Supreme Court Considers State Lawsuits Against Energy Companies Over Climate Change Costs

Why it matters locally: The Supreme Court's decision on whether states can pursue lawsuits against energy companies for climate change costs could set a precedent affecting North Carolina's coastal communities and agricultural sectors, which are increasingly vulnerable to climate-related damages. If the ruling allows such lawsuits to proceed, North Carolina municipalities and counties could pursue similar legal avenues to recover costs associated with adapting to climate change.

WASHINGTON – The Supreme Court on Monday heard arguments in a case originating from a lawsuit filed by the city and county of Boulder, Colorado. Boulder seeks to hold two energy companies, Suncor Energy Inc. and ExxonMobil, accountable for alleged contributions to climate change and its associated costs. After nearly two hours of debate in *Suncor Energy Inc. v. County Commissioners of Boulder County*, the justices did not indicate a clear majority opinion on whether federal law prohibits Boulder's claims. Justice Samuel Alito recused himself from the case. A 4-4 tie would affirm a Colorado Supreme Court ruling that allowed Boulder's case to proceed. Boulder's lawsuit, initiated eight years ago, targets Suncor, which operates Colorado's two oil refineries, and ExxonMobil. The city and county seek compensation for expenses incurred due to alleged climate change effects, including property protection. Boulder contends that both companies allegedly misled the public about climate change and the role of fossil fuels, and contributed to climate change through fossil fuel production, refining, and marketing. After attempts by the energy companies to move the case to federal court failed, they asked a state trial court to dismiss the case. The court denied this request. The Colorado Supreme Court then ruled that federal law did not preempt Boulder's state-law claims, allowing the case to move forward. The companies subsequently petitioned the Supreme Court, which agreed in February to hear the case. Kannon Shanmugam, representing the energy companies, characterized Boulder's claims as an "unprecedented effort to use state law to regulate global conduct." He argued that the Constitution prohibits applying state law to "certain inherently federal areas" and that federal law has historically governed interstate pollution claims. Shanmugam also stated that a state cannot regulate out-of-state conduct based on its "attenuated effects" within the state. Chief Justice John Roberts questioned this perspective. He suggested to Shanmugam and Sarah Harris, principal deputy U.S. solicitor general who argued in support of the energy companies, that lawsuits based on out-of-state conduct with in-state effects are not uncommon. Roberts asked Harris what distinguished this situation from other cases where the court allowed such lawsuits in state court. Harris responded that, unlike those lawsuits, Colorado's case aimed to ban fossil fuel production nationwide. Roberts appeared unconvinced, stating that this concerned potential relief rather than the initial permissibility of the lawsuit. Justice Elena Kagan also expressed skepticism regarding the energy companies' arguments. She noted Boulder's suit appeared similar to 1990s tobacco lawsuits and more recent opioid manufacturer lawsuits, asking if federal law preempted those cases. Shanmugam distinguished these cases, arguing the injury in Boulder's case was not a traditional consumer injury and reiterated that federal law applies to interstate air and water pollution claims. Kagan asked for constitutional or statutory support for this argument. Kevin Russell, representing Boulder, supported Roberts's point. He stated that states have historically provided remedies for in-state injuries caused by out-of-state conduct. Russell said applying state law has not been interpreted as projecting it nationwide. He also noted Congress has the authority to preempt state laws. Justice Brett Kavanaugh, however, questioned Russell. He cited Supreme Court cases that he said "make crystal-clear that interstate air and water pollution are matters for federal law" unless Congress specifies otherwise. Kavanaugh suggested these cases mean state law generally does not apply to claims like Boulder's, and Congress might consider interstate pollution issues federal without needing new legislation. Several justices voiced concerns about the potential for numerous similar cases nationwide if Boulder's lawsuit proceeded. Justice Clarence Thomas asked Russell to outline principles that would limit who state and local governments could sue. Russell cited constraints on jurisdiction and the dormant commerce clause as potential limiting factors. Thomas then asked if Boulder's theory would permit lawsuits against "large retailers" of fossil fuels. Russell acknowledged that the theory did not prevent this, adding that "when lots of people act together to cause widespread harm, it is not uncommon for multiple different defendants to be potentially liable." Justice Amy Coney Barrett inquired if Colorado could pass a law capping greenhouse gas emissions in other states under Boulder's theory. Russell agreed such a law would be prohibited. He distinguished that scenario from Boulder's lawsuit, stating the suit did not directly regulate company actions but sought to require them to "internalize a portion of the cost of their activities by paying for some of the damage that those activities inflict." Shanmugam, in his rebuttal, called the "breadth of Boulder's theory here astonishing." He suggested it could lead to individuals being sued for contributing to climate change. He concluded that while climate change is a pressing issue, Boulder's approach was not the correct method for resolution. The justices spent little time on the question of the Supreme Court's jurisdiction to hear the appeal, a point they had asked litigants to address. Justices Sonia Sotomayor and Ketanji Brown Jackson appeared most interested in this jurisdictional question, which could allow the court to avoid ruling on the merits of the dispute for now.