It is fair to say that there are some very strong and longstanding ties between the two industries. However, there are some puzzling policy decisions coming out of Washington, D.C. and a refusal to recognize these bonds. Early in 2021, President Joe Biden’s Special Envoy for Climate John Kerry had a message for oil and gas companies: Embrace the Administration’s ideological vision and unrealistic timetable for energy transition or be penalized. To assist making this policy position reality, Kerry took his message to banks and financial institutions. Encouraging the industry to reduce U.S. oil and gas commitments and join the (at the time) newly formed United Nations-run Net-Zero Banking Alliance.
Understanding the unfortunate likely result of this policy, members of the U.S. Senate Banking Committee shared their concern with Kerry writing, “pressuring banks to make extralegal commitments regarding energy-related lending and investment activities … would result in … higher energy costs for American consumers, and slow economic growth.”
But more must be done to inform policy makers about the importance of America’s oil and gas producers and the banks that support them. To that end, the Texas Bankers Association organized a “boots on the ground” Texas Energy Tour for the purpose of collecting facts for our energy sector banking advocacy efforts in Texas and in Washington, D.C. Leading the tour was TBA Chairman Ford Sasser, TBA CEO Chris Furlow, American Bankers Association CEO Rob Nichols, TBA General Counsel Celeste Embrey and former TBA Chairman and ABA Board member Wes Hoskins.
From September 21-23, the team used “learn, look and listen” visits to gather key data about the critical importance of Texas oil & gas to America’s economic and national security interests. Beginning at the Federal Reserve’s Houston branch on September 21, a large group of Texas bank leaders received a briefing from Federal Reserve Senior Business Economist Jesse Thompson to learn of the critical links between the Texas energy industry, the local economy and global markets. It was clear from his presentation that the energy transition will take decades and there is no renewables market without oil and gas, despite regular calls from some politicians and activists to completely eliminate fossil fuels.
On September 22, the delegation headed to Corpus Christi where the port is America’s #1 crude oil export gateway and is #2 for liquified natural gas (LNG) exports. Two of the most important energy exporting mid-stream facilities in the country are run by Cheniere and Enbridge. The scale and footprint of the complexes left no doubt about their impact on the local and state economy, as well as emphasizing Texas’ leadership role influencing the global oil and gas supply and achieving American energy independence. The Port of Corpus Christi alone supports more than 98,000 jobs in the Coastal Bend region and has an economic impact of $400 billion for the U.S.
On the docks, vessels 1,100-1,500 feet in length were loading LNG and crude oil for delivery to Europe where a myopic shift to a renewables-only energy policy has left countries vulnerable to tyrants like Vladimir Putin and the winter fury of Mother Nature. Interestingly, companies like Enbridge are leveraging resources from fossil fuels to provide cash flow for development of next-generation clean energy hydrogen solutions.
The day ended with a flight to the Permian Basin and a meeting with West Texas oil patch bankers. Demonstrating the deep insights of community bankers, they highlighted the industry’s local connections to well-paying jobs, small oilfield service and supply companies and other downstream beneficiaries such as home builders, hotels and restaurants. They also shared their general concern with overregulation coming out of Washington that will negatively impact their local communities.
Wrapping up the Energy Tour in Dallas with area bankers on September 23, Nichols summarized his observations: “Government needs to get out of the way and let banks be banks. ABA believes that free market principles, credit worthiness and safety and soundness should be our guides — not ideologically-driven agendas that seek to make banks a social police force.”
Furlow added, “Together, we want to be voices for collaboration and common sense when it comes to protecting our environment without destroying the livelihoods of Texas workers, the economic security of small businesses and communities and the viability of banks that support them.”
Banks should be free to bank the energy industry without another layer of regulations that are intended by proponents to suppress capital to oil and gas. This has been TBA’s message in 2022 and it will continue to be our call in the upcoming state legislative session, with leaders of the new Congress and in our engagements with Federal regulators.
The realities of economics, war and supply chain disruption are making it clear that we cannot simply shift to a fully green economy by 2030. It’s time for an honest and direct discussion about the politicization of banking.
In a September congressional hearing, Rep. Rashida Tlaib (D-MI) asked some of America’s largest bank CEOs if their banks would be cutting off oil and gas lending. JPMorgan Chase CEO Jamie Dimon responded: “Absolutely not and that would be the road to hell for America.”