Commerce officials told the Minnesota Senate Environment and Climate Committee on Feb. 17 that a sudden freeze of federal grants and competitive awards jeopardizes projects across the state and that the Department of Commerce is requesting $14,250,000 per year in state operating support in the governor's budget.

For the record, Grace Arnold, Commissioner of the Minnesota Department of Commerce, introduced the department's energy division presentation and Pete Wyckoff, Deputy Commissioner of Commerce for the Energy Division, outlined the agency's responsibilities and funding picture. Wyckoff said roughly a billion dollars in federal funding are currently under contract to the agency and that “as of the end of last week, all of that money is frozen.”

That funding supports a wide array of state programs and competitive awards, officials said. Wyckoff named several specific items that Commerce said are at risk if the federal funds do not flow: a $52,000,000 competitive tax-credit–style award to a Minnesota company expected to build a rare‑earth‑free magnet plant in Sartell; an $812,000,000 grant to Great River Energy; weatherization and home efficiency rebates; and other competitive awards the department has reserved or leveraged with state match dollars.

Why it matters: Commerce staff said the frozen funds are already under contract and that losing them would put projects, local matches and jobs at risk across Minnesota. “A contract is a contract. You don't get to pick and choose,” Wyckoff told the committee when describing the department's talks with the federal government and the state Attorney General's office.

Budget and requested state funding: Commerce said the governor's budget includes a request for $14,250,000 per year for the Division of Energy Resources. Officials described the makeup of that request as follows:
- About $6,040,000 per year is non‑ridered (flexible) base funding to support core staff and program work across the division.
- $3,200,000 per year to continue a pre‑weatherization program that helps bring homes into eligibility for federal weatherization dollars.
- An RDA (Regional Development Agency) pass‑through amount of roughly $600,000 over the biennium was noted in the packet.
- The administration-wide operating adjustment cited for FY2026 and FY2027 totals $1,200,000 and $1,800,000 respectively to cover personnel and shared IT/services costs; Commerce said that request is agency‑wide rather than division‑specific.

Programs and federal funding detail: Wyckoff told senators that much of the division's work is funded by federal formulas and competitive grants stemming from the Inflation Reduction Act (IRA) and the Infrastructure Investment and Jobs Act (IIJA). Highlights cited by Commerce staff included:
- Solar for Schools: Commerce reported it had funded 141 K–12 and higher education projects statewide under the program created in 2023.
- Electric resilience grants: the new state program has received 40 applications from 29 applicants and awards were imminent, Commerce said. The state program includes cyber‑security and other flexibility not always available in the federal counterpart.
- State Competitiveness Fund: Commerce said it set aside $100,000,000 to help match federal grants; about $80,000,000 has been reserved and the department said it has leveraged nearly $100,000,000 in federal funds so far. Awards have ranged, Commerce said, from roughly $29,000 to $10,000,000 depending on project type.
- Weatherization and energy assistance: Commerce said the annual weatherization appropriation is about $18,000,000, supplemented by IIJA funds that Commerce said totaled about $19,500,000 but that the IIJA tranche had been frozen. Commerce told the committee that much of the weatherization and rebate funding has been frozen as of late last week.
- Electric vehicle rebates and school bus funding: Commerce said combined rebate spending to date was about $15,000,000 and that the first round of electric school bus awards under state programs total roughly $4,500,000 (about $2,500,000 general fund and $2,000,000 RDA), with additional rounds pending.

Committee questions and concerns: Senators pressed Commerce on several operational and policy details. Senator Gruenhagen asked whether there is a decommissioning fund for small private wind turbines whose foundations can remain in fields; Commerce said decommissioning obligations are typically addressed in the original project agreement and that the department would follow up with the senator. Senators raised questions about the Energy Conservation and Optimization (ECO) Act's 1.5% annual conservation target and how communities could accommodate load growth while meeting conservation goals; Commerce staff said ECO is intended to encourage efficiency without blocking load growth and that implementation aims to allow efficient growth.

Modeling and federal assumptions: In response to questions about cost modeling for the state's 2040 carbon‑free electricity statute, Wyckoff said federal competitive grants referenced in his presentation were not assumed in the core cost model: “none of these grants are assumed in that graph. So they are bonus on top of that.” He added that what the model does assume is continuation of federal clean energy tax credits.

Follow‑up and next steps: Commerce told the committee it will follow up with additional program‑level figures (for example, exact counts for electric buses awarded) and said it is coordinating with the Attorney General's office on legal options to push back on federal contract freezes. Department leaders asked the committee to note that many of the programs Commerce runs are intended to leverage federal funds and that the state share helps attract private and federal investment.

Sources and attribution: Reporting in this article is drawn from testimony by Grace Arnold (Commissioner, Minnesota Department of Commerce), Pete Wyckoff (Deputy Commissioner of Commerce, Energy Division), Melissa Polish (Assistant Commissioner, federal and state initiatives), and other Commerce staff during the Feb. 17, 2025, Environment and Climate Committee hearing.