New York to charge fossil fuel companies $75B under climate cost recovery law

The state of New York will assess oil and gas companies a collective $75 billion over 25 years under a new climate law signed by Governor Kathy Hochul on Dec. 26.

The Climate Change Superfund Act (S.2129-B) aims to shift the burden of climate mitigation from taxpayers to fossil fuel companies by charging them for the greenhouse gases they emitted between 2000 and 2018.

The funds, to be collected at a rate of $3 billion per year, will help pay for infrastructure upgrades, extreme weather response, cooling systems and other climate-related investments, which could "easily reach several hundred billion dollars" in state costs through 2050, according to the legislation's text.

"New York has fired a shot that will be heard round the world: the companies most responsible for the climate crisis will be held accountable," state Senator Liz Krueger, a Democrat and lead sponsor of the legislation, said in a statement.

The legislation, creating what it formally called a "climate change adaptation cost recovery program," was first introduced in January 2023. It passed the state Senate in May by a 43-17 margin.

The law applies to producers and refiners that emitted more than 1 billion tons of greenhouse gases over 18 years. Krueger said the "polluter-pays model" mirrors existing state and federal Superfund laws, which tax companies to cover the cost of cleaning up hazardous waste sites. Earlier this year, Vermont passed similar legislation that applies this model to greenhouse gas emitters.

Industry qualms

But Scott Segal, a partner at Bracewell who advises energy companies, questioned the comparison to the US Environmental Protection Agency's Superfund program.

"While we all share the goal of addressing climate change, imposing retroactive liability on companies for legally conducted business activities sets a troubling precedent that could significantly impact New York's business environment and economic competitiveness," Segal said in an emailed statement. "Unlike its namesake federal statute that dealt with waste activities, the use of fossil fuels is and was an essential component of maintaining quality of life in New York and elsewhere."

Segal also warned that the fines could hurt consumers by raising energy prices. Other policy analysts believe this is unlikely because the law only imposes a one-time cost on fossil fuel producers.

"Given that the assessment generated by the Climate Superfund is based on past pollution and therefore does not affect today's marginal cost of production, there should be no shifting of costs to consumers," economist Joseph Stiglitz, a professor at Columbia University, wrote in a September letter to Hochul.

The activities for which companies are being assessed are also too far upstream to affect local gasoline prices, according to Stiglitz.

In a Dec. 26 statement, the American Petroleum Institute called the law "a punitive new fee on American energy" and said it was evaluating its options.