On Thursday, December 26^th, New York Governor Kathy Hochul signed the Climate Change Superfund Act passed by the State Legislature back in June of this year. This makes New York the second state in the country (after Vermont) to enact a statute imposing strict liability on certain fossil fuel producers for costs required to mitigate the impacts of climate change. 

The Act applies to companies and shareholders owning more than 10% of any company (referred to as “responsible parties”) engaged in the extraction of fossil fuels or refining of crude oil that resulted in the emission of more than 1 billion tons of greenhouse gas emissions between 2000 and 2018. Emissions covered by the Act include all emissions resulting from the extraction, storage, production, refinement, transport, manufacture, distribution, sale and use of fossil fuels or petroleum products extracted, produced, refined, or sold by any affected company. Notably, the Act does not require such emissions to have been created in New York.  

The Act requires the New York State Department of Environmental Conservation (DEC) to collect $3 billion every year for the next 25 years from responsible parties identified by DEC. The program will assign a percentage of the $3 billion to such responsible parties based on their percentage of greenhouse gas emissions by all responsible parties. DEC will then use the funds to pay for climate mitigation projects identified as part of a statewide climate change adaptation master plan to be created by DEC within two years of the passage of the Act.  

The Act is expected to be challenged on a variety of grounds, including federal pre-emption and violations of the due process and commerce clauses of the U.S. Constitution. However, the Act was intentionally structured to resemble the federal Superfund statute, which has survived several rounds of challenges to the U.S. Supreme Court in the past. At this point, it appears to be a close call as to whether the statute will survive such challenges. Even if it does survive, individual responsible parties may have defenses to their own individual liability under the statute, which will be a fact-intensive inquiry and largely be based on how DEC implements the program.     

While the legislation (available here) goes into effect immediately, DEC is required to draft regulations in the next year to implement the program. We therefore expect a flurry of activity around the Act over the next year, including not just the aforementioned legal challenges but also lobbying at the DEC to try to influence the proposed regulations. We will be monitoring new developments and providing updates as they happen.