Mnuchin said he is considering a lending program for the companies that are seeking aid as they cope with a devastating plunge in prices.

“One of the components we’re looking at is providing a lending facility for the industry,” Mnuchin told Bloomberg News on Thursday. “We’re looking at a lot of different options and we have not made any conclusions.”

Industry allies have promoted several ideas, such as loans to distressed producers in exchange for government stakes or lifting restrictions on existing aid programs, which could complicate negotiations on future stimulus packages.

President Donald Trump pledged to make funds available to oil companies on Tuesday, and top cabinet officials have been huddling over a plan to deliver on the president’s tweeted promise to ensure “these very important companies and jobs will be secured long into the future.”

The effort comes as analysts predict a wave of bankruptcies among oil producers struggling to survive an unprecedented collapse in crude prices and demand tied to coronavirus-spurred lockdowns that have grounded planes and kept cars off the road.

Mnuchin wouldn’t say whether the program would be housed at the Treasury Department or at the Federal Reserve, which has created loan facilities to help businesses hard hit by the economic collapse triggered by the outbreak.

But congressional Republicans have warned that the lending created by the $2 trillion stimulus package isn’t enough to head off the “growing emergency.”

‘Present Danger’

“We face a real and present danger of seeing hundreds — if not thousands — of oil producers shuttering,” 11 Republican senators warned in a letter this week to Mnuchin and Federal Reserve Chairman Jerome Powell. “Assisting these companies could be the difference between maintaining our domestic energy production and workforce or shedding more U.S. jobs and returning to dependence on foreign sources of oil.”

Industry advocates are pushing for changes to ensure oil companies can tap loans restricted to firms that had credit ratings of at least BBB-/Baa3 as of March 22, 2020. Some oil companies saw their debt downgraded even before that deadline as they were pummeled by both the pandemic-spurred collapse in fuel demand and a surge in crude unleashed by a Russia-Saudi Arabia battle for market share.

That March 22 ratings deadline could be a big obstacle for shale producer Occidental Petroleum Corp., which had its debt cut to junk by Moody’s on March 18, with Fitch and S&P following on March 20 and March 25, respectively.

Republicans led by Senators Kevin Cramer of North Dakota and Ted Cruz of Texas argue the Treasury Department and Fed should shift the date earlier so company ratings predate the Russia-Saudi maneuvering. They are also asking for additional flexibility on credit score requirements.

Debt Payments

Separately, the Independent Petroleum Association of America wants the Fed to permit oil companies to use loans under the Main Street program to pay off existing debt coming due amid the crisis. In a letter to Powell, IPAA president Barry Russell said that change would provide a “bridge to recovery for businesses that would have otherwise been able to meet their debt obligations, were it not for the virus.”

Administration officials have indicated they are receptive to changes. “We are working very closely together to ensure all the folks in the producing community have access to those types of loans, that type of liquidity,” Energy Secretary Dan Brouillette said during a Tuesday interview on Bloomberg Television.

Mnuchin signaled he’s unwilling to tap a separate $17 billion pool set aside for national security interests, telling reporters Tuesday that program was really designed for companies that are either major suppliers to the Department of Defense or have top-secret clearance.

Another option is for the Fed to purchase non-investment grade debt from distressed energy firms, ClearViewEnergy Partners said in a research note to clients. “Treasury could guarantee loans to distressed firms in return for equity stakes or senior debt, and Washington could use its voting shares to compel shut-ins” in oil production from their wells.

‘Alternative Structures’

For oil companies that aren’t credit-worthy enough to tap the Fed, Mnuchin said he is discussing “alternative structures with banks” because firms “would have to fit into the normal constraints” to take advantage of a Fed facility.

Any effort to use emergency virus funding to help the oil industry is sure to enrage Democrats who have warned about steering federal dollars to fossil fuels while other businesses struggle.

Senator Ed Markey of Massachusetts and Representative Nanette Barragán of California warned Powell on Thursday to steer clear of bailing out “an industry that has been struggling under its own short-sighted financial decisions for years.”

“It would be short-sighted misuse of taxpayer resources” to accede to requests to use loan proceeds to pay off or settle pre-coronavirus debts, the lawmakers said in the letter to Powell.

New Jersey Representative Frank Pallone explicitly warned against such a move last month.

“I refuse to put the American people on the hook for rescuing oil companies from a crisis that they themselves had a hand in creating,” said Pallone, the chair of the House Energy and Commerce Committee.

Oil and gas producers have recently stepped up lobbing for aid, with Occidental even enlisting its employees to ask Congress to “provide liquidity to the energy industry.”

Range Resources Corp. hired FTI Government Affairs earlier this month to lobby on “economic stimulus package assistance relating to the COVID-19 crisis,” according to a disclosure filed with Congress.