by Allison Prang, Louisiana Illuminator
April 5, 2025

WASHINGTON — A multibillion-dollar Environmental Protection Agency program designed to spur investment in energy-efficiency improvements nationwide is tied up in a legal battle that threatens to upend planned projects across the United States focused on affordable housing, the adoption of electric vehicles and more.

The EPA last month said it was terminating grants tied to the $27 billion Greenhouse Gas Reduction Fund, a program Congress created as part of the 2022 Inflation Reduction Act, “based on substantial concerns regarding… program integrity, the award process, programmatic fraud, waste, and abuse, and misalignment with agency’s priorities.” President Joe Biden signed the act into law.

Funds had already been dispersed into awardees’ bank accounts at Citibank as part of the program.

But the Trump administration, according to a document shared related to the lawsuit, directed Citi to freeze activity on those accounts. As a result, organizations around the country either already awarded money or in advanced talks to obtain funding are unable to access capital for planned projects.

The projects run the gamut, focusing on anything from installing energy-efficient technology in affordable housing units with the aim of lowering residents’ utility bills to adding solar panels to schools.

“There will be … very real capacity constraints if the funding is frozen indefinitely,” said Kari Groth Swan, executive director of the Minnesota Climate Innovation Finance Authority, a state body that finances clean-energy projects.

Groth Swan’s organization was awarded $25 million from the Coalition for Green Capital, one of the groups allocated funding from the Greenhouse Gas Reduction Fund.

Seeding energy-efficiency projects

The goal of the fund is to catalyze investment in energy-efficiency technology and other initiatives to reduce greenhouse gases.

“We loan it out, we get it back, we do it again,” Groth Swan said. “It acts like a revolving loan fund.”

The Minnesota Climate Innovation Finance Authority is one of many betting on funding from the Greenhouse Gas Reduction Fund to help get these projects off the ground. Organizations have been relying on this money to further pad much larger funding pools that include capital from outside investors.

In Minnesota, for example, the $25 million the Minnesota Climate Innovation Finance Authority was awarded from the federal program makes up about one-fifth of the capital Groth Swan is planning to go toward a host of projects.

They include making an old school that’s being turned into a workforce development site more energy efficient and putting solar and storage technology on schools in north Minneapolis to keep the lights on during severe weather, according to Groth Swan.

Her organization also plans to loan money to an ice hockey arena for a new electric cooling system so it can stop using a toxin the EPA wants ice rinks to get rid of, she said.

Suit to unfreeze funds

The Minnesota Climate Innovation Finance Authority is one of several organizations that last month sued both the EPA and Citibank over the freezing of money from the Greenhouse Gas Reduction Fund.

The fund drew ire from Republicans long before President Donald Trump’s return to the White House. Democrats, who held majorities in both chambers of Congress and the White House in 2022, passed the law creating the program without any Republicans supporting it.

After Trump’s return to office, his EPA said it was terminating $20 billion in grants from the fund, and recipients sued to retain the funding.

A federal judge last month ruled that Citibank couldn’t move any of the federal funding in question out of the accounts, stating that the agency hadn’t provided “credible evidence” that there was “waste, fraud, or abuse” associated with the grant agreements.

When an attorney for the Department of Justice was asked in court last month whether he could provide evidence that the law had been violated through conflicts of interest or fraud, the attorney said he did not have that. The attorneys listed as representing the EPA didn’t respond to a request for comment and an EPA spokesperson said in an email that it doesn’t comment on pending litigation.

The court on April 2 held a hearing over the plaintiffs’ request for a preliminary injunction, but a judge has yet to hand down a ruling.

Citibank did keep the money in awardees’ accounts, said Brooke Durham, a spokesperson for Climate United, one of the funding awardees and plaintiffs in the lawsuit. But one thing Durham and others expressed concern about is the uncertainty surrounding the Greenhouse Gas Reduction Fund money affecting other investors in these projects.

“There are a lot of people counting on these investments across the field all the way from developers to community lenders to private capital,” Durham said.

Citibank declined to comment.

EPA Administrator Lee Zeldin, on the same day the judge issued a temporary restraining order, addressed the Greenhouse Reduction Fund in a post on the social media platform X, alleging the grants were “riddled with self-dealing and wasteful spending.”

“I will not rest until these hard-earned taxpayer dollars are returned to the U.S. Treasury,” he said in the post.

A letter from the EPA to the agency’s inspector general last month raised concerns with the structure of the grant awards and bank account agreements and alleged that a grant awarded to a Biden official’s former employer violated conflict-of-interest standards.

Seeking alternatives

The temporary restraining order hasn’t stopped potential funding recipients from trying to find alternative funding to keep their projects going.

Megan Lasch, owner and president of Texas-based affordable housing organization firm O-SDA Industries, said her organization was going through the process to get $4 million in funding from one of the groups already given funding from the Greenhouse Gas Reduction Fund for a $30 million affordable housing renovation in southwest Fort Worth.

The project is focused on renovating 116 homes, most of which are two and three-bedroom units. Lasch’s company is aiming to lower residents’ utility bills by installing things like energy-efficient light fixtures and more efficient heating and air-conditioning systems.

“It’s really important dollars that a lot of developers, real estate professionals are utilizing in their capital stack to help create and preserve affordable housing,” Lasch said.

Lasch said her firm called in a favor from another nonprofit organization as a “Hail Mary” to get a loan to fill a potential void from the federal money O-SDA was counting on, but the plan is to pay the organization back. She’s not optimistic other projects will be able to move ahead without the federal funding, though, she said.

“I think there’s going to be several developments that just don’t happen because there’s not another source that can get some of these deals done now,” she said.

Rising costs for consumers

Similarly to Lasch, Homewise, a housing-focused developer and financial firm based in New Mexico, was also working on procuring money from different programs under the Greenhouse Gas Reduction Fund and had moved forward in the due diligence process, according to deputy CEO Johanna Gilligan.

Gilligan said she hopes that either the state or philanthropic organizations could step in to help fill the funding void.

Homewise’s plan is to use the money for a program to help low- to moderate-income homeowners in big cities like Albuquerque and Santa Fe reduce their utility expenses by undertaking energy-efficiency upgrades, she said.

As part of that program, Homewise sends representatives out to people’s houses to help them understand where they’re losing energy and how they could lower their costs. That person might explain what tax credits or rebates people can use, Gilligan said. She described the program as “a one-stop shop for energy-efficiency improvements” and said the goal of the organization is to make these processes simpler for everyday people to understand.

“That’s the real loss here,” she said. “For working-class people and those who are contributing significantly to the economy, often … this change makes it harder to help those folks to in turn be able to improve their homes and save money on their bills.”

Robert Sheppard, the co-founder of Vital Housing, an affordable housing investment firm that does work in the Pacific Northwest, said his firm was awarded a 3% interest loan from one of the organizations awarded funding from the Greenhouse Gas Reduction Fund. The plan is to use the $1.5 million loan to reduce carbon emissions and energy use in an affordable housing project in Portland, Oregon, to limit residents’ utility costs.

“We don’t have a source to replace the financing at this point,” said Sheppard, who has raised a total of $24 million for the project. Without the federal funding, residents would see higher energy costs, he said.

“We would not do the work that is scheduled to be done, which would leave carbon exposure and maintain energy costs at a level that is above where it should be for the residents and the building,” he said.

Dollars aside, some of the recipients of the federal money expressed concern that even if the funds do become available for withdrawal again, the agency’s posture toward the program could still be problematic for them.

“We can win the battle of getting the funds unfrozen but we still (have) to make sure that we have a(n) EPA that understands the value of our mission and our mandate,” Minnesota’s Groth Swan said.

Last updated 2:19 p.m., Apr. 4, 2025

Louisiana Illuminator is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501c(3) public charity. Louisiana Illuminator maintains editorial independence. Contact Editor Greg LaRose for questions: info@lailluminator.com.

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