US appeals court rules Trump administration likely broke law in clawing back $20b in clean energy grants

A federal appeals court has moved to block the Donald Trump administration's effort to claw back and freeze $20 billion in clean energy grants that Congress had approved for distribution to nonprofit organizations.

The full US Court of Appeals for the District of Columbia Circuit ruled Tuesday in a 6-4 decision that the administration's actions were likely unlawful, according to the Associated Press.

The en banc ruling reversed a 2-1 decision the same court's three-judge panel issued last September. A full-court en banc review is an unusual procedure reserved for cases of significant legal or social importance.

The six judges in the majority agreed with a ruling US District Judge Tanya Chutkan issued last April, which found that the Environmental Protection Agency likely violated the law by attempting to terminate, freeze and recover the grant funds on policy grounds.

The four dissenting judges sided with the EPA, arguing that the statutory basis for the grants under the Inflation Reduction Act had been repealed by the so-called One Big Beautiful Bill Act, which Congress passed last July.

The EPA said it was reviewing its options in response to the ruling.

If the ruling restores the force of Judge Chutkan's preliminary injunction from last April, the frozen funds could once again flow to the nonprofit organizations.

The full appeals court granted a grace period of several days before the injunction takes effect, giving the EPA time to seek intervention from the Supreme Court.

The grace period is seven days, according to The New York Times.

If the EPA does not challenge the ruling before the Supreme Court or secure a separate order to maintain the freeze within that period, the injunction will be reinstated and the funds released to the nonprofits.

The nonprofit plaintiffs welcomed the decision. Climate United, the lead plaintiff, said in a statement that the DC Circuit judges on Wednesday "confirmed what we have always known" — that the EPA had unlawfully attempted to freeze the grant program.

Many of the organizations had suffered significant harm from the funding freeze, according to The New York Times. Climate United CEO Beth Bafford left the organization in March and has not been replaced. Other groups laid off staff.

Power Forward Communities, which received $2 billion in grants, had been reduced to just two employees earlier this year.

The funds came from the Greenhouse Gas Reduction Fund, a $27 billion program created under the Inflation Reduction Act, which the Joe Biden administration signed into law in 2022, according to Reuters.

Of that total, $20 billion went to eight organizations tied to the National Clean Investment Fund and the Clean Communities Investment Accelerator, which provided loans and investment for small-scale energy projects and efforts to improve the energy efficiency of buildings and transportation.

In February last year, EPA Administrator Lee Zeldin announced plans to claw back and freeze the $20 billion, saying the programs did not align with the EPA's priorities and citing allegations of mismanagement and fraud.