EPA Administrator Lee Zeldin wants to reclaim $20 billion in funding that the Biden administration steered to green banks — saying this week that he aims “get that money back to the government immediately.”
But saying it and doing it are two different things.
And if Zeldin tries to claw back money from the Greenhouse Gas Reduction Fund without cause, it could put the government at risk of breaching its contracts with some or all the green bank participants, experts say. And that could cost taxpayers more in damages than the sum Zeldin hopes to recover.
“If the government abrogates the contract without legal justification, then it will eventually owe damages to these people when they sue, but will not be getting the services that are under contract here,” said David Super, a professor of law and economics at Georgetown University Law Center.
During the Biden administration, EPA officials worked with the Treasury Department to contract Citibank as the financial agent for two grant programs — the $14 billion National Clean Investment Fund, or green bank, and the $6 billion Clean Communities Investment Accelerator program, which seeks to build green lending capacity at institutions that serve low-income communities.
That means the money is in accounts at Citibank in the names of the eight awardees for those two programs. The money and income from any interest belongs to the grantees to be used for purposes consistent with their award agreements with EPA. But Citibank reports extensively to Treasury and EPA on any transactions.
People familiar with the contract between Citibank and Treasury and granted anonymity to discuss a private contract say it has provisions to allow EPA and Treasury to exercise a security interest on those accounts if it discovers the awardees have engaged in conduct that meets official definitions of waste, fraud and abuse.
In those instances, the federal government could freeze accounts or recover funds. But Zeldin did not reference any specific instances of misconduct when he announced his plans for the green bank program Wednesday on the social media site X. He also stated that EPA had found no evidence of “any wrongdoing” on the part of Citibank.
Zeldin has charged that the Biden EPA rushed to set up its climate law grant programs and cut corners on transparency and oversight.
He told POLITICO on Thursday in an interview that the result was “EPA having less oversight than it would if EPA was housing the money, approving the grants, we want to get that money back to the EPA.”
He added that “EPA wants to reassume control over the money to make sure that we are following our statutory obligations and we can be accountable to Congress once the financial agent agreement is terminated.”
EPA’s timeline for the program was set by Congress. The Inflation Reduction Act required EPA to obligate all grants under the program by the end of September 2024 — a deadline EPA beat by two weeks. A third Greenhouse Gas Reduction Fund program, called Solar for All, is being administered by the Treasury Department and has been frozen for most of the last two weeks despite federal courts ordering the funding to be released.
Zealan Hoover, the former EPA official who oversaw implementation of IRA and infrastructure law programs, disputed Zeldin’s charge that the Citibank arrangement meant “less oversight, less process.”
“Even though the funds are in the financial agent, the project officers and EPA have access to the same level of data and insight that they would have” if the funds moved through the federal government’s own grant portal, he said.
The contracts for these projects — including work plans, budgets and terms — are publicly available online for the National Clean Investment Fund and for the Clean Communities Investment Accelerator. The Biden EPA also left an oversight plan in place.
EPA has few staff providing oversight to such large programs. But that’s because the IRA gave the agency an unusually slim administrative budget, and Congress declined to add to it through appropriations. Most of the 30-some employees serving in the program office at the end of Biden’s term also were new hires, which means they could be laid off under President Donald Trump’s workforce reduction policies.
Former officials said Citibank probably has more capacity to scrutinize transactions than the EPA itself.
There wasn’t clarity Thursday about whether the Treasury Department could freeze the Citibank accounts to conduct a program review, as it has for Solar for All and EPA’s other IRA grant programs that it administers. The contract between the Treasury Department and Citibank is not public, and the Treasury Department did not respond to questions.
But Super of the Georgetown University Law Center said that the terms of the grantees’ contracts — which are publicly available on EPA’s website — don’t give EPA leeway to pull funding because of a shift in policy. They’re filled with cross-references to federal regulation procedures requiring an agency to give notice to grantees of any failure or irregularity and provide opportunities to correct those problems.
Super said that if EPA shirked its contractual obligations, that could ultimately cost taxpayers.
“In other words, this isn’t just a clever way of postponing the expenditures,” he said. “This is a way of taking a situation in which the government is contracted for valuable services and throwing it away.”
It is unclear from Zeldin’s statements whether he proposes to cancel the contracts with the eight awardees or just renegotiate it. EPA didn’t respond to questions from E&E News seeking clarity.
But extracting the funds from the awardee accounts at Citibank and returning them to Treasury would be a renegotiation of terms. The money was deposited there with the purpose of earning interest for the recipients and allowing them to leverage private capital to increase the funds available to finance things such as renewable energy projects and building renovations.
Moving the funds to Treasury where they could be drawn down only for immediate expenses would not allow the grantees to implement their work plans. And the grantees already are lending money and making investments in initiatives such as affordable housing in Appalachia and distributed generation and storage in Puerto Rico.
Adam Kent, director of blended and inclusive finance at the Natural Resources Defense Council, said that if EPA walks away from the contracts now it could have a chilling effect on private investment.
“The U.S. is the most investment-friendly country in the world, and that’s largely due to regulatory and political certainty and our innovation ecosystem,” he said. “Actions like freezing contracts illegally erode investors faith and confidence in the U.S. government to honor its contracts and to pay its debts. And that can have ripple effects.”
