La. senators seek relief for energy industry

Louisiana’s U.S. senators, John Kennedy and Bill Cassidy, on Thursday asked President Donald Trump to direct the secretary of the interior to provide royalty relief to independent offshore oil and gas companies affected by the coronavirus pandemic and the oil battle between Saudi Arabia and Russia.
Also, the federal government moved Thursday to open Strategic Petroleum Reserve facilities for an important purpose in a time of depressed prices: storage.
In their letter to Interior Secretary David Bernhardt, Cassidy and Kennedy urged the department to “take immediate and decisive action to provide relief to the independent offshore oil and gas companies who operate in the Gulf of Mexico.
“Unless the Federal Government provides meaningful relief to the independent offshore oil and gas companies in the next 30 days, the continued viability of the industry will be in serious jeopardy. … The loss of this important industry would have a devastating effect on Louisiana and would negatively impact the national security interests of the United States,” the senators wrote.
In addition to sustaining tens of thousands of jobs, independent oil and gas companies paid the federal government over $1.5 billion in royalties in 2018, they said.
Kennedy and Cassidy also spoke recently with Bernhardt to request that he temporarily suspend royalty payments from oil and gas producers to the federal government.
The SPR move was announced Thursday by the U.S. Department of Energy. The department said it would make a solicitation “to immediately make storage space for 30 million barrels of crude available to struggling oil producers.
“Louisiana’s oil producers praise the President, his administration, and Louisiana’s federal delegation for taking swift, decisive action to help support the nation’s energy producers with the SPR’s exchange for storage,” Gifford Briggs, Louisiana Oil & Gas Association president, said.
“The oil and gas industry is the backbone of Louisiana’s economy and the foundation for many communities who have found themselves reeling in the wake of both COVID-19 and the Russian-Saudi oil price war. This market-based solution creates a win-win scenario by opening up badly needed storage for producers and filling up the SPR for citizens when American energy security is needed most.”
The department currently intends to make an additional 47 million barrels of storage capacity available thereafter.
The unprecedented worldwide reduction in consumer demand caused by COVID-19 has forced U.S. refiners to dial back production of motor gasoline, diesel fuel, and commercial airline jet fuel. This situation has reduced refinery crude oil demand, exacerbated a market glut of globally produced oil, and increased the need for already constrained crude oil storage, the Energy Department said.
A lack of storage is forcing premature shut-in of oil wells and economically hurting the U.S. energy industry and its workforce. The SPR is well-positioned to relieve some of this economic stress by making storage capacity available to U.S. oil producers immediately.
To help alleviate financial hardship to the critical American energy sector, the president has has directed the secretary of energy to fill the Strategic Petroleum Reserve to its maximum capacity.
“Filling the SPR with crude oil, produced by American companies that are facing catastrophic losses and increased financial hardship, is a logical action for the federal government to take as we work to overcome the economic disruptions caused by COVID-19 and intentional, global oil market disruptions,” said U.S. Secretary of Energy Dan Brouillette.
“The department continues to work with Congress to find ways to make funding available for DOE to buy American oil. However, we must move with a sense of urgency to support an industry that underpins the U.S. economy and supports our national security. Making some of the SPR’s storage capacity available to industry, without purchasing the oil, provides this immediate benefit to the industry and its hard-working employees.”
“We expect the first crude oil deliveries to arrive in late-April or early-May depending on producer logistics. The SPR will be ready to receive up to 685,000 barrels per day.” explained Assistant Secretary for Fossil Energy, Steven Winberg. “With its extensive storage, pipeline, and marine infrastructure along the Gulf Coast, the SPR will help relieve oil-related disruptions to our economy.”