California Legislature Sets First Hearing on New “Climate Superfund” Bill That Would Impose Wide-Ranging Liability on Fossil Fuel Industry

On April 2, 2025, the California Senate Environmental Quality Committee will hold the first hearing on SB 684 – the Polluters Pay Climate Superfund Act of 2025 (click link for bill text from California Legislature website). The bill was introduced by State Senator Caroline Menjivar on February 21, 2025, as urgency legislation, with four other Senators (Allen, Gonzalez, Stern, and Wiener) and three Assembly Members (Addis, Garcia, and Kalra) as coauthors.

SB 684 follows in the footsteps of similar “climate Superfund” statutes enacted in Vermont and New York in 2024, which are both the subject of ongoing litigation. The proposed California law seeks to “require fossil fuel polluters to pay their fair share of the damage caused by covered fossil fuel emissions, thereby relieving a portion of the burden to address costs otherwise borne by current and future California taxpayers.” It does so by imposing strict liability on identified responsible parties, which include any “entity” that holds or held a “majority ownership interest” in a business engaged in extracting or refining fossil fuels at any time between 1990 and 2024, which is also determined to be responsible for more than one billion metric tons of fossil fuel emissions globally, during that time period. “Entity” is defined broadly to include individuals, agents, partnerships, associations, corporations, and even “foreign nations” – which in the context of this bill would attempt to impose liability on a number of nations with state-owned oil companies, such as Mexico, Brazil, Russia, China, and India. With respect to corporate (including LLC) liability, the imposition of strict liability on majority ownership interests would essentially allow piercing of the corporate veil without any evidentiary showing that the traditional grounds for veil-piercing (such as fraud, other illegal acts, and/or undercapitalization) exist.

The consequences for responsible parties would be profound if SB 684 is enacted and survives legal challenge. The bill creates a “Polluter Pays Climate Superfund Program” within the California Environmental Protection Agency (CalEPA), funded by assessments on responsible parties. Those assessments are based on a “climate cost study” that would calculate the “total damage amount” to be assessed, consisting of the costs incurred by state, local, and tribal governments and California residents since 1990, and projected to be incurred by the state in the future, through 2045, as a result of the effects of fossil fuel emissions on climate change. The climate-change impacts to be analyzed are specified – and they are vast – including effects on public health and safety, biodiversity and ecosystems, agriculture and food systems, water, wildfire, the built environment, and economic development, as well as “any other effects that may be relevant” in the eyes of CalEPA. Given this mandate, the “total damage amount” calculated by CalEPA will presumably total hundreds of billions of dollars – if not trillions.

SB 684 provides that within 60 days of completion of the climate cost study, CalEPA will assess a cost recovery demand on each responsible party, in an amount equal to its proportionate share of the total damage amount, calculated as the ratio of the responsible party’s fossil fuel emissions to fossil fuel emissions globally over the 1990-2024 time period. The assessment would be paid via 20 annual installments, with 10 percent due in the first year, and the remainder paid in equal installments over the next 19 years. The statute allows an administrative challenge to CalEPA’s cost recovery demand, but only if the responsible party can establish “to the satisfaction of the agency” that a portion of the demand is actually attributable to “the refining of crude oil extracted by another responsible party.” Given that the bill imposes liability on responsible parties for extraction and refining of fossil fuels other than crude oil (such as coal), this provision is problematic on its face. It also remains to be seen whether CalEPA would define by regulation what specific burden of proof applies to such a challenge, if any, given the entirely subjective “agency satisfaction” standard.

Litigation is currently pending with respect to the similar “climate Superfund” laws already enacted by Vermont and New York, challenging those statutes on a number of grounds. If SB 684 is enacted by California, the state can expect a similar wave of lawsuits by potentially responsible parties.