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Opposing forces of Biden, red Senate could bring stability to gas industry

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Opposing forces of Biden, red Senate could bring stability to gas industry

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U.S. Senate Majority Leader Mitch McConnell, R-Ky., leaves the Senate on Nov. 16. Should Republicans maintain their majority in the chamber, McConnell could provide a check on Democrats' climate legislation.
Source: Alex Wong/Getty Images News via Getty Images

A divided government under President-elect Joe Biden could provide more certainty for the oil and natural gas industry than a second term of President Donald Trump, according to some industry observers.

Under this view, the former U.S. vice president will likely face a Republican majority in the U.S. Senate, led by Senate Majority Leader Mitch McConnell, R-Ky., that is expected to block or at least temper more aggressive climate and clean energy legislation during Biden's first two years in office. At the same time, a Biden administration and Democrat-controlled U.S. House will moderate GOP-led deregulation efforts, potentially offering more certainty for the industry, according to some market observers.

Other observers countered that the sector should not expect any help from the incoming administration, given Biden's climate priorities.

According to Reuters on Nov. 17, Biden was projected to receive 306 electoral votes to Trump's 232. Trump has refused to concede and is contesting the results in several states, including Georgia, where the margin between the two presidential candidates was thin and the state is now recounting votes. Also in Georgia, Republican and Democratic candidates for the U.S. Senate are in close races before a Jan. 5, 2021, vote that will determine which party controls the chamber.

Those who saw a Biden administration as having potential benefits for the industry described mixed results from the Trump administration. While Trump spent much of his first term rolling back regulations and pushing for increased domestic fossil fuel production, another four years could have hurt the oil and gas industry down the line, argued Jen Snyder, energy director at Enverus, a provider of oil and gas data.

"Another four years of an energy-first and almost at-all-costs agenda may look beneficial for the industry in the short term, but could have done more damage in the long term," Snyder said.

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Some of the larger oil and gas companies supported some regulatory efforts under the Obama administration, Snyder noted, especially rules to limit methane emissions. Trump and a Republican-led Senate have since sought to "deregulate across the board, really without necessarily considering the appetite for deregulation," Snyder said.

As the gas industry seeks to market itself as a bridge fuel in the energy transition and a cleaner alternative to coal, such deregulatory efforts could hurt the sector's public perception. "You're really allowing all oil and gas operators to potentially be defined by some of the worst operators," Snyder said. "There is some danger in deregulating for deregulation's sake when there is some benefit ... and costs that can be borne by the industry that essentially makes it easier to argue that the producers are acting responsibly."

"Oil and gas isn't going anywhere soon, so we should not shorten the runway by appearing irresponsible and unaware of environmental, social goals," she said.

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Though Trump's environmental rollbacks often helped fossil fuel companies, they sometimes ended up in court and did not always bring the regulatory certainty that businesses need to plan for the future. A Biden administration working with a divided Congress could offer a "moderating force" as the federal government works to rebuild the economy and handle the pandemic, according to Frank Maisano, a senior principal with the Policy Resolutions Group at the Bracewell LLP law and government relations firm, which has clients across the energy sector.

Given the amount of renewable energy in many Republican lawmakers' districts, the two political parties could come together to pass a greener infrastructure bill to help the nation, Maisano said. While such a package might not be as green as progressives want, "it will be a bridge to start building some consensus," he said.

A red Senate will put a check on Democrats that would have been lacking had the Senate flipped blue, said Kelly Johnson, a partner with the law firm Holland & Hart LLP. But she said there was room for negotiation.

"It's going to be a different dynamic, because if the House passes a bill that is semi-palatable to the Senate, and there are things senators actually want [to] accomplish … maybe you could actually broker some legislative accomplishments knowing that a Biden administration will sign them," she said.

Stability could also come from other sources. The Biden administration faces a conservative judiciary that may be less receptive to federal regulatory actions, forcing the White House and Congress to enact legislation rather than govern through agency rulemakings, Maisano said.

"It creates an environment where certainty and regulatory certainty becomes more viable," Maisano said. "In the current Trump environment, we didn't get a lot of regulatory certainty, no matter what."

But an industry attorney rejected the expectations of an improved position for the oil and gas industry. Paul Seby, an attorney with Greenberg Traurig LLP who is representing North Dakota in a challenge to an Obama-era methane regulation, said the Obama administration did not provide certainty for the industry, and he did not have higher expectations for an administration led by the former vice president.

"The industry I say it's naïve, because they want to believe that the Biden administration isn't populated with people who are anti-fossil fuel," Seby said. "But the reality is, it is."

"And so the idea that 'acceptable' or 'liveable' regulations for certainty purposes are coming there's no political basis for that," Seby said. "Biden was part of the Obama administration and their efforts were not balanced, restrained, reasonable. They were grossly overstepping their legal authority, and the courts have said that in many instances."

Biden was elected with a strong mandate to act on climate change, and he is clearly supportive of a transition away from fossil fuels, said John Morton, a partner with the climate change advisory and investment firm Pollination Group who served as White House senior director for energy and climate change under the Obama administration. While Biden may have "strong bipartisan instincts," he will be focused on decarbonization and combating climate change, Morton said.

"The future of fossil fuel energy production in this country no one should have any doubt that under this administration, and I would imagine future administrations as well the future is not a long-term one," Morton said.