News
January 29, 2025

Trump's Funding Freeze Threatens Infrastructure and Climate Projects

Caroline Raffetto

New executive orders issued by President Donald Trump could significantly disrupt the implementation of infrastructure and environmental projects, as funding for the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) is put on hold, legal experts say. Last week, Trump directed federal agencies to cease disbursing funding for these acts, including money Congress had already authorized. This move has thrown numerous climate and infrastructure projects into uncertainty, with potential delays and even cancellations looming.

Trump’s Jan. 20 “Unleashing American Energy” order, which calls for a pause and review of funding processes, has been flagged by Washington D.C.-based law firm Crowell as having “significant implications for the implementation of the IIJA and IRA.” The freeze could lead to project delays, terminations, and broader economic uncertainty. According to Crowell, the full impact of this freeze may not be understood for months, but the mere uncertainty alone is likely to disrupt ongoing projects.

"Whether the pause is temporary or becomes permanent, this action potentially could halt billions of dollars in obligated funding for infrastructure projects that already are underway, including those already under construction," Crowell reported.

Funding Freeze Leads to Further Confusion

Compounding the confusion, the Office of Management and Budget (OMB) issued an internal memo on Jan. 23, ordering a halt on all federal grants and loans, effective by 5 p.m. the next day. The memo indicated that federal agencies must pause funding and activities related to grants, loans, and contracts affected by Trump’s executive orders, including those linked to “Green New Deal” projects and other areas like foreign aid, diversity initiatives, and environmental programs.

Trump freezes funding under Inflation ...

In response, several nonprofit groups and a small business organization have filed a lawsuit seeking to block the funding freeze, according to CNBC. The attorneys general of New York, California, Illinois, Massachusetts, New Jersey, and Rhode Island are also preparing an announcement related to the freeze.

Scope and Implications of Trump's Orders

Legal experts, including Daniel Ramish, partner at Haynes Boone, have noted that the full scope and effect of Trump’s orders remain unclear. The orders are expected to have broad consequences for federal contracts, grants, and assistance agreements. "Contractors and assistance recipients should follow these fast-moving actions closely and consider how their awards may be affected," said Ramish.

The key section of Trump’s Unleashing American Energy order (Section 7) directs federal agencies to freeze disbursements under the IIJA and IRA while they review their funding processes and assess alignment with the new administration’s energy goals. Agencies have been given 90 days to report how the freeze aligns with these objectives.

However, many aspects of the executive order remain unclear. Section 2 of the order uses broad language to direct actions, covering areas such as energy exploration and eliminating electric vehicle mandates, but it does not explicitly list which portions of the two laws should be paused. For example, the freeze may apply to funds allocated for electric vehicle (EV) charging stations or other “green” infrastructure programs.

Legal Challenges and Potential Impact on Projects

The uncertainty surrounding these orders is exacerbated by the lack of clear definitions, especially when it comes to traditional infrastructure like roads, bridges, and broadband, which may be affected despite not being directly listed in the order. While some $294 billion in IIJA funds remain unallocated, it’s unclear whether the freeze will also impact funds already legally committed under contract.

Trump and OMB Director Russell Vought have argued that the president has the power to cancel congressionally authorized spending, a controversial stance that runs counter to the prevailing interpretation of federal law, which prohibits unilateral cancellations of congressional funds. Experts expect this position to be tested in the courts.

The freeze could have immediate and far-reaching consequences, potentially delaying or canceling vital projects. Crowell suggests that disruptions in cash flow could create delays, raise legal and contractual issues, and affect contractors and suppliers engaged on IIJA and IRA-funded projects.

Uncertainty for Contractors and the Future of Federal Infrastructure Projects

Despite the ambiguity surrounding the executive orders, Ramish predicts that Trump’s deregulatory agenda could benefit federal construction projects in some instances, particularly by eliminating environmental review requirements under the National Environmental Policy Act (NEPA). However, he also warns that contracts and grants not aligned with the administration’s new priorities may be terminated.

As the legal and political landscape continues to evolve, infrastructure projects funded under the IIJA and IRA could face a lengthy period of uncertainty. Contractors, grantees, and other stakeholders in the federal project ecosystem will need to carefully monitor developments to understand how the freeze may impact their operations and financial commitments.

News
January 29, 2025

Trump's Funding Freeze Threatens Infrastructure and Climate Projects

Caroline Raffetto
Construction Industry
Washington

New executive orders issued by President Donald Trump could significantly disrupt the implementation of infrastructure and environmental projects, as funding for the Infrastructure Investment and Jobs Act (IIJA) and Inflation Reduction Act (IRA) is put on hold, legal experts say. Last week, Trump directed federal agencies to cease disbursing funding for these acts, including money Congress had already authorized. This move has thrown numerous climate and infrastructure projects into uncertainty, with potential delays and even cancellations looming.

Trump’s Jan. 20 “Unleashing American Energy” order, which calls for a pause and review of funding processes, has been flagged by Washington D.C.-based law firm Crowell as having “significant implications for the implementation of the IIJA and IRA.” The freeze could lead to project delays, terminations, and broader economic uncertainty. According to Crowell, the full impact of this freeze may not be understood for months, but the mere uncertainty alone is likely to disrupt ongoing projects.

"Whether the pause is temporary or becomes permanent, this action potentially could halt billions of dollars in obligated funding for infrastructure projects that already are underway, including those already under construction," Crowell reported.

Funding Freeze Leads to Further Confusion

Compounding the confusion, the Office of Management and Budget (OMB) issued an internal memo on Jan. 23, ordering a halt on all federal grants and loans, effective by 5 p.m. the next day. The memo indicated that federal agencies must pause funding and activities related to grants, loans, and contracts affected by Trump’s executive orders, including those linked to “Green New Deal” projects and other areas like foreign aid, diversity initiatives, and environmental programs.

Trump freezes funding under Inflation ...

In response, several nonprofit groups and a small business organization have filed a lawsuit seeking to block the funding freeze, according to CNBC. The attorneys general of New York, California, Illinois, Massachusetts, New Jersey, and Rhode Island are also preparing an announcement related to the freeze.

Scope and Implications of Trump's Orders

Legal experts, including Daniel Ramish, partner at Haynes Boone, have noted that the full scope and effect of Trump’s orders remain unclear. The orders are expected to have broad consequences for federal contracts, grants, and assistance agreements. "Contractors and assistance recipients should follow these fast-moving actions closely and consider how their awards may be affected," said Ramish.

The key section of Trump’s Unleashing American Energy order (Section 7) directs federal agencies to freeze disbursements under the IIJA and IRA while they review their funding processes and assess alignment with the new administration’s energy goals. Agencies have been given 90 days to report how the freeze aligns with these objectives.

However, many aspects of the executive order remain unclear. Section 2 of the order uses broad language to direct actions, covering areas such as energy exploration and eliminating electric vehicle mandates, but it does not explicitly list which portions of the two laws should be paused. For example, the freeze may apply to funds allocated for electric vehicle (EV) charging stations or other “green” infrastructure programs.

Legal Challenges and Potential Impact on Projects

The uncertainty surrounding these orders is exacerbated by the lack of clear definitions, especially when it comes to traditional infrastructure like roads, bridges, and broadband, which may be affected despite not being directly listed in the order. While some $294 billion in IIJA funds remain unallocated, it’s unclear whether the freeze will also impact funds already legally committed under contract.

Trump and OMB Director Russell Vought have argued that the president has the power to cancel congressionally authorized spending, a controversial stance that runs counter to the prevailing interpretation of federal law, which prohibits unilateral cancellations of congressional funds. Experts expect this position to be tested in the courts.

The freeze could have immediate and far-reaching consequences, potentially delaying or canceling vital projects. Crowell suggests that disruptions in cash flow could create delays, raise legal and contractual issues, and affect contractors and suppliers engaged on IIJA and IRA-funded projects.

Uncertainty for Contractors and the Future of Federal Infrastructure Projects

Despite the ambiguity surrounding the executive orders, Ramish predicts that Trump’s deregulatory agenda could benefit federal construction projects in some instances, particularly by eliminating environmental review requirements under the National Environmental Policy Act (NEPA). However, he also warns that contracts and grants not aligned with the administration’s new priorities may be terminated.

As the legal and political landscape continues to evolve, infrastructure projects funded under the IIJA and IRA could face a lengthy period of uncertainty. Contractors, grantees, and other stakeholders in the federal project ecosystem will need to carefully monitor developments to understand how the freeze may impact their operations and financial commitments.