Oil Majors Win Big In Midterms

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By Nick Cunningham

Democrats were big winners on Tuesday, reclaiming the U.S. House of Representatives and winning a handful of state legislatures and governor’s mansions. But the oil and gas industry was also victorious, beating back a handful of closely-watched ballot initiatives with a tidal wave of cash.

The two most significant voter initiatives were in Colorado and Washington State. In Colorado, voters rejected a proposal that would have increased the setback distances for oil and gas drilling operations to 2,500 feet, up from the current 500 feet. The industry warned that the regulation presented an existential threat to drilling in Colorado, potentially putting about 85 percent of acreage off limits to drilling. Supporters of the setback distances cited air and water pollution, as well as the safety hazards of living so close to drilling operations.

In the end, spending on advertising and campaign messaging was lopsided, and the industry made sure that its position won out with a more than 30:1 spending advantage. Buried beneath that wave of cash, supporters of the setback initiative didn’t really stand much of a chance.

In Washington, the narrative is much the same. Voters were given the chance to vote on a carbon tax that would escalate gradually over time, with the proceeds to be used for clean energy initiatives. Again, the oil and gas industry ensured its defeat with heavy spending. BP and Chevron led the way, funneling money into the state.

Both initiatives were handily defeated.

Notably, however, Colorado voters also rejected a separate initiative that would have compensated landowners if their property values were negatively affected by state regulations. The measure would have made it prohibitively expensive for the state to pass regulations that hamper oil and gas drilling. Voters rejected the measure, but since they also rejected the proposal to increase setback distances, the result is somewhat of a wash for oil and gas drillers.

To be sure, however, that is very welcome from the perspective of shale drillers, many of whom saw their share prices hit in recent weeks due to the fact that greater setback distances would have put some of their oil and gas reserves off limits. News of the defeated setback measure sent the share prices of Colorado drillers soaring. Anadarko Petroleum and Noble Energy were up more than 5 percent on Wednesday.

Some other clean energy initiatives went down in defeat. In Arizona, voters rejected a proposal that would mandate utilities generate 50 percent of their electricity from clean energy by 2050, but the measure was crushed by a 70 to 30 margin. The vote was largely a battle between billionaire green energy advocate Tom Steyer and the Arizona Public Service Company, the state’s largest utility.

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However, Steyer had more luck in Nevada, which is further along in its clean energy transition. As Vox notes, the state already has Tesla’s gigafactory, and Las Vegas, the state’s largest city, already buys 100 percent of its electricity from renewables. The initiative that passed on Tuesday requires the state’s utilities to generate 50 percent of their electricity from renewables by 2030.

In fact, beneath the headlines of the losses in Colorado and Washington, clean energy advocates still notched a few notable wins. California voters rejected an initiative that would have repealed the state’s recently passed tax hike on gasoline. The 12-cent-per-gallon tax on gasoline and the 20-cent-per-gallon tax on diesel would have been repealed. The rejection leaves those taxes in place, and they should generate some $5 billion in revenue over the next decade, which will be used for public transit and road maintenance.

Florida voters passed a ban on offshore drilling. The measure is practically symbolic, since it would only apply to state waters within three miles of the coast. Drilling tends to occur in federal waters, which are farther away from the shore. In any event, the federal government will still decide whether or not to allow drilling near Florida – for now, federal waters near Florida remains off limits, as they have for a long time.

In Portland, Oregon, voters passed a Clean Energy Initiative, which implements a 1 percent tax on big businesses in the city, with the revenues to be used for energy efficiency, clean energy and job training for low income communities.

Of course, the larger headlines focused on the Democratic Party’s takeover of the U.S. House of Representatives. Rightly so. In the majority, the Democrats now control the chamber’s committees, arming them with subpoena power and the power to launch investigations into the Trump administration.

Democrats have indicated they could begin to probe the legality of the deregulation effort spearheaded by Trump’s EPA and Department of Interior, including the watering down of methane emissions on oil and gas and the lease sales of public lands. Such probes would likely focus on the communications and possible coordination between the industry and the government.

Overall, the energy industry won quite a few significant battles, and only lost some minor ones. But, the flip side is that the industry was playing defense on just about all of these fights. They won handily, but only the victory only maintains the status quo. Meanwhile, the Democratic takeover of the House means that friendly legislation at the federal level is unlikely, and some scrutiny on the industry could return.

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