New York’s Climate Change Superfund Act Challenged by 22 States

On December 26, 2024, New York Governor Kathy Hochul signed into law the Climate Change Superfund Act (the “Act”), a statute designed to hold fossil fuel companies financially accountable for their contributions to climate change. The Act imposes strict liability based on environmental damage caused mainly by fossil fuel companies’ emission of greenhouse gasses and mandates that such major greenhouse gas emitters pay $75 billion over the next 25 years into a fund dedicated to climate adaptation and resilience projects across the state.

The New York State Department of Environmental Conservation (NYSDEC) will then use the fund to pay for climate mitigation projects throughout New York, which will be identified through a statewide climate change adaptation master plan, which the NYSDEC will create within two years. The climate mitigation projects, for which such funds may be available, could include adapting transit, roads, water and sewage systems, buildings, or other important infrastructure.

The Act may also create new compliance and reporting obligations for businesses engaged in fossil fuel production and distribution. Companies should be prepared to conduct internal audits, assess their exposure under the law, and explore potential legal defenses if they are targeted for payment under the new framework.

The $75 billion in required payments will be distributed over 25 years, with individual companies expected to contribute based on their historical emissions data. While proponents argue that this will help fund necessary climate adaptation projects, industry groups warn that the financial burden could lead to higher energy costs for consumers and businesses. Some argue that companies may choose to pass these costs along to consumers, while others may reduce investments in energy infrastructure or shift operations outside of New York.

The policy purpose behind the Act is to shift the financial burden of climate adaptation from taxpayers to the corporations most responsible for environmental degradation. Funds collected are intended to support critical infrastructure initiatives, including coastal protection and flood mitigation systems, enhancing the resilience of New York communities against climate-related events.

The Climate Change Superfund Act is modeled after the federal Superfund legislation, which has been used for decades to hold companies responsible for environmental contamination. However, New York’s Climate Change Superfund Act differs in that it applies retroactively to greenhouse gas emissions, a novel legal approach that raises significant constitutional questions. Opponents argue that it violates the Commerce Clause by imposing penalties on companies that may not be based in New York but have historically sold fossil fuels in the state. Additionally, there is debate over whether the law conflicts with federal statutes such as the Clean Air Act, which grants the Environmental Protection Agency (EPA) authority over emissions regulation.

Legal practitioners anticipate that courts will closely examine whether New York has the authority to impose climate-related liability in this manner. If upheld, the law could pave the way for similar measures in other states, potentially reshaping how environmental accountability is enforced across the country.

However, the legislation has encountered significant opposition. On February 6, 2025, a coalition of 22 states led by West Virginia; several coal, oil, and gas trade associations; and a mining company, filed a lawsuit challenging the constitutionality of New York's Climate Change Superfund Act. They contend that the Act is unconstitutional, alleging it violates the Supremacy Clause, the Commerce Clause, and the Takings Clause of the U.S. Constitution. The plaintiffs argue that the law unfairly penalizes energy companies for past emissions that were lawful at the time and contend that it violates the U.S. Constitution and is preempted by the federal Clean Air Act. They also express concern that the financial obligations imposed by the Act could lead to substantial job losses within the energy sector.

In response, New York officials, including Governor Kathy Hochul and Attorney General Letitia James have defended the legislation, emphasizing the necessity of holding corporate polluters accountable for the environmental and economic damages resulting from climate change. Governor Hochul's office stated that the law is intended to ensure that the costs associated with climate adaptation are borne by those who have significantly contributed to the problem, rather than by everyday New Yorkers.

The outcome of this legal battle carries profound implications for environmental policy and corporate liability nationwide. As this situation unfolds, it is imperative for businesses operating within the energy sector and related industries to stay informed and assess the potential impacts on their operations.

While it appears that New Jersey, Maryland, Massachusetts, and California have considered, or are now considering, similar legislation, as of the writing of this article, only Vermont has enacted a climate change superfund law similar to the New York State law discussed here. That law is also facing challenges. On December 30, 2024, the American Petroleum Institute (API) and the U.S. Chamber of Commerce filed a lawsuit in the U.S. District Court for Vermont, contesting the constitutionality of the state's Climate Superfund Act. Accordingly, the outcome of the New York and Vermont litigation may impact how other states choose to proceed, and how other courts respond, when confronted with such issues. Affected companies would therefore do well to monitor these cases and statutes closely, as they may have lasting and far-reaching consequences.

Despite its challenges, the Climate Change Superfund Act may also present opportunities for companies to adapt and innovate. Businesses that proactively invest in clean energy technologies, carbon offset programs, and sustainable infrastructure may find themselves better positioned to navigate regulatory changes while also gaining a competitive edge. Additionally, companies facing potential liability under the Act may explore litigation options, negotiation strategies, or policy advocacy efforts to shape how the law is implemented and enforced.

Regardless of your place in the market, one thing is clear: environmental and energy-related legislation is constantly changing, being reshaped by litigation, scientific advances, and shifting policy priorities. In this climate, staying informed and up to date on these changes is the first line of defense. Stay-tuned for our next article on developments in the environmental law landscape.

Jacob H. Zoghlin is a Partner in Underberg & Kessler LLP’s Litigation department and chairs the firm’s Environmental Law practice group and Municipal Law practice group. He focuses his practice in the areas of environmental law, municipal law, development law, zoning and land use, and cannabis law, Article 78 proceedings, and related litigation. He can be reached at jzoghlin@underbergkessler.com.

Reprinted with permission from The Daily Record and available as a PDF file here.