The recent enactment of the Climate Change Superfund Act in New York has set the stage for a significant legal battle over the scope of state authority to impose financial responsibility for purported climate related damages. The outcome of this litigation could have far reaching effects, influencing not only New York but the entire energy sector, worldwide.

The breadth and scope of this matter is clear from the first averment in the lawsuit:

“The State of New York believes it can seize control over the makeup of America’s energy industry. In an unprecedented effort, New York has set out to impose tens of billions of dollars of liability on traditional energy producers disfavored by certain New York politicians. These energy producers needn’t operate in New York before becoming a target. And New York consumers won’t bear the brunt of these crushing new costs once they’re imposed. Rather, New York intends to wring funds from producers and consumers in other States to subsidize certain New-York-based ‘infrastructure’ projects, such as a new sewer system in New York City.”

Signed into law by Governor Kathy Hochul on December 26, 2024, the Act seeks to hold major fossil fuel companies chargeable for their contributions to greenhouse gas emissions, establishing a retroactive and strict liability scheme reminiscent of the federal Comprehensive Environmental Response, Compensation, and Liability Act (the Superfund law). However, the Act’s implementation has been met with immediate legal opposition, with a coalition of state attorneys general and industry groups challenging its constitutionality.

Background of the Climate Change Superfund Act

The Act aims to generate $3 billion annually over 25 years, totaling $75 billion, to fund infrastructure projects related to climate change adaptation and mitigation. Funding would be derived from assessments levied against fossil fuel companies deemed responsible for more than one billion tons of greenhouse gas emissions between 2000 and 2018.

While this case was pending, on February 28, 2025, Governor Hochul signed Senate Bill 824, an amendment expanding the liability period to include emissions through 2024, thereby increasing potential financial exposure for targeted entities.

To appreciate what is at risk, Aramco of Saudi Arabia, alone, could be charged with the largest annual assessment of any company under the Act, $640 million a year, for emitting 31,269 million tons of greenhouse gas emission from 2000 to 2023. It is not conceivable that the Saudi royal family will ever pay those sums to the state of New York.

Legal Challenge: Federal and State Law Claims

On February 6, 2025, opponents of the Act, including 22 state attorneys general and industry representatives, filed suit in the District Court for the Northern District of New York, arguing, “.. unfortunately for New York, the U.S. Constitution has something to say about the State’s retroactive and extraterritorial shakedown.”

Among the claims in the Complaint are that the Act unlawfully burdens out of state (.. and international) entities and violates multiple constitutional provisions:

Federal Constitutional Claims

1. Equal Protection Clause (14th Amendment): The lawsuit contends that the Act disproportionately imposes liability on out of state fossil fuel companies while benefiting New York residents, creating an unconstitutional disparity.

2. Commerce Clause: Plaintiffs argue that the Act discriminates against out of state businesses by targeting fossil fuel producers regardless of their presence in New York, thereby improperly regulating interstate commerce.

3. Preemption by the Clean Air Act: The federal Clean Air Act establishes a comprehensive regulatory framework for air emissions. The lawsuit asserts that the New York law intrudes into this federal domain, violating the Supremacy Clause.

4. Due Process Clause (5th and 14th Amendments): The Act retroactively imposes liability on companies that engaged in lawful activities at the time, without affording sufficient procedural due process protections.

5. Excessive Fines Clause (8th Amendment): Plaintiffs argue that the Act levies through strict liability exorbitant financial penalties against a select group of companies, constituting unconstitutional excessive fines.

New York State Constitutional Claims

1. Takings Clause (Article 1, Section 7): By compelling fossil fuel companies to pay assessments for public infrastructure projects without just compensation, the Act allegedly violates New York’s Takings Clause.

2. Due Process (Article 1, Section 6): The state based claim parallels the federal argument, asserting that the Act allows for arbitrary enforcement without sufficient procedural due process safeguards.

Implications of the Lawsuit

This lawsuit raises critical questions about the balance of state and federal authority in environmental and energy public policy, as well as the extent to which states can impose financial responsibility on specific industries for historic greenhouse gas emissions. The outcome of this litigation could have far reaching effects, influencing not only New York’s climate initiatives but also American national energy policy.

The litigation reflects the broader pushback against progressive states attempting to set national energy policy. Opponents argue that New York is overstepping its authority, effectively dictating climate policy beyond its borders by targeting out of state fossil fuel companies. The challenge to the Act underscores tensions between the few state governments that prioritize aggressive climate action in a society that relies heavily on traditional energy industries. The outcome of this case could determine whether individual states have the power to impose significant financial penalties on corporations for historical emissions or if such authority remains primarily within the federal government’s purview, if at all.

Given that Vermont enacted substantially the same law in May 2024, also currently facing legal challenges, the decisions in these cases may establish significant precedents regarding state level climate liability.

A Highway to Nowhere

Neither the Act nor this litigation take into account that EPA Administrator Lee Zeldin has reportedly in recent days recommended to the White House that his agency should rescind the finding that greenhouse gas emissions endanger human health and the environment. A reversal of the 16 year old endangerment finding would have broad implications for the underpinnings of these disputes and differences that one can hardly fathom.

The Road Ahead

In response to the February 28, 2025, amendment to the Act, another lawsuit was promptly filed in the Southern District of New York by a coalition including the U.S. Chamber of Commerce, the Business Council of New York State, the American Petroleum Institute, and the National Mining Association. This legal battle is likely to continue evolving, with high stakes implications for both national energy public policy and corporate liability.

“The Climate Change Superfund Act is an ugly example of the chaos that can result when States overreach.” We will continue to monitor developments and provide further insights into the legal and policy ramifications of the New York Climate Change Superfund Act.
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