California and 12 other state attorneys general filed a federal lawsuit on February 18, targeting the U.S. Department of Energy and the Office of Management and Budget over the Trump administration’s cancellation of billions in federally approved clean energy awards, including a $1.2 billion commitment to California’s hydrogen hub, ARCHES (Alliance for Renewable Clean Hydrogen Energy Systems).
The legal action argues the rescissions violate the constitutional separation of powers and the Administrative Procedure Act because Congress, not the executive branch, has authority over federal appropriations.
ARCHES was part of a broader national investment under the Inflation Reduction Act and the Infrastructure Investment and Jobs Act designed to deploy regional hydrogen hubs that enable decarbonization in sectors where emissions are hard to abate, such as heavy‑duty transportation, port operations, and utilities. DOE’s termination of the funds follows internal directives initiated on President Trump’s first day back in office that declared a “national energy emergency” and led agencies to review and rescind previously granted awards.
Critics of the administration’s actions frame the funding cuts as politically selective rather than rooted in standardized economic evaluation. States argue that the cancellation not only undermines the execution of bipartisan energy legislation but also jeopardizes labor market impacts and broader clean energy ecosystem development. California officials say the ARCHES funding would have supported more than 200,000 jobs and nearly $3 billion in annual health cost savings by reducing pollution, figures tied to projected emissions reductions and workforce deployment in the hub’s value chain.
From an administrative law perspective, the lawsuit emphasizes that DOE and OMB lacked statutory authority to unilaterally withdraw appropriated funds. The complaint contends that the executive branch must “faithfully execute” enacted laws and not nullify spending decisions made by Congress, challenging the legitimacy of post‑appropriation reviews that culminated in the rescissions.
Opponents of the suit, including DOE officials in past statements, have defended the cancellations by asserting that some funded projects did not meet criteria for advancing national energy security or economic return, framing the adjustments as fiscal discipline rather than partisan policy. While specific economic assessments of ARCHES were not publicly detailed by DOE, the administration’s broader funding rollback reportedly affected roughly $7 billion to $8 billion in clean energy awards across multiple states.
The litigation also illustrates growing friction between federal executive authority and state energy strategy. California’s lawsuit is one of numerous legal challenges involving energy and environmental regulations under the same administration. States argue that the funding cuts will distort long‑term investment signals for emerging technologies such as hydrogen, where infrastructure costs and scaling timelines hinge on stable policy commitments.
In framing their legal argument, California and its partners underscore the interplay between federal appropriations and private capital leverage. ARCHES proponents asserted the potential to unlock significant third‑party investment contingent on federal support, positioning the hub as a fulcrum for wider market entry and supply chain development within the U.S. hydrogen economy. With the funding rescinded, stakeholders now face heightened uncertainty in closing financing gaps and progressing deployment schedules.
As the case advances, its resolution could shape judicial interpretation of executive power over congressionally authorized energy spending and influence strategic planning for decarbonization initiatives that depend on federal‑state cooperation and sustained policy signals.
