Mid-term election shakes up Washington and impacts energy industry
After one of the most anticipated and talked about mid-term elections, one thing is clear, Republicans underperformed while Democrats overperformed. We will have a divided Congress, with Republicans taking the House of Representatives by a very slim margin, and Democrats holding the Senate with a slim margin, as well.
Democratic advantage. The runoff election in Georgia has been decided in favor of the Democratic candidate, leaving that party with a 51-member majority, albeit with Sen. Krysten Sinema (D-Ariz.) declaring on Dec. 9 that she will be an independent but still caucus with the Democrats. Whether she and Sen. Joe Manchin (D-W.Va.) will be able to affect legislation in the manner that they have done over the last nearly two years remains to be seen.
With the Democrats retaining control in the Senate, leadership will remain largely the same. Sen. Chuck Schumer (D-N.Y.) appears poised to retain his role as majority leader, and Sen. Dick Durbin (D-Ill.) will likely become majority whip, the second-highest-ranking leadership role. Additionally, the Energy and Natural Resources Committee chair, Sen. Manchin, and the Environment and Public Works Committee chair, Sen. Tom Carper (D-Del.), will also seek to maintain their positions on these important committees.
On the Republican side, leadership will mostly remain unchanged, with Minority Leader Mitch McConnell (R-Ky.) holding his leadership role despite calls from a handful of Senators to replace him. Also, ranking members Sen. John Barrasso (R-Wyo.) and Sen. Shelley Moore Capito (R-W.Va.) will likely hold their positions on Energy and Natural Resources and Environment and Public Works, respectively.
Of particular importance to the industry is Sen. Manchin. As chair of the Energy and Natural Resources Committee, he is expected to continue pushing for permitting reform. To be successful in clearing a Republican House, this effort must be bipartisan and include significant changes made to the measure that he tried unsuccessfully to pass in September 2022.
As for the situation in the House, the outlook is not as clear. At the time of this writing, it appears likely that Republicans will enter the new Congress with 222 seats and Democrats with 213. This margin is very slim and will have significant effects on the House Republicans’ ability to push back on many of the administration’s actions, Fig. 1.
Leadership in the House is still far from certain. In November, Kevin McCarthy defeated Rep. Andy Biggs in a caucus vote for Speaker of the House, 188-31, but a floor vote will take place in January when the new Congress convenes. With 31 Republican defectors, McCarthy will need to win their votes in January, or must rely on Democrats to provide the majority he needs to become Speaker. Either scenario will require McCarthy to cut a deal within his own party or with Democrats. Neither option is ideal for McCarthy or his ability to lead the caucus moving forward.
House committee chairmanships have not yet been decided, but we can expect Rep. Cathy McMorris Rogers (R-Wash.) to chair the Energy and Commerce Committee. Significant for our industry, she has vowed to focus on how funds allotted through the Inflation Reduction Act are distributed.
Another important panel, House Committee on Natural Resources, will almost certainly be chaired by Rep. Bruce Westerman (R-Ark.). Mr. Westerman plans to significantly broaden the focus of the committee, which has spent most of the past two years focused on climate change and related issues under Democratic leadership. Additionally, we expect the House Select Committee on the Climate Crisis to either be disbanded or drastically refocused, as most work is done in other standing committees, such as Energy and Commerce, and Natural Resources.
On the Democrat side, Nancy Pelosi and Steny Hoyer both announced they would retire from that party’s leadership, opening the door for new leaders among House Democrats. These moves made a lane for Hakeem Jeffries (D-N.Y.), who has now been elected Democrats’ House Minority Leader for the new session.
With the majority in the House having such slim margins, power will come from its oversight role. Rep. James Comer (R-Ky.) is expected to take the helm of the House Oversight Committee. Under his leadership, expect strong pushback on President Biden’s energy regulatory agenda.
White House actions. As legislative avenues will be difficult, if not impossible, for the Biden Administration, given the close margin in the Senate and the Republican-controlled House, expect most energy and climate actions from the administration to come in the form of regulations. Republicans in the House will be unable to stop many of these actions through legislation, but they may have success slowing implementation of regulations through their oversight powers.
Industry opportunities. While the government make-up in Washington is closely divided, we do see opportunities. As mentioned, there will be a path for permitting reform, should Republicans be open to negotiating with Sen. Manchin and the Senate. There will also be opportunities for industry to work with Republican members in the House on oversight to push back on policies that have hindered oil and gas development, and any new regulatory hurdles the administration looks to implement.
Additionally, with such a slim majority in the Senate, there may be opportunities to block controversial appointments to agencies, commissions and boards that may be detrimental to the industry. This includes appointments to FERC, the SEC, and cabinet agencies—including the Departments of Energy and Interior—and the EPA. Sen. Manchin and other moderates in the Senate will continue to be key votes for any future appointments.
Also, look for oversight of the Executive Branch, as it implements the Inflation Reduction Act. This will protect our industry’s opportunities to benefit with tax credits for clean energy technology and manufacturing, in addition to 45Q credits and the new 45X credits. Also, the House will be able to ensure that the administration follows the law and continues with federal onshore and offshore lease sales.
I am optimistic about our industry and what the coming year holds. Our workforce is growing, our production continues to increase, demand is on the rise, and the industry is delivering and implementing new and innovative technologies to continue lowering emissions while expanding production to meet ever growing global demand. WO
