While the various fracking bans proposed by the Joe Biden/Kamala Harris ticket attracted the most attention during the general election campaign, the 2020 elections also produced outcomes in four key states that appear to be status quo in nature, but which could still produce significant impacts on the domestic oil and gas industry. From Pennsylvania to Montana to Texas to New Mexico, operators, pipeliners and refiners will all have to remain vigilant and ready to engage on energy-related proposals that are likely to arise.
Let’s look at the outcomes in these four big energy states:
Despite wildly inaccurate pre-election polls and media predictions that the Democrats were about to turn this traditionally red state blue, Texas in fact experienced its most status quo election result in the 21st century. Texas Republicans again won every statewide election as they have done in every cycle since 1994, including the crucial race to fill the open seat on the Texas Railroad Commission, which regulates oil and gas operations in the state. Democrats failed to defeat a single GOP incumbent in the state’s congressional races, and the balance of power in both houses of the state legislature remains safely in Republican hands.
All of this status quo-ism means that the state legislature will likely occupy virtually all of its time during its 140-day session in 2021 balancing the state’s budget and dealing with redistricting for the next decade. Members of the House and Senate will find little time to propose and shepherd any major legislation specific to the oil and gas business through the complex process during this session.
However, one big issue will certainly arise again, as it has done in every biennial session since 2009: That is the issue of Eminent Domain reform. With the major buildout of new pipeline capacity needed to carry Permian Basin oil, gas and natural gas liquids to markets along the Gulf Coast still ongoing, there can be little doubt that the legislature will once again have to wrestle with balancing the rights of landowners with the need for essential energy infrastructure in the state.
Funding the Railroad Commission will also no doubt be a sticky issue, given that it is funded almost entirely from fees on the industry itself. Given the fact that permits to drill and other necessary permits have declined dramatically in 2020, the legislature, industry and Commissioners will have to find creative ways to keep the Commission’s doors open for the next biennium.
North Carolina is not a significant producer of oil and gas, but it has become a very key energy state during the course of 2020, with big policy decisions impacting pipelines and public utility policy coming up for debate.
Incumbent Gov. Roy Cooper, a Democrat, won re-election with just 51.5% of the vote, signifying the “purple” nature of the state’s political balance of power. As well, the GOP retained and even increased its majorities in both houses of the legislature in a state that was won by President Donald Trump.
Gov. Cooper and his fellow Democrats have invested a lot of political capital in the promotion of a “clean energy” plan that would mandate increasing use of renewables in the state’s energy mix, a plan that major public utilities like Duke Energy
Pennsylvania is another state that experienced a true status quo election outcome. Democratic Gov. Tom Wolf was not up for re-election this year, and the Republicans seem certain to retain their majorities in both houses of the legislature.
Wolf is another Governor who has pushed an aggressive “clean energy” plan, along with higher taxes on the natural gas industry in what is the center of the Marcellus Shale universe. But the voters’ decision to retain GOP majorities likely means neither of the Governor’s policy preferences will become reality for at least the next two years.
New Mexico also had its own status quo set of election outcomes. Democratic Gov. Michelle Lujan Grisham was not up for re-election, and the Democratic Party retained its strong majorities in both houses of the state legislature.
The one outcome that could potentially produce a change of direction on some energy-related policy was the strong voter approval of Amendment 1, a plan that will change the makeup of the Public Regulation Commission (PRC) from an elected, 5-member panel to a 3-member panel appointed by the Governor. Although presented as a “non-partisan” effort by its boosters in the environmentalist movement, the reality is that appointees to this key Commission will almost certainly come from among supporters of whomever happens to be serving as governor when they are made.
A fracking ban on federal lands would have a major, direct negative impact on New Mexico’s oil and gas industry, given that such lands make up a huge portion of the acreage on which oil and gas drilling takes place in the state. But this change to the makeup of the PRC, which regulates the state’s electricity sector, could also have a significant, if less direct, negative impact on the business in New Mexico.
Despite their status quo appearances, the development of energy policies in these four key states in the coming years will be very interesting to watch.