A three-judge panel on Monday appeared skeptical of the Environmental Protection Agency‘s justification for terminating $20 billion in grants for three nonprofit climate groups that were awarded the funding during the Biden administration. 

The D.C. Court of Appeals heard arguments by the EPA and climate groups regarding $20 billion in grants issued through the Greenhouse Gas Reduction Fund program, which was established through the 2022 Inflation Reduction Act.

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Last month, the appeals court paused a ruling from U.S. District Judge Tanya Chutkan that would have blocked the EPA from terminating grant money held in Citibank, allowing itself time to consider Chutkan’s full opinion. 

EPA Administrator Lee Zeldin has targeted the program since the beginning of his post at the agency, claiming it was mismanaged and lacked oversight, and that the money was routed through Citibank to avoid accountability. Zeldin has called the funds “gold bars,” referring to a sting video last year in which a former EPA employee said the Biden administration was trying to disburse promised funds quickly before the next administration. 

“It truly feels like we’re on the Titanic, and we’re throwing, like, gold bars off the edge,” the former employee says in the video.

The EPA’s efforts to terminate $20 billion in grants from the program’s eight grantees were quickly met with lawsuits brought by three grantees — Climate United, Coalition for Green Capital, and Power Forward Communities — who were awarded billions to help fund clean energy projects nationwide. 

The EPA argued its case for terminating funds before the three-judge panel, stating that the program’s funds lack transparency and oversight and that the agency has a right to terminate them. 

Judge Nina Pillard, who was appointed during the Obama administration, pressed the lawyer arguing on behalf of the EPA, acting Assistant Attorney General Yaakov Roth, stating that, from her understanding, there is “much more transparency, if not more,” over the funds, because the agency can see how the money is being spent.

Roth argued that the “EPA has the ability to see the money flowing out,” but it does do not have pre-approval of the funds. He noted that the grants’ reporting also happens later in the process.

Pillard said the structure is “by design” because it is not a traditional government program, but instead is meant to leverage private investment. 

The judge added that the plaintiffs leveraged the government’s money several times through private investment, so building energy infrastructure projects would cost the taxpayers less.  

She said that the program held the funds outside of the government at Citibank by design so that the entities would be seen as “stable and adequately funded partners up front.” 

“If there’s something illegal about that model, we should know, but I don’t see anything to that effect. And I don’t see, after how many months, actually, any evidence of the structural problems that the government reported to rely on here,” Pillard said.

Roth argued that there is an oversight problem, adding that the $20 billion is being granted to three climate groups and then passed through sub-grants for other organizations and investors to build projects. 

“The further removed it is, the harder it is for EPA to be able to understand what’s going on and trace the money, and so that is part of the concern as well from an oversight,” Roth said. 

Pillard asked, “why not modify the grants instead of canceling them?” 

“EPA determination was that these need to be terminated, and we need to redo them,” Roth answered. 

The other two judges were Gregory Katsas and Neomi Rao, who were appointed during the first Trump administration. Still, the judges questioned the agency’s argument that there was wrongdoing on the part of the grantees.

“What is your claimed basis for termination on the theory that there’s no breach, there’s no waste, fraud or abuse, but there’s a contract structure that might facilitate that? I’m not sure I see that in the grant agreement,” Katsas said.

Roth answered that the agency’s argument is that there is a “structural risk of waste and abuse, rather than a particular instance of waste and abuse.”

Following the hearing, Climate United CEO Beth Bafford said in a statement, “Today, the EPA should be celebrating new investments that create jobs, generate affordable domestic energy, and save hardworking Americans money.” 

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“Instead, they are taking up a frivolous battle in court. This is bigger than our contract with the federal government,” she said. “It’s about EPA’s lawless and indiscriminate subversion of Congress and due process to freeze our funds and terminate our grant agreement. We will continue to push forward so we can get back to doing this critical work.”