Oil & gas to languish after US mid-terms

December 31, 2010

Don’t expect much action on legislative items of interest to the US oil & gas industry before the next Congress is sworn in early 2011. That was the word from King & Spalding senior government relations advisor George Crawford, who spoke to a gathering in Houston sponsored by the international law firm.

Republicans won big in November’s midterm elections, capturing a sizable majority in the House of Representatives and trimming the Democrats’ majority in the Senate by six seats.

Many incoming politicians – and more than a few congressional veterans – are aligned with the conservative ‘Tea Party’ movement, which fiercely opposes taxes and much government spending.

The shift in power will likely vault Republican Darrell Issa to the chairmanship of the oversight & government reform committee, where he has vowed to launch vigorous investigations into the Obama administration’s activities, including this year’s restructuring of the Minerals Management Service, now the Bureau of Ocean Energy Management, Regulation & Enforcement.

‘Election Day produced a major restructuring of the power alignment in [Washington] DC, particularly in the House,’ said Crawford, who before joining King & Spalding served as chief of staff for top House Democrat Nancy Pelosi of California.

The ambitious energy bill passed by the Democrat-led House during the first half of President Obama’s term was underpinned by a cap & trade proposal; the bill languished in the Senate, while more modest bills that might have garnered bipartisan support were pushed aside.

‘That will change,’ Crawford said, noting signals from the administration and some Republicans that some of the less ambitious bills that did not include cap & trade requirements to curb carbon emissions could be revisited.

‘The good news is that those bills are on the shelf and ready to go.’

It’s not likely that there will be any action on an energy bill during the ‘lame duck’ session that began late November however, when lawmakers take up the contentious issue of Bush-era tax cuts, which are set to expire.

‘The plate’s rather full,’ Crawford said. In addition to added scrutiny of BOEM, Issa has vowed to hold hearings on the administration’s commission investigating the Deepwater Horizon disaster, which some Republicans have claimed is weighted with industry opponents.

While many pundits are predicting a period of unprecedented deadlock, energy could be one area where opponents can reach agreement. ‘Interestingly, in one of his first statements after the election, President Obama highlighted energy and the environment as areas of potential compromise with the incoming Republican majority,’ Crawford said.

For example, granting the BOEM’s budget request could get the agency’s delayed offshore permitting process moving again, pleasing pro-industry politicians on both sides of the aisle. Tea Party adherents are a wild card however; having run on an anti-tax, anti-government spending platform, many Republicans might oppose even modest budget increases or initiatives like the Carbon Limits & Energy For America’s Renewal, or CLEAR Act, which has come to be seen as a tax on oil interests.

‘A lot of energy proposals, whether it’s clean coal or nuclear or renewables, typically take up a large chunk of federal resources,’ Crawford said. ‘And it’s going to be interesting to see if people who are deficitfocused are willing to put that type of federal investment into some of these programs.’

The immediate post-election atmosphere does little to relieve the uncertainty about the future of offshore drilling, Crawford said. BOEM has said it hopes to begin issuing permits under its stringent new safety regulations before the end of 2010, but a lack of new funds will further delay that effort; meanwhile, a debate has grown around the scheduling of three federal lease sales in 2011, which could be held up by a recently announced requirement for supplementary environmental impact statements.

‘That regulatory uncertainty, that legislative uncertainty, delays planning for long term projects,’ Crawford said. OE



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