Another one
Fracking giant Chesapeake Energy has filed for bankruptcy. What happens next?
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Here at HEATED, there is a subset of readers who get annoyed when I indulge too deeply in Millennial cultural references. Like when I used an extended Power Rangers metaphor to describe how oil and gas companies consolidate power.
To that subset of readers, I would like to apologize in advance for today’s newsletter, published in the spirit of DJ Khaled, a man who often exclaims in self-satisfied delight: “another one.”
Another bankrupt fracker
Fracking giant Chesapeake Energy has filed for bankruptcy.
It’s the largest oil and gas company to file for bankruptcy during the coronavirus pandemic. It also won’t be the last, as coronavirus continues to ravage the entire industry.
a chart from Quartz showing the potential rise in U.S. oil bankruptcies
What will these struggling fossil fuel companies do? Increasingly, they’ve been looking to banks for help. Last week, the Washington Post reported that the oil and gas industry is “putting pressure on the Trump administration to loosen bank guidelines put in place under President Barack Obama so they better access emergency loans during the coronavirus pandemic.”
But even with loosened guidelines, banks might not want to take on the risk of giving more loans to an industry that increasingly looks like it might not be able to pull itself out of the hole—a hole the industry was in long before the coronavirus pandemic deepened it.
Instead, banks might prefer to buy the oil and gas companies themselves.
Big banks plan to take ownership of frackers
With the news of Chesapeake’s bankruptcy, it’s worth revisiting the possibility that big banks might decide to purchase struggling oil and gas companies in order to avoid losses on the loans they’ve given them.
The idea was first reported by Reuters in April. According to their sources, banking giants including Chase, Wells Fargo, Bank of America and Citigroup were each “in the process of setting up independent companies to own oil and gas assets,” and “looking to hire executives with relevant expertise to manage them.”
This near-unprecedented move would only happen because banks are facing unprecedented losses if they don’t do something. As Oil Price has noted, “U.S. energy companies are indebted to the tune of more than $200 billion, with loans mostly backed by oil and gas reserves. According to Moody's, the U.S. oil and gas industry has about $86 billion of rated debt due over the next four years, one of the highest for any sector.”
However, if banks do take ownership of oil and gas companies, they’ll be increasing their financial interest in extracting and burning fossil fuels as the climate crisis worsens.
“The plan neatly illustrates why, despite some pledges to not ruin the climate, we can’t trust banks to do good on their own,” Earther reports. “The problem is, the goal of private banks isn’t to take care of people and the planet (although in the long run, that’s a pretty good financial strategy). It’s to protect their investments.”
Literally no one wants banks to do this
Make no mistake: banks aren’t trying to purchase fracking companies and then wind them down. According to Earther, banks are “looking to put private equity companies like the Houston-based firm EnerVest at the helm of managing these companies and continuing to frack and extract oil and gas.”
But no one wants banks to do this: Not Democrats, not independents, and not even Republicans, according to exclusive poll released today by the progressive polling firm Data for Progress. In early May, Data for Progress conducted a web survey of 1,143 likely voters nationally—weighted to be representative by age, gender, education, race, and voting history—asking if voters support prohibiting banks from buying fossil companies.
Overall, 47 percent of voters said they support prohibiting banks from buying fossil fuel companies. Only 26 percent of voters said they would want to allow banks to do so.
One major caveat, though, is that a lot of people simply don’t know enough about the issue to have an opinion. That’s why 25 percent of Democrats, 41 percent of independents, and 25 percent of Republicans’ opinions aren’t reflected in the poll.
Clearly, there needs to be a much louder discussion of this possibility before banks unilaterally decide to purchase oil and gas companies. However, there’s been no new reporting since April on whether the banks plans have changed.
Climate activists, however, are continuing to warn banks against the idea. Jeanne Martin, the campaign manager at ShareAction, told The Guardian that Chesapeake’s bankruptcy should serve as a “wake-up call” for banks that continue to fund the industry while knowing of its risks to the climate.
“Environmentalists have raised the alarm about the environmental disaster of fracking and the vulnerability of the fracking industry for years,” she said. “Chesapeake’s bankruptcy flagrantly shows that these risks are no longer on the horizon, but at companies’ doorstep.”
Another section of things to read
—ANOTHER WIN FOR THE CLIMATE YOUTHS. After years of pressure from student climate activists, George Washington University has voted to divest its $1.7 billion endowment from fossil fuels, the GW Hatchet reports. GW’s fossil fuel holdings currently total $53 million. University officials “also voted to accelerate GW’s plans to become carbon neutral by 10 years to 2030 and aspire to remove all greenhouse gas emissions the University has produced since its founding in 1821.”
—ANOTHER LAWSUIT AGAINST BIG OIL. Washington, D.C., aka the District of Columbia, aka The Best City in the World, has officially joined the growing list of states and localities that are suing Big Oil companies over their contributions to climate change (except D.C. isn’t a state because racism). As always, Amy Westervelt at Drilled News has the scoop.
—ANOTHER IMPORTANT CLIMATE STUDY. Surface temperatures at the South Pole are warming three times faster than the global average, researchers reported in a paper published in Nature Climate Change on Monday. While the South Pole is in not yet in danger of melting, the results are important because it shows no place is untouched by human-caused climate change. The South Pole is “the most remote place on the planet,” according to one of the researchers. “[It is] the ultimate canary in the coal mine, one that we can no longer ignore.”
—ANOTHER TWEET. Never forget.
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Chesapeake was one of the companies that Rachel Maddow highlighted in her book Blowout. If you want to know more about their history of corruption and exploitation, it's a great read.
I am going to be really irritated if the federal response to a fracking company's bankruptcy isn't "Let them die," when the federal response to people threatened by coronavirus has been a resounding "Let them die."