based oil and gas company that has benefited from a separate pandemic stimulus effort from the Federal Reserve despite filing for bankruptcy while its CEO walks away with millions.
In 2019, before the pandemic hit, financial hardships caused Whiting to lay off a third of its workforce. By April 2020, it was pushed to bankruptcy. But just days beforehand, the board approved $14.6 million in cash bonuses for top executives, including $6.4 million to departing CEO Brad Holly — on top of a $2.5 million severance after his three year tenure. In its filing, Whiting said the change to its compensation structure was meant to ensure stability and avoid “potential misalignment of interests” for senior executives.
Meanwhile, as part of the Fed’s COVID-19 response, it has established corporate credit facilities to purchase debt that disproportionately includes debt from oil and gas companies, according to an analysis by the nonprofit InfluenceMap.
In May 2020, the Fed reported purchasing $100 million in a high-yield bond Exchange-Traded Fund (ETF), which includes Whiting. Crucially, the Fed does not require corporate bond issuers to maintain payroll as the small business relief in the CARES Act does, nor does it require them to limit executive compensation.
Overall, the Fed has bought up $355 million in fossil fuel bonds and funded more than 50 oil and gas companies so far, including major polluters like Exxon and Chevron, Bailout Watch revealed.
This move includes companies with a track record of environmental racism, such as Marathon Petroleum, which has ranked among the top third of the nation’s worst air polluters according to the Political Economy Research Institute, and whose oil refineries disproportionately impact communities of color, as Truthout has reported. It is worth noting that in 2019, Marathon CEO Gary R. Heminger earned $24.1 million, with his pay ranking 46 out of 451 companies on the S&P 500.
Though Marathon has denied requesting a COVID-19 bailout, the company has certainly found ways to benefit. Through the Federal Reserve’s pandemic response, the U.S. public now owns $15 million of Marathon Petroleum’s bonds. But that’s a cherry on top of the company’s tax refund via the CARES Act, which came in at a staggering $1.1 billion. Meanwhile, last month the company announced it would be cutting hundreds of workers as it permanently idles California’s fourth-largest refinery.
Business as Usual
Fossil fuel companies have long been reliant on government subsidies to prop them up despite driving the climate crisis that is fueling the hazardous climate events unfolding today.
Official estimates for fossil fuel subsidies in the U.S. range from $4.6 billion to $649 billion a year. A study by the Stockholm Environment Institute, conducted prior to the pandemic and its historically low oil prices, found that up to half of new U.S. oil fields rely on government subsidies to be economically viable. Without these government handouts, those polluting, climate-wrecking projects wouldn’t proceed, and that money could instead go to supporting workers as we transition off dirty energy for good.
The egregiousness of fossil fuel companies receiving bailouts — while their CEOs garner millions in bonuses and yet thousands of jobs are lost — occurs against the backdrop of climate disasters colliding with the pandemic. A record-setting fire season is currently barreling across the West Coast, burning through five million acres of land in California and Oregon so far, destroying entire communities in Washington, and cloaking vast portions of the country with hazardous air.
We know the climate crisis fuels destructive and deadly disasters, often making them more intense and more likely. These hurricanes, wildfires, and floods, for example, exacerbate existing social inequities and are compounded in times of upheaval. This year already has seen a pandemic, racial injustice crisis, and economic recession. All the while, fossil fuel companies have pushed for stealth bailouts from the U.S. government, at the taxpayer’s expense.
There is an alternative: a People’s Bailout, which calls for COVID-19 relief and stimulus packages to contribute to a just recovery by putting people over profits. We must also end fossil fuel subsidies, which the End Polluter Welfare Act would do. The bill, introduced by Rep. Ilhan Omar and Sen. Bernie Sanders, promises to save American taxpayers up to $150 billion over the next 10 years. These resources can instead be directed toward a fair deal for workers in a just energy transition and reinvigorate emergency management against increasing climate-fueled disasters.
government’s COVID-19 response has once again shone a light on the gross
political power of the fossil fuel industry and its longstanding reliance on
government support to enable oil executives to profit at the expense of people
and the planet. As climate catastrophes wreak havoc across American communities,
we must demand Congress acts for the people, not polluters.