The ballots have been counted and the winners declared, but perhaps most important of all, the campaign ads are over. Ads for candidates, ballot measures, and specific issues monopolized commercial slots over the past few months. One of the most important issues this election cycle was energy development, especially as it pertains to hydraulic fracturing, also known as “fracking.”
Because government regulation of oil and natural gas development primarily occurs at the state level, the results of several statewide elections will significantly affect hydraulic fracturing. In some cases, the elections will result in a change of policy; in others they may bring more of the same. Here is a snapshot of some of the likely changes coming for Pennsylvania, Illinois, and New York.
Pennsylvania. In Pennsylvania, incumbent Republican Gov. Tom Corbett was defeated by his Democratic challenger, Tom Wolf. Pennsylvania sits atop the Marcellus Formation and is the third-largest natural gas producing state in the country, largely because of hydraulic fracturing. Pennsylvania is also the only large natural gas producing state in the country that does not have a severance tax. Instead, Pennsylvania assesses an impact fee of $50,000 per well on natural gas drillers. In the past three years, the impact fee has raised $630 million, which was used to repair roads and offset other costs in the communities affected by natural gas development.
That policy will likely change, because Wolf has pledged to enact a 5 percent severance tax on the natural gas produced in the state and use the money to fund statewide expenditures. This worries local citizens in fracking areas, who fear this money will no longer be used to offset expenses in their communities.
Illinois. Illinois also experienced a change in governor this election cycle, as Republican Bruce Rauner defeated incumbent Democrat Pat Quinn. Quinn had signed the Hydraulic Fracturing Regulatory Act (HFRA) last summer, and Southern Illinois landowners feared the governor intended for the delays in administrative rulemaking to delay the process indefinitely, as has happened in New York under Gov. Andrew Cuomo (D).
However, fracking will begin in Illinois, as the Joint Committee on Administrative Rules (JCAR) approved regulations drafted by the Illinois Department of Natural Resources (IDNR) on November 6. This decision will lead to the development of oil and gas leases in Southern Illinois, creating up to 47,000 jobs and potentially generating an economic impact of more than $9.5 billion for the state under the most optimistic scenarios.
Even if JCAR had not approved the rules, the election results might have eventually led to fracking in downstate Illinois. In Illinois, the head of IDNR is appointed by the governor. Rauner has stated his support for hydraulic fracturing and might have advised the IDNR to issue oil and natural gas permits had JCAR not approved the administrative rules by the November 15th deadline.
New York. Gov. Andrew Cuomo, a Democrat, won reelection in New York, meaning the moratorium on hydraulic fracturing that has been in place since 2008 may not be lifted soon. New York sits atop the Marcellus Formation, and drillers and landowners in economically depressed Upstate New York are eager for the economic activity associated with natural gas drilling.
Although Cuomo coasted to reelection by beating his Republican challenger by 14 percentage points, Republicans took control of the state’s Senate, partly because of their support for natural-gas drilling. Cuomo has been routinely criticized for delaying fracking in order to avoid a politically unpopular decision before the elections, while other Democratic governors such as John Hickenlooper of Colorado and Pat Quinn of Illinois embraced the responsible use of fracking with strict environmental protections.
Cuomo had initially said he would make a decision on whether to allow fracking before the November 2014 elections. A decision is now expected in 2015.
This election cycle reinforces the adage that “elections have consequences.” Illinois will follow the lead of Colorado by supporting the safe and environmentally responsible use of hydraulic fracturing in order to develop domestic energy and stimulate economic growth, but the people in economically depressed Upstate New York will likely have to wait longer.
