Federal Grant Rules, Local Environmental Consequences

Why environmental nonprofits should comment like the record matters

On May 29, 2026, the Office of Management and Budget, joined by federal award-making agencies across the federal government, proposed significant revisions to the Guidance for Federal Financial Assistance—the government-wide framework that governs federal grants, cooperative agreements, and other forms of federal financial assistance. The deadline for submitting comments is July 13, 2026.

The proposal is framed as a transparency, accountability, and oversight measure, but its practical effect would be to make federal funding less predictable by giving agencies broader discretion to screen, condition, suspend, or terminate awards based on shifting agency priorities, broadly stated “national interest” concerns, and new restrictions tied to DEI, immigration, and other administration policy priorities. For nonprofits, local governments, universities, and other recipients and subrecipients of federal funds, this is not a minor technical update. It is a proposed change to the rules that shape whether federal funds are awarded, what conditions attach, how awards are administered, and when funding may be disrupted after work has begun. 

National nonprofit organizations are urging nonprofits to pay attention. The National Council of Nonprofits has warned that the proposed overhaul of the OMB Uniform Guidance could significantly affect the ability of nonprofits to apply for and administer federal resources, with consequences for the communities that rely on nonprofit services. It has also published a comment guide and a chart of significant proposed provisions, to help organizations understand what is at stake. Alliance for Justice has similarly flagged the proposal as a significant issue for federally funded nonprofits, including because of proposed restrictions affecting advocacy, public messaging, and policy-related work. 

Those national calls to action are important. But environmental nonprofits have a particular story to tell.

Federal environmental grants are not just administrative funding streams. They are often the mechanism by which congressionally authorized environmental programs become real projects in real places: watershed restoration, brownfields assessment and cleanup, stream restoration, coastal resilience, habitat protection, environmental education, water-quality monitoring, community science, technical assistance, and work with communities affected by pollution, flooding, or environmental degradation.

That means environmental nonprofits should not only consider commenting. They should comment carefully. This article does not attempt a section-by-section analysis of the proposed rule. The purpose here is narrower: to explain why environmental nonprofits, in particular, should pay attention, how the proposal could affect environmental and community-based grant work, and how comments can help build a useful administrative record.

Will comments really matter?

Maybe not in the simple sense of persuading the administration to abandon the proposal entirely. A rulemaking of this scope often reflects decisions already made at the policy level. But that does not mean comments are merely symbolic.

Good comments can matter in at least three ways.

First, they can narrow or improve the final rule. Agencies often revise proposed rules in response to comments that identify practical problems, unintended consequences, ambiguous language, or conflicts with existing statutory programs.

Second, comments force the agency to explain itself. In notice-and-comment rulemaking, an agency must respond to significant comments. If environmental nonprofits provide concrete examples and legal objections, OMB and the federal grantmaking agencies must grapple with those concerns in the administrative record.

Third, comments may matter if the final rule is later challenged in court. Under the Administrative Procedure Act, courts generally do not decide whether a rule is wise policy. They ask whether the agency had legal authority, considered the important aspects of the problem, responded to significant comments, and explained its decision in a reasoned way. Comments that identify specific legal and practical defects are therefore much more useful than comments that simply express opposition.

Environmental nonprofits should not sound anti-accountability

Environmental nonprofits should avoid framing their comments as opposition to oversight. That is not the issue.

Most nonprofits that administer federal funds already operate under substantial compliance obligations: budgets, cost principles, procurement standards, audit requirements, performance reporting, matching-fund documentation, subrecipient monitoring, and grant closeout.

A stronger frame is this: Environmental nonprofits support transparency, accountability, and lawful stewardship of federal funds. But those goals are not served by rules that make federal environmental grants less predictable, less science-based, more politically contingent, or more vulnerable to midstream disruption.

As explained below, that's an important distinction.

The statutory-purpose problem

Many environmental grants exist because Congress created a program, appropriated funds, and identified statutory purposes. Those purposes may include clean water, brownfields cleanup, coastal resilience, Chesapeake Bay restoration, environmental education, conservation, disaster resilience, or support for communities facing environmental and public-health burdens.

A government-wide grants rule should not allow shifting executive-branch priorities to displace the purposes Congress wrote into law.

This is one of the most important legal points for environmental nonprofits to preserve. A comment should identify the programs the organization actually works with and explain how vague or discretionary review standards could conflict with the statutory purpose of those programs.

For example, a watershed organization might explain that a grant authorized to advance water-quality restoration should be evaluated against water-quality, ecological, technical, and community-benefit criteria—not against undefined or shifting concepts that are not part of the authorizing statute or the funding notice.

The reliance problem

Environmental work is not easily paused and restarted. A stream restoration project may depend on design sequencing, permit conditions, contractor availability, planting windows, and landowner access. A monitoring program may depend on multi-season data. A brownfields project may require coordination among property owners, local governments, consultants, laboratories, and regulators. A community engagement process may depend on trust built over months or years.

If federal awards can be suspended, modified, or terminated based on vague post-award determinations, nonprofits may be left holding obligations they undertook in reliance on a federal award. That is not just inconvenient. It can cause financial harm, disrupt local partnerships, and leave environmental work half done.

Comments should be specific. A nonprofit should explain, as applicable:

• whether it hired staff in reliance on federal funding;

• whether it entered into subawards, contracts, or access agreements;

• whether it committed matching funds;

• whether it coordinated with state or local agencies;

• whether field work depends on seasonal windows;

• whether monitoring must occur over multiple years;

• whether community commitments have already been made; and

• whether a midstream disruption would affect other public or private partners.

Those facts matter. They show that the proposed rule would have real-world consequences the agency must consider.

The science-based grantmaking problem

Environmental grantmaking often depends on technical expertise. Projects may be evaluated based on watershed science, engineering judgment, ecological benefit, public-health data, climate-risk analysis, environmental monitoring, or demonstrated community need.

If technical review becomes merely advisory or is subordinated to broad political review, environmental nonprofits should say so plainly. The problem is not that elected administrations have policy priorities. They do. The problem is when technical and statutory criteria become secondary to--or are overridden by--undefined political or ideological considerations.

A useful comment would ask OMB to preserve merit-based review and clarify that political or senior-level review may not override statutory criteria, published funding criteria, or the technical basis for an award.

The advocacy and public-engagement problem

Environmental nonprofits often do work that is lawful but sometimes uncomfortable for government agencies, regulated entities, or project proponents. They educate the public. They submit comments on permits. They participate in administrative proceedings. They publish data. They advocate for stronger environmental protection. They work with communities affected by pollution, flooding, habitat loss, or infrastructure siting.

Federal grant rules should not chill lawful nonpartisan advocacy, public education, community engagement, environmental justice work, or participation in environmental decision-making.

Comments should draw a careful line. Federal funds may not be used for impermissible lobbying or partisan political activity. But that is different from lawful education, technical assistance, regulatory participation, and community outreach. Environmental nonprofits should ask OMB to make that distinction explicit.

The environmental justice problem 

The national nonprofit community has focused significant attention on provisions addressing DEI, immigration, and related administration policy priorities. Environmental nonprofits should not ignore those issues, but they may be most effective when they explain how those provisions would operate in environmental programs.

Many federal and pass-through environmental grants have encouraged or required attention to communities facing cumulative pollution burdens, flooding risk, legacy contamination, public-health disparities, lack of green space, or historic underinvestment. In recent years, tools used to identify those communities have often included environmental, health, socioeconomic, demographic, and sometimes race-related indicators.

If the final rule creates uncertainty over whether agencies or recipients may use environmental justice, cumulative-impact, disadvantaged-community, or overburdened-community criteria, it could chill lawful and statutorily supported work in precisely the communities many environmental programs were designed to reach. OMB should clarify that federal award recipients may continue to use lawful, program-related criteria to identify and serve communities facing heightened environmental, public-health, infrastructure, or climate risks.

The Maryland and Chesapeake Bay angle

Maryland nonprofits have a particularly strong story to tell. Environmental progress in Maryland often depends on layered partnerships among federal agencies, state agencies, counties, municipalities, universities, resilience authorities, watershed groups, land trusts, community associations, and local nonprofits. Chesapeake Bay restoration, stormwater retrofits, riparian buffers, stream restoration, coastal resilience, brownfields cleanup, and community-based environmental work are rarely carried out by one entity acting alone.

If federal grant rules become unstable or unpredictable, the harm will not stop with the direct recipient. It will ripple through state and local implementation systems. Small nonprofits may become less willing to serve as subrecipients. Local governments may lose trusted community partners. Restoration and resilience projects may become harder to finance, staff, and complete.

That is a practical point, but it also has legal significance. It speaks to whether the agency has considered the real-world consequences of the rule.

What comments are most useful if the rule is later challenged?

The broad nonprofit-sector calls to comment are important because they show the scale of concern. But for purposes of the administrative record, individualized comments are especially valuable.

Environmental nonprofits should consider including the following:

1. Identify the specific federal programs affected.

Name the grant programs your organization uses or helps implement. Explain the statutory purposes of those programs and how the proposed rule could interfere with them.

2. Explain concrete reliance interests.

Describe commitments already made in reliance on federal awards or recurring federal grant programs: staffing, contracts, subawards, matching funds, landowner permissions, community commitments, and project schedules.

3. Describe administrative burden with specificity.

If the rule claims to reduce burden, explain where it would do the opposite. Identify new legal review, compliance, reporting, procurement, subrecipient-monitoring, or risk-management burdens.

4. Identify vague terms.

Point out terms that need definition. Ask how recipients are supposed to know whether a project advances the “national interest,” remains aligned with “agency priorities,” or creates reputational concern.

5. Protect lawful nonprofit activity.

Ask OMB to state clearly that lawful nonpartisan public education, community engagement, administrative advocacy, environmental justice work, and participation in permitting or rulemaking proceedings are not disqualifying activities.

        6.   Explain how DEI-related restrictions could affect environmental justice and community-targeted funding. 

If your organization works with communities identified through EJScreen, state environmental justice screening tools, disadvantaged-community criteria, cumulative-burden analysis, brownfields prioritization, climate-vulnerability mapping, or similar methods, explain how vague restrictions could disrupt lawful targeting of environmental funds to communities facing documented environmental and public-health risks.

    7.    Propose narrower alternatives.

Suggest specific alternatives: prospective application only, notice and cure rights, written findings before termination, protection for existing awards, preservation of statutory criteria, and clear appeal or reconsideration procedures.

Should nonprofits worry about drawing attention?

Some organizations may reasonably ask whether commenting could draw unwanted attention. Public comments are public, and nonprofits should be thoughtful about how much detail they provide about particular grants, projects, partners, or advocacy activities.

That does not mean environmental nonprofits should stay silent. For many organizations, their federal funding history and public-facing environmental work are already visible. A careful comment can be specific enough to help build the administrative record without unnecessarily identifying sensitive projects, litigation strategy, vulnerable community partners, or adversarial proceedings.

The goal is not to be provocative. It is to explain, in a grounded and credible way, how the proposed rule would affect lawful, congressionally supported environmental work. Organizations with particular exposure concerns may choose a lower-risk approach: join a sector-wide comment letter, submit a short organizational comment focused on general grant-administration impacts, or describe categories of work rather than naming sensitive projects.

A practical bottom line

The National Council of Nonprofits, Alliance for Justice, and other nonprofit-sector voices are giving nonprofits an important warning: this is not a routine technical update. It is a proposed change to the federal grant framework that could fundamentally affect how nonprofits seek, receive, administer, and rely on federal funds. Environmental nonprofits should strongly consider adding their own voice to that record.

They do not need to write like litigators to submit meaningful comments. But they should write like organizations whose experience matters.

The most effective comment will say: here is what we do; here are the federal programs that make it possible; here is how the proposed rule would affect real projects, real communities, and real environmental outcomes; here is where the proposal conflicts with statutory purpose or reasoned grant administration; and here are specific changes OMB should make before finalizing the rule.

Federal grant rules may sound procedural. For environmental nonprofits, they are operational. They shape whether restoration projects get built, whether monitoring continues, whether communities receive technical help, whether brownfields move toward reuse, and whether public environmental goals can be carried out through the nonprofit partners government often depends on.

That is why environmental nonprofits should pay attention, assess their own risk and role, and—where appropriate—comment like the record matters.

--Jennifer Wazenski

Watershed Legal Counsel advises private clients and government instrumentalities in environmental and natural resources matters, serves as outside general counsel for mission-driven enterprises in the environmental sector, and provides strategic legal services that help organizations manage change. Founder Jennifer Wazenski is a Maryland attorney who has practiced environmental and natural resources law since 1991. She served as Principal Counsel to the Maryland Department of Natural Resources from 2010 through 2021, and, prior to that, Deputy Counsel to the Maryland Department of the Environment.

Disclaimer: Attorney advertising. The information provided at this site is for general purposes only. It is not, nor is it intended to be, legal advice.

© 2026 Watershed Legal Counsel. All rights reserved.

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Resources:

National Council of Nonprofits, OMB Uniform Guidance resource page: https://www.councilofnonprofits.org/trends-and-policy-issues/omb-uniform-guidance

National Council of Nonprofits, 2026 proposed OMB Uniform Guidance comment guide: https://www.councilofnonprofits.org/files/media/documents/2026/2026-proposed-omb-uniform-guidance-comment-guide.pdf

Alliance for Justice, “Federal Funding: The OMB Rule Proposal That’s Got Nonprofits Talking”: https://afj.org/article/federal-funding-the-omb-rule-proposal-thats-got-nonprofits-talking/

Federal Register, “Regulation for Federal Financial Assistance”: https://www.federalregister.gov/documents/2026/05/29/2026-10817/regulation-for-federal-financial-assistance