New Executive Actions Potentially Impact Renewable Energy Projects

Among the wave of executive actions issued upon President Trump taking office again, some executive orders and memorandums may affect portions of the burgeoning renewable energy sector. The renewable energy sector has been experiencing a surge of growth after the passage of the Inflation Reduction Act of 2022 (the “IRA”) under the prior administration. Below are some potential impacts to renewable energy projects.

1. Renewable Energy [1]

The executive order titled “Unleashing American Energy” requires, among other things, all agencies to “pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 (Public Law 117-169) or the Infrastructure Investment and Jobs Act (Public Law 117-58).” The executive order also requires agencies to review “their processes, policies, and programs for issuing grants, loans, contracts, or any other financial disbursements” with respect to appropriated funds for consistency with the law and the policy outlined in the executive order. 

The use of “appropriation” will be subject to interpretation and require further guidance, but this executive order likely would not pick up the provisions of the IRA that provide renewable tax credits for the development of new or repowered renewable energy projects pursuant to Sections 45, 45Y, 48 and 48E of the Code as they would not be considered an appropriation. In general, the U.S. House of Representatives defines an “appropriation” as: “[A] law of Congress that provides an agency with budget authority. An appropriation allows the agency to incur obligations and to make payments from the U.S. Treasury for specified purposes. Appropriations are definite (a specific sum of money) or indefinite (an amount for “such sums as may be necessary”).[2] These IRA-related tax credits were not designated as being subject to appropriations in their enactment language.[3] Furthermore, a wholesale repeal of the renewable tax credits of the IRA would require Congressional action.

With respect to renewable energy projects, this executive order seems to be primarily restricting certain Department of Energy loan and grant programs for the development of these types of projects, in particular with respect to entrance by the Department of Energy into any new loan or grant agreements or loan or grant agreements yet to be fully disbursed under the IRA.

One question is whether Section 6417 “direct pay” would be affected by this executive order. The direct pay amount, which is treated as a “payment against tax” under Section 6417, was added in Section 13801 of Part 9 of the IRA and is under the section of IRA titled “Credit Monetization and Appropriations.” However, similar to the IRA-related tax credit provisions discussed above and unlike other sections of IRA Part 9, Section 13801 does not have an appropriations restriction. Further guidance would be required to conclusively answer the question.

This executive order also revoked a number of Biden-era executive orders, including Executive Order 14082 of September 12, 2022 (Implementation of the Energy and Infrastructure Provisions of the Inflation Reduction Act of 2022).[4]

2. Wind Projects[5]

The memorandum titled “Temporary Withdrawal of All Areas on the Outer Continental Shelf from Offshore Wind Leasing and Review of the Federal Government’s Leasing and Permitting Practices for Wind Projects” restricts wind energy leasing in all areas within the Offshore Continental Shelf (OCS) as defined in Section 2 of the Outer Continental Shelf Lands Act, 43 U.S.C. 1331.[6] The memorandum goes further to restrict the Secretary of the Interior, the Secretary of Agriculture, the Secretary of Energy, the Administrator of the Environmental Protection Agency and the heads of all other relevant agencies from issuing “new or renewed approvals, rights of way, permits, leases, or loans for onshore or offshore wind projects pending the completion of a comprehensive assessment and review of Federal wind leasing and permitting practices” until the Secretary of the Interior has lead an assessment on the environmental impact of onshore and offshore wind projects upon wildlife.[7] The memorandum also specifically provides a temporary moratorium on Magic Valley Energy, LLC with respect to the  Record of Decision (ROD) issued by the Bureau of Land Management on December 5, 2024, with respect to the Lava Ridge Wind Project Final Environmental Impact Statement (EIS), as approved by the Department of the Interior. The Lava Ridge Wind Project was planned to be one of the largest wind projects in the country and was to be built on Bureau of Land Management public lands.[8]

The restriction on issuance of new federal approvals, rights of way, permits, leases or loans for onshore or offshore wind projects is more sweeping on its face than was expected. Read literally, it would pick up certain permitting matters that have otherwise been routine or perfunctory. At a minimum, it seems clear that wind projects on federal land or that would require a grant of a federal right of way would be halted until the Secretary of the Interior’s assessment is complete. Investors in onshore wind projects not located on federal lands (or requiring federal rights of way) and which have not been fully permitted — or which have upcoming permit renewals — would be best served by reviewing their particular facts and circumstances in light of the Executive Order. We will continue to monitor for developments with respect to the executive actions that may impact renewable energy projects.