Appeals court rules for EPA, allowing cancelation of environmental grants

The D.C. Circuit Court of Appeals on Tuesday ruled in favor of the Environmental Protection Agency, allowing it to cancel $20 billion in climate grants from the Biden administration.

The grant recipients are expected to appeal the decision, POLITICO reported.

U.S. District Court Judge Tanya Chutkan for the District of Columbia had issued an injunction against EPA Administrator Lee Zeldin’s grant terminations in April, ruling that he had violated the law and the Constitution. Chutkan’s injunction was stayed while the EPA appealed, preventing withdrawals from the accounts at Citibank where the Greenhouse Gas Reduction Fund money was held.

The appeals court panel in a split decision reversed Chutkan's ruling, saying she should not have issued the injunction.

“The grantees are not likely to succeed on the merits because their claims are essentially contractual, and therefore jurisdiction lies exclusively in the Court of Federal Claims,” wrote Judge Neomi Rao, joined by Judge Gregory Katsas. Both judges are Trump appointees.

“And while the district court had jurisdiction over the grantees’ constitutional claim, that claim is meritless,” Rao continued. “Moreover, the equities strongly favor the government, which on behalf of the public must ensure the proper oversight and management of this multi-billion-dollar fund.”

Judge Nina Pillard, an Obama appointee, dissented from the rest of the panel, claiming the majority opinion reached “the wrong conclusion at every step of its review” and the Trump administration's “spurious” investigations into the GGRF were undertaken in order to commit “sabotage” of the IRA.

Zeldin, with the termination of the grants, has claimed that some of the GGRF recipients were not qualified to receive the large sums, that the groups had connections to prominent Democrats or Biden administration officials, and that Biden officials limited EPA’s oversight of the spending before leaving office. The EPA administrator has argued that those concerns broadly led to a need to terminate the entire program, which had disbursed $3 billion before the funds were frozen.

In court, the Trump administration has argued that the grant terminations amount to a breach of contract, meaning that it must be heard by a specific tribunal, the U.S. Court of Federal Claims. Katsas and Rao agreed with the government's argument.

That court could take at least a year to reach a judgment, which some grant recipients claim will be too late, as they will have to close their doors long before then. The majority opinion pushed back on that claim.

“EPA terminated the grants because of concerns about the integrity of the grantmaking process,” Rao wrote. “While litigation is pending, the grantees may have to scale down their operations or return to the operational status they had before they received federal funds. Although this causes some harm, the harm is readily compensable through damages and therefore is not irreparable.”

The panel will not formally lift Chutkan’s injunction until the grant recipients have had a chance to file a petition for a rehearing before the entire appeals court.

A Climate United Fund spokesperson, which is one of the GGRF recicpients, said they are considering whether to seek review before the full court, which has a majority of Democratic-appointed judges.

“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,” Climate United CEO Beth Bafford said in a statement.