Midterm Election Review: What’s Next for Oil & Gas?
Healthcare, immigration and the economy were top-of-mind for a majority of U.S. voters this midterm election cycle on Nov. 6, but they also had their say on a host energy-related measures on ballots with significant implications for oil, natural gas and power markets.
In one of the more high-profile decisions on the ballot, voters in Colorado decisively rejected Proposition 112, scoring a resounding victory for the upstream oil and gas sector. The measure, if passed, would have mandated new oil and gas development, including hydraulic fracing, be a minimum distance of 2,500 ft. from occupied buildings and other areas designated as “vulnerable”.
The measure would’ve undoubtedly created uncertainty for oil and gas companies operating in the state, particularly in southwest Weld County where the majority of oil and gas activity is occurring in the core of the Denver-Julesburg basin.
Colorado, which ranks seventh in the nation in domestic oil production and fifth in natural gas production, according to the U.S. Energy Information Administration (EIA), currently requires setbacks of 500 ft from homes and 1,000 ft from high-occupancy buildings such as schools and hospitals.
The Colorado Oil & Gas Association, a staunch opponent of Proposition 112, issued a statement thanking Coloradoans who “stood with the energy sector to oppose this measure.” Meanwhile, supporters of the measure, such as Colorado Rising, told media outlets it does not intend on backing down from proposing similar anti-fracing measures in the future.
Permits Filed Before and After the Announcement of Colorado's Proposition 112 on Election Ballot
(Source: Ralph E. Davis Associates, US Census Bureau 2010, Drillinginfo)
However, the defeat of Proposition 112, and the future of oil and gas development as a whole in Colorado, conflicts with stated policy goals set forth by newly-elected Governor Jared Polis (D), who advocates for the development of 100% renewables by 2040 and aims to place more stringent controls on development of public lands.
Elsewhere, voters soundly defeated similar measures on ballots that were aimed at restricting oil and gas development and/or affected the energy sector at large, such as:
- Alaska (Ballot Measure 1) – A proposal intended to protect anadromous fish, such as salmon. The measure, if passed, would have burdened oil and gas producers with more onerous permitting requirements for oil and gas development.
- Arizona (Proposition 127) – A proposal that would have forced electric utilities in the state to acquire a certain percentage of electricity from renewable resources each year, with the percentage increasing annually from 12% in 2020 to 50% in 2030. The current 15% by 2025 renewable mandate remains in place.
- California (Proposition 6) – Californians will continue to pay the 12 cents-per-gallon gasoline tax increase and 20 cents-per-gallon diesel tax increase that was enacted last year this measure would have repealed. The proceeds will go to help fund the state’s infrastructure and mass transit projects.
- Missouri (Proposition D) – Measure would have increased the gas tax by 10 cents-per-gallon for gasoline, diesel, natural gas and propane. For gasoline and diesel, the increase would have been phased in over four years (2.5 cents per year) through 2022 with the tax rising to 27 cents-per-gallon at that time.
- Washington (Initiative 1631) – Measure would have enacted a carbon emissions fee of $15 per-metric-ton of carbon beginning January 1, 2020, and increase by $2 per-metric-tons annually until the state met its existing greenhouse-gas reduction goal for 2035 and was on track to meet its 2050 goal. Proceeds of the revenue from the fee would have gone to fund various programs and projects related to the environment. A similar carbon tax proposed in 2016 was rejected.
- Nevada (Question 3) – Residents will continue to be served by vertically integrated electric utilities rather than transition to a competitive, market-based structure.
Ballot measures that passed include the following:
- Florida (Amendment 9) – Effectively bans offshore drilling for oil and natural gas on lands beneath all state waters and indoor vaping.
- Nevada (Question 6) – Requires electric utilities to acquire 50% of their electricity from renewable resources by 2030.
outlook for Oil & Gas Sector
Going forward the oil and gas industry can expect continued dogmatic viewpoints and strategies from anti-oil and gas opponents in order to accelerate the shift from fossil fuels to non-renewable energy. With newly Colorado-elected government officials being democratic, a new push towards similar initiatives, like Proposition 112 in Colorado, would not be surprising.
About the Authors:
Chad Bourne is a graduate of Texas A&M University holding a Bachelor of Science degree in Petroleum Engineering. During his college tenure, Chad gained upstream and midstream, industry experience per two internships: an onshore gathering and processing company, Costar Midstream LLC and a privately-owned exploration and production company in Houston, Alta Mesa Holdings LP. Upon graduating, Chad furthered his experience by interning with a start-up midstream company, Century Midstream. Since being hired by Ralph E. Davis Associates, Chad continues to advance his entry-level position by assisting in reserve evaluations, field development studies and certifications for public filings.
Ryan Long is a Geoscience Technician for Ralph E. Davis Associates, an Opportune LLP company, based in Houston. Prior to joining Ralph E. Davis, he worked for Credit Suisse in the Energy A&D group as a GIS/Geoscience Associate. Prior to Credit Suisse, he worked as a Geoscience Technician in the Deepwater Gulf of Mexico with Venari Resources and on the exploration team in the U.S. Gulf of Mexico and Permian Basin for Apache and Mariner Energy. Ryan earned a Bachelor of Business Administration degree in Business/Commerce at the University of Houston.