The November elections will change Washington. Republican gains represent the largest midterm election shift in terms of seats changing hands to the Republicans since 1938. Newly elected Members of Congress will be arriving in the nation's Capitol in January, bringing with them the will of their constituents. The question, of course, will be how much these new Members will change the debate on energy, climate and environmental public policy. Although it's only been a few short days, we can already predict how some of the energy, climate and environmental issues will be impacted by the new Congress and an updated strategy by the Administration.

With Republicans capturing the majority in the House of Representatives and Democrats holding a narrow edge in the Senate, significant changes in public policy will require overwhelming bipartisan support. So, a "cap and trade" effort covering all sectors of the economy will not happen. However, a range of issues may be considered with more targeted approaches. In addition, the Administration will be moving forward with programs and regulations at all of the federal agencies including the U.S. Environmental Protection Agency (EPA) and Department of Energy (DOE). While some of these issues may be debated during the "lame duck" session, we don't believe that much progress will be made until the new Members of the House and Senate are sworn in this January.

Policies On The Table

The makeup of Congress will change the emphasis of certain issues, but these topics will remain "front and center" in Washington debates:

  • EPA Regulatory Actions
  • Look for Congress to do a significant amount of oversight related to the EPA. In the months ahead, U.S. EPA rules that affect nearly all U.S. businesses and industries in some way will progress forward. The Congress is expected to intervene in some of them. These efforts include:
  • Rules for increased ozone standards and for lower allowable particulate matter air pollution, greenhouse gas regulations, the Air Transport Rule, rules on industrial boilers, and regulations on coal ash waste.
  • Rules for the permitting of energy resource projects, including coal mining activities and oil and gas drilling and exploration.
  • Renewable Electricity Standard (RES)
  • The RES, which requires a certain portion of U.S. electricity to be produced from renewable sources, was a topic that received extensive attention in Congress the last two years. Expect this issue to again receive attention, with the Obama Administration getting involved. Provisions could provide assistance to power sources from wind, solar, geothermal, hydropower, and tidal technologies. A competing concept, the Clean Energy Standard, includes clean coal and nuclear power as eligible activities under a RES.
  • Alternative Vehicles
  • Electric cars and buses and natural gas vehicles saw a boost from some stimulus programs. Larger policy changes could occur to improve related market and research capabilities next year, as some bipartisan efforts will be ready for action.
  • Tax Policy
  • A broad rewrite of tax policy is possible next year and could be the foundation for a number of incentives for the renewable energy, alternative fuel, ethanol, manufacturing, research and development, and fossil fuels industries.
  • Other specific Congressional efforts include extending clean energy loan programs, tax credits for various energy resources, and tax deductions for coal and hard mineral fossil fuels.
  • Surface Transportation Legislation
  • Multi-billion dollar legislation that funds highways, bridges, transit, alternative fuel programs, research, and Clean Air Act permitting issues will likely be crafted in 2011 in the House and Senate.
  • This legislation has a range of environmental policy components as well, including the Congestion Mitigation and Air Quality Program, diesel emissions reduction efforts, and has been the setting for a number of changes to air quality laws.
  • Energy Production Legislation
  • New legislation providing incentives to traditional energy resources may also be considered. Proposals could provide a boost to nuclear power, shale reserves, carbon sequestration technology, flex fuel vehicles, and expanded domestic oil and gas exploration.
  • Efforts to accelerate the development of energy resources on federal lands could also continue, with a focus on both renewable energy and fossil fuel resources.
  • Debate over the permitting of new energy development of coal, natural gas, and oil, along with the regulation of air pollution from electric utilities, is also likely to be extensive.
  • The "Farm Bill"
  • The last time Congress considered this bill, massive new renewable and alternative fuel programs were created. A major update to the law will be crafted in 2011. Programs in this bill also provide assistance to biorefineries, funding for biomass energy development, and critical tax incentives.

Congressional Committee Snapshot

With the new Congress, there will be a shuffling of key committee assignments and leadership from new Chairman and Ranking Members. This will cause a shift in the focus of Congressional hearings, oversight, and legislation. The following is a quick snapshot of these changes.

U.S. House of Representatives

  1. House Committee on Energy & Commerce

Chairman: Rep. Joe Barton (R-TX) or Rep. Fred Upton (R-MI)

Ranking Member: Henry Waxman (D-CA)

Outlook: The new Chairman will be either Joe Barton (the returning senior Republican) or Congressman Fred Upton. The efforts of both Barton and Upton will be largely focused on opposing various EPA initiatives, including greenhouse gas (GHG) regulations, coal ash standards, and air quality rules. Mr. Upton, should he assume control, has been a consistent proponent of increased nuclear energy development and production as well as fossil fuels including natural gas and clean coal technology. It is also likely that both Barton and Upton will tackle oversight of the Federal Energy Regulatory Commission.

Expect Ranking Member Waxman to continue to advocate for climate change measures, either in smaller, more targeted approaches specific to a sector of the economy or reviving the RES, or electric vehicle pilot programs, among other issues.

  1. House Committee on Natural Resources

Chairman: Rep. Doc Hastings (R-WA)

Ranking Member: Undecided

Outlook: Congressman Hastings of Washington will take over at the helm of the Committee. He has a strong interest in the potential for biomass energy and geothermal energy applications, including the potential that exists on Federal lands. Hastings will focus on energy development from traditional energy resources, including hydropower, because it provides significant energy and irrigation sources for much of the western United States. Mining and resource regulations and their effects on domestic industry will also be examined. Siting renewable resources and new transmission lines on federal lands will also receive attention.

Former Chairman Rahall has a direct interest in coal and hard-rock mining issues, which received attention due to the Upper Big Branch mine explosion and might lead this committee for the Democrats. It is also important to note that he may consider pursuing the Ranking Member position at the House Transportation and Infrastructure Committee. Should that occur, others that have been mentioned for the position include Rep. Edward Markey (MA) and Peter DeFazio (OR). Mine safety legislative efforts could continue to be a focus for Mr. Rahall, along with a range of public lands protection measures.

  1. House Committee on Ways & Means

Chairman: Rep. Dave Camp (R-MI)

Ranking Member: Undecided

Outlook: Chairman Dave Camp of Michigan takes over with his first experience running the important tax-writing Committee. It is anticipated that a very large policy effort will be undertaken to revamp the tax code as it relates to everything from personal income to biofuels, renewable power incentives, and tax treatment of the oil and gas industry. Chairman Camp is expected to work to make significant changes to expiring provisions in the tax code, including the treatment of ethanol, renewable energy incentives, as well as the research and development (R&D) tax credit.

Congressman Levin (D-MI) briefly held the Chairmanship of the primary tax-writing committee in 2010, but it is not certain who will be the Ranking Member. Richard Neal (D-MA) and Charles Rangel (D-NY) are also interested in the top Democrat spot. Congressman Rangel was the Chairman before stepping down amid ethical allegations. Congressman Neal is currently a subcommittee Chairman. During his brief tenure as Chairman, Congressman Levin introduced the framework for "green jobs" legislation, for which he will likely advocate next year. This legislation provides a range of incentives for manufacturing clean energy products and extending stimulus programs.

U.S. Senate

  1. Senate Committee on Energy & Natural Resources

Chairman: Sen. Jeff Bingaman (D-NM)

Ranking Member: Sen. Lisa Murkowski (R-AK) or Sen. Richard Burr (R-NC)

Outlook: Senator Bingaman's committee passed bipartisan legislation that would create a national RES in 2009. He will likely continue that effort while supporting policies that could provide incentives to electric and natural gas powered vehicles. In 2011, the Committee could also consider energy efficiency legislation that includes the "Home Star" and "Building Star" programs that provide payments for energy efficiency upgrades.

Senator Lisa Murkowski is the current Ranking Member of the Committee. It was widely speculated after her defeat in her primary that Senator Burr would take the reins of the Committee. However, Senator Murkowski is currently leading in her race. Senator Burr has supported clean energy programs for large trucks, and is interested in providing incentives for nuclear power projects. Burr could also push for an examination of alternative energy incentives, as well as the offshore oil and gas development issues in the Outer Continental Shelf. Senator Burr differs from Senator Murkowski in that he is generally considered to be more conservative, which may make it more difficult to reach bipartisan agreement on some issues. For instance, Senator Murkowski supported Senator Bingaman's RES proposal while Senator Burr opposed the measure last year.

  1. Senate Committee on the Environment & Public Works

Chairman: Sen. Barbara Boxer (D-CA)

Ranking Member: Sen. Jim Inhofe (R-OK)

Outlook: Senator Boxer retains control of this Committee. The Committee in 2011 will be tasked with leading the effort to renew the surface transportation programs nationally, which again will cause a review of a number of Clean Air Act and Clean Water Act issues.

Senator Inhofe also supports passing the surface transportation legislation, which he oversaw as Chairman the last time Congress considered the bill. The Committee will likely begin consideration of updating the Water Resources Development Act, which provides over $20 billion in funds for wastewater, environmental restoration, studies, and other construction projects led by the U.S. Army Corps of Engineers. A priority for Mr. Inhofe will also be engaging the EPA on GHG rules, coal ash regulations, and air pollution proposals. The margins on all Senate Committees will be tighter next year, and no one will feel this more acutely than Senator Boxer who enjoyed a 12-7 ratio of members this past Congress. Next year, she will only have a one to two seat margin which will necessitate more bipartisan compromises.

  1. Senate Committee on Finance

Chairman: Sen. Max Baucus (D-MT)

Ranking Member: Sen. Orrin Hatch (R-UT)

Outlook: The Committee has a number of programs affecting the energy and environment sectors that will remain "front burner" issues in 2011. Senator Baucus in the past has led various bipartisan proposals that extended tax incentives for renewable and clean energy sources. The Finance Committee will be taking the lead on such issues as biofuels tax incentives, clean renewable energy bonds, renewable energy infrastructure and preferential tax treatment. Baucus has also expressed support for coal-to-liquids programs and has overseen efforts to eliminate certain tax policies that are beneficial to the oil and natural gas industries.

Senator Hatch is new in his role as the Ranking Member of the Committee, and he will be deeply involved in tax law changes affecting the oil, gas and renewable fuels as well as other industries. He was one of the original Senate supporters of legislation to greatly expand the use of natural gas-powered vehicles, and has supported tax incentives to encourage the commercialization of plug-in hybrid electric vehicles. Senator Hatch is considered to be less of a supporter of the ethanol tax subsidies than his predecessor, Senator Grassley.

Be Prepared for 2011

B&D Consulting understands the range of strategies for meeting federal affairs objectives in an era of divided government that could affect investors, private, public, and non-profit entities across the country. The 112th Congress will begin in January, with about 70 new faces from across the country, and a President who has already stated that his energy and environment policies and strategies will shift when dealing with the Congress. Educating, advocating, and exploring opportunities for clients and interested parties will be exciting in 2011.