In a significant legal setback for environmental advocates, a federal appeals court has ruled that the Trump administration acted within its rights to freeze $16 billion in climate grants awarded to a coalition of nonprofit organizations.
The U.S. Court of Appeals for the District of Columbia Circuit, in a 2-1 decision, determined it lacked the jurisdiction to order the immediate release of the funds, which are at the center of a fierce political and legal battle.
The majority opinion stated that the court’s hands were tied, despite the severe financial strain placed on the grant recipients.
“While some grantees may be forced to shutter their operations during the litigation, their harms do not outweigh the interests of the government and the public in the proper stewardship of billions of taxpayer dollars,” the court wrote.
The funding originates from the 2022 Inflation Reduction Act, a cornerstone of President Biden’s climate agenda. The Environmental Protection Agency (EPA) awarded $20 billion to eight nonprofits last year to establish “green banks,” which would provide low-cost financing for community-level projects like residential solar panels and energy-efficient building retrofits.
The initiative was thrown into turmoil following the presidential transition. Shortly after taking office, EPA Administrator Lee Zeldin moved to reclaim the money, publicly questioning the integrity of the grant process.
He repeatedly invoked a hidden-camera video from the group Project Veritas, in which a Biden-era staffer compared the agency’s efforts to spend federal money on climate change programs before leaving office to throwing “gold bars” off the Titanic.
Zeldin began referring to the grants as “gold bars,” alleging they were vulnerable to waste and fraud, though his agency has not publicly provided evidence to support the claim.
A lawyer for Brent Efron, the former E.P.A. employee in the video, said his client was not referring to the Greenhouse Gas Reduction Fund.
At the government’s request, Citibank—which was serving as the financial intermediary—froze the accounts holding the grant money. Several of the nonprofits then sued for access to the funds.
The court’s ruling vacates a lower court’s decision that would have temporarily restored the groups’ access to a portion of the money. It instead sends the core contractual dispute to the Court of Federal Claims to decide if the government must pay the nonprofits.
The majority judges, Neomi Rao and Gregory Katsas, were both appointed by President Trump. The decision was celebrated by the current EPA leadership.
“It’s fantastic to see reason prevail in the court system,” said EPA spokesperson Brigit Hirsch. “The gold bar recipients were wrong about jurisdiction all along and wrong to act so entitled to these precious public funds that belong to hardworking American taxpayers.”
In a sharp dissenting opinion, Judge Nina Pillard, an Obama appointee, accused the majority of enabling an overreach. “The majority allows the government to seize plaintiffs’ money based on spurious and pretextual allegations and to permanently gut implementation of major congressional legislation.”
Beth Bafford, CEO of Climate United, a grant recipient slated to receive nearly $7 billion, vowed to continue the fight. “While we are disappointed by the panel’s decision,” she said, “we stand firm on the merits of our case. The EPA unlawfully froze and terminated funds that were legally obligated and disbursed.”
“This is another hurdle in our fight to lower energy costs for those who need it most while creating jobs for hardworking Americans,” Bafford said, “but we will continue to press on for communities across the country that stand to benefit from clean, abundant, and affordable energy. This is not the end of our road.”
Legal scholars note the case tests uncharted territory.
Because the grants were legally obligated in September and the funds have already left the government’s coffers, the E.P.A.’s effort to recoup the money is “beyond the scope of what a lot of people thought they would even try and do,” said Jillian Blanchard, vice president of Lawyers for Good Government, a legal advocacy organization that has worked with some of the nonprofits involved in the green financing program.
“It’s money that’s gone all the way through the fiscal process and is being pulled back, and that’s really not something administrations have done in the past,” said David Super, a law professor at Georgetown University.
The plaintiffs have indicated they will pursue further legal action, which could include a request for a rehearing by the full appeals court or an appeal to the U.S. Supreme Court. For now, the future of the $16 billion fund—designed to kickstart a self-sustaining market for clean energy projects—remains frozen.
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