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State, federal elections mean different things for energy industry

On paper, the balance of power in Washington and Harrisburg look quite similar. Republicans control both chambers of the legislature in both capitals, while Democrats control the executive branch.

In reality, the situations couldn’t be more different.

Pennsylvania Gov.-elect Tom Wolf will enter office in January on the heels of a 10-point election win over incumbent Gov. Tom Corbett, meaning the former York businessman will have political capital to spend.

President Barack Obama watched his party suffer defeat after defeat during the midterm elections often cast as a referendum on his leadership.

It’s a split government in both capital cities. But one chief executive has broad public support and the other has been nothing short of conciliatory since his party was walloped last week.

The consequences are meaningful for the energy industry, which is interested to watch how much Mr. Wolf will compromise with a Republican majority and how aggressive Republican leaders in Washington will be in fighting Mr. Obama.

Wolf’s challenge

The start of Mr. Wolf’s term in office will be important as a time for him to establish relationships with Republican legislators, who gained eight seats in the state House and three seats in the Senate.

“Each party can claim a successful election and that they have solid public support,” said Chris Borick, a professor of political science and director of the Muhlenberg College Institute of Public Opinion. “An expanding Republican majority helps build the case that Pennsylvanians are in favor of GOP legislative control while governor-elect Wolf’s very solid 10-point victory gives him a bit of a mandate coming into office as a Democrat.”

Mr. Borick expects Mr. Wolf to work quickly in Harrisburg to find common ground and build trust with Republican leaders. In order to follow through on some campaign promises, the new governor might have to sacrifice in other areas.

But Mr. Borick expects Mr. Wolf will hold true to his pledge to try to establish a shale extraction tax.

“The public demand for an extraction tax is pretty clear,” Mr. Borick said. “Pennsylvanians want an extraction tax. Governor-elect Wolf campaigned on that, and he has to push forward on it.”

The question is: What will it cost him?

There is some Republican support for the tax, especially among moderates representing some of the state’s more liberal districts.

Related: API poll reveals interesting voting statistics

Senate majority leader Dominic Pileggi, a Republican, said on the campaign trail he expects the state will establish an extraction tax in 2015. Mr. Pileggi has been criticized by members of his own caucus for failing to embrace a conservative agenda, and his leadership post could be threatened in the new legislature.

Republican leaders in the House have not been as enthusiastic about the tax. They will elect a new speaker after Sam Smith, a Republican from Jefferson County, declined to seek re-election.

Mr. Wolf might have to scale back the size of his proposed extraction tax — he campaigned on a 5 percent levy — or he might have to compromise elsewhere in order to make it more palatable to Republicans, Mr. Borick said.

The Wolf transition team announced Monday that Katie McGinty, former head of the Pennsylvania Department of Environmental Protection and an environmental adviser to former president Bill Clinton and former presidential nominee Al Gore, would serve as Mr. Wolf’s chief of staff.

In both positions, Ms. McGinty worked to reduce energy waste and increase energy from renewable sources.

Ms. McGinty finished fourth in the Democratic gubernatorial primary this spring. Her appointment likely will not encourage energy lobbyists as she will be Mr. Wolf’s point person in helping to usher his agenda in the legislature.

National agenda boost

Despite the mixed results in Pennsylvania, the election last week was a big win for Republicans across the country. That has encouraged several energy-related organizations.

“In race after race, voters from all regions of our nation and from both political parties voted for pro-development through all of the above energy policies,” Jack Gerard, president and CEO of the American Petroleum Institute, said Wednesday during a teleconference with reporters.

The federal elections have buoyed hopes for development of the Keystone XL pipeline. House speaker John Boehner of Ohio said he believes Congress will act to approve the pipeline, which will carry crude oil from Western Canada to refineries near the Gulf of Mexico. And Senate Republican leaders believe they have enough bipartisan support to beat back a filibuster.

Mr. Obama has stalled the project by ordering lengthy review of the proposal. But with enough Congressional support, he could be forced to make a decision on the pipeline.

In a press briefing Thursday, White House press secretary Josh Earnest said the Obama administration is not threatening a veto on any Keystone bill and would consider any legislation that reaches the Oval Office.

Republican leaders in Washington are also poised to take up the REINS (Regulations From the Executive in Need of Scrutiny) Act, which would require Congressional approval of any executive action that involves major regulatory changes.

Mr. Obama has used executive orders more frequently in recent years as working with Congress has proved challenging for the Democrat.

There might be a lesson in all of this for Mr. Wolf, Mr. Borick said. There is a lot of animosity in Washington and there was not a lot of cooperation in Harrisburg — even between a Republican governor and Republican leaders in the legislature.

“You don’t have to agree with the other side,” Mr. Borick said. “But you have to trust. A lot of that is personal. A lot of that has to come early.”