IRA Repeal

With narrow control of both chambers of Congress, the new government also will be able to prioritize taxes in the budget reconciliation process. Requiring only a simple majority to support a budget reconciliation resolution, we can expect that Congress will attempt to repeal the tax credits enacted in the IRA and renew the tax provisions that were passed in the 2017 Tax Cuts and Jobs Act. We think it unlikely that a full repeal of the IRA will occur and that significant elements will survive. We could also see Congress add domestic content rules similar to the section 30D provision rules to other IRA provisions.

The electric vehicle industry may be most at risk while tax credits tied to hydrocarbons, such as CCUS and 45V clean hydrogen, are most likely to remain. The statute’s so-called “methane fee,” which directs EPA to collect a Waste Emissions Charge on methane released from certain oil and gas facilities at a rate to increase to $1,500 per metric ton, could be repealed. At the agency level, new leadership at the U.S. Department of Treasury could amend guidance for tax credits to permit natural gas-derived hydrogen to be eligible for the 45V tax credit, assuming the credit is not repealed.

Antitrust

Return to Traditional Antitrust

We expect that a second Trump administration will signal a major shift in the antitrust environment for oil & gas M&A. Current FTC Chair Lina Khan has taken an aggressive approach towards antitrust issues in the sector since her appointment in 2021. Her Republican successor will change that dynamic, likely returning to traditional antitrust enforcement principles thereby reducing the uncertainty regarding M&A in the sector and spurring further consolidation in the wake of Exxon/Pioneer and Chevron/Hess.

• Reduced Scrutiny of E&P Transactions: The FTC under Khan closely scrutinized large, high-profile transactions in exploration and production.   While the FTC did not seek to block any of these transactions, a rise in Second Request responses triggered increased transaction costs and lengthened the timeline to a deal’s closure.

• Returned Focus to Core Antitrust Issues: Khan’s FTC obtained consent decrees on ancillary issues in three oil & gas mergers despite concluding that the underlying transactions did not raise competitive concerns. A Trump administration will likely return to a traditional antitrust approach.

• Deals That Raise Antitrust Concerns Will Still Face Scrutiny: For example, we expect the FTC to continue to scrutinize midstream transactions that increase concentration or create bottlenecks in the supply chain. Likewise, oilfield services and equipment and retail fuel outlets are also areas that both Democrat and Republican administrations have consistently scrutinized in the past. So, while we expect to see reduced interest in the oil & gas industry overall, parties to transactions that may raise antitrust concerns can still expect scrutiny.

In Europe, the Commission has a new slate of Commissioners, including a new Executive Vice President for a Clean, Just and Competitive Transition, Teresa Ribera. This is the first time that the EC has folded the competition portfolio alongside energy, suggesting a clear interlinkage in European thinking around using enforcement pressure to promote a clean transition.

The last few years have seen a greater focus on sustainability when reviewing commercial agreements, partnerships and acquisitions, both within and outside of the traditional energy arena, in markets such as plastics and fast-moving consumer/household goods. This policy is set to continue, such that arrangements and transactions that might previously have been considered anticompetitive in one or more markets may now be easier to justify (including with commitments) on the grounds of sustainability or other relevant customer benefits.

Energy Regulation

FERC Will Get a New Chair

Federal Energy Regulatory Commission (FERC) Makeup

The FERC chairmanship will pass to a Republican, from current Chairman Willie Phillips, on January 20, 2025. While policy preferences, including direction from the agency’s Office of General Counsel, will change, FERC may continue to have a 3-2 Democratic majority until Phillips’ term expires in June 2026.  While Phillips could choose to resign and open the seat for President-elect Trump to fill, there is precedent for former agency chairs to remain in place rather than give the President the opportunity to appoint a new Commissioner. Were he to resign to open the seat, with three of the agency’s five commissioners joining in 2024, FERC would lose some of the institutional overlap that traditionally knits the agency across presidential administrations.

Will Bipartisan Reign?

Under Chairman Phillips, the agency has taken a more bipartisan approach and voted out more unanimous orders than prior commissions. Whether that continues in the short-term will depend on who President Trump appoints to lead the agency and whether Chairman Phillips resigns his seat or continues to serve. If the composition remains, expect continued support for infrastructure development, including pipeline and LNG terminal projects, with the caveat that the agency’s reviews seem to be becoming more susceptible to reversal in the D.C. Circuit following the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. The agency, aware of this trend, has also adapted the orders it writes.

Environmental Justice

Chairman Phillips has stated that he hopes the new chairman will continue to support the agency’s efforts on outreach to environmental justice communities even after the expected repeal of Biden administration Executive Orders calling for a government-wide approach. While FERC was expected to update its regulations implementing the National Environmental Policy Act (NEPA) to align with new Council on Environmental Quality (CEQ) regulations codifying environmental justice concepts, a recent D.C. Circuit decision calls the CEQ regulations into question. Regardless, these changes will not lessen FERC’s statutory obligations to consult with Indian Tribes, and many of the environmental justice community issues may fall into the Tribal consultation space. As was the case during the first Trump administration, we can also expect an increase in environmental activism as a result.