EPA's Termination of Solar for All: Why the Divestment Was Unlawful

When a federal agency takes back money it has already promised, it tests the boundaries between executive discretion and Congress's control over federal spending. The termination of the Solar for All program on August 7, 2025, shows how sharp that test can be [1]. The program committed $7 billion to specific recipients through signed grant agreements, so the money was "obligated" [2]. In practice, that means the government had made a legally binding promise to pay a particular recipient a specified amount. Money that Congress has appropriated but the government has not yet committed remains unobligated and open to future decisions [3]. This distinction is central to the dispute. The One Big Beautiful Bill Act repealed the Environmental Protection Agency's (EPA) authority to spend unobligated funds going forward, but it did not authorize the agency to reclaim money it had already committed [4]. Despite this, the EPA treated the statute as a basis for ending the program entirely [5]. The affected, intended recipients sued EPA, and in September 2026, two federal courts vacated the termination. One case, Rhode Island AFL-CIO v. EPA (2026), was brought by labor and community groups on behalf of the program's downstream beneficiaries [6]. Another case, Harris County v. EPA (2026), was brought by the Texas county that leads that state's Solar for All coalition [7]. Charlotte Biren of Columbia Law School’s Sabin Center for Climate Change Law has analyzed the reasoning behind both decisions [8]. Building on that analysis, this article argues that the termination of the Solar for All program was unlawful primarily because Congress never gave the EPA the power to cancel grants it had already obligated. The agency’s explanation also falls short of the Administrative Procedure Act’s (APA) arbitrary-and-capricious test; by unilaterally pulling back committed funds, the EPA intruded on Congress’s constitutional authority over appropriated money; and the cancellations breached the terms of the grant agreements the EPA had signed with recipients.

The clearest problem with the EPA's termination is that it ran contrary to the plain language and structure of the statute on which the agency relied. Plaintiffs in Rhode Island AFL-CIO argued that the EPA misapplied Section 60002 by using it to claw back funds already obligated [9]. Their argument begins with Section 60002, which rescinds only "the unobligated balances" of the program's funding; however, every Solar for All dollar had already been obligated. Section 60002 does not authorize an agency to rescind money it has already committed under binding agreements. Reading the provision as authorizing such rescissions would be doing the work of a much broader clawback power that Congress never wrote into the text. The EPA's interpretation thus disregarded the distinction between obligated and unobligated funds drawn by the statute. In Rhode Island AFL-CIO, District Judge Mary McElroy agreed with the plaintiffs that Section 60002 did not give the EPA authority to terminate grants whose funds were already obligated. She held that Congress clearly intended the EPA to continue administering the already-obligated grants, and concluded that the EPA acted without statutory authority when the agency terminated the program and vacated the termination [10]. This holding suggests that an agency has only the power Congress gives it. When the statute supplies no authority for an action, the action cannot stand, however sound the agency's policy reasons may be. This is why the statutory question offers the most direct basis for invalidating the termination: a weak explanation might be addressed by reissuing the decision with better reasoning, but a lack of statutory authority is harder to remedy, since a stronger justification would not by itself give the EPA the power to act.

Setting the statutory question aside, the EPA's decision-making process also conflicts with the APA's arbitrary-and-capricious standard. Under that standard, a court must "hold unlawful and set aside" agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law" [11]. This independent ground demonstrates how the termination would be vulnerable even if EPA had possessed some authority to act. The plaintiffs in Rhode Island AFL-CIO claimed that the EPA’s stated justification—that it lacked the funds or authority to administer the program—was factually false, and that the agency failed to engage in reasoned decision-making before acting [12]. Independent evidence supports both of these claims. When the Congressional Budget Office scored the One Big Beautiful Bill Act as passed by the House, it estimated that repealing the Greenhouse Gas Reduction Fund, which included Solar for All’s $7 billion, would rescind only $19 million in budget authority, a sign that the obligated grant funds were expected to remain in place [13]. A federal court later reached a similar conclusion about the EPA’s reasoning: in Harris County, Judge Chutkan held that the termination decision was arbitrary and capricious [14]. The EPA’s decision therefore rested on a premise the agency could not support, which is the kind of arbitrariness the APA standard targets. Under the framework the Supreme Court established in Motor Vehicle Manufacturers Ass'n v. State Farm Mutual Automobile Insurance Co. (1983), courts ask whether an agency examined the relevant data and articulated a satisfactory explanation connecting the facts it found to the choice it made [15]. An agency fails this test if it relied on factors Congress did not intend it to consider, ignored an important aspect of the problem, or offered an explanation that runs counter to the evidence before it [16]. The EPA's explanation would fail that test if the agency had the authority and funds to administer the program, as the plaintiffs claimed, because its reason for ending the program was false. Even if the EPA had the power to terminate the program, it would still have needed a reasoned explanation supported by the administrative record for doing so.

Beyond administrative law, the termination independently goes against contract-law principles governing the EPA’s grant agreements. By February 2025, the EPA had entered into binding grant agreements with recipients in 23 states and the District of Columbia, all of whom later sued, and their complaint alleged that the EPA’s unilateral terminations breached the express terms of those agreements [17]. The agreements permitted termination in narrow circumstances: substantial noncompliance that materially impaired performance, adequate evidence of waste, fraud, or abuse, or material misrepresentation of eligibility [18]. The EPA invoked none of them, and its stated reason was a claimed lack of authority and funds, which is not a ground the agreements recognize. The plaintiffs alleged in their complaint that the EPA breached its duty of good faith and fair dealing by destroying the states’ reasonable expectations of receiving the benefits of their agreements [19]. That duty is a settled principle of contract law: the Restatement (Second) of Contracts provides that every contract imposes on each party a duty of good faith and fair dealing in its performance and enforcement [20]. In Centex Corp. v. United States (2005), the Federal Circuit has confirmed that the duty binds the federal government as a contracting party and that the government may not act to eliminate or reappropriate the benefits the other side bargained for [21]. A breach does not require the violation of an express contractual term; it is enough that the government’s conduct is inconsistent with the contract’s purpose and deprives the other party of its contemplated value [22]. Steven Burton, a legal scholar, argues that a party acts in bad faith when it uses its discretion in performance to recapture opportunities it gave up by entering the contract [23]. The EPA’s alleged conduct fits that description. Within a week of announcing the cancellation in August 2025, the EPA withdrew roughly 90 percent of the money in recipients’ accounts, reclaiming funds it had already obligated with no basis in the agreements [24]. This argument reinforces the statutory one: even if Congress had given the EPA some power to end the program, the agency would still have to answer for the promises it made.

Finally, the EPA’s termination raised constitutional concerns distinct from the statutory one. The statutory argument asks what Congress said; the constitutional arguments ask what the executive may do when Congress has not clearly spoken. Harris County, Texas, a leading Solar for All recipient, sued and won its case in federal district court in D.C. on three theories [25]. First, under the Appropriations Clause, Congress, not the executive, controls federal spending; as the Supreme Court explained in Office of Personnel Management v. Richmond (1990), money may be paid out only as Congress has authorized by statute [26]. Second, under the separation-of-powers framework from Justice Jackson’s concurrence in Youngstown Sheet & Tube Co. v. Sawyer (1952), executive power is at its “lowest ebb” when it acts against Congress’s expressed will [27]. Third, the action was ultra vires: no statute authorized it, and under Leedom v. Kyne (1958), courts may set aside agency action taken in plain excess of statutory authority [28]. The Appropriations Clause provides that no money may be drawn from the Treasury except under appropriations made by law, which places the power of the purse with Congress [29]. That power covers how appropriated money is spent, not only whether Congress makes it available. Once Congress appropriates funds and an agency legally obligates them through binding grant agreements, executive discretion to refuse spending narrows significantly. Under the Impoundment Control Act, a President who wants to cancel appropriated funds can only propose rescinding the funds. Congress has 45 days of continuous session to approve the rescission; if it does nothing, the funds must be made available for obligation [30]. But the EPA never asked Congress to rescind the money. Instead, it relied on a statute that addressed only unobligated balances and treated it as permission to reclaim committed funds. If the executive could do this, it could functionally override congressional spending decisions after the fact. Congress could appropriate funds, the agency could obligate, and the executive could then reverse both by announcement. The constitutional argument also shows why the statutory question carries so much weight. Reading Section 60002 to reach obligated funds would effectively transfer a power the Constitution reserves to Congress to the executive.

The EPA’s termination of Solar for All was, as a federal court has confirmed, an unlawful exercise of agency power [31]. As noted above, it disregarded Congress's clear intent that already-obligated grants continue. It rested on an explanation the record does not support. It violated the express terms of binding grant agreements and the duty of good faith that comes with them. It intruded on Congress's constitutional control over appropriated funds. All of these reasons call the termination into question. The boundary between obligated and unobligated funds is not a technicality. It marks the moment the government's promise becomes binding on both the agency that made it and any administration that inherits it—Judge McElroy's ruling reaffirms that boundary. Whether the ruling holds will influence whether future administrations can accomplish by announcement what the Constitution requires Congress to accomplish by law.

Sources

[1] Lee Zeldin (@epaleezeldin), X (Aug. 7, 2025), https://x.com/epaleezeldin/status/1953518426602803684.

[2] Harris County v. EPA, No. 1:25-cv-03646, ECF No. 58 (D.D.C. Sept. 22, 2026), https://law.justia.com/cases/federal/district-courts/district-of-columbia/dcdce/1:2025cv03646/285851/58/.

[3] U.S. Gov’t Accountability Off., GAO-05-734SP, A Glossary of Terms Used in the Federal Budget Process 70–72 (2005), https://www.govinfo.gov/app/details/GAOREPORTS-GAO-05-734SP.

[4] One Big Beautiful Bill Act, Pub. L. No. 119-21, § 60002 (2025).

[5] Lee Zeldin (@epaleezeldin), X (Aug. 7, 2025), https://x.com/epaleezeldin/status/1953518426602803684.

[6] R.I. AFL-CIO v. EPA, No. 1:25-cv-00510, ECF No. 48 (D.R.I. Sept. 18, 2026), https://docs.justia.com/cases/federal/district-courts/rhode-island/ridce/1:2025cv00510/60578/48.

[7] Harris County v. EPA, No. 1:25-cv-03646, ECF No. 58 (D.D.C. Sept. 22, 2026), https://law.justia.com/cases/federal/district-courts/district-of-columbia/dcdce/1:2025cv03646/285851/58/.

[8] Charlotte Biren, Two Courts, One Conclusion: EPA Unlawfully Terminated Solar for All, Climate L. Blog (Sabin Ctr. for Climate Change L., Colum. L. Sch.) (Oct. 12, 2026), https://blogs.law.columbia.edu/climatechange/2026/10/12/two-courts-one-conclusion-epa-unlawfully-terminated-solar-for-all/.

[9] Complaint, R.I. AFL-CIO v. EPA, No. 1:25-cv-00510, ECF No. 1 (D.R.I. Oct. 6, 2025), https://www.courtlistener.com/docket/71560315/1/rhode-island-afl-cio-v-united-states-environmental-protection-agency/.

[10] R.I. AFL-CIO v. EPA, No. 1:25-cv-00510, ECF No. 48 (D.R.I. Sept. 18, 2026), https://docs.justia.com/cases/federal/district-courts/rhode-island/ridce/1:2025cv00510/60578/48.

[11] 5 U.S.C. § 706, https://www.law.cornell.edu/uscode/text/5/706.

[12] Complaint, R.I. AFL-CIO v. EPA, No. 1:25-cv-00510, ECF No. 1 (D.R.I. Oct. 6, 2025), https://www.courtlistener.com/docket/71560315/1/rhode-island-afl-cio-v-united-states-environmental-protection-agency/.

[13] Cong. Budget Off., Cost Estimate, Estimated Budgetary Effects of H.R. 1, the One Big Beautiful Bill Act, tbl. 4, § 42103 (June 4, 2025) (scoring the bill as passed by the House on May 22, 2025; enacted as § 60002), https://www.cbo.gov/publication/61461.

[14] Harris County v. EPA, No. 1:25-cv-03646, ECF No. 58 (D.D.C. Sept. 22, 2026), https://law.justia.com/cases/federal/district-courts/district-of-columbia/dcdce/1:2025cv03646/285851/58/.

[15] Motor Vehicle Manufacturers Ass’n v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 43 (1983), https://supreme.justia.com/cases/federal/us/463/29/.

[16] Ibid.

[17] Complaint, Maryland Clean Energy Center v. United States, No. 1:25-cv-01738 (Fed. Cl. filed Oct. 15, 2025), https://ag.ny.gov/sites/default/files/court-filings/maryland-clean-energy-center-et-al-v-united-states-complaint-2025.pdf.

[18] Ibid.

[19] Ibid.

[20] Restatement (Second) of Contracts § 205 (Am. L. Inst. 1981).

[21] Centex Corp. v. United States, 395 F.3d 1283, 1304 (Fed. Cir. 2005).

[22] Metcalf Construction Co. v. United States, 742 F.3d 984, 990–92 (Fed. Cir. 2014).

[23] Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv. L. Rev. 369 (1980).

[24] R.I. AFL-CIO v. EPA, No. 1:25-cv-00510, ECF No. 48 (D.R.I. Sept. 18, 2026), https://docs.justia.com/cases/federal/district-courts/rhode-island/ridce/1:2025cv00510/60578/48.

[25] Harris County v. EPA, No. 1:25-cv-03646 (D.D.C. filed Oct. 13, 2025), Climate Litigation Database, https://www.climatecasechart.com/collections/harris-county-v-epa_d701.

[26] Off. of Pers. Mgmt. v. Richmond, 496 U.S. 414, 424 (1990); see U.S. Const. art. I, § 9, cl. 7.

[27] Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 637 (1952) (Jackson, J., concurring).

[28] Leedom v. Kyne, 358 U.S. 184, 188 (1958).

[29] U.S. Const. art. I, § 9, cl. 7.

[30] 2 U.S.C. § 683(b); U.S. Gov’t Accountability Off., Impoundment Control Act, https://www.gao.gov/legal/appropriations-law/impoundment-control-act.

[31] Judge Rules EPA Illegally Ended $7B Solar Program for Low-Income Americans, CT Mirror (Sept. 18, 2026), https://ctmirror.org/2026/09/18/trumps-solar-for-all-termination-ruled-illegal/.