20 States Challenge Climate Change Superfund Act

Feb. 20—ALBANY — More than 20 states filed a federal lawsuit against New York earlier this month challenging the constitutionality of the new Climate Change Superfund Act, which will establish regulations seeking to collect roughly $75 billion from companies — some controlled by foreign nations — deemed responsible for greenhouse gas emissions due to their refinement and production of fossil fuels.

"New York's law is nothing more than an unconstitutional shakedown of vital American energy industries that form the bedrock of our national economic independence," said Texas Attorney General Ken Paxton. "In return for keeping the lights on and fueling our manufacturing, energy producers are being targeted for destruction by the left-wing policies of New York radicals."

The legislation was signed into law at the end of December by Gov. Kathy Hochul, over the objections of a coalition of business, energy and labor organizations aligned with the Business Council of New York State, which had asked the governor to veto the bill.

It had been stripped from the state budget last year but passed by the state Senate in May and the Assembly a month later.

The federal lawsuit was filed in U.S. District Court in Albany this week by attorneys generals from Alabama, Arkanas, Georgia, Idaho, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah and Wyoming. Several industry groups, including the West Virginia Coal Association, Alpha Metallurgical Resources, and the Gas and Oil Association of West Virginia, are also parties to the litigation.

The lawsuit was filed against state Attorney General Letitia James, interim Department of Environmental Conservation Commissioner Sean Mahar, and acting Department of Taxation and Finance Commissioner Amanda Hiller.

"The state of New York believes it can seize control over the makeup of America's energy industry," the 76-page complaint states. "In an unprecedented effort, New York has set out to impose tens of billions of dollars of liability on traditional energy producers disfavored by certain New York politicians. These energy producers needn't operate in New York before becoming a target. And New York consumers won't bear the brunt of these crushing new costs once they're imposed. Rather, New York intends to wring funds from producers and consumers in other States to subsidize certain New-York-based 'infrastructure' projects, such as a new sewer system in New York City."

The superfund act tasks the state Department of Environmental Conservation with establishing regulations to identify "responsible parties" and the procedures for collecting payments from those companies after issuing notices of cost recovery demands. Although the state attorney general's office and Department of Taxation and Finance would be given authority to enforce the payment demands, it's unclear how that would work, including if the targets are in Russia or other nations at odds with U.S. interests.

The coalition supported by the Business Council characterized the legislation as "bad public policy" in a letter they sent to Hochul last year. The letter noted there are significant questions about the implementation of the regulations, whether they would meet constitutional muster, and the potential for "unintended consequences and increased costs for households and businesses."

The group said that the legislation also ignores the direct culprit for carbon emissions — consumers — and is discriminatory because it targets only the largest fossil fuel extraction and processing firms, including those that produce petroleum, natural gas and coal.

State and federal lawmakers who support the legislation have taken varied positions on fossil fuels. Under former Gov. Andrew M. Cuomo, the state created the "FUEL NY" initiative in response to Superstorm Sandy in 2012, a catastrophic event that created extensive power outages and disruptions to fuel supply systems. That initiative, which remains in place, notes that New York "relies on the continuous availability and resupply of gasoline and diesel fuel to maintain public safety, commerce, and the well-being and economic vitality of its residents, businesses, and governments."

The FUEL NY plan seeks to mitigate disruptions in fuel distribution and establish two fuel reserves, as well as a back-up generator program for gas stations in strategic locations, to make it easier for New Yorkers to resume "daily life" following a severe storm.

"Now, state government is proposing to penalize the very same suppliers of gasoline, natural gas, and other fossil fuel-based products," the business coalition group wrote. "By targeting and imposing strict liability only on the extraction and refinement of fossil fuels, the bill disregards the fact that most emissions are generated by the actual use of fossil fuels and not by their refinement or extraction. Imposing a fee on this past activity means is not designed to impact business or consumer behavior, suggesting the main goal of the legislation is to receive funding from the fuels sector."

The law received staunch support from many Democratic lawmakers, including U.S. Rep. Jerrold Nadler, a Manhattan Democrat who wrote a letter to Hochul last year urging her to sign the bill.

"The Climate Change Superfund Act is unique in that it holds the companies responsible for the largest greenhouse gas emissions accountable in a way that keeps those costs from being passed on to the public," Nadler wrote, adding that it is expected to cost hundreds of billions of dollars "to shore up New York against the impacts of climate change."

A memo circulated in the Legislature two years ago by state Sen. Liz Krueger, another Manhattan Democrat, and Assemblyman Jeffrey Dinowtiz, a Bronx Democrat, cited a "peer-reviewed" article that they said ranked a list of violators and helped establish the amount of money they should pay New York. The article analyzed global emissions since 2000 and based the penalties on each company's annual assessment, and places "the burden of the damages caused on the manufacturer, not the users, even if the substance was legally produced and emitted at the time the harm was caused."

That annual assessment list ranges from $222 million for Exxon Mobil to $100 million for Lukoil in Russia and $23 million for Novatek, an oil and gas company that is Russia second-largest producer of natural gas. There are also more than a dozen U.S. companies on the bill's list.

The legislation entitles a fossil fuel company to contest any financial assessments "consistent with due process requirements of the U.S. Constitution."

But the lawsuit filed in federal court against New York contends the law runs afoul of the Constitution and the federal Clean Air Act, which regulates emissions across state lines.

"And rather than focusing on greenhouse-gas emissions released in New York, the act punishes a small group of energy producers for global greenhouse gases emitted from all sources into the atmosphere from 2000 to 2018," the complaint states. "Yet coal, oil, and natural gas were helping New York during that time. They helped keep the lights on in Albany, manufacture the steel that supported New York City's iconic skyscrapers, and fuel the industry that keeps New York ports humming."

Blair Horner, executive director of New York Public Interest Research Group, had pushed back on the Business Council, claiming the organization would rather have "taxpayers and small business owners pick up the entire tab for climate destruction, instead of the wealthy fossil fuel companies who knew they were causing climate change for decades and did nothing to change course."

"It's their same old playbook — fighting for the wealthiest business interests over the real New Yorkers just trying to pay their bills between every dangerous and expensive extreme heatwave, flood, and tornado," Horner added.