Full DC Circuit grills DOJ over effort to claw back billions in green energy funds

WASHINGTON (CN) — The full D.C. Circuit appeared split on Tuesday over whether it should vacate a preliminary injunction finding the Trump administration wrongfully gutted a Biden-era program meant to fund smaller climate projects by setting up intermediary investment funds. 

The en banc panel was called back to the case, after a smaller panel indicated the Trump administration could claw back nearly $16 billion in grants, by a group of “green banks” who argued that the Environmental Protection Agency had unlawfully gutted the Greenhouse Gas Reduction Fund without proper explanation. 

The grants, authorized under Biden’s Inflation Reduction Act, were awarded to fund clean energy projects across the country. Climate United received $6.97 billion, Coalition for Green Capital $5 billion and Power Forward $2 billion.

A three-judge panel, dominated by Donald Trump appointees, determined in a 2-1 ruling that U.S. District Judge Tanya Chutkan exceeded her authority by issuing the injunction. The judges found that since the dispute was contractual, only the Court of Federal Claims has jurisdiction over the case. 

In their Sept. 2 opinion, U.S. Circuit Judges Neomi Rao and Gregory Katsas sided with the Justice Department’s assertion that it was necessary to summarily eliminate the grant program due to a lack of proper oversight and management. 

U.S. Circuit Judge Cornelia Pillard, a Barack Obama appointee, was the lone dissenter and slammed her colleagues for ignoring the government’s pretextual effort to effectuate Trump’s anti-climate policy goals. 

The green banks petitioned for a rehearing before the full court, asserting that the EPA had no statutory authority to demand back the funds that had been congressionally appropriated and disbursed to their Citibank accounts. When it agreed to rehear the case, the court froze the merit panel’s ruling, leaving the $16 billion with Citibank. 

Justice Department attorney Jacob Roth urged the en banc court to fully vacate Chutkan’s injunction as clearly erroneous, asserting that Congress’s decision to repeal the Greenhouse Gas Reduction Fund program via Trump’s “Big, Beautiful Bill” last summer meant the banks could no longer press their separation of powers claim.

“It wouldn’t really make sense if the goal of the claim is to vindicate what Congress wanted,” Roth said. “Congress has now told us they don’t want this program.”

Many members of the panel seemed skeptical that it should place much weight in the congressional repeal, noting the EPA’s conduct was very likely unlawful and unreasonable. 

U.S. Circuit Judge Michelle Childs reminded Roth the EPA first provided no explanation for terminating the grants, then claimed there was waste, fraud and abuse — a line frequently used at the start of Trump’s second term by the Department of Governmental Efficiency — and finally landed on oversight concerns. 

The Justice Department had provided the court no evidence to back up any of the claims, the Biden appointee said. “So how are we to take that you actually had an adequate reason?” she asked.

Roth said that the Trump administration had reports that, days before the inauguration, certain grant recipients took out nearly $3 billion out of the Citibank accounts to a series of private equity funds. He added that the EPA could make a fraud, waste and abuse claim first and find evidence via the discovery process at the Court of Federal Claims. 

U.S. Circuit Judge Patricia Millett, an Obama appointee, had a heated exchange with Roth over his assertion that the underlying preliminary injunction was erroneous, pointing out the clear record of statements by Trump and EPA Administrator Lee Zeldin targeting the “Green New Deal” and this specific grant program. 

She asked Roth how he could contest that the EPA did not try to dismantle the program as a whole, to which he answered that the concern was with how the grants were structured and implemented rather than program itself. 

Millett seemed taken aback, emphasizing that for the court to determine Chutkan’s decision was clearly erroneous, there would need to be no evidence that supports her findings, but the administration’s statements are obvious pieces of evidence. 

Roth’s position, Millett said, raised a factual dispute that would require the court to remand back to Chutkan to figure out. 

Adam Unikowsky, of Jenner Block and representing the green banks, said that the grant program was structured in a way that, once the funds were obligated, the recipients themselves held title over the funds.

Rao tried to press Unikowsky on his argument that EPA’s action was illegal under the Administrative Procedure Act or the Inflation Reduction Act, suggesting that he hadn’t raised the point prior to Tuesday’s arguments. 

Unikowsky rejected that, reading out the banks’ specific APA section from their preliminary injunction motion and stating the argument had been there “the whole way.”

“We say, ‘indeed, it is clear that the vague references to fraud, waste and abuse in the notices are prefectural cover to shut down a program approved by Congress that the new administration does not like,’” Unikowsky said, reading from the section. “And likewise, in the section about the Tucker Act, one of our core arguments is that this wasn’t really an individual termination case, that ultimately the EPA had shut down the entire program.”

The full panel was rounded out by U.S. Circuit Judges Florence Pan, Robert Wilkins, Justin Walker, Bradley Garcia and Chief U.S. Circuit Judge Sri Srinivasan. 

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