Judges side with Trump EPA over canceled Inflation Reduction Act grants to nonprofits

The battle over $20 billion worth of climate-related funding authorized by Congress continues as an appellate court ruled on Tuesday in favor of the Environmental Protection Agency, which had terminated Biden-era grants made to nonprofits.

The legal tussle stems from EPA administrator Lee Zeldin’s decision to cancel grants dispersed as part of the Inflation Reduction Act. Zeldin said that the grants did not match the EPA’s current priorities and claimed, without evidence, that he had concerns about fraud.

A district court had previously ruled that Zeldin’s actions were “arbitrary and capricious.”

The two majority justices, both Trump appointees, wrote that Zeldin’s cancellation of the contracts was valid and that the government “must ensure proper oversight and management” of the grants. They cited in support of their decision an undercover video taken by Project Veritas, a conservative activist group that releases deceptively edited videos.

In March, court filings revealed that the EPA along with the FBI and the EPA inspector general had instructed Citibank to freeze money that had already been placed in accounts controlled by the nonprofits. The money was largely to be used for loans, which would be paid back and reused.

The grants in question were awarded to a range of nonprofits, including Climate United and Power Forward. At the time of the March hearing, Climate United had committed to $392 million in projects based on the money in its accounts, including $63 million for solar power developments in Oregon and Idaho and another $31.8 million in solar projects in rural Arkansas. Power Forward had committed $539 million and said the freeze left it unable to pay contractors’ outstanding invoices.

Zeldin had claimed that fraud was one of his main concerns, though a lengthy investigation by the interim U.S. attorney in Washington, D.C., failed to turn up any meaningful evidence, according to a report in The New York Times.

Perhaps as a result of a lack of evidence of fraud, EPA arguments before the appeals court focused on the contractual nature of the grants. The majority of justices agreed that the matter should be heard by the U.S. Court of Federal Claims, not the broader federal judiciary.

The dissenting justice, an Obama appointee, said that the EPA “has no lawful basis — nor even a nonfrivolous assertion of any basis — to interfere with funding that, pursuant to Congress’s instructions, already belongs to Plaintiffs.”

The plaintiffs are likely to appeal to the U.S. Supreme Court. If they fail there, the EPA could still be liable for billions of dollars, according to legal analysis by its own attorneys.