A multibillion dollar dispute between the Environmental Protection Agency and several nonprofit organizations escalated on Saturday when one group sued the E.P.A. and Citibank, seeking access to grant money that has been frozen under President Trump.
Climate United, a nonprofit organization, claimed that the E.P.A. and Citibank have illegally withheld a nearly $7 billion award announced last April. Citibank has housed the funds as part of a green financing program to finance projects that address climate change.
The funds are part of a larger pot of money, $20 billion, that have been swept up in controversy after Lee Zeldin, the E.P.A. administrator, called the green financing program a “scheme” that was “purposely designed to obligate all of the money in a rush job with reduced oversight.”
Now, some of the nonprofits say, their bank accounts are frozen and that they are struggling to pay staff.
Climate United had planned to loan the money to developers across the country in support of solar power, electric trucks, and energy-efficient affordable housing projects, and said the freeze has meant small businesses and developers are unable to draw down funds they were promised.
“We’re not trying to make a political statement here,” said Beth Bafford, chief executive of Climate United. “This is about math for homeowners, for truck drivers, for public schools — we know that accessing clean energy saves them money that they can use on far more important things.”
The E.P.A. did not immediately respond to request for comment.
“We have received and are currently reviewing the suit,” Citibank said in a statement. “As we’ve said previously, Citi has been working with the federal government in its efforts to address government officials’ concerns regarding this federal grant program. Our role as financial agent does not involve any discretion over which organizations receive grant funds. Citi will of course comply with any judicial decision.”
Climate United is one of eight nonprofits that collectively received $20 billion from the Greenhouse Gas Reduction Fund, also known as “green bank” funding, during the Biden administration.
The money was appropriated through the 2022 Inflation Reduction Act and had been held in recipients’ accounts at Citibank since late last year. The nonprofits have been unable to make withdrawals for more than two weeks.
The funds were frozen after Mr. Zeldin issued a statement linking the grants to a hidden-camera video released in the final weeks of the Biden administration by Project Veritas, a conservative group known for using covert recordings to embarrass its political opponents.
In the video, Brent Efron, then an E.P.A. employee, likens the agency’s efforts to spend federal money on climate change programs before leaving office to throwing “gold bars” off the Titanic.
A lawyer for Mr. Efron said his client was not referring to the Greenhouse Gas Reduction Fund.
Mr. Zeldin has called for Citibank to return the funds to the E.P.A. and suggested potential fraud. The Department of Justice and the F.B.I. subsequently launched investigations. Denise Cheung, a top federal prosecutor in Washington, D.C. resigned after determining there was not enough evidence to order the funds frozen.
Earlier week, Mr. Zeldin referred the program to his agency’s acting inspector general for investigation, suggesting a link between fund recipients and Biden administration allies. Some of the nonprofit organizations have received letters from the Justice Department and the acting inspector general seeking more information.
In a letter to the E.P.A. sent Tuesday, lawyers for Climate United detailed the organization’s efforts to meet with the agency to discuss the program. They wrote that an agency employee canceled a Feb. 25 meeting after learning Climate United’s lawyers would be present, and the agency never rescheduled.
The $20 billion clawback attempt is part of a sweeping effort by the Trump administration to reduce federal spending through contract cancellations and mass firings. The president’s team has also launched a rapid-fire rollback of climate policies.
Because the grants were legally obligated in September and the funds have already left the government’s coffers, the E.P.A.’s effort to recoup the money is “beyond the scope of what a lot of people thought they would even try and do,” said Jillian Blanchard, vice president of Lawyers for Good Government, a legal advocacy organization that has worked with some of the nonprofits involved in the green financing program.
