Congress could make big moves on energy policy next session, thanks to the boom in natural gas and oil production from shale deposits across the country.
The rapid expansion of hydraulic fracturing and horizontal drilling might spark the nation’s first comprehensive energy law in five years, attorneys at Washington law firms say. New provisions could give a boost to energy production, while also including some of President Barack Obama’s green-energy goals.
Lawmakers on Capitol Hill now have a reason to review and reshape America’s domestic energy production, as well as the country’s role in the global energy market, said Joshua Greene, a former congressional staff member and entrepreneur who now focuses on energy and environment as a partner at Patton Boggs in Washington.
“I’m optimistic, I think others are optimistic of energy policy getting done,” Greene said. “I think people are coming to the realization that, as it comes to not only our national energy security but our own economy, we have to do some pretty heavy lifting on energy policy.”
Among the issues that could gain traction on Capitol Hill: creating federal standards related to the environmental effects of fracturing to replace the patchwork of state regulation, as well as provisions that would increase demand for natural gas such as opening up exports and encouraging use among passenger vehicles or purchases by the federal government.
Vast deposits of natural gas and shale oil are located in traditionally more liberal states—such as Colorado, Pennsylvania and New York—meaning more Democratic legislators will have common ground with traditionally pro-production Republicans. The presence of these resources in several states where energy is suddenly a big industry, such as North Dakota, increases the number of senators who could support a bill boosting energy production in their states.
“Over time … energy will be an important component in many more communities’ visions of themselves,” said David Bernhardt, a former solicitor of the U.S. Department of the Interior who is now a partner in Brownstein Hyatt Farber Schreck’s Washington office. “You have a potential to have some conciliation on energy and some progress made.”
Added to the mix, the Senate Committee on Energy and Natural Resources will have a new chairman, likely Senator Ron Wyden, D-Ore. He appears ready to aggressively push energy legislation and has a reputation for working well with the ranking minority member of the committee, Senator Lisa Murkowski, R-Alaska.
Wyden has already foretold plans to reshape the country’s energy policy, which he says needs updating. He said in a statement on Nov. 2 that the Natural Gas Act needs reconsideration because the free trade agreements included in it were adopted “before newly accessible shale gas became a strategic asset for the U.S.” He wants to examine how exporting natural gas could increase the price domestically and hurt consumers and manufacturers. He also has a history of supporting green-energy initiatives. This year he sought, along with several Republicans, the extension of the wind-energy production tax credit and extended the tax credit for the purchase of new electric motorcycles.
Scott Segal, a partner in Bracewell & Giuliani’s Washington office, said during a webinar last month that Wyden “likes to do deep dives on complicated issues,” and likes legislation that focuses on fixing real problems.
Lawyers are tempering their hopes with some financial reality. Budget issues, including tax reform, could sap all the legislative energy, depending on what happens with the lame duck session negotiations to avert the “fiscal cliff,” a mix of mandated tax increases and spending cuts set to go into effect at the start of 2013.
Bills on larger climate issues, such as a cap-and-trade law or a carbon tax bill, are unlikely to be successful, Greene and Bernhardt said.
But the Obama administration is looking to have some energy and environmental issues addressed this term as part of shaping the legacy of his presidency, Bernhardt said. Obama said in the past year that energy would be a focus in his second term, telling voters during the Oct. 23 presidential debate, “I want to control our own energy by developing oil and natural gas but also the energy sources of the future.”
But Obama’s relationship with Congress on energy issues was not warm during his first term. A top White House aide on energy, Heather Zichal, spoke at renewable energy conference RETECH 2012 in October and said the president wants to “hit the reset button with Congress.”
Zichal said the administration wants to avoid “boom and bust” cycles in green energy and ensure that natural gas production proceeds safely and responsibly, according to a report on her speech by The Hill. The White House did not respond to requests for an interview with Zichal.
Greene said the Senate is the best chance for a bill, because the Republican-led House is likely to focus on its same pro-coal, anti-Environmental Protection Act agenda. If any legislation is ultimately successful, the House would have to follow the lead of a Senate bill, he said.
The Senate bill would likely include a pro-nuclear component, such as allowing for smaller, more modular plants or loan guarantees to build new plants and a clean-coal component such as promoting carbon capture, Greene and his colleagues at Patton Boggs predicted in a post-election report.
Sensitive environmental concerns related to hydraulic-fracturing operations would mean water policy issues could be included along with any provisions that boost compressed natural gas production, the Patton Boggs attorneys said in their report.
Segal said during the webinar last month that a number of regulations were bottled up pending the outcome of the election, and Obama could use some of those to push his energy agenda in the first part of the year even without Congress. Those issues include the power sector and its use of coal, regional haze regulation in the West, new source performance standards for power plants and the finalization of carbon standards for new power plants, Segal said.
Other major initiatives, he said, include reforming national ambient air quality standards for ozone and particulate matter; rules on cooling towers and affluent guidelines under the Clean Water Act; and the status of coal ash under the Resource Conservation and Recovery Act.
Bernhardt said he first will be watching what happens on the fiscal side—for instance, how renewable energy is treated in any fiscal package agreement between Congress and the White House. “Depending on how that goes, it could either hamper or be a positive outcome on trailing legislation,” Bernhardt said.
Any reshaping of energy laws this year to account for natural gas production means Capitol Hill would not be pulling out the same template for an energy bill, and updating old statutes might not be enough, Bernhardt said. “For somebody like me, what’s really going to be exciting is: There could be some new big ideas up there that are being discussed,” Bernhardt said. “Change presents opportunities, and challenges, for clients.”
Todd Ruger writes for The National Law Journal, a Daily Report affiliate.