Divided federal appeals court says Trump administration was wrong to terminate climate funds

WASHINGTON (AP) — A divided federal appeals court on Tuesday said the Trump administration improperly terminated billions of dollars in funds to boost clean energy projects, handing a win to a coalition of nonprofits picked to run the Biden-era effort.

Climate United Fund and other nonprofits won’t have access to their funds immediately as the decision will be put on hold for several days giving the Environmental Protection Agency time to ask the Supreme Court to step in.

The judgement by the full U.S. Court of Appeals for the District of Columbia is a loss for the Trump administration in one of its earliest efforts to dismantle President Joe Biden’s campaign to reduce climate-warming greenhouse gases. The Greenhouse Gas Reduction Fund, commonly referred to as a “green bank,” is a $20 billion congressionally authorized program that provided money to nonprofits that would then make loans and invest in small energy projects, energy-efficient buildings and transportation.

EPA Administrator Lee Zeldin accused Climate United Fund and other nonprofits picked to run the green bank of mismanagement and potential fraud. He froze billions that had been placed in a Citibank account for the program and then terminated their grants. The groups disputed any wrongdoing and sued, arguing the Trump administration broke the law and violated the Constitution by not spending money authorized by Congress.

“Despite efforts to harm the awardees with false allegations and misinformation, there remains no legal basis for terminating our grant award and clawing back funds that were already disbursed in our bank accounts,” Climate United said in a statement.

In September, a divided three-judge panel of the same appeals court overturned a lower court and said the Trump administration had broad power to cancel grants without having to face charges of illegality in federal court.

The full appeals court agreed to revisit that decision, a rare occurrence reserved for the most important cases.

Zeldin early last year told Fox News that he suspected the green bank “was a clear-cut case of waste and abuse” that “in my opinion, is criminal.”

U.S. District Judge Tanya Chutkan last year said that when the federal government was asked for evidence of fraud, the agency didn’t provide it and shifted its position to more general concerns about the level of EPA oversight over the program. Chutkan ruled the government can’t violate the law and terminate the contracts and that the groups should have access to some of their frozen money. That order was put on hold during appeal.

A lawyer for the nonprofits argued at the time that the agency had already allocated the money by putting it in the Citibank account for the program’s use.

The agency argued the nonprofits are making constitutional and statutory arguments that don’t apply in a simple contract fight, and that the matter should be heard by a different court that can only award a lump sum — not force the government to keep the grants in place. Federal officials argue there is no law or provision in the Constitution that compels the EPA to make these grants to these groups.

The green bank was created by the 2022 Inflation Reduction Act, a Biden administration priority that boosted clean energy and climate-friendly projects. President Trump’s tax and spending bill last year, however, repealed part of the law that established the bank and rescinded money that hadn’t already been obligated to its recipients. That added a layer of complication to the legal case.

Six of 10 judges agreed with a lower court judge that the Trump EPA likely violated the 2022 law when it terminated the grants and tried to claw back funds based on a policy disagreement.

However, one of the six judges that agreed the grant terminations were improper said Trump’s bill complicated whether the clean energy groups could access funds going forward.

The remaining four judges broadly disagreed with the majority and sided with the EPA, saying that after Trump’s tax and spend bill, the agency likely would have authority to end the grants.

The EPA did not immediately provide comment.

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