On Thursday, December 26th, 2024, New York Governor Kathy Hochul signed the Climate Change Superfund Act (S.2129/A.3351) [the “Act”]. The Act is modeled on existing State and Federal Superfund laws (which requires responsible parties to fund certain waste cleanups) and imposes strict liability primarily on fossil fuel companies on the basis of environmental damage caused by their emission of greenhouse gasses. The Act’s passage makes New York the second state, following Vermont, to enact legislation imposing strict liability on certain fossil fuel producers for past and ongoing greenhouse gas emissions.
Specifically, it applies to any company or shareholder owning more than 10% of any company (referred to as “responsible parties”), which engaged in the extraction, storage, production, refinement, transport, manufacture, distribution, sale, and use of fossil fuels that resulted in the emission of more than 1 billion tons of greenhouse gas between January 1, 2000, and December 31, 2018, regardless of whether these emissions were created in New York. Under the Act, these companies will bear “a proportionate share” of the cost of climate change mitigation.
The Act establishes a party’s “proportionate share,” by implementing formulas based on the type of fuel produced:
- Coal: Every million pounds of coal represents 942.5 metric tons of carbon dioxide (“CO2”)
- Crude oil: Every million barrels of crude oil represents 432,180 metric tons of CO2
- Fuel gas: Every million cubic feet of fuel gas represents 53,440 metric tons of CO2
The Act instructs the New York State Department of Environmental Conservation (“DEC”) to collect $3 billion every year for the next 25 years, beginning in 2028, from these responsible parties based proportionately on these calculations. DEC will then use these funds to pay for climate mitigation projects, including adapting roads, transit, water and sewage systems, buildings, and other infrastructure. These projects will be identified through a statewide climate change adaptation master plan to be created by DEC within two years.
Hodgson Russ Insights
The Act will likely face various challenges to its constitutionality, including under both State and Federal Law. We expect challenges based on Federal pre-emption, as well as alleging violations of the due process and commerce clauses of the U.S. Constitution. In order to protect the Act against these challenges, legislators intentionally structured it to resemble the Federal Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”), which has weathered several attacks to its constitutionality since its enactment in 1980. It is unclear how these challenges to the Act will proceed. While the Act goes into effect immediately, the specifics of its implementation will only take shape once DEC drafts regulations next year to implement the program. A key question is how broadly the DEC will interpret the concept of a “responsible party” as part of the regulatory process.
Hodgson Russ will continue to monitor the Act as it is implemented through DEC’s regulatory process and faces these inevitable challenges.
