Attorney General Ellison sues to stop federal cuts that threaten state energy programs
August 15, 2025 (SAINT PAUL) — Attorney General Ellison today joined 15 other states in suing to block the U.S. Department of Energy (DOE) from imposing a new funding cap that slashes support for vital state-run energy programs. The DOE policy would prevent states from using critical federal funds by limiting reimbursement for key administrative and staffing costs that have long been covered by these federal energy programs. The coalition argues that by capping certain funding for these programs, DOE is jeopardizing states’ ability to keep them running. The states are asking the court to vacate this unlawful cap and restore the legally required reimbursement rates for these essential energy programs.
A copy of the filing is can be found here.
“Once again, the Trump Administration is trying to impose arbitrary funding cuts that will harm the people of Minnesota,” said Attorney General Ellison. “This time, Trump's funding cuts will jeopardize programs to lower energy costs. That is unacceptable. Federal courts have blocked the Trump Administration from engaging in similar conduct four times already, yet they insist on continuing to violate the law. My mission as Attorney General is not just to sue Donald Trump and his administration, but I will not hesitate to take them to court whenever they violate the law and harm the people of Minnesota."
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 limit resources states rely on to keep programs operating and ensure federal dollars reach the people they are meant to help. It could force 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 face sudden shortfalls, and agencies would be 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, but DOE’s new policy would cut approximately $290,000 in funding to the state, putting both essential staff and programming at risk.
The states argue that the new policy violates federal regulations that require agencies to honor negotiated indirect cost rates between states and the federal government. They assert the policy mirrors similar caps that federal courts have recently struck down, and also additional federal regulations regarding fringe. The coalition emphasizes that every court to have ruled on the merits of such blanket limits has found them unlawful, unjustified, and disruptive to essential public programs.
The coalition is asking the court to vacate DOE’s new policy and bar implementation of any unlawful reimbursement caps.
Attorney General Ellison, New York Attorney General Letitia James, and Colorado Attorney General Phil Weiser led the filing and were joined by the attorneys general of California, Connecticut, Delaware, Hawai’i, Maine, Maryland, Michigan, North Carolina, Oregon, Washington, and Wisconsin, as well as the governors of Kentucky and Pennsylvania.