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A federal judge in the Northern District of New York has struck down New York’s Climate Change Superfund Act, ruling that the “polluter pays” climate law is preempted by federal law and “simply beyond the limits of state law.” The court concluded that the Clean Air Act (CAA) does not authorize New York’s compensation scheme, which calculates liability based on greenhouse gas (GHG) emissions attributable to worldwide fossil fuel extraction and refining. It separately held that any cost-recovery demand against a foreign producer would be preempted under the constitutional foreign affairs doctrine, which limits state intrusion into matters committed predominantly to the federal government. The court directed the parties to file a status report by September 14, leaving the form of further relief unresolved. In practical terms, the court has decided that the Act is preempted and cannot be enforced but has not yet determined the precise terms of its final order, including whether to formally enjoin its enforcement.
The decision in West Virginia v. James, Case No. 1:25-cv-00168 (N.D.N.Y. Aug. 31, 2026), issued by Chief U.S. District Judge Brenda K. Sannes, who was appointed by President Obama, marks the first judicial invalidation of a state climate superfund statute and carries significant implications for the climate superfund landscape and the three remaining lawsuits challenging these laws.
New York’s Act and the Challenge
New York enacted its Climate Change Superfund Act in late 2024. As amended, the law established a $75 billion program over 25 years to fund infrastructure intended to address the effects of climate change. To fund these activities, the Act imposes strict liability on a list of fossil fuel extractors and crude oil refiners that the New York State Department of Environmental Conservation (DEC) determined were responsible for more than one billion metric tons of covered greenhouse gas emissions from 2000 through 2024. The calculation included extraction and refining worldwide but excluded entities New York deemed lacking sufficient contacts with New York.
The law drew immediate legal challenges. A coalition of 22 states led by West Virginia and four industry plaintiffs filed the lead case in February 2025, arguing that the Act was unconstitutional and preempted by federal law. The U.S. Chamber of Commerce, the American Petroleum Institute, the National Mining Association, and the Business Council of New York State brought a separate challenge that was transferred and consolidated with West Virginia v. James. The U.S. Department of Justice also maintains a separate challenge, United States v. New York, No. 1:25-cv-03656 (S.D.N.Y.), where its motion for summary judgment remains pending.
The Court Applied the Second Circuit’s City of New York Decision
The court’s analysis centered on the Second Circuit’s 2021 decision in City of New York v. Chevron Corp. There, the Second Circuit held that New York City could not use state tort law to seek compensation for the effects of global GHG emissions. Judge Sannes rejected New York’s attempts to distinguish the statute from common law claims and compensation from regulation. She found “very little daylight” between the two approaches because both use state law to impose liability for harms associated with worldwide emissions, and explained that a compensation obligation can govern conduct and policy. The court also emphasized the need for a uniform regulatory framework for matters affecting national energy and environmental policy, concluding that the Act risked disrupting the balance among efforts to address global warming, energy production, economic growth, foreign policy and national security.
The court did not decide whether displaced federal common law or the Constitution’s structural principles independently preempted the Act. It nevertheless concluded that interstate pollution remains an area of uniquely federal interest. Applying City of New York, the court held that federal common law had governed liability for domestic interstate emissions and that, once the CAA displaced that law, New York could use state law only to the extent the statute authorized. The court then found that the CAA’s savings clauses preserve standards for sources within a state and suits under the law of the source state, but not New York’s worldwide compensation scheme.
EPA’s February 2026 rescission of its 2009 GHG endangerment finding, which the State had argued weakened further opponents’ preemption positions, did not change the analysis. The court reasoned that Congress delegated to EPA the decision whether and how to regulate emissions, regardless of whether and how EPA exercises that authority.
Because the CAA does not reach foreign emissions, the court separately applied foreign affairs field preemption. It concluded that the Act does not address an area of traditional state responsibility and that demands against foreign producers would intrude on federal authority. The court did not reach the plaintiffs’ remaining constitutional claims (brought under the dormant Commerce Clause and the Foreign Commerce Clause; the federal and New York Due Process Clauses; the Equal Protection and Excessive Fines Clauses; and the federal and New York Takings Clauses).
The court also rejected New York’s standing challenge. Although DEC had not yet adopted implementing regulations or issued cost recovery demands, the court found that the industry plaintiffs and association members faced a credible threat of future injury because New York had not disavowed enforcement against them.
Implications on the Broader Climate Superfund Landscape
New York and Vermont remain the only states to have enacted full climate superfund cost recovery statutes. As of September 1, 2026, lawmakers in 11 other states have introduced comparable measures modeled loosely on CERCLA’s “polluter pays” framework. Of those, all failed except for New Jersey’s bills, which have stalled but remain pending.
States have also considered related approaches. Lawmakers in three states introduced climate cost study bills, which direct a state agency or commission to calculate past and projected costs attributed to GHG emissions and, in some cases, evaluate potential recovery mechanisms. Maine and Maryland enacted their bills, while New Hampshire’s failed. Proposals creating private causes of action, which would allow private parties to seek damages from fossil fuel companies for losses attributed to climate change or extreme weather, were introduced in three states, but all failed. Three states also considered climate insurance bills, which would authorize attorneys general, insurers or public insurance entities to recover certain insurance costs and losses from covered fossil fuel companies, but, again, none of these proposals have been enacted.
Vermont’s 2024 climate superfund law is the subject of two pending challenges: Chamber of Commerce of the United States of America v. Moore, No. 2:24-cv-01513 (D. Vt.) and United States v. Vermont, No. 2:25-cv-00463 (D. Vt.). The district court heard arguments in both cases in March 2026 but has not yet issued a ruling. While Judge Sannes’s decision is not binding on the District of Vermont, City of New York is controlling Second Circuit precedent. Nevertheless, a different result may be reached if the court declines to extend City of New York to statutory claims.
Judge Sannes noted that other courts have criticized the Second Circuit’s approach in City of New York, including the Colorado Supreme Court in Suncor Energy (U.S.A.) Inc. v. County Commissioners of Boulder County. In litigation brought by Boulder County and the City of Boulder, the Colorado Supreme Court held that municipal tort claims were not preempted by federal law and could proceed, without deciding their ultimate merits. The U.S. Supreme Court has granted review and will hear argument on October 5, 2026, on whether federal law precludes state claims for injuries attributed to interstate and international greenhouse gas emissions. Although Suncor involves tort claims brought by local governments rather than a state-created cost-recovery program, the Court’s treatment of the federal preemption framework could bear directly on the reasoning underlying Judge Sannes’s decision. The Court has also directed the parties to address whether it has statutory and Article III jurisdiction. Thus, Suncor could clarify the governing preemption framework if the Court reaches the merits—or leave the existing division among courts unresolved if it does not.
Looking Ahead
The decision is a significant development for potentially covered companies, but it is unlikely to be the final word. It provides a concrete framework for challenging state measures that impose substantial financial liability based on historical worldwide emissions, and the court’s standing analysis confirms that potentially targeted companies and their associations need not necessarily await implementing regulations or an actual cost recovery demand before bringing a pre-enforcement challenge.
The framework will soon face further testing. Vermont’s law differs from New York’s in how the total recovery amount is calculated, but both impose strict liability based on historical GHG emissions, and the Vermont cases arise within the Second Circuit, where City of New York remains controlling. The United States and EPA’s separate challenge to New York’s law also remains fully briefed in the Southern District of New York.
The principal uncertainty is Suncor. A Supreme Court decision endorsing federal preclusion of state climate claims would substantially reinforce Judge Sannes’s reasoning. A decision rejecting that theory could undermine an important premise of the ruling, although differences between municipal tort claims and legislatively imposed cost-recovery demands may remain consequential. And if the Court resolves Suncor on jurisdictional grounds, the existing disagreement among courts—and the Second Circuit’s controlling rule—may remain intact.
For industry, the key distinction is not simply where a state proposes to spend the recovered funds, but what conduct triggers liability. Limiting expenditures to in-state adaptation projects may not cure a program that calculates liability from worldwide or out-of-state emissions. Companies with potential exposure should therefore continue to monitor the New York proceedings, the Vermont cases, Suncor, and pending state proposals notwithstanding this important initial ruling.
Pillsbury’s team will continue to track these cases and related legislation. For a comprehensive, state-by-state overview of climate superfund activity across the country, visit Pillsbury’s Climate Superfund Map.
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