By Nate Raymond

March 18 (Reuters) - A U.S. judge on Tuesday temporarily blocked the U.S. Environmental Protection Agency from recovering grant funds issued as part of a $20 billion climate funding program that Republican President Donald Trump's administration has moved to terminate.

U.S. District Judge Tanya Chutkan in Washington issued a temporary restraining order halting the EPA's termination of three environmental nonprofit groups' grant agreements and barring Citibank from dispersing grant funding held at the bank in their accounts.

Chutkan said it appeared the EPA failed to take the legally required steps necessary to terminate grants worth a combined $13.97 million that were awarded to Climate United, Coalition for Green Capital and Power Forward Communities.

She said that while EPA claimed it terminated the grants due to "substantial concerns" about fraud, waste and abuse, it provided only "vague and unsubstantiated assertions" to back up those claims in court.

Absent a court order preserving the status quo as the litigation proceeds, Chutkan said those groups would face imminent harm if Citibank transferred money the groups use to pay employees, pay rent and fund projects out of those accounts.

"If Citibank transfers money out of these accounts, the funds will not be recoverable," wrote Chutkan, an appointee of former Democratic U.S. President Barack Obama.

The EPA and Citigroup, C.N Citibank's parent company, did not respond to requests for comment.

EPA Lee Zeldin had publicized his campaign to claw back money from the Greenhouse Gas Reduction Fund, which Congress authorized in 2022 as part of the Inflation Reduction Act during then Democratic U.S. President Joe Biden's tenure in 2022 to kick-start projects aimed at curbing pollution.

The EPA under Zeldin's watch has maintained that the program did not align with the agency's priorities, and it cited concerns with potential fraud, waste and abuse. Zeldin has said that the FBI and Justice Department are also investigating.

Their grant funding was required to be held at Citibank. The three nonprofits sued last week to challenge the EPA's termination of their grants and Citibank's withholding of the money, arguing the agency's decisions were arbitrary.

Climate United CEO Beth Bafford in a statement called Tuesday's ruling "a strong step in the right direction," and said the organization would work in the coming weeks towards a long-term solution.

(Reporting by Nate Raymond in Boston)

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