Dive Brief:

• The Environmental Protection Agency has frozen access to $20 billion in Greenhouse Gas Reduction Fund grants, leaving the grantees in a precarious financial position, said a spokesperson for the Climate United Fund.
• Last April, the Climate United Fund was tapped to manage $6.97 billion from the National Clean Investment Fund, a program under the GGRF program. So far, it has made investments that include a $10.8 million pre-development loan for utility-scale solar projects on tribal lands in eastern Oregon and Idaho and $250 million toward electric truck manufacturing.
• In a Monday letter to the EPA Office of Inspector General’s acting inspector general, Nicole Murley, EPA Administrator Lee Zeldin said the EPA has “launched certain oversight and accountability measures” to investigate the GGRF fund disbursement for “financial mismanagement, conflicts of interest, and oversight failures.”

Dive Insight:

Inflation Reduction Act funding was used to create the GGRF “to mobilize financing and private capital to address the climate crisis, ensure our country’s economic competitiveness, and promote energy independence while delivering lower energy costs and economic revitalization to communities that have historically been left behind,” according to the fund’s website.

“We have placed staff on administrative leave, begun a full assessment of internal controls, and are cooperating with the Department of Justice and Federal Bureau of Investigation in their ongoing investigation,” Zeldin said of the measures EPA has taken.

The Climate United Fund’s $6.97 billion grant held by Citibank has been frozen since Feb. 18. Per contracts with the EPA, grantees are able to withdraw funds from Citibank to cover up to 14 days of expenses, said the spokesperson. The freeze reaches the two-week mark today.

The Climate United Fund will soon become unable to make payroll or disburse funding to its contracted borrowers, who are using the funds for projects such as the development of solar capacity on tribal and rural lands, the spokesperson said.  

“These projects will lower energy bills for communities, boost American manufacturing and increase energy independence while addressing a growing need for electricity generation,” the spokesperson said. “Unless the EPA or Citi takes action to unfreeze funds, local projects across the country will be unable to move forward without legal intervention.” 

The Climate United Fund has reached out to the EPA and Citibank daily for the past two weeks without receiving a response, the spokesperson said. Citibank did not respond to a request for comment.

Zeldin’s letter makes direct allegations of malfeasance or mismanagement related to the GGRF. The letter accuses former GGRF acting director Jahi Wise of a conflict of interest in overseeing a $5 billion grant to his previous employer, Coalition for Green Capital, and says that a “$2 billion grant was awarded to Power Forward Communities, a new nonprofit with ties to Stacey Abrams, despite reporting only $100 in total revenue in 2023.”

The letter does not mention any alleged malfeasance by the Climate United Fund or the Justice Climate Fund, which received a $940 million grant. An EPA spokesperson referred to Zeldin’s letter to explain the freeze, but the EPA spokesperson did not respond to a question asking if the Climate United Fund is suspected of fraud or if the funding had been frozen unilaterally.

Zeldin’s letter asserts that the structure of the GGRF itself is fraudulent, alleging that “Financial Agent Agreements, Account Control Agreements (ACAs), and Amended Account Control Agreements” signed in the final months and days of the Biden administration “reduced rather than enhanced EPA oversight.”

“EPA was not a party to the Account Control Agreements with subrecipients, allowing taxpayer dollars to be further distributed without proper agency oversight,” Zeldin said. “The ironically named ‘Notice of Exclusive Control,’ the ostensible purpose of which is to allow EPA to take control of accounts at the financial agent, grants prime recipients and subrecipients the ability to transfer funds to private financial institutions of their choosing outside the scope of the financial agent agreement.”

He added that contract provisions “appear to have been intentionally structured to weaken EPA oversight,” and alleged “reckless financial management, blatant conflicts of interest, astonishing sums of tax dollars awarded to unqualified recipients, and severe deficiencies in regulatory oversight under the prior administration.”

Much of the Inflation Reduction Act funding that President Trump initially froze via exective order has been unfrozen in accordance with court orders, but the $20 billion in GGRF funding remains locked, with no clarity on when grantees might be able to access it again.

The freeze is “going to be very devastating, especially for smaller businesses that really don't have a lot of funding through which they can [wait] out months of not getting access to the money that was awarded to them,” said Rachel Cleetus, senior policy director with the Climate and Energy program at the Union of Concerned Scientists. “They will go bankrupt because they do not have a lot of cushion here, and they will obviously have to lay off people, and the benefits from the projects themselves for communities will not go forward.”

Cleetus said she finds the freeze “just extraordinary” and “really illegal,” as the funding was appropriated by Congress and in the process of being disbursed.

All Democratic members of the Senate Committee on Environment and Public Works joined ranking member Sen. Sheldon Whitehouse, D-R.I., in issuing a Feb. 24 letter to Zeldin asking him to explain the regulatory basis for the freeze and requesting an answer by March 3.

The revocation of grant funding leaves Cleetus concerned about the broader implications for the economy, she said, as “there has always been an implicit understanding and explicit understanding that contracts with the government were going to be respected, that the word of the U.S. government was good, and that is fundamentally being broken here.”