In August 2005, the U.S. Congress and then-President George W. Bush blessed the oil and gas industry with a game-changer: the Energy Policy Act of 2005. The Act exempted the industry from federal regulatory enforcement of the Safe Drinking Water Act, the Clean Water Act and the National Environmental Policy Act.
While the piece of omnibus legislation is well-known to close observers of the hydraulic fracturing (“fracking”) issue – especially the “Halliburton Loophole” – lesser known is another blessing bestowed upon shale gas and tight oil drillers: near zero-percent interest rates for debt accrued during the capital-intensive oil and gas production process.
Or put more bluntly, near-free money from the U.S. Federal Reserve Bank. That trend may soon come to a close, as the Federal Reserve recently announced an end to its controversial $3 trillion bond-buying program.
In response to the economic crisis and near collapse of the global economy, the Federal Reserve dropped interest rates to between 0 percent and .25 percent on December 16, 2008, a record low percentage. It also began its bond-buying program, described in a recent Washington Post article asimplemented to provide a “booster shot” to the economy.
“The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability,” the Fed stated in a press release announcing the maneuver. “In particular, the [Federal Reserve] anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.”
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