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A new law in Vermont, a bill awaiting the governor’s approval in New York and proposed bills in California, Maryland and Massachusetts represent a growing trend of state-level initiatives aimed at holding fossil fuel companies accountable and attempting to fund efforts to mitigate and adapt to climate change impacts. These new bills raise more questions than answers and must be tracked so companies can begin to understand future risk profiles as it is possible that these new laws could start to target others beyond fossil fuel companies just like greenwashing claims do in our current environment.

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<a>On May 30, 2024, the </a><a href="https://legislature.vermont.gov/Documents/2024/Docs/ACTS/ACT122/ACT122%20As%20Enacted.pdf">Climate Superfund Act</a> (S.259) became law in Vermont, establishing a Climate Superfund Cost Recovery Program, the first in the nation, which the Climate Action Office of Vermont’s Agency of Natural Resources (Agency) will administer beginning July 1 when it takes effect. The new law was enacted to secure compensatory payments from responsible parties to fund climate change adaptation projects, which are “designed to respond to, avoid, moderate, repair, or adapt to negative impacts caused by climate change and to assist human and natural communities, households, and businesses in preparing for future climate-change-driven disruptions.” Proposed projects encompass a range of initiatives, including implementing nature-based solutions and flood protections, upgrading stormwater drainage systems, providing medical care for climate-related illnesses and making defensive upgrades to transportation infrastructure like roads, bridges, railroads and transit systems.

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Responsible parties, strictly liable for a share of the costs of climate change adaptation projects, are defined as any entity, or its successor, that is “engaged in the trade or business of extracting fossil fuel or refining crude oil and is determined by the Agency attributable to more than one billion metric tons of covered greenhouse gas emissions” from January 1, 1995, to December 31, 2024.<a> </a>The cost recovery demand for each responsible party will be proportional to their share of greenhouse gas emissions relative to the total emissions from fossil fuels extracted or refined during the covered period. This amount is calculated based on the overall cost to Vermont and its residents from these emissions, as determined by the state treasurer. In fiscal year 2025, $300,000 is allocated to the state treasurer for hiring consultants or third-party services to help assess the cost of covered greenhouse gas emissions in Vermont.

The Agency must adopt rules to implement the program, including methodologies for identifying responsible parties and determining their share of greenhouse gas emissions, requirements for issuing notices of cost recovery demands and criteria and procedures for prioritizing climate change adaptation projects. The biggest open issues appear to be how the proportionality piece will be calculated and whether there will be a mechanism to contest that determination.

Similarly, the New York Senate passed the <a href="https://nyassembly.gov/leg/?default_fld=&amp;leg_video=&amp;bn=S02129&amp;term=2023&amp;Summary=Y&amp;Actions=Y&amp;Committee%26nbspVotes=Y&amp;Floor%26nbspVotes=Y&amp;Memo=Y&amp;Text=Y&amp;LFIN=Y&amp;Chamber%26nbspVideo%2FTranscript=Y#jump_to_Text">Climate Change Superfund Act</a> (S02129B), which is pending the governor’s approval and would establish a climate change adaptation cost recovery program that requires fossil fuel companies to pay a share of the costs of infrastructure investments and other expenses necessary for adapting to the impacts of climate change. The program is also based on the principle of strict liability and assigns proportional responsibility to companies based on their greenhouse gas emissions during the covered period of 2000 to 2018.

The New York bill creates a climate change adaptation fund that receives payments from fossil fuel companies and disperses them to eligible projects that benefit the public’s safety and welfare, with a goal of at least 40% of the funds going to disadvantaged communities. The total payment amount is set at $75 billion over 24 years. The bill also requires the Department of Environmental Conservation to promulgate regulations, conduct an independent evaluation and complete a statewide climate change adaptation master plan for the program.

<a href="https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=202320240SB1497">California</a>, <a href="https://mgaleg.maryland.gov/2024RS/bills/sb/sb0958f.pdf">Maryland</a> and <a href="https://malegislature.gov/Bills/193/H872">Massachusetts</a> have introduced similar bills in their legislatures, with varying degrees of progress and detail, all of which seek to impose strict liability on fossil fuel companies, establish climate funds and allocate at least 40% of collected funds to benefit disproportionately affected communities. The bills vary in the financial obligations they impose on fossil fuel companies. While Massachusetts and Marland have set specific recovery amounts, $75 billion and $9 billion, respectively, the California bill opts for proportional emission-based recovery demands without a predetermined total amount to be recovered.

These legislative efforts underscore a significant shift toward developing a cost recovery framework like that used to remediate Superfund Sites but targeted at holding companies (for now, only fossil fuel companies) financially accountable for their role in climate change. While we expect some legal challenges to these new laws, it will be imperative to determine how many states may follow the lead of Vermont and New York and whether these new state legal regimes will have success in trying to fund climate-related projects.

<em>This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.</em>

https://admin.thompsonhine.com/wp-content/uploads/2024/07/Expanding-ESG-Will-States-Create-CERCLA-Equivalents-for-Fossil-Fuel-Accountability-and-Climate-Funding.pdf

Expanding ESG: Will States Create CERCLA Equivalents for Fossil Fuel Accountability and Climate Funding?

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