US Republican victory may have muted oil, gas impact

Washington (Platts)--5Nov2014/423 pm EST/2123 GMT

A sweeping Republican victory in Tuesday's US midterm elections will likely bring some legislative priorities of the oil and natural gas industry to the House and Senate floors, such as approving the Keystone XL pipeline, rolling back air quality regulations for oil refineries and expanding drilling in both federal lands and waters.

But while they expanded their majority in the House of Representatives and gained their first Senate majority since 2006, Republicans will still lack enough votes to overcome a Senate filibuster on a party-line basis and the two-thirds majority to override a veto from President Barack Obama, limiting the scope of possible energy policy movement.

Perhaps the most profound impact of Tuesday night's election results for the oil and gas industry will be the agenda set by likely Senate Majority Leader Mitch McConnell, who easily was reelected as Kentucky's senior senator, and Senator Lisa Murkowski, an Alaska Republican who is expected to become chairman of the Senate Energy and Natural Resources Committee.

McConnell is expected to use Senate budget proceedings to curb financial and environmental regulations put in place by Obama over the past six years. He is likely to shepherd fossil fuel-friendly votes, such as approval of Keystone XL and US LNG exports, which current Majority Leader Harry Reid, a Nevada Democrat, had previously blocked.

In an election roundup note, analysts with ClearView Energy Partners speculated that with a Nebraska Supreme Court decision on Keystone XL's route expected late this year, the US State Department could approve the pipeline before the 114th Congress begins in January "to rob the GOP of an early-session victory lap (or, less cynically, as an olive branch to the new Republican leadership)."

Keystone observers have noted that Republican Senate victories in Colorado, Iowa, South Dakota and West Virginia have pushed the number of senators publicly backing the pipeline to 61 votes, above the 60-vote filibuster threshold -- though still shy of the 67 needed to override an Obama veto.

CRUDE EXPORTS TO THE FOREFRONT?

Murkowski's ascension from the ranking member seat to chair of the Senate Energy Committee may not initially mark much of a shift in the committee's focus. It is currently chaired by Senator Mary Landrieu, a Louisiana Democrat who has gone to great pains to show her support of the oil and gas industry during her re-election campaign.

Landrieu's race against her Republican challenger, Representative Bill Cassidy, will go to a December 6 runoff. Should Landrieu lose, Maria Cantwell, a Washington Democrat, and Bernie Sanders, a Vermont independent who caucuses with Democrats, are next in line to assume her seat as the committee's ranking member. Neither have been very supportive of oil and gas industry priorities.

That could set up an interesting dilemma for the oil and gas industry on who to support in the Louisiana runoff, as both Landrieu and Cassidy have touted their industry-friendly credentials in their campaigns.

Jack Gerard, head of the American Petroleum Institute, declined to say whether his trade association would prefer a Landrieu or Cassidy victory.

"I suspect moving forward you'll see similar to what you've seen in the past, with some supporting Senator Landrieu and some supporting Cassidy," he said in a briefing with reporters.

Murkowski, meanwhile, has made no secret of her congressional energy priorities and has become Capitol Hill's leading voice in calling for the US to drop its nearly 40-year-old restrictions on crude oil exports.

Murkowski has not said if or when she may introduce legislation on that issue. Several Republican lawmakers have said they are hesitant to support a change to export policy since it could be perceived as influencing US gasoline prices.

Gerard, whose trade group supports lifting the export restrictions, said he is hopeful that with Murkowski leading the Senate energy committee, the issue will rise to the forefront.

"Ultimately we need to build a consensus on the question and then change the law," he said.

Representative Fred Upton, a Michigan Republican who is expected to remain chairman of the House Energy and Commerce Committee in the next Congress, said he is still studying the export policy issue and has yet to decide if he supports a change.

COMMITTEE CHANGES

Murkowski may attempt to move the Fixing America's Inequities with Revenues Act (S. 630), which she introduced with Landrieu in March.

The bill, which does not have support from the Obama administration, would give coastal states as much as 37.5% of revenues for offshore energy projects. It would also give states 50% of revenues from solar, wind and other renewable energy projects on federal lands, mirroring the current revenue-sharing program for onshore coal, oil and natural gas.

A much more striking change will be seen in the Senate Environment and Public Works Committee where Senator Jim Inhofe, an Oklahoma Republican and author of a book calling climate change a hoax, is slated to replace Senator Barbara Boxer, a California Democrat, as committee chairman.

Inhofe supports legislation to repeal or reform biofuels mandates in the Renewable Fuels Standard, but these efforts may be complicated since opposition to the RFS does not fall cleanly down party lines.

--Brian Scheid, brian.scheid@platts.com
--Herman Wang, herman.wang@platts.com
--Edited by Derek Sands, derek.sands@platts.com

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