New York’s Climate Change Superfund Act: What You Need to Know

By Alexa Gamble , Emily Humbert and Christin Soo Hee Kim

On December 26, 2024, New York Governor Kathy Hochul signed into law S02129B, also known as the New York Climate Change Superfund Act (Act). This law is modeled after the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and retroactively imposes strict, joint and several liability on responsible parties.

The first payments required under the Act are due on September 30, 2026. Legal challenges to the Act are anticipated.

This controversial piece of legislation, the second of its kind after Vermont passed a similar law last year, requires companies that have allegedly contributed to the buildup of climate-warming greenhouse gas (GHG) emissions in the atmosphere to help mitigate the costs of infrastructure and environmental repairs or upgrades required due to the current and future effects of climate change.

In this alert, we summarize key provisions of the Act, highlight some key takeaways and note some open questions.

Key Provisions of the Climate Change Superfund Act

How does the Act work?

The Act seeks to address the impacts of climate change by making two key changes to existing New York law. First, the Act amends New York’s environmental conservation law by establishing the Climate Change Adaptation Cost Recovery Program (the Program) (i) to assess and coordinate the collection of compensatory payments from entities that New York contends have had an outsized impact on climate change in New York, and (ii) to identify adaptive infrastructure projects necessitated by the effects of climate change. Second, the Act amends New York’s finance law to establish the Climate Change Adaptation Fund (the Fund), which will hold any payments received through the Program and issue payments to qualifying adaptive infrastructure projects. The Act will be implemented and enforced by the New York State Department of Environmental Conservation (the Department), the New York State Department of Taxation and Finance, and the New York Attorney General.

To whom will the Program apply?

The Program will apply to certain “Responsible Parties” that are determined to have had an outsized impact on climate change in New York. As defined in the Act, the term “Responsible Parties” includes any entity (or a successor in interest to such entity), which, at any time from January 1, 2000 to December 31, 2018 (the Covered Period), was engaged in the trade or business of extracting fossil fuel or refining crude oil and is determined by the Department to be responsible for more than one billion tons of covered GHG emissions. A Responsible Party must have a connection to New York sufficient to satisfy the nexus requirements of the U.S. Constitution. Since the Act only levies penalties for fossil fuel production that has already occurred, it is not designed to reduce emissions.

How will compensatory payments be determined?

The Program seeks to raise a total of $75 billion in compensatory payments from Responsible Parties based on a standard of strict liability. Each Responsible Party will be accountable for an amount that bears the same ratio to $75 billion as the Responsible Party’s share of covered GHG emissions bears to the aggregate amount of covered GHG emissions generated by all Responsible Parties together during the Covered Period. Covered GHG emissions for each Responsible Party will be the amount of GHG emissions exceeding one billion metric tons that the Responsible Party generated.

To determine the total GHG emissions attributable to Responsible Parties, the Act provides the following conversions for various sources of emissions:

When are payments due?

Payments, once determined in accordance with the parameters described above, are required to be made either in full on September 30, 2026 or in 24 annual installments (with 8% of the total amount due on September 30, 2026 followed by 23 annual installments of 4% of the total amount). Failure to timely make these payments may result in the imposition of late fees.

What types of projects may receive payments from the Fund?

Within the next two years, the Department is required to complete a statewide climate change adaptation master plan to help determine which adaptive infrastructure projects may qualify to receive payments from the Fund. Such projects may include coastal wetlands restoration; storm water drainage system upgrades; energy efficient cooling systems in public and private buildings, including schools and public housing; support for programs addressing climate-driven public health challenges; and responses to extreme weather events.

Any projects that receive payments from the Fund must comply with various labor and job standards and worker protections, including, among others, compliance with prevailing wage requirements. Additionally, any contracts for projects that receive payments from the Fund must contain a provision that iron, steel and certain other materials used in connection with the project must be produced or made in whole or substantial part in the United States, its territories or possessions.

What are the next steps?

The Department is charged with promulgating the regulations necessary to carry out the Act by December 26, 2025. As such, the methodologies that the Department will use to carry out the objectives established by the Act remain to be determined. We will continue to monitor for further developments.

Key Takeaways

The Act is the second of its kind in the nation (after Vermont’s Climate Superfund Act) to pursue a superfund model to cover damages attributable to climate change. However, a growing number of states like California, Maryland, Massachusetts and New Jersey have already proposed similar superfund model laws in addition to other climate accountability laws. The outcome of legal challenges to the Act and Vermont’s law will provide important indications of how successful these types of laws will be in the coming years.

Vermont’s Climate Superfund Act

On July 1, 2024, Vermont’s Climate Superfund Act went into effect, becoming the first law in the U.S. to use the superfund model to charge fossil fuel companies for damage related to climate change. Like the New York Act, Vermont’s Climate Superfund Act aims to hold fossil fuel companies responsible for the costs of damages associated with GHG emissions. The law seeks to ensure that companies responsible for emissions contribute to the state’s climate adaptation efforts. Like New York’s Act, Vermont’s law defines “Responsible Parties” as fossil fuel extractors or crude oil refiners that are responsible for more than one billion tons of covered GHG emissions during the Covered Period. And like New York’s Act, Vermont’s law requires “Responsible Parties” to have a connection with Vermont sufficient to satisfy nexus requirements of the U.S. Constitution. However, unlike New York’s Act, Vermont’s Covered Period extends from 1995 to 2024 and Vermont’s law does not identify a specific amount that Responsible Parties will collectively be required to pay to the state.

Potential Legal Challenges

It is anticipated that the Act will face legal challenges. The Vermont law is currently subject to a federal lawsuit brought by the U.S. Chamber of Commerce and the American Petroleum Institute challenging the statute on various grounds, including claims that: a state does not have the authority to regulate interstate air emissions; the law is preempted by the federal Clean Air Act; the law violates the Due Process Clause of the Constitution because it imposes an overly harsh retroactive penalty for emissions that were lawfully released; the law violates the Commerce Clause of the Constitution because it negatively impacts states other than Vermont such as states with economies that rely heavily on the energy sector; the law violates the Eighth Amendment of the Constitution in that it imposes an excessive fine; and the law results in an unconstitutional taking in violation of the Fifth Amendment of the Constitution.

Open Questions

As only the second law of its kind in the U.S., the New York Act leaves companies with several open questions about implementation, enforcement and future legal challenges.

By April 25, 2025 (120 days from the effective date), the Governor of New York is required to publish a public report illustrating how companies can comply with the Act’s labor and job contracting requirements, its regulations to ensure good jobs and employment opportunities, and how public entities can establish a system to track compliance, accept reports of non-compliance for enforcement action and make annual reports.

By December 26, 2026 (one year from the effective date), the Act requires the Department to promulgate implementing regulations.

And, within two years, the Department is required to complete a statewide climate change adaptation master plan.

Conclusion

As states around the country begin to experience increasingly severe damage from climate and weather-related disasters, the pressure to cover the expenses associated with these events will only increase. The early challenges to Vermont and New York’s law will be crucial indicators of whether a superfund type law is a feasible avenue for states to pursue.

Read the full text of the Act here.

For more information, please contact Alexa C. Gamble at [email protected], Emily A. Humbert at [email protected], Christin Kim at [email protected] or another member of the firm’s Environmental, Social & Governance practice.

This information is intended to inform firm clients and friends about legal developments, including the decisions of courts and administrative bodies. Nothing in this alert should be construed as legal advice or a legal opinion. Readers should not act upon the information contained in this alert without seeking the advice of legal counsel. Views expressed are those of the author(s) and not necessarily this law firm or its clients. Prior results do not guarantee a similar outcome.