If carried out as envisioned, the Paris Agreement on climate change signed in April 2016 will have enormous environmental and social effects. It will also shake the oil and gas industries to their foundations and transform their business models. In the U.S., the Paris Agreement will become the legitimizing framework for a national energy policy, based on climate peril, not security of supply. Given the prospects, my paper sketches a scenario in which carbon-intensive oil and gas suppliers evolve from their current form into highly-regulated fuel utility businesses with significant accountability for climate action at regional and city levels. The utility model would largely replace familiar, integrated oil and gas companies with a new hybrid form.

The Paris Agreement will reinforce de facto actions towards a national energy policy such as the coal-leasing moratorium on federal lands, which some observers see as a “fundamental shift [to] curbing the supply of fossil fuels available for burning rather than just working to reduce overall demand.” Within the context of U.S. securities law, the Agreement will require fossil-energy suppliers to be forthcoming about the potential impact of climate actions on their business. These are signposts that oil and gas suppliers will face an increasingly restrictive, if not hostile, business environment. The regional implications of the Paris Agreement will also force fossil-energy companies away from their familiar scale and autonomy towards a regional and urban model attuned to locally appropriate energy use.

The uncertain path ahead for U.S. coal companies need not be the one that oil and gas businesses will inevitably follow. Avoiding a similar fate, however, will require strategic foresight that recognizes the Paris Agreement as a catalyst to identify and test early steps to a new, energy-utility model. The convergence of forces on oil and gas companies point in this direction — away from defending business as usual and towards corporate transformation. Oil and gas suppliers at mid-21st century won’t become the local electric company — but they will be regulated and managed like one.