A federal judge Tuesday found the Environmental Protection Agency (EPA) acted in an “arbitrary and capricious” manner when terminating contracts with three nonprofits. The judge issued a temporary restraining order that requires the EPA and Citibank to give nonprofits access to funds in their accounts.
The restraining order is the latest development in a lawsuit brought by three nonprofits that were recipients of grants from the Greenhouse Gas Reduction Fund, a part of the Inflation Reduction Act signed into law in 2022. The EPA asked Citibank to freeze the accounts over alleged concerns about waste, fraud, and conflicts of interest. The judge found the EPA’s claims “vague and unsubstantiated.”
The EPA’s termination letters “vaguely reference ‘multiple ongoing investigations’ into ‘programmatic waste, fraud, and abuse and conflicts of interest’ but offer no specific information about such investigations, factual support for the decision, or an individualized explanation for each [of the nonprofits],” the judge wrote. “This is insufficient.”
In the opinion issuing the restraining order, the judge, Tanya Chutkan of the U.S. District Court for the District of Columbia, found the nonprofits will “suffer imminent, irreparable harm” if they don’t gain access to their funding.
One of the plaintiffs, Climate United, has already committed $392 million to projects that qualify for money from the Greenhouse Gas Reduction Fund, including $31.8 million for solar projects in rural Arkansas and $63 million for solar power plants to be developed in Oregon and Idaho in conjunction with tribal communities.
Another plaintiff, Power Forward, has committed $539 million, and the freeze on its accounts has left it “unable to pay outstanding invoices from contractors.”
Normally, when the EPA or any other government agency moves to terminate a contract, it sends written notice and gives the awardee an opportunity to object. In this case, the nonprofits didn’t hear from the EPA or Citibank before their accounts were frozen. Instead, when the nonprofits requested withdrawals in February and March, Citibank didn’t release the money, and when asked about it, ignored their inquiries. The EPA ignored the nonprofits, too.
Eventually, the EPA offered to meet with Climate United the week of February 24, but “rescheduled the meeting three times and then canceled it without explanation,” the judge found. The EPA didn’t send the nonprofits formal termination letters until March 10, right before a scheduled hearing on the matter of the unreleased funds.
That termination letter, though, “appears to contravene a duly enacted statute and interferes with [the nonprofits’] statutory rights to these funds,” Judge Chutkan wrote.
“It does not appear that EPA…took the legally required steps necessary to terminate these grants, such that its actions were arbitrary and capricious. And when questioned at the March 12 hearing, [the EPA] proffered no evidence to support their basis for the termination…or that they followed the proper procedures.”
In issuing the restraining order, the judge found that the nonprofits “have shown a substantial likelihood of success” in winning the case.
