Proposed climate bill brings big costs, bad precedent and unintended consequences

In what will literally be the last hours of the legislative session, lawmakers in Trenton will be asked to consider legislation that could have a profoundly negative impact on the state.

The bills (S.3545 and A.4696, referred to as the "Climate Superfund Act") have been positioned as a means to punitively extract billions of dollars from the oil and gas industry. What is conveniently ignored by advocates is the potentially devastating impact this legislation could have on the state's economy and business community.

At its essence, this legislation seeks to impose massive, retroactive fees on a select group of companies for natural gas and oil produced and refined (both in-state, domestically, and globally) over the past three decades.

Keeping in mind that the fuels upon which the fees will be based were and continue to be produced and refined legally and in response to consumer need and demand.

As patently unfair as it is to target these companies for producing fuels essential for the state and its citizens, the legislation is worse for the dangerous precedent that it sets: Meaning the state is free to financially target a given industry for selling a legal product that later falls out of favor by a select few.

Beyond the alarming precedent this bill creates, it poses a significant threat to the state's business environment, which is already in a vulnerable position.

With a steep tax burden and a cost of living among the highest in the nation, the state's ability to attract and retain businesses - and the talent to support them - is declining. A complex regulatory environment, aging infrastructure, and sluggish population growth compound the challenges. Regretfully, the Climate Superfund Act could exacerbate those problems and accelerate those trends.

According to an analysis by the U.S. Chamber of Commerce's Institute for Legal Reform, if the full $40 billion cost (estimated by the bill sponsor) were imposed, it would ultimately translate to an additional $9,186 per New Jersey household. That includes $5,177 in higher transportation costs, $2,304 in pass-through costs from other businesses and $1,706 in higher electric bills.

For businesses and families already struggling with affordability, this would be a serious blow. At a time when affordability is the primary issue in the state, legislators should be doing all they can to reduce our bills, not potentially raise them.

Beyond matters of fairness and economic impact, it's unclear, at best, whether this kind of law is even legal. Vermont and New York, both of which have passed similar legislation, are embroiled in lawsuits in which the constitutionality of the laws are being questioned. The state could find itself in the same position, potentially spending millions of dollars to defend a law that very well could be found unconstitutional.

As lawmakers consider the bill, they must weigh the costs and risks associated with litigation. It makes more sense and would be prudent and fiscally responsible for the state to refrain from passing laws similar to ones currently being challenged in federal court.

A Dec. 22 Bloomberg news article notes that "10 states proposed some type of climate superfund legislation in 2025 … none of the bills that would make polluters pay for their emissions advanced far, which some of the bills' sponsors attribute to … legal challenges [are] weighing on efforts to pass climate superfund legislation."

And consider this: The Climate Superfund Act does nothing to advance the state's stated goals for increasing clean energy and reducing greenhouse emissions. Policymakers concerned with the pace of climate change should shift their attention toward prospective remedies rather than pursuing retroactive measures that are likely to face protracted legal challenges.

What's more, the legislation does not address the critical need to improve grid stability and capacity and to lower energy costs.

Proponents of the bill suggest the Climate Superfund bill is a panacea. Unfortunately, they are wrong and ignore the fact that it is rife with legal uncertainty and unintended consequences that can have a chilling effect on our business climate.

The state's business community adamantly believes the Climate Superfund Act is bad public policy and pushing it through because the clock is ticking in what will likely be waning few minutes of the session makes it worse.

While the Legislature may be motivated to make a statement prior to closing out lame duck, we encourage lawmakers to recognize the complexity and magnitude of this issue, and to show discipline in not hastily passing the Climate Superfund Act given its uncertainty and potentially deleterious effects.

- Michael Egenton, Executive Vice President, Government Relations, New Jersey Chamber of Commerce & Ray Cantor, New Jersey Business & Industry Association