FINANCIAL EDGE, RAILWAY AGE AUGUST 2024 ISSUE: It’s the dog days of summer. Most of the country is sweltering under extraordinary heat (it was 127 degrees on July 5 in Death Valley), extreme rain (Hurricane Beryl dropped six inches of rain in one day at Houston’s major airports and knocked power out to 3 million Texans) or both. As the month rolls on, the nation will immerse itself in the 2024 “summer showcase” events: the RNC, the 2024 Paris Summer Olympics and the DNC (now Joe Biden-free!).
The headline acts sell the tickets so to speak. Even if you were forced to sit idle while CrowdStrike created global computing havoc, no one is looking forward to spending summer nights watching re-runs of Penn & Teller: Fool Us (128th ranked broadcast program).
Environmental issues often model the TV circuit. The headlines usually come off the Left Coast out of the California Air Resources Board (CARB). But this summer is bringing all kinds of redirects—recently the environmental news (putting aside the SCOTUS “Chevron Doctrine” decision) is coming from the Right Coast. In late May, Vermont passed into law a “Climate Superfund” bill. In early June, the New York State Assembly passed a similar bill (currently sitting on Gov. Hochul’s desk). Similar bills are working in Maryland, Massachusetts and California.
A Climate Superfund bill requires fossil fuel companies to compensate a state for climate change damage resulting from the fossil fuels they produce. For companies producing fossil fuels, this doesn’t sound “super” or “fun.”
In theory, states will use the proceeds of the bill to finance projects to offset the impact of climate-related disasters. The cost for these projects will therefore not be borne by the taxpayer. The New York law estimates charging $3 billion over 25 years.
The news made some local waves without catching national attention, possibly because superfund bills are likely to end up in the laps of the SCOTUS where the limitations of the Constitution’s 10th Amendment (powers assigned to the states) will be hotly debated.
Andy Blumenfeld, Data Analytics Director, McCloskey by OPIS, recently took the podium at The Coal Institute’s 2024 Summer Trade Seminar. In addition to a deep knowledge of the landscape for U.S. power generation and the prospects for coal in 2024 and beyond, Blumenfeld has a great handle on the regulatory issues for power generation including current EPA thinking on power generated emissions. He had the following to say about superfund bills:
“It should not surprise anyone that the first ‘superfund club’ states look like the same states following California’s new rules for electric vehicles. I believe the most difficult part for the states to defend will be the reach-back provisions that establishes a penalty for historical emissions.”
When asked if he felt that the EPA could reject the Climate Superfund laws, Blumenfeld noted:
“This is a states vs. federal question, which is a political hot-point at this time. The Biden EPA is more likely to be hands-off, but a Trump Administration could move to block this legislation. This is best exemplified by the first Trump Administration attempt to revoke California’s automobile emission standards in 2019. Regardless of which Administration, this legislation will be challenged in court.”
Why does this matter for North American railroading? It is not a stretch to see the destination of the flying canary in this coal mine. If the superfund bills stick to big energy (New York is looking at you, Aramco, Exxon, Chevron, BP, Pemex, Shell and Peabody), don’t be surprised that publicly and privately held carbon emitters such as Class I railroads are next in line for the shakedown.
The superfund bills, much like the recently rejected Manhattan congestion pricing charge, represent the ongoing trend of states to treat law and politics like a food mill, spinning issues and deficits around until they find someone willing (more accurately someone they can force) to pay to cover budget deficits and funding gaps (other than the “taxpayer”). The harsh reality is that the taxpayer (a.k.a. the consumer) always foots the bill.
Worse still, like the legalization of marijuana, casinos and the lottery, don’t be surprised if every state jumps on this bandwagon. No state legislator can stand the heat in the kitchen of “why are other states getting something and we’re not?” That includes Florida Gov. Ron DeSantis. Yes, you can write “climate change” out of the state budget but you’ll never eliminate chasing opportunities to increase the tax revenue.
One interesting thing to watch will be if states working on superfund bills opt not to join in ratifying CARB’s locomotive policies in favor of the superfund shakedown.
Got questions? Set them free at dnahass@railfin.com.
