A judge in a federal court has ruled that the Environmental Protection Agency (EPA) was “arbitrary and capricious” when it terminated contracts with three nonprofits and froze their Citibank accounts. The judge ordered a temporary restraining order requiring the EPA and Citibank to allow the nonprofits access to their funds. This decision is part of a suit brought by the nonprofits, who received grants from the Greenhouse Gas Reduction Fund, a program included in the 2022 Inflation Reduction Act.
The EPA had asked Citibank to freeze the accounts on grounds of waste, fraud, and conflicts of interest. But the judge rejected these allegations as “vague and unsubstantiated.” The letters of termination issued by the EPA mentioned ongoing investigations but provided no concrete information or evidence to support the action. The judge believed that the nonprofits would suffer “imminent, irreparable harm” if they did not reclaim access to their funding.
One of the nonprofits, Climate United, had put $392 million into projects, including solar projects in Oregon and Arkansas. Another plaintiff, Power Forward, had invested $539 million and was unable to pay contractors due to the freeze. In normal situations, government agencies provide written notice and allow awardees to protest before terminating contracts. In this case, the nonprofits were not provided with notice before their accounts were frozen, and their inquiries were ignored by both the EPA and Citibank.
The EPA subsequently invited Climate United to discuss with them but kept postponing and then abruptly cancelling the meeting without cause. Official termination letters were finally issued on March 10, prior to a hearing that had been scheduled. The judge held that the actions of the EPA violated a duly enacted statute and disrupted the nonprofits’ statutory right to the funds.
The Greenhouse Gas Reduction Fund has been under fire, with the EPA attempting to cancel $20 billion in grants. The program was designed to pay for clean energy and climate-resilient projects, but it has been disallowed by Republicans who consider it an unaccountable “slush fund.” The EPA administrator Lee Zeldin has raised questions about fraud, but no evidence has been submitted to support these claims.
The ruling by the judge prevents the EPA from proceeding with canceling the grants until the case is resolved. Citibank is not allowed to disburse the funds to the federal government if requested. The judge did not, however, order Citibank to release the frozen funds, so the nonprofits are still not able to access their funds. Climate United was able to delay employee furloughs after it received a temporary emergency grant from a donor and will be seeking an injunction for the release of the funds shortly.
The case has also involved the FBI, which requested that Citibank freeze accounts for possible criminal violations. Habitat for Humanity and United Way are some of the other organizations impacted by the disruptions to their sustainability initiatives. The legal battle helps to highlight the difficulties of implementing climate programs in the midst of allegations of mismanagement and political scandal.
