Climate Liability Laws, Litigation Add to Oil Industry Headache

Big Oil is facing a growing minefield of climate payout efforts, raising questions about how state and city plaintiffs will navigate new legal territory—and whether the fossil fuels industry will take a meaningful financial hit.

New York joined Vermont and enacted a “climate Superfund” law Dec. 26, which seeks $75 billion from the state’s largest polluters to address climate change over the next quarter-century. This comes as three tort suits have emerged from US states and cities just in the last two months targeting alleged misinformation campaigns about climate change and plastic pollution.

Climate Superfund bills and the ongoing deception lawsuits are separate actions, but the momentum of both trends is creating a growing landscape of liability for big oil. And there could also be some mutual benefit as states build up evidence of attribution between companies and their emissions in order to assign financial responsibility, according to Yale Law School professor Douglas Kysar.

“They’ve got to go through those really intensive fact inquiries and establish this mechanism,” Kysar said. “By doing that, they’re going to build a kind of evidentiary record that would be helpful to the lawsuits,” as climate tort cases move forward.

It’s too soon to tell whether such legislative and legal pressure will constitute considerable financial burden for companies—or even complicate legal strategies for states especially as they ramp up their defenses against an incoming Trump administration—but the inundation of these actions could be a strategy in itself.

“Will anything material come of it? I don’t know,” according to ArentFox Schiff LLP partner J. Michael Showalter. “But is death by a thousand cuts a real thing? Maybe.”

The American Petroleum Institute, which represents about 600 members of the oil and gas industry, said after the New York law was signed that it was “evaluating options” moving forward.

State Bills and Laws

State climate Superfund bills mimic the Comprehensive Environmental Response, Compensation, and Liability Act, known as the federal Superfund, which holds polluters responsible for clean-up of hazardous waste.

Maryland, Massachusetts, and California introduced climate-focused Superfund bills during their most recent legislative sessions, but none passed. Lawmakers from Maryland and Massachusetts have expressed interest in reintroducing their bills in 2025, and have said they’re watching New York and Vermont closely.

Oil and gas companies have scored a “disturbingly successful” win in getting Americans not to hold them liable the same way as industries like tobacco and toxic chemicals, said Massachusetts state Sen. Jamie Eldridge (D), who is planning to tweak the language of his climate Superfund proposal for next year’s legislative session.

New York’s enactment is a “big boost,” especially since it has another dense, urban environment like Massachusetts, he said.

But there’s still concern over legislating around such a new legal concept. Vermont Gov. Phil Scott (R), for instance, allowed his state’s climate Superfund bill to become law, but expressed concerns and declined to give his signature.

Overall, the “critical mass of states interested in adopting these laws” isn’t there, largely due to fears of litigation and energy price increases, said Scott Segal, a partner at Bracewell LLP who advises energy companies on the implications of climate legislation.

‘Kitchen Sink’ of Claims

Litigation on both sides of the industry-state fight will increase in the coming months, according to legal observers closely watching Superfund bills and climate tort cases.

States pursuing both climate Superfund laws as well as climate deception cases could face unintended consequences from courts looking to quash double-dipping on damages imposed on companies, Segal said, noting that the federal Superfund law was designed to prohibit “robust access” to the courts.

In federal cases, “if the harms associated with disposal of hazardous waste are addressed through Superfund, you can’t receive damages too,” he said. “This could close doors to litigation” in states with climate Superfund laws if they’re interpreted in the same way as the federal law.

And even as potential costs mount, energy companies don’t have an appetite to settle climate litigation, because the cases haven’t so far succeeded in wringing out substantial damages, Segal said. Federal courts, where some of these lawsuits could land, have also been “somewhat hostile” toward climate change litigation and instead defer to Congress and states to legislate.

Companies could also argue that these climate laws don’t align with with the original federal law, CERCLA. For one, fossil fuels are not the same as the traditional waste products covered under the federal Superfund, Segal says, but instead something very much in demand by state residents. They could also claim that the laws are preempted by federal laws like the Clean Air Act, Segal says.

Overall, litigation strategies will likely be a mix of old favorites among energy companies and novel, inventive strategies, said Yale’s Kysar.

“There’s going to be a whole kitchen sink set of arguments brought,” Kysar said.