HF3945

HF3945 (Legislative Session 94 (2025-2026))

Greenhouse gas pollution cost-recovery program created, account established, reports required, and money appropriated.

Related bill: SF4126

AI Generated Summary

Purpose

Establish a program and funding mechanism to recover costs the state incurs from greenhouse gas emissions and to fund climate change adaptation projects, especially those that benefit disadvantaged communities.

Key Definitions (overview)

Greenhouse gas pollution account: a dedicated fund to receive cost-recovery payments and pay for adaptation projects.
Covered greenhouse gas emissions: total GHG emissions released from fossil fuels used, extracted, or refined in Minnesota.
Responsible party: an entity (or its successor) that operated in fossil fuel extraction or crude oil refining during the covered period and is deemed liable for a large share of emissions; includes a nexus requirement with Minnesota.
Controlled group: multiple entities treated as one for liability purposes; all in the group are jointly and severally liable.
Climate change adaptation project: a project to respond to, avoid, repair, or adapt to climate-change impacts for communities, households, and businesses.
Disadvantaged community: defined group eligible for special consideration, including environmental justice areas.
Public plan: plans like hazard mitigation, climate action, energy action, or adaptation plans used to evaluate project eligibility.
Cost-recovery demand: a formal bill sent to a responsible party detailing the amount owed.
Cost-recovery payment: money paid to the account to cover the state's costs from emissions.

Greenhouse Gas Pollution Cost-Recovery Program (what it does)

Creates a program to secure cost-recovery payments from responsible parties and to disburse money from the Greenhouse Gas Pollution Account to fund adaptation projects.
The program will determine each party’s proportional liability, issue cost-recovery demands, collect payments, and disburse funds for climate adaptation projects.

Liability and Parties

Liability is strict: responsible parties must pay a share of the costs to the state and its residents caused by covered emissions.
If parties are in a controlled group, they are treated as a single entity for liability purposes, with joint and several liability.
For each party, the demand amount is proportional to that party’s share of covered emissions relative to all emissions from fossil fuels during the covered period.
If a party has a minority stake in another entity, the stake’s emissions are added to the party’s share in proportion to that stake.
Some emissions measures apply: specific tonnage conversions are used to attribute emissions to an entity (e.g., coal, crude oil, and fuel gases).

Cost-Recovery Demands and Payments

The commissioner must issue cost-recovery demands within six months after rules are adopted.
Payment options:
- Pay the full amount within six months, or
- Pay in nine annual installments (first payment within six months, equal to 20% of the total demand; each subsequent year 10%), with potential interest and possible adjustments for changes in the Consumer Price Index.
If installments are not paid timely or other triggering events occur (like asset liquidation or business cessation), the remaining balance may become due immediately, unless there's a buyer who agrees to assume the remaining installments.
Costs collected under the program go into the Greenhouse Gas Pollution Account.

Climate Change Adaptation Projects and Public Plans

Money from the account can be used only for costs of climate change adaptation projects recommended in public plans.
At least 40% of disbursements must benefit disadvantaged communities.

Labor Standards and Public Works

Funds must be used to increase local employment and improve job quality.
Contracts for projects must pay prevailing wage and follow state public works rules.

Rulemaking and Administration

The commissioner will adopt rules to implement the program, including:
- How to identify responsible parties and their shares,
- How to register entities,
- How to issue and collect cost-recovery demands,
- How to identify eligible public plans,
- How to determine which costs qualify,
- How to ensure at least 40% of disbursements go to disadvantaged communities.
One full-time position (and potentially more) is created in the Pollution Control Agency to run the program.

Greenhouse Gas Pollution Account (the fund)

An account is created in the environmental fund to receive cost-recovery payments and to make payments for adaptation projects.
The account may also hold money appropriated by the legislature or other sources, plus interest.
Uses of the money include costs of climate adaptation projects (operation, monitoring, maintenance, admin costs) and the program’s administrative expenses.
Audited reporting: the state auditor will assess the program’s costs to the state and to residents within two years of the act and update every four years.
Reporting to Legislature: every two years (even-numbered years) the commissioner must report on payments received, money disbursed, project status, and the share of disbursements for disadvantaged communities.

Appropriations (Funding to Start)

Fiscal year 2027: funding from the general fund to the Pollution Control Agency for program implementation (staffing, support, consultants).
Fiscal year 2027: funding from the general fund to the State Auditor for implementation support (staffing, support, consultants).

Notable Policy Features

Emissions period: covers emissions from January 1, 1995 through December 31, 2026.
Public accountability: requires public plans for project eligibility and annual or biannual reporting.
Disadvantaged communities focus: ensures a substantial share of funds benefits these communities.
Nexus requirement: ensures liable parties have a sufficient connection to Minnesota to be held responsible.

What this bill seeks to accomplish

Create a mechanism to hold major fossil fuel extractors and refiners accountable for past emissions.
Fund climate adaptation projects with a priority on helping disadvantaged communities.
Establish a transparent process with defined costs, liabilities, and reporting to manage funds and monitor outcomes.
Leverage state resources to mitigate climate impacts and address related public costs.

Relevant Terms - greenhouse gas - cost-recovery program - cost-recovery demand - responsible party - controlled group - covered greenhouse gas emissions - calendar/covered period - climate change adaptation project - public plan - disadvantaged communities - Greenhouse Gas Pollution Account - environmental fund - state auditor - Pollution Control Agency - prevailing wage - public works - emissions - nexus - climate cost assessment - installments - interest - rulemaking

Bill text versions

Introduction PDF PDF file

Actions

Date	Chamber	Where	Type	Name	Committee Name
March 05, 2026	House		Action	Introduction and first reading, referred to	State Government Finance and Policy
March 09, 2026	House		Action	Author added

Citations

[
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Defines the greenhouse gas pollution costrecovery program scope and connects to the program provisions in the bill (116.3937).",
      "modified": []
    },
    "citation": "116.393",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Referenced for definitions related to terms used with the program and public/tribal planning elements.",
      "modified": []
    },
    "citation": "116.391",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Used to identify disadvantaged communities under the community energy transition grant program.",
      "modified": []
    },
    "citation": "116J.55",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Environmental justice area definition used to determine benefits to disadvantaged communities.",
      "modified": []
    },
    "citation": "115A.03",
    "subdivision": "10b"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Plan requirements (hazard/climate/action/adaptation) integrated into public planning; cross-reference to the comprehensive plan provision in 473.859(7).",
      "modified": []
    },
    "citation": "473.859",
    "subdivision": "7"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Establishes the greenhouse gas pollution costrecovery program; referenced as the core program statute.",
      "modified": []
    },
    "citation": "116.3935",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Account created for costrecovery program disbursements; initial funding mechanism.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "1"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Liability structure: treated as a single entity in a controlled group; joint and several liability among group members.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "2"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Provision of costrecovery demands, payment terms, interest, CPI adjustments, and appeals.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "3"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Other remedies; preserves existing remedies at common law or statute.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "4"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Eligibility of climate change adaptation projects; requires public plan recommendation.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "5"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Labor standards; prevailing wage requirements apply to climate change adaptation contracts.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "6"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Rulemaking authority for implementing the program, including calculations of emissions shares, registrations, notices, and disbursement criteria.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "7"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Staffing: creation of at least one full-time position at the Pollution Control Agency; additional positions as needed.",
      "modified": []
    },
    "citation": "116.3937",
    "subdivision": "8"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Reference to bankruptcy proceedings (Title 11) in the context of costrecovery installment defaults or related events.",
      "modified": []
    },
    "citation": "11 U.S.C.",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Used to define control group for purposes of determining responsible parties.",
      "modified": []
    },
    "citation": "Internal Revenue Code §52a",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Used to define control group for purposes of determining responsible parties.",
      "modified": []
    },
    "citation": "Internal Revenue Code §52b",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Cross-reference relating to ownership interests within a controlled group for liability purposes.",
      "modified": []
    },
    "citation": "Internal Revenue Code §414m",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Cross-reference relating to ownership interests within a controlled group for liability purposes.",
      "modified": []
    },
    "citation": "Internal Revenue Code §414o",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Nexus requirements and constitutional considerations for determining responsible parties.",
      "modified": []
    },
    "citation": "United States Constitution",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Contested case hearing rights and procedures applicable under Minnesota Administrative Procedure Act.",
      "modified": []
    },
    "citation": "Minn. Stat. ch. 14",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Prevailing wage rate definition applied to contracts under the program.",
      "modified": []
    },
    "citation": "Minn. Stat. § 177.42, subd. 6",
    "subdivision": "6"
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Prevailing wage requirements apply to contracts funded under the program.",
      "modified": []
    },
    "citation": "Minn. Stat. § 177.27",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Prevailing wage requirements apply to contracts funded under the program.",
      "modified": []
    },
    "citation": "Minn. Stat. § 177.30",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Prevailing wage requirements apply to contracts funded under the program.",
      "modified": []
    },
    "citation": "Minn. Stat. § 177.32",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Prevailing wage requirements apply to contracts funded under the program.",
      "modified": []
    },
    "citation": "Minn. Stat. § 177.41",
    "subdivision": ""
  },
  {
    "analysis": {
      "added": [],
      "removed": [],
      "summary": "Prevailing wage requirements apply to contracts funded under the program; part of the 177-series provisions referenced in the bill.",
      "modified": []
    },
    "citation": "Minn. Stat. § 177.435",
    "subdivision": ""
  }
]