AG Ellison Wins Lawsuit Against DOE, Preserves State Energy Funding

AG: Minnesota Communications

Filed April 2nd, 2026

Detected April 4th, 2026

Summary

Minnesota Attorney General Ellison won a lawsuit forcing the U.S. Department of Energy to rescind its unlawful policy capping reimbursement for state energy programs at 10% of project budgets. The DOE agreed to dismiss its appeal, preserving a September 2025 federal court victory that struck down the indirect costs policy threatening millions in state funding. Minnesota receives over $22 million annually in DOE grant funding for energy programs.

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What changed

The U.S. District Court for the District of Oregon ruled in September 2025 that DOE's "indirect costs" policy capping administrative and staffing costs at 10% of project budgets violated federal law. The policy, announced May 8, 2025, would have eliminated negotiated reimbursement rates for state-run federally funded programs that have been standard practice for decades. After initially appealing the ruling, DOE rescinded the policy and dismissed its appeal on April 2, 2026, bringing the litigation to a close and ensuring states continue receiving full federal funding for essential energy programs.

State energy agencies and departments like Minnesota's Department of Commerce Energy Resources Division should take note that the 10% indirect cost cap is permanently invalidated. No new compliance actions are required since the policy was rescinded before implementation. However, agencies administering DOE grants should document this resolution for audit purposes and ensure their cost allocation practices align with the restored longstanding requirements for negotiated indirect cost rates. The underlying legal principle—that agencies must negotiate fair reimbursement rates with states—remains in effect.

Source document (simplified)

Attorney General Ellison successfully protects state energy programs

April 2, 2026 (SAINT PAUL) — Attorney General Ellison today released the following statement after the U.S. Department of Energy (DOE) rescinded its unlawful policy capping reimbursement for state energy programs and agreed to dismiss its appeal, preserving states’ victory in federal court and bringing the case to a close:

"Once again, my fellow attorneys general and I have had to force the Trump administration to abandon an unlawful policy that would harm the people of Minnesota. At a time when the Trump’s war with Iran has driven up gas prices across the nation, the last thing Minnesotans need are cuts to programs that help deliver clean and affordable energy. While we have won this fight, it remains a tremendous shame that our president has to be forced by litigation and court order to actually follow the law, instead of simply acting lawfully from the start. The American people deserve better.”

In August 2025, Attorney General Ellison and a coalition of states sued DOE over a new policy capping reimbursement for key administrative and staffing costs at ten percent of a project’s total budget, threatening millions of dollars in funding for state energy programs. In September 2025, the U.S. District Court for the District of Oregon ruled in favor of the states and struck down DOE’s “indirect costs” policy.

After initially appealing that decision, DOE has now rescinded the policy and agreed to dismiss its appeal, ensuring that states will continue to receive full federal funding for these essential programs and bringing the litigation to a successful conclusion.

Background

For decades, federal law has required agencies like DOE to negotiate agreements with states that set fair reimbursement rates for federally funded, state-run programs. This includes the basic administrative or staffing costs needed to run federally funded programs. These “indirect” and “fringe” costs have never been subject to a cap. On May 8, 2025, DOE announced a new policy that ignores this longstanding practice, capping indirect and employee benefit costs at 10 percent of a project’s total budget, regardless of previously negotiated rates.

If allowed to stand, the cap would have limit resources states rely on to keep programs operating and ensure federal dollars reach the people they are meant to help. It could have forced states to make cuts to staffing and operations, reducing their ability to deliver crucial energy services and potentially delaying or cancelling key projects. State budgets would have face sudden shortfalls, and agencies would have been forced to spend more time and money navigating DOE’s new budget rules, leaving fewer resources for direct consumer assistance.

In 2024, the Minnesota Department of Commerce received over $22 million in annual grant funding from DOE. Commerce’s Energy Resources Division relies on this funding to promote reliable, affordable, and clean energy for Minnesotans and to support the public servants who are essential to this work. For example, Minnesota uses DOE State Energy Program funds to help lower energy costs, secure the grid, and provide local economic stability. DOE’s policy would have cut hundreds of thousands of dollars in that funding, putting both essential staff and programming at risk.