A federal judge in the Southern District of New York has ruled that New York’s Climate Change Superfund Act is preempted and permanently enjoined its enforcement. The September 23, 2026 decision in United States v. New York addresses a statute designed to recover $75 billion from large fossil fuel producers and refiners to fund climate adaptation projects.
The court held that the Act conflicts with the federal framework governing interstate greenhouse gas (GHG) emissions and encroaches on the federal government’s foreign affairs authority. The dispute, however, will likely not end on this ruling. Companies should monitor the resulting judgment and any appeal or request to stay the injunction.
The ruling follows an August 31 decision in which another federal judge in New York reached the same central conclusion in consolidated litigation brought by states and industry groups in State v. James.
Together, the decisions strengthen the legal challenge to New York’s approach, but neither is an appellate ruling resolving the validity of the state’s climate measures. Courts are also considering several similar state climate accountability efforts, including cases involving Michigan, Hawaii, and Minnesota.
Companies—particularly energy companies with historical fossil fuel extraction or crude oil refining—should continue to monitor litigation and legislative activity in New York and other states to evaluate potential risk.
New York’s Climate Superfund Act
Enacted in December 2024, the Act established a climate adaptation cost recovery program based on strict liability. It attributed emissions to fossil fuels extracted or crude oil refined anywhere in the world during 2000–2024 and applied to qualifying entities responsible for more than 1 billion tons of covered emissions, subject to a statutory due process contacts limitation.
Each responsible party’s assessment was designed to reflect its purported share of the covered emissions attributed to all responsible parties.
The Act required the New York State Department of Environmental Conservation (DEC) to issue cost recovery demands by June 30, 2028. At the time of the September 23 ruling, no demands had been issued and no payments made. The statute permitted DEC to spread payments over 24 years, with 8% due in the first year.
The legal backdrop includes American Electric Power Co. v. Connecticut (2011), in which the Supreme Court held that the Clean Air Act displaces federal common-law claims to abate carbon dioxide emissions from domestic power plants, while leaving unresolved the availability of state-law claims.
In 2021, the Second Circuit rejected New York City’s state-law nuisance claims seeking to recover costs attributable to global emissions from fossil fuel producers.
Neither decision, however, extinguished every state-law claim seeking to remedy the alleged effects of emissions from fossil fuel producers. The source and geographic reach of emissions remain important factors in evaluating the viability of these claims.
Court Finds Clean Air Act Preemption
In his September 23 ruling in United States v. New York, Judge P. Kevin Castel applied the Second Circuit's City of New York reasoning to the Act. He concluded that charges based on emissions attributed to fossil fuel products across the country and around the world amounted to de facto regulation, even though they addressed past activity and were framed as compensation.
Because the Clean Air Act did not authorize New York to impose this liability for interstate emissions, the court held that the Act was preempted. The ruling does not invalidate state rules addressing emissions from sources within New York.
The court also rejected the argument that the Environmental Protection Agency’s (EPA) rescission of its motor vehicle greenhouse gas endangerment finding changed the analysis. Under the court's reading of City of New York, the decisive question was federal authorization for the state program, not whether the EPA chose to exercise a particular regulatory power.
Court Finds Conflict with Federal Foreign Affairs Authority
The court separately held that applying the Act to producers’ foreign activities encroached on the federal government’s foreign affairs authority. It reasoned that imposing a New York assessment tied to global extraction and refining would bypass federal diplomatic channels on an issue requiring international coordination.
This holding matters particularly to multinational producers, foreign-headquartered groups, and businesses with significant historical operations outside the United States. The opinion characterized foreign affairs field preemption as an exceptional doctrine, not a general prohibition on state measures with international effects.
The court also found that the United States had standing to protect its sovereign interests in administering federal air pollution law and conducting foreign affairs. Having granted full relief on those two grounds, the court did not decide the remaining extraterritoriality or dormant Commerce Clause claims.
Related Ruling Reinforces the Preemption Challenge
In the parallel Northern District of New York litigation, State v. James, Chief Judge Brenda K. Sannes granted summary judgment to state and industry association challengers on preemption grounds on August 31, 2026. Both district courts relied heavily on the Second Circuit's binding precedent in City of New York.
The August 31 order, however, required further case management submissions and did not provide the same final injunctive disposition ordered in the September 23 opinion.
Key Implications for Businesses
While the permanent injunction remains in effect, DEC cannot enforce the Act. Companies should not treat the statute’s June 2028 demand date as an active payment deadline. They should continue to track the judgment, appellate proceedings, and any stay or modification before revising financial assumptions.
The decision does not suspend applicable federal or state emissions requirements, eliminate source-state claims, or dispose of claims built on materially different conduct. It addresses a global, producer-focused historical assessment, not every state measure concerning local emissions or climate impacts.
For multinational energy companies, the court’s foreign affairs rationale may inform defenses to similar global emissions assessments. Its application to other regimes, however, will depend on their language, reach, and asserted state interests.
What Comes Next
The most consequential near-term questions are whether New York seeks appellate review and whether the injunction remains in place throughout that process. Because the United States is a party, New York has 60 days after entry of the order granting the injunction to file a notice of appeal.
An appeal could test whether City of New York extends from a tort suit to a statutory cost recovery program, as well as the separate foreign affairs rationale.
The district court expressly left the other constitutional theories unresolved, so appellate or future litigation may address issues the ruling did not decide.
The U.S. Supreme Court is considering related legal questions presented in Suncor Energy (U.S.A.) Inc. v. County Commissioners of Boulder County. The Court granted review to consider whether federal law precludes state-law claims seeking relief for injuries allegedly caused by interstate and international GHG emissions. Oral argument was held October 5, 2026, and a ruling is expected before the Court’s term ends in June 2027.
For now, affected businesses should treat the September 23 decision as a significant constraint on New York’s worldwide, historical producer-assessment model.
If you have any questions, or would like additional information, please contact one of the attorneys on our Environmental, Land Use & Natural Resources team.
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