Energy Companies Backing the losing side
On energy and the environment, the Department of Energy and the Environmental Protection Agency (EPA) will remain in the hands of conservation-minded policymakers, who want to tilt the energy market in favor of clean technologies, back strict controls on greenhouse emissions and vehicle efficiency and are somewhat skeptical about drilling for oil and gas.
BACKING THE LOSING SIDE
In the past 18 months, the financial services and fossil energy industries moved into outright opposition to the Obama administration and the Democratic Party, making little secret of their desire to see a Republican takeover in Washington.
Employees of banks such as Goldman Sachs and JPMorgan Chase and Co, as well as many brokerages and derivatives dealers poured millions of dollars into political action committees that supported Romney for president and backed other Republicans in a bid to seize control of the Senate.
The American Petroleum Institute (API), which lobbies on behalf of the oil and gas industry, created and funded Vote4Energy to campaign for oil- and gas-friendly policies in battleground states. The organization was nominally independent, but its positions and advocacy closely mirrored the views of the Romney campaign.
In return, Romney's campaign promised to repeal the hated Dodd-Frank law and ease restrictions on the development of fossil energy.
MORE GUERRILLA WARFARE?
Wall Street and the fossil energy industry now must decide how to cope with the new reality that the White House and the executive branch will remain under Democratic control for the next four years, while Democrats will control the Senate until the start of 2015.
One option is to maintain a strong oppositional stance. The U.S. House of Representatives remains in the hands of a solid Republican majority and can be counted on to block any attempts to pass fresh legislation on energy or financial services that the industries do not like.
The U.S. District Court and Court of Appeals for the District of Columbia, which review most financial and environmental regulations, remain in the hands of conservative judges, most appointed by Republican presidents, and will continue to review regulations critically.
Lobbying groups such as the Securities Industries and Financial Markets Association (SIFMA), the International Swaps and Derivatives Association (ISDA), the API and the U.S. Chambers of Commerce have mounted a series of legal challenges to regulations implementing Dodd-Frank and in some cases have won the first round.
It is part of a broader coordinated effort to roll back financial, energy and environmental regulations by citing cost-benefit concerns.
The two industries could continue to mount a guerrilla campaign against the new regulations in the courts and the House, harrying regulators with legal challenges, cuts to agency budgets and congressional hearings.
But most of the legal victories that the industries have won so far have been on peripheral issues, such as lack of adequate cost-benefit analysis. They have been unable to prevail on the substance of the new laws and regulations. And regulators now have four more years to redraft any regulations that the courts find deficient.
BURYING THE HATCHET?
In 2012, business lobby groups and the Republican Party made some headway among voters with their argument that the Obama administration was over-regulating the economy and harming the recovery, but it was not enough. By 2016, Dodd-Frank and the administration's energy policies will be well entrenched and the argument may not have so much resonance with the electorate.
So industry leaders will come under intense pressure in the weeks and months ahead to bury the hatchet and take a more conciliatory approach to the administration and Senate Democrats.
Banks and energy companies have spent record amounts on lobbying in Washington in the past four years. Goldman Sachs, for example, spent almost $3.3 million lobbying senators and representatives in the 12 months to September, according to filings with the congressional lobbying database, on issues connected with derivatives reform and tax policy.
But however much money they pour into lobbying efforts, the perception that energy companies, banks and brokerages, as well as most of their employees, are solidly behind the Republican Party will limit their future influence on a range of issues that are vital for both industries.
Pressure to rebuild a constructive relationship with the White House and at least part of the Senate Democratic Caucus will therefore be intense.
In fact there are a variety of issues on which the two sides could reset the relationship. Fiscal reform is one area in which there could be scope for compromise. Business and financial leaders have been signaling for weeks that they are ready to support moderate tax increases as part of an overall tax and spending package to avert the fiscal cliff.
The Keystone XL pipeline is another early decision where the president could reach out to the industry and appear to back the development of fossil fuel resources, albeit with strict safety and environmental safeguards.
But it will take a spirit of compromise on both sides. After a resounding defeat, the energy and financial services industries would be wise to repair relationships.
Views: 1526
Replies to This Discussion
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Permalink Reply by blackjackjackson on
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wow, great post. i was looking for link, but it was you!
boener said today that he heard the american people saying "compromise" and he hopes to work w/ the obama administration.
i'm land/mineral owner in central louisiana. i have no formal conclusion on the keystone, but i see it actually being a negative to the tex/la oil producers. it sounds like an easy way for canada to get its oil to the foreign markets at the u.s.'s expense?
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Permalink Reply by adubu on
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Blackjackjackson-- thanks but I did not write this it came from a business news site
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Permalink Reply by Steve P on
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well, I was about to congratulate you on such a well-researched and written article as well.
Recall that in 2008, many oil execs and actually most of the Wall Street boys placed money, big money, on Obama. The oil industry tended to give to both, more to the Rs but some to the Ds. the Wall Street guys gave far more to the Ds. This time around, not so much, and for good reason. There is now a 4 year track record rather than just "hope" to understand what they are going to get.
I think getting rid of the depletion allowance is going to be "job # 1" for the President, and I doubt that there is much opportunity to compromise on that. I would suspect that the oil companies figure they have little to gain from any deals with the WH, and rather need to be vigilent that they don't lose to much from Washington over the next 4 years. The House provides a decent firewall for them, and I think we can expect the House to stay Republican for the next 4 years (risking statement).
The Keystone has to cross thousands of federal and state rights-of-way. I'm pretty sure I could come up with some terms on limiting export of that oil and requiring some hefty % of it to be refined and consumed here in the US, so I'm not too concerned with the export problem. I see few down-sides to that pipeline being constructed.
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Permalink Reply by adubu on
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SteveP--what Obama does not understand is the depletion allowance effects many middle class retired people who avg only about $500 per month in royalties and loss of 15% deduction will hurt them and he said he would not raise taxes on middle class and upper middle class up to $250,000 another one of many of his lies. The Keystone will not get permit due to the Lobby of Warren Buffet because he owns the Northern Pacfic RR and Rail is primary way Crude Oil is transported from the Bakken Field
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Permalink Reply by Skip Peel - Mineral Consultant on -
Warren bought the BNSF and it's most significant single cargo is coal.
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Permalink Reply by adubu on
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Skip peel yes that is true coal is a significant cargo for BNSF but now rail is major way crude transported from Bakken because not enough pipelines in area. And more affective than trucking it out. Keystone would have provide that. Warren just profits from it with BNSF
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Permalink Reply by Skip Peel - Mineral Consultant on
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When Warren bought the Burlington Northern 14% of revenue was from coal delivery to the SE U.S. The only operator currently moving significant oil by rail from Bakken as far as I know is EOG. And they accomplish that with their own tanker car fleet and loading facilities.
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Permalink Reply by adubu on
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Skip---Recent article on Seeking Al;pha in Sept 2012--Railroads are booming, and it's not because of the rising cost of gas or a consumer return to an older form of transportation. It's oil.
The boom started in January, when TransCanada's (TRP) $7 billion pipeline was denied. This denial started a train in motion - literally - as oil and petroleum exploration and development companies looked to the railroad to transport its raw materials to refineries and refineries looked for efficient methods of distribution.
According to the U.S. Energy Information Administration (EIA), rail deliveries of oil and petroleum rose almost 40% in the first half of 2012. BNSF, a Berkshire Hathaway (BRK.A) company and the biggest railway mover of crude in the U.S., posted an increase of 60% in carloads of crude oil and petroleum products during that period, and they are upping that even further.
BNSF Railway recently "expanded its capacity to transport 1 million barrels-per-day of shale oil from the Bakken formation in North Dakota and Montana in 2012, a 25% increase from a year earlier," writes Reuters. "The Forth Worth, Texas-based company expects to use a quarter of this capacity in 2012. Still, with 88.9 million barrels of Bakken crude shipped on its rail cars in 2012, it will witness a nearly 7,000% growth since it started shipping by rail five years ago."
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