Federal Court Turns Away States’ Lawsuit, Leaves EPA Grant Terminations Intact

A federal court in Washington state on June 1 dismissed a coalition of states’ appeal seeking to reinstate $7 billion in solar energy grants that the U.S. Environmental Protection Agency (EPA) canceled.

The plaintiffs—21 states, the District of Columbia, and two state-related entities—had sued the EPA and EPA Administrator Lee Zeldin.

The EPA issued $7 billion in grants to expand the Solar for All program, which the agency created during the Biden administration to expand access to affordable residential solar energy using Section 134 of the federal Clean Air Act. In July 2025, Congress passed the One Big Beautiful Bill Act, which repealed Section 134 and rescinded the unobligated balances due from the grants.

The EPA then terminated the Solar for All grants and rescinded 93 percent of the balances due from those grants, including billions of dollars’ worth of obligated balances.

The plaintiffs, who were designated as grant recipients, sued to challenge the rescission of grants, arguing that proper procedures were not followed and that this violated the Administrative Procedure Act (APA).

The EPA acted in an manner that was “arbitrary and capricious,” the plaintiffs said, using the legal term of art in their legal complaint.

Arbitrary and capricious refers to an action, decision, or rule that has been made without a rational basis, adequate consideration of the relevant facts, or clear legal justification. It suggests that a decision was made on whim or sudden impulse rather than on reason or evidence.

The APA is a federal statute enacted in 1946 that governs administrative law procedures for federal executive departments and independent agencies. The late U.S. Sen. Pat McCarran (D-Nev.) said at the time the law was “a bill of rights for the hundreds of thousands of Americans whose affairs are controlled or regulated in one way or another by agencies of the federal government.”

The plaintiffs argued that their grant monies could not be taken away because those funds were awarded by Aug. 16, 2024, which preceded the enactment of the One Big Beautiful Bill Act, also known as H.R. 1.

“Thus, H.R. 1 did not affect Plaintiffs’ obligated funds, nor did it affect the continuation of EPA’s administration of the state [Solar for All] programs already funded and underway,” the complaint said.

Arizona Attorney General Kris Mayes said in an October 2025 press release that the plaintiffs were arguing that the EPA illegally ended the $7 billion program that “lowers energy costs and pollution by bringing solar energy to more than 900,000 households in low-income and disadvantaged communities across the country.”

“Beyond the fact that this energy infrastructure funding has already been appropriated to our state and is owed to Arizonans, protecting solar projects and lower electricity bills is personal to me,” Mayes said.

“Arizona families are already facing sky-high electricity bills, and I will not let the EPA wriggle out of its commitment to fund solar energy projects that would lower costs for more than 11,000 Arizona households.”

The EPA argued in a brief that the plaintiffs’ claims lacked merit.

H.R. 1 repealed Section 134, which created the program, took away EPA’s administrative funding, and “granted Plaintiffs no rights or interests,” the brief said.

“While Congress did not direct EPA to terminate [Solar for All] grants, it did not mandate the grants’ preservation,” it said.

“EPA’s decision to terminate [Solar for All] grants after Congress repealed the statutory authority and rescinded administrative funding, was reasonable and did not violate either the APA, [One Big Beautiful Bill Act], or the Constitution.”

U.S. District Court Judge Tiffany Cartwright dismissed the case known as State of Arizona v. EPA without prejudice, meaning the plaintiffs are free to refile their claims in the future.

“Because Plaintiffs’ claims are contractual in nature, the Tucker Act vests exclusive jurisdiction over them in the Court of Federal Claims,” she said.

The federal statute, enacted in 1887, allows entities to sue the federal government when the government has waived sovereign immunity for specific types of claims, including those founded on any “express or implied contract” with the United States. These cases need to be brought before the U.S. Court of Federal Claims in the nation’s capital.

Sovereign immunity is a legal doctrine that prevents governments from being sued unless they consent to being sued.

The Supreme Court cited the Tucker Act in April 2025 when it stayed a lower court decision that would have forced the Trump administration to reinstate $65 million in U.S. Department of Education grants. The government froze those grants over concerns about the money being used to promote diversity, equity, and inclusion (DEI) programs.

Cartwright said the Supreme Court also applied the Tucker Act to another grant termination case last year known as National Institutes of Health (NIH) v. American Public Health Association.

The high court allowed the NIH to cancel hundreds of millions of dollars in research grants linked to DEI initiatives.

Separate Lawsuit Is Pending

Cartwright noted in her decision that the plaintiffs have already filed a separate breach-of-contract claim against the federal government in the Court of Federal Claims.

The pending case, known as Maryland Clean Energy Center v. United States, seeks financial damages resulting from EPA’s alleged breach of the grant agreements from the Solar for All program.

That court is currently considering a motion for partial summary judgment filed by the plaintiffs on May 7.

The plaintiff states argue that the federal government breached program grant agreements “by unilaterally terminating them without grounds to do so under the clear terms and conditions of the Grant Agreements.”

The evidence to be presented will show that the plaintiffs suffered damages of more than $2 billion in total, the motion said.

The federal government is required to file a response to the motion by June 4.

The EPA’s press office told The Epoch Times that the agency was reviewing the new federal district court decision.

The Epoch Times reached out to Mayes for comment, but received no reply by publication time.

Sam Dorman contributed to this report.