EPA Climate Grants Were Legally Canceled, Appeals Court Says (1)

The Trump administration doesn’t have to restore millions in green grants to cities and nonprofits, after a federal appeals panel ruled Wednesday that a lower court didn’t have jurisdiction over a contractual dispute.

The US Court of Appeals for the Fourth Circuit granted the government’s request to vacate a lower court’s injunction to restore the climate funds, citing two US Supreme Court orders that held disputes over canceled grant programs belong in the US Court of Federal Claims under the Tucker Act.

It’s the latest blow for federal grant recipients who are trying to restore funds rescinded by the Trump administration in federal court. Judge Allison Jones Rushing rejected plaintiffs’ argument that their case against the Environmental Protection Agency centers on the separation of powers issue, as “the alleged statutory and constitutional violations do not alter the essentially contractual nature” of their Administrative Procedure Act claims.

The Trump administration has repeatedly invoked the Tucker Act, an 1887 law governing contract claims against the federal government, as an argument to move funding disputes to claims court. The DC Circuit also accepted this argument when it ruled the Environmental Protection Agency can withhold billions in grants appropriated for greenhouse gas reduction projects.

Rushing also said the Environmental Protection Agency didn’t violate the Inflation Reduction Act or the Infrastructure Investment and Jobs Act, as the statutes don’t require the government to distribute grants specifically to the plaintiffs in this case but rather simply maintain the funds for obligation.

The EPA appealed an order from the US District Court for the District of South Carolina to restore millions in grants awarded to cities including Baltimore, Nashville, and San Diego.

Judge Richard M. Gergel ruled the agency likely violated the APA as the EPA “failed to produce a single document showing any individualized review of plaintiffs’ grants.”

However, the panel here said “pausing funding pending review is not the same as the complete, permanent termination of grant programs that plaintiffs claim violates a specific statutory prohibition.”

Judges Paul Niemeyer and Toby J. Heytens joined the opinion.

Plaintiffs are represented by the Southern Environmental Law Center.

The case is The Sustainability Inst. v. Trump, 4th Cir., No. 25-01575, 1/21/26.