An independent federal office is launching an investigation into the U.S. Department of Energy after it canceled $8 billion in funding for clean energy projects in California and other Democratic-leaning states.
The Energy Department Office of the Inspector General agreed to audit the agency after nearly 30 California lawmakers wrote a letter raising concerns about the termination of funding, which they described as unlawful because it was targeted at blue states “for their perceived lack of support for president Trump.”
The cancellation, in October, included more than 300 awards in 16 states that did not vote for Trump in the 2024 presidential election. Among them were 79 canceled grants for California — more than any other state on the list — totaling $2.1 billion, as well as $1.2 billion in future funding expected for the state’s hydrogen hub, the Alliance for Renewable Clean Hydrogen Energy Systems, or ARCHES.
Responding to the lawmakers’ letter Monday, Inspector General Sarah B. Nelson said it “highlights important issues regarding the Department’s administration of financial assistance.”
“In response to your letter, the Office of Inspector General recently announced an audit which will review the Department of Energy’s processes when cancelling financial assistance and whether those cancellations were in accordance with established criteria,” Nelson wrote. “This work will help ensure that these activities are conducted consistently with applicable laws, regulations, and Departmental policies and procedures.”
News of the funding cuts first broke in a post on X from Russell Vought, director of the White House’s Office of Management and Budget.
“Nearly $8 billion in Green New Scam funding to fuel the Left’s climate agenda is being canceled,” Vought wrote. “The projects are in the following states: CA, CO, CT, DE, HI, IL, MD, MA, MN, NH, NJ, NM, NY, OR, VT, WA.”
The Energy Department later confirmed the plan in a news release, stating that the awards were terminated following a “thorough, individualized financial review” that determined the projects “did not adequately advance the nation’s energy needs, were not economically viable, and would not provide a positive return on investment of taxpayer dollars.”
The funding losses generated a swift response from California, which has invested heavily in clean energy projects including offshore wind and solar and battery energy storage, as well as the billion-dollar hydrogen hub, which was awarded under President Biden.
The Oct. 20 letter in response led by Sen. Adam Schiff, Sen. Alex Padilla and Rep. Zoe Lofgren (D-San José) challenged the administration’s decision as politically motivated and suggestive of “unlawful bias.” They also said the Energy Department did not have the legal authority to terminate the awards, many of which came from the Bipartisan Infrastructure Law passed by Congress in 2021.
“The cancellation of these funds directly threatens California jobs and will drive up energy bills at a time when costs are already out of control and the demand for energy is going up exponentially,” Schiff said in a statement Wednesday. “I look forward to the Office of Inspector General’s thorough review of this matter and will continue to urge that these critical, congressionally appropriated grants are reinstated.”
Padilla noted that while the cuts appeared to focus on blue states, many of the project terminations in California affected Republican-represented districts.
“After our calls for a watchdog investigation, I am glad to see the Energy Department’s inspector general taking action to bring transparency and accountability for the administration’s vengeful hit list,” Padilla said. “From a backup power generator for a California children’s hospital to bipartisan funding for ARCHES Hydrogen Hub, the administration must reverse these harmful cuts and work to prevent Americans’ energy costs from skyrocketing even further.”
Representatives for the Energy Department did not immediately respond to a request for comment. While this round of funding cuts focused heavily on Democratic-leaning states, the administration has been broadly focused on canceling climate-related projects across the map, such as the Environmental Protection Agency’s terminated “Solar for All” program to help low-income households install solar panels on their homes.
It is not the first time California has sparred with the federal government over issues relating to energy and the environment. The state this week filed its 50th lawsuit against the Trump administration this year, this time over funding for electric vehicle charging infrastructure.
California and other states also sued the administration over its ban on federal permits for new wind energy projects. A federal judge sided with the states last week.
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