The legal landscape for the hundreds of awards that the Department of Energy canceled last fall is coming into sharper focus.
Recent developments — including the DOE’s admission in a case earlier this month that it canceled billions of dollars in funding “based solely” on a project’s location in a blue state — suggest a promising pathway for recovering funding via the court system, even as dozens of Democratic Senators call on the agency to “change course” and conduct a wholesale reinstatement of cancelled awards.
But it’s still not straightforward. Sources told Latitude Media that there are plans in the works to file a class action suit on behalf of all grants canceled last fall, but the vast majority of them are still in limbo and not represented in an active case. And court case or no, the administration is looking to make it easier to cancel future grants based on changing political priorities.
To date, plaintiffs in two lawsuits, both in federal court in Washington, D.C., have had their cancellations overturned: seven awards in a case brought by the City of St. Paul, and 11 awards in a case brought by the American Institute of Chemical Engineers.
In both, plaintiffs won on an argument that DOE violated equal protection rights under the Fifth Amendment by targeting funding recipients based on their location in states that voted for Kamala Harris in 2024. And in both cases, the federal government officially stipulated that a primary reason the grants in question were selected for termination was because the recipient was located in a “blue state” — something Russ Vought, director of the Office of Management and Budget, tweeted about at the time; Energy Secretary Chris Wright, nonetheless, has continued to deny that politics played a role.
The government hasn’t yet gone to a court of appeals to argue that discriminating against a blue state project is not, in fact, an equal protection violation. That makes the Fifth Amendment claim, at least at present, one of the strongest tools for canceled awards at this point, Claudia Polsky, the lead attorney representing the University of California researchers, told Latitude Media.
But it’s not the only tool. Polsky’s class action case, which is pending in federal district court in San Francisco, is also arguing that DOE has targeted researchers’ rights of political association with the blue state funding purge, and accordingly violated the First Amendment as well.
The university is also pursuing a separation of powers claim, arguing that Congress specifically directed DOE to fund certain programs (like hydrogen and direct air capture hubs), via legislation like 2021’s infrastructure law. In refusing to fund the mandated programs, the agency is defying Congress its constitutionally guaranteed power of the purse. It’s a claim that has already found some success in other lawsuits over canceled federal awards, Polsky explained.
Notably, because so many University of California researchers were sub-recipients for a DOE award, if that case ultimately prevails, the impacts would be wide-reaching.
One example: The lawsuit could prompt the reinstatement of a grant for one of seven hydrogen hubs funded by DOE during the Biden administration. Formally called the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES), California’s hydrogen hub was awarded up to $1.2 billion by the now-defunct Office of Clean Energy Demonstrations to use renewable energy and biomass to produce clean hydrogen. ARCHES paused operations in the wake of the funding cancellation, but the lawsuit means that the grant could be recoverable..
The same is true for one of the smaller direct air capture hubs, which DOE said last fall it was canceling because they “provide no tangible economic benefit” and “may raise natural gas prices if deployed at scale.”
A path without DOE
For some grantees, there’s also a path that doesn’t involve maintaining ties with the federal government at all. A recent Supreme Court “shadow docket” ruling in an NIH grants case suggested that claims seeking damages may belong in the court of federal claims rather than in district court.
The court of federal claims, which can award damages but can’t order agencies to reinstate awards, can’t hear constitutional claims, like the First and Fifth Amendment claims being brought by the University of California, for example. But it can hear contract claims. So if they can make a convincing argument, grantees could potentially recover their lost funding in cash — and without the strings of a DOE grant.
To date, only one DOE awardee has pursued financial compensation in the court of federal claims: Sublime Systems, a low-carbon cement company, was counting on an $87 million grant to scale its electrochemical manufacturing approach. Its award was among the first tranche canceled by DOE in late May of last year.
The company initially disputed the termination through an internal DOE process, but the process took so long that the company ultimately had to pause construction on the plant the grant would have funded and conduct layoffs.
Instead of turning to federal court, Sublime filed suit in the court of federal claims, arguing that by breaching its contract with the company, DOE had caused it to lose income and funding, and to suffer delays and overall loss of company value. The company is seeking roughly $2 billion in damages — far more than its original DOE award.
