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Election showing deep divide on energy issues, tough path for climate policy

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Election showing deep divide on energy issues, tough path for climate policy

A host of energy and environmental developments unfolded across the country in down-ticket races in the U.S. election, revealing a growing disconnect on energy issues that will make any collective shift toward climate policy difficult to accomplish.

The results showed the lack of a Democratic "blue wave to easily sweep in national U.S. climate policy," according to Amy Myers Jaffe, research professor and managing director of the Climate Policy Lab at Tufts University's Fletcher School.

Jaffe pointed to Florida and Texas as two states hard-hit by recent severe weather events that nevertheless reaffirmed support for Republicans, who largely oppose climate legislation.

"Energy remains a powerful wedge in an increasingly divided America," Katie Bays, managing director of FiscalNote Markets, said.

READ MORE: Sign up for our weekly election newsletter here, and read our latest coverage here.

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States with a climate focus

Some states that have been vocal about leading on climate change in the absence of federal policy or have experienced economic wins from renewable energy retained their Democratic incumbents.

For instance, Democrat Jay Inslee held onto his seat as governor of the state of Washington. Climate policy is expected to remain a priority in his third term, with the state on a path to a carbon-neutral electric grid by 2030 and 100% renewable energy by 2045.

North Carolina's Democratic Gov. Roy Cooper will get a second term to continue efforts to harden infrastructure against extreme weather and cut carbon emissions in the politically conservative South. His plan to address climate change and transition to a clean energy economy looks to accelerate coal plant retirements, expand renewable energy growth and reform utility regulation and rate setting. North Carolina already ranks second among U.S. states in solar energy capacity.

Cooper's reelection does not bode well for the oil and gas lobby, as he has opposed drilling off the North Carolina coast. And while his position on pipelines and fracking has wavered in the past, more recently he has taken a more critical view of gas pipeline projects routed through the state.

Another area to watch is how Republican Greg Gianforte's election as governor of Montana shapes the energy sector from here on, according to Monica Hlinka, an associate research analyst at Regulatory Research Associates, a group within S&P Global Market Intelligence.

"Since the Republicans were able to flip the governorship and secure control of the legislature, they've created a government trifecta," Hlinka said.

Montana joined the U.S. Climate Alliance last year, but Gianforte previously said President Donald Trump's decision to withdraw the United States from the Paris Agreement on climate change was the right call.

Gianforte said during one of the gubernatorial debates that he supports an energy policy that continues to rely on coal and other nonrenewable energy sources, although he does not oppose other energy sources, such as wind and solar, Hlinka noted.

Fossil fuel-friendly states

States dependent on fossil fuels that remain significant players in coal production, on the other hand, held onto their Republican leaders.

Republican Indiana Gov. Eric Holcomb, a fossil fuel advocate, won reelection. Neither climate change nor the environment made his top-five list of priorities, as Indiana ranks seventh among U.S. states in coal production and second in coal consumption. In 2019, coal fueled 59% of Indiana's net power generation, according to the U.S. Energy Information Administration. Renewables accounted for just 7% of the state's generation that year.

New Hampshire's Republican Gov. Chris Sununu secured a third term in office, defeating a Democratic challenger who had planned to take a more proactive stance on mitigating climate change. Though no longer touting the GOP line of climate skepticism, Sununu has rejected regional initiatives to cut greenhouse gas emissions, making New Hampshire a regional outlier among New England states that otherwise have committed to more ambitious climate goals.

Sununu's approach to climate policy has put an emphasis on keeping costs down. He has opposed various renewable energy proposals from lawmakers and more ambitious emissions-reduction goals, asserting that they would raise electricity rates for low-income families and businesses. He has, however, been a vocal proponent of offshore wind development.

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North Dakota's Republican Governor Doug Burgum easily won a second term as that state grapples with an economic downturn brought on by the oil price drop and weak global demand.

North Dakota is the second-biggest oil-producing state after Texas, but it temporarily fell to the third spot behind New Mexico in May and June when producers rushed to shut in wells in response to low prices.

As of August, North Dakota's oil output has recovered to 1.16 million b/d, the highest since April, but state regulators continue to predict that another sharp downturn lies ahead after all easy-to-restart wells return to production. A lack of new drilling will bring on the next downturn as natural declines outpace new production.

Ballot initiatives establish policy priorities

A measure in Nevada to amend the state constitution to include a 50%-by-2030 renewable portfolio standard looked likely to pass, as of the evening of Nov. 4. The Associated Press reported that with 75% of precincts reporting, 56.4% of voters had approved Question 6.

The standard already is law in Nevada, after Gov. Steve Sisolak signed off on the requirement in 2019, but the constitutional amendment makes it harder to challenge legally, according to Jim Davis, research analyst at Regulatory Research Associates, a group within S&P Global Market Intelligence. Amending the Nevada constitution requires two rounds of voter approval; Question 6 passed the first round in November 2018, getting nearly 60% of voters' approval and setting the measure up for a vote again in 2020.

Echoing Davis' remark, Sam Gilchrist, western campaigns director at the Natural Resources Defense Council, said if the measure ultimately succeeds, it will provide an additional layer of protection for the renewable requirement. "It's a backstop if for some reason there were to be any changes made by the future legislatures," he said.

NV Energy Inc., whose utility subsidiaries serve about 1.2 million electric customers in Nevada, already is pursuing large-scale transmission and solar-plus-storage projects to meet the state's green energy goals.

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New Mexico is set to join the ranks of states that seat state utility regulatory commissions via executive appointment. Voters backed by 55% to 45% Constitutional Amendment 1, which reduces the number of members on the Public Regulation Commission from five to three and brings an end to elections determining the makeup of the body.

Under the measure, the New Mexico governor will — starting Jan. 1, 2023 — appoint three commissioners chosen from a list of nominees put together by a committee. The appointments for staggered six-year terms also would need the consent of the Senate.

The change likely will result in a more professional and less politically charged commission, according to RRA's Davis. Davis noted that the agency has seen some commissioner scandals in the past and subsequently adopted certain minimum standards. From an investor perspective, Davis said, RRA generally assigns more risk to elected commissions than to commissions whose members are appointed.

Governors in 35 states pick members of state utility regulatory agencies, according to RRA.

Passage of the ballot initiative also means that Joseph Maestas and Cynthia Hall, respectively elected and reelected on Nov. 3, will serve two-year terms instead of four-year terms.

Outside the continental U.S., an Alaska ballot measure to increase taxes on certain oil production in the North Slope looked poised for rejection.

With 53% of precincts reporting, the Associated Press reported that roughly 57% of voters said no to Ballot Measure 1, which would apply to North Slope fields that produced at least 40,000 barrels per day in the last calendar year and have a cumulative output of at least 400 million barrels of oil.

BP PLC, ConocoPhillips Alaska Inc. and Exxon Mobil Corp. are part of the OneAlaska coalition that urged voters to reject the measure, arguing it will increase taxes by at least 300% at $60/b oil prices and threaten oil development and jobs.

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Voters in Louisiana backed by a wide margin — 58.34% to 41.66% — an amendment to the state constitution to allow the presence or production of oil or gas to be taken into account when assessing the fair market value of an oil or gas well for ad valorem property tax purposes.

Constitutional Amendment 2 was pitched by supporters, including the Louisiana Oil and Gas Association, as making assessments on wells more accurate, predictable and fair.

The state only allows two ways to assess property values for oil and gas wells, neither of which takes into account the presence of oil or gas in a well. That means assessments do not match the value of the well, the group said.

"The core question was how do you figure out the value of a well, and assessors only had a limited ability to do that," Louisiana Oil and Gas Association spokeswoman Kati Hyer said Nov. 4.

The result on the ballot initiative shows voters agreed that the limitation did not make sense, Hyer said.

Along with that association, the Louisiana Tax Assessor's Association and the Louisiana Mid-Continent Oil and Gas Association also supported the measure.

Meghan Gordon, Maya Weber and Jasmin Melvin are reporters with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.