INTRODUCTION
On May 30, 2025, the U.S. Department of Energy (DOE) abruptly rescinded more than $3.7 billion in federal grants allocated to 24 Clean‐Energy Grants and decarbonization demonstration projects. These awards, originally approved under the Bipartisan Infrastructure Law (Public Law 117‐58), funded initiatives ranging from carbon capture and utilization to large‐scale hydrogen production. Energy Secretary Chris Wright justified the cancellations by stating that these projects “failed to advance the energy needs of the American people” and that many lacked sufficient technical readiness or economic viability. Shares of leading clean‐energy firms, including Plug Power and Sunrun, plunged in response, signaling investor anxiety over the executive’s authority to undo congressional appropriations.
At the heart of this controversy lies a conflict among three pillars of U.S. governance: (1) the executive branch’s authority to oversee and reallocate appropriated funds; (2) Congress’s exclusive power of the purse under Article I; and (3) statutory mandates created by recent climate and energy legislation. Specifically, 42 U.S.C. § 18861 instructs DOE’s Office of Clean Energy Demonstrations (OCED) to award grants that “advance carbon management and decarbonization technologies,” subject to criteria like technical merit and commercial feasibility . By unilaterally canceling awards—even those not yet expended—the DOE’s action raises questions under the Impoundment Control Act (ICA) of 1974 (2 U.S.C. § 681 et seq.) and standards for agency decision‐making articulated in the Administrative Procedure Act (APA), 5 U.S.C. § 706.
This article argues that DOE’s rescission exemplifies a broader constitutional tension: executive discretion to guard taxpayer interests versus Congress’s prerogative to determine national energy policy and budget priorities. “The abrupt cancellation of these grants challenges the fundamental separation of powers enshrined in the Constitution,” asserts Harvard Law School’s Professor Richard Lazarus . As litigation looms, affected parties and policymakers will scrutinize whether DOE followed required ICA procedures and provided adequately reasoned explanations under the APA. This decision may set a precedent for how future administrations can—or cannot—alter congressionally authorized climate investments, reshaping the trajectory of U.S. clean‐energy policy.
LEGAL AND HISTORICAL BACKGROUND
Statutory Foundations
Bipartisan Infrastructure Law (BIL) of 2021 (Pub. L. 117‐58): Section 40342 authorized $500 million annually (FY 2022–2026) for DOE’s OCED to demonstrate carbon capture, industrial decarbonization, and energy storage technologies (42 U.S.C. § 18861). Under this statute, DOE must select projects based on technical merit, cost‐effectiveness, and potential for commercialization .
Energy Act of 2020 (Pub. L. 116‐260): Section 3201 authorized $3 billion for long‐duration energy storage demonstrations (42 U.S.C. § 17232), complementing OCED’s mission.
Impoundment Control Act (ICA) of 1974
Congressional Power of the Purse: Article I, Sections 8 and 9 vest Congress with exclusive authority to appropriate federal funds. The ICA, enacted after Train v. City of New York, 420 U.S. 35 (1975), restricts unilateral executive withholding of appropriations. Under 2 U.S.C. § 683, if the president (or an agency) proposes rescission, Congress has 45 days to approve; otherwise, funds remain available .
Administrative Procedure Act (APA)
Arbitrary and Capricious Standard: Under 5 U.S.C. § 706(2)(A), courts reviewing DOE’s decision will require a reasoned explanation showing DOE considered statutory factors—technical readiness, economic viability, public benefit—and did not ignore relevant evidence. “When an agency strays from its own criteria without justification, APA review will likely vacate the action,” observes Professor Cass Sunstein .
Historical Precedent
Reagan Administration (1981–1983): President Ronald Reagan defunded Carter‐era solar research by executive order, reallocating $3 billion in appropriations to defense. Although courts generally deferred, congressional committees later tightened oversight to prevent similar broad rescissions.
Obama Administration (2009–2011): DOE’s Loan Guarantee Program, established under the Energy Policy Act of 2005, faced suspension after Solyndra’s bankruptcy. Courts upheld DOE’s pause, finding that DOE reasonably reevaluated project viability, illustrating how reasoned agency actions can survive APA challenges .
Relevant Case Law
Train v. City of New York, 420 U.S. 35 (1975): Held that the president cannot refuse to spend congressionally appropriated funds when statute dictates expenditure.
Federal Communications Commission v. Fox Television Stations, Inc., 566 U.S. 502 (2012): Articulated that agencies must provide detailed reasoning when changing policy, a principle applicable to grant rescissions.
Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984): Established that courts will defer to reasonable agency interpretations of ambiguous statutes; however, if Congress’s intent is clear, deference is limited. “Chevron deference may not protect DOE if § 18861 plainly prohibits midstream rescission,” explains Yale’s Adrian Vermeule .
CASE STATUS AND LEGAL PROCEEDINGS
DOE’s Abrupt Rescission
On May 30, 2025, DOE issued a brief announcement canceling awards issued between November 2024 and January 2025, citing that “nearly 70 percent of the $3.7 billion remained unspent,” which DOE claims facilitated quick cancellation without major contractual obligations . Affected projects included carbon capture demonstrations by Chevron and Eastman Chemical, as well as hydrogen pilot plants by Plug Power. DOE asserts that many lacked sufficient technical milestones or realistic commercialization plans.
Administrative Appeals and Potential APA Litigation
Internal Appeals: Grantees have 30 days to file administrative protests within DOE, arguing DOE’s decision lacked statutory basis or adequate explanation. They may present updated technical data and cost analyses, demanding DOE reevaluate under 42 U.S.C. § 18861 criteria.
APA Suits: If internal remedies fail, grantees can seek judicial review in federal district court. They will likely claim DOE’s action is “arbitrary and capricious” (5 U.S.C. § 706(2)(A)), pointing to DOE’s sparse rationale and absence of documented technical deficiencies. “When an agency fails to tie its conclusions to concrete evidence, courts will likely vacate the rescission,” opines Professor Susan Dudley .
Impoundment Control Act Claims
Several recipients will argue DOE violated ICA by failing to propose rescission to Congress under 2 U.S.C. § 683. Under ICA, a “rescission proposal” must include specific funds, justifications, and await congressional action; unilateral cancellation without congressional approval could be illegal.
Congressional Oversight
Representative Marcy Kaptur (D-Ohio), ranking member of the House Appropriations Subcommittee on Energy, has announced hearings to examine whether DOE complied with ICA procedures and if any contracts remained binding . Senate Environment and Public Works Chair John Barrasso (R-Wyo.) has defended DOE, asserting executive responsibility to prevent wasteful spending.
Amicus Briefs and GAO Review
Environmental organizations (e.g., Sierra Club, NRDC) plan to file amicus briefs emphasizing statutory intent to decarbonize. Conversely, conservative legal scholars (e.g., Ilya Shapiro, Cato Institute) will argue DOE’s fiduciary duty to taxpayers. The Government Accountability Office (GAO) is evaluating DOE’s adherence to ICA; a finding that DOE neglected required procedures could strengthen litigants’ cases.
VIEWPOINTS AND COMMENTARY
Progressive / Liberal Perspectives
Progressive voices argue that rescinding grants undermines U.S. climate commitments and disregards statutory mandates. “Cutting $3.7 billion in decarbonization funding is economically and morally indefensible,” asserts Professor Jack Lienke of UCLA Law, emphasizing that many projects were in nascent stages poised for regional economic revitalization . These awardees had already expended resources—hiring engineers, conducting site surveys—creating reliance interests. Critics contend DOE’s opaque criteria violated APA’s requirement for reasoned analysis. Senator Elizabeth Warren (D-Mass.) condemned the cancellations as “jeopardizing working-class jobs in coal country turned hydrogen hubs” . Environmental justice advocates highlight that projects targeted polluted regions (e.g., Appalachia) and that rescinding funds stalls local efforts to reduce air toxins and create green jobs. The Brennan Center for Justice criticized DOE for “defying congressional intent” and urged immediate restoration of funding to prevent further erosion of public trust .
Conservative / Right-Leaning Perspectives
Conservative analysts argue that DOE’s action reflects prudent stewardship of taxpayer dollars. “It is the executive’s duty to halt funding for projects demonstrably lacking commercial prospects,” states Ilya Shapiro of the Cato Institute, asserting that many awardees failed to meet rigorous cost-benefit benchmarks . Energy Secretary Chris Wright defended the decision: “We cannot prop up unviable projects at the expense of Americans’ energy security and fiscal responsibility” . Conservative think tanks, such as Heritage Foundation, argue that market forces—not government grants—should drive innovation. Senator John Barrasso (R-Wyo.) asserted that the Bipartisan Infrastructure Law’s funds should be reallocated to proven technologies like natural gas and nuclear to ensure energy reliability . National security proponents emphasize that excessive reliance on untested clean technologies could jeopardize domestic supply chains during geopolitical disruptions. “Affordable, reliable energy is a national security imperative,” noted former Secretary Rick Perry .
COMPARABLE OR HISTORICAL CASES
Reagan Administration’s Defunding of Carter-Era Clean-Energy Initiatives (1981–1982)
Background: On March 18, 1981, President Ronald Reagan issued Executive Order 12227, ending funding for the Solar Energy Research Institute (established by President Carter), redirecting $3 billion toward defense and fossil-fuel research.
Legal and Policy Reflection: Congress did not formally challenge these cuts, but subsequently strengthened oversight over DOE’s budget to prevent blanket defunding. “Reagan’s disinvestment illustrated how partisan shifts can abruptly derail research pipelines,” notes historian William Novak . Despite legal challenges under the APA, courts deferred to the president’s policy judgment due to clear statutory termination dates.
Obama Administration’s Suspension of Loan Guarantee Program (2011)
Background: Following Solyndra’s 2011 bankruptcy, DOE paused new loan guarantees under the Energy Policy Act of 2005 while reassessing credit risk.
Judicial Response: Courts upheld DOE’s suspension, provided DOE followed notice-and-comment and offered reasoned justification, distinguishing it from outright rescission. “Courts recognized DOE’s need to protect taxpayers after Solyndra, provided due process was observed,” writes Professor Jody Freeman . Unlike the 2025 case, DOE did not cancel existing loan commitments, merely paused new commitments pending updated criteria.
Trump Administration’s 2018 Withdrawal from Paris Agreement vs. 2025 Grant Cancellations
Paris Withdrawal: Although pulling out of the Paris Agreement (which was not a binding treaty) was legally permissible under U.S. law, critics argued it undermined international credibility.
Relevance to Grant Cancellations: With appropriations, Congress’s intent is binding; withdrawal from nonbinding accords does not conflict with statutes, whereas rescinding appropriated funds without congressional approval may contravene ICA. “The Paris withdrawal severed diplomatic ties; this rescission severs statutory obligations,” observes constitutional scholar Bruce Ackerman .
INS v. Chadha, 462 U.S. 919 (1983)
Relevance: Chadha invalidated legislative vetoes as violating bicameralism and presentment. Analogously, DOE’s unilateral rescission without congressional concurrence may intrude upon legislative prerogatives, raising constitutional separation-of-powers issues.
Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984)
Relevance: Chevron deference requires courts to accept reasonable agency interpretations when statutes are ambiguous. The question in 2025 litigation will be whether 42 U.S.C. § 18861 unambiguously prohibits midstream rescissions. “If Congress’s intent is clear that funds must be spent, Chevron won’t shield DOE,” notes Yale’s Adrian Vermeule .
POLICY IMPLICATIONS AND FORECASTING
Short-Term Effects
Market Volatility: Within 24 hours of DOE’s announcement, the Clean Energy Select Sector SPDR ETF (XLB) fell by 8 percent, reflecting investor uncertainty about future federal backing. Bloomberg Intelligence projects continued volatility as stakeholders reassess risk profiles for demonstration-stage projects .
Employment Disruptions: The cancellations imperil an estimated 4,500 direct construction and engineering jobs tied to projects by Chevron, Heidelberg Materials, and Eastman Chemical. State governments that co-funded pilot plants may face budget shortfalls, potentially triggering local bond defaults.
Long-Term Consequences
Innovation Chilling Effect: Emerging‐technology firms rely on DOE grants to achieve scale. By sending a message that funding can be rescinded midstream, private investors may demand higher equity stakes or shorter timelines, slowing commercialization. “The pivot undermines confidence in federal-industry partnerships, delaying deployment of crucial decarbonization tools,” warns the Brookings Institution’s Energy Security Initiative .
Energy Strategy Reorientation: Budget planners may reallocate funds toward technology-neutral programs or proven incumbents (e.g., natural gas, nuclear). Consequently, emerging clean technologies—advanced nuclear, long-duration storage—may struggle to secure demonstration dollars.
Legislative Responses
Tighter Appropriation Language: In the 2026 appropriations cycle, Congress may include riders ensuring that funds “shall remain available until expended” and cannot be rescinded outside specific conditions.
Stronger ICA Enforcement: Lawmakers could clarify what constitutes a valid “rescission proposal,” shorten congressional review windows, or require expedited legislative action on deferral notices. Senators Susan Collins (R-Maine) and Joe Manchin (D-W.Va.) have both signaled interest in crafting bipartisan language to protect ongoing clean-energy demonstrations.
Judicial Projections
Preliminary Injunctions: Courts may grant temporary relief restoring funds if DOE’s compliance with ICA is in doubt.
Statutory Interpretation: If 42 U.S.C. § 18861 is ambiguous about rescission authority, courts could defer to DOE under Chevron. If unambiguous, rescission may be vacated for exceeding statutory scope. “Judicial determination will hinge on how clearly Congress intended those funds to be irrevocable until project completion,” predicts Stanford’s Deborah Rhode .
International and Societal Impacts
Credibility in Climate Diplomacy: The U.S. has reentered discussions on a global carbon markets framework; rescinding domestic demonstration funding may weaken American bargaining power. “Allies in Europe and Asia will question whether U.S. climate pledges translate into action,” cautions IEA Executive Director Fatih Birol .
Public Trust and Political Polarization: Partisan divides over climate policy may deepen as constituents perceive energy policy as a zero-sum contest. This could impede bipartisan coalitions needed for stable, long-term clean-energy investment.
CONCLUSION
The DOE’s decision to cancel $3.7 billion in clean-energy demonstration grants encapsulates a pivotal struggle between executive oversight and congressional authority. By interpreting 42 U.S.C. § 18861 to permit rescission of unspent funds, DOE asserts its duty to protect taxpayers from unviable projects. Yet, absent a clear rescission proposal under the Impoundment Control Act, the action risks transgressing Congress’s exclusive power of the purse. “This abrupt reversal reveals how tenuous federal support can be for nascent clean-energy technologies,” notes Duke Law’s John Harrison .
From a legal standpoint, affected parties will challenge DOE under the APA’s arbitrary and capricious standard and ICA’s procedural requirements. If courts find DOE failed to provide reasoned explanations or obtain congressional consent, rescission decisions may be vacated, reaffirming Congress’s legislative primacy over appropriations. Conversely, a Chevron-style deference to DOE’s interpretation could embolden future administrations to revoke appropriations at will, subject only to minimal judicial review.
Politically, the rescission underscores deep partisan discord over the pace and scope of America’s energy transition. Progressives decry the move as a retreat from climate commitments and social equity goals, while conservatives champion it as fiscal prudence and a recalibration toward energy security. Should Congress act swiftly to enshrine stricter appropriation languages, it may curb executive overreach. Yet, absent such safeguards, the balance of power will tilt toward an emboldened executive capable of reshaping policy by rescinding funds midstream.
“In the end, this episode may redefine the contours of separation of powers over federal spending and climate policy,” observes UC Berkeley’s Erwin Chemerinsky . As stakeholders navigate litigation and legislative debates, a central question emerges: Will future climate progress hinge on enduring statutory commitments, or remain at the mercy of shifting executive priorities?
For Further Reading
- Secretary Wright Announces Termination of 24 Projects, Generating Over $3 Billion in Taxpayer Savings
- Trump Administration Cancels $3.7 Billion in Clean Energy Projects, Ending Ambitious Industrial Decarbonization Efforts
- Energy Department Slashes $3.7B in Funding for Clean Energy Projects
- Kaptur Condemns $3.7 Billion In DOE Cuts To American Manufacturing Nationwide
- U.S. cancels $3.7 billion for clean energy, including $331 million Exxon grant
