With a full field of energy-related races and ballot initiatives galloping toward the finish line of the November 6 US midterm election, polling and speculation this week began to provide a clearer picture of the winners and losers among oil, natural gas and power market players.
Despite an aggressive late push by President Donald Trump to support Republican candidates, pollsters still expect the US House of Representatives to flip to a Democratic majority, which could complicate the president's regulatory rollback agenda. Also holding on to predicted leads were state ballot initiatives and gubernatorial candidates that figure to restrict oil and gas drilling in Colorado, Alaska, Florida and New Mexico.
Renewables continue to be a major focus in New York, Colorado and elsewhere. Closing in on victory were higher renewable energy targets for Nevada, though a similar pitch in Arizona was trailing. Also fading in the closing week of the race were proposals for a new gasoline tax in Missouri, to repeal California's 2017 gasoline and diesel tax increase, and a Nevada proposition to establish an open, competitive retail electric energy market.
"With the federal government loosening regulations and more supportive of the fossil fuel industry, states have moved to the forefront of making decisions on a clean energy agenda — be it around renewables, distributed energy, regulating energy drilling/production, reducing emissions, or alternative transport and electric vehicles," observed Roman Kramarchuk of S&P Global Platts Analytics.
He went on to note that a total of 36 governorships will be decided next week, "with some candidates holding very contrasting visions for the future of the energy sector." Beyond the major races, "voter choices regarding less prominent but still influential government roles such as public utility commissioners and public land commissioners can also impact energy developments," said Kramarchuk. "Where energy policy agendas have not been clearly outlined, we will be looking out for announcements of key appointments by the winning parties," he added.
There are 10 state ballot initiatives that could impact a broad cross section of energy markets, companies and strategies. Meanwhile, races for governor in Michigan, New Mexico, Colorado and New York, and for the US Senate seat in Texas, also could significantly shift decision-making on energy issues.
Here's a quick rundown of key races and ballot measures:
US: House of Representatives
Overview: House flip could elevate climate change conversation.
Polls: Polling firm FiveThirtyEight as of October 29 saw an 85.1% chance Democrats would win control.
Energy impact: Polls show Democrats likely to take a narrow majority, but much depends on voter turnout, as Republicans seek to stretch a post-Kavanaugh hearings enthusiasm bump among their base. A split Congress promises increased oversight of the Trump administration's agenda on deregulation and fossil fuel extraction, but would complicate odds of major legislation. Infrastructure legislation could be an area of common ground, with possibilities for electric transmission, although funding a hefty package remains an obstacle. Should Democrats take the House, Representative Frank Pallone of New Jersey, the likely House Energy and Commerce chairman, has indicated he would highlight the "clean energy" economy and hold the Trump administration accountable "for dangerous policies that only make [climate change] worse." If Republicans hold on to the House, their caucus may move further to the right, as moderates are among the vulnerable seats.
Overview: Control of the Senate is key for confirming judges, agency positions.
Polls: FiveThirtyEight saw an 83% chance as of October 29 that Republicans would hold power.
Energy impact: Should the Senate stay in Republican hands, the Energy and Natural Resources Committee is expected to continue work on modest bipartisan energy legislation. Such legislation would need to be hammered out with a greener House, should that chamber flip to Democratic control. Backers of the president's deregulatory agenda see keeping Senate control as essential to confirming judges with an ultimate say in energy and environmental policy. Confirmation of Trump's choice to fill a fifth slot at FERC, Bernard McNamee, is among the key pending confirmations and could face longer odds in the unlikely event the Senate turns to Democratic control. The elections put in doubt the future of some pro-fossil fuel Democrats who make for key Senate energy dealmakers, such as Heidi Heidkamp of North Dakota, who trailed the challenger for her seat by 16 points in an October NBC Valley News poll.
New Mexico: governor
Overview: US Representatives Michelle Lujan Grisham, Democrat, and Steve Pearce, Republican, are campaigning to replace term-limited Republican Governor Susana Martinez.
Polls: Lujan Grisham remains ahead in the polls, but Vice President Mike Pence stumped for Pearce last week trying to rally Republican turnout.
Energy impact: Lujan Grisham is seen as more likely to embrace drilling regulations, such as limits to methane emissions, while Pearce is expected to oppose any new state and federal limits. In Congress last year, Pearce proposed withholding Interior Department funds to implement methane regulations, which he said were putting the state's small producers out of business. During a debate, Pearce suggested building toll roads for drilling services trucks that need better access in southeastern New Mexico. The No. 3 oil-producing state, New Mexico has faced similar pipeline takeaway constraints as Texas, where natural gas flaring also has surged in order to keep oil wells producing. Departing Governor Martinez oversaw a deregulatory push to re-examine state rules and resist new federal rules.
New York: governor, state senate
Overview: The already difficult climate for natural gas project permitting may become more challenging if Governor Andrew Cuomo prevails over Republican challenger Marc Molinaro and a Senate flip increases pressure for 100% renewables targets.
Polling: Senate is a toss-up; Cuomo is favored to win by 23 points in an October 10-16 Quinnipiac poll.
Energy impact: Should the state Senate turn a deeper shade of blue, legislation mandating an economy-wide shift to renewable energy could get new life. The measure features a target of 50% renewables from the power sector by 2030, and eliminating greenhouse gas emissions from human-caused sources by 2050. State agencies would apply a climate test to permitting decisions. The bill has passed the state Assembly three times but languished in the Senate, where a group of independent Democrats caucused with Republicans, allowing Republican leadership to prevent a vote. But six of those eight independents were defeated in primaries, bringing a flip to Democratic control within reach. In question is whether Cuomo would seek to match California clean energy targets as he cultivates progressive bona fides. New York is already a tough spot for siting fossil fuel infrastructure, and the primary pulled Cuomo to the left. A proposed Transcontinental Gas Pipe Line natural gas pipeline project to serve New York City and Long Island will be a key permit to watch.
Overview: Former state senator Gretchen Whitmer, recently endorsed by US Senator Bernie Sanders and the Sierra Club, is the Democrat, facing off against Bill Schuette, the current attorney general.
Polls: A poll released October 29 by The Detroit News and WDIV-TV showed Whitmer leading by 12 percentage points. Schuette this week began canceling planned TV ads across Michigan, except in the Detroit area.
Energy Impact: At stake is the future of Enbridge Energy's aging, 645-mile Line 5 oil and NGL pipeline running through the Straights of Mackinac. Current Governor Rick Snyder in early October inked a deal under which Enbridge would build a utility corridor tunnel running along the current route that would house a new pipeline as well as power and telecommunications cables. The existing line would remain in service during the project, which is estimated to take up to 10 years to complete. If elected, Whitmer has vowed to move quickly to negotiate the shutdown of Line 5, which carries upwards of 540,000 b/d of crude and NGLs from Canada's oil sands to the US Midwest and Ontario. Canadian throughput currently is so constrained that any lessening of capacity would make clearing the market even more challenging, according to Platts Analytics. Whitmer also has endorsed a goal of 100% renewable energy in the state.
Overview: US Congressman Jared Polis is the Democrat facing the state's treasurer, Republican Walker Stapleton.
Polls: The most recent polls show Polis ahead by about seven points.
Energy Impact: The gubernatorial race in the Centennial state has become one of the most closely watched in the US, in part because of the candidates' stark differences on energy policy. Polis' energy position is underpinned by his campaign promise of 100% renewable electricity in Colorado by 2040, which prompted the Colorado Sierra Club Chapter to launch a $600,000 campaign on behalf of the candidate. Stapleton argues that move could cost ratepayers billions as the state builds out new generating capacity. In July 2018, about 15% of Colorado's electricity was produced by renewables, according to the US Energy Information Administration. Polis is vice chair of the Sustainable Energy and Environment Coalition and has vowed to protect Colorado's public lands from energy development.
Texas: US Senate
Overview: US Senator Ted Cruz, Republican-Texas, faces well-funded Democrat Beto O'Rourke.
Polls: Recent polls show Cruz in the lead, but the race has generated considerable national attention, and Democratic campaign cash is streaming into the state. Trump held a rally in Houston last week to boost GOP turnout on the first day of early voting.
Energy impact: Cruz has been one of the loudest voices in Washington for reforming the Renewable Fuel Standard, although the White House discarded his proposal to cap Renewable Identification Numbers at 10 cents. Cruz rallied Northeast oil refinery workers, complaining that the biofuel policy is putting the facilities out of business and threatening regional energy security. Trump sided with ethanol interests in October, directing the Environmental Protection Agency to approve year-round sales of higher-ethanol blends, although Trump asked for new rules for RINs trading as a concession to refiners. While presenting himself as pragmatic and a supporter of the broader elements of the Texas energy economy, O'Rourke wants to increase federal funding of climate research, rejoin the Paris climate agreement, increase EPA's independence and support stronger land-use policies in Texas.
Colorado: Proposition 112
Overview: Passage would increase oil and gas drilling setbacks from 500 feet to 2,500 feet.
Polls: The proposition is leading 52% to 48%, according to a recent poll from the University of Colorado at Boulder.
Energy impact: Colorado's drilling setback proposal would likely stop most new drilling in the prolific DJ Basin, the fastest-growing production area in the Rocky Mountain region. Surface area available for drilling would decline 78% in Weld County and 85% across the state, according to a study by the Colorado Oil and Gas Conservation Commission. Proponents of the rule have contested the impact would be less severe, in part because developers potentially could use longer drilling laterals to get around some of the surface constraints. If implemented, the state's oil production would sink to 275,000 b/d by the end of 2023, a 54% decline from current projections, and natural gas output would fall to 1.9 Bcf/d, down 45% from the current outlook, according to Platts Analytics. Several producers have applied for as many drilling permits as possible in advance of the election as the permits would be grandfathered in and have a shelf life of two years. The oil and gas industry has spent more than $36 million on defeating the proposition.
Alaska: Ballot Measure 1
Overview: This proposal would define activities that have "significant adverse effects" on the habitat of fish that swim up freshwater bodies to spawn, and it would alter the process of securing permits for projects that may affect that habitat.
Polls: No polling data available.
Energy impact: The measurecould put at risk Alaska's 460,000 b/d of oil production by introducing a new permitting process for maintenance and development near bodies of water that are known habitats of fish that swim upstream into freshwater to spawn, namely salmon. Oil and gas companies have said the additional rules are unnecessary and could delay projects and increase costs. Of the $13 million of lobbying efforts related to the measure, about 90% has gone to defeating it.
California: Proposition 6
Overview: If approved, the proposition would repeal a recent 12-cent/gallon gasoline tax increase and prevent state lawmakers from increasing gas taxes in the future without voter approval.
Polls: An October poll by the Public Policy Institute of California of 989 likely voters found that 41% supported the proposition, 48% opposed it and 11% were undecided. A September Los Angeles Times poll of 794 likely voters found that 41% supported the proposition, 42% opposed it, and 17% were undecided.
Energy impact: California is the most populous state in the US, and one that consumes about 43 million gallons of gasoline every day. The proposition, if approved, would repeal a 12-cent/gallon increase in the gas tax and also a 20-cent/gallon diesel fuel tax that went into effect on November 1, 2017. The tax increase is intended to help fund mass transit and transportation infrastructure projects. Sam Ori, executive director at the Energy Policy Institute at the University of Chicago, said the increase is unlikely to impact statewide gasoline demand, which is relatively inelastic, but it is unclear if voters would approve future tax increases that could have more meaningful impacts on demand. “On the one hand, people, generally speaking, don't like to pay more for gasoline,” Ori said in an interview with the Platts Capitol Crude podcast. “On the other hand… Californians are pretty ambitious on climate policy and addressing climate change.”
Florida: Amendment 9
Overview: If approved, the amendment would prohibit drilling, either for exploration or extraction, of oil or natural gas in state waters. The ballot item is a state constitutional amendment that also includes a possible ban on electronic cigarettes and other vapor-generating devices in certain workplaces. The amendment, which requires a 60% supermajority vote for approval, has been challenged in Florida's Supreme Court because the offshore drilling ban and vaping issues are unrelated, but included in the same amendment.
Polls: A June poll commissioned by the Florida Chamber of Commerce of 605 likely voters found that 55% supported the amendment, 31% opposed it and 14% were undecided.
Energy Impact: The amendment would prohibit drilling in all state waters along Florida's shoreline, which includes submerged lands 10.36 statutory miles off Florida's Gulf Coast and three nautical miles off the East Coast. The amendment would not impact the transportation of oil, refined products or LNG through state waters by pipeline or ship nor possible future drilling in federal waters. The amendment would have no impact on supply since no drilling currently takes place in state waters, but would prohibit future development. Its potential passage may serve political purposes as the Trump administration works to finalize its offshore oil and gas lease sale plan. Interior Secretary Ryan Zinke has told Governor Rick Scott that Florida waters will be excluded from the final plan, but has declined to offer specifics and has said that a final decision has yet to be made. The federal offshore plan has been an issue in the current race for US Senate between Scott and Senator Bill Nelson, a Democrat. Nelson has criticized Scott for not getting federal waters offshore Florida explicitly removed from future offshore leasing plans.
Washington: Initiative 1631
Overview: Carbon fee set at $15/mt starting in 2020, increasing by $2/mt annually until the state meets its existing greenhouse gas reduction goal for 2035 and is on track to meet its 2050 goal.
Polls: The initiative appears to have broader support than a similar carbon tax proposed in 2016, which was rejected by 59% of voters.
Energy impact: Oil refineries, natural gas-fired power plants and other large users of fossil fuels would be hit by the fee, which would generate an estimated $2.3 billion in the first five years. Washington has 3.4% of the nation's oil refining capacity. The fee would not apply to the state's sole coal-fired power plant, which is already required to close by 2025. Competing ballot initiatives 1601 and 1602 would prohibit state and local governments from imposing a carbon tax and collecting revenue from one. If passed, the carbon fee would be a first of its kind nationally and would likely lead to similar proposals in other states to curb emissions.
Arizona: Proposition 127
Overview: Passage would increase Arizona's renewable portfolio standard to require electric utilities to obtain 50% of their electricity from renewables by 2030, up from the current mandate for 15% by 2025.
Polls: A late-September Suffolk University/Arizona Republic poll showed 46% of voters oppose the measure and 33% support it.
Energy impact: Arizona Public Service has opposed the initiative, citing the mismatch between renewables output and its customers' demand patterns. APS also says the proposition could lead to early retirement of the 3.9 GW Palo Verde nuclear plant and the 1.5 GW Four Corners coal-fired plant. But advocates say the measure would reduce pollution from fossil-fuel plants and take advantage of the state's abundant sunshine. Renewable developers — in particular solar — would have a significant opportunity over the next 12 years. Billionaire Tom Steyer's nonprofit NextGen Climate Action has provided $22 million supporting the measure, and APS parent Pinnacle West Capital has spent $29 million opposing it.
Nevada: Question 3
Overview: Amends the state constitution to require Nevada to transition away from its vertically integrated utility system to a competitive, market-based structure.
Polls: A September Suffolk University/Reno Gazette poll showed 51% of voters opposed the initiative while 32% supported it. The measure passed in 2016, but it needs to be approved again to become a part of the Nevada Constitution.
Energy impact: If the measure passes, large commercial customers are expected to see benefits in the form of reduced rates, and the biggest backers of the measure are Las Vegas Sands Corporation and data-storage firm Switch, which have spent $21 million and $10 million, respectively. The state's incumbent utility, NV Energy, has spent $62 million opposing the measure. The Sierra Club and Natural Resources Defense Council are worried the move would interrupt NV Energy's commitment to boost renewables. NV Energy would likely be forced to divest its generating assets and assign its contracts to new owners, according to a report by the Nevada Public Utilities Commission. The PUC also found the change can be implemented by the measure's 2023 deadline, but it would be a heavy lift. A report by the Governor's Committee on Energy Choice recommended that if the measure succeeds, Nevada should join an existing grid operator, presumably California Independent System Operator.
Nevada: Question 6
Overview: Increases Nevada's renewable portfolio standard to require utilities to obtain 50% of their electricity from renewable resources by 2030, up from the current mandate of 25% by 2025.
Polls: An April poll by the Mellman Group showed 68% of voters supported the measure and 20% opposed it. As a constitutional amendment, Question 6 needs to be approved by voters twice; if it passes in November, it would appear again in 2020.
Energy impact: NV Energy is on pace to surpass the current standard, reaching an overall 23.8% RPS in 2017. And the utility plans to double its renewable energy by 2023, potentially putting it on track to meet the increased RPS even without the mandate. But NV Energy announced in May that it might not pursue its planned investment in 1 GW of new renewable energy if Question 3 passes, saying it wants to avoid increasing liabilities for customers. Billionaire Tom Steyer's nonprofit NextGen Climate Action has spent $5.7 million backing the measure.
Missouri: Proposition D
Overview: If approved, the proposition would raise the state's gasoline tax by 10 cents/gallon to 27 cents/gallon over four years. The proposition also would create a fund for road projects and exempt Olympic prizes from state taxes.
Polls: There is no polling on the ballot, but Missouri voters have previously defeated five proposed gas tax increases and approved three, including the state's initial, 2 cents/gallon gas tax in 1924.
Energy Impact: The proposition, if approved, is unlikely to impact demand since it is a relatively minor tax increase phased in over time. The proposition increases the tax for gasoline and diesel by 2.5 cents/gallon per year by 2022. According to SaferMo.com, a website created by supporters of the proposition, the average Missouri driver will spend $5.10 more per month on gasoline when the 10-cent tax is fully phased in after four years. The tax increase on compressed gas, LNG and propane used as an alternative fuel would take effect in 2026. The measure sets up an equivalent tax rate from all alternative fuels. Revenue from the gas tax increase would be used for state highway patrol funding.