DC Circuit grills EPA over nixing green energy grants

WASHINGTON (CN) — A D.C. Circuit panel appeared doubtful Monday that the Environmental Protection Agency followed the law when it suddenly terminated nearly $14 billion in clean energy grants, citing potential fraud concerns.

The Justice Department asked the appellate court to overturn a preliminary injunction blocking the EPA and the Treasury Department from clawing back the funds currently held in the grantees’ accounts at Citibank.

The grants, part of the Greenhouse Gas Reduction Fund program authorized under President Joe Biden’s Inflation Reduction Act, were awarded to fund efforts for clean energy projects across the country. Climate United received $6.97 billion, Coalition for Green Capital $5 billion and Power Forward $2 billion.

EPA Administrator Lee Zeldin issued three termination letters to the grantees, effective immediately, “based on substantial concerns regarding program integrity, the award process, programmatic fraud, waste and abuse and misalignment with the agency’s priorities.”

Zeldin specifically highlighted an “absence of adequate oversight controls,” “improper or speculative allocation of funds” and “circumvention and defeat of key oversight mechanisms in the disbursement of federal funds.”

Adam Unikowsky, of Jenner Block and representing the grantees, argued Monday that the EPA’s justification was not factual because any grant recipient, including sub-grantees that receive funds to construct the projects, has monitored bank accounts.

“The question in this case is whether the EPA has the authority to just terminate the whole program and re-obligate the funds just because it disagrees with the decision of the prior administration,” Unikowsky said.

U.S. Circuit Judge Cornelia Pillard, a Barack Obama appointee, pressed Justice Department attorney Jacob Roth over separation of powers concerns sparked by the EPA’s canceling of congressionally appropriated funds.

“EPA has been really clear on this, from in the termination letters and in every statement it’s made, that this is not some sort of frontal assault on the appropriation or Congress’s objective,” Roth said. “There’s a whole series of grants, like the solar grants, that were not touched because they don’t implicate the structural problems with these particular grant agreements.”

U.S. Circuit Judge Neomi Rao, a Donald Trump appointee, expressed concern that finding any separation of powers issue would set a precedent for a slew of constitutional claims anytime the executive fails to terminate a contract as specified by statute.

Unikowsky pushed back, arguing that Climate United and the fellow grantees’ claims were a special case because the EPA violated the appropriations clause rather than a usual statute.

“Suppose EPA simply announced that it doesn’t care about what the act of Congress says, it’s the executive branch, it has the unilateral authority to terminate contracts at will,” Unikowsky said. “I think that would raise some separation of powers and constitutional issues.”

Pillard noted that the facts of the case seem to undermine the Justice Department’s case, pointing both to Zeldin’s public comments and the EPA’s actions at the outset of the case.

Following his confirmation, Zeldin indicated on Feb. 12 that the EPA would not rest until the grant funds had been recovered.

During a Feb. 23 Fox News interview, Zeldin made clear what he thought about the Greenhouse Gas Reduction Fund program, stating “the entire scheme, in my opinion, is criminal.”

According to the grantees, they first learned their funds had been frozen in mid-February when they placed their regular request to Citibank to release the funds but received no response.

They continued requesting access to funds until Citibank informed them on March 3 that it had forwarded the request to the EPA for further guidance. During this time, the EPA did not respond to similar requests from the plaintiffs.

The agency offered to meet with Climate United around Feb. 24, then rescheduled the meeting three times before ultimately canceling without explanation.

On March 4, the Treasury instructed Citibank not to disburse the funds through March 9, after which the EPA ordered the freeze to be continued indefinitely.

Climate United sued, seeking a temporary restraining order on March 8, and U.S. District Judge Tanya Chutkan scheduled a hearing for March 12. On March 11, the EPA sent three termination letters to the green energy groups.

Chutkan, an Obama appointee, granted the temporary restraining order on March 18, then granted a preliminary injunction on April 15, finding that the EPA had never explained its freeze of the funds or why the programs’ wholesale cancellation was necessary.

U.S. Circuit Judge Gregory Katsas, a Trump appointee, rounded out the panel.

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