Permitting reform is likely move for Democratic controlled US Congress

With Democrats capturing the House of Representatives and Senate in the US mid-term elections, permitting reform could be a top agenda for advancing power growth and reducing energy costs in the US, according to Wood Mackenzie analysis. The elections came amid rising energy costs driven by the conflict in Iran, which drove peak diesel and jet fuel prices in the US roughly 2.5 times higher than pre-war forecasts. Prices should ease as the conflict subsides, though the hardest-hit products will still be 30% above pre-war forecasts in 2027.

Congress has three policy levers to address energy affordability, each with very different odds:

• Permitting reform: Bipartisan interest makes it, in Wood Mackenzie's view, the likeliest route to faster gas, transmission and wind approvals. Nuclear, CCUS, and upstream get an incremental boost.
• Subsidies for renewable energy: Democrats have proposed several expansions, but a presidential veto makes new credits unlikely.
• Large-load cost rules: Federal mandates face legal and political resistance, so states will set cost allocation policy for data centers.

A Democratic Congress does not guarantee legislative success under a Republican White House. President Trump retains veto authority, and executive agencies can dilute the impact of any legislation that does pass. But permitting reform has a path that other Democratic priorities do not. The midterm results point to a sentiment shift in the US. The cost of energy has emerged as a check on the president's agenda, creating common ground for both parties on affordability.

With rapid development in data centers and power infrastructure, the US will see load growth lifted 3% from 2026 to 2035, driving wholesale power prices up 46% in Wood Mackenzie's base case over the same time period and making affordability a likely key driver for permitting goals.

"While we see the likelihood for permitting reform, how policy is legislated and implemented remains a risk to the US economy," said David Brown, Director, global integrated energy research for Wood Mackenzie. "Entrenched partisanship could fuel policy stagnation and regulatory confusion."

Most likely option - Permitting reform

Supported by key Senate architects and a coalition of clean energy developers, oil and gas producers, mining operators and trade unions, the Bipartisan American Affordability and Jobs Act (BAAJA) could speed up infrastructure approvals.

Key initiatives include:

• Mandates that environmental impact analyses under the National Environmental Policy Act (NEPA) are fully completed within two years
• Prevents federal agencies from revoking permits
• Limits litigation to a 150-day window after project environmental approvals are issued
• Mandates a 9-month timeline for evaluating water quality dredge and fill permits required for new gas pipelines

Permitting reform matters most for front-of-the-meter gas-fired power, which is typically located away from gas supply basins and requires new pipelines to support Wood Mackenzie's forecast of 166 GW of net new natural gas-fired capacity from 2026 to 2035. Permitting reform would also remove regulatory delays for short laterals, pipeline interconnections, and compressor upgrades that are necessary for behind-the-meter (BTM) power. Wood Mackenzie reports BTM gas demand is approaching 6 billion cubic feet per day (bcfd), about 6% of US domestic gas demand excluding LNG and piped supply.

"Without reform, midstream bottlenecks are likely to return, stifling upstream investment and pushing regional gas and power prices higher, most acutely in the power-hungry Northeast," said Siddhant Warrier, research analyst, North American power for Wood Mackenzie. "Prolonged pipeline delays would also slow data center development, a high priority for both parties."

High-voltage transmission speeds up - but who pays is in question

With congestion costs exceeding $10 billion a year and high-voltage completions in the 2020s running at under half the 2010s rate, the need for faster grid buildout is urgent. BAAJA addresses the permitting side of that challenge, mandating one-year NEPA assessments, protecting against permit revocation, and limiting post-approval litigation to a 150-day window. The next legislative frontier will be inter-zonal cost allocation: who pays for a line that crosses multiple utility territories and benefits multiple states.

Wind: new legislation will help clear the permitting backlog

The Restoring Renewable Energy Parity Act would require the Defense Department to sign mitigation agreements for pending wind, solar and transmission projects and overturn executive actions targeting renewables. But wind carries added risk: the President has targeted it directly, and the federal government controls offshore leasing.

"The wind industry's best bet for permitting reform is to be included in a national bill across multiple technologies and to have Congress monitor implementation," said Warrier.

States step up as federal policy outlook remains uncertain

Should federal energy policy stall under divided government, state-level energy policies and market rules will take on even more importance. States hold broad statutory authority over retail electricity, utility regulation, and siting, cementing their independence from federal gridlock.

The midterm gubernatorial results highlight this dynamic. In Texas, the election of Gina Hinojosa as Governor marks a significant shift in data center policy. The incoming regulatory environment could increase execution risk for developers with longer permitting and community approval timelines if Hinojosa's platform becomes law in the January 2027 legislative session.

Texas will remain a leading market for data center investment given its renewable resources, natural gas infrastructure and regulatory autonomy from FERC, but the new Governor will push for new constraints on speed to power in the Lone Star State.

Supply chain: executive order adds new uncertainty

An August executive order restricting bulk-power equipment from 24 countries, including China, adds a further layer of complexity. Implementation rules due in late December will clarify exposure for grid-connected data centers. New restrictive policies under the order could exacerbate existing supply chain deficits, 18% for power transformers and 14% for substation transformers.

Can a sentiment shift solve big problems in the US?

"While we see the potential and likelihood for advancing permitting reform, there is a wider concern over how policy is created, managed, and implemented in the US," said Brown.

Brown noted that economic headwinds could create divergence, with Congress focusing on affordability issues and the Executive branch pursuing foreign policy agendas that create policy confusion and stagnation. Veto power from the White House could derail significant advancements as well.

"The US has had moments of bipartisanship when it needed them most. Twenty years ago, Democrats took Congress amid an unpopular US-led war in the Middle East, resulting in deep partisan gridlock," Brown continued. "But the Energy Independence and Security Act of 2007 raised Corporate Average Fuel Economy (CAFE) standards, set lighting and appliance efficiency standards and expanded renewable fuels with bipartisan support. A similar effort is needed now to build affordable energy at home and for the US to keep global leadership in AI."