‘Green banks’ petition for rehearing in $14B EPA funding freeze case

Nonprofit recipients of $14 billion in Greenhouse Gas Reduction Fund grants that were frozen by the Environmental Protection Agency earlier this year filed a rehearing petition late Wednesday after a U.S. Court of Appeals panel upheld the freeze.

U.S. District Court for the District of Columbia Judge Tanya Chutkan granted an injunction against the freeze in April, ruling that the EPA had acted arbitrarily and capriciously in attempting to revoke the funding, but the U.S. Court of Appeals for the District of Columbia Circuit issued a stay on that ruling soon after.

The appeals court issued its 2-1 ruling upholding the freeze on Sept. 2, saying, “The district court erred in concluding the grantees are likely to succeed on their regulatory, arbitrary and capricious, and constitutional claims.”

The plaintiffs named in the rehearing petition include the Climate United Fund, Coalition for Green Capital, Power Forward Communities and the California Infrastructure and Economic Development Bank. The petition argues that the panel’s opinion contradicts settled jurisprudence and misconstrues the plaintiffs’ constitutional claim.

The majority opinion aligns with the Trump administration’s arguments to freeze GGRF funding disbursed by the Inflation Reduction Act, citing public criticism about the “sheer scale of the grant program and the method of allocating billions of dollars,” and stating, “The month before President Trump’s inauguration, EPA modified the grant agreements — with no apparent consideration from the grantees — to make it more difficult for the government to terminate the grants.”

The opinion concludes that the dispute in this case is contractual, not constitutional, and should be heard in the Court of Federal Claims — thus Chutkan lacked the jurisdiction to rule on the issue.

“While the district court had jurisdiction over the grantees’ constitutional claim, that claim is meritless,” the opinion states. “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.”

The majority opinion was filed by two judges appointed by President Donald Trump, Judge Neomi Rao and Judge Gregory Katsas.

“The grantees insist the [Administrative Procedure Act] gives them an independent right to be free of arbitrary agency action, including contract terminations. But we have long rejected the idea that the APA’s general bar on arbitrary and capricious action subjects contract terminations to a parallel review scheme in district court,” Rao and Katsas wrote.

The EPA said in a release responding to the panel’s decision that it was “fantastic to see reason prevail in the court system ... The gold bar recipients were wrong about jurisdiction all along and wrong to act so entitled to these precious public funds that belong to hardworking American taxpayers.”

The “gold bar” language refers to a covert video recorded of a Biden administration EPA adviser having a conversation in a bar in which he likens the administration’s efforts to disburse funds before Trump’s inauguration to throwing gold bars off the edge of the Titanic. The adviser’s lawyer has said he was not referring to the GGRF in his comments.

The plaintiffs requested a rehearing en banc – meaning all judges of that particular court would have to hear the case.

The panel’s dissenting judge, Nina Pillard, was appointed by President Barack Obama. Of the court’s 15 judges, four are Obama appointees, three are Biden appointees, three are Trump appointees, one is an appointee of President George H.W. Bush, and four judges have senior status and would not vote on an en banc petition.

Pillard said in her dissent that the majority had “[embraced] a misguided and breathtakingly expansive conception of the Tucker Act,” a federal statute which gives the U.S. Court of Federal Claims jurisdiction to hear certain claims against the U.S. government.

The plaintiffs cite this argument of Pillard’s in their petition, saying the panel “badly erred in concluding that the Tucker Act impliedly precludes jurisdiction and that Plaintiffs’ constitutional and statutory claims fail.”

“The panel’s constitutional ruling cannot be squared with existing law; Plaintiffs’ claim that EPA seeks to dismantle the GGRF, flout the IRA, and override Congress’s power of the purse is plainly a constitutional claim,” said the plaintiffs.

Pillard said the majority is allowing “the government to seize Plaintiffs’ money based on spurious and pretextual allegations and to permanently gut implementation of major congressional legislation designed to improve the infrastructure, health, and economic security of communities throughout the country.”