Attorney General Dan Rayfield and 18 other states, plus the District of Columbia, sued 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 lawsuit was filed today in the U.S. District Court in Eugene, Oregon.
The coalition argues that by capping certain funding for these programs, DOE is jeopardizing states’ ability to keep them running. The attorneys general are asking the court to vacate this unlawful cap and restore the legally required reimbursement rates for these essential energy programs.
“Oregonians count on these programs to keep our homes energy-efficient, our air clean, and our bills manageable,” said Attorney General Rayfield. “This cap strips away the resources we need to keep that work going – and the people and expertise behind it. We can’t meet Oregon’s energy needs if the federal government pulls critical infrastructure that supports the people and expertise behind this work midstream.”
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.
In 2024, Oregon received about $786,000 in federal funding through the State Energy Program to support local clean energy work. Nearly half of that went to essential operating costs — including staff benefits and the basic overhead needed to run programs — with the rest funding on-the-ground energy projects. If these federal dollars are cut, it will directly impact the state’s ability to keep staff, maintain programs, and deliver energy savings for Oregonians.
Attorney General Rayfield and the coalition 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 additional federal regulations regarding fringe. The attorneys general emphasize 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 attorneys general are asking the court to vacate DOE’s new policy and bar implementation of any unlawful reimbursement caps.
Joining Attorney General Rayfield in filing this lawsuit are the attorneys general of California, Colorado, Connecticut, Delaware, Hawaii, Illinois, Maine, Maryland, Michigan, Minnesota, Nevada, New Mexico, New York, North Carolina, Washington, and Wisconsin and the District of Columbia, as well as the governors of Kentucky and Pennsylvania.
