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. 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."
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:
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. 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.
Document ID: 2025-0234 | |||||||