By: Scott Staruch
From gas prices to environmental regulations, the new legislature could significantly impact the state’s energy economy.
On November 4th, Pennsylvanians elected Democrat Tom Wolf as governor. They also gave Republicans a 119 to 84 majority in the House and a 30 to 20 edge in the Senate.
What does this mean for Pennsylvania as an energy superpower?
Governor-elect Wolf campaigned calling for a 5 percent natural gas severance tax. That may prove difficult with enlarged Republican majorities in the General Assembly. Democratic House and Senate members from natural gas producing areas undoubtedly will feel pressure from local communities to not upend Act 13’s impact fee, which has generated $630 million. Impact fees have provided new revenue to energy-producing counties and municipalities to reduce debt, improve infrastructure, support emergency responders and make other investments.
Will 200,000-plus Pennsylvanians working in natural gas related jobs actively oppose a severance tax? What Republican policies is Governor-elect Wolf willing to support to win over enough Republicans to further tax natural gas? Will the households and businesses seeing significant natural gas savings over the last few years realize a new tax will likely be passed along in the form of higher gas costs? Add these together, and we’ll likely see a sharp decline curve in support for additional taxes on natural gas.
Additional state energy issues to watch:
• Who will head the Department of Environmental Protection and Department of Conservation and Natural Resources?
• Will the moratorium on natural gas development in the Delaware River Basin Commission change with Governor-elect Wolf’s seat on the Commission?
• As Governor-elect Wolf eyes new funding, will he withdraw his campaign promise to not allow new drilling in Pennsylvania’s state parks and forests?
• As the Wolf Administration develops a plan to meet President Obama’s Climate Action Plan edict to cut emissions from the power sector, what will this mean for PA coal mining and coal power generation, which provides 40 percent of the state’s electricity?
At the federal level, the U.S. Senate and House will now be under Republican control, and we can expect an impact on energy.
In the Senate, new Republican members will be representing energy-producing states like Arkansas, Colorado and West Virginia. If Dan Sullivan holds on in Alaska and Bill Cassidy wins in Louisiana’s December 6 runoff election, two more Republicans will join the Senate from major energy states.
Regarding chairmanships: Alaska’s Senator Lisa Murkowski will head Senate Energy and Natural Resources Committee; and, Oklahoma Senator James Inhofe will likely re-take the reins on Senate Environment and Public Works Committee, a position he held from 2003-2007.
Elections in other states give Republicans at least a 64-seat edge. What to watch for:
• Clean Power Plan. The new Republican-controlled Congress might start with the Environmental Protection Agency (EPA), and their new emissions regulations on power plants, noted above. These regs would force states to cut greenhouse gas emissions to 30 percent below 2005 levels – by 2030. For states, like Pennsylvania, with coal-fired electrical power generation and a coal mining economy, the administration’s Plan could be harsh. A National Association of Manufacturers/NERA Economics Consulting study found the proposal could reduce the nation’s GDP by $270 billion per year and carry a compliance price tag of $2.2 trillion from 2017 to 2040. So how might Congress impede EPA’s enactment?
• Energy Taxes. How might new energy taxes factor into the greater tax debate? The White House has pushed relentlessly for tens of billions of dollars in new taxes on domestic energy producers, claiming these companies must pay “their fair share.” However, an analysis by S&P Capital IQ published last year shows large energy companies were taxed at an effective rate of 37 percent from 2007 to 2012. The tax imposed on S&P 500 firms averaged 29.1 percent.
• Oil & gas. Gasoline prices have dipped below $3 per gallon, a result of the shale oil and natural gas boom. This price dip at the pump could save the average consumer $500 a year, according to analysts. How might low gas prices and increasing oil production affect the debate around crude oil exports?
• Natural Gas. The president has supported the natural gas industry in many ways. However, the shale gas revolution has largely taken place on state and private lands as oil and gas production on federal lands respectively fell by 6 and 28 percent between 2009 and 2013. Further, how might the new Congress look to expedite liquefied natural gas permit approvals? (Note: The aforementioned Senator Lisa Murkowski has a great white paper on natural gas exports. Google: The Narrowing Window: America’s Opportunity to Join the Global Gas Trade.)
• Keystone-XL. Certainly, the multi-year Keystone XL pipeline debate will continue to be a top issue. While soon-to-be-out Senate Majority Leader Harry Reid has blocked efforts to bring this $8 billion project to a vote, there’s now a filibuster-proof majority in the Senate. The president will likely be forced to make a decision.
These are just the tip of the iceberg when it comes to energy and environmental issues. It promises to be an “energetic” 2015.