Analysis: Recent executive orders creating chaos for companies operating under the IRA and the IIJA

Glenn Legge, Endeavor Management

Over the last two years, a vast number of American companies invested significant financial and commercial assets to achieve various goals set by the federal government. These goals ranged from increasing offshore oil and gas production and effectively decommissioning end-of-life offshore oil and gas structures, to embracing energy transition projects for the benefit of our environment.

To achieve these goals, Congress passed legislation to provide substantial financial support and tax incentives in an effort to generate corporate participation and investment opportunities.

IRA and IIJA

The Infrastructure Investment and Jobs Act (IIJA), also known as the Bipartisan Infrastructure Law (BIL), and The Inflation Reduction Act (IRA) were federal statutes passed by the 117th US Congress in November 2021 and August 2022, respectively. 

The IRA and IIJA incentivized existing offshore oil and gas activities, as well as offshore energy transition projects, which included:

• Reinstating offshore oil and gas Lease Sale 257.
• Requiring oil and gas Lease Sales 258, 259 and 261 to be held within a limited period of time.
• Increasing the offshore oil and gas royalty minimum of 16.66% to 18.75%
• Requiring an area wide oil and gas lease sale of 60 million acres, prior to issuing offshore wind leases.

These statutes also provided financial support to accelerate development of energy transition and clean energy technologies. These incentives included:

• Substantial tax credits for CO₂ injection/storage (45Q credits) and for Green Hydrogen production (45V credits) generated in both onshore and offshore locations.
• Financial support to accelerate innovative development of clean energy technologies ranging from CO₂ sequestration, green hydrogen and wind.
• Extension of Production Tax Credits for offshore wind.

Even before the IRA was passed, the National Ocean Industries Association acknowledged that the upcoming legislation would establish “a framework for continued development of US offshore oil and gas; mechanisms to advance offshore wind; and incentives to spur offshore carbon sequestration innovation.” In particular, the organization noted that the IRA supported a number of NOIA priorities that would strengthen the outlook for the American offshore energy industry, including offshore oil and gas lease sales; offshore wind tax credits; and carbon capture and storage tax incentives.

Following the passage of the IRA and IIJA, the US General Accounting Office (GAO) issued a report concerning the energy industry’s failure to timely decommission and abandon of offshore oil and gas structures in the Gulf of Mexico. The GAO report analyzed various significant problems that had not been addressed by at least four previous administrations:

• The failure to timely decommission thousands of offshore oil and gas facilities between 2010-2022, which created a $40-70 billion obligation that could fall on American taxpayers (GAO Report 24-106229).
• Determining whether the offshore oil and gas sector had the industrial or financial capacity to perform these overdue decommissioning obligations.

To address these concerns, in 2023, BIL funds were utilized to create a $64-million contract between the Department of Interior’s Bureau of Safety and Environmental Enforcement (BSEE) and Promethean Energy to decommission oil and gas wells and structures in the federal waters of the Gulf of Mexico. BSEE Director Kevin Sligh commented that: “… the Bipartisan Infrastructure law is providing critical funding to help us remove these serious hazards to safety and the environment.”

Executive order 14154

The January 20, 2025, EO 14154, entitled Unleashing American Energy, created uncertainty in the energy sector. Some relevant parts are identified below, with some commentary.

• Section 4 of EO 14154 revoked the previous administration’s EO 14082, which implemented the IRA and IIJA, including:
• Any assets, funds, or resources allocated to an entity or program abolished by E.O. 14154 (including funds provided and administered by the IRA and IIJA)
• “Any contract or agreement between the United States and any third party on behalf of the [IRA and IIJA] shall be terminated for convenience, or otherwise, as quickly as permitted under the law.”
• Section 7 of EO 14154, entitled “Terminating the New Green Deal,” states that “all agencies shall immediately pause the disbursement of funds appropriated through the Inflation Reduction Act of 2022 ... or the Infrastructure Investment and Jobs Act.”
• Although the previous and current administrations have frequently referred to the “New Green Deal,” there is no federal legislation or regulations that are entitled “New Green Deal.” Rather, the term appears to reference the previous administration’s attempts to address climate change through legislation.
• Section 7 of EO 14154 also states that all federal agencies shall immediately pause the disbursement of funds appropriated through the IRA and IIJA.

Other EOs and reports 

There have been other recent executive orders and agency reports that have also worked to create uncertainty:  

• On January 27, 2025, the Office of Management and Budget (OMB) subsequently published Memorandum M-25-13 requiring federal agencies to “...temporarily pause all activities related to obligation or disbursement of all Federal financial assistance…that may be implicated by [President Trump’s] executive orders, including, but not limited to…nongovernmental organizations…and the green new deal.” On January 28, 2025, the OMB rescinded Memorandum M-25-13. However, the White House press secretary stated that “This is not a recission of the federal funding freeze.”
• On February 26, 2025, the GAO issued a report titled “Oversight of EPA and DOE Spending” which found that:
• The DOE Office of Clean Energy Demonstrations (OCED) and Loan Programs Office (LPO) were responsible for billions of dollars of DOE’s IIJA and IRA funding. The report stated:

                   §  The OCED had “awarded about 140 projects and obligated about $1.6 billion, despite the fact that the OCED did not have a sufficient strategic workforce to manage this funding.”

                   §  The LPO provided loans in the amount of $24.4 billion by the last quarter of 2024, and the total amount of loans as of the date of the GAO report was $52.5 billion.        

• On February 26, 2025, the President issued an EO entitled “The President’s ‘Department of Government Efficiency’ Cost Efficiency Initiative.” This EO requires that each federal agency review current contracts and grants and establish guidance templates for promoting efficiency and justifying payments to contractors.
• This EO applies to existing and future contracts/grants. Existing contracts will be reviewed by agencies in an effort to determine if they should be modified or terminated.
• The EO states that this “process shall commence immediately” and that each “Agency Head” shall complete its reviews within 30 days of the date of the EO.

The flurry of executive orders has created concern among numerous business entities, large and small, about the interruption in federally committed financial support for projects and deciding how to address these “pauses in funding.”

Other notable points include: 

• Amount of Funding Provided or Made Available for Industry – In addition to the existing funding created by the IRA and IIJA passed in 2021 and 2022, respectively, in January 2025 the US Department of Treasury and the IRS announced $6 billion in 48C tax credit allocations, that are dedicated in part, to expand US critical minerals processing and refining capacity.
• Geographical Scope – Of the 435 US congressional districts in the United States, almost 40% of them have one or more projects supported, in part, by the IRA or IIJA.

Uncertainty and challenges

Section 4 of EO 14154 issued on January 20, 2025, revoked the previous administration’s “Executive Order 14082 of September 12, 2022 (implementation of the Energy and Infrastructure Provisions of the Inflation and Reduction Act of 2022).”

The rapid issuance of these executive orders and OMB Orders has created significant uncertainty for ongoing offshore energy programs that are supported, in whole or in part, by the IRA and/or the IIJA funding. These uncertainties have created significant challenges for business entities that have started, and are actively involved with, commercial projects that cannot survive without federal assistance under the IRA or the IIJA.

The OMB Orders attempt to “backfill” some of the questions created by the apparent broad scope of the recent executive orders. The use of a “pause” in federal funding and support creates a significant temporal ambiguity. How long does a “pause” last? A week, a month, several months? 

Industries can deal with financial crises and natural disasters – this was evidenced when a bigger, stronger offshore energy sector rebounded following the Deepwater Horizon oil spill and the subsequent deepwater drilling moratorium. However,  commercial and financial uncertainty can bring ongoing projects and corporations to their knees. Subcontractors, service companies, vendors and suppliers cannot wait for undetermined periods to receive monthly payments.

Companies impacted by the recent executive orders must review their agreements concerning federal funding under the IRA or IIJA. They must also review their commercial contracts with owners, operators, subcontractors, and service providers that may be substantially impacted by the federal government’s failure to continue funding under these legislative programs. It is likely that many of the traditional energy and energy transition projects will be facing strong headwinds as long as the uncertainty about federal funding exists.

Legal challenges to EO 14154 

There have been a number of legal challenges to EO 14154. These include:  

• US District Court Rhode Island (USDC-RI) – On January 28, 2025, 22 U.S. states and the District of Columbia filed a Request for Emergency Temporary Restraining Order (TRO) requesting the Court to issue a TRO against the EOs and OMB orders pausing federal funding.
• On February 12, 2025 – District Judge confirms that the Court’s Temporary Restraining Order halting the EO’s attempt to “pause” federal funding remains in place. 
• US Court of Appeals for the First Circuit denied the Trump Administration’s request for a stay of the District Court of Rhode Island TRO.
• US District Court for the District of Columbia (“USDC, DC”) – Numerous cases have been filed in the federal district courts in the District of Columbia.
• On January 20, 2025 – In the case of National Council of Nonprofits, the American Public Health Association, Main Street Alliance and SAGE v. Donald J. Trump, the Plaintiffs’ requested the Court to issues a TRO restraining the EOs. District Judge Cooper issued an Order denying Plaintiffs’ Motion for a Temporary Restraining Order, however the Order acknowledged that the new administration “had been marked so far by ‘an onslaught of executive orders” leading to “disruption and even chaos.”

Choosing the best path forward

Unfortunately, there is no uniform strategy to address the legal, regulatory and commercial uncertainty created by the recent executive orders. Business entities hoping to secure funding under the IRA and/or the IIJA for hydrocarbon-related, or energy transition projects, currently face an uphill battle.

With regard to businesses that are currently leading, or participating in, projects funded in whole, or in part, by these government funding programs, decisions may have to be made promptly to maintain project scheduling and integrity. Clearly, the executive orders are intended to create greater efficiencies and essentially “do more with less.” Although this is an admirable goal from an efficiency perspective, each project will have its own timeline and contractual requirements. 

Some companies may have contractual terms to establish “impossibility” or “impracticability” to perform, or “force majeure” grounds, to address delays in performance. These strategies must be considered with a great deal of focus and foresight, as they may create an opportunity for the other party to repudiate/cancel certain contractual obligations, or the contract in its entirety.

Companies navigating through the new executive orders and judicial rulings will have to make “best judgments” to address commercial and legal uncertainties resulting from the recent acts of the presidential administration and the regulatory agencies. The good news is that neither the US government, nor the industries involved in these contracts, want to be involved in large numbers of delayed/terminated projects, or the protracted lawsuits that would arise from such circumstances.