EPA's challenges grow in quest to claw back ‘gold bars'
The Trump administration's bid to take back billions of dollars in green finance grants hasn't made much progress.
The money is still sitting in Citibank accounts under the names of the eight nonprofits the Biden administration chose for the Greenhouse Gas Reduction Fund grants. Internal emails between government lawyers — obtained by POLITICO last month — show that several raised doubts about EPA's case for withholding those funds from recipients.
And EPA Administrator Lee Zeldin's claims of fraud are being contradicted by the Justice Department lawyers defending the agency in court.
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But on Tuesday, Zeldin continued to insist that EPA's decision to terminate the awards is justified by evidence of malfeasance.
'One thing that we have zero tolerance for, is that there will be zero waste and abuse of even a penny of your constituents' tax dollars,' he said during a Tuesday hearing of the House Energy and Commerce Committee.
EPA announced it would terminate the awards March 12, pointing to 'well-documented incidents of misconduct, conflicts of interest, and potential fraud.'
Two months later, the Trump administration has yet to publicly disclose any concrete charges of fraud or wrongdoing either by the Greenhouse Gas Reduction Fund recipients or the Biden officials who designed the program. Last week, The New York Times reported that a probe into the grant program — initiated by the Office of the U.S. Attorney for the District of Columbia — may have shut down after finding no evidence of criminality.
Zeldin often goes on the offensive when asked to provide evidence of fraud. He cites a surreptitiously recorded video of a former Biden official describing the late-term rush to obligate climate law funds as 'throwing gold bars' from the Titanic, the fact that several of the program's awardees have former Democratic officials on their staff or board, and the relative newness of some of the nonprofits launched to run the new lending facility.
At the House budget hearing Tuesday, he complained that Rep. Nanette Díaz Barragán (D-Calif.) prevented him from listing all those data points in response to her question about the grant terminations.
'I guess the other side of the aisle doesn't want me to go into any real list,' he told Rep. Buddy Carter (R-Ga.). 'One, two, three, four, I mean, how much time do you have? Because if you want to yield a full 20 minutes, I'm happy to go through all of the specifics.'
At a Senate Environment and Public Works Committee hearing a day later, Zeldin got into a heated argument with Sen. Sheldon Whitehouse (D-R.I.), the committee's ranking member. Whitehouse accused EPA of not meeting the requirements of its own grantmaking regulations — and lying about individually reviewing every canceled grant.
Zeldin hit back at Whitehouse, accusing him of trying to force EPA to light 'taxpayer dollars on fire.'
'The American taxpayers, they put President [Donald] Trump in office because of people like you,' he said.
What EPA's lawyers say
EPA first froze the $20 billion Greenhouse Gas Reduction Fund grants in April, declaring them terminated a few weeks later. Most grantees are now suing EPA and Citibank to regain access to their funds, which the Biden administration awarded to finance a transition to electrification and renewable energy.
EPA's first district court filing on the case — which was penned by EPA chief of staff Eric Amidon — asserted evidence of misconduct and fraud. But Department of Justice attorneys have not made allegations of waste or fraud central to the defense of EPA's case.
'To be clear, we're not accusing anybody of fraud,' Yaakov Roth, an acting assistant attorney general, said at a Monday hearing before a U.S. Court of Appeals for the District of Columbia Circuit panel. 'I don't want to suggest otherwise.'
DOJ attorney Marc Sacks, who argued the case in April before the U.S. District Court for the District of Columbia, focused on the inherent right he said new administrations had to cancel grants that didn't align with their policy objectives.
But last month, District Court Judge Tanya Chutkan issued an injunction that would allow grantees — mostly community lenders and green energy nonprofits — to withdraw funds under their contracts while litigation continues.
An appeals court has temporarily stayed that injunction. The appeals panel, which is made up of one Obama appointee and two Trump appointees, is expected to decide shortly whether it will lift that stay.
Roth, who represented EPA at the appellate court this week, has focused on a different argument than Sacks. EPA, he told the court, was forced to terminate the grants because the arrangement with Citibank didn't give the agency the 'tools and oversight' it needed to scrutinize spending by the program's subawardees — the businesses and individuals that the primary award recipients invest in or lend to.
When Judge Nina Pillard, an Obama appointee, asked whether EPA could have instead modified the contract to provide better visibility, Roth said that was beside the point.
'It may be that this could have been modified and that the issues could have been addressed by modification rather than termination,' he conceded. 'I don't really know the answer to that, but I'm not sure it matters for purposes of either this court's review or the claims court's review.
'The question isn't going to be the reasonableness of the concerns, it's going to be how much leeway did EPA have under the contract to make these kinds of decisions,' he said.
A former EPA official granted anonymity because he feared retribution said the grant terms would have allowed EPA to seek amendments to the award contracts without terminating the grants. But he said the arrangement with Citibank was already designed to be transparent and to provide EPA with the ability to conduct oversight — including over subawardees.
Roth was one of several senior government attorneys to express concern about EPA's decision to freeze the grant awards in a March email chain obtained by POLITICO. Days before EPA formally terminated the grants, Roth warned that the courts could ultimately award the eight grantees the balance of their original awards — plus damages and interest — if they ruled the freeze was unlawful.
The government's immediate focus, he wrote at the time, should be on 'short-term objectives,' including keeping money from going out the door before investigations are concluded.
On Wednesday, Zeldin told the Senate environment panel that $3 billion in program funds has already been spent.
New awards?
Roth said on Monday that if the courts allow the government to recover the funds, EPA would relaunch the Greenhouse Gas Reduction Fund with new safeguards and select new recipients.
'This is not some sort of frontal assault on the appropriation or Congress' objective,' he told the appeals panel. 'The problem that EPA has is with these contracts, not with the statute.'
That means Zeldin, who is expected to soon release a finding that greenhouse gas emissions don't endanger the public, would oversee a $20 billion program devoted to slashing those pollutants.
Sam Bagenstos, the top lawyer for former President Joe Biden's Office of Management and Budget, argued in an amicus brief filedthis week that 'whether or not the EPA truly intends to reobligate the money to new grantees, it cannot lawfully do so.'
In the 2022 climate law, Congress gave EPA a deadline of Sept. 30, 2024, to obligate all grants under the green lending program before its authorization expired. EPA met that deadline.
While some appropriated funds would remain available for five years to cover expenses associated with the program, 'what they can't do is make a new grant to someone new,' said Bagenstos, who is now a professor at the University of Michigan.
In his brief in support of the awardees, Bagenstos said it was an 'elementary principle' of appropriations law that an agency was not permitted to enter into new funding obligations once the appropriation has expired.
The former EPA official disagreed with that, saying that in some cases agencies can reopen grant competitions after a program has expired if the original grant competition was flawed in some way.
Bagenstos and other experts said that if the courts permitted EPA to claw the funds back, it would just flow back into the Treasury rather than going to finance new grants.
If that happens, they said, the Trump administration and its GOP allies in Congress probably couldn't use those savings as a 'pay for' to offset the tax cuts and defense and immigration enforcement spending in their megabill.
The package is estimated to add trillions of dollars to the national debt, and Republicans are searching for spending cuts to narrow that gap. The current bill before the House would slash climate law programs — including an unspent $19 million to administer the green lending fund — and other spending for health and social services.
'Just clawing the money back administratively actually means that they wouldn't be able to get the benefit of that in [Congressional Budget Office] scoring, because it would be the administration doing it, not Congress in this bill,' said Bagenstos.
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