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Despite Divided Government, Oil and Gas Industry Optimistic After Midterms

Trade associations representing the oil and gas industry said that despite a return to divided government in Congress for the next two years, last week's midterm elections both produced and retained candidates that the industry believes they can work with effectively.

According to the website Ballotpedia, as of Friday Democrats had gained a net total of 32 seats in the U.S. House of Representatives, nine more than the 23 seats the party needed to win control of the chamber. Eight House races were still too close to call.

On the other side of Capitol Hill, Ballotpedia reported that Republicans had gained a net total of two seats in the U.S. Senate. Two races, in Arizona and Florida, were too close to call on Friday, but even without those seats the GOP would maintain control. A runoff in Mississippi between Republican incumbent Cindy Hyde-Smith and Democrat Mike Espy is scheduled for Nov. 27. The winner will complete the rest of former Sen. Thad Cochran's (R-MS) term.

In a note to clients, analysts at ClearView Energy Partners LLC said the mixed results from the midterm elections "seems more likely to promote Congressional pugilism than cross-party policy cooperation."

"House Democrats might bring back the Energy Independence and Global Warming Committee that Republicans abolished in 2010, but we would not look for a climate bargain to emerge from the lower chamber," ClearView said.

According to the law firm Van Ness Feldman LLP, House Democrats are scheduled to vote on their leadership on Nov. 28-29, though that election may be delayed until the first week of December. But the firm expects Senate Democrats to quickly reaffirm its current leadership.

"This would not be the first time current Minority Leader Nancy Pelosi (D-CA), who is slated to ascend to the role of Speaker, has fought off intra-party opposition," the firm's government relations and advocacy team said. "House rank-and-file members expect Nancy Pelosi to be elected Speaker of the House by the Democratic Caucus despite politically charged campaign rhetoric about her status as the Democrat's leadership of the Democratic Caucus."

The firm added that it believes House Democrats will "create opportunities for more junior House members, including some of those newly elected members, to serve in leadership roles within the Democratic Caucus or on key Committees to reflect the changes within the Democratic Caucus."

But the firm projected that Rep. Frank Pallone (D-NJ) would be elevated to chairman of the powerful House Energy & Commerce Committee, while Rep. Raúl Grijalva (D-AZ) would chair the House Natural Resources Committee.

With Sen. Bill Nelson's (D-FL) bid for re-election mired in a recount, the firm opined that Sen. Maria Cantwell (D-WA) "will likely have a choice to continue serving as ranking member of the Senate Energy and Natural Resources Committee or shift to the ranking member role on the Senate Commerce, Science and Transportation Committee. Should this happen, Sens. Debbie Stabenow (D-MI) and Joe Manchin (D-WV) are the likely Democrats to take over as the ranking member at the Energy and Natural Resources Committee."

Industry Reaction

American Petroleum Institute (API) CEO Mike Sommers said that despite a divided Congress coming to power in January, the division "doesn't mean that nothing legislative can get done."

"Energy touches too many aspects of our daily lives and family budgets to fall victim to the partisanship that divides Congress on other issues," Sommers said. "We are optimistic that there is room for cooperation on critical energy issues like infrastructure and trade, and will work hard to make that case. Progress in a divided government doesn't require both parties to suddenly agree on everything -- just enough lawmakers of good faith to join together and deliver for the American people."

Western Energy Alliance President Kathleen Sgamma said that while she agreed with political pundit James Carville's assessment that a Democratic "blue wave" didn't materialize across the country on Election Day, there was a "blue tsunami" in Colorado and New Mexico, two important oil and gas producing states.

"Democrats took or expanded their hold in both houses of both state legislatures and took hold of all statewide offices," Sgamma told NGI. "Interestingly, that blue tsunami didn't translate into support for Proposition 112 on setbacks or other tax increase measures, indicating that it's not a hard-left result in Colorado but rather there are plenty of moderates in the electorate and in office whom industry can work with.

"We also saw both governors-elect moderate their previously adversarial positions regarding the industry during the campaign. That coupled with the fact that the industry is a major source of revenue in both states gives us a basis on which to build constructive relationships with them."

Democratic Rep. Jared Polis defeated Republican State Treasurer Walker Stapleton in Colorado's gubernatorial race. Polis will succeed Gov. John Hickenlooper, another Democrat. Polis, Stapleton and Hickenlooper had all spoken out against Proposition 112, which would have increased well site setbacks to 2,500 feet from 500 feet for residences and workplaces, as well as "vulnerable areas" like playgrounds and public water sources.

Meanwhile, in New Mexico, Democratic Rep. Michelle Lujan Grisham defeated Republican Rep. Steve Pearce in that state's gubernatorial election.

Sgamma said "the one ominous cloud" from the midterms was the election of Democrat Stephanie Garcia Richard to the post of New Mexico Land Commissioner. Richard is an avowed opponent of hydraulic fracturing, and has voiced opposition to the practice in several areas, including Chaco Canyon and Sandoval County, NM.

"[Garcia Richard] thinks she can increase returns from state lands while stopping the one industry that provides 94% of the revenues from those very same state lands," Sgamma said. "It will be incumbent on her to learn her office or she'll have to explain to the voters why she's depriving schools of revenue."

Last March, Interior Secretary Ryan Zinke postponed an oil and gas lease sale near Chaco. The sale was to include 25 parcels covering 4,434 acres in New Mexico's Rio Arriba, Sandoval and San Juan counties, which are in the Four Corners area of the state.

Florida voters approve ban on offshore drilling

In Florida, voters passed an amendment to the state constitution that calls for a ban on offshore oil and gas drilling in Florida's territorial waters, although the measure won't affect federal offshore leases.

According to the Florida Division of Elections, Amendment 9, which also called for a ban on vaping in enclosed public workplaces, passed with nearly 69% of the vote. The amendment passed despite opposition by the Florida Chamber of Commerce and the Florida Petroleum Council (FPC).

FPC Executive Director David Mica lamented the amendment's passage as "the wrong path for Florida," and called the drilling ban unnecessary.

"Placing a ban in the Florida Constitution significantly reduces Florida's flexibility to consider energy policy that could have immediate impact to Floridians' economic well-being," Mica told NGI. "There was already a Florida statute ban on drilling in state waters that has been in law for 30 years...

"Oil and natural gas are integral drivers of our economy. Florida consumes over 28 million gallons of gasoline and diesel per day; that is over 10 billion gallons per year. In addition, almost 70% of Florida's electricity is generated from natural gas. It is a key driver for our tourism and agriculture industries along with Florida's military bases."

Conversely, environmental groups were happy with the outcome. "This is great news for coastal communities and the clean, tourist-friendly beaches we depend on," said Center for Biological Diversity spokeswoman Sarah Gledhill. "By passing Amendment 9, Floridians are sending a loud message to President Trump that we oppose his reckless plan to expand offshore drilling."

The Trump administration had initially proposed in early January expanding offshore oil and gas drilling to include nearly all of the nation's Outer Continental Shelf (OCS). But within days, the Interior Department dropped Florida from a draft proposal to expand OCS drilling. The move drew the ire of elected officials from other coastal states seeking similar exemptions.

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