Advisories July 11, 2024

Environment, Land Use & Natural Resources Advisory | Emerging Climate Liability: Understanding State Climate Change Superfund Bills

Executive Summary
Minute Read

States are increasingly holding the fossil fuel sector liable for costs related to climate change. Our Environment, Land Use & Natural Resources Group unpacks what companies need to know about these new state “superfund” laws.

  • Trend among states to legislate corporate responsibility for climate change
  • Shifting the costs for domestic and international climate change policies to companies
  • Companies identified as responsible for climate change costs face mandatory contributions to state funds 

In a significant legislative step, states such as Vermont and New York are setting a precedent with laws targeting companies they deem responsible for climate change. Vermont’s recently passed S 259, dubbed the Climate Superfund Act, along with the pending New York Climate Change Superfund Act, represent a paradigm shift in environmental liability. These laws have far-reaching implications for businesses, impacting operational costs, liability exposure, and compliance requirements. Additionally, California, Massachusetts, and Maryland are following suit with proposed legislation, indicating a controversial trend among states to legislate corporate responsibility for climate change.

Vermont’s Climate Superfund Act: S 259

Vermont's S 259, which became law without the governor’s signature in 2024, is aimed at addressing the alleged financial and environmental repercussions of climate change. The law creates a state-managed Climate Superfund Cost Recovery Program Fund, designed to secure compensatory payments from responsible parties to provide a source of revenue for climate change adaptation projects. Payments will be based on the proportional liability of responsible parties.

Key elements of the law include:

  • Identification of Responsible Parties: Mandates the adoption of methodologies to identify responsible parties and determine their applicable share of covered greenhouse gas emissions. Responsible parties include any entity (or successor in interest of an entity) engaged in the trade or business of extracting fossil fuel or refining crude oil that is determined by the state to be responsible for more than 1 billion metric tons of covered emissions.
  • Financial Contributions: Identified parties are required to contribute financially to the state-managed fund. The contribution amount is equal to an amount that bears the same ratio to the cost to the state and its residents, as calculated by the state treasurer, from the emission of “covered greenhouse gases” as the responsible party’s applicable share of covered greenhouse gas emissions. “Covered greenhouse gases” means the total quantity of greenhouse gases released into the atmosphere during the covered period resulting from the use of extracted or refined fossil fuels.
  • Strict Liability: The law imposes strict liability on businesses for contributing a share of the costs of climate change adaptation projects and qualified expenditures supported by the fund. This provision significantly broadens the scope of potential liabilities for businesses operating in Vermont.
  • Retroactive Application: The law has retroactive provisions, allowing the state to collect funds for past alleged environmental damages during the covered period beginning January 1, 1995 through December 31, 2024. This aspect can potentially expose businesses to liabilities for historical pollution.

New York’s Pending Climate Change Superfund Act

Following Vermont’s lead, New York is poised to enact the Climate Change Superfund Act, currently pending in the state legislature. The proposed law shares similarities to Vermont’s S 259, including strict liability for required payments, but also includes unique provisions tailored to New York’s environmental landscape. Key features of the pending legislation include:

  • Climate Change Adaptation Master Plan: Like its Vermont counterpart, the law mandates comprehensive assessments of the impact of greenhouse gas emissions to develop a master plan for dispersal of the funds throughout the state.
  • Joint and Several Liability: The New York bill, like Vermont’s S 259, includes a joint and several liability clause, allowing the state to hold multiple parties jointly responsible for environmental damages.
  • Fund Allocation: Funds collected through the Climate Change Superfund will be allocated to projects designed to avoid, mitigate, or adapt to climate change impacts. These include infrastructure upgrades, nature-based coastal protection, disaster preparation, preventive health care, environmental cleanup projects, and renewable energy initiatives.

California’s SB 1497: Polluters Pay Climate Cost Recovery Act of 2024

California, a state known for its aggressive environmental policies, is considering SB 1497, the Polluters Pay Climate Cost Recovery Act of 2024. Key aspects of SB 1497 include:

  • Cost Recovery Mechanism: The bill gives the state attorney general authority to enforce the collection of required payments into the Polluters Pay Climate Fund and assess late penalties to recover costs associated with climate-related damages, including wildfires, droughts, and sea-level rise. This provision aims to make industry bear the financial burden of climate impacts. The bill would not relieve parties from liability for damages resulting from climate change.
  • Climate Cost Study: The bill requires the California Environmental Protection Agency to complete a climate cost study, to be updated at least every two years, to quantify the cost of climate change to California and assist in allocating costs to responsible parties. The study will also assess potential qualifying expenditures to mitigate or adapt to the impacts of climate change through 2045.

Massachusetts’s H 872 and S 481: Establishing a Climate Change Superfund

Massachusetts is considering two similar bills, H 872 and S 481, establishing a climate change superfund. In addition to sharing many components of the laws and proposals already discussed, key aspects of the bills include:

  • Predetermined Cost: The Massachusetts bills would establish a $75 billion fund. The state would calculate a responsibly party’s share of covered greenhouse gas emissions as the same ratio to $75 billion as the party’s share of covered greenhouse gas emissions to total covered emissions of all responsible parties.
  • Notification and Collection of Allocated Costs: The state will notify responsible parties of the cost recovery demand amount, how and where cost recovery demands can be paid, the potential consequences of nonpayment and late payment, and information regarding their rights to contest the assessment. The state can pursue collection efforts and negotiate settlements with responsible parties.

Maryland’s SB 958: Responding to Emergency Needs from Extreme Weather Act of 2024

Maryland also proposed similar legislation, SB 958, to establish a Climate Change Adaptation and Mitigation Payment Program. Key aspects of the bill include:

  • Smaller Fund: Like the Massachusetts bill, the Maryland bill calculates responsible parties’ cost share based on a predetermined $9 billion. Responsible parties are held joint and severally liable.
  • Clean Energy Investments and Grants: Money from the Climate Change Adaptation and Mitigation Fund can be spent on an expansive list of projects, including clean energy, cleantech, and zero-emission transportation. The bill would also establish a grant program for local jurisdictions.

Implications for Businesses

The legislative developments in Vermont, New York, California, Massachusetts, and Maryland reflect a broader trend of state-led initiatives to target companies involved in the extraction, production, and use of fossil fuels, and to controversially shift the costs for domestic and international climate change policies onto these companies. This comes at a time when the oil and gas industry is supporting millions of jobs, providing reliable energy, and ensuring the nation’s energy security.

The financial implications for businesses are considerable. Companies identified as responsible parties will face increased operational costs due to mandatory contributions to the fund.

Additionally, the imposition of strict and joint liability provisions exposes businesses to greater financial risks. Companies may face substantial liabilities for both merely engaging in longstanding, permitted, and lawful oil extraction activities.

As states continue to pioneer these initiatives, businesses must remain vigilant and proactive in determining whether to challenge or adapt to the changing regulatory environment.

You can subscribe to future advisories and other Alston & Bird publications by completing our publications subscription form.
If you have any questions, or would like additional information, please contact one of the attorneys on our Environment, Land Use & Natural Resources Team.

Meet the Authors
Media Contact
Alex Wolfe
Communications Director

This website uses cookies to improve functionality and performance. For more information, see our Privacy Statement. Additional details for California consumers can be found here.