American Oil and Gas Reporter - February 2021 - 23

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Industry's Adversaries
Pressure Capital Providers
To Shun Arctic Projects
In June 2020, the Alaska congressional delegation sent a
letter to the U.S. Office of the Comptroller of the Currency discussing decisions by several of the nation's largest banks to
stop lending toward new oil and gas projects in the Arctic. The
letter described the unfair effects these lending decisions had
on Alaska's North Slope Native communities and all Alaskans.
The letter also stated that, although the authors believed that the
banks' rationale was essentially political, the banks ostensibly
justified their decisions by claiming reputational risk.
In response, the OCC requested information from several
large banks to better understand their decisions. The ensuing
responses indicated that, during the course of 2019 and 2020,
these banks had decided to cease providing financial services to
one or more major energy industry categories, including coal
mining, coal-fired electricity generation and/or oil exploration
in the Arctic region. The terminated services were not limited
to lending, where risk factors might justify not serving a
particular client (e.g., when a bank lacked the expertise to
evaluate the collateral value of mineral rights in a particular
region or because of a bank's concern about commodity price
volatility). Instead, certain banks indicated they also were terminating advisory and other services unconnected to credit or
operational risk.
Such actions led the OCC in November to propose a rule to
ensure fair access to banking services provided by national
banks, federal savings associations, and federal branches and
agencies of foreign bank organizations. The proposal aimed to
codify more than a decade of OCC guidance, which maintained
that banks should provide access to services, capital and credit
based on the risk assessment of individual customers, rather
than broad-based decisions affecting whole categories or classes
of customers.
" Fair access to financial services, credit and capital are
essential to our economy, " wrote Acting Comptroller of the
Currency Brian P. Brooks. " This proposed rule would ensure
that banks meet their responsibility to provide their services
fairly since they enjoy special privilege and powers because if
the system fails to provide fairness to all, it cannot be a source
of strength for any. "
IPAA voiced support of the rule. OCC was rightfully
concerned about such a de facto " redlining " of certain industry
categories based on issues unrelated to their financial soundness
and that rely on external characterizations of their soundness,
particularly by entities that object to these industries.
Unfortunately, during recent years, America's essential oil
and natural gas production industry has become a target for
several " Keep It in the Ground " environmentalist lobbying operations. These organizations have turned from their historic
regulatory focus to a broader arena of actions, including attacking
capital sources. They have gone beyond conspiring to abuse
federal delegation of Clean Water Act authority to prevent the
rightful permitting of interstate commerce-based projects and
repeatedly using the courts to challenge permitting of essential

" These radical environmental groups have
made it a prime objective to use political
pressure to limit capital to an essential
industry. If they succeed, it will strike a
devastating blow against the U.S. economy,
American national security, and the
country's oil and natural gas producers.

infrastructure projects such as pipelines. In 2020 they attempted
to prevent any COVID-19 relief funding to be directed to oil
and natural gas production companies facing unprecedented financial threats. They also have started pressuring banks to stop
lending toward oil and natural gas projects.
These radical environmental groups have made it a prime
objective to use political pressure to limit capital to an essential
industry. If they succeed, it will strike a devastating blow
against the U.S. economy, American national security, and the
country's oil and natural gas producers.
Democrats including such as Senator Sherrod Brown, DOh., chairman of the Senate Banking Committee criticized the
rulemaking. " This proposal would cause a chilling effect on the
development of prudent risk management approaches, and
would inhibit banks' ability to consider a broad range of risks,
including climate-related financial risks, " he charged.
However, on Jan. 14, the OCC released the finalized " Fair
Access to Financial Services " rule. Senator Kevin Cramer, RN.D., praised the rule saying, " Discrimination is not allowed in
our society and big banks should not be an exception. No
matter how important their services are, they do not have the
right to create de-facto bans on legal businesses like energy
producers and gun manufacturers. "
With the Biden administration's moves to halt all pending
Trump administration rulemakings, as well as efforts to undo
those that have taken effect, this victory for our industry may be
short lived, but in the year ahead the team at the Independent
Petroleum Association of America will continue to push for fair
access for independent producers, whether that be in financial
services broadly or the next COVID aid legislative package. ❒

LEE FULLER is executive vice

president of the Independent Petroleum Association of America.
His other experience includes
working as staff on the U.S. Senate
Committee on Environment and
Public Works, at the Smith-Free
Group and its predecessor organizations, and for Exxon Company
USA's Baytown, Tx. refinery.
FEBRUARY 2021 23

American Oil and Gas Reporter - February 2021

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