States Sue Administration to Release $1.2 Billion in Withheld Clean Energy Funds
San Francisco, Wednesday, 18 February 2026.
Led by California, a state coalition sued Wednesday to force the release of $1.2 billion for hydrogen projects, challenging the executive branch’s authority to block congressionally approved spending.
Constitutional Clash Over Congressional Appropriations
The legal challenge, formally filed as State of California v. Wright in the U.S. District Court for the Northern District of California, argues that the Department of Energy (DOE) lacks the legal standing to withhold funds already appropriated by Congress [5]. California Attorney General Rob Bonta, joined by Colorado Attorney General Phil Weiser and Washington Attorney General Nicholas Brown, asserts that the executive branch is violating the separation of powers [4][5]. According to the complaint, federal agencies are obligated to execute laws as written, with Bonta stating, “It’s as simple as Congress has the power of the purse, not the executive branch” [1]. The dispute focuses on funding originally approved under the 2021 Bipartisan Infrastructure Act and the 2022 Inflation Reduction Act, which the Trump administration began dismantling shortly after taking office in January 2025 [1][5].
Economic Fallout and Partisan Allegations
At the center of the financial dispute is the cancellation of $1.2 billion allocated for the Alliance for Renewable Clean Hydrogen Energy Systems (ARCHES) [1][4]. This public-private hub was designed to transition heavy industry, including ports, trucking, and public transit, away from fossil fuels by utilizing clean hydrogen [1][5]. State officials contend that the rescission of these funds will have immediate economic consequences, estimating the loss of over 200,000 union jobs [4][5]. California Governor Gavin Newsom criticized the administration’s stance as economically irrational, arguing that the hydrogen sector is vital for future employment and saving billions in health costs [4]. The lawsuit follows a broader move by Energy Secretary Chris Wright in September 2025, when he canceled 223 projects nationwide, labeling them as “rushed through” by the previous administration [4].
A Broader Context of Deregulation
This fiscal conflict occurs against a backdrop of sweeping environmental deregulation. On the same day as the state lawsuit, a coalition of environmental and health organizations sued the Environmental Protection Agency (EPA) over its February 10, 2026 decision to repeal the 2009 “endangerment finding” [2][3]. This finding, which established that greenhouse gases threaten public health, had served as the legal foundation for federal climate regulations for nearly two decades [2][6]. While President Trump hailed the repeal as the “single largest deregulatory action in American history,” opponents, including the American Public Health Association, argue the move ignores established science and legal precedent confirmed by the Supreme Court [2][6]. As states fight for appropriated funds and non-profits litigate for regulatory standards, the judiciary is poised to decide the extent of the executive branch’s power to reverse established energy and environmental policies.