GOP Senate Majority Would Hit EPA, Push for Keystone Approval

NEW YORK (TheStreet) -- The expected Republican majority in the U.S. Senate after Tuesday's mid-term elections is likely to seek to roll back federal regulations on power-plant emissions, approve the Keystone XL pipeline, expand oil and gas development on federal lands and work toward ending the 40-year ban on U.S. crude oil exports, energy experts said.

EPA regulations requiring big cuts in power-plant carbon emissions will be a major target of a new Republican-controlled Congress, said a former House Republican staffer who spoke on condition of anonymity.

"There will be a lot of oversight and legislation aimed at the EPA regulations," the former staffer said. He also predicted that Keystone "will keep coming up until it's approved" and that federal lands will be increasing opened up for oil and gas drilling.

Michael Lynch, president of Strategic Energy and Economic Research, a consulting firm in Amherst, Mass., predicted the administration will approve Keystone in response to renewed Republican pressure and lower political risk after the mid-term elections.

"The Republicans will go to Obama and say, look, 'We've got to get this done; your own government is saying this is fine. The election is over so you don't have to worry,'" Lynch said.

The predicted GOP Senate majority will also likely try to end the 40-year ban on U.S. crude oil exports, said David Goldwyn, president of Goldwyn Global Strategies, a consulting firm.

Goldwyn, who advised former Secretary of State Hillary Clinton on energy policy, argued that Republican lawmakers may well push for scrapping the ban -- which was imposed in response to the Arab oil embargo of the 1970s -- because selling oil overseas would help to sustain the current boom in U.S. oil and gas production.

After the latest plunge in global oil prices, the incentive for energy companies to invest in U.S. production is dwindling, and that threatens to derail rapid growth in what has been one of the strongest areas of the domestic economy since the recovery began, Goldwyn argued.

Any decision to sell U.S. crude overseas would create a new market for the oil, pushing up its price and simultaneously driving down the European benchmark crude, North Sea Brent, because of the new global supply.

Under the export scenario, higher domestic prices would attract new investors to the U.S. industry while domestic gasoline prices, which are tied to Brent, would drop slightly, contradicting a popular belief that gas prices would rise if U.S. crude exports resumed, Goldwyn said.

"The lower oil prices go, the likelier it is that this fantastic U.S. production boom which we have enjoyed is going to flatten out, and with it all of the tax revenue and job creation which comes with it," he said.

"That's a serious problem because losing what has been one of the few bright spots in the economy over the past couple of years could potentially push the U.S. economy back into recession."

The U.S. benchmark crude, West Texas Intermediate, closed at $78.78 a barrel on the New York Mercantile Exchange Monday, its first close below $80 since 2012. The latest decline was triggered by Saudi Arabia's surprise decision to cut prices to U.S. customers, in an apparent attempt to defend its market share after recent increases in U.S. production.

A new GOP majority in Congress will be under pressure to defend the economic gains of the current domestic oil boom, Goldwyn argued, and that's likely to overcome refiners' opposition to higher U.S. crude prices, or misplaced fears of gasoline price hikes.

But any Congressional decision to lift the ban would have to be twinned with the Obama administration's agenda of cutting carbon emissions, and so the policy is likely to be linked to new measures such as tightening restrictions on methane from natural gas operations, or ensuring stronger compliance by industry on carbon emissions, he said.

And the fervor of a new Republican majority to roll back some of Obama's energy policies would be limited by the threat of a presidential veto of legislation, and by the Senate rule requiring 60 votes to end debate on any bill, a number that Republicans are unlikely to achieve even with a majority.

There's also a chance that newly empowered Republicans may depart from their traditional defense of fossil fuels by bringing the party into line with a corporate agenda that increasingly accounts for carbon emissions, argued Mark Alan Hughes, Director of the Kleinman Center for Energy Policy at the University of Pennsylvania.

"It's one thing for a Republican minority to grandstand against these things but it may prove to be a slightly different set of incentives for Republicans in the majority trying to ignore corporate interests on environmental standards, to actually be the standard bearer of a Republican-branded version of that," he said.

Republicans may find that they could take credit by catching up with an environmental policy "that is completely consistent with a growing number of large American corporations and their own predictions about where the world is going in the next 10 years," Hughes said.

In the short term, Republicans are likely to seek faster approval of U.S. liquefied natural gas export terminals so that producers can benefit from much higher prices in Europe and Asia, analysts said.

Lou Pugliaresi, president of the Energy Policy Research Foundation, said approvals have already been streamlined but a new GOP majority might try to speed that further by removing the Department of Energy from the process, leaving it entirely up to the Federal Energy Regulatory Commission.

"I wouldn't be surprised if more effort is given to remove the DOE entirely from the review process," he said.

And FERC might also be given more resources in order to make a quicker decision on interstate pipelines that would help get abundant oil and gas to market, Pugliaresi said.

But the major barrier to overseas gas sales might be the markets rather than the regulators.

Lynch said a rise in both European and Asian natural gas prices has eroded the differential with U.S. prices, reducing the chances that some of the currently planned terminals will be built.

"I think the enthusiasm for exports from the industry side is going to weaken significantly," he said.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


 

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