The Department of Energy’s Loan Programs Office has a nearly $400 billion authority to offer loans to help projects reach commercialization. Under the Biden administration, the office signed more than 50 deals, doling out over $100 billion to projects, ranging from helping major utilities build transmission to manufacturing electric vehicle wiring components.
Donald Trump’s antipathy toward LPO during his first term — his administration attempted to zero out its budget four years in a row — has been a source of concern for would-be borrowers. They ramped up their timelines in recent months, and many attempted to get final approval on their loans before the second Trump administration took office.
However, the scrutiny on LPO and its deals started several months before the inauguration. In December, Republicans on the Hill sent the office’s then-director Jigar Shah a cease and desist letter, accusing the office of “scrambling to close deals” as part of the “rush-to-green agenda” voters had just rejected. And the DOE inspector general, a Trump nominee, issued a report that urged LPO to immediately suspend “all loan and loan guarantee packages.”
The inspector general’s recommendation turned out to be at the top of Trump’s to-do list when he returned to office earlier this week. Within hours of being sworn in as president for a second term, Trump signed an executive order pausing the disbursement of funds from the IRA and BIL — which includes LPO funds.
The anxiety that pushed so many companies to finalize their LPO deals in the waning days of the Biden administration has certainly come to bear. Legal experts suggest that while the executive order applies the pause to a broad swath of grants, prizes, and awards, it’s the fate of deals signed by LPO that remain at most risk.
“The question mark on LPO is probably the biggest one,” said John Lushetsky, senior vice president of ML Strategies. While the fate of individual projects will depend on a variety of elements including their contract status and even their location, there’s one constant Lushetsky said all LPO applicants (with the exception of fossil fuel projects, as OMB clarified this week) can expect: a major slowdown in the government’s side of the deals.
That’s not to say that LPO will go dormant, though.
LPO only obligated around a quarter of its total authority, so there are still billions of dollars up for grabs, Lushetsky explained.
“Those [remaining] funds could be redirected toward projects that the administration would look more favorably on,” he added, pointing to carbon capture, nuclear, next generation geothermal, and hydropower. LPO’s authority on those funds expires in 2026, Lushetsky noted, “but that’s enough time to do some significant things.”
Conditional commitments
The Trump administration’s DOE will need to “get comfortable” with the Biden administration’s work, especially the conditional commitments, Lushetsky said: “If [a loan] goes to close, it’s going to be their project, no matter who it came in under, who did the conditional commitment.”
Conditional commitments for LPO loans were given a bit of extra protection by the Biden administration before it left office, explained Emily Hammond, an energy and administrative law professor at George Washington University who previously served as deputy general counsel for environment and litigation at DOE. DOE regulations used to allow the Energy Secretary to terminate a conditional agreement for any reason, at any time before the Guarantee Agreement was signed. An update to those regulations in the summer of 2023, though, eliminated that provision.
Changing agency regulations can be complex and time consuming — not as easy as signing a unilateral order. And failing to follow those regulations, Hammond added, could open DOE up to the possibility of lawsuits, though that’s not something Trump has shied away from in the past.
“It may be interesting to see whether the Trump administration decides to explore the limits of that [updated] language,” they said.
Chris Wright, the nominee and likely next DOE lead, may not have that sweeping cancellation authority, but there are still conditions that conditional commitment recipients have to meet in order to finalize their loans. Those include things like environmental reviews and certain financial obligations, and Hammond said that there’s some wiggle room for the Trump administration when it comes to how those regulations are implemented.
For example, while a Biden-era LPO may have granted a slow-moving but promising project an extension on meeting certain obligations, LPO under Trump could decide to use the delay to cancel a loan altogether. And the new administration could also modify requirements.
It may be interesting to see whether the Trump administration decides to explore the limits of that [updated] language.
“One thing I’d like to emphasize is that the regulations themselves don’t contain information, for example, about the Community Benefit Agreements,” Hammond added. Those agreements, designed to ensure projects offer tangible benefits to the communities in which they operate, were mandated in a guidance document that accompanies agency regulations, and such documents can be rescinded much more easily than regulations themselves can be changed.
The other thing Hammond expects may happen is that DOE could end up “simply sitting on those obligations until time runs out to do the final closing.” (Conditional commitments come with an expiration date no more than two years after they are issued.)
As to the types of conditional commitments at most risk, Hammond expects projects related to climate change or environmental justice are likely to have to ensure the entire 90-day pause outlined in Trump’s executive order — and potentially longer delays as well. “For deals in a more preliminary stage of negotiation with the agency…we might see it pause indefinitely or not move forward,” they added.
Finalized loans
The outlook for most projects that signed and sealed deals with LPO before the handover is more promising. That said, Hammond said clean energy and environmental justice projects still face immense uncertainty.
A pause in activity is fairly standard when administrations change over, they explained, so finalized loan recipients would therefore be hard pressed to make a successful legal claim that they’re suffering damages because of that pause. But there will likely be other, less direct, but still harmful, impacts.
“Some of the consequences of a pause may slow projects down, and that can be in terms of reluctance of other investors, reluctance of communities to continue engaging, and an overall climate of concern that these projects can be viable,” Hammond said.
If the Trump administration were to move to cancel finalized loans outright once the pause is up, they’d likely face lawsuits by recipients attempting to enforce those contracts, Hammond said.
But there are ways the administration could hamper those projects even without rescinding the loans. Like conditional commitments, there are milestones that have to be met, and many projects are receiving their loans in tranches, leaving room for discretion on the part of the new administration.
What’s next?
Week one at Trump’s LPO has probably involved sorting through the 200 or so applications still in the pipeline, Hammond said, to see which match the administration’s policy preferences — namely, those useful to fossil fuel or tech company interests. There are likely to be several, they added, if the mix of already approved deals is anything to go by.
In September, for instance, the office finalized a $1.5 billion loan to restart the Palisades Nuclear Plant. (The only loan LPO closed during the first Trump term was an additional $3.7 billion for the Vogtle project, a loan initially signed in 2014 under the Obama administration.)
LPO designated another $162.4 million to help Boulder-based LongPath build a methane emissions monitoring network in oil and gas production basins. And billions of dollars have been promised to transmission projects spanning the breadth of the country.
Those types of projects, Hammond said, are all likely to fare better, and may have more confidence given OMB’s clarification on the reach of the 90-day disbursement pause.
But the broader fate of LPO and its remaining $300 billion-ish in loan authority, Lushetsky said, may become clearer in the coming weeks.
“One of the key things will be if we see an LPO director named in the next 90 days,” he explained. “I’ve heard several names thrown around,” he added, “names I recognize that would be viewed as very encouraging, and some maybe not so encouraging in terms of LPO’s future.” (Lushetsky declined to comment on which names are being discussed.)
That nomination will be crucial to the office’s continued functioning — and to the projects that are already underway
“There’s a significant number of projects closed, and those projects are going to need to be managed,” he explained. “Because of the technical complexity of those projects, there’s really no other agency that is set up to do that.”
Lushetsky said that during the first Trump term there was discussion of moving finalized projects to the purview of another lending agency. That likely wasn’t possible then, and given the current portfolio, is less likely now, he added. “Frankly, the technical expertise to manage those projects is very unique to LPO.”
