6 ms·

‘Stealth bailout’ shovels millions of dollars to oil companies

125 points by laurex 6y ago

MattGaiser 6y ago
My understanding is that the change was to allow the stimulus loans to be used to pay off and refinance loans they currently have as well as claim back past losses on taxes. While questionable in many ways, why is that specific to the oil and gas industry other than them having many past profits?
- toomuchtodo 6y ago
  Because they were already over leveraged businesses that shouldn't have been given access to stimulus capital. This is exactly the problem causing "zombie companies" [1], companies that are only able to survive with cheap capital (similar to the VC model funding business models that are never going to be profitable at any scale). And of all companies to provide stimulus for, oil and gas is not what we should be wasting even more fiat on. This is a handout, plain and simple, no different than the governor of North Dakota trying to prop up a coal plant that hasn't been profitable in years that the owners themselves want to shut down [2] [3]. [1] https://en.wikipedia.org/wiki/Zombie_company https://en.wikipedia.org/wiki/Zombie_company [2] https://www.cnbc.com/2020/05/11/north-dakotas-largest-power-plant-set-to-close-as-owner-bets-on-wind.html https://www.cnbc.com/2020/05/11/north-dakotas-largest-power-... [3] https://www.utilitydive.com/news/north-dakota-governor-opposes-Great-River-energy-coal-exit/577660/ https://www.utilitydive.com/news/north-dakota-governor-oppos...
- noad 6y ago
  Around here the frackers are starting to abandon wells and hollow out as much cash from the companies as possible before bankruptcy, and now those sites are active pollution and safety hazards that the taxpayer will be responsible for. I hope all the poor brown and black kids that live around here don't hop the fences to the drill sites and get hurt somehow, but I know it's just a matter of time. This is the third time this has happened in my specific city in the past hundred years. Two major oil busts, and now the fracking collapse. Everyone always gets to keep their bonuses. Nobody ever goes to jail.
sand_castles 6y ago
You must live in the Truman Show to believe Uncle Sam would let anything happen to Oil and Gas companies.
blackoil 6y ago
Should not be surprising, particularly now when there is a 3-way turf war on between Russia, Saudis and US.
sremani 6y ago
83% of US energy portfolio is connected to Oil, Gas and Coal. Either you prop energy industry now, or fight KSA's wars and ideological misadventures in ME. For what its worth, saving ONG jobs in US at least gives us better policy options than being energy hostage. Green tech is not there yet to pick heavy load. In the interim you need ONG.
- Mizza 6y ago
  This comment is pure neoliberal death cult ideology. Can't you even conceptualize other ways of being that don't involve a simple binary choice of imperial war or handing gobs of taxpayer cash to the companies which already profit from the extraction of natural resources?
  - dang 6y ago
    Please don't take HN threads further into ideological flamewar. This place is for curious conversation, not smiting enemies. Of course it's fine to disagree with stealth oil subsidies, just not by name-calling and denunciatory rhetoric. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
- wolco 6y ago
  Why not let the free market decide.
  - reducesuffering 6y ago
    It isn't a free market. OPEC+ is literally a cartel trying to gain monopolistic control over oil prices. With NA ONG bankrupt, they can proceed to gouge oil prices for the next half decade, until NA ONG can be recapitalized and operating at full capacity again. In the meantime, KSA will then be given large amounts arms and wealth to prop up their shenanigans in the ME.
    - MiroF 6y ago
      This is absurd. Even if domestic supply falters (i'm unconvinced we wouldn't be able to quickly turn it around if need be, as we have multiple times in the past decade), KSA is still not a major international source of US oil.
archgoon 6y ago
My personal feeling is that we should have just cut everyone a 10k check and be done with it. Some direct funding to hospitals maybe; but 95% of the stimulus should have just been direct cash. Seems like the best way to ensure that people who need it got it, and also give people a cushion to figure out what to do next in the new economy; and not feel compelled to prop up the old one. I'm sure there's some very good reason we didn't do it. Love to hear it.
- toomuchtodo 6y ago
  > I'm sure there's some very good reason we didn't do it. Love to hear it. Congress. The Fed did everything possible without straying too far beyond their mandate and authority granted to them by Congress ("unlimited support", special vehicles to lend where they technically should not be lending). Only Congress can direct the Treasury to issue payments directly to citizens.
  - archgoon 6y ago
    Oh; so this was part of the fed stimulus, not the 2 trillion congress stimulus bill?
    - toomuchtodo 6y ago
      Ironically, no! The Congressional CARES act is what authorized this specific "back door" and provided woefully inadequate economic support to citizens. J Powell was clear to Congress that he couldn't provide the necessary economic stimulus, and they would have to (direct transfer payments). And they didn't provide anywhere near what was needed. Call your Congressional rep.
  - sumedh 6y ago
    > Only Congress can direct the Treasury to issue payments directly to citizens. Doesnt the Senate have to approve the deal?
    - toomuchtodo 6y ago
jlbnjmn 6y ago
Meanwhile millions of people approved for unemployment benefits still aren't getting paid. Not cool.
vmception 6y ago
eh this just temporarily reinstates the prior tax code before the 2017 Tax act changes. The 2017 law removed the ability to carry back net operating losses, only leaving carry forwards. We had carry backs for at least 3 decades. The CARES Act temporarily reinstated carry backs. I think it is disingenuous to say thats a problem, when its more normal than anything else that has happened. Regarding how it was sold for the "little guy", who cares? Like imagine being that naive not to notice that everything gets consensus in this country by catering to the constituents that can gain consensus. Consensus needs numbers, you don't sell a bill by saying "in this esoteric accounting standard that you will never encounter, we need to make a rule change regarding carrying losses to encourage growth ACT", you cater to things most people will encounter, and that the representatives of those people will relate to, and get phone calls and emails from their people about. I take social cues from other people, so I can tell I feel differently, as in feel nothing, from this. But I think you should too.

125 points by laurex 6y ago

My understanding is that the change was to allow the stimulus loans to be used to pay off and refinance loans they currently have as well as claim back past losses on taxes. While questionable in many ways, why is that specific to the oil and gas industry other than them having many past profits?

toomuchtodo 6y ago
Because they were already over leveraged businesses that shouldn't have been given access to stimulus capital. This is exactly the problem causing "zombie companies" [1], companies that are only able to survive with cheap capital (similar to the VC model funding business models that are never going to be profitable at any scale). And of all companies to provide stimulus for, oil and gas is not what we should be wasting even more fiat on. This is a handout, plain and simple, no different than the governor of North Dakota trying to prop up a coal plant that hasn't been profitable in years that the owners themselves want to shut down [2] [3]. [1] https://en.wikipedia.org/wiki/Zombie_company https://en.wikipedia.org/wiki/Zombie_company [2] https://www.cnbc.com/2020/05/11/north-dakotas-largest-power-plant-set-to-close-as-owner-bets-on-wind.html https://www.cnbc.com/2020/05/11/north-dakotas-largest-power-... [3] https://www.utilitydive.com/news/north-dakota-governor-opposes-Great-River-energy-coal-exit/577660/ https://www.utilitydive.com/news/north-dakota-governor-oppos...
noad 6y ago
Around here the frackers are starting to abandon wells and hollow out as much cash from the companies as possible before bankruptcy, and now those sites are active pollution and safety hazards that the taxpayer will be responsible for. I hope all the poor brown and black kids that live around here don't hop the fences to the drill sites and get hurt somehow, but I know it's just a matter of time. This is the third time this has happened in my specific city in the past hundred years. Two major oil busts, and now the fracking collapse. Everyone always gets to keep their bonuses. Nobody ever goes to jail.

sand_castles 6y ago

You must live in the Truman Show to believe Uncle Sam would let anything happen to Oil and Gas companies.

blackoil 6y ago

Should not be surprising, particularly now when there is a 3-way turf war on between Russia, Saudis and US.

sremani 6y ago

83% of US energy portfolio is connected to Oil, Gas and Coal. Either you prop energy industry now, or fight KSA's wars and ideological misadventures in ME. For what its worth, saving ONG jobs in US at least gives us better policy options than being energy hostage. Green tech is not there yet to pick heavy load. In the interim you need ONG.

Mizza 6y ago
This comment is pure neoliberal death cult ideology. Can't you even conceptualize other ways of being that don't involve a simple binary choice of imperial war or handing gobs of taxpayer cash to the companies which already profit from the extraction of natural resources?
- dang 6y ago
  Please don't take HN threads further into ideological flamewar. This place is for curious conversation, not smiting enemies. Of course it's fine to disagree with stealth oil subsidies, just not by name-calling and denunciatory rhetoric. https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
wolco 6y ago
Why not let the free market decide.
- reducesuffering 6y ago
  It isn't a free market. OPEC+ is literally a cartel trying to gain monopolistic control over oil prices. With NA ONG bankrupt, they can proceed to gouge oil prices for the next half decade, until NA ONG can be recapitalized and operating at full capacity again. In the meantime, KSA will then be given large amounts arms and wealth to prop up their shenanigans in the ME.
  - MiroF 6y ago
    This is absurd. Even if domestic supply falters (i'm unconvinced we wouldn't be able to quickly turn it around if need be, as we have multiple times in the past decade), KSA is still not a major international source of US oil.

archgoon 6y ago

My personal feeling is that we should have just cut everyone a 10k check and be done with it. Some direct funding to hospitals maybe; but 95% of the stimulus should have just been direct cash. Seems like the best way to ensure that people who need it got it, and also give people a cushion to figure out what to do next in the new economy; and not feel compelled to prop up the old one. I'm sure there's some very good reason we didn't do it. Love to hear it.

toomuchtodo 6y ago
> I'm sure there's some very good reason we didn't do it. Love to hear it. Congress. The Fed did everything possible without straying too far beyond their mandate and authority granted to them by Congress ("unlimited support", special vehicles to lend where they technically should not be lending). Only Congress can direct the Treasury to issue payments directly to citizens.
- archgoon 6y ago
  Oh; so this was part of the fed stimulus, not the 2 trillion congress stimulus bill?
  - toomuchtodo 6y ago
    Ironically, no! The Congressional CARES act is what authorized this specific "back door" and provided woefully inadequate economic support to citizens. J Powell was clear to Congress that he couldn't provide the necessary economic stimulus, and they would have to (direct transfer payments). And they didn't provide anywhere near what was needed. Call your Congressional rep.
- sumedh 6y ago
  > Only Congress can direct the Treasury to issue payments directly to citizens. Doesnt the Senate have to approve the deal?
  - toomuchtodo 6y ago

jlbnjmn 6y ago

Meanwhile millions of people approved for unemployment benefits still aren't getting paid. Not cool.

vmception 6y ago

eh this just temporarily reinstates the prior tax code before the 2017 Tax act changes. The 2017 law removed the ability to carry back net operating losses, only leaving carry forwards. We had carry backs for at least 3 decades. The CARES Act temporarily reinstated carry backs. I think it is disingenuous to say thats a problem, when its more normal than anything else that has happened. Regarding how it was sold for the "little guy", who cares? Like imagine being that naive not to notice that everything gets consensus in this country by catering to the constituents that can gain consensus. Consensus needs numbers, you don't sell a bill by saying "in this esoteric accounting standard that you will never encounter, we need to make a rule change regarding carrying losses to encourage growth ACT", you cater to things most people will encounter, and that the representatives of those people will relate to, and get phone calls and emails from their people about. I take social cues from other people, so I can tell I feel differently, as in feel nothing, from this. But I think you should too.