Appeals court backs EPA action terminating billions in 'green bank'
grants
[September 03, 2025]
By MICHAEL PHILLIS and MATTHEW DALY
WASHINGTON (AP) — The Trump administration was handed a win by a federal
appeals court on Tuesday in its effort to freeze billions of dollars and
terminate contracts for nonprofits to run a “green bank” aimed at
financing climate-friendly projects.
The head of the Environmental Protection Agency had blasted the
Biden-era program as a waste of taxpayer money, tried to claw back
funding that had already been distributed and accused the nonprofits of
mismanagement — misuse accusations that Justice Department lawyers did
not back up in court.
The decision by the 2-1 majority on the U.S. Court of Appeals for the
District of Columbia Circuit finds that federal officials have broad
latitude to cancel funds that have been appropriated by Congress without
facing allegations in federal district court that they broke the law. A
strongly worded dissent said the outcome was a loss not just for the
five green bank groups who sued the EPA, but for the authority of
Congress to write policy and maintain its traditional power of the
purse.
Appeals court says the dispute belongs in federal claims court
In an opinion written by Judge Neomi Rao, the appeals court said the
dispute should be heard in a federal claims court that considers
contract disputes. Rao was appointed by President Donald Trump in his
first term.
“In sum, district courts have no jurisdiction to hear claims that the
federal government terminated a grant agreement arbitrarily or with
impunity. Claims of arbitrary grant termination are essentially
contractual,” Rao wrote in a decision supported by Judge Gregory Katsas,
also a Trump appointee.
The green bank groups said the federal claims court is limited to
awarding possible monetary damages. The groups were seeking an order
allowing them immediate access to their funds, which total about $16
billion.
EPA press secretary Brigit Hirsch said in a statement that the decision
reaffirmed EPA's "duty to be an exceptional steward of taxpayer
dollars.”
“It’s fantastic to see reason prevail in the court system," she said.
Green banks have been in the EPA chief's crosshairs for months
A lower court had previously said the EPA couldn’t support Administrator
Lee Zeldin’s accusations of wrongdoing and that the nonprofits should
not have their contracts terminated and must have access to certain
funding that had been frozen. The majority ruling overturned that
decision Tuesday, although the order won’t go into effect immediately to
allow for an opportunity to appeal.
The Greenhouse Gas Reduction Fund, commonly referred to as a “green
bank,” was authorized by the 2022 Inflation Reduction Act, the climate
law approved by congressional Democrats. However, its goals run counter
to the Trump administration’s opposition to climate-friendly policies
and its embrace of fossil fuels such as oil and coal. Zeldin quickly
made the bank a target, characterizing the billions in grants as a “gold
bar” scheme marred by conflicts of interest and potential fraud.
In terminating the grants, Zeldin cited a conservative journalist’s
undercover video made late last year that showed a former EPA employee
saying the agency was throwing “gold bars off the Titanic” — presumably
a reference to spending before the end of Biden's term.
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In a February interview with Fox News, Zeldin said he suspected the
green bank “was a clear-cut case of waste and abuse” and an example
of what he called “self-dealing” among the Biden administration and
like-minded groups.
The appeals court said the lower court was too quick to dismiss the
EPA's concerns that the program lacked sufficient oversight.
“The court disregarded the government’s interest in prudent
management of the grant programs and the government’s
representations that it planned to properly supervise, rather than
abandon, the grantmaking process,” Rao wrote.
Advocates vow to keep fighting for frozen funds
Climate United Fund and four other groups sued the EPA, Zeldin and
Citibank, which held the grant money on behalf of the agency, saying
they had illegally denied the groups access to funds awarded last
year. They wanted access to those funds again, saying the freeze had
paralyzed their work and jeopardized their basic operations.
Climate United CEO Beth Bafford said in a statement Tuesday, “This
is not the end of our road.”
“While we are disappointed by the panel’s decision, we stand firm on
the merits of our case: EPA unlawfully froze and terminated funds
that were legally obligated and disbursed,” Bafford said.
Amir Kirkwood, CEO of the Justice Climate Fund, said the ruling
”hurts America’s under-resourced communities, stalling hundreds of
American-made clean energy projects across the country.″
Critics say the ruling sets a dangerous precedent
Judge Cornelia Pillard, who was appointed by former President Barack
Obama, said in a sharply worded dissent that the green bank groups
provided evidence that the EPA simply disagreed with the program's
goals and tried to end it, while throwing around allegations against
the groups it couldn't support.
"Those unprecedented and unfounded actions were part of EPA’s hunt
for reasons to shut down the congressionally mandated program and
claw back the funding that had already been disbursed to Plaintiffs
and committed to infrastructure projects,'' she wrote.
“The majority allows the government to seize plaintiffs' money based
on spurious and pretextual allegations and to permanently gut
implementation of major congressional legislation designed to
improve the infrastructure, health and economic security of
communities throughout the country,” she said, adding the lower
court was right to block the termination of the grants.
Camille Pannu, an associate clinical professor at Columbia Law
School, said the split ruling shows “what happens when courts are
politicized." For an agency to “overrule Congress and decide not to
spend legally appropriated money is surprising and seems like an
overreach,'' she said in an interview.
“If the government is not honoring legally binding contracts, that's
a problem," Pannu said.
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