This bill establishes the climate resiliency fund program (the "program") to be administered by the department of environment and conservation ("TDEC"). The purposes of the program are to: (1) Secure compensatory payments from responsible parties based on a standard of strict liability to provide a source of revenue for climate change adaptation projects within this state. For purposes of this bill, "responsible party": (A) Means any entity or a successor in interest to an entity that during any part of the covered period (January 1, 1995, to December 31, 2025) was engaged in the trade or business of extracting fossil fuel or refining crude oil and is determined by TDEC to be attributable for more than 1,000,000,000 metric tons of covered greenhouse gas emissions during the covered period; and (B) Does not include any person who lacks sufficient connection with this state to satisfy the nexus requirements of the U.S. Constitution. For purposes of this bill, "covered greenhouse gas emissions" means the total quantity of greenhouse gases released into the atmosphere during the covered period, expressed in metric tons of carbon dioxide equivalent, resulting from the use of fossil fuels extracted or refined by an entity. For purposes of this bill, "climate change adaptation projects" means a project designed to respond to, avoid, moderate, repair, or adapt to negative impacts caused by climate change and to assist human and natural communities, households, and businesses in preparing for future climate-change-driven disruptions. The full text of this bill specifies various projects that are climate change adaptation projects; (2) Determine proportional liability of responsible parties; (3) Impose cost recovery demands on responsible parties and issue notices of cost recovery demands; (4) Accept and collect payment from responsible parties; (5) Develop, adopt, implement, and update the strategy that will identify and prioritize climate change adaptation projects; and (6) Disperse funds to implement climate change adaptation projects identified in the strategy. LIABILITY Under this bill, a responsible party is strictly liable for a share of the costs of climate change adaptation projects and all qualifying expenditures supported by the climate resiliency fund. For purposes of liability, entities in a controlled group must be treated by TDEC as a single entity for the purposes of identifying responsible parties and are jointly and severally liable for payment of any cost recovery demand owed by any entity in the controlled group. This bill defines "controlled group" to mean two or more entities treated as a single employer under provisions of federal law concerning the treatment of employees of all members of a controlled group of corporations for purposes of computing the work opportunity credit. For purposes of this bill, entities in a controlled group must be treated as a single entity for purposes of meeting the definition of responsible party and are jointly and severally liable for payment of any cost recovery demand owed by any entity in the controlled group. With respect to each responsible party, the cost recovery demand must be equal to an amount that bears the same ratio to the cost to the state and its residents, as calculated by the state treasurer, from the emission of covered greenhouse gases during the covered period as the responsible party's applicable share of covered greenhouse gas emissions bears to the aggregate applicable shares of covered greenhouse gas emissions resulting from the use of fossil fuels extracted or refined during the covered period. If a responsible party owns a minority interest of 10% or more in another entity, the responsible party's applicable share of covered greenhouse gas emissions must be increased by the applicable share of covered greenhouse gas emissions for the entity in which the responsible party holds a minority interest multiplied by the percentage of the minority interest held by the responsible party. The full text of this bill specifies the methods TDEC will use to calculate the cost recovery demand amount for a responsible party, which must be issued not later than six months following the adoption of the rules to implement this bill. This bill requires a responsible party to pay the cost recovery demand amount either: (1) In full not later than six months following TDEC's issuance of the cost recovery demand; or (2) In nine annual installments, the first of which must be paid not later than six months following the department's issuance of the cost recovery demand and must be equal to 20% of the demand amount. Subsequent annual installments must be equal to 10% of the total cost recovery demand amount. This bill authorizes TDEC to charge reasonable interest on each installment payment or a payment delayed for any other reason and, at the commissioner of environment and conservation's discretion, may adjust the amount of a subsequent installment payment or a payment delayed for any other reason to reflect increases or decreases in the consumer price index. The full text of this bill specifies collection methods for unpaid cost recovery demand amounts and an appeal process to contest a cost recovery demand. CLIMATE RESILIENCY FUND This bill creates the climate resiliency fund (the "fund") to be administered by TDEC to provide funding for climate change adaptation projects in Tennessee. The fund consists of cost recovery payments, appropriations, and other monies received from any source, public or private, dedicated for deposit into the fund. This bill limits use of the fund to the following: (1) Paying qualified expenditures for climate change adaptation projects identified by TDEC; (2) Paying reasonable administrative expenses of the program; (3) Implementing climate adaptation action identified by TDEC; and (4) Implementing community resilience and disaster mitigation efforts. REPORTS On or before January 15, 2026, TDEC, in consultation with the state treasurer, is required to submit a report to the general assembly detailing the feasibility and progress of carrying out the requirements of this bill, including any recommendations for improving the administration of the program. On or before January 15, 2027, the state treasurer, after consultation with TDEC and any other person or entity whom the state treasurer decides to consult, is required to submit to various legislative employees and officers an assessment of the cost to the state and its residents of the emission of covered greenhouse gases for the covered period. The full text of this bill specifies the contents of the assessment. RULES AND STRATEGY This bill requires TDEC to adopt rules to implement the requirements of this bill. The full text of this bill specifies some of the subjects for which TDEC must promulgate rules, including developing a resilience implementation strategy, which must include: (1) Practices utilizing nature-based solutions intended to stabilize floodplains, riparian zones, lake shoreland, wetlands, and similar lands; (2) Practices to adapt infrastructure to the impacts of climate change; (3) Practices needed to build out early warning mechanisms and support fast, effective response to climate-related threats; (4) Practices that support economic and environmental sustainability in the face of changing climate conditions; and (5) Criteria and procedures for prioritizing climate change adaptation projects eligible to receive monies from the climate resiliency fund program. The full text of this bill specifies considerations, consultations, and identifications that TDEC must perform in adopting the resilience implementation strategy. AUDIT Beginning on January 1, 2031, and every five years thereafter, the comptroller of the treasury is required to evaluate the operation and effectiveness of the climate resiliency fund program. This bill requires the comptroller to make recommendations to TDEC on ways to increase program efficacy and cost-effectiveness. The comptroller shall submit the results of the audit to various legislative officers and employees. This bill requires that the comptroller is reimbursed from the climate resiliency fund for any costs associated with hiring persons who possess the technical expertise necessary to complete the audits.