The Fuse

In Swing States, Expect Energy Issues to Come to the Fore

by Leslie Hayward | February 11, 2016

We’re still in the early stages of the primary season, and the outcome of the 2016 presidential election is very much up in the air. But one thing we do know is that once the primaries are over, the general election will be largely determined by voters in a small number of swing states—some of which have large energy industries, or are strongly invested on energy issues.

The national energy landscape is in a very different place than in 2008, before the shale oil and gas boom, and 2012, before the oil price collapse. But changes in the national energy landscape go beyond the oil and gas boom: Electric vehicles have become commercially available nationwide, there’s been dramatic growth in renewable energy development, and coal-fired power generation has struggled under increasing displacement from natural gas and regulatory pressure.

Energy issues and the party line  

So far, most of the candidates in this election have not strayed far from typical party positions. Conservatives have generally expressed support for supply-side policies, such as opening new areas offshore drilling, the Keystone XL pipeline (rejected in November), lifting the crude oil export ban (which occurred in December), expanding hydraulic fracturing, and some have come out in favor of rescinding the clean power plan. Texas Senator Ted Cruz is a very strong proponent of domestic production. In March 2015, he introduced the Energy Renaissance act, which would leave fracking regulations up to the states, end greenhouse gas regulations by the Environmental Protection Agency (EPA), and expand oil exploration and production on federal lands and offshore. Donald Trump is another strong supporter of the domestic oil and gas industry.

Clinton has identified OPEC as a serious concern, labeling the group as a monopoly cartel, and argued that the members of OPEC who are also members of the World Trade Organization are violating the latter’s rules and regulations.

Both Democrats Hillary Clinton and Bernie Sanders are less pro-production—Clinton came out against the Keystone XL Pipeline before it was rejected by the Obama Administration, while Sanders supported a ban on fracking in his home state of Vermont. Sanders was also co-sponsor of the “Keep It In the Ground Act,” which would prohibit future leases on public land to extract gas, oil, and coal. It would also ban offshore drilling in the Arctic and Atlantic Oceans. Both Clinton and Sanders are in favor of boosting fuel economy standards and supporting adoption of alternative fuel vehicles. Clinton has identified OPEC as a serious concern, labeling the group as a monopoly cartel, and argued that the members of OPEC who are also part of the World Trade Organization are violating the latter’s rules and regulations.

Swing states likely to boost support for fracking

It’s not unprecedented for national energy policy to be shaped at the state level during the campaign cycle. Biofuel’s opponents have argued many times in recent years that Iowa’s corn industry, and the timing of its caucuses, have had an outsized influence on encouraging presidential candidates to back the ethanol industry and the Renewable Fuels Standard (RFS). Even recent polling supported the idea that to perform well in the Iowa Caucuses required some level of support (or some would say pandering) to the ethanol industry. In fact, every winner from both parties since 1980 has supported federal ethanol subsidies. Ted Cruz bucked the trend this year, winning the Iowa Caucus in spite of his public disapproval of the RFS.

The same way that Iowa has historically pushed candidates to vocalize support for the RFS, the number of swing states located in shale oil and gas formations is likely to increase backing for the fracking industry, both in future primaries and the general election. Colorado, Ohio, and Pennsylvania are all states where the fracking boom has brought jobs and economic growth to the region, and support for fracking remains high in spite of the challenges created by low oil and gas prices. It’s likely that candidates will try to use this to their advantage. If he wins the Democratic nomination, Sanders in particular is likely to face some heavy opposition from industry in these states.

In addition, candidates can find ways to help industry on the demand side.

Ohio and Pennsylvania are two of the largest swing states, with 18 and 20 electoral votes respectively. While natural gas prices remain low at around $2 per MMBtu, and the drilling industry at large has been hit hard by the oil price rout, there’s a window of opportunity for candidates to come out in favor of demand-side policies that could give the natural gas industry a boost. There are a few policies from the Obama administration that might find themselves in the crosshairs. In November, the Environmental Protection Agency proposed a suite of rules to reduce methane pollution from the oil and gas industry, while the Interior Department finalized rules for fracking on federal lands in March of last year. Both rules have been unpopular with the industry, and could be reversed fairly easily by an incoming administration. In addition, candidates can find ways to help industry on the demand side. Look for them to express support for liquefied natural gas (LNG) exports, energy-intensive manufacturing, and the chemicals industry—all ways that politicians can signal support for drillers while making a broader proposal to enhance American competitiveness and geopolitical strength.

Offshore Drilling

Support for offshore drilling in the coastal swing states, which include Florida, Virginia, and North Carolina, is not as galvanizing as other issues. Florida’s heavy reliance on the tourism industry to support it state economy means that even Republican legislatures typically oppose offshore drilling in that state. When the George W. Bush administration proposed opening new areas of the Gulf of Mexico to offshore drilling, then Governor Jeb Bush fought against his own brother to move the leasing territory further from the Florida coast, pushing the area from within 30 miles of Pensacola to over 100 miles away from any point on the coastline. Governor Bush’s current chances for the nomination are slim, but it reflects the fact that candidates will have to treat the issue carefully as they compete for Florida’s 29 electoral votes. Public support for offshore drilling remains low—approximately 60 coastal entities have passed resolutions against offshore drilling, and in 2010, the state legislature rejected a measure to allow offshore drilling in Florida’s coastal waters.

Industry will be putting pressure on candidates to express support now in order to keep forward momentum for when oil prices recover.

Virginia and North Carolina are somewhat divided on the issue of offshore drilling. Senators Mark Warner (D-VA) and Tim Kaine (D-VA) both support drilling off Virginia’s coast. However, in spite of the prospects of job growth and other benefits to state economies, many coastal residents have a “Not In My Backyard” approach to the issue. This could put candidates who would like to follow through on the Obama administration’s work in opening areas of the Atlantic coast to seismic research and offshore drilling in a tough spot, as they seek Virginia and North Carolina’s votes. Candidates might try and dodge the issue this year, since low oil prices have made the prospects of expanded offshore drilling less of an immediate priority for producers. However, the process of initiating offshore drilling is a lengthy one, with years required for permitting and seismic research. Industry will be putting pressure on candidates to express support now in order to keep momentum moving forward for when oil prices recover.

King coal dethroned

The double punch of the shale gas boom and tightening regulations on coal-fired power plants have hurt coal-producing states—many of which are up for grabs in the 2016 general election. According to the Energy Information Administration’s most recent annual coal report, U.S. coal production has fallen below one billion short tons for the first time in two decades. According to the Bureau of Labor Statistics, coal mining jobs have fallen by roughly 30 percent since 2011, which has impacted swing states including Colorado, Ohio, and Pennsylvania. Obama has been criticized as a foe of the coal industry, but the real challenge to coal’s supremacy has largely come from natural gas, which is now overtaking coal as the largest energy source for power generation in the United States. How candidates treat the decline of this industry on the campaign trail will probably be largely determined by party affiliation.

 

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