The nation witnessed a surgical air strike eliminating vulnerable left-leaning Democrats in the U.S. House of Representatives November 2, as voters responded to unpopular progressive policies instituted over the past two years. Judging by positive audience reaction to conservative political pundit Karl Rove, speaking at Hart's Developing Unconventional Gas—East conference in Pittsburgh the day following the election, the liberal carnage came none too soon for the energy industry.
"This was extraordinary change. This is the end of the Obama liberal agenda," declared Rove, political analyst and former advisor to President George W. Bush. "The House of Representatives is Republican, and they're not going to vote for this kind of stuff."
An energy-friendly conservative majority will take control of the House in 2011, eliciting sighs of relief from the industry. But following two years of defensive anti-energy maneuvering on the Washington front, is it yet safe to breathe easy?
The answer is… yes—but don't be fooled into thinking that it's safe to lay down arms. With the White House and most of the Senate still on the same agenda as before, gaining the House is a stop-gap measure at worst for energy-averse policies, and incrementally accretive at best.
"Hopefully, the new Republican majority will provide a counterweight to the Obama administration's goal of making coal, oil and natural gas more expensive and more difficult to produce domestically," says Tom Pyle, president of the Institute for Energy Research. He expects a "modest and marginal" improvement rather than the dramatic improvement that some in energy might hope for.
Let's measure the political victory. Hydraulic fracturing will remain under state jurisdiction. That is versus federal oversight if allowed to be regulated by the Safe Drinking Water Act, as was proposed. And removing tax deductions for intangible drilling costs will be off limits under a Republican watch. If there's any upside to the sweeping health-care legislation, it's that it bought time to bring in reinforcements for energy issues.
The most obvious casualty of the election is climate-change legislation, aka cap and trade, passed by the sitting House but stalled in the Senate by certain Democrats from energy states. "Climate (legislation) is dead," declared Rove. "If (the Senate) couldn't pass it with 59-41, they sure as heck aren't going to be able to pass it with 52-48."
Even President Obama conceded cap and trade in his post-election speech, but suggested the core issues would remain in play. "Cap and trade was one way of skinning the cat, not the only way. It was a means, not an end. I will be looking for other ways to solve this problem."
But in Obama's message an unlikely alliance emerged—one that could benefit natural gas.
"When it comes to energy…let's make progress on those things where we do agree." And where might that be? "We've got broad agreement that we've got terrific natural gas resources in this country," Obama said. "Are we doing all we can to develop those?"
And thus begin the negotiations with a new Congress. Clear the obstacles for natural gas development in exchange for carbon caps, alternative energy subsidies, electric cars—and leaving health reform alone. Call off the regulatory dogs if gas is dubbed the hydrocarbon fuel favorite. It might be worth the trade, if oil is allowed to ride, especially offshore. Green light permitting in the Gulf. Remove the federal ban on other offshore drilling and let states decide. Fair trade?
Nonetheless, with the 2010 general election behind us, the energy industry should take note of the public concerns that instigated such legislative agendas of the last Congress.
The oil from Macondo still washes up in the public's memory. People still believe gas drillers are fracing their drinking reservoirs with toxic goo. Don't let the pendulum swing so far right to exacerbate the image of an unchecked, greedy energy industry. In the balance stands 2012.
Instead, now is the time to cooperate in putting together guidelines for best practices—and publicly sharing them. Note the consortium of deepwater majors in the Gulf formed by ExxonMobil to address and alleviate those concerns; onshore fracers should follow suit. Now is the time to invest capital in marketing the energy industry's positive message.
Unfriendly energy agendas are not dead. To breathe easy and ignore those invites new, invigorated enemy fire when the battle lines shift once again.