By Scott Segal
The 2014 Midterm Elections have taken place and Republicans performed extremely well in all categories – winning key gubernatorial and congressional races – in what many are viewing as a "wave election."
In the Senate, Republicans are now in the majority after picking up at least seven seats that were previously held by Democrats, giving the GOP a minimum of 52 Senate seats in the 114th Congress. Republicans picked up seats in Montana, South Dakota, West Virginia, Iowa, North Carolina, Arkansas, and Colorado. They also managed to hold Republican seats in the hotly-contested states of Georgia, where Republican David Perdue will succeed retiring GOP Senator Saxby Chambliss; Kansas, where Senator Pat Roberts (R-KS) managed to hold on despite a strong challenge from independent Greg Orman; and in Kentucky, a top target for Democrats seeking to unseat Senator Mitch McConnell (R-KY), who is expected to be elected the next Senate Majority Leader. Democrats were able to hold off challenges in the states of New Hampshire, where former Senator Scott Brown challenged incumbent Senator Jeanne Shaheen (D-NH); Michigan, where Congressman Gary Peters (D-MI-14) defeated GOP candidate Terri Lynn Land to hold on to the seat of retiring Senator Carl Levin (D-MI); and in Oregon, where incumbent Senator Jeff Merkley (D-OR) easily overcame a challenge from Republican Monica Wehby.
In the House of Representatives, Republicans added at least ten seats to their existing majority. Speaking on election night, House Speaker John Boehner (R-OH) said that he is "humbled by the responsibility the American people have placed with us," adding that this is "not a time for celebration" but a time for "government to start getting results and implementing solutions to the challenges facing our country, starting with our still-struggling economy."
What this means for a range of important issues is outlined in further detail below.
Energy and Environment on Election Night
By Scott Segal
Environmental issues featured more prominently in the lead-up to the 2014 midterm elections than they did in 2012. Most notably, billionaire Tom Steyer spent $70 million of his own money on races across the country, mostly for naught. Democrat Gary Peters gained a Senate seat in Michigan, but Steyer’s backing was not the difference maker. The League of Conservation Voters, the NRDC Action Fund, the Environmental Defense Action Fund, and the Sierra Club also spent tens of millions of dollars, with little measurable impact on outcomes.
At the same time, President Obama’s environmental regulations had a significant impact on several important races, to the detriment of Democratic candidates. In West Virginia, Republican Shelley Moore Capito cruised to an easy victory over Democrat Natalie Tennant. Capito is West Virginia’s first Republican Senator in 48 years. In Kentucky, Democratic challenger Alison Lundergan Grimes fared exceptionally poorly in coal country. In 1992, Bill Clinton won 75% of the vote in Kentucky’s Knott County. This year, Grimes won 38% of the votes cast there, despite most of the County’s voters being registered Democrats. In Louisiana, Senator Mary Landrieu used her position as Chair of the Senate Energy & Natural Resources Committee as a talking point with voters. While Landrieu’s fate will not be determined until the run-off election on December 6th, the results in the open primary suggest her position may be insufficient to sway the State’s electorate in any meaningful fashion.
Finally, energy issues received a significant amount of airtime in debates on the Senate campaign trail. The Colorado race was a case-in-point: In March, candidates Rep. Cory Gardner (R-CO) and Sen. Mark Udall (D-CO) both introduced legislation to expedite the LNG export permitting process and allow LNG to be shipped to Ukraine, Japan, and allies in western Europe who are reliant on Russian natural gas. In August, Governor John Hickenlooper (D-CO) and Representative Jared Polis (D-CO) brokered a deal to remove two anti-fracking initiatives from the ballot, in an effort to help Udall who had been under attack for not opposing the initiatives quickly enough.
What Comes Next
The President, Speaker of the House John Boehner (R-OH), and soon-to-be Senator Majority Leader Mitch McConnell (R-KY) have all expressed interest in tackling energy issues in the 114th Congress. Senator Lisa Murkowski (R-AK) will be Chair of the Senate Energy & Natural Resources Committee and Senator Jim Inhofe (R-OK) will be Chair of the Senate Environment & Public Works Committee. Both Committees will undoubtedly step up their oversight of the Environmental Protection Agency (EPA), with a particular focus on the President’s "Clean Power Plan." Senator Murkowski is a strong advocate of oil and natural gas development on federal lands, and opposed to continued subsidies for renewable energy. If Mary Landrieu prevails in December, she and Murkowski will continue their strong working relationship. If Landrieu loses, however, the position of Ranking Member will fall to Senator Maria Cantwell (D-WA), whose state has no oil and gas production and plans to soon close its only coal-fired power plant. Senator Cantwell is a strong supporter of market manipulation rules in the energy sector. While Cantwell is also a more staunch supporter of environmental regulation than Landrieu, she and Murkowski also have a history of working together to facilitate the Committee’s work.
What sort of legislative activity should we anticipate? In the new session in 2015, a bill to finalize the approval of the Keystone XL pipeline is a virtual certainty, whether as a separate legislative item or an attachment to must-pass legislation. It remains to be seen what legislative amendments and/or riders will be advanced to curtail the scope and speed of the Clean Power Plan, but it is likely one or more of these provisions will reach the floor of both chambers. Points of focus for States and Republican legislators include: the interim targets for emissions reductions states must meet by 2020, the impact the Clean Power Plan is likely to have on electrical reliability, and the enforceability of the Clean Power Plan in light of widespread opposition from numerous governors.
Because the success or failure of the Clean Power Plan is highly dependent on the States, the outcomes in a number of gubernatorial races will also be felt in the coming years. Governors mansions fell to Republicans in Democratic strongholds like Illinois, Maryland, and Massachusetts. Gas-rich Pennsylvania flipped the other way. But the net effect probably amplifies the chorus of opposition to implementation of the Clean Power Plan and other EPA rules.
Finally, we anticipate the volume obligations and the credits program under the Federal Renewable Fuel Standard, the ethanol mandate, to be subject to greater scrutiny and perhaps legislative reform in the new Congress. Further oversight is likely on ozone, regional haze, coal ash, and the waters of the United States as well.
Restrictions on Exports of Crude Oil
By Josh Zive
Since 1975, the U.S. has required a license from the Department of Commerce for any exports of crude oil from the United States. The licenses, now issued by the Department of Commerce’s Bureau of Industry and Security (BIS), are subject to specific restrictions and limited exceptions. In function, the licensing mandate has operated as a de facto ban on most crude oil export from the U.S. However, this year’s midterm elections are coming at a time when the U.S. is experiencing an energy production renaissance, and the change in control of the Senate could result in crude export issues assuming a more prominent role in energy policy debates in the coming years. These issues include:
- The domestic energy renaissance has changed the nature of the crude oil export debate. Current U.S. crude oil export policy was motivated by the shortages and price shocks resulting from the 1973 OAPEC (Organization of Arab Petroleum Exporting Countries) oil embargo, and consistently declining domestic oil production from 1970 to 2008 made the "short supply" controls relatively noncontroversial. However, since 2008 U.S. oil production has experienced a renaissance, and now the U.S. has reached a 45-year high in domestic oil production. This growth in production has resulted in lower domestic crude prices, with producers now seeking to expand opportunities to export U.S. crude and other petroleum products. In recent months, officials in the Obama Administration have indicated a willingness to consider changes to crude oil export regulations, and Senator Lisa Murkowski (R-AK), the Chairwoman-elect of the Senate Energy and Natural Committee, has been a vocal advocate for sweeping changes to crude oil export restrictions.
- Changes to export policies are controversial and complicated. Although the growth in domestic oil production has changed the debate over crude oil export restrictions, it has not resolved many of the complicated political and policy issues involved in that debate. Domestic oil refiners and elected officials concerned about U.S. gasoline prices have defended existing restrictions as being in the best interest of U.S. consumers and national security and have criticized policies that have been perceived as loosening the restrictions. For example, in June of this year BIS issued rulings to two companies classifying their condensate (a very light petroleum product) as a product not subject to licensing mandates. In response, Senators Ed Markey (D-MA) and Robert Menendez (D-NJ) wrote a scathing letter to BIS claiming that the agency had circumvented the statutory ban on crude exports. As a result, well-funded industry coalitions have formed on both sides of the crude oil export debate.
- Midterm results promise more debate and study, but large policy changes are unlikely in the short-term. With Republicans assuming control of the Senate, Senator Murkowski will hold the gavel at the Senate Energy and Resources Committee, where she has been the leader of the legislative effort to overhaul crude oil export policy. As a result, in the coming months more hearings, studies, and analyses of export policies can be expected. Also, it is likely that numerous legislative vehicles will be discussed and debated. Proposals will range from small changes focused on products such as condensates, to more sweeping changes that include reforms to export policies and efforts to address other topics such as Jones Act shipping requirements. However, because of the difficult commercial and political issues involved in the energy export debates, it is unlikely that the President and the Congress will agree on any large policy options. In the short term, legislative movement will likely be slow and incremental, with a real focus on building the analytical foundation necessary to evaluate policy options.
Shale Oil and Gas Production
For the first two years of the second Obama presidential term, the White House has broadly supported continued shale development even as a portion of the Democratic base continues to oppose hydraulic fracturing. During the 2014 midterm cycle, Democrat and Republican candidates in key races largely competed with each other over who would be best positioned in Congress to continue promoting (insert one of the following: "energy jobs," "energy independence," "energy security").
Historically, the issue of domestic energy production is comfortable territory for Republican candidates. In key energy states such as Kentucky, Louisiana, Alaska, West Virginia, and Colorado, Democratic candidates in 2014 largely struggled to convince voters that a Democrat-led Senate was the best choice to continue expansion of shale production in the United States.
With a Republican House and Senate and two years remaining for the Obama presidency, there are several key items to watch relating to shale oil and gas development:
Oversight and Use of Appropriations Process to Blunt Regulations on Shale Production
Perhaps the greatest change anticipated on Capitol Hill from the Republican Senate victory will be a return to a "regular order" appropriations process. While Republican attempts to use appropriations bills to block environmental regulations the past few years have largely failed, having a majority in both chambers likely means these efforts will be reenergized as the Administration attempts to push out its remaining regulatory agenda. In the shale space, likely targets of Republican appropriations riders include:
- The Bureau of Land Management’s final regulations on hydraulic fracturing on federal and tribal lands;
- The Fish and Wildlife Service’s listings of species in areas of shale production;
- The EPA rules on methane emissions, chemical disclosure, and so-called "Waters of the U.S."—a proposed expansion of Clean Water Act authority over intermittent bodies of water.
Ultimately, even with majorities in both chambers, Republicans will not get all of these riders in a final budget agreement. But with increased leverage and a weakened President, the process could force the White House to accept some limits on proposed regulations.
Regulation of Methane Emissions from Shale Production
While the Obama Administration has gone to great lengths to disclaim any intent to administratively curtail U.S. shale production, President Obama has also tried to win back some critics of hydraulic fracturing by calling for an increased focus on methane emissions from onshore oil and gas production. The issue of methane emissions has been hotly contested with some environmental groups trumpeting data on fugitive methane emissions to call into question the ultimate carbon savings gleaned from replacing coal with shale gas. While leading analysts and even government officials have called these assertions sharply into question, as part of his Climate Action Plan to reduce U.S. greenhouse gas emissions, President Obama called on EPA to evaluate the need for further regulation on methane emissions in the energy sector. Accordingly, in a likely attempt to maintain the benefits of shale production for his economic legacy while also protecting his climate legacy, we can expect EPA to closely examine direct regulation of methane emissions. With a Republican Congress looking on, expect this issue to draw oversight attention and possible action in the appropriations process.
Debate Over LNG Export Policy
For domestic shale gas producers, U.S. policy on natural gas exports is a market issue that can make U.S. production more economically feasible. For many Members of Congress, increased U.S. gas exports is a geopolitical issue that can blunt the energy pressure placed on our European allies by Russia. In the last session, as the Russia-Ukraine crisis unfolded, congressional frustration with DOE’s slow approval process led Congress to step into the debate and introduce legislation that would fast-track approvals. These bipartisan efforts were tabled in the Senate by Democratic leadership. With a new Republican majority in the Senate, we can expect more attention on previously-proposed House and Senate bills that would extend preferential treatment to applications to export natural gas to NATO allies and Japan.
DOE’s recent revisions to its export approval process and a "pause" in the Ukraine crisis diverted attention from these bills in the last session. However, most observers continue to believe Russian President Vladimir Putin will continue to press his interests in Ukraine and other Eastern European countries in the months ahead. If Europe experiences another cold Winter and Russia begins to use natural gas supplies to pressure our allies, could a new Republican majority in the Senate gather enough moderate Democrat votes to get a bill to President Obama’s desk? Perhaps and, if so, would President Obama veto such a bill even though it is heavily sought by our foreign allies and he has publicly touted the potential benefits of exports?
LNG Export Policy
Since granting the first authorization to export natural gas to non-free-trade-agreement (FTA) countries over two years ago, the issue of natural gas exports has been one of the dominant policy debates on Capitol Hill. This debate has encompassed numerous analyses, several hearings in both the House and Senate, and, at times, has been a leading diplomatic issue between the United States and our allies abroad.
During the 2014 election cycle, to the extent the gas export issue garnered attention, it was largely an issue of agreement among both Republican and Democrat candidates who were united in wanting to see the Obama Administration take swifter and more decisive action to approve gas exports. The majority of candidates in both parties saw increased gas exports as leading to lower global greenhouse gas emissions, greater U.S. jobs, and enhanced geopolitical leverage in a suddenly chaotic world. Dissenting voices in Congress on LNG exports – primarily liberal Democrats like Senators Ed Markey (D-MA) and Robert Menendez (D-NJ) – will find themselves with fewer allies in the next Congress.
With such widespread agreement that the U.S. should export more LNG, the new Republican majority in the Senate may make it possible for Congress to take action to more rapidly achieve that objective, taking advantage of Democratic rhetoric on the subject and the slow pace of export approvals. President Obama and many of his top aides and Cabinet officials have extolled the virtues of increased gas exports and, even in a Democrat-led Senate, a number of Democrats sponsored or cosponsored legislation to speed up permits. However, despite the public statements from the Executive Branch, as of October 21, 2014, the U.S. Department of Energy (DOE) has issued only three final authorizations to export natural gas, totaling just under 4 Bcf/d of natural gas. Nearly 40 applications to export natural gas to non-FTA countries remain pending before DOE, totaling just over 34 Bcf/d. And despite the sentiments of centrist Democrats on Capitol Hill, legislation to expedite gas exports was never brought to the floor by Majority Leader Senator Harry Reid (D-NV).
DOE’s recent revisions to its export approval process and a deadlock in the Ukraine crisis diverted attention from these bills in the last session. However, most observers continue to believe Russian President Vladimir Putin will continue to press his interests in Ukraine and other Eastern European countries in the months ahead. With a new Republican majority in the Senate, we can expect previously-proposed House and Senate bills that would extend preferential treatment to applications to export natural gas to NATO allies and Japan to once again receive Committee attention. If Europe experiences another cold winter and Russia begins to use natural gas supplies to pressure our allies, could a new Republican majority in the Senate gather enough moderate Democrat votes to get a bill to President Obama’s desk? Perhaps, and if so, it would be difficult for President Obama to veto a bill that is so heavily sought by our foreign allies.
Offshore Energy: Key Issues in 2015
The 2014 election finds the U.S. offshore energy industry grappling with a sharp cyclical downturn due to falling global oil prices and a surge of output from new domestic sources. Concerns over the depth of the Obama Administration’s commitment to an "all of the above" energy policy have today taken a backseat to more pragmatic questions involving the scope of offshore tracts coming online for development and the ever-evolving extent of the Interior Department’s regulatory reach.
As Republicans take hold of Congress in 2015, there are a handful of items on our radar to watch:
Congressional Committees. With the Senate switching hands, Sen. Lisa Murkowski (R-AK) is poised to take the helm of the Energy and Natural Resources Committee. Murkowski, who generally enjoyed a good working relationship with current Committee Chair Mary Landrieu (D-LA), will continue as a strong proponent for offshore exploration and production, in addition to pushing forward on initiatives involving crude and LNG exports. On the House side, the retirement of Natural Resources Committee Chairman Doc Hastings (R-WA) opens up the top slot on this key offshore committee to two main contenders: Rep. Louie Gohmert of Texas and Rep. Rob Bishop of Utah. Bishop’s close ties to Speaker Boehner likely leave him best positioned to take the helm in 2015, where he will be set to continue his strong focus on issues related to public lands use. Look for pushback on the administration’s recent enthusiasm for designating new national monuments.
Expanded Offshore Legislative Push. The newly aligned planets of a fully Republican Congress and ever-growing U.S. energy production could tempt lawmakers to make a legislative push into opening up more offshore areas for energy development – areas traditionally governed by the Interior Department’s five-year Outer Continental Shelf (OCS) leasing plans. Legislation could be enacted to supersede the Interior Department's planning process through stand-alone legislation or through provisions added to the Budget Reconciliation bill, under the rationale that such a provision would expand federal revenue generated by bids and royalties related to offshore development.
Five-Year Plan / Atlantic Drilling. Barring legislative intrusion into the Interior Department leasing plan process, the coming 2017-2022 plan will be mostly ironed out under the Obama Administration, even though it will ultimately be blessed by his successor. According to the U.S. Energy Information Administration, the U.S. OCS contains approximately 90 billion barrels of oil and over 404 trillion cubic feet of natural gas. Yet many of those resources are located in planning areas either completely or largely prohibited from development, leading to some interesting regional political dynamics. Look to the newly empowered Sen. Murkowski to pressure Interior Department planners to approve additional E&P in the Alaskan OCS. Turning to the southeast U.S., a recent study found that development in the Eastern Planning Area could create 100,000 new jobs in Florida alone, likely to be left on the table if the Eastern Gulf remains off limits to drilling. Meanwhile, with an eye on their own jobs numbers, coastal governors from Virginia’s Terry McAuliffe on down the coast have submitted formal comments in favor of Atlantic drilling. To the north, comments filed under Maryland Gov. Martin O’Malley reflected his staunch opposition to mid-Atlantic leasing, but his successor, newly elected Gov. Larry Hogan, stated during the campaign that he favored "policies which enable all of Maryland's energy resources to be put to use," a posture that appears to set the stage for support of offshore development. Finally, if Hillary Clinton manages to succeed Barack Obama, we can expect her long-time friend and fundraiser Gov. McAuliffe to weigh in on the final draft of the 2017-2022 plan in strong favor of Atlantic drilling.
"Risk Management, Financial Assurance and Loss Prevention" ANPR. Four and a half years after Macondo, Interior Department regulators continue to test the extent of their jurisdictional reach. First came the decision to issue "Incidents of Non Compliance" orders directly to contractors in addition to their offshore customers (the lessees). Now the Bureau of Ocean Energy Management (BOEM) has issued an advanced notice of proposed rulemaking (ANPR) on "Risk Management, Financial Assurance and Loss Prevention," which again proposes to cross traditional lines of responsibility. The ANPR asks whether BOEM should impose obligations on contractors to mitigate the financial risk associated with recovering royalties from offshore drilling projects, potentially extending regulatory reach into an area once reserved squarely for lessees. A host of legal and policy questions have been raised by this ANPR: Does BOEM have the statutory authority to impose such obligations on entities other than the lessee? If so, would contractors be forced to acquire additional insurance or post bonds, and at what cost? Would companies able to self-insure gain a competitive advantage, putting BOEM in the position of picking winners and losers? We’ll be watching this rulemaking process closely with an eye toward the potential market uncertainty that could unfold if such an obligation were imposed.
Policies favoring renewable energy will likely face headwinds in the next Congressional session with the Senate moving into Republican hands. Republicans in Congress have often taken the position that the federal government shouldn’t "pick winners and losers" in the energy markets or gamble taxpayer dollars on renewable-energy loans to companies with programs like federal loan guarantees, and several have proposed slashing funding for renewable energy programs. Just a day after the election, a collection of conservative and anti-wind groups sent a letter urging Speaker Boehner and Senate Minority Leader McConnell to reject any attempt to revive the wind Production Tax Credit, specifically in any tax extenders package in the lame-duck Congressional session.
We also saw significant oversight and investigations on issues like Solyndra and the Department of Energy’s Loan Guarantee program in the House Oversight Committee last session, where Chairman Darrell Issa (R-CA) led a number of the inquiries. With Republicans in control of the next Senate, we expect some of this oversight could re-emerge in Senate committees after years of oversight and investigations frustration.
Finally, there certainly will be some impetus to move forward with legislation that can improve and promote energy efficiency, similar to legislation that stalled in the Senate last fall. Efforts like this will likely become a foundation piece of any energy legislation that Congress attempts to move because of its broad bipartisan support.
The Production Tax Credit (PTC), which expired at the end of 2013 but is kept alive by the commence construction criteria, will likely be temporarily extended through the end of 2015. There are too many members on both sides of the aisle—and both sides of the Capitol—who support the PTC enough for it to expire. As for the next year, if Congress decides to reform the tax code, the Republicans would probably try to end the PTC. However, in the absence of tax reform, there may be a solution to phase out the credit over time.
The Renewable Fuels Standard
In 2014, no one energy issue was as closely linked to a key Senate election as the Renewable Fuels Standard (RFS) was to the Iowa Senate race. Earlier this year, EPA proposed the first-ever reduction in the renewable fuel mandate in partial recognition of the so-called ethanol "blend wall" (the term used for the limit of ethanol that can be placed into the domestic fuel pool). When this proposal outraged farm state legislators and other ethanol advocates (notably in Iowa), it was widely assumed that the White House political operation would issue a final rule restoring some of the cuts before the midterm election in an effort to bolster Iowa Democrat Bruce Braley in his critical race against Republican Jodi Ernst. Instead, and despite being almost a year past the deadline for the rule prescribed in the statute, the White House has still not released the final rule and Iowa (and new Senator Jodi Ernst) became a crucial victory on the march to a Republican Senate.
What does the result in Iowa and a new Republican Senate majority mean for the ongoing RFS debate for the next two years? First, it is important to understand that there is a strong movement on Capitol Hill—one that existed even before the 2014 election—to reform or repeal the RFS. Interestingly, this group includes congressional Republicans who don’t believe the federal government should be interfering in the domestic fuels market at all, as well as Democrats who believe the RFS has only served to promote corn-based ethanol, which has negligible or negative environmental impacts. This group will look to see what EPA does in the final rule and then gauge the landscape for a reform effort. If they can find a bipartisan solution that can pass Congress, would the Administration really side with the corn lobby and choose to continue the year-to-year drama of RFS?
Finally, while a Republican Senate does not guarantee that RFS legislation could be sent to the President, at the very least it increases the leverage for those who want the RFS to be rolled back or reformed. Expect this leverage to come in the form of enhanced oversight over the troubled RFS rulemaking process and increased use of the appropriations process to target RFS.
Wind and Solar
Further advancement on solar and wind are at some risk if Republicans take control of the Senate. Despite its higher priority status in the Obama Administration, many projects have struggled to gain traction. This is in part due to unexpected regulatory and technological issues with scaling up large commercial new advanced-tech projects, as well as other issues like low-cost natural gas and local "not-in-my-backyard" opposition.
Despite the concerns, there is significant support for wind power among Republicans because of the broad swath of Republican districts in which parts of the industry are located. Every state in the United States has either an operational wind energy project or a wind-related manufacturing facility, or both, and 82% of these Congressional Districts are represented by Republican members. Nearly 900 utility-scale wind projects – which represent over 60,000 megawatts – are installed across 39 U.S. states and Puerto Rico. There are also 559 wind manufacturing facilities spread across 44 states.
There is also broad support for commercial scale solar projects, especially in areas like California and the Southwest. With state renewable mandates and EPA rules pushing cleaner power plants, these large-scale projects will find support from Congress, states and utilities despite some emerging environmental and wildlife issues. Questions regarding alleged disparate impacts of net metering-dependent roof top solar programs (because of cost shifting to non-qualifying households) and some attendant consumer confusion arising from third-party leases may well be the basis of Congressional oversight as well.
Endangered Species Act: Congressional Challenges in 2015
Industry concerns about the impact of Endangered Species Act (ESA) decisions on economic development are increasing. As a result of significantly increased litigation (a dynamic referred to by some as "sue and settle"), environmental organizations now have a large role in directing ESA decisions and listings. For example, the Fish and Wildlife Service (FWS) is operating under a consent decree that requires it to make listing decisions on 851 species, including 251 candidate species that have already been determined to warrant listing. Many of these listings, such as the lesser prairie chicken, dunes sagebrush lizard, and potentially the greater and Gunnison sage grouse, will have a disproportionate impact on specific industries such as oil and gas. Also, the regulatory agencies in question, and the Fish and Wildlife Service in particular, have proposed new rules expanding the scope of the ESA. The result is that ESA compliance has become increasingly onerous, time-intensive and intrusive.
With a new fully Republican-led Congress, there likely will be significantly increased efforts to push back against these specific ESA listings—as well as on the Act itself on numerous fronts. This push-back is expected to come in the form of greater committee oversight, targeted efforts to extend listing deadlines, and systemic reform and even repeal of the ESA. We expect to see the following initiatives:
- An attempt to scale back sue-and-settle litigation. These efforts could include legislation targeting sue-and-settle litigation in various forms, including giving industry a role in the litigation before it is settled; oversight hearings looking into past litigation to determine the source and whether there was collusion with the Administration; and document requests associated with oversight hearings that seek to draw ties between the environmental organizations and the FWS.
- There likely will be challenges to specific finalized and proposed listings. Efforts will be made to address decision-making on specific species, including some of the higher-profile ones, either to stave off or delay pending listings or defray the impact of past listings. Among other things, there likely will be attempts to prevent the FWS from making certain listing decisions; legislation or other efforts requiring the acceptance of voluntary measures and mechanisms in place of future listings; and delays in decision-making on certain high-profile species. The specific listing decisions most likely to be affected involve those felt to be most impactful to industries that are well-positioned in Congress.
- Congress may target listing policy and procedure. In addition to targeting the environmental groups’ sue-and-settle tactics, we anticipate legislation requiring the adoption of voluntary conservation measures in place of listings; a push to prevent the implementation of the newly-proposed critical habitat rules; and limits on the scope of critical habitat designation authority.
Finally, there may be efforts to repeal or reform some or all of the ESA itself, but we believe these are not likely to succeed.
Addressing the expired and expiring tax provisions, commonly referred to as "tax extenders", is the most substantial tax item left on the agenda during the lame duck session. Both House and Senate leadership staff have indicated that they will turn to tax extenders in December. Senator Mitch McConnell (R-KY) has also stated that he would like to pass tax extenders in the lame duck session in order to clear the deck for tax reform in the 114th Congress. It appears that the House is positioned to push for making a handful of provisions permanent. The Senate is set to pass the Senate Finance Committee version, which is essentially an extension of almost all of the provisions through the end of 2015. However, there are other provisions - the Child Care Tax Credit and the American Opportunity Tax Credit - that do not expire until the end of 2016, which the Democrats would like to be made permanent. The final package might include a permanent extension of the research and development tax credit, business-related tax provisions (179 expensing or bonus deprecation), Child Care, Earned Income and American Opportunity tax credits, and a temporary extension of everything else through to the end of 2015.
In the next Congress, tax reform will continue to be a high priority of the House and Senate Republicans economic agenda. Several factors will make passing a comprehensive tax reform plan in the next Congress complicated. Seven of the current eleven Republican members of the Senate Finance Committee are up for re-election in 2016. The Republican-controlled Senate will be led with a very slight majority, making filibustering by the minority Democrats an obstacle for Republicans. Also, a Republican-led House and Senate may not want to make their members take tough votes knowing that the Obama administration would likely veto a bill. Finally, it is uncertain whether the package will be paid for. With these challenges, the best chance for any tax reform in the next Congress will likely be early, bipartisan, and negotiated with the White House. While the expected incoming Chairman of the Ways and Means Committee, Rep. Paul Ryan (R-WI), has called for enacting comprehensive tax reform, a more limited, business-only tax reform seems more achievable. Republicans and Democrats are not too far apart on this issue.
The other items on the agenda for the next Congress are passing a permanent fix to fund the Highway Trust Fund (which both parties support) and the debt ceiling. Both of these issues need to be addressed by the second quarter of 2015, and both could be used as a means to leverage tax reform.
Consumer Product Safety
While the November 4th elections will not change the composition of the Consumer Product Safety Commission (CPSC) (a majority of Commissioners will continue to be Democrats), the change in power in the Senate could have an impact on the CPSC, particularly through renewed oversight of Commission activities.
Elliot Kaye has been CPSC Chairman for only three months, and all indications are that he intends to lead a very active Commission. In the past several weeks, Chairman Kaye has renewed the Commission’s focus on mandatory rulemakings, with recent actions on the Window Coverings petition and the Recreational Off-Highway Vehicle Notice of Proposed Rulemaking. It is anticipated that the Commission will also turn to other issues that were on hold prior to Chairman Kaye’s confirmation, including:
- Proposed rulemaking that would make important changes to the Voluntary Recall Rule under Section 15 of the Consumer Product Safety Act;
- Proposed rulemaking that would compel significant changes related to information disclosure under Section 6(b) of the Consumer Product Safety Act;
- Proposed rulemaking regarding CPSC staff participation and involvement in voluntary standards activities;
- Proposed rulemaking amending existing regulations on Certificates of Compliance; and
- Continued rulemaking under Section 104 of the Consumer Product Safety Information Act (CPSIA) for certain durable infant and toddler products, including cribs.
Commissioner Adler Re-Nomination
The most immediate issue for Congress regarding the CPSC is the re-nomination of CPSC Commissioner Robert Adler. Commissioner Adler’s term expired in October 2014, and he remains on the Commission while currently serving his courtesy year. The President re-nominated Commissioner Adler at the same time that he nominated Chairman Kaye and Commissioner Joe Mohorovic in May 2014; however, the Senate did not include Commissioner Adler when confirming his two colleagues. If the Senate does not confirm Commissioner Adler by the end of the 113th Congress in December, President Obama will need to re-nominate him when the 114th Congress begins in January 2015. If the Senate does not act on his nomination by October 2015, then he will need to step down.
Changes to Senate and House Committees
Leadership on the Senate Commerce Committee was destined to change regardless of the election results due to the retirement of Senator Jay Rockefeller (D-WV), the current Chairman of the Committee. Republican control of the Senate means that the new Chairman will be Senator John Thune of South Dakota, its current Ranking Member. The subcommittee with jurisdiction of the CPSC will also undergo leadership changes; however, it is unclear who will replace current Chair Senator Claire McCaskill (D-MO). The current lead Republican, Senator Dean Heller (R-NV), will have the option to assume the Chairmanship. However, other retirements and losses in the Senate open options on different subcommittees. Other potential Chairs include Senators Dan Coats (R-IN), Deb Fischer, (R-NE) or Ron Johnson (R-WI).
The House of Representatives remains under Republican control and Rep. Fred Upton (R-MI) will continue as Chairman of the House Energy and Commerce Committee. With the retirement of Rep. Henry Waxman (D-CA), the Committee’s current Ranking Member, the Democratic Caucus will need to select the Committee’s new Ranking Member. The race is between two members of the Committee, Rep. Frank Pallone (D-NJ) and Rep. Anna Eshoo (D-CA). This race should be decided sometime before the end of this year.
Additional leadership changes include those to the Subcommittee of the Energy and Commerce Committee with oversight of the CPSC. Current Commerce, Manufacturing, and Trade Subcommittee Chairman Lee Terry (R-NE) has not conceded, but is losing his re-election bid in a tight race. With his impending loss, Rep. Burgess (R-TX) and Rep. Marsha Blackburn (R-TN) will compete for the chairmanship. On the Democratic side, Committee Ranking Member Jan Schakowsky (D-IL) could be replaced if the new top Democrat on the Energy and Commerce Committee decides to return to seniority instead of hand picking from the Committee’s roster. Currently, more senior Democrats on the Committee do not have Subcommittee ranking member slots, including Reps. Elliot Engel (D-NY), Gene Green (D-TX), Mike Doyle (D-PA) and Lois Capps (D-CA).
With both Houses of Congress controlled by the Republicans, we anticipate renewed oversight of the Commission by both the relevant House and Senate Committees. Furthermore, as we approach the five-year anniversary of the CPSIA, Congress may begin the process of evaluating its effectiveness and perhaps make some changes to the law given the complexities that remain unresolved. The appropriations process would also be different, as for the first time in recent memory Congress may again send individual appropriations bills to the President’s desk. Under regular order, the Congress could assert oversight over the Commission’s activities.