HF3945

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