On January 20, 2025, President Donald Trump signed the Unleashing American Energy Executive Order (“Energy EO”) and the Reevaluating and Realigning United States Foreign Aid Executive Order (“Foreign Aid EO”), both portend a shift in federal funding priorities and raise questions about the willingness to continue to fund prior government commitments.
Unleashing American Energy EO
The stated objective of the Energy EO is to prioritize U.S. traditional energy production and further consumer choice by removing regulatory barriers and eliminate subsidies for electric vehicles. The Energy EO, in section 7, titled “Terminating the Green New Deal,” directs federal agencies to immediately halt the disbursement of funds allocated through the Inflation Reduction Act of 2022 (“IRA,” Public Law 117-169) and the Infrastructure Investment and Jobs Act (“IIJA,” Public Law 117-58), including, but not limited to funds for electric vehicle charging stations provided through the National Electric Vehicle Infrastructure Formula Program and the Charging and Fueling Infrastructure Discretionary Grant Program.
The Energy EO directs agencies to review their processes, policies, and programs for issuing grants, loans, contracts, and other financial disbursements of such appropriated funds to ensure the use of such funds aligns with the law and the policy outlined in Section 2 of the Energy EO. Additionally, agency heads must submit a report to the Director of the National Economic Council and the Director of the Office of Management and Budget (“OMB”) within 90 days of January 20th (by April 20, 2025), detailing a review of their findings and recommendations to more closely adhere to the Energy EO’s objectives. Furthermore, the Energy EO prohibits agencies from disbursing affected funds until the Assistant to the President for Economic Policy and the Director of OMB determine such disbursements are consistent with the review recommendations that the agencies chose to adopt.
While the Energy EO as drafted appeared to apply to all appropriations under the IRA and the IIJA, in a January 21 Memorandum to the Heads of Departments and Agencies from the Acting Director of OMB, the Acting Director clarified that the directive to immediately pause disbursement of funds applies only to funds supporting programs, projects, or activities that may be implicated by the policy established in Section 2 of the Energy EO. Section 2 of the Energy EO sets out several policy objectives relating to , namely to unleash the development of affordable and reliable energy and natural resource production in the United States, as well as policy objectives to “eliminate the ‘electric vehicle (EV) mandate’” and to “safeguard the American people’s freedom to choose . . . goods and appliances.” The Acting Director also affirmed that the January 21 interpretation is consistent with the heading of the section, “Terminating the Green New Deal” and its reference to the “law and the policy outlined in section 2 of th[e] order.”1
While the Energy EO provides for a “pause,” the legal authority of the Trump Administration to permanently halt the disbursement of funds will depend on whether a program or project is funded through a loan guarantee agreement, cooperative agreement, grant, or other transaction agreement, and the terms of those agreements. In some cases, such as “financial assistance” agreements, agencies have the authority to terminate an agreement pursuant to the terms and conditions of the federal award, including, to the extent authorized by law, if an award no longer effectuates the program goals or agency priorities. See 2 CFR 200.340(a)(4). In such cases, the agency may terminate contracts and other transaction agreements for convenience but would be obligated to pay for work performed in accordance with an approved budget. However, where the agency entered into a loan guarantee agreement, the agreement should be binding and should obligate the agency to fund if the borrower satisfies any conditions in the loan guarantee agreement.
If a current agreement is terminated, the remaining funding could be used for other projects under the IRA or IIJA or the Administration may attempt to refuse to obligate the funds, resulting in a potential dispute under the Impoundment Control Act of 1974, which requires the President to obtain approval of Congress before rescinding funds. President Trump is expected to attempt to impound funds for programs that he opposes and, if so, we anticipate litigation over the constitutionality of the Impoundment Control Act
Realigning United States Foreign Aid EO
Similarly, President Trump’s Foreign Aid EO immediately halts the disbursement of funds related foreign assistance that is “not fully aligned with the foreign policy of the United States.” Unlike the Energy EO, the Foreign Aid EO does not set out with any particularity the contours of those policies. Section 3 of the Foreign Aid EO calls for a 90-day pause in such disbursements to allow for an “assessment of programmatic efficiencies and consistency with United States foreign policy.” The Foreign Aid EO pauses all “new obligations and disbursements of development assistance funds to foreign countries and implementing non-governmental organizations, international organizations, and contractors” for the next 90 days.
Within the 90-day period, department and agency heads are required to conduct a review of their foreign assistance program, using guidance from the Secretary of State (in consultation with the Director of OMB). Together, the department and agency heads and the Secretary of State will decide within 90 days whether to continue dispensing foreign aid as previously conducted, modify the parameters of the foreign aid, or cease the foreign aid program entirely. Once this determination is made, the assistance program, modified or otherwise, will resume (or be canceled). Moving forward, under the Foreign Aid EO, new foreign assistance programs must be approved by the Secretary of State (in consultation with the Director of OMB).
The Foreign Aid EO allows for exceptions to the 90-day pause in foreign aid distributions in the discretion of the Secretary of State. As with the federal funding affected by the Energy EO, a decision not to provide foreign aid under the Foreign Aid EO where a binding loan or other assistance agreement is in place is apt to result in legal challenges.
1 The funding pause likely does not apply to various tax credits enacted under the IRA, such as the consumer credits for EV purchases under Section 30D, as tax credits, generally speaking, are not “appropriated funds.”
