States Challenge New York’s Climate Superfund Act

The Climate Superfund Act (Act), signed into law by New York Governor Kathy Hochul on December 26, 2024, faces a substantial lawsuit filed by a coalition of states and industry participants. As described in our previous post here, the Act authorizes the state government to unilaterally levy billions of dollars in fines on fossil fuel companies over the next two decades for alleged contribution to greenhouse gas (GHG) emissions.

On February 6, 2025, 22 states and multiple industry associations (Plaintiffs) filed a lawsuit against the New York officials (Defendants) allegedly responsible for implementing and enforcing the Act. At bottom, Plaintiffs challenge New York’s attempt to interfere with the economic interests of its sister states (and to supersede the authority of the federal government) by implementing a “law to impose billions of dollars in fines on traditional companies” for out-of-state activities. Plaintiffs also argue the Act would impact wide swaths of the energy market in Plaintiffs’ states, leading to loss of tax revenue and increased energy costs. Given that New York is not home to the majority of companies targeted by the Act, but rather imports 85% of its energy needs from elsewhere, Plaintiffs argue the Act would protect New York’s interests while imposing penalties on out-of-state producers for conduct that was legal at the time and that remains legal.

Plaintiffs seek both declaratory and injunctive relief on the grounds that the Act violates many provisions of both the U.S. and New York constitutions.

Plaintiffs allege the following federal and state law claims:

1. Federal Preemption: The Act violates the Supremacy Clause by infringing on the “equal sovereignty” of Plaintiff states and is a state law already preempted by federal statute – the Clean Air Act.
2. Commerce Clause: The Act violates both the Commerce and Foreign Commerce Clauses by discriminating against out-of-state energy producers and imposing excessive penalties that burden interstate commerce, while benefiting local New York interests.
3. Due Process: The Act violates the Due Process Clause by retroactively imposing harsh penalties without sufficient notice or justification.
4. Equal Protection: The Act violates the Equal Protection Clause by discriminating against large out-of-state producers of coal, oil, and natural gas – those satisfying the Act’s definition of “responsible” entities – for the benefit of New York interests.
5. Excessive Fines: The Act levies fines – billions of dollars over a 25-year period – on a small group of energy producers for lawful activities.
6. Takings Clause: The Act violates the Takings Clause by requiring out-of-state energy producers to pay substantial sums for New York’s climate adaptation projects, thereby effectuating an unconstitutional taking.
7. Due Process Clause of Article One § 6 of the New York Constitution: The Act is retroactive and arbitrary under New York’s Constitution.
8. Takings Clause of Article One § 7 of the New York Constitution: The Act compels energy producers to fund state projects without providing just compensation.

Comparing the New York Lawsuit with the Recent Climate Superfund Suit in Vermont

The Act is not the only recently enacted law that seeks to pull money from the energy industry. As we previously noted, Vermont has also passed a similar law and several states have proposed their own versions. The federal claims in the New York lawsuit parallel the claims made by the U.S. Chamber of Commerce and the American Petroleum Institute’s in their recent lawsuit against Vermont’s Climate Change Superfund Legislation, as referenced in our previous posts here and here. Plaintiffs in both cases emphasize the realities of energy production within Vermont and New York: neither state is a producer of traditional fossil fuels, but both still rely heavily on traditional energy imports. Moreover, while both New York and Vermont do have in-state energy production, that production is exempted from the new superfund laws. Similarly, the plaintiffs in both the New York and Vermont cases point out that the respective laws impose retroactive and discriminatory fines against out-of-state energy producers, causing increased energy costs and loss of tax revenue for the Plaintiff states. Similarly, the Vermont lawsuit argues that Vermont’s Climate Change Superfund Act is similarly unconstitutional, claiming it violates the Supremacy Clause, Commerce Clause, Due Process Clause, Equal Protection Clause, and the Takings Clause, and that it imposes excessive fines.

These lawsuits are likely to result in important decisions not only about the constitutionality of the recent attempts to use legislation to pin the costs of climate change on the energy industry, but also about the role of individual states in environmental policy and regulation. It is also highly likely that these two lawsuits will not be the only challenges to the New York and Vermont laws. While New York and Vermont try to move towards implementing and enforcing these laws, traditional energy producers and related entities should follow these cases (and any other challenges to these laws) closely.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.