Technically speaking none of Goodreads material or content is being used publically, the only information displayed on the site is freely available (Title, Author) and not Goodread's property.
You could try to argue that this falls under "create derivative works from any materials or content accessible on the Service" but even then it seems really flimsy to say that recommending books based on Goodread reviews is an infringemnt.
It's just not that different to a youtuber saying "I read reviews for 50 books, here's the ones to read"
The way their letter is worded it seems that they have a rainy day fund constituted to ride out the stormy next few week and I'm fairly certain they'll come back with more details as to how they'll be acquiring funding from now on in the next few days. Maybe paid access to an API, maybe donations from large companies that use the system, maybe something else ::shrug::
Hopefully a project as important as this doesn't just dissapear completely because of government pressure.
You could try to argue that this falls under "create derivative works from any materials or content accessible on the Service" but even then it seems really flimsy to say that recommending books based on Goodread reviews is an infringemnt.
It's just not that different to a youtuber saying "I read reviews for 50 books, here's the ones to read"