EPA Says It Had Good Reason to Claw Back Green Bank Grants (1)

The EPA acted reasonably in freezing $20 billion worth of Biden-era environmental grants, because the grant agreements were changed in a way that made oversight “exceedingly insufficient,” the agency told a federal court on Wednesday.

The agreements were modified on two occasions, both after the 2024 presidential election, to limit the Environmental Protection Agency’s contractual rights, according to a Justice Department filing opposing the grant recipients’ motion for a preliminary injunction.

As a result, the EPA was left with “insufficient authority to retain control of funds short of outright termination,” according to the government’s motion filed in the US District Court for the District of Columbia.

The EPA is trying to rescind grants awarded to nonprofit green banks involved in the litigation: the Coalition for Green Capital, Climate United Fund, and Power Forward Communities. State green banks, including the California Infrastructure and Economic Development Bank, Efficiency Maine Trust, and Minnesota Climate Innovation Finance Authority, also sued over the freeze, and their cases were consolidated.

Judge Tanya S. Chutkan handed the nonprofit groups a temporary win on March 18, ordering Citibank to maintain climate grants held in its accounts.

The government claims the grant recipients “are not entitled to the relief they seek because their non-contract claims are a mirage, and they offer no authority that would deny the government the same rights that every party enjoys when it chooses to conduct its affairs through contract.”

Moreover, a change in administration “is a perfectly reasonable basis for an executive agency’s reappraisal of the costs and benefits of its programs,” according to the filing.

The EPA also noted that it has not abandoned the funding program, known as the Greenhouse Gas Reduction Fund. Rather, the termination letters it sent to grant recipients only state that the agency “will work to re-obligate lawfully appropriated funds” within the program, with “enhanced controls” to ensure proper oversight and accountability.

Separately, Citibank—a defendant in the litigation—said in its own brief on Wednesday that it complied with its legal obligations in freezing the accounts. The bank was first asked to hold back the money by the Federal Bureau of Investigation, then ordered to by the Treasury Department.

Citibank has “complied with its contractual obligations at every turn,” according to the filing.

Senate Democrats on Wednesday questioned whether the EPA had a legal reason for canceling the grants during a confirmation hearing for Sean Donahue, the Trump administration’s nominee to become the agency’s general counsel.

The funding had already been dispersed by the time the Trump administration took office, “so what they had to do was try to cook up a way to freeze the fund, and the way they tried to freeze the fund was to create a pretend criminal investigation,” said Sen. Sheldon Whitehouse (D-R.I.). “The problem was there is no evidence of any crime.”

Rep. James Comer (R-Ky.), chair of the House Oversight and Government Reform Committee, on Thursday called on eight groups that got EPA grant money to provide all communications they’ve had with the agency about their grants, as well as details about their staff and salaries.

“The radical environmental groups profiting from Biden’s Green New Deal must be held accountable for their misuse of taxpayer-funded grants and provide information for our investigation,” Comer said.

The case is Climate United Fund v. Citibank N.A., D.D.C., No. 1:25-cv-00698, EPA opposition 3/26/25.