The “climate superfund” bill is bad legislation

By Ken Pokalsky | May 14, 2024

For the second year, the state Senate passed its “climate superfund” bill.  For the next 25 years, it would impose a $3 billion annual assessment on the largest producers of petroleum and natural gas, but the Senate wants you to believe that it won’t be treated like a tax, and its cost won’t be passed down to consumers.

By the way, the Hochul administration is also proposing a GHG rule, expected to be in place by 2025, that will cost up to $12 billion a year as soon as 2027 – the largest share of which will also be borne by fossil fuel providers and users.  But at least the state recognizes that this “cap and invest” rule will have widespread consumer impacts, and has already passed legislation to use some of those funds for financial relief for lower income households.  Likewise, the proposed HEAT act, designed to curtail the state’s natural gas system, has built-in subsidies for lower income households, to offset expected higher energy costs.  Of course, the cost of those subsidies will be borne by other residential and business energy consumers.

The “Climate superfund” bill imposes an assessment based on a claim of climate change damages resulting from the sale and use of fossil fuels.  Proponents say it’s modeled on the federal superfund program that addresses hazardous waste sites and imposes “strict, joint and several liability” on responsible parties – but it really isn’t.  There is a federal tax on chemical feedstocks that supports the actual “fund” used to pay for cleanups at orphaned sites.  But superfund liability for contaminated sites doesn’t apply to the companies that make chemical feedstocks, it applies to the entities responsible for releasing contaminants into the environment.  Applying the superfund model to climate, the liability would apply to entities burning fossil fuels and releasing GHGs into the environment.  By the way, under New York’s superfund program, funding is derived from a tax on the generation of hazardous wastes, not on the production of chemicals.

If New York State wants to generate funds for climate spending, why not impose a more direct carbon tax?  For two reasons, I think.  The first is based on the political narrative that climate change is the sole responsibility of fuel producers, utilities and large corporations.  This ignores the fact that we all have benefitted greatly from accessible and affordable energy provided by fossil fuels.   The second is that this mechanism removes legislators from direct responsibility for cost increases, saying “it’s not a ‘pass through tax,’ it’s a liability assessment.”  But we doubt that that gambit will be effective or convincing.

This leads us to two final questions.  First, to avoid additional liability under “climate superfund” legislation, what would we want fossil fuel companies to do?   One response would be to significantly curtail the sale of fuel in New York State, which would have significant and immediate adverse economic consequences.  Second, if it is the policy of New York to impose liability based on past fuel sales, why would oil and gas companies not expect that the state will eventually impose additional liability on them for current and future sales?  If this will be a permanent cost-of-doing business factor in New York, we should expect that its cost will be reflected in energy prices.

Overall, we  believe that the “climate superfund” bill is bad legislation based on a misleading premise.  We strongly recommend against its approval.

Ken Pokalsky is Vice President, Government Affairs at The Business Council of New York State Inc.


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