New York’s “Climate Superfund” Bill becomes Law, Part of a Trend

While each proposed bill and the laws in New York and Vermont have unique nuances, they share a common goal and approach: allocating the financial responsibility for infrastructure repairs and resilience measures to energy companies by generally following the famously stringent “polluter pays,” strict-liability framework of the federal Superfund law. Under this framework, the energy sector may be required to pay into a “fund” to cover the public repair and resilience costs that otherwise are borne by governments, ostensibly in proportion to their shares of legacy greenhouse gas (GHG) emissions.

State Climate Superfund Bill History
In 2023, New York was the first state to introduce the concept of a Climate Superfund, but this first bill died in assembly. The day after the close of the 2024 legislative session, the New York Senate and Assembly passed a new version of the bill (A.3351B/S.2129B). After six months in legislative limbo, Governor Hochul signed the NY bill into law on December 26, 2024, just five days before it otherwise would have expired. New York is the second state and the largest one to enact a Climate Superfund law, part of a growing trend of states taking such an approach. Vermont beat New York to a successful bill passage on May 30, 2024, when its Climate Superfund Act (S. 259)—which passed with overwhelming support—became law without the governor’s signature. Vermont’s law went into effect July 1, just days before Hurricane Beryl brought tremendous flooding to the state once again.

Similar bills were proposed in Maryland (H.B. 1438 and S.B. 958: Responding to Emergency Needs from Extreme Weather Act), Massachusetts (H.B. 872 and S.B. 481: Climate Change Adaptation Cost Recovery Act), California (S.B. 1497: Polluters Pay Climate Cost Recovery Act), and New Jersey (S.B. 3545 and A.B. 4696: Climate Superfund Act). The Maryland and Massachusetts bills have not progressed out of committee after being introduced in February 2024, while the California bill was placed in the inactive file by its sponsor while he garners support to secure the votes needed for passage. The New Jersey bill is in the early stages of the legislative process, having just been introduced on September 12, 2024, and referred to committee in December. The federal bills (S.B. 5054/H.R.9573: Polluters Pay Climate Fund Act of 2024) were also introduced on the same day by Sen. Chris Van Hollen (D-MD) and Rep. Jerrold Nadler (D-NY-12). However, neither the Senate nor House version of the bill has progressed past their initial committee referral since introduction in September of 2024, and reintroduction in the 119^thCongress is an unlikely option given impending republican control of both houses at the start of 2025.

Responsible Parties
The “polluter pays” principle is a foundational concept of the federal Superfund Program. Under CERCLA, entities are required to conduct removal and remedial actions at their own cost due to releases or threatened releases of hazardous substances into the environment; otherwise, the government may step in and use the Superfund to do so and may seek reimbursement from statutory responsible parties. While the state and federal bills follow this “polluter pays” approach, only a subset of those that have contributed to GHG emissions would be required to pay into the “funds”—those with over 1 billion metric tons of GHG emissions over a given period. The coverage periods for the states differ, and it is unclear how the specific dates were determined. New York, Massachusetts and Maryland seek to apply to entities that exceeded the emissions threshold between 2000 and 2018, while the federal bill’s coverage period extends from 2000 to 2022. The California bill has a similar coverage period of 2000 through 2020. Vermont’s and New Jersey’s covered periods are the broadest, ranging from 1995 through 2024 for Vermont or the last day of the year in which New Jersey’s bill takes effect. None of the laws or bills require the emissions to originate in or reach the legislating state; the California bill expressly applies to “global” emissions. The New Jersey bill, however, limits its application to entities required to pay sales taxes in New Jersey.

Strict and Joint-and-Several Liability and Climate Attribution
The New York and Vermont Climate Superfund laws adopt the strict and joint-and-several liability frameworks of CERCLA. This means that after the state implementing agency sends notice of an administrative cost recovery demand, the liable parties will be required to pay into the “funds” regardless of whether their emissions violated any law or permit and, furthermore, that each company found to have contributed to the emissions or damages can be made to pay 100% of the costs assessed. However, each state permits the overseeing agency to adjust the cost recovery demand if the responsible entity provides evidence that the emissions were attributable to another responsible party or were previously accounted for.

To allocate responsibility, the Climate Superfund laws seek to utilize advancements in “climate attribution science”—a growing field that aims to determine the extent to which specific weather events or long-term climate trends can be attributed to human-induced climate change. Specifically, the laws task agencies with utilizing attribution models to allocate the historical emissions of individual fossil fuel companies and apportion monetary responsibility for the damages associated with their share of emissions. Unsurprisingly, attribution models are not without controversy from both policy and technical standpoints.

Fund Allocation
Borrowing from the federal Superfund Program, each state seeks to create a state-managed fund, but rather than using the fund to perform or reimburse governments for environmental remediation, the funds may be used both proactively to finance projects focused on preventing and mitigating the damage associated with extreme weather events and to retroactively respond, repair or recover from the same events. In New York, the funds will be used for “climate change adaptive or mitigation infrastructure projects,” with a portion of the expenditures dedicated to projects in vulnerable communities. This includes both preparing for and recovering from hurricanes, flooding and other extreme weather events, as well as providing medical care to treat illness or injury caused by the effects of climate change.

Similarly, Vermont, New Jersey and California do not limit the use of funds to infrastructure-related projects and would permit the fund to be allocated to any project designed to “avoid, mitigate, repair, adapt, or respond” to climate change impacts, including medical care programs. Other potential fund uses include projects such as seawall construction and other coastal armoring to protect coastline communities, wetland restoration, transportation infrastructure resilience and modernization, and upgrading, relocating, retrofitting or elevating sewage systems to better manage increasing rainfall. Interestingly, Vermont and New Jersey would allow the state to use funds for home buyouts but are silent on whether this could be used for mandatory relocations or strictly for the construction of infrastructure projects. The funds in the remaining two states, Massachusetts and Maryland, would be strictly limited to infrastructure projects.

The strict liability scheme and the creation of funds are where the similarities between the federal Superfund and state Climate Superfunds end, making the legislations’ titles misnomers.

Funding the Fund
The ceilings for the funds, the contribution amounts required from each responsible party, and the methods for calculating these contributions differ across the state and federal bills. Vermont, New Jersey and California delegate authority to their respective state agencies to set the funds’ ceilings rather than setting a legislative cap. These states require either their state Environmental Protection Agency (New Jersey and California) or treasurer (Vermont) to calculate the total costs of climate change to the state. Once these cost evaluations are completed, the states will use EPA’s Emissions Factors for Greenhouse Gas Inventories to determine the emissions attributable to each responsible entity. The state agencies will then seek cost recovery from each party in proportion to its share of the total covered emissions though an official administrative cost recovery demand. For example, if the state has ascertained climate change losses to be $10 billion and a party is responsible for 5% of the total covered emissions, the demand on that party would be $50 million. Once the responsible state agency issues a cost recovery demand, the responsible party is required to make payment into the fund in accordance with the act or future regulations as established by agency rulemaking process. Additionally, while there is no private right to action under the climate superfund bills and laws, and only the state government may bring the cost recovery demand, Vermont permits responsible parties to challenge their cost recovery demands in court.

In contrast, New York, Massachusetts and Maryland instead set specific funding targets in the legislation: $75 billion each for Massachusetts and New York and $9 billion for Maryland. The states would determine the cost share of each responsible party by applying a proportional formula based on the total fund amount set by their respective legislation. Specifically, a party’s share of the covered GHG emissions would correspond to the same percentage of the total fund amount—$75 billion or $9 billion—as that party’s share of covered emissions is to the total emissions of all responsible parties. New York’s law requires funding of $3 billion per year over a 25-year period. Similarly, the federal bill sets a specific target for its fund—an astounding $1 trillion—to be collected in annual increments of $100 billion. As with New York, Massachusetts and Maryland, the federal bill establishes responsible parties’ liability for the $1 trillion fund in proportion to their share of covered emissions. Across the board, each bill or law varies slightly in the mechanics of the cost recovery demands, but once fully funded, the states have granted themselves broad authority to allocate the funds as they see fit.

Reactions and Legal Uncertainty
Proponents laud the legislation as a revenue raiser that shifts the burden from taxpayers to significant GHG emitters. Many also predict these bills, especially after the passage of New York’s bill, will spur other states to adopt similar legislation in the coming year.

Opponents argue that the laws impose a retroactive tax in an area that states have no authority to regulate. Specifically, they oppose the states’ ability to determine the amount of money they allegedly owe—both in the statutory text and in the agency process. Moreover, there is uncertainty as to whether these laws will be amended to extend coverage periods. It is worth noting, however, that legal challenges to retroactive liability under CERCLA generally failed.

Industry has also questioned the constitutionality of these laws, saying it is unclear whether the targeted companies, some of which do not operate within the regulating state or even the United States, have sufficient jurisdictional “contacts” within the state as required by the Due Process Clause. As a result, any foreign-owned producer sent a cost recovery demand will likely claim sovereign immunity. Another issue is whether multiple jurisdictions can levy cost demands against entities for the same emissions.

Lastly, some opponents argue that the Clean Air Act (CAA) federally preempts this legislation, making the laws unenforceable. The Supreme Court may soon resolve, or give an indication of how it might resolve, this preemption question in Honolulu v. Sunoco, in which the Hawaii Supreme Court allowed the City and County of Honolulu to proceed with a state common-law based climate change lawsuit against oil and gas companies. The industry defendants have asked the Supreme Court to decide whether federal law precludes Honolulu’s state-law claims seeking redress for injuries allegedly caused by the effects of interstate and international GHG emissions on the global climate. The Court’s decision, however, may be limited to common-law claims and will not necessarily impact the constitutionality of the state climate superfund statutes. Because the Climate Superfund laws are written to operate more like a tax, rather than regulate the emissions, they may not be preempted by the CAA.

Conclusion
The Climate Superfund laws represent a marked—and controversial—shift in how liability for public costs associated with extreme weather events may be approached. Until now, those costs have been borne by the general public via government coffers. These laws extend beyond traditional regulatory frameworks to impose direct financial responsibility on the fossil fuel industry for their (including permitted) emissions. While proponents see this as a necessary step to relieve taxpayers of the financial burdens of extreme weather events attributed to climate change, critics argue the laws raise significant legal concerns and will substantially increase regulated entities’ operating expenses and therefore energy consumers’ costs, and they question the reliability of rapidly evolving attribution science. As states and now federal lawmakers continue to advance these legislative efforts, businesses must closely monitor developments and assess their exposure to these potentially expanded liabilities. To keep abreast of these legislative updates, contact Pillsbury’s Environmental & Natural Resources practice.