Soon the new Trump administration’s “drill, drill, drill” focus and a platform aimed at cutting “costly and burdensome regulations” will run head-on into President Biden’s efforts to push fossil fuels into the backseat while enshrining net-zero emissions goals in US energy policy.
A 19 November Wood Mackenzie opinion written by David Brown, director of the firm’s energy transition practice, said President-elect Trump’s full agenda, including plans to upend policy aimed at net-zero emissions goals, will likely face political and market opposition. Industry lobbyists support loosening regulations and promoting exploitation of US hydrocarbon resources, yet many within the industry remain committed to the net-zero course.
Woodmac’s “A Second Trump Administration Part 2: A Deep Dive Into Energy and Commodities” cross-commodity report predicts US energy policy will veer from net-zero targets under Republican control of the government, although not without opposition. According to Brown, the US is likely in store for lighter standards on emissions regulations, more protectionist trade policies, and the removal of the US from the Paris Agreement, and these actions would shift US policy away from a net-zero trajectory.
President-elect Trump is likely to enact legislation simplifying and strengthening the permitting process for LNG projects, Brown wrote. In January 2024, the Biden administration paused permitting for LNG export projects, while a July ruling said the Department of Energy must at least reviewsuch applications.
Woodmac said it expects public E&P companies, who are navigating lower crude prices in setting 2025 budgets, are unlikely to add more rigs as they work to keep investment rates low. Private E&P companies, on the other hand, may rise in 2025 in response to the potential for permitting reform on federal lands and an administration more receptive to hydrocarbons, the firm said. Woodmac projects annual average oil production from the Lower 48 to reach 13.2 million BOPD in 2024 and rise to 13.6 million BOPD in 2025.
Even with the Trump administration’s focus on fossil fuels, the report expects renewables will remain competitive while the Inflation Reduction Act (IRA) is unlikely to be fully repealed but may be amended.
According to Woodmac, much of the $220 billion in manufacturing investment supported by the IRA has been concentrated in Republican-led states. The election’s impact on low-carbon investment will likely vary by sector, commodity, and technology, Brown wrote.
The opinion said investments in renewables may slow, but that capacity is still expected to increase by 243 GW from 2024 to 2030, even in the firm’s delayed transition scenario.
For example, with manufacturing investments concentrated in Republican states, the report projects advanced manufacturing credits will remain intact and around 7 GW of solar manufacturing will likely proceed. Longer-term solar projects are likely to face policy risk, according to the opinion, while the near-term pipeline for solar demand and projects is robust.
“We expect flat installation growth in the next few years despite high demand for solar, driven primarily by interconnection and transmission bottlenecks. Then, from 2028–2031, annual growth should pick up modestly, averaging 5% annually,” the opinion said.
But when it comes to onshore and offshore wind projects, deployment risk rises from 2040 because the Trump administration is expected to de-emphasize offshore wind development by restricting permitting resources and limiting new leases. This is not expected to affect the 25 GW of projects already permitted or in the late stages of permitting.
Woodmac also said offshore wind project economics are most at risk if tax credits are rolled back, while onshore wind would also face downside risk if portions of the IRA are repealed.
The firm believes it is unlikely a Republican Congress will target incentives like 45Q credits and project funding included in the IRA because the executive branch has little power to “outright eliminate” the various provisions in the act alongside bipartisan support for carbon capture, utilization, and sequestration (CCUS) efforts.
The US Environmental Protection Agency (EPA), a target for deregulation, is expected to become more friendly to fossil fuels. Additionally, a lawsuit challenging greenhouse gas (GHG) emission standards for new and existing coal and gas plants remains on track, and Woodmac believes it’s unlikely for the GHG standards to survive both the legal process and a Trump EPA.
Revamp Permitting, Promote Resources
The American Petroleum Institute (API) on 12 November weighed in with a five-point policy roadmap that it said details concrete steps Washington can take in 2025 and beyond to leverage national resources, reform the permitting system, bolster geopolitical strength, advance sensible tax policy, and protect consumers.
In a letter to President-elect Trump, API President and CEO Mike Sommers wrote the country has a “generational opportunity” to leverage US energy leadership but that success is not guaranteed because the country has been “heading down a path of extreme regulations threatening everything from our choice of home appliances to the cars we drive.”
To leverage the country’s natural resources, the API supports the US Bureau of Ocean Energy Management issuing a new 5-year offshore leasing program. In September 2023, the Biden administration released a 2024–2029 leasing program that planned for a maximum of three annual lease sales in the Gulf of Mexico (GOM), as part of an effort to phase out oil and gas in the Gulf to support the nascent offshore wind industry.
The API would also like to see the administration repeal restrictive onshore leasing rules, starting with the US Bureau of Land Management Conservation and Landscape Health Rule.
The API is also pushing for reform of the country’s permitting system, focused specifically on the National Environmental Protection Act (NEPA) and the Clean Water Act. Additionally, the API is proposing judicial reform and repealing Biden-era NEPA rules.
The API, which would like to see the Trump administration lift the LNG permitting pause, supports swift processing of export applications, which the organization said would strengthen the country geopolitically.
Erik Milito, president of the National Ocean Industries Association, in a 6 November news release, emphasized the importance of permitting reform and funding the federal government.
“These measures are essential to laying the foundation for the incoming Congress, enabling them to build on this momentum and further expand bipartisan offshore energy priorities,” he said.
Milito said that includes mandating not just offshore wind lease sales, but oil and gas lease sales as well.
“The Gulf of Mexico provides a crucial geopolitical counterbalance to nations like Iran and Russia, reinforcing America’s energy independence and global influence," he said.
Carbon Capture Pathway
Milito called the GOM a key player for lower-carbon energy. "With its vast potential for carbon sequestration, the Gulf is essential for efforts to reduce emissions and decarbonize hard-to-abate industries."
In October, ExxonMobil announced it had secured more than 271,000 acres in shallow waters offshore Texas for what will become the largest carbon capture and storage (CCS) site in the US.
The supermajor has said certain policy changes are needed to help reduce US emissions more quickly. Those changes include creating a favorable investment environment for CCS activities; providing financial support for CO2 capture, transport, and sequestration infrastructure; and ensuring government approval for CO2 storage.
Speaking during an 18 November media roundtable in Houston, DNV’s Pedram Fanailoo, director of low-carbon segment, North America, said permitting plays a role in developing the infrastructure needed for moving renewables and CCUS projects forward.
Permitting processes are currently “incredibly difficult,” which means some projects may not move forward due to the need to wait too long to reach investment decisions.
“We’ve got to take the politics out. This isn’t about ideology. The fact is, we have too much carbon, and all these sectors need to do something about that,” he said.
He said that according to DNV’s most recent energy transition outlook, the world is unlikely to reach net-zero emissions by 2050. Even electrifying everything through renewable sources wouldn’t make it possible to meet net-zero emissions by 2050, he said.
“The case for CCUS is we already have too much CO2 in the atmosphere, and the longer we wait, the more difficult it will be to meet the target,” Fanailoo said.
Multiple transitions are in progress, he said, and the world shouldn’t focus on a silver bullet but rather the “silver buckshot.”
Amit Goyal, regional head of DNV’s low-carbon center of excellence, said the biggest driver for most projects is policy, such as tax credits and incentives.
Fanailoo said some major players would like to see policy set for emitters and that a price for carbon could drive change.
When it comes to decarbonization, the US federal government has opted for the "carrot" of incentives rather than the "stick" of mandates to encourage adoption.
“We don’t have a strong enough price of carbon,” which Fanailoo said is needed to promote change.
Having a clear direction to move is also needed. In the absence of such, or when change is voluntary, he said, it’s likely to become a procurement issue, with cheaper options winning.
When there’s “a baseline for the whole industry to work towards, you start to see action and change,” he said.
