The oil industry is courting a powerful new friend in the Democratic Party—on the East Coast, no less—just when it needs one most.
Sen. Mark Warner, D-Va., has no history of warm relations with Big Oil. Indeed, in past years he has been a vocal critic of the $4 billion in annual tax breaks that oil companies receive from the federal government—tax breaks that will be in the crosshairs this fall as the new congressional super committee looks for ways to slice $1.5 trillion off the federal deficit.
But now Warner wants Virginia to become the first East Coast state to allow offshore drilling, which he sees as a pragmatic way to bring jobs and new revenue to his state, and perhaps a way to keep his job in the face of an increasingly red constituency.
Warner is also vocally vying for a seat on the new super committee, which would give him an outsize influence on the fate of Big Oil’s corporate tax breaks. Even if he doesn’t land a seat, he is likely to continue to be an influential voice in shaping the debt debate, which oil companies say is sure to target their bottom line.
Corporate oil currently has just two reliable Democratic friends in the U.S. Senate—Mary Landrieu of Louisiana and Mark Begich of Alaska—both from red states where offshore drilling provides thousands of jobs and millions of dollars to state coffers and local economies. Landrieu and Begich consistently break with their party to defend Big Oil’s tax breaks and to back bills that would expand offshore oil drilling and direct more offshore drilling revenues directly to states.
But Virginia is taking fledgling steps toward joining the ranks of offshore drilling states, which could significantly change its politics. The federal government estimates that the waters off the coast of Virginia hold 130 million barrels of oil and 1.1 trillion cubic feet of natural gas. Republican Gov. Bob McDonnell has made a push for offshore drilling a cornerstone of his administration.
Last year, the Republican-led state Legislature voted to use future revenue from new offshore drilling to pay for infrastructure improvements. And last month, an online poll in the Norfolk-based Virginian-Pilot newspaper found that 74 percent of readers supported legislation that would allow drilling off Virginia’s coasts if the state got a significant share of the drilling royalties paid by oil companies. That proposal was echoed in a bill introduced the same week in the Senate by Warner and his fellow Virginia Democrat, Jim Webb.
Visitors to Warner’s website are now greeted with an image of Virginia’s coastline and a description of the Warner-Webb drilling bill. And oil companies and energy analysts took notice last week when Warner joined Landrieu, Begich, and six oil-state Republicans in signing a letter to President Obama that essentially asked the administration to spare the oil industry in its debt-cutting efforts.
“While we continue to hear about increased taxes on the oil and natural gas industry, numerous studies show that the industry can create thousands of jobs throughout the economy and substantially increase the income and revenues it provides our government if increased access is given to domestic resources,” the senators wrote.
“Begich and Landrieu, you expect them to do that. But now the calculus is changing,” said Mike Cantrell, president of the Domestic Energy Producers Alliance, which lobbies for the interests of independent U.S. oil and gas companies. Cantrell’s group, which has rock-solid Republican support, has recently reached out to Warner and other Democrats.
“The industry for too long has been Republican-biased,” Cantrell said. “Two years ago, we decided to correct that. We have been working with Democratic senators.” Cantrell’s group met with Warner’s office just a few days before the Virginian signed on to the oil letter.
“This very interesting letter is discordant with some of Warner’s very vocal comments a few months back,” said Kevin Book, managing director of Clearview Energy Partners, an energy policy analysis firm. “He’s been persuaded there are parts of the Virginia economic future that he can influence with oil—those are jobs and dollars.”
As recently as June, Warner voted with his Democratic colleagues in favor of a bill that would eliminate about half of the oil industry’s annual tax breaks. That same money will be back on the table this fall, as even some moderate Republicans concede that rolling back tax breaks for one of the most profitable (and often politically reviled) industries is sure to be popular. And Warner told National Journal that oil’s tax breaks should remain “in the mix” as the super committee looks to close tax loopholes in its quest for revenue.
Energy analysts say that for now, Warner and other Virginia Democrats are in the early steps of the transition to becoming true oil-state Democrats. Until companies actually start pumping oil off Virginia’s shores—which would take at least a decade—Democrats like Warner won’t have the kinds of deep, abiding ties with the industry shared by longtime oil loyalists like Landrieu.
This article appears in the Aug. 3, 2011, edition of National Journal Daily.