A federal judge says some nonprofits awarded billions for a so-called green bank to finance clean energy and climate-friendly projects cannot have their contracts scrapped and must have access to some of the frozen money. The ruling is a defeat for President Donald Trump’s Environmental Protection Agency, which argues the program is rife with financial mismanagement.

The order late Tuesday by U.S. District Judge Tanya Chutkan “gives us a chance to breathe after the EPA unlawfully — and without due process — terminated our awards and blocked access to funds that were appropriated by Congress and legally obligated,” said Climate United CEO Beth Bafford.

Legal Challenge Launched Over Frozen Funds

The lawsuit by Climate United Fund and other groups contends that the EPA, Administrator Lee Zeldin and Citibank, which held the grant money, illegally blocked the funds awarded last year and had jeopardized the organizations’ operations.

Chutkan said Citibank must provide the money that was due to the nonprofits before the EPA had frozen their accounts in mid-February. The EPA immediately appealed.

Green Bank Program Faces Political Opposition

The Greenhouse Gas Reduction Fund, commonly referred to as a “green bank,” was authorized by the 2022 Inflation Reduction Act under Democratic President Joe Biden. Its goals run counter to the Trump administration’s opposition to climate-friendly policies and its embrace of fossil fuels. Zeldin quickly made the bank a target, characterizing the $20 billion in grants as a “gold bar” scheme marred by conflicts of interest and potential fraud.

A federal prosecutor resigned after being asked to open a criminal investigation, saying there was not enough evidence to move ahead. The FBI and Treasury Department, in coordination with the EPA, pressured Citibank to freeze the grants, which it did, according to the nonprofits.

Administration Cites Misconduct Concerns

Last month, Zeldin announced the termination of the grants, saying “well documented incidents of misconduct, conflicts of interest, and potential fraud raise significant concerns and pose unacceptable risk.”

Chutkan paused that move, saying the government provided no significant evidence of wrongdoing. But the Republican administration, in a recent filing, asserted it was allowed to end the contracts based on oversight concerns and shifting priorities.

“EPA’s new admission that it ‘did not terminate for Plaintiffs’ noncompliance’ … confirms that EPA’s invocation of ‘waste, fraud, and abuse’ was arbitrary and pretextual” the nonprofits said in a court filing.

To the government, the case is “just a run-of-the-mill (albeit large) contract dispute.”

That argument is important because it could move the case to a different court that can only award a lump sum and not force the government to keep the grants in place.

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