The Environmental Protection Agency said that it was canceling $20 billion in grants for climate and clean energy programs that have been frozen for weeks, a move that was labeled illegal by nonprofit groups that were supposed to receive the funds.
The money has been caught in an escalating controversy involving the E.P.A., the Justice Department, the Federal Bureau of Investigation and Citibank, where the funds are being held and are now frozen, prompting lawsuits from three nonprofit groups.
The grants were issued to a total of eight nonprofit organizations through the Greenhouse Gas Reduction Fund, which received $27 billion program in funding from Congress through the 2022 Inflation Reduction Act.
But since taking office, Lee Zeldin, the E.P.A.’s administrator, has tried to claw back the money, saying they were part of a “scheme” and citing as evidence a hidden-camera video from Project Veritas, a conservative group known for using covert recordings to embarrass its political opponents.
The E.P.A. can cancel the grant contracts if it can document examples of waste, fraud, and abuse by the grantees. But that hasn’t happened at this point.
Yesterday, Democrats on the House Energy and Commerce Committee launched an investigation into the E.P.A,’s freezing of the funds and what they said were Mr. Zeldin’s “false and misleading statements.”
Two of the nonprofit grant recipients, Climate United and the Coalition for Green Capital, said they will fight the cancellation. A court hearing on a related case is scheduled for Wednesday.
Here is what we know about the $20 billion in funding and how it became a target of the E.P.A.
How the controversy started
In February, Mr. Zeldin announced that he had found billions of dollars of “gold bars” of grant funding at Citibank, calling the Greenhouse Gas Reduction Fund (or “green bank”) grant program a “scheme” and a “rush job with no oversight.”
Mr. Zeldin has embraced the Trump administration’s emphasis on spending cuts, touting his work with the Department of Government Efficiency. He has canceled scores of other E.P.A. contracts, totaling what the agency said is around $2 billion across more than 400 initiatives.
The “gold bars” comment was a reference to a video released in December by Project Veritas in which Brent Efron, then an E.P.A. employee, likened his agency’s efforts to spend federal funds on climate programs before leaving office to throwing “gold bars” off the Titanic.
Mr. Efron’s lawyer has denied his client was referring to the Greenhouse Gas Reduction Fund.
After Mr. Zeldin’s statement, Ed Martin, the interim U.S. attorney for Washington D.C., asked Denise Cheung, a top federal prosecutor, to freeze the $20 billion held by Citibank. But she abruptly resigned after determining there was not enough evidence to order the funds frozen. The F.B.I. and the Justice Department continued their investigations.
Last week, Mr. Zeldin also referred the matter to his agency’s acting inspector general for a third, concurrent investigation.
The nonprofit grant recipients began executing their legal defense this past weekend, when Climate United sued E.P.A. and Citibank, claiming they were illegally withholding the money. Two other recipients filed suits against Citibank in the following days.
A hearing on Climate United’s request for a temporary restraining order to release the funds was scheduled for Wednesday in the United States District Court for the District of Columbia.
What the nonprofits are saying
The cancellations surprised Climate United, a nonprofit organization that was awarded nearly $7 billion, said Beth Bafford, the group’s chief executive officer. She said she received an official termination letter a half-hour before the agency issued a public statement.
The nonprofits have been unable to access the funds in their Citibank accounts since mid-February. The funds have been held there under an agreement between the E.P.A. and the bank.
Without the promised funds, some groups said they are struggling to pay staff.
In a termination letter viewed by The New York Times, the E.P.A. said it had identified “material deficiencies” in the program, including the absence of adequate oversight and improper or speculative allocation of funds. It did not provide any evidence.
The Coalition for Green Capital, one of the largest recipients, called the E.P.A.’s decision “unauthorized and unlawful,” and said it was considering legal options.
What we know about the $20 billion program
The $20 billion program was designed to offer low-cost loans to businesses and developers for climate initiatives, which include things like installing solar panels and retrofitting homes to make them more energy efficient.
The E.P.A. distributed the money to eight nonprofits, which planned to distribute the money as loans as well as grants to local “green banks’” or credit unions, which would in turn make their own loans.
The idea was that the commitment of federal dollars would attract private investments to green projects.
Mr. Zeldin has made much of the fact that $20 billion in grant money was held at Citibank, portraying the E.P.A.’s decision to use an outside financial institution as an intermediary as an attempt to subvert oversight.
Grant recipients and former E.P.A. officials have disputed this characterization, and said that the agency has full visibility into transactions through the Citibank accounts for the nonprofit organizations and their sub-recipients
It’s not clear how much of the $20 billion was spent before the freeze was put in place.
A spokeswoman for the E.P.A. said it could not answer how much of the money has been loaned out by the nonprofits because the funds were spent under the Biden administration.
Citibank did not respond to request for comment.