Ending Fossil Fuel Bailouts Act

Summary#

This bill changes the bankruptcy rules in title 11 of the U.S. Code for companies that explore, produce, refine, or distribute oil, gas, or coal. It adds definitions for "fossil fuel company," "oil," "gas," "coal," and "executive officer." Trustees must treat cleanup and reclamation costs for fossil fuel operations as necessary costs and recover those costs from secured property. For fossil fuel debtors, certain claims get a new priority order: (1) wages and benefits for non-executive employees, then (2) accumulated and projected reclamation costs (including unpaid environmental bonds and penalties under specified environmental laws), then (3) other unsecured claims, (4) shareholder claims, and (5) the existing order in section 507(a). If the estate cannot cover wages and reclamation costs, courts may recover executive officers' compensation from the prior five years, and private equity owners, parent companies, and hedge funds can be held jointly and severally liable. The bill makes environmental bond obligations and reclamation costs nondischargeable in bankruptcy. It also bans abandoning property used for fossil fuel operations as "burdensome" and extends the look-back period for avoiding fraudulent transfers to 10 years for fossil fuel debtors. The Department of the Interior must include a lease clause, for new oil, gas, and coal leases, that prevents transfer of the lease if the lessee has filed for bankruptcy. The amendments apply only to bankruptcy cases begun on or after the law takes effect.

What it means for you#

• If you work for a fossil fuel company that files bankruptcy: wages and benefits for non-executive employees are placed ahead of many other claims.
• If you are a government agency or a party with environmental reclamation claims: reclamation costs and unpaid environmental bonds are given high priority and cannot be wiped out in bankruptcy.
• If you are an executive officer of a fossil fuel company: the court may seek compensation paid to you in the five years before bankruptcy if the estate cannot pay higher-priority claims.
• If you are an owner or investor (private equity, parent company, or hedge fund) in a fossil fuel company: you can be held jointly and severally liable for shortfalls in wages and reclamation costs when the estate lacks funds.
• If you hold or seek an oil, gas, or coal lease issued after this law takes effect: the lease must include a rule that stops the lessee from transferring the lease if the lessee has filed for bankruptcy.

Expenses#

The bill directs trustees to treat accumulated and projected reclamation costs for fossil fuel operations as necessary costs and to recover those amounts from secured property. It prioritizes unpaid environmental bonds and specified environmental penalties and requirements. The bill does not include any dollar amounts or estimates of total costs, and there is no publicly available information in the bill text about the broader budgetary impact on federal, state, or local governments.

Proponents' View#

The bill's stated purpose in its title and text is to ensure oil, gas, and coal companies that enter bankruptcy fulfill environmental reclamation obligations and to prevent those costs from being shifted away from cleanup responsibilities. The changes are framed to prioritize cleanup costs, protect non-executive employee wages, and hold owners or financiers liable when the debtor estate cannot pay required reclamation or wages.

Opponents' View#

No publicly available information.