A federal appeals court on Tuesday vacated a lower court order requiring the Environmental Protection Agency and Citibank to continue funding $16 billion in climate-related grants, ruling that the grantees are unlikely to prevail in their lawsuit.
Judge Neomi Rao, writing for the panel, said the district court "abused its discretion" in issuing a preliminary injunction after five nonprofits sued the agency over its March 2025 decision to terminate the awards.
The court found that the groups' claims were primarily contractual and must be pursued in the Court of Federal Claims, while their constitutional claim was without merit.
The case centers on grants awarded under the $27 billion Greenhouse Gas Reduction Fund created by the Inflation Reduction Act of 2022. In August 2024, the EPA directed $20 billion to eight nonprofits through two new programs, the National Clean Investment Fund and the Clean Communities Investment Accelerator.
The plaintiffs include Climate United Fund, which was awarded nearly $7 billion; the Coalition for Green Capital, which received $5 billion; Power Forward Communities, $2 billion; Inclusiv, $1.9 billion; and the Justice Climate Fund, $940 million.
The grants were structured through Citibank, which was designated as the federal government's financial agent to hold and release the funds under EPA's direction. That arrangement later became central to the legal dispute.
Earlier this year, U.S. District Judge Tanya Chutkan, an appointee of former President Barack Obama and who is often criticized by President Donald Trump, issued a temporary restraining order blocking the EPA's attempt to terminate several of the nonprofit agreements. Her order also prohibited Citibank from disbursing funds while the case was pending.
The grants had been targeted as part of EPA Administrator Lee Zeldin's campaign to claw back money from the Greenhouse Gas Reduction Fund, which Congress authorized under former President Joe Biden to launch pollution-reduction projects.
The EPA cited concerns about conflicts of interest and oversight in halting the program. The appeals court said 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 funding arrangement had drawn scrutiny after a video surfaced of an EPA employee suggesting that staff rushed to disburse climate grants before Trump's inauguration, comparing the process to "throwing gold bars off the Titanic."
The ruling leaves the nonprofits without access to the contested funding while the case proceeds in the proper venue.
Sandy Fitzgerald ✉
Sandy Fitzgerald has more than three decades in journalism and serves as a general assignment writer for Newsmax covering news, media, and politics.
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