14 January 2025

New York climate change superfund act signed into law

On January 8, 2025, as part of an apparent agreement between bill sponsors and New York Governor Kathy Hochul, State Senator Liz Krueger introduced legislation (SB 824) to modify the Climate Change Superfund Act (the Act) (SB 2129 and AB 3351), which was signed into law by the Governor on December 26, 2024. The Act requires entities engaged in the trade or business of extracting fossil fuel or refining crude oil to remit a fee intended to reflect the purported damages of greenhouse gas emissions.

Climate change superfund fee overview

The Act applies to businesses that extract fossil fuel or refine crude oil and are determined to be a responsible party by the state, meaning they have generated at least one billion metric tons of attributable greenhouse gas emissions during the covered period (currently 2000–2018). The fee is determined based on a responsible party's pro rata share of total covered greenhouse gas emissions during the covered period and paid into a Climate Superfund.

Covered greenhouse gas emissions include "greenhouse gases resulting from the extraction, storage, production, refinement, transport, manufacture, distribution, sale, and use of fossil fuels or petroleum products extracted, produced, refined, or sold by such entity."1 Emissions are determined on a set schedule defined within the Act.

The Act allows entities to make payments of the determined pro rata share of damages in 24 annual installments, with the first payment equal to at least 8% of the total liability and the remaining 23 payments equal to 4% of the total liability per year. Companies in a controlled group are jointly and severally liable for payment of the fee.

The Act excludes from the definition of responsible party subject to the new fee any company "who lacks sufficient connection with the state to satisfy the nexus requirements of the United States Constitution."

Proposed amendments

Among its provisions, SB 824, would:

  • Extend the covered period from 2000–2018 to 2000–2024.
  • Define "affiliate" to mean, "with respect to any specified entity, an entity that directly, or indirectly through one or more intermediaries, controls or is controlled by, or is under common control with, the entity specified."
    • Remove the 10% subsidiary ownership threshold
    • Retain joint and several liability for payment of the fee for a controlled group
  • Impose a 50% penalty plus interest on any responsible party who fails to make a required payment.
  • Impose a new information reporting requirement on responsible parties, in place of the defined carbon dioxide equivalent emissions schedule under the Act, for amounts of coal, crude oil, and fuel gas produced by responsible parties.
  • Require the enforcing agency, the New York Department of Environmental Conservation (NY DOEC) to develop and apply consistent factors to convert extraction and refining data into greenhouse gas emissions attributable to responsible parties.
  • Require responsible parties to disclose "past practices, production, extraction, refining, emissions, or other historical information about such entity necessary or appropriate to enable the [NY DOEC] to determine whether such entity is a responsible party and, if so, the amount of such responsible party's covered greenhouse gas emissions."
  • Delay the payment date to the fourth calendar year after enactment of the amendments and allow payment to be made in installments over 24 years, with the first payment equaling at least 8% of the total determined liability.
  • Eliminate the Department of Tax and Finance's role in enforcing the Act, leaving administration to the NY DOEC and state's Attorney General.
  • Require the NY DOEC to issue regulations to enforce the Act and the new information reporting requirements within 30 months of enactment.
  • Require the NY DOEC to issue cost recovery demands to responsible parties by June 30 of the fourth calendar year after the amendments are enacted.

Other jurisdictions

Vermont enacted a similar superfund measure in 2024 (Act 122), the constitutionality of which is currently being challenged in federal court. In their December 30, 2024 complaint, attached separately, the US Chamber of Commerce (Chamber) and American Petroleum Institute (API) argue Act 122 is:

  • Generally preempted by the Supremacy Clause of the US Constitution and the general reservation to the federal government of regulating unique federal interests, such as greenhouse gas emissions
  • Specifically preempted by the federal Clean Air Act

The Chamber and API also argue Act 122 violates:

  • The US Constitution 14th Amendment due process clause limitation on state extraterritorial regulation by retroactively imposing a harsh and oppressive penalty
  • The Commerce Clause by discriminating against and seeking to regulate beyond its borders both interstate and international business
  • The 5th Amendment takings and the 8th Amendment excessive fines prohibitions.

The complaint requests an injunction against enforcement of Act 122 not only because it violates the Constitution and is preempted by federal law, but also because of the burden and extreme costs imposed on taxpayers to defend allegations they have nexus with the state to be subject to Act 122.

Other states have proposed substantially similar legislation to enact climate superfund levies. These states include California (2024 SB 1497), Massachusetts (2024 SB 481), Maryland (2024 SB 958 and HB 1438) and New Jersey. While none of these proposals advanced during the 2024 legislative session, the Maryland proposal was reintroduced on January 8 as HB 128 and SB 149, the California proposal is expected to be reintroduced later this year, and New Jersey's SB 3545 and AB 4696 remain active as carryover bills from into the 2025 legislative session.

Implications

The superfund fee will be administered and enforced by the NY DOEC and the Attorney General. While the current law does not impose penalties or interest for failure to pay the fee, taxpayers should monitor for enactment of the proposed amendments, which would impose a 50% penalty and interest for failure to pay the fee.

The Act requires the NY DOEC and the Attorney General to issue implementing regulations. When the implementing regulations will be issued depends on whether the above amendments are enacted — one year if they are not and 30 months if they are. Interested parties should monitor the NY DOEC for any guidance or proposed regulations on the new fee.

EY will continue to monitor these superfund developments in New York and Vermont, as well as other states, and provide updates when warranted.

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Endnote

1 Including subsidiaries owned 10% or more.


Attachment

U.S. Chamber of Commerce v. Moore

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Contact Information

For additional information concerning this Alert, please contact:

Sustainability Tax Services

State Policy Services

Published by NTD’s Tax Technical Knowledge Services group; Chris DeZinno, legal editor

Document ID: 2025-0234