US ELECTIONS: Potential split US government puts energy policy in agencies' court

With major national election outcomes still in flux Wednesday morning, energy lobbyists and policy analysts were parsing the potential for divided government to dampen energy policy shifts, even if Democratic presidential contender Joe Biden ultimately prevailed.

The strong blue wave that some Democrats had hoped would allow them to capture the US Senate and expand their margins in the House of Representatives appeared not to materialize.

Scott Segal, co-chairman of Bracewell's Policy Resolution Group, said in the vote tabulation trends continue, it seems most likely the Senate will remain in Republican hands. In that scenario, the ability to use the budget-reconciliation process or eliminate the filibuster is "effectively off the table," he said during the group's Nov. 4 webinar on the election outcome. Both steps have been discussed in the context of Democrats passing climate-related legislation.

But within that context, Segal described Biden as potentially well-positioned to work with the Senate. "This is somebody who will literally bring four decades of experience in dealing with the Senate," and brings friendships in the chamber.

"The ability to jawbone in the Senate, and create a middle path or passage of legislation is more important," he said. "On the major issues — tax packages, energy, climate change — we will see more modest attempts, in my judgment, at negotiated compromise because that's what an institutionalist like Joe Biden knows, that's all he can get."

Others, including Ron Minsk, a former energy and environment advisor to President Obama and a current fellow at the Columbia Center on Global Energy Policy, suggested much would also depend on the stance the Senate decides to take in working with the president.

Should Trump prevail in a second term, Bracewell analysts pointed to more of the same of what they have seen in the first.

A turn toward FERC

Bracewell energy regulatory lawyer Christine Wyman said no matter who takes White House, the Federal Energy Regulatory Commission will play a bigger role in the nexus of energy and climate policy than it has played in the past.

Without control of the Senate, Biden, if elected, is likely to look to FERC to achieve climate and energy goals such as decarbonizing the power sector by 2035, Wyman said. She noted that Biden would likely inherit a 3-2 Republican-controlled FERC that would run through at least June 2021.

Under a Trump-wins scenario, she saw FERC Chairman Neil Chatterjee for the remainder of his term continuing to engage in the climate debate, whether by review of carbon pricing schemes or implementing Trump's National Environmental Policy Act reform rules in the coming year.

And Ron Minsk, a former energy and environment advisor to President Obama, and a current fellow at the Columbia Center on Global Energy Policy, said Trump appears to have held fast in his view of the need to maintain coal and nuclear generation to ensure grid resiliency.

"I am guessing that they will look for any path that they can possibly find. [Trump] has not been shy in trying to exercise the authority of the president, in reality, the authority that he and only he believes the president has," Minsk said.

Eric Washburn, a consultant for PRG and co-chairman of Sportsmen and Sportswoman for Biden, said Biden would likely have to promote his clean energy agenda administratively.

EPA outlook

"That's going to put a lot of pressure on [the Environmental Protection Agency]," he said. "I suspect you're going to see a new Clean Power Plan, revisiting methane limits, revising wetlands protection, ... a lot of what we saw in the Obama administration come back this time in a pretty activist EPA." The Department of Energy may well ramp up energy investment in innovation in areas like green hydrogen, offshore wind, and grid integration of renewables, he added.

A Biden administration could make strides on climate goals through the EPA by reversing Trump administration rollbacks of vehicle fuel efficiency targets and protecting California's waiver to set tougher-than-national standards, a policy that will otherwise be fought over in the courts if Trump wins a second term. The waiver is key to California's latest zero-emission vehicle goal of phasing out all new sales of gasoline-powered cars by 2035.

Just as Trump often turned to administrative actions without the support of Congress to execute policy goals, Rapidan Energy Group predicted a Biden White House could rejoin the Paris Agreement, block new federal drilling leases, require lengthier environmental project reviews, and halt the use of small refinery waivers to the federal biofuel mandate.

Rapidan said Biden could also pursue climate action through the Federal Reserve or Security Exchange Commission to restrict the fossil fuel sector's access to low-cost capital.

Increased partisanship

Katie Bays, managing director of FiscalNote Markets, said increased partisanship seen on energy matters adds a headwind around large-scale energy infrastructure investment.

"Even if President Donald Trump retains control of the White House, midstream developers and upstream operators will likely face increasing scrutiny and difficulty developing projects in blue states, counties, and municipalities," she said.

Fossil fuel advocates saw the early results as a useful check on an energy policy sea change.

"One thing is for certain: if Joe Biden shuffles into the White House, he will do so lacking any kind of mandate to make energy more expensive, restrict the use of our domestic natural resources, ban fracking on federal lands, or impose a carbon tax or other restrictive carbon policies on the American public," said Tom Pyle, president of the American Energy Alliance and former head of Trump's 2016 Department of Energy transition team.