SF4886

1. Purpose
2. Create a Greenhouse Gas Pollution Cost-Recovery Program to recover costs related to greenhouse gas emissions and use those funds to pay for climate change adaptation projects in Minnesota.
3. Establish a dedicated Greenhouse Gas Pollution Account to hold cost-recovery payments and money for approved climate adaptation projects.

4. Improve accountability by reporting on costs, disbursements, and progress, and ensure a portion of funds directly benefits disadvantaged communities.

5. Key Definitions (to understand how the bill works)

6. Account: the Greenhouse Gas Pollution Account in the Environmental Fund that holds and spends money for the program.

7. Climate change adaptation project: a state, local government, or Tribal project to respond to or prepare for climate change impacts.

8. Covered greenhouse gas emissions: total GHG emissions from fossil fuels used, extracted, or refined by an entity, measured in CO2 equivalent.

9. Disadvantaged community: communities defined as eligible under a state program or environmental justice area.

10. Entity and responsible party: various forms of ownership or control (including partnerships, corporations, municipalities) that held fossil fuel interests; a “controlled group” is treated as a single entity for liability, with joint and several liability among all in the group.

11. Fossil fuel and coal/crude oil/fuel gas: standard terms for coal, oil, and fuels that emit greenhouse gases when burned or refined.

12. Greenhouse gas: CO2, methane, nitrous oxide, HFCs, PFCs, SF6 from human-caused sources in Minnesota.

13. Public plan: plans like hazard mitigation, climate action, energy action, or adaptation plans used to guide project funding.

14. Cost-recovery demand: a written notice from the commissioner telling a party how much they owe.

15. Program: the greenhouse gas pollution cost-recovery program establishing liability, collection, and disbursement processes.

16. Public works and prevailing wage: requirements that contracts for adaptation projects pay prevailing wage and follow related labor standards.

17. Notice of cost-recovery demand and payment schedule: the formal process and timing for paying the demanded amounts.

18. Petroleum product: refined or rerefined oil products, including from crude oil or other sources.

19. Public plan and disadvantaged communities criterion: rules to ensure project funding benefits those communities most in need.

20. Greenhouse Gas Pollution Cost-Recovery Program (Sec. 3)

21. Program establishment and duties:

    • The program secures cost-recovery payments from responsible parties and disburses money for climate adaptation projects.
    • The commissioner determines each party’s proportional liability, issues cost-recovery demands, collects payments, and disburses funds under rules.

22. Liability and apportionment:

    • Each responsible party is strictly liable for a share of costs caused by their covered emissions.
    • Entities in a controlled group are treated as a single entity; all members share liability jointly and severally.
    • The cost-recovery demand for a party is proportional to that party’s share of emissions relative to total emissions from fossil fuels during the covered period.
    • If a party has a minority stake (10% or more) in another entity, the party’s share increases by its minority-interest share of that other entity’s emissions.
    • Specific emission-attribution factors are used (e.g., coal, crude oil, fuel gases) to translate emissions into demand amounts.
    • The commissioner may adjust the demand amount if refining activities by another party contributed to the same crude oil or products.

23. Cost-recovery demands and payments:

    • The commissioner must issue cost-recovery demands within six months after rules are adopted.
    • Payment options: pay in full within six months, or pay in nine annual installments (20% at first, then 10% annually), with potential interest and adjustments for inflation or changes in the amount.
    • If a party fails to timely pay installments, consequences include accelerated payment due on events like liquidation, asset sale, cessation of business, or similar cases; a buyer can assume remaining installments if they agree to be liable.
    • Cost-recovery payments go into the Greenhouse Gas Pollution Account.
    • A party can contest a demand through a hearing.

24. Other remedies and eligibility:

    • The program does not replace other legal remedies; it works alongside existing laws.
    • To be eligible for account funds, climate adaptation projects must be recommended in a public plan.

25. Labor standards:

    • Funds should support local jobs and higher job quality.
    • Contracts for adaptation projects must pay prevailing wage and follow state labor and public works requirements.
    • The contracting authority for projects is the local contracting agency; projects are treated as public works.

26. Rulemaking and staffing:

    • The commissioner will issue implementing rules for determining responsible parties, registering entities, issuing and collecting notices, identifying public plans, evaluating project criteria, and ensuring at least 40% of disbursements benefit disadvantaged communities.
    • One full-time position is created at the Pollution Control Agency to implement the section, with room to hire more staff as needed.

27. Greenhouse Gas Pollution Account (Sec. 4)

28. Account creation and use:

    • A Greenhouse Gas Pollution Account is created in the Environmental Fund to receive cost-recovery payments and to pay for climate adaptation projects and program administration.
    • Money in the account may only be used for climate adaptation projects (including operation, monitoring, maintenance) and reasonable administrative expenses.
    • At least 40% of disbursements must fund climate adaptation projects that benefit disadvantaged communities.

29. Costs assessment:

    • The State Auditor must prepare a climate cost assessment within two years and update it every four years, outlining:
    • Cost-driving impacts of emissions on infrastructure, emergency response, health, resources, biodiversity, housing, and more.
    • Categorized current and future costs to the state and its residents for adapting to these impacts.

30. Reporting and audits:

    • By December 31, 2030 and every even-numbered year thereafter, the Commissioner must report on cost-recovery payments, disbursements, project status, and the share of disbursements benefiting disadvantaged communities.
    • The State Auditor may conduct fiscal audits of the account and expenditures as a reasonable administrative expense.

31. Appropriation and Implementation (Sec. 5)

32. Initial funding:

    • Fiscal year 2027 appropriations from the general fund to the Pollution Control Agency for program implementation (staffing, administration, and expert assistance).
    • Fiscal year 2027 appropriations from the general fund to the State Auditor for program implementation (staffing, administration, and expert assistance).

33. Significant Changes This Bill Introduces

34. Establishes a new, dedicated cost-recovery framework to claim liability from fossil fuel-related entities for their share of emissions and to fund climate adaptation projects.

35. Creates a single, dedicated Greenhouse Gas Pollution Account to collect cost-recovery payments and disburse funds to adaptation initiatives, with a mandate that at least 40% of disbursements benefit disadvantaged communities.

36. Introduces joint and several liability across entities within a controlled group and specifies detailed attribution methods for emissions to determine each party’s liability.

37. Requires payment options (lump-sum or installments) with enforcement provisions tied to asset sales and business changes.

38. Ties funding to public plans for adaptation and requires labor standards (prevailing wage) on funded projects, treating adaptation work as public works.

39. Requires ongoing climate cost assessments and public reporting, with oversight by the State Auditor and the Pollution Control Agency.

40. Provides initial funding for program startup in the 2027 fiscal year, establishing ongoing administration and accountability processes.

Relevant Terms - greenhouse gas pollution cost-recovery program - cost-recovery demand - responsible party - controlled group - covered greenhouse gas emissions - CO2 equivalent - public plan - climate change adaptation project - disadvantaged communities - greenhouse gas pollution account - environmental fund - fossil fuels - coal - crude oil - fuel gas - petroleum product - emissions attribution factors (e.g., per million pounds of coal, barrels of crude oil, cubic feet of fuel gas) - prevailing wage - public works - State Auditor - Climate cost assessment - emissions liability - proportionate liability - joint and several liability - administration and rulemaking - environmental justice / environmental justice areas - budget appropriation (FY 2027) - Pollution Control Agency