With Democrats and Republicans battling it out for leadership of the Senate and House, energy issues are likely to play a major role in the outcome of the midterm elections. During today's OnPoint E&E Daily reporters Mary O'Driscoll, Ben Geman and Alex Kaplun weigh in on the congressional reaction to BP's Prudhoe Bay oilfield shutdown. They talk about the future of offshore drilling legislation and also discuss which issues will be the most important to voters come Election Day.
Monica Trauzzi: Welcome to OnPoint. I'm Monica Trauzzi. Joining me today for a reporter's roundtable are E&E reporters Alex Kaplun, Mary O'Driscoll and Ben Geman. Ben, you've been following a major story dealing with the shutdown of Alaska's Prudhoe Bay oilfield due to corrosion. At the same time, BP is facing accusations that they have maybe tampered with some data dealing with the corrosion of their pipelines. There are several hearings coming up in the next couple of weeks. Give us a breakdown of where the hearings are going to take place and what the committees are actually going to be looking at.
Ben Geman: Sure. Well, there's actually pretty broad congressional interest in what's been happening up in the Prudhoe Bay field and it's splitting off into several different areas though. You're going to have hearings as lawmakers are returning from their recess that I would say are certainly going to look at largely how did BP allow things to get to this point? Why did this necessitate the shutdown of the largest oilfield in the United States? A second thing that's going to be looked at though is what was the federal role here and what should the federal role be? There's been a lot of concern that there's not adequate regulation of what are considered to be these low stress pipelines, and the Bush administration actually has pledged to accelerate a rulemaking on this issue. It's also the subject of at least a couple of different pieces of legislation that's on Capitol Hill. So I think first and foremost again, lawmakers want to know where did BP go wrong? How did they let it get to this point? But they're also going to be wondering what their role should be in perhaps beefing up the regulatory regime, and at least ensuring the Bush administration beefs up that regime.
Monica Trauzzi: And Mary, there's a lot of interest about this on the Hill. How much of that has to do with the midterm elections?
Mary O'Driscoll: Well, I think it's even. I'd say that there's of course going to be interest in this going into the midterm elections. This is the kind of issue -- you know, Congress usually leaves town in August, and for the past several years there has always been some big energy related story going on in August. Last year it was the hurricanes, and a couple of years ago we had the big blackout, so there's always a big focus on what happens. So this year it just happened to be what happened up in Prudhoe Bay. But, also, there's some real genuine concern about this because there was a leak earlier this spring that kind of presaged a lot of this. And so it's going to be interesting to see what happens. I think that it's about evenhanded. I mean there's real genuine concern about what's going on, what could have prevented this, how did this even happen? But then also it's an election year, so you can expect to see that there will be some advantage taken on that.
Ben Geman: Yes, and I'll be the first to pull out a cliche here, which is that this problem can be seen as the sort of proverbial sort of a Rosarch test in the sense that you'll have some people saying, well, the fact that we get so much of our oil, you know it's the largest field in the U.S., the fact that such a significant percentage of our domestic output comes from Prudhoe Bay is cause to have other areas open up for production, saying we can't just rely on this aging, declining oilfield. On the other hand, you'll have environmental organizations saying, look, efforts to expand production, be it in Alaska, in other places of Alaska, or offshore, their argument will be, well, there are real safety concerns here with the major oil companies at least. And as a result, maybe we should think twice about these things. So, everybody with sort of a stake in oil policy is going to sort of bring a different argument to bear about this.
Monica Trauzzi: Much of the emphasis in the next two months is going to be clearly on the midterm elections. Which races are you guys going to be looking at to focus on energy and environmental issues?
Alex Kaplun: You know, pretty much every race at this point has some kind of energy aspect. There's a couple of the high-profile Senate races where it's really becoming a big issue. The big one is actually Missouri, between Jim Talent and Claire McCaskill. That's a very competitive race. All the polls show them basically tied. And they're putting a lot of emphasis on getting rural voters. And the way they're both doing it is touting their support for ethanol and going after each other and actually kind of digging in the past, trying to show how the other person's not ethanol friendly. And that's really been perhaps the biggest issue in the race the last few weeks and could really stay that way with Missouri having big potential as sort of an ethanol state. And there's some others where it's really at the forefront; the Montana race between Conrad Burns and Jon Tester. They're sparring back and forth over energy policy and it's sort of the lot of the same things that you hear about a bigger emphasis on renewables, alternative energies, ethanol and that kind of thing. You have some of the fighting in the Tennessee Senate race, where you have Harold Ford accusing his opponent Bob Corker of taking money from oil and gas interests. The Washington Republicans have kind of fired back with these ads talking about how Harold Ford, despite his message, drives around an SUV when he's in Washington. And it's really an issue, on some level, in every major Senate race, every competitive House race. Every candidate has an energy policy or an energy platform. They all kind of look the same, but they're trying to get their message out there on that issue.
Monica Trauzzi: And high gas prices are definitely going to be a big issue among voters. The Democrats have been out and about throughout August raising that issue and trying to pin that up against Republicans. How much of an effect do you think prices are going to have on the midterm elections?
Alex Kaplun: I think it really depends a lot on where prices are. There's been this theory out there that voters get really passionate about prices when they're high and as soon as they come down, even if it's a month or six weeks later, they kind of forget about it and move on to other issues. And we've seen gas prices slide the last couple of weeks and they could side some more. So by the time November rolls around gas prices are around $2.25, something like that, that consumers might be comfortable with. It really might not be that huge issue. It's sort of actually unfortunate for the Democrats, on this particular issue, that the elections in November and not in August.
Monica Trauzzi: So will the Democrats be successful in taking over one or both houses?
Mary O'Driscoll: I tend to think that -- everyone is talking about now that there's potential for the Democrats to do it, but the Republicans really know how to close the deal. They've shown in the past couple of election cycles that they really know how to come in at the end and really pour on a lot of the advertising and a lot of the issues and things tend to swing their way. So I think it's still pretty much a tossup. I think it's way too early to tell who's going to win and who's going to take control. I think that the Democrats are poised to take some seats, but taking control I think is real iffy to predict at this point.
Ben Geman: Yeah, I think especially when you look at the Senate you can kind of -- there's not enough competitive districts out there where you could see how the Democrats would win back the House. When you look at the Senate you can see even though a not very pro-Democratic year, how they get to 49, maybe even to 50, but it's hard to see enough competitive seats for them to get to 51, unless something really dramatic happens, some kind of huge upset that no one expects.
Mary O'Driscoll: One thing I wanted to add too is that whenever you're talking about energy, energy only really comes up in a political climate when there is a disaster, when you've got high prices, when you have accidents, when you have that kind of thing. It's only a real issue when there's a disaster or some sort of impending crisis of some sort. If the prices go down it becomes much less important as the election year wears on.
Monica Trauzzi: Let's switch gears to OCS. Where does the legislation stand right now?
Ben Geman: Well, it's going to be a big issue confronting both chambers as Congress returns whether or not there's going to be some type of final agreement on expanding offshore oil and gas drilling. And I've been talking to a lot of people about this over the last few days, and there's a pretty wide range of opinion. As we've discussed before, the Senate passed one measure that expands oil and gas drilling in one specific area of the Gulf of Mexico. The House passed a much, much, much broader measure. And one thing to look for is whether or not the House leadership will move away from their position that they want to negotiate between the two chambers, and whether or not perhaps if they're sensing that they need to take home something before the balloting on energy policy, whether they'd be willing to capitulate to the Senate version of the bill. It was interesting, Senate Majority Leader Frist, instead of appointing conferees after both chambers passed their legislation, he simply sent the Senate bill over to the House. I guess in the hopes that they would just simply pass that measure. You know, to date House leadership has not indicated they would be simply willing to back down, but quite frankly I think if they're concerned that they're going to lose the chamber they might change their stripes, although it's hard to tell at this point. It's also possible that the issue could, A, that there could be no deal, or B, that it could bleed into the lame-duck session. In other words, if there's no agreement before they go home for campaigning and the issue is still alive when they get back, that brings up a whole other dynamic, such as whether or not the Democrats understanding -- if for example, the Democrats take back the House and they know that they're going to be running the show come next year, would that prompt them to sort of do anything in their power to block any deal from occurring in favor of saying, look, we'd rather be the people driving this train. So those are things to look for.
Monica Trauzzi: What kind of role is this playing in the midterms?
Ben Geman: I don't know if it's going to play a huge role. I mean, again, as we've been discussing, I think gasoline prices tend to play a much more direct role. I think you will have both parties, depending on what happens, you'll have both parties looking to say we indeed have done something on oil production, which in turn, down the line of least, has a relationship to gasoline prices. Whether or not the OCS bill itself would be a big sort of, I suppose, tool used by either party as they approach the balloting -- I'd be surprised if it became a very, very big issue in a lot of races, some specific races though it could be, such as in the coastal states. You've seen a lot of lawmaker's attention to that.
Monica Trauzzi: Mary, something you're going to be keeping a close eye on in the coming weeks is FERC.
Mary O'Driscoll: Right.
Monica Trauzzi: They have a meeting set for mid-September with its commissioners, three of them are new.
Mary O'Driscoll: Right.
Monica Trauzzi: And they're from the West, and there's some speculation about how they may treat Western states and rules and decisions made for western states. Do you think that's going to have an effect at all?
Mary O'Driscoll: Well, it's going to be interesting, that yes these three new commissioners, Philip Moeller, Marc Spitzer and Jon Wellinghoff, are all from the West. And the West is unique in these circles because there are no real organized electric power markets and it's bucked the trend that FERC was going through over the past five or six years of trying to organize specific markets. FERC no longer does that and now they're being all -- you know, they're embracing everyone in all of their differentness and that kind of thing. But what I think is more important is who these new members are. You have Phil Moeller, Commissioner Moeller, who is a known quantity. He's worked in Washington for a long time on Capitol Hill and with the utility industry, and so people know him and there's a certain comfort level that a lot of people in the industry have with him. You have Commissioner Spitzer, who is the only commissioner who's been elected to a political office in his own right, which is important because then that makes him -- you know, he's much more political in that way because he has played the political game in Arizona. He was a state senator in Arizona. And then you have Jon Wellinghoff, who is an industry lawyer, but he's been focused out in the West. He's from Nevada and was a consumer advocate for many years. And so he's bringing a real consumer advocate bent to this, which FERC really hasn't had before. So it's going to be very, very interesting to see how they work, this as a new commission. Chairman Kelleher has had the luxury of working with people for several years that he's worked with for a long time. And so now he's got three new members joining him and Commissioner Suedeen Kelly. And so it's going to be very interesting to see how the dynamics work, and that will evolve over probably the rest of the fall and into the end of the year. It'll be very interesting.
Monica Trauzzi: We're almost out of time, but what are you looking to happen during this month's meeting?
Mary O'Driscoll: Well, we're not quite sure. You predict what FERC is going to do at a monthly meeting at your own peril because they can change at the very last minute. But there are various things that are going to be coming up. You've got reliability rules. This is the first time that reliability rules are going to carry a significant amount of weight, the same amount of weight that any other FERC rule carries. There's going to be penalties if you don't abide by them and that kind of thing. So they still have to finalize those. They'll be looking at Order 888, which is the open access, which really helped open up the electric power market there. They found that just by opening up your transmission lines doesn't mean that you can't manipulate the markets. And so now they're going to be rewriting some of those rules. So we'll see some significant things on that over the course of the next few months.
Monica Trauzzi: All right. We'll keep a look out on that.
Mary O'Driscoll: OK.
Monica Trauzzi: Alex, Mary, Ben, thanks for joining me. This is OnPoint. I'm Monica Trauzzi. Thanks for watching.
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