ANALYSIS: New electoral map renews energy infra emphasis

The 2022 federal elections may force closer collaboration between the parties - and energy infrastructure could benefit

US Capitol Building (Credit: Getty)

The 2022 midterm elections have come and gone, leaving plenty of analysts scratching their heads over what the results will ultimately be, whether that’s in terms of what the future holds for the legislative agenda over the next two years, or who might be in prime position for a tilt at the White House in 2024.

For those in the infrastructure space, this year’s elections are perhaps less critical than they have been in the past - at least on Capitol Hill.

That’s because President Joe Biden had made infrastructure his signatory policy issue that he wanted to drive through the legislature when he first took office two years ago. That results - after expending significant political capital and a sometimes tortuous effort to win some bipartisan support - in the Infrastructure Investment & Jobs Act (IIJA). Biden signed that into law a year ago, and you can read some industry views on the tumultuous first year that it has faced by clicking here

With that trillion-dollar package already over the line - plus the more recently signed Inflation Reduction Act that provides tax incentives for certain infrastructure projects - it might be argued that the federal heavy lifting has been largely done and it is therefore now over to the delivery bodies to get things done. Whether that’s national organizations like the Build America Bureau or state agencies, it might be tempting to think that the changes around who is now sitting in Congress will have little impact on infrastructure delivery.

“It is difficult to predict of course but the combined impact of the Infrastructure Act and the Inflation Reduction Act, including the tax incentives in the IRA, are driving a fair amount of development in clean energy infrastructure,” says Vanessa Richelle Wilson, US chair of DLA Piper’s energy and natural resources sector.

Many in the market agree that it would take a retraction of that legislation to really start to stop that momentum from continuing. With Biden still in the White House - plus the fact that the IIJA managed to get a small number of Republicans supporting it - any effort to unpick those pieces of legislation looks extremely remote for the next few years at least.

However, that’s not to say that the new political map won’t have some impact on infrastructure policy. A number of Republicans - including those who backed the IIJA - have raised concerns that they feel the Biden administration is implementing the law in a way that contravenes its original intention.

As far back as February this year (just three months after the law was signed), Shelley Moore Capito - who had been critical in brokering a bipartisan agreement - expressed concern that the Federal Highway Administration was implementing policies “contradicting those negotiated in the bipartisan law”.

“The law addresses infrastructure issues in a manner that reflects bipartisan input and consensus and avoids burdensome, prescriptive requirements,” she wrote in a joint letter with Senate minority leader, Mitch McConnell.

Emboldened by almost certainly taking control of the House of Representatives, Republicans may look to return to some elements of the IIJA in order to tighten up how it is being implemented in practice.

“In the short-term, we expect most activity to occur at the agency level in the form of guidance and regulations to resolve questions as to how the new legislation will be implemented,” concludes Wilson.

Another reason why we may yet see more infrastructure-focused legislation coming through Congress over the next two years is because this is one of the very few areas where the two parties even come close to being aligned. It may not have been straightforward, but Biden did eventually manage to get a small number of Republicans to back his infrastructure bill - including heavyweights like McConnell and Capito.

Assuming that the two parties don’t simply choose to block each other’s efforts for the next two years (and that is quite a big assumption), we could see them working together in areas like infrastructure where there is something close to agreement. Energy, in particular, could be an area to benefit.

“There does seem to be broader support for supporting the development of energy infrastructure and improvement of things like the transmission system,” says Wilson. “Another factor we think lawmakers will consider is that energy companies have already and are making investment decisions based on the existing legislation and reversing course could have a negative impact on those companies and their employees.”

Away from the federal sphere, there does seem to be appetite from the general public to continue investing in infrastructure. Analysis carried out by the American Road & Transport Builders Association (ARTBA) revealed that 88% of 380 state and local transportation funding initiatives across 18 states were backed by voters during the November 8 elections.

The figures were at the higher end of ARTBA’s tracking since it began compiling the figures in 2014, suggesting that public support for tackling the nations’ infrastructure needs remains strong. This finding is something that those on Capitol Hill, and those in or with an eye on the White House, will want to bear in mind when it comes to 2024.