On January 27, Matthew Vaeth, Acting Director of the Office of Management and Budget (OMB), issued a sweeping freeze on all federal financial assistance. Specifically, OMB ordered all agencies to “temporarily pause all activities related to obligation or disbursement of all Federal financial assistance,” and specifically identified five Executive Orders which define the Trump Administration’s policy focus.
These E.O.s include Protecting the American People Against Invasion (Jan. 20, 2025), Reevaluating and Realigning United States Foreign Aid (Jan. 20, 2025), Putting America First in International Environmental Agreements (Jan. 20, 2025), Unleashing American Energy (Jan. 20, 2025), Ending Radical and Wasteful Government DEI Programs and Preferencing (Jan. 20, 2025), Defending Women from Gender Ideology Extremism and Restoring Biological Truth to the Federal Government (Jan. 20, 2025), and Enforcing the Hyde Amendment (Jan. 24, 2025). In a footnote, the memorandum clarified that the freeze does not include assistance provided directly to individuals.
Notably, OMB halted both the obligation and disbursement of federal funds, indicating that the freeze applies to both obligated and unobligated funds. Funds that have been authorized and appropriated become obligated when a formal award document is signed and executed. Failure by the government to comply with the terms of these formalized agreements opens the door to legal remedies for damages incurred.
The OMB memo heavily impacts many sectors, ranging from the energy industry to healthcare to educational institutions and includes a vast array of federal grant recipients. In all, the actions could potentially impact as much as $3 trillion in federal funding.
In all, the actions could potentially impact as much as $3 trillion in federal funding.
The two-page memo follows the Unleashing American Energy Executive Order, which ordered federal agencies to temporarily suspend payments tied to domestic infrastructure and renewable energy projects while completing a 90 day review of the projects. Significant funding associated with the Inflation Reduction Act and the Infrastructure Investment and Jobs Act is now halted, putting federal funding and incentives that were believed to be secure, at elevated levels of risk. This includes, but is not limited to, funds for electric vehicle charging stations made available through the National Electric Vehicle Infrastructure Formula Program and the Charging and Fueling Infrastructure Discretionary Grant Program, among others.
In addition to the freeze on funding and agency review, the E.O. directs agencies to “assess whether enforcement discretion of authorities and regulations can be utilized to advance the policy goals” articulated in the order, signaling the aggressive pursuit of clawbacks of funds already disbursed based on strict interpretations of fraud and other provisions governing government grants and contracts.
The lack of clarity on how the funding freeze will be implemented raises concerns about legal challenges and disruption and certainly could lead to delays in clean energy initiatives and projects. Moreover, industry leaders may face increased uncertainty around key business decisions as this action threatens to slow progress across the energy sector.
The pushback against the Trump Administration’s orders already has begun. On January 28, less than 24 hours after the Office of Management and Budget memo was announced, U.S. District Judge Loren AliKhan has imposed an “brief administrative stay” that preserves federal disbursement until 5:00 p.m. on until Monday, February 3. This order was prompted by a lawsuit brought by a group of nonprofit groups that receive federal money.
Additionally, the Attorneys General of New York, California, Massachusetts, Illinois, Rhode Island and New Jersey announced they would seek injunctive relief to stop the freeze from taking effect. State officials in Arizona, Colorado Michigan, and North Carolina also said they plan to take legal action in opposition to the administration’s plan. The group of AGs said the Trump Administration’s actions violate the Constitution’s separation of powers, which grants Congress authority over federal spending. Democrats in Congress are also questioning the legality of the freeze and suggesting that Senate confirmation of Russell Vought, the President’s choice to lead OMB, be delayed.
As of this writing, reports suggest that OMB has withdrawn the OMB Memorandum, which drew considerable backlash. However, as long as the underlying executive orders are in place, there continues to be an executive mandate to freeze funding as defined by the executive orders.
If you are a private company that has received a guaranteed loan, grant, or contract that has been impacted by the FREEZE,
- FIRST - Look to the four corners of the agreement with the Federal government to understand the terms that define available remedies.
- SECOND - Take administrative action as directed by the agreement or other legal provisions (the Code of Federal Regulations, Federal Acquisition Regulations).
- THIRD – Consider challenging it in court, while weighing the political considerations against business realities.
These events are developing rapidly and will continue to move at a fast pace. We will keep you updated on developments.
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