Senate Bill Aimed At Kremlin Would Also Hurt U.S. Oil Producers

At a time that is undeniably one of existential crisis for the U.S. domestic oil and gas industry, the worst thing that could possibly happen would be to incur even further damage from friendly fire. That very threat exists today in the form of a bipartisan bill sponsored by two powerful senators: New Jersey Democrat Robert Menendez and South Carolina Republican Lindsey Graham.

Looking to sanction Russia for its persistent efforts to meddle in U.S. elections, Menendez and Graham last year introduced the Defending American Security from Kremlin Aggression Act, or DASKA. While certainly a worthy goal, the bill unfortunately casts such a wide net that it would, if left in its current drafted form, potentially end up penalizing U.S.-based companies more than those based in Russia and supported by the Kremlin.

The bill would impose U.S. sanctions over a wide range of international projects in which Russian-based oil companies are involved. While this no doubt seems to the Senators and many others like a good way to punish the Kremlin and one of its major sources of income, the execution contained in the bill leaves much to be desired.

As former Congressman Joe Barton pointed out in a recent Houston Chronicle op/ed, DASKA would “prohibit U.S. companies from participating in energy development projects in which Russian companies were also participating. This would deny the Russians American know-how and resources, creating possible setbacks for Russia’s highly important oil and gas sector. But it would also deny U.S. companies a chance to be part of promising exploration and development projects anywhere in the world. This would force U.S. companies out of projects already underway and bar them from new projects. The Russians are often bad actors but they are seldom fools. Every joint venture they sign onto, even in a minor role, is one more venture the U.S. would have to forgo. The result would be to hurt the U. S., not Russia. This would be the exact opposite of the stated goal of the legislation.”

Some might think that such negative impacts would only apply to major, integrated oil companies like ExxonMobil and Chevron, U.S.-based “big oil” giants who invest in development projects all over the world. But that would be wrong. Many independent producers also engage in international projects, and the viability of those projects and ability to engage in others has never been more vital to helping these companies weather the major storm in which they are currently entangled.

This is not a slam on these two senate sponsors and other congressional supporters of this bill. Their intentions are noble, and the fact is that many in the U.S. oil and gas industry have for years advocated that congress intervene to sanction Russia. Because our elections are far from the only way that country has created mischief in U.S. society.

For well over a decade now, Russian interests have poured millions of dollars into funding an array of anti-fracking NGOs that have used those funds to sow disinformation about hydraulic fracturing and the oil industry in general in the U.S. media. Russia has long viewed the U.S. shale industry as a threat to its own market share where oil and gas is concerned, and has taken many actions to do it damage. Industry advocates have long sought to convince the U.S. government to intervene to sanction this kind of Russian influence, to little avail.

It would be the height of irony now if congress should finally decide to take action against the Kremlin related to oil and gas, but do so in a way that could actually do more harm to U.S.-based companies than to those based in Russia. DASKA is a noble idea, but its execution to this point is a problem. No one wants to kill the bill, but it certainly needs to be re-written in order to avoid these unintended consequences.