Demand For Oil Has Plummeted, But Industry Keeps Building New Infrastructure Anyway

Oil and gas companies are constructing pipelines and wells amid the pandemic, risking workers’ lives and depleting personal protective gear.

In February, CNBC anchor Jim Cramer took aim at the heart of the debate over fossil fuels with a bold declaration on his investment advice show: “I’m done with fossil fuels. They’re done. ... We are in the death knell phase.”

That was before the coronavirus pandemic and a price war sent oil prices into a tailspin.

By March, analysts were predicting a “financial bloodbath” for the oil industry. By early April, usually sober economists at commodities trading firms were describing demand for oil like this to The Wall Street Journal: “Since humans started using oil, we have never seen anything like this. There is no guide we are following. This is uncharted.”

On Monday, oil prices plunged below $0 as the world ran out of places to store what’s already been pumped.

You’d be forgiven for wondering, then, whether the oil industry exists in a different reality.

Instead of retreating, the American oil and gas sector has plowed ahead at full speed during one of the worst pandemics in a century, even as demand for its product tanked because of the COVID-19 economic downturn. The industry’s efforts continued in no small part because federal and state regulators deemed fossil fuel work “essential” during the pandemic.

In Texas, oil companies won permits to expand drilling, with 1,175 new wells in March alone, pushing the tally for the first three months of this year 30% higher than for the same period in 2019.

In Massachusetts, crews went to work building a controversial new facility to send fracked natural gas to Canada. In Montana and West Virginia, the resumption of stalled pipeline projects has stirred up old fights with environmentalist foes.

Oil rigs in Midland, Texas.
Oil rigs in Midland, Texas.
Jessica Rinaldi/Reuters

“Continuing construction of new fossil fuel infrastructure and expanding production during a massive oil supply glut is madness,” Collin Rees, a senior campaigner at the environmental group Oil Change USA, said in an email to HuffPost. “It’s the opposite of ‘essential,’ and it’s unbelievably dangerous to both workers and the communities they’re entering, many of which are already underserved by health services. This is just one more example of the Trump administration bailing out Big Oil and putting the interests of CEOs ahead of working people and communities on the frontlines.”

The industry’s business-as-usual stance in the face of a historic public health catastrophe is only possible because of how politically entrenched the fossil fuel sector remains. It has capitalized on the crisis to further embed itself, risking the lives of workers and their families on projects that have depleted protective gear for little obvious public good.

COVID-19 has thrown into stark relief the industry’s strategy for postponing its ecologically necessary and economically logical demise: persevere and multiply at all cost. And the Trump administration has proven to be a firm ally in helping the industry stay its course.

In one sense, the pandemic couldn’t have come at a better time for the oil industry. It was already deep in debt and facing its best-organized opposition in more than a decade as President Donald Trump’s brand of petro-state nationalism spurred an international movement for a Green New Deal. Then the coronavirus struck. Since the start of 2020, leading oil and gas companies have lost on average 45% of their value, according to a report published Thursday by the nonpartisan Center for International Environmental Law (CIEL), which concludes that U.S. and overseas producers are “exploiting” the COVID-19 crisis to demand bailouts, regulatory relief and more in hopes of recovering from financial troubles that predate the pandemic.

“Throwing money at oil and gas and petrochemical companies in hopes that it will save them will be a massive waste of taxpayer dollars and political will at a time when both are limited and very precious and have much higher uses,” Carrol Muffett, CIEL’s president and a co-author of the report, said during a telebriefing on Thursday.

Sipping Texas Tea

As the COVID-19 death toll began mounting last month, doctors and nurses in Texas warned that the state wasn’t ready. With just 2.9 hospital beds per 1,000 residents, the Lone Star State lacked the capacity to treat the predicted surge in patients, the Texas Tribune reported. As in many other states, medical workers were pleading for help to stem shortages of the personal protective equipment (PPE) that offered a line of defense against the mysterious virus.

Nurses in Texas are “terrified of the reality that they may soon run out of PPE,” Kanaka Sathasivan, a spokeswoman for the Texas Nurses’ Association, told HuffPost. “We are asking our state leaders to prioritize PPE for nurses and other health care workers.”

Federal regulations recommend that oil field workers use respirator masks, goggles and protective suits, particularly when tapping new wells. Retailers who supply equipment to oil field workers sell a wide range of gear that medical professionals and other essential workers could use right now ― gear that would work better than the jerry-rigged plastic coverings and single-use surgical masks many have been forced to rely on.

A handful of oil and gas companies have donated gear to those fighting COVID-19, though more contributed food or money, according to a report on Energy in Depth, an industry-funded blog. Yet missing from the list were Kinder Morgan, EOG Resources and Occidental Petroleum, the oil companies that together received about half of all permits to drill new wells in Texas last month, an analysis by the watchdog group Documented found.

None of those companies responded to requests for comment. But the Permian Basin Petroleum Association (PBPA), a trade group for drillers in the oil-rich region of West Texas, told HuffPost that “a number” of its member companies donated N-95 respirator masks, including to a veterans hospital. The group argued that much of the equipment that drilling workers rely on would be useless to medical professionals ― flame-retardant clothing, unsealed eye protection, mechanics gloves and steel-toed boots. Stephen Robertson, the group’s executive vice president, declined to provide an estimate of how many masks alone its members used to tap new wells last month.

Kinder Morgan received the most permits for "completions," a crucial late step in extracting oil, from the Texas Railroad Commission in March.
Kinder Morgan received the most permits for "completions," a crucial late step in extracting oil, from the Texas Railroad Commission in March.

“We’re so proud of the number of PBPA member companies who have volunteered equipment,” Robertson said in an email. “It’s quite humbling the lengths to which people will go to help one another in a crisis.”

Residents of Blanco, Texas, are less impressed. Late last month, a Kinder Morgan crew continuing construction on the Permian Highway Pipeline spilled drilling fluid.

The spill, the size of which was not disclosed, contaminated groundwater in the surrounding area, where residents like Teresa Albright were living during the coronavirus quarantine. When she tried to get water to make some tea, grayish-brown fluid gushed from her faucets, as photos she posted to Facebook show.

“We were already trying to do our best washing clothes, washing hands, keeping everything clean. ... You can’t go to the gym and shower because it’s closed. You can’t go to a hotel because they’re closed,” she told ABC affiliate KVUE.

‘It Makes No Sense. It’s Not Essential.’

In Weymouth, Massachusetts, Canadian energy company Enbridge is continuing work on a 7,700-horsepower compressor station, part of the company’s Atlantic Bridge Project that will deliver fracked natural gas via pipeline to Maine and Canadian provinces. City residents opposed to the project filed a complaint with the Occupational Safety and Health Administration in mid-March alleging numerous on-site hazards that they said put workers at increased risk of contracting and spreading the coronavirus.

Alice Arena, president of Fore River Residents Against the Compressor Station, argues that it’s simply not possible for those workers to comply with health and safety protocols on site. She told HuffPost that she and her team have observed out-of-state workers carpooling to the project site, laboring in close proximity to one another and not wearing face masks and other protective gear. Arena worries about the impact that ongoing construction could have on both crew and the community, and questions what makes the project necessary during a public health crisis.

“There’s nothing connecting this construction project to anything. There’s no gas flowing in, there’s no gas flowing out,” she said. “It makes no sense. It’s not essential.”

In a protest designed to adhere to social distancing guidance, 1,000 signs were arranged on the lawn of the U.S. Capitol Building showing the faces of nurses and other frontline health care workers pleading for adequate PPE on April 17.
In a protest designed to adhere to social distancing guidance, 1,000 signs were arranged on the lawn of the U.S. Capitol Building showing the faces of nurses and other frontline health care workers pleading for adequate PPE on April 17.
Paul Morigi via Getty Images

The Trump administration and the state of Massachusetts disagree. The U.S. Department of Homeland Security in March deemed all energy sector work, including construction of pipelines and compressor stations, as critical for the pandemic response. Energy operations are also “essential services” under an emergency order signed by Massachusetts Gov. Charlie Baker (R) on March 23.

It’s not just that these companies get to keep working. The Environmental Protection Agency and the Federal Energy Regulatory Commission have also loosened regulations during the pandemic, suspending enforcement of bedrock clean air and water laws and postponing site inspections.

Enbridge is following expert guidance and “taking steps to protect work crews and the public,” including screening workers entering the site, practicing social distancing and excusing crew who may be at risk, company spokesman Max Bergeron said via email.

That the Department of Homeland Security has identified energy infrastructure as critical “underscores our duty to continue to provide essential energy across North America while at the same time prioritizing the health and safety of our people and the public,” he said.

It appears the industry pushed for the designations at both the state and federal levels. The American Pipeline Contractors Association noted in a press release last month that it submitted comments to Homeland Security about the department’s initial, less-inclusive March 19 guidance on essential work during the pandemic. And in a March 20 letter, the American Gas Association, an industry trade group, requested that officials in Kansas, Maryland, Mississippi and several other states and cities designate all gas utility operations, including ongoing construction projects, as essential work. “It is critical for utilities to have available the necessary personnel to ensure the continuation of all ongoing essential utility functions to meet current and future service needs and complete major project work in time for the next heating season,” the group wrote.

While the coronavirus has forced some fossil fuel projects to shut down ― work on the National Grid pipeline in Brooklyn, New York, was temporarily halted late last month following public protest, for example ― others are moving forward.

In Montana, Gov. Steve Bullock (D) gave Canadian company TC Energy the green light to bring in hundreds of out-of-state workers to resume construction of the controversial Keystone XL oil pipeline. (On Wednesday, a federal judge revoked a key permit needed for the pipeline to cross rivers, though that is not expected to impact work now underway in Montana, the Associated Press reported.)

“The last thing Montana needs during this public health crisis is an onslaught of out-of-state workers potentially spreading coronavirus to already vulnerable rural and Tribal communities,” Summer Nelson, director of the Sierra Club’s Montana chapter, said in an April 6 statement, adding that an outbreak would quickly overwhelm the state’s health care system.

In West Virginia, opponents of the Mountain Valley Pipeline have urged Gov. Jim Justice (R) to issue a stay to stop out-of-state workers from returning to build the $3.5 billion project. Construction of the pipeline has been on hold since October due to legal challenges, but CBS affiliate WDBJ7 reported that work could resume this spring.

“The fossil fuel industry’s crass opportunism in forcing through projects that are threatening communities and wrecking the climate is beyond the pale, but not surprising,” Rees of Oil Change USA said. “Big Oil knows the movement to stop dirty projects like Keystone XL is winning, and the industry is desperately reaching for any possible advantage.”

In recent weeks, as share prices plummeted, shale driller Whiting Petroleum Corp. filed for bankruptcy and firms began laying off fracking workers, boards of directors at major shale companies approved hefty severance packages for top executives. The average change-of-control agreement ― or so-called “golden parachute” ― in the event of a merger, takeover or bankruptcy tops more than $18 million for CEOs at midsize U.S. oil and gas producers, according to a Documented analysis of Securities and Exchange Commission filings in 2020.

A week before Whiting Petroleum went bankrupt, its top five executives raked in a collective $14.5 million, The Wall Street Journal reported at the time. More than $6 million of that went to CEO Brad Holly.

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