Results of the midterm elections and local state races and the ensuing hydraulic fracturing and coal policies will affect international energy markets.
Former US Secretary of State Hillary Clinton, with strong ties to Pennsylvania, stopped in Philadelphia to back Tom Wolf’s quest for the Pennsylvania governor’s office. Despite Wolf’s wide lead over the Republican incumbent, Tom Corbett, national Democrats are not taking the state for granted.
At the same time, Chris Christie, head of the Republican Governors Association, has stumped for Corbett four times since early summer. Securing midterm victories in these states will set the trend for 2016 and for energy policy.
The election results in Pennsylvania, Ohio and West Virginia will be central to the debates on hydraulic fracking, climate change, and job creation. Though Pennsylvania is likely safe for Democrats, neighboring Ohio, a key 2016 battleground state, looks to be a different story.
Amid the push for greater carbon trading programs in Pennsylvania, what will the midterms results mean for the energy market? Two major resources, coal and liquefied natural gas (LNG), are driving the economic talking points on jobs during this tense election.
Although there has been a decline in construction jobs, the ever-growing fracking industry remains critical to the workforce in the region. Marcellus Shale-related development generated $6.5 bilion worth of private contracts throughout the region in 2014. Non shale-related construction has decreased by 53.7 percent since 2008.
The other resource at stake is coal. The pro-coal policies left behind by previous generations are still felt internationally. Anthracite, a type of coal with high carbon content found in eastern Pennsylvania, is still earmarked for defense appropriations to the NATO base in Kaiserslautern, Germany. This contract has existed since the 1960s and brings the Pennsylvanian coal industry $20 million annually. Amid a growing consensus to trim the national debt, Congress is eager to cut back on earmark programs. Such contracts may soon be at risk.
Blue Dog Democrats are endangered. In West Virginia, fighting efforts to regulate the coal industry and carbon emissions will be crucial to Democrats’ survival in this state.
Incumbent democrat, Nick Rahall has a difficult fight for West Virginia’s 3rd congressional district. As the demand for coal continues to drop, West Virginia will struggle. This predates any environmental regulations from the EPA. New mining technology and cheaper LNG are the main causes behind this trend. Roughly 18.5 percent of West Virginians are below the poverty line.
The overall US exports of coal to Europe are rapidly falling. In early 2014, the US shipped off 52.3 million short tons (MMst) which is 16 percent less than 2013. The shift to hydraulic fracking may fill the void.
However, US companies face severe Federal restrictions on energy exports. There is a quiet momentum gathering behind lifting the ban. China and Europe may be prime candidates for a new market. China seems to be ready to end its reliance on the polluting coal. Meanwhile, Europe is looking for ways to end total dependency on Russia for energy.
Oil prices are dropping and OPEC is increasing production to keep up with the competition from fracking in the United States. In Pennsylvania, new pipeline projects are under development to increase the pace of supplying LNG to other parts of the US. Energy independence by 2020 is still the political mantra of the land. At the start of 2014, 4 billion cubic feet a day (4 Bcf/d) was produced in the United States, with most of the LNG is coming from Marcellus Shale and Utica Shale.
Despite the fracking boom, Pennsylvania remains heavily tied to coal, a sector which produces $7.5 billion every year. Along with the new Clean Energy Standards (CES) proposed by the EPA in the Clean Power Plan last June, the Obama Administration proposed a plan to cut emissions by 30 percent of the 2005 levels by the year 2030. This may make Carbon Capture and Storage (CCS) technology an option for the long term use of coal energy.
A recent rally at the EPA headquarters in Washington, DC, saw busloads of miners with the United Mine Workers of America protest the new emission standards. Coal generates double the amount of carbon of LNG. Coal-fired plants are closing around the country for failing to comply with the new CES.
For Republicans, this echoes of the 2006 midterm elections. The party in control of the White House usually suffers in the midterm cycle. However, ending the energy export restrictions and moderate solution to climate change issues may be too big of an undertaking for the current Congress at the moment. The extinction of Blue Dog Democrats and the increasingly polarized tones may postpone these tasks until after 2016.
