Gravel2Gavel Construction & Real Estate Law Blog
A second federal judge has struck down New York’s Climate Change Superfund Act and barred its enforcement. On September 23, 2026, Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York issued a decision granting summary judgment to the United States and the U.S. Environmental Protection Agency (EPA), declaring the Act unconstitutional, and permanently enjoining New York officials from enforcing it in United States v. New York, No. 1:25-cv-03656 (S.D.N.Y. Sept. 23, 2026).
Judge Castel’s decision closely tracks the Northern District of New York’s August 31 decision in West Virginia v. James, Case No. 1:25-cv-00168 (N.D.N.Y. Aug. 31, 2026). Both courts held that the Clean Air Act (CAA) preempts New York’s effort to impose strict liability through a climate attribution and cost recovery framework based on interstate greenhouse gas (GHG) emissions. Both also held that the foreign affairs doctrine preempts the Act as applied to fossil fuel activity outside the United States. On September 24, the Northern District entered Rule 54(b) judgment implementing its August 31 decision, enjoining Attorney General Letitia James and DEC Commissioner Amanda Lefton from implementing or enforcing the Act and permitting an immediate appeal of the preemption claims.
New York’s Act and the Parallel Challenges
New York enacted the Act in late 2024. As amended, it aimed to establish a $75 billion climate change adaptation cost recovery program to fund infrastructure projects intended to address the effects of climate change in the state. It imposed strict liability on certain 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 GHG emissions attributable to their activities or products from 2000 through 2024. The Act apportioned the $75 billion cost recovery amount among responsible parties based on their respective shares of aggregate covered emissions. The calculation included emissions attributable to extraction and refining activity worldwide, but the Act excluded entities lacking sufficient contacts with the state. DEC was required to issue cost recovery demands by June 20, 2028.
The Act immediately prompted several challenges. A coalition of 22 states and several industry plaintiffs filed two actions in the Northern District of New York that were later consolidated, while the United States and EPA filed a separate action in the Southern District. On August 31, 2026, Chief Judge Brenda K. Sannes of the Northern District held that the Act was preempted by the CAA and the federal government’s authority over foreign affairs. On September 23, Judge Castel reached the same conclusions in the federal government’s case, declared the Act unconstitutional, and permanently enjoined its enforcement. The following day, the Northern District entered judgment for the state and industry plaintiffs, enjoined AG James and DEC Commissioner Lefton from implementing or enforcing the Act, and entered judgment under Rule 54(b) on the preemption claims, allowing an immediate appeal.
The Southern District Followed the Northern District
In its August decision, the Northern District relied on the Second Circuit’s precedent in City of New York v. Chevron Corp. to hold that the CAA preempts the Act. Judge Castel applied the same framework and rejected New York’s attempt to distinguish a statutory cost recovery program from the common law damages claims at issue in City of New York. He concluded that imposing strict liability based on historical worldwide GHG emissions would regulate interstate emissions in the same practical manner, and that the CAA does not authorize New York to impose that liability. He also found that neither the Supreme Court’s decision in Hencely v. Fluor Corp., 146 S. Ct. 1086, 1093–94 (2026) (holding that state tort claims against a military contractor were not preempted where the challenged conduct was neither ordered nor authorized by the federal government), nor EPA’s rescission of its GHG endangerment finding changed the analysis.
Judge Castel also held that the foreign affairs doctrine preempts the Act as applied to fossil fuel activity outside the United States. The court reasoned that global GHG emissions implicate national diplomacy rather than a traditional state responsibility and that imposing liability for foreign activity would intrude on the federal government’s authority to conduct foreign affairs.
The Southern District decision also addressed the standing of the United States and EPA. Judge Castel held that the federal government could challenge the Act before enforcement began based on alleged interference with its sovereign authority to administer the CAA and conduct foreign affairs. The Act’s requirement that DEC issue cost recovery demands by Summer 2028 made the asserted injury sufficiently imminent such that an injunction was available to prevent it. That basis for standing may provide a framework for other federal challenges to state climate laws. Because the two preemption holdings afforded complete relief, the court did not reach the government’s Commerce Clause or extraterritoriality claims.
Looking Ahead: Vermont and Supreme Court Review
Two federal judges have now held that, for preemption purposes, New York’s statutory cost recovery program is not materially different from the common law damages claims rejected in City of New York. The rulings do not foreclose state authority over emission sources within the state. Instead, the CAA holdings focus on liability calculated from interstate and worldwide GHG emissions, while the foreign affairs holdings separately address liability based on activity outside the United States. For similar programs, the relevant question is therefore not only where the recovered funds will be spent, but what conduct and emissions determine liability.
The same reasoning bears directly on the two challenges to Vermont’s climate superfund law, Chamber of Commerce of the United States v. Moore, No. 2:24-cv-01513 (D. Vt.), and United States v. Vermont, No. 2:25-cv-00463 (D. Vt.). Vermont’s program is not identical, but it likewise imposes strict liability based on historical GHG emissions. Though the New York decisions are not binding precedent for the District of Vermont, City of New York is controlling within the Second Circuit. Judge Castel’s standing analysis will also be relevant in United States v. Vermont, where the federal government similarly challenges the law before enforcement based on alleged interference with federal regulatory and foreign affairs authority.
The Supreme Court’s review in Suncor Energy (U.S.A.) Inc. v. County Commissioners of Boulder County adds another source of uncertainty. The Court is scheduled to hear argument on October 5, 2026, and directed the parties to address both whether federal law precludes state law claims for injuries attributed to interstate and international GHG emissions and whether the Court has statutory and Article III jurisdiction. Because the Court could resolve the case on jurisdictional grounds, it may not reach the preclusion question. If it does, its reasoning could inform any appeals in the New York cases and the pending Vermont challenges. Suncor concerns municipal tort claims rather than a statutory cost recovery program, however, so the scope of any merits decision will matter.
Pillsbury’s Environmental & Natural Resources team will continue to track these cases and related legislation. For a comprehensive nationwide overview of climate superfund activity, visit Pillsbury’s Climate Superfund Map.
RELATED ARTICLES