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Appalachian Natural Gas Industry Hopeful After Midterm Elections

While very little changed politically across the Appalachian Basin’s key oil and natural gas producing states, the industry sees both opportunities and challenges after the midterm elections as Democrats and Republicans step into new roles throughout the region.

In New York, where the industry has faced formidable opposition, Democratic Gov. Andrew Cuomo was elected to a third term by a nearly 30-point margin. His party will take over the state legislature for the first time since 2010 and for only the second time since the 1930s after Democrats cruised to victory in statewide races and easily took back the Republicans one-seat majority in the state Senate.

Things are likely to get tougher for natural gas infrastructure and the state’s ailing legacy producers, as Cuomo’s vision to slash emissions and increase renewable energy generation are reinforced by the majority, sources said.

“It comes down less to partisanship than it does to geography,” said Unshackle Upstate’s Michael Kracker, executive director of a coalition of business and trade organizations that advocates for economic growth. Kracker said most Upstate legislators, those who represent most of the state to the north of New York City, are now in the minority. That creates a challenge in the state capital as groups like Kracker’s will now have to get in front of Democratic majority members more often to get their issues on the table, he added.

“The bulk of the membership in both chambers in the majority hail from the New York City area, so we’ve got to make sure we’re stating our case for any business issues in Upstate New York, particularly economic development,” Kracker said in an interview with NGI’s Shale Daily shortly after the elections. “That’s going to be a challenge, one that requires a lot of engagement and a lot of education for members who might not be as familiar with these issues as Senate Republicans, who largely hail from Upstate New York, were.”

Upstate New York, where parts of the economy have long struggled, would have arguably benefited the most from stalled infrastructure projects such as the Constitution Pipeline or the Northern Access expansion, and even high-volume hydraulic fracturing, which was banned by the Cuomo administration in 2015.

Cuomo’s administration is also working on more stringent emissions requirements that could hit struggling legacy producers hard in western New York.  Environmental groups in the state, which are fighting against gas-fired power plants too, have pushed Cuomo and Democrats to do more to reduce the use of fossil fuels.

“I think specifically with energy infrastructure, that was a challenge prior to any flip of the legislature, so it’s safe to say that it’s going to be an even greater challenge going forward, but it’s still an important fight that we’re having,” Kracker said.

Executive Director Karen Moreau of the American Petroleum Institute (API) of New York said the industry should be prepared for more outreach. “It will be more important than ever for the natural gas industry to educate the elected representatives and general public about the critical role natural gas plays in the development of intermittent renewables, providing affordable and clean energy to their constituents,” she told NGI’s Shale Daily. “New York City in particular continues to be a huge consumer of natural gas, and natural gas will continue to support the tri-state area.”

Ohio More Welcoming To Industry

In Ohio, the situation is different. Industry representatives are eager to start working with Republican Gov.-Elect Mike DeWine, who beat Richard Cordray by about five points with 51% of the vote. DeWine, a career politician currently serving as the state’s attorney general and a former lieutenant governor and U.S. senator, has praised the Utica Shale boom and its impact on the state economy.

“I think he sees the value of what oil and gas development in eastern Ohio brings to the entire state and to the entire region,” said the Ohio Oil and Gas Association’s Matthew Hammond, executive vice president. “I think there are some more things that we can do to help paint that picture and educate his administration, and we’re looking forward to doing that, but I absolutely think it’s a positive for the industry.”

DeWine talked of an “all of the above” energy policy during the campaign and a spokesman told NGI’s Shale Daily last month that the governor-elect has no plans to raise taxes. DeWine is set to take office after Republican Gov. John Kasich’s two terms. Kasich, who largely supported the industry, clashed with it at times, primarily in his unsuccessful push to increase the state’s severance tax.

API Ohio Executive Director Christian Zeigler agreed with Hammond and said he was “encouraged” by DeWine’s comments about the oil and gas industry on the campaign trail. Zeigler added that he doesn’t expect “any major energy policy shifts” during DeWine’s tenure.

Even as Democrats gained some seats in the Ohio House for the first time in years, Republicans held on to a strong majority in the chamber and gained in the state Senate.

Energy analysts also see the outlook for oil and gas improving under DeWine. ClearView Energy Partners LLC said the state’s Renewable Portfolio Standard (RPS), which requires more energy to be generated by renewable sources, could once again be in jeopardy under the new governor. Republicans have in the past tried to rollback the RPS, but it has been shielded by Kasich’s veto power.

The nuclear subsidies that have passed in Connecticut, Illinois, New Jersey and New York, and which are widely expected to be further debated in both Ohio and Pennsylvania, now have less of a chance in the Buckeye State with DeWine taking over, analysts at Height Securities LLC said. The chances of such legislation passing in the state “are somewhat lower than if Democratic candidate Richard Cordray had won,” they wrote in a recent note to clients.

Pennsylvania, West Virginia Incumbents Endure

In neighboring Pennsylvania, little changed as incumbent Democratic Gov. Tom Wolf cruised to victory with about 58% of the vote over former state Sen. Scott Wagner. Republicans also retained strong majorities in the state legislature.

Wolf continues to roll-out a broad plan to cut industry emissions and his administration has indicated that it will continue to push for a severance tax in the state during his second term. But the governor also has recognized the industry’s role in the state’s economy and taken more of a centrist approach on energy issues. Ahead of the midterm elections, industry sources in the state said they don’t expect any major shifts in policies during Wolf’s second term.

Republicans also retained their majorities in the West Virginia legislature, where Republican Gov. Jim Justice is in the middle of his first term.

Industry representatives in the state are girding for a defensive political season when the legislature reconvenes early next year. Things quieted on the political front after the industry won a major legislative battle earlier this year with the passage of co-tenancy. The law is similar to forced pooling in other states. It makes it easier for producers to block-up land for longer laterals and secure rights for properties that are owned by multiple people.

Charlie Burd, executive director of the West Virginia Independent Oil and Gas Association, said last month his group would be focused on resisting legislation or regulations that could have a negative impact on the development of the state’s Marcellus and Utica shales, such as a higher severance tax.

 

 

 

 

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