New York — Note: This is the second in a series about the impact of the US elections on key energy commodities. Similar deep dives into LNG, natural gas and the energy transition will follow over the next several weeks. The first part of this series can be found here.
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As the 2020 US elections approach, much of the national discussion focuses on the presidential race, but voters also face a host of ballot choices that will determine the future of energy sector policy at the federal and state levels.
The last two years have featured a divided US Congress. Democrats will have a chance to regain control of the Senate after six years in the minority. If coupled with a continued majority in the House of Representatives and a Joe Biden presidential win, a Democratic Senate would dramatically change the landscape for all manner of energy legislation, regulation and policy.
At the state level, high-impact ballot measures face voter review on Nov. 3, including proposals to mandate a 50% renewable portfolio standard (RPS) by 2030 in Nevada, increased taxes on North Slope oil production in Alaska, and for a new ad valorem property tax formula tied to oil and gas production in Louisiana.
Energy issues also play heavily into several high-profile races for governor, state legislatures and key state commissions.
Hanging over it all will be the fundamentals of the US economy and energy markets, already roiled by the coronavirus pandemic. Notably, these factors could temper regulatory policy pendulum swings, as policymakers and elected officials remain mindful of the damage already inflicted on the energy sector by the pandemic and associated economic downturn.
While a Donald Trump victory and continued control of the Senate by the GOP would promise more of the same for fossil fuels, trade and regulatory rollbacks, a Biden win and Senate shift wouldn't necessarily offer the opposite, at least not right away, according the Chris Midgley, Platts global head of analytics.
"I don't believe for a moment that his first year will be marked by him taking on the oil and gas sector at a time when they're all struggling," said Midgley of a potential Biden presidency. "That would be suicide. He needs to make sure he's sustaining the momentum of the economy."
Here's a quick rundown of key races and ballot measures:
US Senate/House balance of power
Overview: Republicans hold a three-seat majority in the Senate, maintaining a path for nominees and chairmanships on committees vital to energy legislation. But a Democratic sweep at the federal level would have long-term implications for the energy sector should Congress pass climate and clean energy legislation, rather than relying on a Biden administration to do the heavy lifting.
Most polls predict: Toss-up for Senate; Democrats strongly favored to hold House
Energy impact: A blue Congress could eliminate the Senate's filibuster, which could see more progressive legislation pass. It would also lead to using the Congressional Review Act to overturn some of the Trump administration's recent regulatory rulemakings. The left could also pack climate-focused provisions and clean energy funding into economic recovery legislation in the near- to mid-term should Democrats maintain control of the House and retake the Senate.
While Biden has proposed to completely decarbonize the US power sector by 2035, a Democrat-led Congress would likely pass a more watered-down, though still "historically ambitious," version of that emissions-reduction plan given headwinds from congressional Republicans, states and market constraints, said David Livingston, senior analyst with the Eurasia Group.
"It's not unusual for a policy as ambitious as the power sector one to go through the congressional process ... and perhaps arrive at a compromise outcome," Livingston said.
But if a Democrat-led Congress deferred to the executive branch to govern through executive orders and regulations in the energy sector — as has been the case in recent years — those changes and policies may not be as long-lasting, said Sasha Mackler, director of the Energy Project at the Bipartisan Policy Center. A Democratic majority may also include more moderate lawmakers from purple states, requiring climate policy to remain "pragmatic and bipartisan in nature," he said.
Unlike the major policy implications when the White House changes hands between political parties, congressional power shifts are less likely to yield dramatic effects, said William Yeatman, a research fellow with the Cato Institute. "Why would Congress lift a finger in this arena when the president can do it all for them, essentially?" Yeatman asked.
A Biden presidency with a divided Senate may resort to more executive action. But just as the Obama administration – which relied on the Environmental Protection Agency's Clean Air Act authority to implement the Clean Power Plan – had one of its major climate efforts stymied by a Supreme Court stay, a Biden administration could face similar obstacles without a strong Democratic majority in Congress, according to Matt Williams, emissions and clean energy analyst with S&P Global Platts Analytics.
Even Democratic Senators representing carbon-intensive states, such as Joe Manchin of West Virginia, might be more reluctant to support legislation providing incentives for clean energy over traditional fossil fuels, Williams noted.
Democrats' chances of retaking the Senate are unclear, and there are several toss-up races featuring significant energy elements, including in Colorado, Iowa and Montana where the Republican incumbent faces a difficult reelection bid.
Republicans appear less likely to flip the House, but doing so would limit climate policy advancements, according to the Bipartisan Policy Center's Mackler. A split Congress would be unlikely to pass partisan energy or climate legislation, continuing the current political gridlock in the Capitol.
Overview: Incumbent Governor Jay Inslee holds a sizable lead in the polls against Republican Loren Culp, the current police chief for the city of Republic.
Polls predict: The latest poll shows Inslee leading 61% to 32%. During a primary that featured 36 candidates, Culp earned a spot in the general election by receiving 18% of the vote compared to Inslee's 51%.
Energy impact: Dubbed "the greenest governor in the country" when elected eight years ago, Inslee in 2019 signed legislation placing Washington on the path to have a carbon-neutral electrical grid by 2030 and 100% renewable energy by 2045. Culp has said little regarding energy policy for the state, but he generally favors less government regulation and supports free market solutions. If elected, he also intends to immediately end coronavirus restrictions and fully reopen all schools and businesses.
Overview: Incumbent Chris Sununu serves as governor of one of only three states with Republican governors where the majority voted for Hilary Clinton in the 2016 election.
Polls predict: Sununu won the general election in 2016 by a margin of 49% to 47% and in 2018 by 53% to 46%.
Energy impact: One of the leading primary Democratic candidates, State Senator Dan Feltes, has pushed pro-solar and net metering bills. The primary election is taking place Sept. 8. Sununu has opposed various renewable energy proposals from lawmakers.
Overview: Republican Governor Eric Holcomb is running against Woody Myers, a millionaire venture capitalist and former Indiana health commissioner. If he wins, Myers would become the state's first African American governor.
Polls predict: Myers faces a difficult election as the latest polls have Holcomb leading by 43 points.
Energy impact: Holcomb supports the fossil fuel industry, while Myers has called for moving to renewables. Indiana ranks seventh among US states in coal production and second in coal consumption. In 2019, coal fueled 59% of Indiana's electricity net generation. Renewables accounted for just 7% of the state's generation in 2019.
Overview: Republican Governor Doug Burgum, a former tech investor, is seeking his second term against veterinarian Shelley Lenz, a Democrat, in a state whose economy is dominated by fossil fuel production and consumption.
Polls predict: Burgum holds a decisive edge in early polls, leading Lenz 62% to 32%.
Energy impact: Oil and gas production remains integral to North Dakota's economy. The state holds 2% of US natural gas reserves and trails only Texas in crude production and proved crude oil reserves. Due to a lack of adequate gathering and processing facilities, producers flared more than 200 MMcf/d of associated natural gas produced in June. The energy platform of opponent Lenz includes a North Dakota Energy Co-op and improving energy infrastructure for both the fossil fuel and renewable sectors. Burgum supported the Dakota Access Pipeline and said he's open to finding ways to keep a large coal-fired plant open even after Great River Energy announced plans to close it. The state generates more than 60% of its power through coal.
Overview: Governor Roy Cooper, a Democrat, is up for reelection in the state, where he has helped to transform the state's public utility commission into a more proactive player.
Polls predict: Cooper leads in the polls 50% to 40% in a race that also features the state's Republican Lieutenant Governor Dan Forest, along with Libertarian Steven DiFiore and Constitutional Party candidate Al Pisano on the ballot.
Energy impact: State leadership could prove important for gas pipelines. After a controversy involving Cooper over a multimillion dollar fund for the state related to the now canceled Atlantic Coast Pipeline project, the North Carolina Department of Environmental Quality recently denied a water quality certificate for Mountain Valley Pipeline Southgate.
Overview: Voters will decide whether to give a second and final approval to amending Nevada's constitution to include a 50%-by-2030 renewable portfolio standard.
Energy impact: NV Energy, whose utility subsidiaries serve about 1.2 million electric customers in Nevada, is already pursing large-scale transmission and solar-plus-storage projects to meet the state's green energy goals, which include a renewable portfolio standard of 50% by 2030. Governor Steve Sisolak signed the requirement into law in 2019.
But Nevadans are being asked whether to approve Question 6 and amend the state constitution to include the standard, which would prevent a future legislature from changing the requirement without the say so of voters. 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.
Overview: Voters will decide whether to change how the state Public Regulation Commission is set.
Energy Impact: Constitutional Amendment 1 would reduce the number of commissioners from five to three and bring an end to elections determining the makeup of the regulatory body.
The utility regulator now has five commissioners each representing a district of the state and serving staggered four-year terms. Under the measure, starting Jan. 1, 2023, the New Mexico governor would appoint three commissioners chosen from a list of nominees put together by a committee. The appointments for six-year terms also need the consent by the Senate. Approval of the measure would make future gubernatorial elections more significant for utility oversight, as governors would gain greater control over the regulatory body.
Approval of the measure means that 2020 would be the last year for election of commissioners.
Incumbent Cynthia Hall, Democrat, is facing off against Janice Arnold-Jones, Republican, for the District 1 seat. Democrat Joseph Maestas and Libertarian Chris Luchini are vying for the District 3 seat now held by term-limited Valerie Espinoza.
Overview: Voters will decide whether to increase taxes on certain oil production in the North Slope.
Energy Impact: The increase called for in Ballot Measure 1 would apply to North Slope fields that produced at least 40,000 b/d in the last calendar year and have a cumulative output of at least 400 million barrels of oil.
BP, Conoco Phillips Alaska and ExxonMobil are part of the OneAlaksa coalition urging 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.
Vote Yes for Alaska's Fair Share, which is spearheading the initiative, said the increase would apply only to Alaska's largest and most profitable fields – posing no threat to new development – and would give the state more money to pay for things like education, healthcare and capital projects.
Overview: Voters in the Pelican State will decide whether to amend 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.
Energy Impact: Constitutional Amendment 2 was referred to voters in May, when both the House of Representatives and Senate unanimously backed House Bill 360 from state Representative Mike Huval. The measure has the support of the Louisiana Tax Committee, Louisiana Tax Assessor's Association, Louisiana Oil and Gas Association and the Louisiana Mid-Continent Oil and Gas Association and is seen as putting the value of wells in the right place. Approval by voters would mean that when wells are more valuable, they will pay a little more tax and when less valuable, pay less tax, LOGA said.
Overview: The news here is the lack of an official ballot initiative drive.
Energy impact: Protect Colorado, a pro-drilling group, had planned to put before voters a measure to prohibit local governments from banning gas infrastructure in new buildings.
But Governor Jared Polis in July reached a deal with industry and environmental groups that could keep oil and gas issues off the ballot through 2022. As part of the bargain, Protect Colorado dropped the measure, and environmentalists agreed to stop pursuing stricter setback requirements for oil and gas developments.
The deal is meant to give the state more time to implement Senate Bill 181, a law passed in 2019 that changed the mission of the Colorado Oil and Gas Conservation Commission and gave local governments a bigger say in drilling.
TEXAS RAILROAD COMMISSION
Overview: One of three Texas Railroad Commission seats is in play in November, with three candidates in the running. The TRC regulates oil and gas drillers.
Energy Impact: Republican Jim Wright, owner of several South Texas oilfield services firms, opposes tighter restrictions on natural gas flaring, which surged in 2019 as oil producers wanted to keep producing but lacked access to pipelines to move associated gas volumes. He beat high-profile incumbent Ryan Sitton by more than 10 points in a primary runoff but has since come under fire from a Houston Chronicle investigation alleging his company, Dewitt Recyclable Products, violated TRC rules more than 200 times.
Democrat Chrysta Castaneda, a Dallas energy lawyer, has promised to clamp down on flaring, which could limit future oil production. She also favors stricter water reclamation rules. "Texans deserve someone who will enforce the law and work for all of us. Let's stop wasting energy," she said in a campaign video. Castaneda supports the TRC retaining a supply-coordinating role, such as a proration proposal that was ultimately rejected during the spring oil price crash.
Libertarian Matt Sterett also has come out against flaring but favors fracking generally. He wants to reduce oil and gas industry administrative burdens by cutting regulations and paperwork. The TRC "has the ability to restrict gas flaring, by simply denying permits," he said in a 2020 Ballotpedia survey.
Overview: After nearly 20 years in the minority in House of Representatives, Democrats are aiming to take back the chamber where all 150 seats are up for grabs. Republicans hold 83 House seats to Democrats' 67. A total of 16 seats out of the Senate's 31 are up for election. Presently, Democrats hold 12 Senate seats and Republicans hold 19.
Energy Impact: Clean energy advocates say this could alter the dynamic, after years of playing defense on tax incentives for wind energy and create openings for bipartisan support for electric vehicles, distributed resources and energy storage. Democratic lawmakers could also draft legislation to address oil and gas industry methane leakage and flaring, but without the Senate and/or governor's office in support, passage could be questionable.
Overview: Analysts suggest that the House of Representatives could flip to Democratic control with all 110 seats up for election. As of September, Republicans held 58 seats with Democrats holding 51.
Energy Impact: Democratic control of House would potentially shore up progress Governor Gretchen Whitmer has sought to make through the executive branch toward her goal of 100% clean energy. Michigan remains heavily coal-dependent for power generation, with coal supplying about 32% of the state's electricity in 2019. A Democrat-controlled House could support additional renewable energy-friendly policies, as renewable capacity has grown to supply 8% of Michigan's power in 2019.
Overview: The Senate may flip to Democratic control in a tight race where all 67 seats are up for grabs, analysts suggest; Republicans currently control the chamber 35 to 32. All 134 House seats are up for election, but Democrats control the majority 75 to 59.
Energy Impact: The state may have a chance to join states with 100% clean energy goals if the Senate flips to Democratic control. Governor Tim Walz strongly supported the measure in 2019, a year in which Minnesota produced about 31% of its wholesale electricity from coal. Minnesota is also among the nation's top-five ethanol producers, and about 30% of all US crude oil imports flow through the state.
Overview: Both the House and Senate look like close races with all 203 seats up for election in the House where Republicans currently have control 109 to 93. The Senate could be tight as well where 25 seats out of the Senate's 50 are up for grabs and Republicans have control 28 to 21 with one Independent.
Energy Impact: The House has put the brakes on some clean energy items, such as a bill on energy efficiency that advanced in the Senate, meaning a shift to blue could provide more such policy. Democratic Governor Tom Wolf may also tighten gas industry regulations, and on the power side efforts remain underway for Pennsylvania to join the Regional Greenhouse Gas Initiative, an emissions cap-and-trade program.
ARIZONA CORPORATION COMMISSION
Overview: The Arizona Corporation Commission has three seats out of five up for election, with the field of candidates split between three Republicans and three Democrats.
Energy Impact: The outcome could affect utility Arizona Public Service's pathway to achieving its recently declared 100% clean energy goal and determining what resources are included. Multiple candidates from both parties are pushing clean energy targets, while Republican Lea Marquez Peterson and Democrat Shea Stanfield told Ballotpedia they are in favor of 100% clean power policies. Arizona ranks third in the US in solar power capacity but generates most of its electricity from nuclear, natural gas and coal.