New Administration: New Energy Signals to Watch

The new administration has announced numerous actions and orders, with broad implications for the energy sector. For a digestible breakdown of specific administration actions, please visit: Regulatory Alerts. The energy policy shifts we are watching the closest are those that could impact our clients the most.

Tariffs

Tariffs continue to evolve rapidly, and their impact continues to be assessed accordingly. For additional information on the economic implications of tariffs, visit: Breaking up is hard to do: Tariffs & trade wars.

KPMG point of view:

• Potential Impact on consumer energy costs: Tariffs on Canadian oil would increase costs for U.S. refiners, leading to price hikes for consumers, felt most acutely in diesel and jet fuel costs.
• Competitive considerations: Many U.S. refineries are built for heavier Canadian crude, not lighter U.S. blends, creating a need to either replace Canadian crude with imports from other countries or make significant investments in new U.S. infrastructure. Furthermore, Canada also could choose to ship its oil to refineries outside of the U.S.
• Risk management: Finding new suppliers or making U.S. infrastructure upgrades would not happen overnight, leading to increasing near-term costs for U.S. refiners. 

Domestic Oil Production

By issuing executive orders like “Declaring a National Energy Emergency” and “Unleashing American Energy,” the new administration has made its intentions of “unleashing America’s affordable and reliable energy and natural resources” clear. These actions, combined with reversals of certain climate engagement policies, signal that the new administration is focused on increased oil and gas production.

KPMG point of view:

• Potential impact on consumer energy costs: Increased access to fossil fuel resources is intended to lower energy costs and enhance energy independence. However, consumers should not expect immediate relief at the pump.
  
• Competitive considerations: The current and planned regulatory environment so far is more favorable to fossil fuel production than the policies of the previous administration. The policy shift also creates uncertainty for companies that previously aligned their strategies with clean energy incentives, particularly those that invested heavily in renewable energy.
  
• Risk management: Companies investing in new traditional energy projects could face regulatory uncertainty if either future administrations or congressional policymaking re-emphasizes environmental protections and if states enforce stricter environmental standards, whether existing or new. Further, if an organization chooses to reduce its focus on renewable energy, this could impact its future ability to keep pace with domestic and international markets that are incentivizing renewable energy projects.

Artificial Intelligence & Energy Infrastructure:

OpenAI’s announcement of the Stargate Project, a venture between several private companies with plans for investing up to $500 billion in AI infrastructure as well as Executive Orders “Removing Barriers to American Leadership in Artificial Intelligence,” “Declaring a National Emergency and “Unleashing American Energy,” signal that building energy resources to scale AI in the U.S. is another priority of major tech companies and of this administration.

KPMG point of view:

• Potential impact on consumer energy costs: Power and utilities companies plan over longer time horizons and operate with limited capital because they take both regulatory compliance and their consumers into account, as major capital improvements or infrastructure upgrades can get passed on to the consumer. Major tech companies’ interest in scaling AI, combined with more capital and fewer regulatory requirements, could offset costs, typically passed onto the consumer, for much-needed infrastructure upgrades.
  
  
• Competitive considerations: KPMG data shows nearly 60% of global tech companies, data center developers, and energy providers do not believe the current pace of energy deployment in the U.S. is enough to meet the energy demand caused by AI. Where new data centers are built matters, and it should be noted that as energy demand continues to rise, some states and localities are putting moratoriums on accepting new data centers because their utilities simply cannot provide the amount of energy they require in the timeframe the companies want them built. The race to fulfill this energy demand is on.

The regulatory environment is now more favorable to gas-fired power plants, as they will face fewer restrictions from this administration related to emissions and environmental permitting. For natural gas distribution utilities, this change also provides greater certainty for infrastructure investment and pipeline expansion projects.

• Risk management: Many tech companies and data center developers report emissions in other jurisdictions or have ambitious climate goals, separate from U.S. regulatory requirements. In fact, KPMG data shows tech companies and data center developers are willing to pay a premium for low-carbon electricity, with 62% indicating their organizations are prepared to incur an additional cost of up to 50% more than their current electricity expenses for low-carbon electricity, with another 14% willing to pay between 51-100% more than their current electricity expenses for low-carbon electricity.

Tax Policy

Under Executive Order “Unleashing American Energy,” federal agencies are directed to immediately pause the disbursement of funds appropriated through the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA), including but not limited to funds for electric vehicle charging stations.

This applies to grants, loans, contracts or any other financial disbursements and is subject to a 90-day review period for consistency with the law and the policy outlined in Section 2 of the executive order. The Office of Management and Budget has sought to clarify that the pause only applies to programs or projects implicated by the policy established in Section 2 of the executive order.

KPMG point of view:

• Competitive considerations: Depending on the outcomes of some of the reviews (e.g., level of changes in green investment framework), speed of implementation of announced policies as well as other as any other future measures (e.g., tax policy, tariffs), the expected increase in U.S. infrastructure investment opportunities will differ across sectors.
  
• Risk management: Executive Order “Unleashing American Energy” (or any of the other orders and directives issued to date) does not impact the availability of tax credits under the IRA. Tax credits can only be modified or repealed by legislation.

However, legislation is expected to be enacted by year end to extend the tax rate cuts and other expiring measures introduced in the Tax Cuts and Jobs Act (TCJA) passed during the first Trump administration, and modifications to IRA tax credits are expected to be considered to help offset the cost of those extensions.

For additional U.S. energy and infrastructure tax observations from KPMG’s Tax leaders, please visit: KPMG report: Initial observations on a second Trump presidency and the implications for U.S. infrastructure investment.

Recommended Actions for Energy Companies:

• Strategic Assessment: Energy companies should evaluate how current regulatory changes impact their operations and short and long-term strategies.
  
• Investment Diversification: A balanced energy portfolio that includes both traditional and renewable sources can help mitigate both regulatory shifts and evolving market demand.
  
• Stakeholder Engagement: Maintaining open dialogue with regulators, industry groups, and the public is essential. Proactive communication fosters transparency, builds trust, and helps navigate evolving regulatory frameworks.
  
• Risk Management: Companies should implement comprehensive risk management strategies to address environmental, legal, and market uncertainties. Staying informed about potential regulatory shifts and adopting best practices for sustainability will be key to long-term resilience.