Congress Passes Fiscal Year 2026 Energy Funding Bill

The U.S. Senate on January 15, 2026, passed an Energy and Water Development (E&W) appropriations bill to fund the U.S. Department of Energy (DOE), U.S. Army Corps of Engineers and U.S. Bureau of Reclamation for fiscal year (FY) 2026. The package, negotiated on a bipartisan and bicameral basis, received 82 votes in the Senate, with 10 Democrats and 4 Republicans voting against. The U.S. House of Representatives overwhelmingly passed the bill on January 8, and it is expected that President Donald Trump will sign it into law prior to the funding deadline on January 31.

The E&W bill is part of a "minibus" package of appropriations bills, which also includes funding packages for Commerce, Justice, Science and Related Agencies and Interior, Environment, and Related Agencies. The bill appropriates just over $49 billion for DOE, and though it cuts or reprograms several clean energy and carbon management programs, it advances less aggressive cuts than both the President's FY 2026 Budget Request and a previous version of the bill passed by the House in September 2025. Both the bill text and report contain several notable provisions regarding DOE programs, outlined in more detail below.

Note: The E&W bill does not fully reflect DOE's recently released new organization structure, including the consolidation and renaming of several offices. More information about the reorganization is available in a previous Holland & Knight Energy Technology Blog post.

Highlights and Notable Language

Grant Terminations Guardrails

The report includes language on award terminations, asserting that DOE "shall not terminate a federal award … on the basis that the federal award no longer effectuates program goals or agency priorities." The Senate's earlier version of the bill text contained language with statutory termination guardrails that do not appear in this agreement.

Indirect Cost Rates

The bill text requires DOE, in making awards, to apply indirect cost rates "to the same extent and in the same manner as was applied in fiscal year 2024." This provision follows DOE efforts in 2025 to set lower indirect cost rates for FY 2025 awards to institutions of higher education and in certain state government programs, including the State Energy Program and Weatherization Assistance Program.

Reprogramming of Previous Funding

The bill text reprograms unobligated funds from several Infrastructure Investment and Jobs Act (IIJA) provisions to other DOE initiatives and programs, including from the following:

These repurposed funds will flow to the following programs and activities:

• $375 million to Grid Deployment for programming to enhance the domestic supply chain for grid components
• $3.1 billion to the Office of Nuclear Energy for the Advanced Reactor Deployment Program and for up to two awards for the development of Gen3+ Small Modular Reactors
• The following amounts in support of the FY 2026 funding appropriated by the bill to each of these programs: $1.15 billion for Energy Efficiency and Renewable Energy, $100 million for Nuclear Energy, $140 million Fossil Energy, $150 million for Science and $150 million for the Title 17 Loan Guarantee Program

Energy Dominance Financing (Loan Programs)

The Office of Energy Dominance Financing, which comprises the previous Loan Programs Office portfolio and Transmission Facilitation Program, has significant existing loan authority under the Title 17 loan guarantee program from the Inflation Reduction Act, as well as $1 billion in credit subsidy for the 1706 Energy Dominance Financing Program from the One Big Beautiful Bill Act. The administration requested $750 million in additional credit subsidy through its FY 2026 budget request in May 2025 to support financing of small modular reactors and advanced nuclear reactors. Congress has provided $150 million toward that request.

The report language also directs DOE, in carrying out the Title 17 loan guarantee program, to "prioritize projects that expand the domestic supply of critical minerals."

The bill does not meet the administration's request to rescind unobligated credit subsidy for the Advanced Technology Vehicles Manufacturing (AVTM) Loan Program, while also providing funding for administrative expenses to carry out AVTM and the Tribal Energy Loan Guarantee Program.

Specific Funding Allocations in Report Language

As in recent E&W bills, Congress reasserts that its direction to the agency is to spend in the amounts and for the purposes specified in the accompanying report.

Additional Highlights

• The report directs $17 million of EERE's funds to the Manufacturing and Energy Supply Chains (MESC) Office, including for administrative expenses, the Industrial Assessment Center program, and "Facility and Workforce Assistance." This direction aligns with the Department's recent consolidation of MESC and EERE under the Office of Critical Minerals and Energy Innovation. The report also encourages MESC to develop battery chemistries beyond lithium ion and support development of battery supply chains that reduce aviation emissions.
• The Office of Clean Energy Demonstrations (OCED) was dissolved during DOE's realignment, and the bill, in alignment with the White House's budget request, provides zero funding to OCED for FY 2026. As outlined above, the bill reprograms the unobligated balances for some OCED programs, while the remaining funds and awards from the office will likely be managed by different programs across DOE. Note: OCED was previously authorized in statute.
• The report language emphasizes Congress' support for the CarbonSAFE program, directing DOE to issue funding opportunities with remaining IIJA funds for CarbonSAFE projects and continue advancing projects through the program's four phases. It also affirms Congress' general support of research and development for "diverse carbon management technologies."

Topline Funding Summary

*These amounts include reprogrammed funds from prior year balances, as mentioned previously. Notably, Congress opted to carry over these balances to these programs rather than rescind them.

Next Steps

Holland & Knight's Energy Technology Team is preparing for implementation of the FY 2026 budget and FY 2027 appropriations process. Reach out to us for support with requests or any questions as the process gets underway.