President Trump’s executive orders on energy

The new administration aims to boost oil and gas production and baseload generation, while curbing wind power and EVs.

“Shock and awe” was what President Donald Trump’s team told everyone to expect from his first day in office, and they did their best to live up to that promise. On Inauguration Day, 20 January, the new president issued a barrage of executive orders, intended to “begin the complete restoration of America and the revolution of common sense,” as he put it in his inaugural address. His objective was both to begin to implement his agenda and to signal the planned strategy for his administration over the next four years.

In energy, the strategy was summed up by the announcement that the US would again be leaving the Paris climate agreement. Where the Biden administration aimed to cut greenhouse gas emissions, the Trump administration is attempting to increase US fossil fuel production, to “restore American prosperity… [and] rebuild our nation’s economic and military security,” as the White House put it.

Of the 46 executive orders and other presidential actions signed by President Trump on his first day back in office, six have direct relevance to the energy industry:

  • The withdrawal from the Paris agreement.
  • A catch-all executive order on energy, including a wide range of provisions intended to “unleash America’s affordable and reliable energy and natural resources”. This ends the Biden administration’s pause on approvals for new LNG exports. It also starts processes for easing regulations on oil and gas production, scrapping appliance efficiency standards and changing regulations that encourage sales of electric vehicles.
  • A declaration of a “national energy emergency”, giving the administration more powers to expedite approvals for infrastructure for fossil fuels, biofuels, nuclear power and critical minerals, but not solar and wind. This is focused in particular on securing dispatchable “baseload” power supply for data centres, because artificial intelligence (AI) is a vital issue for national security.
  • An order to lift restrictions on oil, gas and mineral production in Alaska, opening areas for development, including parts of the Arctic National Wildlife Refuge (ANWR), and supporting the state’s aspiration to revive its LNG industry.
  • A mandate for government departments to look for ways to bring down prices for consumers, including scrapping climate policies that raise the cost of fuel and food.
  • New restrictions on wind power development. They include bans on new leasing for offshore wind, threats to existing leases and a temporary suspension of all federal leasing and permitting for wind projects both offshore and onshore.

As well as these executive orders, President Trump also raised other issues that could affect the energy industry. The most important of those was the threat of new 25% tariffs on imports from Canada and Mexico if the flows of people crossing their borders into the US are not stopped.

Some of the measures covered by those orders and statements will have an immediate impact. Others will need time to take effect or face difficult legal challenges. And some may never come into force at all.

One important factor to bear in mind is the decision last year by the US Supreme Court to end “Chevron deference”. That was the principle that when a law is unclear, the courts should defer to a reasonable interpretation offered by an administrative agency. Its end could open many more of an administration’s decisions to legal challenges.

Wood Mackenzie analysts have broken down the announcements from President Trump’s first few days to assess what the energy and natural resources industries can expect, immediately and over time.

Near-term impact

Withdrawal from the Paris agreement

The US exit from the Paris agreement will take about a year to complete, but sends an immediate signal about the new administration’s priorities. It also terminates US involvement in all climate-related international agreements and financial commitments. The US goals for emissions reduction set out by the Biden administration late last year become a dead letter.

Some US states and businesses still committed to climate action are expected to announce that they will continue to align with the Paris goals, as they did during the first Trump administration. Few other countries are expected to follow the US out of the agreement. But some will see the move as a reason to ease off on emissions reduction efforts.

One noteworthy detail is that the US has not (yet) withdrawn from the entire United Nations Framework Convention on Climate Change (UNFCCC), a step advocated by some of President Trump’s supporters. Remaining in the UNFCCC means the US retains a seat at international climate talks.

LNG export approvals

The energy secretary will restart reviews of applications from LNG projects to export to countries that do not have a free trade agreement with the US. The secretary is instructed to make decisions on approvals based solely on the project’s economic, employment and security impacts.

Approvals are unlikely to be issued right away. The energy department will need time to strengthen its decisions against the expected legal challenges. But Wood Mackenzie expects approvals to allow at least one US LNG project to take a final investment decision (FID) this year, and possibly more.

Wind restrictions

The administration has imposed an indefinite moratorium on all leasing of US federal waters for offshore wind projects. That does not have any impact on Wood Mackenzie’s view of the near-term outlook for the build-out of offshore wind. Leases for almost 70 gigawatts (GW) of offshore wind capacity have already been awarded, mostly off the northern and central Atlantic coast, and we forecast that the industry will reach about 12 GW by 2030. The main constraint is not leasing but project economics, which could be affected by new tariffs (more on this below).

Other wind-related measures could have more impact. The Secretary of the Interior and the Attorney General will review the economic and environmental impact of existing offshore wind leases, with a view to possible cancellation. Almost 17 GW of offshore wind capacity has already secured federal permits. If some or all of these permits were to be withdrawn, we would have to revise down our forecasts for installations over the next few years.

There will also be an indefinite ban on all awards of federal permits and leases for wind projects, both onshore and offshore. Depending on how long that ban lasts, it could have a significant impact on wind development in the US.

The administration also issued a specific order blocking development of the Lava Ridge Wind Project in Idaho, which was approved by the Biden administration in December. And companies with “defunct and idle” wind turbines could be compelled to remove them.

Stopping grants and loan guarantees

Government agencies are ordered to stop immediately all payments under the Inflation Reduction Act (IRA) and Infrastructure Investment and Jobs Act (IIJA), including funding for EV charging stations.

A Biden administration official told Reuters last week that roughly 84% of the total grants under the IRA, worth US$96.7 billion, had already been committed before President Trump took office. But any company or organisation that has not yet received the funds will face uncertainty about whether the money will be available.

Any administration is legally required to spend funds committed by Congress. To ensure that the IRA and IIJA money is not spent, the Trump administration will have to fight the question through the courts, or persuade Congress to take away the funding or use it for other purposes.

Longer-term impact

Supporting increased oil and gas production

The administration is setting up an inter-agency working group to find and implement measures to expedite oil and gas development. Regulations could be eased, including the rules for methane and volatile organic compound emissions set by the Biden administration last year. However, consultation procedures must be followed, so it will take time to put a new framework in place.

Under the Biden administration, the average time taken to secure a permit to drill on federal lands rose significantly, from typically no more than 250 days in the 2010s to 320 days by 2023. The Trump administration can speed approvals up again by streamlining processes, and possibly by hiring more staff.

The administration also plans to end the use of an estimated “social cost of carbon” in any permitting or regulatory decisions, which should help accelerate approvals.

However, the principal determinant of activity in the US oil and gas industry is corporate capital allocation decisions, driven by commodity prices and investor preferences. The Trump administration may have some impact on where companies invest – increasing activity on federal lands and waters – but probably not on how much is invested in total.

Removing barriers to new energy infrastructure, including pipelines

Administration officials will make recommendations to Congress for legislation to facilitate the permitting and construction of energy infrastructure, including oil and gas pipelines. There was bipartisan support in the last Congress for permitting reform to remove barriers to infrastructure investment. Although attempts to pass a bill last year were unsuccessful, there is a good chance that a reform package could be agreed by the current Congress.

Ending incentives and regulations that encourage EV sales

The “Unleashing American Energy” order sets the US government on a path towards eliminating subsidies and regulations that favour EVs. These cannot be changed immediately. Ending the US$7,500 tax credit for EVs requires action from Congress. Scrapping the federal emissions and fuel economy rules that encourage manufacturers to sell EVs is another move that will have to go through the usual regulatory processes.

Over time, those changes, along with other measures such as steep tariffs on imported EVs from Mexico, could have a significant impact on the US vehicle market. Before the election, Wood Mackenzie analysts projected that plug-in electric vehicles (PEVs) – battery EVs and plug-in hybrids – would account for 32% of the US passenger car market in 2030. If President Trump follows through with his efforts to remove supports for EV sales, we think that share could drop closer to 23%. As a result of the slower adoption of EVs, Wood Mackenzie is projecting that US gasoline demand in 2030 will be about 300,000 barrels per day (or 4%) higher than in our previous forecast. That is not material to our global crude price outlook, but will strengthen refining margins in the US and Europe.

Increasing US production of critical minerals

As well as boosting investment in oil and gas, the Trump administration aims to increase US production of critical minerals, including rare earths and uranium. The order lists a series of measures to support that objective, including removing regulatory barriers, surveying the nation’s resource potential, possibly opening up more public lands for mining and supporting projects with grants if Congress provides the funds.

As with oil and gas production, these measures will take time to implement, and will lead to increased activity only if the economics are right.

Facing significant challenges

Declaring an “energy emergency”

One of President Trump’s most eye-catching announcements was the declaration of a “national energy emergency”. This gives powers to the federal government to accelerate the development of new energy infrastructure for fossil fuels, nuclear and biofuels. The declaration lists a range of routes for breaking down barriers such as environmental regulations, state and local policies, and property rights.

One key objective of the declaration is increasing investment in gas-fired and nuclear generation to power data centres for AI. The announcement highlights concerns about “a precariously inadequate and intermittent energy supply and an increasingly unreliable grid” as an issue for national security. In their confirmation hearings, both Chris Wright, President Trump’s nominee for energy secretary, and Doug Burgum, the nominee for interior secretary, repeatedly emphasised the importance of “baseload” dispatchable power.

However, any attempt to use the powers proposed in the order would likely face legal challenges from state and local governments, campaign groups, businesses, and individuals whose rights are threatened.

President Trump’s declaration suggests the administration could use powers under the Defense Production Act, a move employed by President Joe Biden several times to support investment in low-carbon technologies. Those tactics were criticised by many Republicans at the time.

A new framework for environmental approvals

One of the potentially most radical moves from the president is the revocation of an order issued by President Jimmy Carter in 1977, setting out the regulatory framework for environmental impact statements used to decide on project approvals. The order has for decades been a key part of the implementation of the 1970 National Environmental Policy Act (NEPA).

The chairman of the White House Council on Environmental Quality is now required to produce new guidelines for implementing NEPA within 30 days. Individual government departments and agencies will make decisions on projects based on those guidelines, with the aim of expediting approvals and prioritising efficiency and certainty.

This could pave the way for a superior process for environmental approvals. But in the short term it creates uncertainty, and will inevitably face legal challenges.

Overturning the endangerment finding

The Environmental Protection Agency in 2009 issued a formal finding that greenhouse gases “threaten both the public health and the public welfare”. That action, which followed the Supreme Court’s decision in Massachusetts v. EPA in 2007, formed a basis for many of the climate policy measures of the Obama and Biden administrations. The Trump administration is now looking at having it overturned. If successful, it would curb the ability of future administrations to impose climate-focused regulations.

This is another issue that is likely to be fought all the way to the Supreme Court.

Ending California’s right to set its own vehicle emissions standards

President Trump raised the possibility of ending California’s right to set its own vehicle emissions standards, which it has held since 1967. The state’s waiver from federal standards is significant because the size of its market means its regulations have an impact on the national automotive industry. Some other states have chosen to follow California’s lead and adopt their own versions of its standards.

California’s waiver is codified in the Clean Air Act, and it is difficult to see how the administration could overturn that.

Uncertain effect

New 25% tariffs on Canada and Mexico

President Trump did not announce any new tariffs in his first days in office. But speaking to reporters, he raised the prospect of 25% tariffs on imports from Canada and Mexico, because they were allowing too many people to cross their borders into the US. If those tariffs are imposed, they will have huge impacts on oil and gas markets and energy supply chains.

Wood Mackenzie analysts have been studying the potential impact on the US utility industry, and you can download a sample of their findings from our website. (For more on this, see ‘Chart of the Week’ below.)

However, President Trump has made it very clear that the threat of tariffs is a negotiating tactic, designed to get a speedy response from Canada and Mexico on strengthening border security. The governments of both countries want to prevent the new tariffs. They hope to make a deal that will satisfy President Trump’s requirements before his proposed deadline of 1 February. But the outcome of the negotiations is uncertain.

Refilling the Strategic Petroleum Reserve

Another policy goal that President Trump did not formalise into an executive order is refilling the Strategic Petroleum Reserve (SPR). He did, however, talk about it in his inaugural address, saying his administration would “fill our strategic reserves up again right to the top”, while cutting prices and exporting energy all over the world.

The stocks in the SPR were run down by about 244 million barrels of oil under the Biden administration. Filling it completely would mean adding another 320 million barrels, which, at today’s price of about US$75 a barrel for US crude, would cost about US$24 billion.

With the federal government’s finances under pressure, both the administration and Congress may be able to think of better things to do with that money.

Quote of the week

“Our Nation’s current inadequate development of domestic energy resources leaves us vulnerable to hostile foreign actors and poses an imminent and growing threat to the United States’ prosperity and national security.”

In President Trump’s order declaring a “national energy emergency”, he summarised a key theme in his administration’s strategy: the connection between the availability of reliable energy supplies, a stable power grid, technological innovation, AI, and national security.

Chart of the week

This comes from the Wood Mackenzie analysis of the potential impact of President Trump’s new tariffs that I mentioned above. It shows the shares of US imports of key electrical equipment sourced from Canada, Mexico and China, the three countries that are most immediately threatened by the new tariffs.

You can see that for the three critical types of products – transformers, circuit breakers and switchgear – those three countries are often very important suppliers to the US. Imposing those new tariffs would have a significant impact on power industry supply chains. Download the summary report, available through the link, for more details.

Ed Crooks

Senior Vice President, Thought Leadership Executive, Americas and host of The Energy Gang podcast

Ed examines the forces shaping the energy industry globally.