Federal Judge Rules EPA's Cancellation of $2.8 Billion Climate Justice Grant Program Unlawful

A federal judge has ruled that the Environmental Protection Agency acted unlawfully when it abruptly shuttered a $2.8 billion grant program designed to help disadvantaged communities address pollution and climate risks. U.S. District Judge Richard Mark Gergel of the District of South Carolina issued a 47-page opinion declaring the termination of the Environmental and Climate Justice Block Grant Program to be "arbitrary and capricious and unlawful" under the Administrative Procedure Act.[1][2][6]

The grant program was originally established by Congress under the 2022 Inflation Reduction Act. It was designed to distribute financial assistance to community groups, local governments, and tribal nations to fund projects targeting air pollution, extreme heat, decaying infrastructure, and rising utility costs in historically underserved areas. Hundreds of communities across the country had spent years preparing applications and negotiating awards.[1][3][7]

In February 2025, following an executive order from President Donald Trump titled "Unleashing American Energy," the EPA halted the program. The administration argued the cancellation was necessary for "policy reasons," with EPA Administrator Lee Zeldin stating that the term environmental justice had been used as an excuse to fund activist organizations rather than directly remediating concrete environmental issues.[2][3][4]

The termination prompted a lawsuit from a coalition of nonprofits, cities, and tribal partners, represented by the Southern Environmental Law Center and the Public Rights Project. The plaintiffs argued that the executive branch cannot unilaterally ignore a congressional mandate and withhold appropriated funds without passing a formal rescission bill through Congress.[2][5][7]

Judge Gergel, an Obama appointee, agreed with the plaintiffs. He ruled that the EPA's internal guidance to shutter the program circumvented the will of Congress, which had explicitly authorized the funding and set statutory eligibility criteria that an executive order cannot rewrite. The decision officially voids the agency's termination guidance, restoring legal status to the grantees.[2][6][7]

However, the legal victory may prove hollow for the communities awaiting funds. Despite declaring the cancellation illegal, Judge Gergel denied the plaintiffs' request for a permanent injunction that would have forced the EPA to resume administering the grants. He noted that the agency had already laid off the federal employees responsible for overseeing the program, making an immediate restart "impractical."[1][2][4]

The lack of an injunction places 116 grantees who were in the middle of award negotiations in a precarious position, as the clock is rapidly running out. Under the Inflation Reduction Act, the EPA only has the authority to obligate the block grant funds through September 30, 2026. After that date, any unobligated money automatically reverts to the U.S. Treasury, and the program ceases to exist.[6][7]

The local impacts of the frozen funds are already being felt nationwide. The Walker River Paiute Tribe in Nevada lost a $20 million grant intended for clean energy infrastructure. Other stalled initiatives include a collaboration in rural Alabama to install household wastewater treatment systems, and a project in Texas aimed at expanding residential composting to reduce landfill waste.[5][7]

The ruling arrives amid a broader push by the administration to dismantle Biden-era climate initiatives and deregulate the energy sector. The EPA recently rescinded the 2009 Endangerment Finding for greenhouse gases, and the Justice Department has actively intervened in Supreme Court cases to block local governments from suing fossil fuel producers over climate impacts.[1][3]

With the EPA stating it is currently "reviewing the decision," legal experts suggest that affected communities have few immediate options. Rather than receiving the actual grants to build infrastructure, terminated grantees may be forced to pursue damages in the Court of Federal Claims—turning a program meant to deliver environmental relief into a protracted, years-long legal battle.[2][5][6]