29 November 2018

U.S. Election Results 2018: Preliminary Considerations for the Energy Industry

Democrats’ regaining the majority in the U.S. House of Representatives assures an interesting upcoming two years of policy debates for the energy industry. Expect House Democrats to push initiatives on clean energy and address the effects of climate change through hearings or possible legislation, along with further scrutiny on the White House, Cabinet secretaries and federal agencies.

House Minority Leader Nancy Pelosi, D-Calif., is experiencing headwinds in her campaign to be elected Speaker. She has ample votes to prevail in the Democratic caucus; however, as of this writing, 16 House Democrats have announced that they will not support her nomination on the House floor, where she must receive a total of 218 votes to be elected. The general thinking is that she ultimately will prevail, but some uncertainty attends this decision.

1. Climate change: If she is elected Speaker of the House, Rep. Pelosi has announced her intention to re-establish the Select Committee on Global Warming. Similar to its predecessor in 2007-10, the committee will not have legislative jurisdiction but will essentially serve as a messaging operation for Democrats on matters related to climate change. It’s notable that Rep. Pelosi has made no other promises regarding the way that climate change will be handled in the new Congress. Democrats will proceed cautiously with an eye toward protecting their majority in the 2020 election and are unlikely to give substantial legislative consideration to a cap-and-trade-style trading program. A carbon tax has some measure of bipartisan support along with an impressive list of corporate supporters, including Exxon, BP, AT&T, General Motors and Walmart. A carbon tax is the more likely legislative vehicle for addressing climate change than a cap-and-trade program. That said, Democrats may rely on messaging and numerous hearings on climate change and postpone legislative consideration for the time being.

2. Oversight and investigations: With Democrats retaking the majority, House committees will see new leadership. Relevant changes include Rep. Frank Pallone of New Jersey ascending to chair the Energy and Commerce Committee; Rep. Raúl Grijalva of Arizona favored to take the gavel of the Natural Resources Committee; Rep. Eddie Bernice Johnson of Texas the presumptive chair of the Science, Space and Technology Committee; and Rep. Elijah Cummings of Maryland set to lead the Oversight and Government Reform Committee. House committee chairs have unilateral authority to issue subpoenas, begin congressional inquiries, issue records requests and hold hearings on matters of their choosing. Both investigative and legislative hearings can be expected on a wide range of issues within the energy and environmental portfolios. A focus on the following subjects is likely, with hearings conducted by the House Energy and Commerce Committee and its Oversight and Investigations Subcommittee:

  • Trump administration rollback of Obama-era emission limits from oil and gas operations;
  • Rollback by the Trump administration of fuel efficiency standards for vehicles;
  • Rollback of Obama’s Clean Power Plan for greenhouse gas emission controls on power plants;
  • Efforts by the Trump administration to instruct the Federal Energy Regulatory Commission (FERC) to favor the dispatch of coal and nuclear plants over gas- and renewables-fueled plants regardless of cost; and
  • House hearings focused on the costs of climate change and impacts of climate change on communities. Under Republican control of Congress, hearings focused on the costs of climate change controls. Democrats will diametrically shift the focus to the costs of inaction.

3. Infrastructure legislation with major energy components: Over the past year, the prospect of a robust infrastructure bill has received bipartisan attention, including input from President Trump. While there is broad agreement that infrastructure investment is necessary, discussions stall when the subject turns to scope and methods of funding. House Democrats have put forth a $1 trillion infrastructure proposal looking to address, among other things, the nation’s water systems, broadband accessibility and school resources, with payment stemming from an increased gas tax. In July, Rep. Bill Shuster, R-Pa., the retiring chairman of the House Transportation and Infrastructure Committee, released a draft bill on infrastructure, prioritizing the solvency of the Highway Trust Fund and calling for a temporary increase in the gas tax. Reports suggest that the President himself has voiced support for a rise in the gas tax to offset costs of the White House infrastructure proposal, which calls for $200 billion in federal spending.

In 2017, Rep. Pallone, the likely incoming Democratic chairman of the Energy and Commerce Committee, introduced the Leading Infrastructure for Tomorrow’s America Act (H.R. 2479). This measure will almost certainly resurface in the new Congress. Look for major portions of this bill to be added to any comprehensive infrastructure measure that passes the House. Rep. Pallone’s bill includes the following energy and environmental provisions:

  • Reduction of lead in drinking water through an authorization of appropriations;
  • The promotion of energy efficiency in buildings, industry, homes and schools;
  • Modernization of the electric grid promoting efficiency, reliability, resiliency and security. In this regard, a major focus will be strengthening the electricity grid in order to accommodate larger amounts of wind- and solar-generated electricity. That power is typically produced in rural areas. New and higher capacity transmission lines will be needed to transport larger quantities of it to the metropolitan loadcenters;
  • Incentives for safety and improved natural gas pipeline environmental performance through pipeline replacement;
  • Revitalization of brownfield sites;
  • A diesel emissions reduction program for vehicles and fleets;
  • The establishment of a Southeast Refined Product Reserve to mitigate the effects of severe regional energy disruptions. This provision was in response to the retail gasoline shortages that arose in the southeastern states several years ago; and
  • Ensuring the Strategic Petroleum Reserve is operated in an environmentally safe manner.

4. Comprehensive energy legislation: In 2016, the Energy Policy Modernization Act of 2015 (S. 2012) nearly became law but fell short after the House and Senate were unable to reconcile differences in a bicameral conference. Last year, the chair and ranking Democratic member of the Senate Energy and Natural Resources Committee, Sens. Lisa Murkowski, R-Alaska, and Maria Cantwell, D-Wash., introduced the successor to S. 2012, S. 1460. Titled the Energy and Natural Resources Act of 2017, S. 1460 seeks, among other things, to:

  • Direct federal agencies to implement cost effective energy efficiency projects;
  • Direct the Office of Management and Budget to collaborate with federal agencies to implement energy-efficient technology development through research, development and demonstration projects; and
  • Direct the Department of Energy to create model grid architecture to promote efficiency and encourage electric grid modernization.

In 2016, the Murkowski/Cantwell legislation passed the Senate by a large bipartisan vote of 85-12. It will almost certainly be reintroduced and given serious consideration in the upcoming session of Congress. One could expect that Democrats will try to move the measure in a greener direction putting more emphasis on promoting energy efficiency and urging grid strengthening to transport renewably-generated power into metropolitan areas. Hearings took place on the bill in the Senate Energy and Natural Resources Committee in the current Congress. It did not advance beyond the committee hearing stage and is not expected to move in the lame-duck session. It is highly likely to receive further serious consideration during the coming two years.

5. The Safe Energy Future Plan: Last year, four Democratic House members — Reps. Diana DeGette and Jared Polis of Colorado, Matt Cartwright of Pennsylvania and Jan Schakowsky of Illinois — introduced a package of five bills called the Safe Energy Future Plan. These measures focus on shielding the public and the environment from risks associated with oil and gas production by, among other things, restoring federal regulatory authority over hydraulic fracturing (fracking); requiring disclosure of chemical solutions used in fracking fluids; ensuring that the oil and gas industry implements protections from air pollution; and providing for the safe handling and disposal of hazardous waste associated with oil and gas operations. Under a Republican-controlled House, this package will not see further consideration this Congress. However, with all five proposals receiving House Democratic support, they are likely to be reintroduced and seriously considered next year.

6. Reviving the Land and Water Conservation Fund: Lawmakers may look to extend permanently the Land and Water Conservation Fund, which expired in September, in the lame-duck session by pushing stand-alone legislation, adding it to a larger bipartisan public lands measure or attaching it to must-pass legislation such as the spending package set for debate in early December. There is bipartisan agreement on the importance of authorizing the fund.

7. Possible review of the renewable fuel standard: Sen. John Barrasso, R-Wyo., chairman of the Senate Committee on Environment and Public Works, has indicated an interest in an examination of the renewable fuel standard. Possible legislative objects could be a hard cap on the percentage of renewable fuels required to be used in each gallon of gasoline and moving the point of obligation in the trading program from the refiner/importer, where it currently resides, to the blender/distributor. Democrats would be unlikely to support these changes.

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