USDA Funding Freeze Hits REAP Projects

OMAHA (DTN) -- A small business owner in Washington state, David Funk was forced to lay off his four staff while 67 farmer clients in Idaho and Washington have $10 million in rural energy projects frozen because of the hold on USDA contracts.

Funk's business, Zero Emissions Northwest, is just one small business caught up in the broader freeze involving billions in funds tied to President Donald Trump's executive orders. Conservation and rural energy programs are frozen at USDA, though department officials have declined to provide public details about which programs are affected.

U.S. District Judge John McConnell in Rhode Island on Monday, responding to a lawsuit by Democratic-led states, said the Trump administration ignored McConnell's initial order to release billions of dollars in federal grants. McConnell's order on Monday stated the Trump administration is required to release any funds appropriated in the Inflation Reduction Act and the Infrastructure Improvements and Jobs Act. The Wall Street Journal reported that the Justice Department filed an immediate appeal of McConnell's order to the First Circuit Court of Appeals.

USDA did not immediately respond to questions over whether the department will follow McConnell's order or provide details on how many farmers and businesses have funds frozen.

Funk is a technical contractor to USDA under the Rural Energy for America Program (REAP). His small business does energy audits for farmers and small businesses up front at no cost and then helps those farmers and businesses connect with contractors, if necessary, to everything from solar panels on machine sheds to insulation in buildings or even variable power monitors for irrigation pumps.

"Our experience is farmers are already too busy. If we can take on more responsibility to help them reduce their energy costs, it's an easy button," Funk said.

Zero Emissions Northwest's contract as a technical assistance provider was frozen due to the Trump administration's emergency order on energy, forcing Funk to lay off his four employees who primarily worked on REAP projects. The company has a $65,000 invoice that would have kept the staff employed. Funk said that frozen invoice was due to work completed since last October. He said he had no idea the new administration would hold out funds for work already completed.

Much like conservation projects, the REAP money is frozen under Trump's "Unleashing American Energy" Executive Order signed on his first day in office. The order froze all money tied to the IRA or the infrastructure law. The executive order sought to freeze funding for at least 90 days while agency heads submit reports to the White House on their reviews and recommendations.

The bulk of recent REAP grants have been frozen because the lion's share of funding comes from the IRA.

Talking about his clients, Funk said his business and subcontractors have $10 million in REAP contracts with 67 farms that were either under construction or in planning stages but are now paused because farmers do not know what is going to happen. The grants amount to about $4 million, with $6 million in private investment also involved. The projects also are expected to help farmers reduce their energy costs by as much as $20 million over time.

For farmers, about $500,000 in reimbursements are currently frozen. "Those are projects that are done, and we're waiting on the federal government to reimburse these projects. That's not money I spent, but the farmer has. All of our funding is still frozen due to this executive order, and that's what USDA has told us," Funk said.

Funk has been reaching out to members of Congress in eastern Washington because at least 67 farmers across two congressional districts are affected.

Even before the funding freeze, Funk said he had been working to diversify the business away from such heavy reliance on USDA. However, the abrupt halt of contracts caught him and others off guard.

"Slamming on the brakes like this for the business community does not give anybody time to strategize, to plan or pivot. It's just been a hard stop, so that's been one of the more frustrating parts of this," he said.

Beyond his own small business and contracts with farmers, Funk said it would be "chilling" to future investors if they believe any new administration can come in and unilaterally cancel contracts with businesses.

"The perspective I will channel to you from all of the farmers is, change future programs. You've got the ability to do that, but honor the contracts that you have signed," Funk said.

He added, "What bank is going to finance long-term infrastructure? That transcends administrations."

PROGRAM'S PURPOSE

REAP was traditionally a smaller program at USDA until the IRA provided $2 billion in additional funding over 10 years. REAP offers grants and loans for small rural businesses and farmers with the maximum grant award capped at 50% of the project costs. Grants are capped at $1 million for renewable-energy projects, but loan guarantees can reach up to $25 million and cover 75% of project costs.

A lot of the projects Zero Emissions Northwest worked on were smaller, but they could save a wheat farmer $10,000 or so annually in energy costs while improving their resiliency. Funk also noted nearly all the projects use American equipment such as solar panels or irrigation pumps.

"Then it's being installed by American workers. It's helping American businesses," he said, adding, "We align with what Trump wants. We really believe we are aligned with unleashing American energy, and we're focusing on all of those things."

For now, a lot of farmers have been patient, mainly because they are accustomed to dealing with factors that are out of their control such as the weather or grain prices, Funk said.

"There are so many things outside of their control, and this is just another one," he said. "A lot of them think this funding will come back because our projects are good ones."

SCRAMBLING ON WHAT TO DO NEXT

Funk shared an email from vegetable grower in Washington state because the grant funding was primarily to help the grower comply with state energy codes that are pricing the farm out of business. The grant funding is frozen, so now the farm is scrambling to try to figure out what to do next. The farm employs 30 workers.

"I really feel for that farm because it's tough to be a small farm already," Funk said. "Those are the people who are primarily challenged by this."

Also see "USDA Freezes Conservation Funds, Other Programs, Leaving Some Farmers in Financial Limbo" here: https://www.dtnpf.com/….

Chris Clayton can be reached at Chris.Clayton@dtn.com

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