Mid-Term Elections Bring Democratic Control to Congress

Discounting California’s rejection of a ballot measure which would have imposed taxes on the state’s oil production and a similar result for another tax initiative in Alaska, energy exploration advocates have little to cheer about in the immediate wake of this year’s mid-term elections. Nationwide, a sweeping Democratic victory will end Republican control of the house of Representatives for the first time since 1994. In the Senate, vote tabulations also appear to have handed control back to the Democrats. Recounts of votes in close races in both Virginia and Montana apparently will not happen. The California referendum, called Proposition 87, would have funded the development of alternative energy with the proceeds of tax revenues taken from oil producers. One of the most costly referendum campaigns in U.S. history has ended in defeat. With about 55% of California voters rejecting the amendment, it was clear that consumers, already being charged some of the highest pump prices in the country, were in no mood to add to that burden. Additionally, oil interests coughed up almost $100 million to defeat Proposition 87, which could have raised as much as $350 million for the state of California. In Alaska, Ballot Measure 2 was also rejected by the voters by a wide margin. The proposed $1 billion a year gas reserves tax, had it passed, could have been the death of any number of big oil infrastructure initiatives in Alaska, including but not limited to the proposed $25 billion LNG pipeline contract which had been negotiated between the state and a consortium of oil majors. In any event, nothing much was expected to happen in Alaska before January, when a new governor takes office. The good news for big oil ends at the statewide level, however. It’s still possible that the House and Senate could agree on a compromise bill on offshore drilling before the end of this lame duck session, but don’t count on it. And, if ANWR was dead-in-the-water before the midterm elections, it is sinking rapidly below the surface as the dust clears from a sweeping Democratic mandate. Come January, with the House and probably the Senate in control of the Democratic leadership, any hope of the more aggressive house version of offshore drilling legislation is clearly over. The best chance since the waning days of the Carter Administration to enact sweeping energy exploration legislation has arguably slipped away. Michael Roberts of the Venable LLP, a corporate and business law group, said this morning, “Clearly, the election results are not helpful. If Congress couldn’t get energy legislation passed with control of both houses, this only makes it much more difficult.” Roberts, whose firm also engages in maritime lobbying and legislative work, went on to say, “The makeup of the rank and file legislators may not be significantly changed, but the Democratic leadership and committee chairs will have a big effect on future legislation.” In general, there is hope that in the 110th Congress, the House version of the offshore drilling bill can be scaled back, and reconciled with the Senate version. If not, it may be at least two years before big oil will again have this kind of shot at initiating new exploration.