Taken together, the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act of 2022 (IRA) provided an unprecedented level of financial assistance to climate change responses of every stripe, including battery manufacture, critical minerals development, carbon capture, methane control, and industrial decarbonization. Monthly, if not weekly, since 2022, the U.S. Department of Energy (DOE) has issued funding opportunities and made awards to competitively selected projects that not only advanced the Biden Administration climate goals, but also promoted U.S. clean energy innovation and domestic manufacturing. Additional IRA funding supports the DOE loan guarantee program. What will happen to those awards and loan guarantees under the Trump Administration?
We have previously noted that at least some of the IRA tax credits are at risk of congressional repeal. Likewise, Congress may choose to de-obligate the funds to support unexecuted financial assistance awards. However, executed financial assistance agreements and loan guarantees are likely safe even in the face of new policy priorities coming from the Trump Administration.
IRA-funded loan guarantees may face a brighter future than under the first Trump Administration
During the first Trump term, although it was funded, the DOE Loan Programs Office did not close a single loan guarantee. Currently pending applications that do not achieve closing before Inauguration Day could become dead letters if history repeats itself. However, there are reasons to think the story could be different this time.
The authorized purposes for DOE loan guarantees now extend beyond the original Innovative clean energy and advanced vehicle portfolios, which are unlikely to be priorities in the next few years. The LPO is also now authorized to extend guarantees to critical minerals projects that have both energy and national security value; reinvestment in shut down coal plants and aging electricity transmission infrastructure; and CO2 transport projects. Those kinds of projects, which support regions and sectors of the energy industry that have been friendly to Mr. Trump might well receive a favorable look. However, proponents will likely have to speak up early, to guard against action in the Congress to simply eliminate the program as just another part of the “Green New Deal” that President-elect Trump campaigned against.
Completed IRA- and IIJA-funded financial assistance awards are probably safe
DOE has awarded tens of billions of dollars in federal funding to a wide range of decarbonization initiatives. The typical termination language in such agreements gives the Government seemingly broad termination rights, e.g., if the award “no longer effectuates program goals or agency priorities.” However, case law suggests that determining what the program goals are requires reference to the underlying appropriations statute, not a general reconsideration of what the agency wants to do. The IRA and the IIJA were specific about the purposes of the awards that they authorized, and DOE has faithfully followed those instructions. Thus, an attempt by new agency personnel to walk away from executed agreements seems destined to fail.
Unexecuted awards and pending funding opportunities are at risk
Immediately following inauguration of the new President, there is likely to be a period of inaction on financial assistance awards that are in negotiation and on announced funding opportunities. DOE career staff can be expected to await direction from the new leadership. However, inaction cannot continue indefinitely without legal challenge from those who hope to benefit from those programs. On the other hand, the new Republican-controlled Congress may well elect to de-obligate funds previously appropriated to support Biden Administration initiatives in order to make room in the budget for new priorities, including tax cuts.
Applicants and aspirants for the remaining funding under the IRA and the IIJA who have not been selected for award should assume sharply reduced prospects of success. Those selected for award who have not completed the negotiation process should prioritize completing their negotiations, as the current DOE leadership is undoubtedly doing.
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