Why the megalaw didn't kill Biden's biggest climate program

E&E News

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President Donald Trump's megalaw was supposed to consign EPA's $27 billion climate lending program to the dustbin of history. Instead it's raising new questions about the fate of the Biden-era program.
Trump's tax and spending package that became law on Independence Day repealed the so-called Greenhouse Gas Reduction Fund — the Inflation Reduction Act's single-largest grant initiative designed to promote lending for technologies like renewable energy, zero-carbon housing and electric buses.
But instead of terminating the program and returning the money to EPA, the law marks a new and uncertain chapter for one of the most ambitious — and politically contested — climate programs put forward by President Joe Biden. The program, whose future is in the hands of the courts, has been the subject of Republican lawmakers' attacks, a centerpiece of EPA Administrator Lee Zeldin's rollback attempts, and a star character in legal fights between the Trump administration and eight nonprofits that were awarded billions of dollars through the program.
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The GOP's One Big Beautiful Bill Act rescinded any uncommitted — or 'unobligated' — funds that might be left over from the $27 billion in funding that Congress appropriated to EPA in 2022 for administrating the program and delivering grants to states and nonprofits. Under the new law, that money would be returned to the Treasury to help offset the cost of extending Trump's tax cuts.
But almost all the money had been spent by the time Biden left office in January. EPA had signed contracts with 68 states, cities and nonprofits to expand green lending initiatives and bring solar power and other clean technologies to low-income communities. That fact was reflected last month in an analysis by the nonpartisan Congressional Budget Office, which found that only $19 million was unobligated.
But the Trump administration has been unwilling to accept that math. And that has sparked a controversy that the courts will ultimately resolve.
EPA and Justice Department attorneys who are representing it have argued that any funding from the eight Greenhouse Gas Reduction Fund grants that Zeldin claimed to have canceled in March should be added to that tally. But most of those recipients are challenging EPA's termination in court. A district court judge issued an injunction in April siding with the nonprofits and barring EPA from recovering the funds. EPA is appealing that decision.
The eight grants awarded to the nonprofits last year originally totaled $20 billion, but some of the money was spent before EPA froze the recipients' accounts at Citibank in February. For example, one grant recipient — the Coalition for Green Capital — disbursed $2.7 billion of its $5 billion award to private equity firms prior to the freeze, according to the investing news site Impact Alpha.
EPA's terminations didn't affect a $7 billion solar grant program for states, one leg of the Greenhouse Gas Reduction Fund that enjoys some bipartisan support.
Now, EPA is arguing that the new Republican megalaw should allow it to recapture the $17 billion that's still left in the awardees' accounts, because the program no longer has the force of law.
DOJ attorney Yaakov Roth, who is representing EPA in its appeal of the April injunction, submitted a letter to the U.S. Court of Appeals for the District of Columbia Circuit on July 3 — one day before Trump signed the 'One Big Beautiful Bill' into law — arguing that the bill would 'rescind the appropriated funds that plaintiffs sought to reinstate through' their lawsuit challenging EPA's cancellation of the grants.
'It is more clear than ever that the district court's preliminary injunction must be reversed,' he wrote.
Capito is a star witness — for both sides
But other lawyers, including those representing the grant recipients, say that's not how it works. EPA signed contracts with the eight nonprofits under authority Congress had granted to it in the 2022 law, they argued. Lawmakers' decision now to revoke that authorization isn't retroactive, they added.
Mari Quenemoen, a staff attorney with Lawyers for Good Government, said she couldn't think of another instance where an administration tried to argue that a change in statute rendered contracts void retroactively.
'What's unprecedented is totally throwing out what was intended by a prior Congress,' she said.
The plaintiffs' attorneys wrote in a letter to the appeals court dated July 7 that the megalaw 'does not affect plaintiffs' claims, given that all their funds were and are obligated.'
Both sides pointed to statements by top GOP lawmakers to buttress their arguments. The plaintiffs' attorneys highlighted an interview that Senate Environment and Public Works Chair Shelley Moore Capito (R-W.Va.) gave to POLITICO after the election in which she asserted that it was a 'ridiculous thought' that EPA might try to claw back grant funds that were already obligated.
Roth, the DOJ attorney, pointed to a quote by Capito in which she says that EPA's March cancellation of the grants had resulted in $17 billion being 'deobligated.'
It is 'the intent of Congress that the entirety of this $17 billion … be rescinded,' Capito is quoted as saying in his letter.
An EPW spokesperson directed POLITICO's E&E News to that same quote and said Capito had long been concerned about the program's risk of waste, fraud and abuse.
'Congress agrees with EPA's March 11, 2025, action to cancel GGRF grants,' the spokesperson said in an email to E&E News. He argued that language in the megalaw repealing the authorization for the Greenhouse Gas Reduction Fund and rescinding unobligated money ensures that EPA does not have to find new recipients for the canceled grants.
EPA, for its own part, said it would take its cues from Congress. It responded to E&E News inquiries about its post-budget bill plans for the program by saying only that it would 'work to ensure Congressional intent is fully implemented.'
'Dueling commentary'
Rhode Island Sen. Sheldon Whitehouse, the committee's top Democrat, issued a statement Friday blasting DOJ for claiming that it could rescind the $17 billion in funding, calling it 'wishful thinking.'
He said that in discussions with committee Republicans and the Senate parliamentarian no one challenged CBO's official accounting that the government stood to save only $19 million in administrative and oversight costs by rescinding unobligated money from the Greenhouse Gas Reduction Fund and not $17 billion as EPA now claims.
'The majority did express concern about EPA prevailing in litigation and suddenly having nearly $20 billion back and, for this reason, pushed to repeal the language,' Whitehouse said. 'But the fact of the matter is [the megalaw] only rescinded EPA's administrative dollars and not a cent of the grant funding.'
The House-passed bill included similar repeal language for other IRA grant programs, but the Senate parliamentarian stripped that out of the version that passed the Senate. Senate rules prohibit the chamber from including extraneous policy provisions in budget bills.
But Dale Bryk, a senior attorney with the Environmental and Energy Law Program at Harvard Law School, said courts, not committee chairs, will have the final say on whether EPA can pull back $17 billion in grant funds or only $19 million in administrative funds.
'There's dueling commentary from Congress — including dueling commentary within her own mind from Capito — but they put down a word. The word says 'unobligated,'' Bryk said. 'And now the court has to decide what that is.'
The appeals court has yet to issue a decision on EPA's request to lift the injunction by U.S. District Court for the District of Columbia Judge Tanya Chutkan this spring. The injunction has prevented EPA from emptying the Citibank accounts. Chutkan found that EPA's March terminations were probably unlawful. Bryk said that could be problematic for Republican arguments that the money could be deobligated.
Attorneys tracking the case say the appellate court might weigh in on whether or not Trump's megalaw allows the agency to pull back grant funds as 'unobligated' funds. Or it may leave that question to the district court, or decide there's no need to address the question at all because it's only a contracts case that should be heard by the U.S. Court of Federal Claims.