The Department of Energy (DOE) has recently terminated or suspended a number of high-profile energy grants, withdrawing more than $3.7 billion in commitments for projects involving carbon capture, decarbonization, and hydrogen production. While some of these awards were only partially funded at the time of cancellation, the decisions have immediate implications for recipients’ ongoing work, contractual obligations, and long-term planning.
This alert outlines the regulatory framework that governs DOE terminations, and the administrative and judicial avenues available to recipients seeking to challenge or mitigate the impact of termination.
Key Federal Rules Governing DOE Termination Authority
DOE grants incorporate the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 C.F.R. §200) and the DOE-specific supplement (2 C.F.R. §910). Within this structure, the specific award agreement terms are decisive.
Of particular importance are:
- Termination provisions — These clauses spell out the conditions under which DOE may end an award. Unless the award explicitly allows termination for convenience or a change in policy, DOE’s authority to cancel is limited. Courts have found that such rights must be clearly stated to be enforceable.
- Audit clauses — DOE retains authority to review performance, compliance, and use of funds. This power is often exercised before a termination decision.
- Closeout procedures — Once a grant is ended, recipients must complete final reporting, reconcile allowable costs, and address the disposition of funded property or intellectual property rights.
A careful reading of your award agreement in light of these rules is the first step in any response.
How DOE Has Approached Recent Reviews
The recent cancellations followed a DOE review of 179 active awards totaling more than $15 billion. The review assessed the financial viability of projects, compliance with federal law, and consistency with current policy priorities. DOE requested detailed project documentation and, in some cases, initiated audits.
Recipients subject to this review process should expect heightened scrutiny of milestones, budgets, and performance reporting. Where projects have been halted, DOE requires a formal closeout, even if substantial work has already been completed.
Administrative Options for Challenging or Modifying a Termination
DOE regulations allow informal dispute resolution under 2 C.F.R. §910.128. Through this process, recipients can:
- Submit a written response to the termination notice, including factual and legal arguments.
- Request meetings with DOE officials to address specific concerns or compliance issues.
- Propose revised project timelines or deliverables as an alternative to termination.
Effective use of this process depends on thorough preparation. Recipients should compile the full award package, all DOE communications, financial records, and evidence that milestones were met or substantial progress achieved.
Judicial Remedies When Administrative Measures Fall Short
If administrative engagement does not resolve the matter, judicial review may be an option. Potential claims include:
- Breach of contract — Arguing DOE acted outside the terms of the award.
- Failure to follow required procedures — If notice and opportunity to respond were inadequate.
- Reliance damages — Seeking recovery for investments made in reasonable reliance on DOE funding commitments.
Recent case law emphasizes that termination authority must be linked to explicit contract language and that agencies are bound by their own procedures. However, litigation carries risk, cost, and time considerations, and should be weighed carefully.
Steps Recipients Should Take Now
For organizations affected—or at risk of being affected—by DOE grant cancellations, timely action is essential:
- Analyze the award agreement — Pay special attention to termination, dispute resolution, and audit provisions.
- Document compliance and performance — Maintain clear records of deliverables, expenditures, and DOE interactions.
- Initiate dialogue with DOE — Early, constructive engagement can preserve flexibility and position the recipient for a negotiated outcome.
- Preserve legal options — Administrative challenges and court actions often depend on documentation assembled early in the process.
- Stay informed — DOE’s review policies and enforcement approaches continue to evolve.
Closing Perspective
DOE’s recent decisions to halt or withdraw grant funding demonstrate how quickly the federal policy environment can shift. For recipients, the best defense is a combination of contractual diligence, disciplined project documentation, and strategic engagement—both with the agency and, when necessary, through available legal remedies.
