As the dust settles on Election Night 2018, we can begin to evaluate the consequences that the election’s results may carry with them. Specifically, how could the election and the changes it brings impact the oil and gas industry? Like many split results, the answer is not always clear.
First, the good news: in Colorado, Proposition 112 was handily defeated, failing 57% to 43%. Proposition 112 had been the subject of much debate since it was added to the state’s ballot earlier this year. The proposition stated that new wells could not be constructed within 2,500 feet of any structure intended for human occupancy, such as a home, school, hospital or office building. Currently, oil and gas wells may not lie within 500 feet of most structures and in some cases, 1,000 feet.
The proposition caused much concern within the state’s oil and gas industry and in the state’s political sphere. The current governor, as well as both the Republican and Democratic nominees for governor, all opposed the proposition. The Democratic nominee for Governor, Rep. Jared Polis, went on to win the nomination.
While Polis was a vocal opponent of Proposition 112, he has supported limitations on oil and gas drilling in the past, so it is possible that the fight in Colorado is not entirely over.
One state over in New Mexico, voters saw Democrat Rep. Michelle Lujan Grisham win the governorship over fellow Congressman Steve Pearce. Although Lujan Grisham has said she wants to work with industry, she promised during the campaign that she will undertake a methane mitigation policy as governor. She has been critical of President Trump’s suspension of rules enacted by the Environmental Protection Agency (EPA) and Bureau of Land Management (BLM) during the Obama administration to curb methane emissions. A staunch supporter of renewables, Lujan Grisham believes that by recovering methane that is flared or lost to infrastructure leaks, New Mexico could recoup tax dollars that could be better spent on education.
In other statewide ballot measure news, Florida voters passed Amendment 9, which prohibits offshore oil and gas drilling in state waters. It does not, however, interrupt the transportation of oil or gas products within this area. Florida’s state water boundary extends out three nautical miles from its shore in the Atlantic and nine nautical miles from its shore in the Gulf.
It is important to note that Amendment 9 will not affect offshore drilling leases in federal waters in the Gulf and Atlantic. It is possible that this measure was proposed as an effort to hinder President Trump’s April 2017 executive order that revised President Obama’s offshore oil and gas leasing plan. Florida has not allowed offshore oil and gas drilling within its state waters in the past, so this measure simply puts that stance into law.
Passage of Amendment 9 does not necessarily change anything in terms of drilling in Florida waters since it has not been allowed in the past, but it does remove the possibility of doing so in the future unless another constitutional amendment were to take place reversing the passage of the amendment.
Meanwhile, Republicans were able to keep their majority in the Senate, meaning that certain pro-business legislative priorities – such as tax reform and cutting back on costly regulations via the REINS Act – will likely remain in place.
On the other hand, the most significant challenges to our industry could come from the Democrat-controlled House of Representatives. The Democrats secured a big win in the House, flipping several Republican-held seats by the end of the night and regaining the majority in the House for the first time since 2010.
As a result of the win, we do have an idea of who is likely to take over as chairman of several oil and gas industry-relevant committees. While there may be some changes to this list, this is who we expect to take over the gavel:
- Energy and Commerce Committee: New Jersey Democrat Frank Pallone is expected to become chairman of the highly relevant Energy and Commerce Committee, which has oversight of the EPA, Department of Energy, Federal Energy Regulatory Commission and other energy-related jurisdictions. The current chairman, Greg Walden, is expected to becoming ranking member. We can expect this committee to take a close look into the effects of fracking and the lifting of the crude oil export ban.
- Natural Resources Committee: Arizona Democrat Raúl Grijalva will likely become chairman of this committee, which oversees the Department of Interior, while Utah Republican and current chairman, Rob Bishop, will likely take over Grijalva’s position as ranking member. This panel could begin investigations into the Department of the Interior and their regulatory decisions.
- Oversight and Government Reform Committee: Maryland Democrat Elijah Cummings will lead this powerful panel, which is tasked with oversight of the Administration’s Executive branch and its underlying agencies. The ranking member slot remains a question with the retirement of current chairman Trey Gowdy, but look for former chairman Jim Jordan or longtime Tennessee Republican John Duncan to take over this role.
- Science, Space and Technology Committee: We expect Texas Democrat Eddie Bernice Johnson to take the gavel in this committee. Oklahoma Rep. Frank Lucas could become the ranking member, but this is far from certain. Lucas could face a challenge from Brian Babin for the position, and we can expect others to jump in as well. This committee could investigate causes of climate change and the effects of carbon-regulation.
These possible chairmen and ranking members will be extremely relevant to the oil and gas industry over the next two years. During the Obama Administration, House Republicans passed a rule change in the House to allow for most committees to obtain enforceable subpoenas. This tool will likely be used to launch widespread investigations of the administration and force documents to be turned over to the committees.
The PESA Government Affairs team will continue to evaluate the election and the consequences that could come as a result. For additional information, please contact PESA Vice President Government Affairs, Tim Tarpley.