On May 29, 2026, the Office of Management and Budget (OMB) issued a notice of proposed rulemaking (NPRM) to update the rules for how federal agencies, including the U.S. Department of Energy (DOE), make Financial Assistance to outside parties. “Financial assistance” means grants, cooperative agreements, contracts, loans and loan guarantees, direct appropriations, donations of property, prizes, insurance, and capacity contracts. It does not include tax credits, spending for the procurement of a good or service, or direct cash assistance to an individual.

The policy changes in the NPRM would be profound for organizations who seek or currently have a financial assistance award, their subcontractors and subgrantees, and the 41 federal agencies that administer them. The scope of impact is enormous: federal agencies initiate over $1 trillion in covered financial assistance every year, and each of these new awards and the organizations that carry them out would be affected. In Fiscal Year 2024, DOE initiated at least 2,700 new financial assistance awards. Existing awards would also be subject to any new requirements that agencies want to impose pursuant to the rule during their go/no-go continuation applications. OMB seeks to finalize and implement the new rule extremely quickly, to take effect by October 1, 2026.

Specific Elements of the Notice of Proposed Rulemaking

Formalizes political influence in award selection: Section 200.205 of the NPRM would direct that a political appointee must personally approve or deny every discretionary funding award according to whether it agrees with the current President’s policy priorities – regardless of how that award may advance national security, energy security, scientific priorities, or Congressional direction for a specific program. This is a pivot from the long-standing DOE model of using merit review to make selections, which utilizes written, objective, pre-determined criteria, including specifically named technical criteria and program policy factors, for comparing applications. Merit review is performed by technical expert civil servants, who are nonpartisan and dedicate their careers to understanding at a deep level the best opportunities for scientific and technological progress within their disciplines.

Policy factors outside of the merit of a specific project are allowed in current DOE guidance (see section 2.5.1). These can enable programs to maximize the effectiveness of a program as a whole, for example by ensuring the selections represent diverse geographies or provide complementary approaches to other applicants. Notably, these policy factors must be identified in the funding opportunity itself along with a justification for their use if they impacted the award selections. The NPRM differs as there is no prior notification on which policy considerations will be used in the assessment or any post-facto notification on why an applicant that was otherwise selected was denied during political appointee review.

Supersedes DOE procedures: The rule would purportedly supersede long-standing policies and laws that structure DOE’s approach to financial assistance and create conflicting requirements. Since 2014, financial assistance at DOE has been subject to the more limited, umbrella OMB Guidance for Federal Financial Assistance (2 C.F.R. Part 200) and DOE’s agency-specific Financial Assistance Regulations (2 C.F.R. Part 910), which are informed by DOE’s authorizing statutes, such as the Energy Policy Act of 2005. In Section IV, the NPRM explains: OMB’s objectives for the current proposed revisions to several parts of subtitle A of 2 CFR include: [...] (2) clarifying the status of the 2 CFR regulatory text as an OMB regulation.” The NPRM would create a blanket policy that circumvents Part 910 and does not consider any statutory obligations that DOE may already have under other laws. DOE program officials and grants officers would face challenges in reconciling competing requirements.

Terminations based on priorities and national interest: The rule would make it significantly easier to terminate active awards mid-stream. Section 200.340(a)(2) would codify agencies’ latitude to cancel a financial assistance award if the agency determines that the award “does not effectuate agency priorities” or “the national interest.” This would allow the government the ability to cancel projects even if the awardee is meeting all of their performance requirements and milestones under their award. It may impair the confidence funding recipients can have in the durability of a federal award, which will result in fewer meritorious applicants pursuing ambitious and potentially risky but high-reward energy initiatives in partnership with the government. Relatedly, Section 200.340(e) would allow agencies like DOE to “pause” for any reason an ongoing award without canceling it, requiring the awardee to terminate all subawards and contracts. This would stop the flow of funding and likely cause irreparable harm to the ongoing project activities, but leave the awardee in limbo.

No recourse for canceled awardees: Section 200.342 would then allow agencies to eliminate the rights of awardees to dispute a termination if the award was terminated based on “agency priorities” or the “national interest.” Hundreds of DOE grantees who saw their awards canceled in 2025 and 2026 are utilizing a DOE-specific policy under 2 CFR 910.128 to pursue informal dispute resolution and/or formal administrative appeals to dispute the cancellation of their awards and seek restoration. The rule would give agencies permission to refuse any recourse or even information for awardees who are canceled, which would eliminate pathways like 2 CFR 910.128 entirely.

A wide range of banned activities: Section 200.300 would prohibit the use of federal financial assistance to promote “disparate-impact liability” or awards “based on the assumed risk of disparate-impact liability.” The regulation would also prohibit use of funding for purposes of “unlawful DEI,” and gender-ideology - two provisions from the Administration’s Executive Orders that have been repeatedly struck down by courts as “unlawful” and “contrary to law” when incorporated into grant provisions. This particular provision (200.300) creates a new legal definition that, in practice, would likely restrict DOE’s ability to make financial assistance that acknowledges federally protected characteristics, such as sex, race, disability, national origin, veteran status, family status, or age. Recent DOE activities that would be threatened under the rule would include:

• Any extramural spending by the Office of Indian Energy Policy and Programs not explicitly required by law

• Energy workforce training programs for veterans

• Programs seeking to advance women’s participation in STEM fields

• Energy assistance on utility bills or household upgrades that prioritizes senior citizen households and households with children

• Programs that seek to develop a career workforce pathway for minority students

• Energy assistance on utility bills or household upgrades that prioritizes individuals with disabilities

• Grants to advance assistive technology pathways for DOE employees and contractors with disabilities

New administrative requirements: The NPRM would create extensive new administrative requirements for applicants and award holders. Section 200.218, Section 200.303(f), and 200.303(g). The new provisions would require awardees and subawardees to:

• Appendix A to Part 170: Awardees must make new reports to the government about executive compensation

• Section 200.218: Awardees must proactively review (and presumably modify) all their own internal policies and procedures for material that relates to “disparate impact liability”

• Section 200.303(f): Awardees must adopt and utilize the Department of Homeland Security’s E-Verify program for all employees and contractors performing work related to an award

• Section 200.303(g): Awardee states must formalize pre-payment verification checks through the Department of Treasury’s Do Not Pay system or a comparable system

• Section 200.305(c): Awardees must furnish DOE with written justifications for every payment request under a Federal award that describes specific activities performed that correspond to the payment request.

• Section 200.322: All awardees and subawardees, not just those for large-scale infrastructure projects, must apply Buy America domestic preferences on the purchase of goods, materials, and products to be utilized under a financial assistance award.

Each of these activities adds administrative burden for grantees that create significant new compliance activities every year. In particular, additional administrative burdens likely impact small businesses with more limited capacity to a greater degree, creating additional barriers for these entities in applying for and managing DOE awards. They also create new requirements for DOE contracting officers and program managers, who will be responsible for implementing, monitoring, and enforcing compliance.

How to Comment

As is typically required with agency rulemakings, the NPRM opens a window for public comment. Under the Administrative Procedures Act, OMB must “think before they act,” meaning it must review and address all substantive comments when it issues a final rule. Comments are due on Monday, July 13, 2026, and must be uploaded here. Interested commenters can also share comments with Lawyers for Good Government (L4GG) here to aid in tracking purposes.

Commenters have been encouraged by OMB to identify the specific sections they are commenting on within their remarks. While commenters are encouraged to reference sections when they can, it is not required. Anonymous comments must be accepted and considered in equal measure as other substantive comments.