US oil sector gets tentative wins in state races

US oil and gas producers appear on track to get their preferred election outcomes in down-ballot races in Texas, Alaska and Louisiana that could affect how the sector is regulated and taxed.

Those results could offer a bright spot for oil and gas officials, as the industry waits to find out who will take control the White House and the US Senate. Democratic presidential candidate Joe Biden has taken the lead in key battleground states, but President Donald Trump still has some paths to win a second term.

Republicans retained a 3-0 majority on the Texas Railroad Commission that regulates the oil and gas sector in a state that last year produced more than 5mn b/d of crude. Republican Jim Wright won the race by 10 points against Democrat Chrysta Castaneda, who had pushed for tougher limits on flaring and methane leaks. Oil and gas industry officials primarily donated to Wright.

In Louisiana, voters approved by a wide margin the industry-supported Amendment 2 ballot measure that will allow local tax officials to take into account the presence of crude or gas in a well when deciding property taxes. The Louisiana Oil and Gas Association and other trade groups supported the measure, which could offer the flexibility for local taxes to decline on a low-producing well but increase on a high-producing well.

In Alaska, nearly 65pc of votes counted so far were against Ballot Measure 1, which would raise taxes significantly on production from the large oil fields of Prudhoe Bay, Kuparuk River and Colville River. But is too early to say the measure was defeated, because the state has counted less than a third of the ballots.

BP, ExxonMobil, ConocoPhillips and Hilcorp put more than $20mn in opposition to the measure, which they said could make the state less competitive and reduce future investment.

Those down-ballot votes come against the backdrop of national results that could remain undecided for days or weeks, mostly because of the time it will take to count large numbers of mail-in and absentee votes. Final election results could also be held up by legal challenges and potential recounts in states where results are close.

Democrats still have a narrow path to take control of the Senate, after their candidates performed far worse than expected.

But that path would likely depend on a Biden victory and picking up two of the three seats now held by Republican incumbents Thom Tillis (North Carolina), Kelly Loeffler (Georgia) and David Perdue (Georgia). Loeffler's race will be decided in a runoff in January.

If Republicans retain control of the Senate, Biden, if elected, would have a more difficult time fulfilling a campaign promise to spend $2 trillion on a climate-related package or to increase the corporate tax rate to 28pc from 21pc. A Republican-controlled Senate could also block Biden's ability to fill key appointments in his administration, the courts and independent regulatory agencies.

Even if Biden wins the election, Republicans could still hold a 3-2 majority on the US Federal Energy Regulatory Commission through at least 2021, if the Senate in the lame duck confirms new members and none resign. A president Biden would still have the power to name one of the agency's Democrats as chairman, but could not force Republican members to resign.

"That is important because without the control of the Senate, which it looks likely he will not have, Biden is likely to look to FERC and its Democratic chair to achieve many of his climate and energy goals such as decarbonizing the power sector," law firm Bracewell energy lawyer Christine Wyman said.

By Chris Knight