On December 26, 2024, New York State Governor Kathy Hochul signed the Climate Change Superfund Act (“Act”), which requires large fossil fuel producers and refiners to share costs for “infrastructure investments and other expenses necessary for comprehensive adaptation to the impacts of climate change.”  The Act is modeled on the federal Comprehensive Environmental Response Compensation and Liability Act (“CERCLA”) contaminated property cleanup program, also known as “Superfund.”  The Act creates a fund using penalties paid by producers and refiners for allegedly excess greenhouse gas emissions which will be used for climate change adaptive infrastructure projects.  The fund will collect $3 billion per year for the next 25 years.  Eligible projects may include coastal wetlands restoration, storm water drainage system upgrades, energy efficient cooling systems, support for programs addressing climate-driven public health challenges, and responses to extreme weather events.  The State will use 35-40% of fund dollars for adaptive infrastructure projects in disadvantaged communities.

How will the DEC determine the responsible parties and penalty amounts?

The Act asserts that new research will allow the New York State Department of Environmental Conservation (“DEC”) to determine “with great accuracy” the share of greenhouse gases released into the atmosphere and require compensation from each responsible party relative to that share to the fund.  Assuming a sufficient connection to New York State to satisfy the nexus requirement of the U.S. Constitution, any entity’s amount of covered greenhouse gas emissions exceeding 1 billion metric tons will be considered in determining the entity’s applicable share of costs.  Like many existing environmental statutes, the program will impose strict liability.  DEC will promulgate regulations regarding notices of cost recovery demands by December 26, 2025. A responsible party can contest the amount assessed and, after a hearing, appeal.

What does this legislation mean for New York State?

If a fossil fuel producer or refiner exceeded one billion metric tons of greenhouse gas emissions in the “covered period” of 2000-2018, they will be assessed penalties by DEC.  The process will be laid out in regulations promulgated by DEC within one year of the Act’s passing.

Operating as a fund generator for the state economy, the accumulation of assessed penalties will increase the amount available for infrastructure projects to address the negative effects of climate change.  Fossil fuel producers and refiners will shoulder some of the cost of the economic effects of climate change that the taxpayers and public have mostly borne, to this point.

There are some who think that the fossil fuel producing entities will simply raise costs and essentially make the taxpayers foot the bill for the penalties imposed.  However, there exists a counter argument that, since only the fossil fuel producers and refiners producing the most greenhouse gases will have to pay penalties, not all fossil fuel producers and refiners, there will not be a uniform effect across each of the oil, gas and coal markets.  In essence, since not all of the entities in a particular fossil fuel space will be paying the increased costs resulting from these penalties, those paying the penalties may not be competitive with those who do not have to pay the penalties if they increase prices for all consumers in a particular industry.

Are there any other states with similar laws?

New York is the second state to pass such an act.   Vermont passed the Vermont Climate Superfund Act in May 2024.  There are many similarities between the New York and Vermont laws, with each requiring their relevant environmental agency to create a set of regulations to implement the respective acts, including the notices and payment of cost recovery demands, and the identification of eligible infrastructure projects.  There are four additional states which have considered such bills in the last year: Maryland, Massachusetts, California and Minnesota.

What sorts of litigation can we expect to result?

Unlike CERCLA, the Act does not allow private cost recovery actions, so individuals, companies and municipalities spending money to deal with the effects of climate change may not bring an action directly against identified, responsible fossil fuel producers and refiners.

Many have suggested that the Act presents constitutional concerns as potentially violating the prohibition against “ex post facto laws,” that is, penalizing conduct that was not illegal at the time.  The Supreme Court has made a distinction between the application of the concept of ex post facto in the criminal and civil context, although the distinction might not be clear with a statute like this one, as the Court has intimated that some laws imposing liability could be so punitive in nature as to be considered criminal, in effect.

The Vermont law has already been challenged based on preemption by the federal Clean Air Act, as well as other theories including an alleged violation of the Commerce Clause, Due Process under the Fourteenth Amendment, and the Takings Clause of the Fifth Amendment. United States Chamber of Commerce v. Moore, No. 2:24-cv-01513 (D. Vt. Filed Dec. 30, 2024).  Once decided, this action is likely to proceed on through the federal appeals process.   The New York law is likely to be the subject of a similar lawsuit.

What can municipalities needing to pay for adaptive infrastructure projects do?

Municipalities contemplating adaptive infrastructure projects should keep up to date on monies that will be made available from the fund for such projects.  Knauf Shaw LLP will provide updates on the resulting DEC regulations and funding opportunities.  For more information, contact Knauf Shaw at info@nyenvlaw.com.