Appeals Court Says Trump Administration Can Proceed with Green Bank Program Clawbacks

On Tuesday, September 2, the Trump Administration scored a victory in its ongoing efforts to roll back clean energy initiatives and grants.

The U.S. Court of Appeals for the District of Columbia Circuit ruled that a lower court judge incorrectly blocked the Trump Administration from freezing $16 billion in grant funding awarded to nonprofit organizations under the Greenhouse Gas Reduction Fund (GGRF), which was established in the Inflation Reduction Act of 2022 (IRA). 

The funds were slated to create financial products for renewable energy commercial and residential projects. Unlike other grant programs where funds are held by the U.S. Treasury, funding for the two grant programs – National Clean Investment Fund (NCIF) and Clean Communities Investment Accelerator (CCIA) – was held by a financial agent.  The Trump Administration criticized the programs as “wasteful spending” and sought to recover the allocated funds.  Before President Trump took office, EPA unilaterally changed the grant terms to make it harder for the incoming Administration to cancel the obligated funds. 

The nonprofit groups who were denied access to their funding challenged the Trump Administration’s decision to do so and filed suit against the EPA, Administrator Lee Zeldin, and the financial agent in federal district court, arguing they were illegally denied access to funds awarded the previous year.  The organizations sought to restore funding access, claiming the freeze had stopped their operations and threatened their basic functions.

The divided D.C. Appeals Court panel held that the lower court overstepped its authority in issuing an injunction forcing EPA to continue funding and concluded that the Tucker Act bars plaintiffs from relief in federal district courts for claims that are contractual in nature:

“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," the majority opinion stated. 

Passed in the 1800’s, the Tucker Act waives sovereign immunity in specific contractual disputes and provides a pathway for individuals to sue the U.S. Government for monetary claims in the Court of Federal Claims.  

In a strongly worded dissent, Circuit Judge Cornelia Pillard argued that the plaintiffs “are not seeking reinstatement of their grant awards or any other form of specific performance of contract.”  Rather, Judge Pillard argued that the “suit challenges the government’s decision to illegally seize their property – money in bank accounts opened in their names. . .”

The plaintiffs are expected to appeal.

This ruling comes less than a month after the Trump Administration cancelled $7 billion in Solar for All grants, a third GGRF program authorized under the Inflation Reduction Act.  In doing so, EPA cited provisions in the One Big Beautiful Bill Act that repealed the statutes creating the GGRF grant programs, and rescinded any unobligated funds as its reason for doing so.

Climate United Fund et al. v. Citibank NA et al., also follows a recent Supreme Court opinion, NIH v the American Public Health Association, which held that the Tucker Act governed the dispute over cancelled NIH grants, saying the Administrative Procedure Act’s ‘limited waiver of [sovereign] immunity’ does not provide the District Court with jurisdiction to adjudicate claims “based on” the research-related grants or to order relief designed to enforce any “‘obligation to pay money’ ” pursuant to those grants.”

Click here to read the U.S. Court of Appeals’ full decision. 

These decisions, coupled with the continuous efforts by the Administration to reverse Biden-era policies, have generated significant uncertainty in the renewable energy sector and the federal grants space.  WBD’s team is already advising clients across the renewable energy sector on how to best protect their interest in this fast-changing landscape.  If you have any questions about how these legal and regulatory actions impact your business or organization, contact us. We are prepared to help you quickly assess your exposure, craft public advocacy campaigns, and coordinate engagement across legal, finance, and policy teams.