New York’s Climate Change Superfund Act has now been blocked by two separate federal district courts. On September 23, 2026, Judge P. Kevin Castel of the U.S. District Court for the Southern District of New York ruled in United States of America v. State of New York, No. 1:25-cv-03656, that the Act is preempted by the federal Clean Air Act and by the federal government’s exclusive authority over foreign affairs. The court declared the Act unconstitutional and permanently enjoined New York officials from enforcing it.
The ruling follows Chief Judge Brenda K. Sannes’s August 31 decision in State of West Virginia v. James, No. 1:25-cv-00168, which also held that the Act is preempted and cannot be enforced (see related article here).
Why does the second decision matter? Although the two cases reach similar results, they involve different plaintiffs and litigation theories, and Judge Castel’s opinion provides an additional federal-court analysis of why New York’s law cannot operate as written.
A Brief Refresher: What Does the Climate Superfund Act Do?
Enacted in December 2024, the Climate Change Superfund Act created a $75 billion climate-change adaptation cost-recovery program. The law imposes strict liability on certain businesses that extracted fossil fuels or refined crude oil during the period from January 1, 2000, through December 31, 2024, if they are determined to have been responsible for more than one billion tons of covered greenhouse-gas emissions.
Importantly, the Act does not require New York to prove that a particular company caused a particular flood, storm, or other event. Instead, a covered company’s payment is calculated according to its proportional share of covered greenhouse-gas emissions. And those emissions are not limited to emissions occurring in New York: the statute expressly encompasses emissions attributable to the company’s fossil-fuel extraction and refining activities worldwide.
The law contemplated DEC issuing cost-recovery demands by June 30, 2028, with payments generally due according to the statutory schedule. No cost-recovery demands had been issued when Judge Castel decided the case.
The New Decision: Why Did Judge Castel Reject the Act?
The United States challenged the Act on several grounds, including the Commerce Clause, Due Process Clause, Clean Air Act preemption, and federal foreign-affairs preemption.
Judge Castel did not need to decide all of those issues. He concluded that the United States had standing to challenge the Act based on the federal government’s sovereign interests in enforcing federal law and conducting foreign affairs. He then ruled for the United States on two claims: Clean Air Act preemption and foreign-affairs preemption. Because those holdings provided all of the relief sought, the court dismissed the remaining claims without prejudice rather than deciding them.
The Clean Air Act analysis closely tracks the Second Circuit’s 2021 decision in City of New York v. Chevron Corp., 993 F.3d 81. In that case, New York City attempted to hold fossil-fuel companies liable under state law for the consequences of greenhouse-gas emissions occurring around the world. The Second Circuit concluded that such claims implicated interstate and international pollution issues governed by federal law and could not proceed under New York law.
Judge Castel found the Climate Change Superfund Act sufficiently similar. New York argued that the Act was different because it imposed liability for past emissions rather than directly regulating future emissions. The court rejected that distinction. Relying on City of New York, it reasoned that a substantial financial obligation can itself operate as regulation, even if a law does not expressly prohibit or limit emissions.
The court also concluded that the Clean Air Act does not authorize a state program imposing this type of liability for interstate and global greenhouse-gas emissions. In Judge Castel’s view, that was sufficient to establish preemption under the framework the Second Circuit had already applied in City of New York.
How Is This Different from the First Decision?
The two decisions are similar in their core reasoning, but they arose from materially different litigation.
West Virginia v. James was brought by 22 states, coal and oil industry organizations, an individual energy company, and business associations. Judge Sannes therefore first addressed whether those plaintiffs had standing. She concluded that an industry plaintiff faced a credible threat of receiving a cost-recovery demand and that trade associations had associational standing on behalf of affected members.
The SDNY case was brought directly by the United States and EPA. Judge Castel therefore addressed a different standing question: whether the federal government itself could establish an injury to its sovereign interests. He concluded that it could, based on federal authority under the Clean Air Act and the federal government’s authority over foreign affairs.
There is also a subtle difference in the treatment of preemption. Judge Sannes discussed the “uniquely federal interests” implicated by interstate pollution and explained why the Act conflicts with the federal interests identified in City of New York. She also independently concluded that the Act was preempted by the Clean Air Act and, as applied to foreign activities, by the foreign-affairs doctrine.
Judge Castel likewise relied on City of New York, but his Clean Air Act analysis more directly emphasized the Second Circuit’s “authorized by federal law” framework: because Congress had not authorized states to impose the particular liability scheme created by the Climate Change Superfund Act, New York could not use state law to accomplish what federal law did not authorize. He then separately held that the Act’s application to foreign activities was field-preempted under the foreign-affairs doctrine.
Thus, the second decision does not create a new appellate precedent. Both are federal district-court decisions. But the fact that two judges reached substantially similar conclusions in separate cases reinforces the legal significance of the Second Circuit’s City of New York precedent while the issue proceeds toward potential appellate review.
What Does This Mean for Businesses, Developers, and Residents?
For fossil-fuel extraction and refining companies potentially covered by the Act, the immediate consequence is that New York cannot presently issue or enforce the statutory cost-recovery demands. The $75 billion assessment mechanism is therefore not an operating liability under current law.
For most other businesses, including manufacturers, retailers, contractors, professional-service businesses, and real-estate developers, the Act did not impose a direct assessment in the first place. The practical issue is instead the loss of the funding mechanism the Legislature created for climate-adaptation infrastructure.
The same is true for individual residents. The Act did not impose a direct charge on homeowners or tenants. Its potential effect on residents was principally through the infrastructure projects that the $75 billion fund was intended to support.
Municipalities Face a Different Practical Question
Municipalities were not themselves responsible for paying into the Climate Change Superfund. Their interest was primarily on the receiving end of the program.
The Act contemplated funding projects addressing flooding, infrastructure resilience, and other climate-related needs. Local governments therefore potentially could have benefited from a new state funding stream for projects that otherwise might require municipal, state, or federal funding.
The federal decisions do not prevent municipalities from pursuing those projects or from enforcing unrelated environmental, zoning, land-use or building requirements. They instead eliminate the particular Climate Change Superfund mechanism as a presently available source of revenue.
What Comes Next?
The legal issue is unlikely to end with these two district-court decisions. Both cases present potential appellate questions, and the two rulings could ultimately be considered by the Second Circuit.
There is also a separate development that could have broader significance. On October 5, 2026, the U.S. Supreme Court is scheduled to hear Suncor Energy (U.S.A.) Inc. v. County Commissioners of Boulder County, No. 25-170. That case concerns whether federal law precludes state-law claims seeking relief for injuries allegedly caused by interstate and international greenhouse-gas emissions.
The Supreme Court’s decision in that case could affect the broader legal landscape surrounding state and local attempts to impose financial liability for climate-related harms. It will not necessarily resolve every issue concerning New York’s statute, but it could bear directly on the federal-preemption principles underlying the litigation.
For now, however, New York’s Climate Change Superfund remains unenforceable under two federal district-court rulings. The next stages of the litigation—and potentially the Supreme Court’s consideration of related climate-liability questions—will determine how much room remains for states and local governments to pursue similar approaches to financing climate adaptation.
Jacob H. Zoghlin is a Partner in Underberg & Kessler LLP’s Litigation department and chairs the firm’s Environmental & Energy Law and Municipal practice groups. His practice focuses on environmental, land use, energy, and municipal law. He regularly represents towns, developers, and community members in matters involving SEQRA, zoning, permitting, and land use litigation. He can be reached at (585) 258-2834 or jzoghlin@underbergkessler.com.
