Challenges in U.S. Energy Regulation
Energy companies in the U.S. are increasingly voicing concerns over the declining stability of the country’s regulatory system, claiming it’s making it harder to secure funding and initiate large projects. This sentiment seems to resonate with many executives I’ve spoken to since 2021. Colette Hirstius, who leads Shell Americas, has recently expressed similar worries.
“I think the uncertainty in the regulatory environment is very harmful,” Hirstius mentioned. “No matter how far the pendulum swings in one direction, it is likely to swing just as much in the opposite direction.”
Her observation underscores a crucial point: stability in regulations is essential for business planning, especially for large projects that can take years and billions of dollars to complete. The demand for energy—from oil and gas to renewable sources like wind and solar—is growing, making such projects more common in the U.S.
Historically, the U.S. has benefited from a stable regulatory environment, offering a competitive edge that attracted global investments. This allowed energy companies to fund numerous projects across the country.
However, the landscape started to shift with the Obama administration, which introduced aggressive climate policies, leading to varied regulatory approaches during subsequent presidencies, especially during Trump’s term. This inconsistency has made it increasingly difficult to attract funding and effectively plan energy projects.
Inflation and persistent supply chain issues have only heightened the challenges for executives dealing with large-scale projects. The complexities surrounding these issues often trace back to the 2009 EPA regulations that categorized carbon dioxide as a pollutant, significantly increasing regulatory requirements.
This regulatory chaos has, unfortunately, contributed to the rise of Trump and his administration, with major shifts in energy regulations occurring every four years, eroding confidence in the legal landscape.
A concerning aspect of these regulatory changes is that they are often enacted through executive orders. This means they can be readily reversed by subsequent administrations, creating even more instability.
Furthermore, Congress’s tendency to avoid solidifying important regulations into law has exacerbated the situation. The current EPA, under Secretary Lee Zeldin, is looking to overturn some of Obama’s regulations, suggesting a wave of new changes could come, depending on political circumstances.
Unless Congress takes meaningful action to solidify these changes, a future Democratic president could easily roll back reforms, further destabilizing the regulatory environment.
This presents a significant challenge that only Congress can address, though the current government shutdown does not inspire much confidence in their ability to navigate these issues effectively.
