State governments increasingly engage on climate issues. In search of a new source of funding for hundreds of billions of dollars in anticipated climate adaptation costs, a recent New York state law could impose $75 billion of liability on major fossil fuel companies.

New York is now the second state, after Vermont, to attempt to hold fossil fuel companies liable for harms perceived to be caused by climate change. New York’s law, the “Climate Change Superfund Act,” is modeled on a federal law that establishes strict joint and several liability for hazardous substances. These state laws join other efforts states have taken in the climate space.

New York’s law seeks to shift several issues — like energy industry responsibility for climate adaptation costs and possible federal preemption — from the courtroom to the legislature. Other states may pursue similar efforts. Similar bills have been proposed in California, Massachusetts, Maryland, and New Jersey.

Law Summary

For five decades, the federal Comprehensive Environmental Response, Compensation, and Liability Act — also known as Superfund — has imposed significant, strict, and retroactive liabilities on the regulated community based on historic waste disposal practices.

New York’s law (like Vermont’s before it) seeks to impose similarly strict liability on the largest fossil fuel producers, i.e., on businesses who produced or refined fuels resulting in more than one billion tons of greenhouse gas emissions. (New York’s law counts emissions between 2000 and 2018, while Vermont uses a longer period.) Among these businesses, the law apportions liability based on the amount of coal, oil, and natural gas each produced. Unlike Vermont’s law, which does not specify how much covered companies must pay, the New York law seeks to levy $75 billion, or $3 billion each year for 25 years, divided across the involved businesses.

Proceeds from this fund are earmarked for climate change adaptive infrastructure projects like wetland restoration, storm water systems, road and transit resilience projects, disaster preparedness and recovery, and energy infrastructure. In New York, projects like these have historically been affected by extreme weather events like Hurricane Sandy, with New York City alone bearing billions of dollars in damages.

New York State’s Department of Environmental Conservation has one year to promulgate regulations implementing the law. By the end of 2026, the Department must create a climate change adaptation master plan to guide how the state will spend its climate superfund.

Takeaways

The regulated community should take away four points from the new law:

• State Legislative Efforts to Address Climate Issues Join State and Local Lawsuits: Many state and local governments have sued fossil fuel companies in recent years alleging harms related to climate adaptation. (We have written here and here.) Often, these cases use “greenwashing” deceptive marketing theories. New York’s law provides a new path, with New York’s legislature proclaiming liability and quantifying damages without waiting on courts.
• New York’s Law Seeks to Recoup Only a Fraction of New York’s Anticipated Climate Adaptation Costs: Climate adaptation efforts have stratospheric price tags because these efforts involve rebuilding major infrastructure. The Act’s findings estimate that the state’s adaptation expenses will easily reach several hundred billion dollars by 2050, including $150 billion to upgrade New York City’s stormwater systems and $75-100 billion to protect Long Island. The Act’s $3 billion a year levy is also arguably modest in comparison to energy industry profitability. The Act’s findings state that the three largest domestic oil producers made $85 billion in 2023.
• Industry May Argue That “Climate Superfund” Laws Are Preempted: Litigants may challenge the law by emulating preemption arguments used against local government climate-cost suits. One of these cases, which we covered here, is currently pending before the US Supreme Court. In City and County of Honolulu v. Sunoco LP, 537 P.3d 1173 (2023), the Hawaii Supreme Court ruled that the Clean Air Act and federal common law do not preempt Honolulu’s suit. The New York law’s opponents may once again argue that federal law preempts state law imposition of liability for fossil fuel production. (The Vermont law has already been challenged). The Hawaii case is up on cert — the state court ruling thus may not be the final test of this issue.
• States Continue to Address Conduct Which May Occur Outside Their Borders: New York’s law imposes liability for climate damage in New York caused by fossil fuels burned both inside and outside the state. We’ve seen this pattern before: as we noted here, the Supreme Court in 2023 upheld California’s Proposition 12, which banned the sale in California of pork from pigs that were cruelly confined inside or outside the state. National Pork Producers Council v. Ross, 598 US 356 (2023). Three US Justices in that decision noted that states have a democratic prerogative to balance economic costs against moral harms, even if those laws impact out-of-state businesses.