Federal Court Blocks New York's $75 Billion Climate Superfund Act

A federal court has held that the state of New York's Climate Change Superfund Act (the Act) is preempted, blocking a statutory program that would authorize recovery from covered fossil fuel companies of a combined $75 billion ($3 billion annually over 25 years) to fund climate adaptation projects in New York.

The court concluded that the Act's strict liability cost-recovery scheme was materially indistinguishable from the state law climate claims the U.S. Court of Appeals for the Second Circuit rejected in City of New York v. Chevron Corp., 993 F.3d 81 (2d Cir. 2021), and that the Clean Air Act does not authorize New York to impose that liability for interstate greenhouse gas (GHG) emissions. The court separately held that cost-recovery demands against foreign producers would be barred by the foreign affairs doctrine.

What Happened

On August 31, 2026, Chief Judge Brenda Sannes of the U.S. District Court for the Northern District of New York granted summary judgment to the plaintiffs in West Virginia v. James, No. 25-168 (consolidated with Chamber of Commerce v. James, No. 25-1307), holding that the Act is preempted. See West Virginia v. James, No. 1:25-cv-00168 (N.D.N.Y. Aug. 31, 2026).

Enacted in 2024, the Act established a climate change adaptation cost-recovery program with a total cost-recovery amount of $75 billion. It requires entities determined by the New York State Department of Environmental Conservation to be responsible for more than 1 billion tons of covered GHG emissions during the covered period from 2000 through 2024 to pay a proportional share of that amount. The Act imposes strict liability and counts emissions attributable to fossil fuel extraction and refining worldwide, not only activity occurring in New York.

The lead action was brought by 22 states, led by West Virginia, along with several industry plaintiffs. A separate action brought by the U.S. Chamber of Commerce, American Petroleum Institute, National Mining Association and Business Council of New York State was later consolidated with the West Virginia case. The plaintiffs asserted federal preemption and multiple constitutional challenges to the Act.

Key Court Holdings

In granting summary judgment, the court made the following key determinations:

• City of New York Framework. Relying heavily on City of New York v. Chevron Corp., the court found "very little daylight" between the Act's strict liability cost-recovery scheme and climate-related public nuisance claims rejected in that case. The court concluded that both seek compensation for harms attributed to global GHG emissions and implicate the same federal interests in a uniform approach to interstate pollution, national energy policy and federalism. Importantly, however, the court expressly declined to decide whether the Act was independently preempted by the U.S. Constitution or federal common law.
• Clean Air Act Preemption. The court held that the Clean Air Act does not authorize New York to impose the Act's state law compensation scheme for interstate GHG emissions. The court reasoned that the Clean Air Act's savings provisions do not preserve the type of extraterritorial state law claims embodied in the Act.
• U.S. Environmental Protection Agency (EPA) Endangerment-Finding Rescission. The court held that EPA's February 2026 rescission of the 2009 GHG endangerment finding did not alter the preemption analysis. In the court's view, the relevant point was the U.S. Congress' delegation of regulatory authority to EPA; EPA's decision regarding whether and how to exercise that authority did not authorize New York to impose a state law regime that federal law otherwise precludes.
• Foreign Affairs Doctrine. The court separately held that any cost-recovery demand against a foreign fossil fuel producer would be barred by the foreign affairs preemption doctrine because the Act intrudes into an area of uniquely federal concern.

In sum, the decision turned on the court's conclusion that the Act imposed strict liability for global emissions in a way that mirrored the claims rejected in City of New York, and the Clean Air Act left no room for New York to impose that liability through state law, even after EPA's 2026 endangerment-finding rescission.

Why It Matters

The decision is significant, but another "climate superfund" remains pending. Vermont's climate superfund law is the subject of pending challenges. The New York decision may provide persuasive arguments on overlapping preemption questions in the Vermont case. Also, roughly 10 other states have been considering comparable legislation. For additional background, see Holland & Knight's previous alert, "An Update on Climate Superfund Laws and Climate Change Lawsuits," May 14, 2025.

More broadly, the decision supports an argument that a state cannot avoid federal preemption merely by converting a climate-related common law theory into a statutory compensation scheme when the statute targets the same interstate and international emissions and seeks the same type of relief. But there are still hurdles before this can be established as a national approach.

What Could Happen Next

New York Gov. Kathy Hochul's office has indicated it is reviewing the decision and considering next steps, and some state lawmakers have urged an appeal to the Second Circuit. Any such appeal will unfold against the backdrop of the U.S. Supreme Court considering a separate but related climate preemption dispute.

The Supreme Court is scheduled to hear oral argument on October 5, 2026, in Suncor Energy v. County Commissioners of Boulder County, No. 25-170, which asks whether federal law precludes state law claims seeking relief for injuries allegedly caused by the effects of interstate and international GHG emissions on the global climate. The Supreme Court also directed the parties to brief and argue whether it has statutory and Article III jurisdiction to hear the case. The West Virginia decision is in line with the relief that the industry seeks from the Supreme Court. If the Supreme Court embraces similar reasoning, it could reinforce federal preemption as a broad bar to state climate tort claims, whether brought under common law or statute.

Broader Implications

Companies within the scope of the climate superfund laws should continue to monitor these proceedings. Judge Sannes' decision gives energy companies stronger defenses against state liability schemes that seek compensation based on interstate or worldwide GHG emissions, but the scope and durability of that defense continue to be litigated in appellate and lower courts. The court's principle conclusion in the City of New York case – that state law compensation schemes targeting worldwide GHG emissions conflict with uniquely federal interests governing interstate pollution – could be relevant to comparable legislation pending in other states.

Holland & Knight will continue to monitor this litigation and related state legislative developments. If you have any questions, please contact the authors.

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