Analysis by Energy Workforce President Tim Tarpley
American politics, especially in recent years, tends to go back and forth like a pendulum. In a two-party system, one party is up for a while, and then the other party comes back and takes some power, and things go back and forth in a somewhat predictable pattern. In recent years, the party not in the White House has always tended to do quite well in the midterm elections. This is natural and expected as the American public grows frustrated with current leadership and wants change. So, it was expected that Democrats would have a good night in this election cycle. What happened last night was more than that. What happened last night was a seismic and dramatic change in American politics that will have major implications for us in the energy space and the direction of the country as a whole for many years. The blame game has already started… and certainly, the Republican Party will begin its internal process of finding a path forward, but in the meantime it’s important for us to understand what it means for us in the short and long term.
First, we need to consider what actually happened. In short, at the time of writing, in the House, the Democrats have flipped 28 seats and currently have secured a 232-139 majority. This number will certainly change as there are a number of races still being counted. In the Senate, Democrats flipped 7 and control 54 seats to Republicans’ 44, with 2 still being counted. In Texas, every statewide candidate on the ballot lost, with the Governor, Lieutenant Governor, Attorney General, and Land Commissioner in Democrat hands for the first time in decades. Democrats also took control of the open Railroad Commissioner seat as well as the majority in the Texas House. This outcome is well beyond any prediction or any concept that most people expected or even considered as a possible outcome. Of all the surprises last night, this may be the most dramatic and also the most impactful to us.
First, let’s talk about the outcome up in DC. Democrats are now in charge of the Senate; their margin may be somewhere between 54 and 56, but that difference doesn’t really matter. They are firmly in control but short of the 60-vote threshold. They will still have to get some Republicans on board for most legislation; however, this shouldn’t be hard, as many Senate Republicans are looking to distance themselves from the President, so bipartisan compromises may come easily. In the House, Hakeem Jeffries is poised to lead a significant Democrat majority that can easily sidestep the Democrat socialist faction because they won’t have enough votes to control the floor. This majority is chomping at the bit to launch multiple investigations of the President and the current Administration, as well as to move legislation to focus on their agenda. The President can still veto anything that comes out of Congress, but he will have to negotiate with the body on appropriations, so compromises will have to be made. We can expect the oversight committees to be busy with investigations of all agency actions over the past two years.
What does this new scenario mean for our priorities? First up is permitting reform. The Senate permitting reform bill is teed up for a procedural vote first thing next week. As of now, this is still on the table… but it will require Democratic votes to get out of the Senate and meet the 60-vote threshold for passage. Some Democrats are already saying that they should renegotiate the package and/or wait until next year when they take the majority. In my opinion, if I were a betting man, I would bet that the naysayers in the Democratic caucus win the day and that permitting reform is derailed next week. However, there are still a few scenarios where it could survive, perhaps if some additional language favored by the Democrats is added during the process. EWTC will be working diligently in the coming days to support these efforts and to keep our membership apprised of developments.
Tariffs are another area of interest where we may see some significant changes. Many democrats ran on an anti-tariff position, and many Republicans in the House and Senate are going to be eager to split from the President on this issue. With energy costs on the minds of both parties, targeted rollbacks of tariffs that hit critical energy components are certainly on the table. The effort will require bipartisan action to ensure that enough pressure is put on the White House to reverse course. This may certainly be one of, if not the only, bright spots we see from last night in our overall policy outlook.
Then there is Texas, home to the Permian and more oil and gas production than anywhere else in the US. In an outcome that is almost entirely incomprehensible to many of us who have lived here for most of our lives, the state is now entirely blue. Governor-elect Hinjosa will be sworn in as the state’s first Democratic Governor since Ann Richards and will have allies in every major state office except the two Railroad Commissioner seats, which were not up last night. This is the biggest surprise to me. The Democratic slate was swept into office by high turnout brought out by the Senate race between Senator-elect Talerico and Ken Paxton. Whether or not this is a sign of a dramatic demographic change in the state or a short-lived phenomenon remains to be seen.
In the near term, the question on all of our minds is whether or not Texas is now Colorado 10 years ago? We will start to see state regulatory actions that target and impede oil and gas? It’s certainly possible… but I tend to think probably nothing significant. We may see some action on the fringes, but I don’t see this new crew acting too aggressively against oil and gas, at least initially, given that they will be keen to hold their majority and they know how important the industry is to the state. Governor-elect Hinjosa did not focus much on oil and gas during her campaign other than taking a pro-data center moratorium position. She will likely need to follow through on that action given how much of a campaign focus it was, so we can expect that there will be some sort of new moratorium in January on new construction until the State legislature (partially controlled by Democrats) can meet and pass new legislation. However, we can be sure that the legal framework for data centers in Texas is going to get tougher; how much tougher is the question. This will certainly change the gas demand outlook projections in the near term for the state.
Beyond the Governorship, the Railroad Commission now includes Commissioner-elect Jon Rosenthal, who will serve as one of the three-member body. While Republicans maintain a majority still, his voice will be relevant and could be impactful as a swing vote. In my view, the changes in the state of Texas may be our biggest challenge. A divided government in DC was expected by many, and in many ways a divided federal government locks everything in place and is fairly predictable. An entirely Democratic run state of Texas is a different political animal. Honestly, we just don’t know what to expect because we don’t have enough data. We are in uncharted waters that we will have to navigate together. EWTC will certainly need to spend time navigating this new landscape along with our members and working together to ensure that Texas continues to produce the energy the country and the world so desperately need.
Tim Tarpley, Energy Workforce President, analyzes federal policy for the Energy Workforce & Technology Council. Click here to subscribe to the Energy Workforce newsletter, which highlights sector-specific issues, best practices, activities and more.
