Republican Wave Promises Shift In America’s Energy Policy

Republicans are expected to gain enough seats in the November 8 midterm elections to capture majorities in both chambers of Congress. A shift back to Republican control could complicate President Joe Biden’s energy policy priorities, but it would undoubtedly provide a boost to energy security advocates.

The Biden administration’s energy policies have prioritized a climate agenda that has contributed to supply scarcity and soaring costs for consumers. The White House’s answer to the energy crisis has so far been to attack America’s oil and natural gas producers, demanding increased production and threatening higher taxes.

Such bully-pulpit leadership from the White House isn’t enough to calm energy markets that are skittish over runaway inflation, Russian aggression in Europe, a standoff with China, and a global pandemic that won’t go away.

Current polling shows Republicans with an 84 in 100 chance to take back the U.S. House of Representatives, according to polling website FiveThirtyEight. The battle for control of the Senate is tighter, with Republicans holding a 52 in 100 shot of winning control of the upper chamber.

While Republican candidates have been gaining in the polls as Election Day approaches, the most likely outcome is a closely divided Congress with small Republican majorities. But even slim Republican majorities can create headwinds for President Biden’s agenda.

Under Biden’s presidency, retail gasoline prices surged to a record $5 a gallon in June. Prices at the pump are about $3.75 a gallon today, which is still 60% above where they were when Biden took office on January 6, 2021. Gas prices are poised to push higher before the end of the year due to tight global supply and rising geopolitical risks, including the Ukraine war and mounting sanctions on Russia, a top oil and gas producer.

It’s not just the price of gasoline that’s a problem, though. The diesel situation is even worse. Meanwhile, the U.S. Energy Information Administration (EIA) expects heating costs to soar this winter – with households forecast to spend nearly 30% more for natural gas and heating oil and 10% more for electricity.

Republicans are expected to upend Biden’s anti-fossil fuel agenda, which has seen the President recently threaten a windfall profit tax on domestic producers that would hamper investment in new oil and gas supplies.

Biden doesn’t have the political support in Congress now for such a tax, never mind when a new legislature convenes with increased Republican membership.

Biden administrators at the Environmental Protection Agency (EPA), Federal Energy Regulatory Commission (FERC), and Securities and Exchange Commission (SEC) have been critical of the domestic oil and gas industry. They have slow-walked new oil and gas lease sales, blocked drilling permits, and slowed approvals of pipelines. Such moves have created an anti-investment atmosphere in the traditional energy sector.

As the election approaches, Biden has grown more desperate to reduce consumer prices at the pump. The White House has drained the Strategic Petroleum Reserve (SPR) – America’s emergency oil stockpile – and courted oil-producing countries with horrible human rights records that promote terrorism.

Somewhere along the line, the President forgot that America is the world’s largest oil and gas producer – with a far better track record of producing energy in an environmentally responsible way than Iran or Venezuela.

Even with control of the House, Republicans could challenge the White House’s energy policies and push for a return to the energy priorities of the previous administration.

That includes the White House’s fraught relationship with Saudi Arabia, the leader of the OPEC cartel, which ignored Biden’s calls for an increase in global oil supplies, instead opting recently to cut production by 2 million barrels a day.

Congressional action on so-called NOPEC legislation, which would allow the U.S. Department of Justice to sue OPEC members on antitrust grounds as members of a monopoly, could come up for a vote in early 2023.

The issues troubling the U.S.-Saudi relationship do not fall neatly along party lines. Criticisms of Riyadh tend to be louder on the Democratic side, and former President Donald Trump was widely seen to have better relations with the kingdom. But Iowa’s Republican Senator Chuck Grassley has long led the charge to pass anti-OPEC legislation.

Trump’s continued influence over the Republican Party could prompt a more powerful Republican Congress to press for better relations with OPEC again. It’s hard to say how this one will fall, but it will be more difficult politically for Biden to veto or lobby against a vote on NOPEC than it has been for past presidents.

Biden’s crowning climate achievement, the Inflation Reduction Act (IRA), remains a GOP lightning rod. And while there is a high hurdle to paring back the law, Republicans can be expected to go to great lengths to expose its flaws.

Republicans remain extremely unhappy with the passage of the Democratic spending bill, which contained $369 billion in clean energy spending. House GOP lawmakers have gone so far as to repeal the law, which Biden signed in August, a central policy plank for the next Congress. If Republicans win control of the House, that means many hearings and bills centered around dismantling the IRA.

Among the most vulnerable of the IRA’s energy provisions are the new methane tax on oil and gas operations and the minimum corporate tax of 15% on income. While Congress has wide latitude regarding tax provisions, Republicans would have to win both chambers to repeal the provisions successfully. Even then, they are not likely to capture the two-thirds majority needed to overcome a presidential veto. Still, hefty GOP House oversight of federal agencies charged with implementing the law — and their budgets — could slow things down.

There is much at stake in energy at the state level in this election, too.

Republican wins in crucial producing states could exacerbate GOP pushback against environmental, social, and governance (ESG) issues. Political rhetoric around the clean energy transition in Washington is at a palpable high, which climate hawks fear could trickle down to state-level politics, widening the band of anti-ESG states.

Related debates have emerged in critical races, including gas-rich Pennsylvania. In the state’s closely watched Senate race, Republican candidate Mehmet Oz has vowed to cast aside the Biden administration’s “woke agenda” and ensure that capital flows to oil and gas projects are uninterrupted. And an SEC climate risk disclosure rule, also said to be on the GOP’s chopping block, is yet to be finalized.

Meanwhile, several tight gubernatorial races carry climate and energy implications, where a power change would almost guarantee a shift in state-level policy in those arenas. States to watch are Oklahoma, New Mexico, and Oregon.