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After the US mid-terms

US energy policy remains President Obama's number-one priority, but with control of Congress in the balance, it will remain in limbo

AFTER almost two years of watching partisan politics virtually paralyse the US Congress, the public is in a surly mood. The Democrats, who were last month in control of the Senate and House of Representatives, could suffer significant damage if voters express their discontent at the polls on 2 November. Historically, the midterm elections have cost the majority party some seats. If Republicans make significant gains this month, what can the industry expect after the 112th Congress convenes in January?

Even if the Democrats maintain their majority, most likely the window of opportunity to win passage of a comprehensive energy package has already closed. Although President Barack Obama has ranked energy as a top priority for 2011, he recently said he plans to tackle the issue one more-palatable piece at a time, instead of packing them all into a single, sweeping bill that could fail because of disputes over a single controversial point.

Greenhouse-gas emissions issues

One of these pieces least likely to pass through Congress, no matter which party gains control, is cap-and-trade legislation, which would impose limits on greenhouse-gas (GHG) emissions that contribute to global warming. Although the energy bill that barely made it through the House contained a cap-and-trade provision as one of its cornerstones, majority leader Harry Reid deleted it from the Senate version in an unsuccessful bid to gain more votes.

If it is reintroduced in either chamber, cap and trade could have an even slimmer chance of passage. It is already a divisive issue among Democrats; 40 of the 255 Democrats in the House voted against the energy bill and some Congressional representatives who supported it the first time have said they would not do so again. West Virginia Democrat Joe Manchin, the frontrunner to win the seat vacated by the death of senator Robert Byrd, ran an advertisement in which he took aim at the cap-and-trade bill with a rifle.

Even if federal lawmakers fail to limit GHG emissions by law, the US Environmental Protection Agency (EPA) intends to do so by regulation. The EPA is preparing plans from 1 January to require polluters to consider GHGs in their air-permit applications, to construct or substantially modify their facilities to include the best available control technologies and energy efficiency measures, and to submit information that would allow the EPA to track their GHG emissions.

However, nothing tends to raise Republicans' rankles as much as government interference in the private sector and if Democrats lose control of Congress, the EPA could lose some of its heady power. A measure introduced by senator Lisa Murkowski, a Republican from Alaska, that would have stripped the agency of its authority to restrict GHGs was defeated by a narrow margin of 47 to 53. However, senator John Rockefeller – ironically, a Democrat – from the coal-producing state of West Virginia plans to introduce legislation that would suspend the agency's power for at least two years.

Offshore drilling

If Congressional power shifts to the right this month, expect to see more aggressive efforts to expand offshore drilling. In a compromise aimed at gaining support for his comprehensive energy package, Obama had announced plans to include provisions in the bill that would open additional offshore areas for development. But the concept was quickly squelched after the worst oil spill in US history highlighted the downside of offshore oil development and led to a six-month moratorium on offshore drilling.

Now that months have passed, the blown-out well has been capped and the clamour to cut back on drilling has died down, the secretary of the interior has lifted the ban, but has issued stringent new standards for well design and cementing, and blowout preventers.

Consistent with their party's emphasis on energy independence over environmental issues, Republicans would not only likely renew the push to open more US coastal waters for drilling; they would also probably take steps to prevent passage of legislation aimed at increasing or lifting liability limits for companies that cause oil spills – measures that could hike insurance costs enough to force smaller operators out of the offshore environment.

Public concerns about possible water contamination issues related to hydraulic fracturing – or fracing, the drilling technique used to produce shale gas – have led some legislators to call for more regulatory oversight of this industry practice. At issue, however, is not only whether fracing should be regulated, but also by whom.

A group of 18 conservative members of the Colorado State Senate have demanded that the federal government refrain from regulating fracing and claim individual states have jurisdiction over the matter. Some Democrats from gas-rich states, where fracing is common, are siding with the Republicans on this issue, which means the legislators that proposed the tighter regulations could face an uphill battle.

Renewable Electricity Standard

No matter which party wins the midterm elections, the plank on the Democratic platform that's most likely to earn Congressional approval is the renewable-electricity standard. The measure has bipartisan support; Democratic senator Jeff Bingaman of New Mexico and Republican senator Sam Brownback of Kansas have introduced a bill that would require large utilities to generate at least 15% of their power from renewable sources, such as wind and solar, by 2021.

The fate of an array of energy-related issues could depend on the outcome of the races. The consensus among pollsters last month was that the Democrats will likely maintain control of the Senate by a narrow margin, but some say the Republicans could seize control of the House by an equally slim margin.

But even if the elections shift the balance of power in the House or Senate, Republicans may not be any more successful at pushing their bills through Congress than the Democrats have been while in the majority. In addition, Obama could veto any Republican-passed legislation that runs contrary to his energy and environmental agenda, and it is unlikely Republicans could achieve the two-thirds majority vote in both chambers of Congress needed to override his decision.

The bottom line is this: do not expect much more from the 112th Congress than from the one it replaces.

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