Legal battles against energy companies will short-circuit on taxpayers
Years of rampant inflation mean higher prices for everyday goods, groceries, and gas are squeezing consumers’ wallets. A campaign of lawsuits filed by state and local governments against energy producers, blaming them for climate change, stands only to make things worse.
As perverse as it sounds, that is the intent of the legal actions. A lead counsel in one of the cases brought in Colorado admitted that one of the goals of these lawsuits is to “raise the price of the products” made by the energy companies. Not only would this stifle economic growth, but the higher costs would be highly regressive, disproportionately burdening low-income workers.
The legal standing of these lawsuits is also highly questionable, especially given the unanimous 2011 Supreme Court decision that established federal regulators, not the courts, should handle such policy matters under the Clean Air Act. Nevertheless, thirty different court cases persist, draining time and funds of state, county, and municipal attorney offices in areas including California, Colorado, DC, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, New Jersey, New York, Pennsylvania, Vermont, and Washington. Despite the intended target, it’s the taxpayers who will bear the brunt of this misguided crusade.
The primary goal of these lawsuits is to extract hefty fines from energy producers to fund climate change mitigation projects. For example, Hawaii plans to use these funds for projects ranging from building seawalls to restoring beaches. But here’s the catch: even should governments win, a significant chunk of these fines would end up as contingency fees for lawyers, not for environmental mitigation.
If the cases move forward and the plaintiffs win, it could spell disaster for taxpayers and the economy. Legal fees and fines would be passed on to consumers in the form of higher oil and gas prices. Further along the supply chain, they would increase the cost of countless goods and services (given the thousands of petroleum-based products in the market). Governments, which purchase many of these products, would feel the pinch too. It will also drive up the cost to refill the federal Strategic Petroleum Reserve which has been depleted to historical lows.
If the aim is to fund environmental mitigation efforts, there are far better ways to do so without wreaking economic havoc. Congress has already provided billions of dollars for remediation efforts that remain unspent. The bipartisan Infrastructure Investment and Jobs Act (IIJA) of 2021 allocated $525 billion for new spending, including $41.8 billion solely dedicated to resilience and mitigation. However, as of spring 2024, only $9.2 billion of this funding has been obligated, and a mere $224 million has been spent.
The slow pace of obligating these funds is not solely due to the necessary oversight and award processes. It points to a lack of urgency and efficiency in tapping into these resources. Instead of pursuing costly and uncertain legal battles, governments should focus on utilizing the existing federal funding for environmental resilience and mitigation. Properly used, this funding could offer long-term savings and more effective solutions.
The ongoing lawsuits against energy producers are a Catch-22 for taxpayers. If successful, these cases would lead to skyrocketing energy prices, disproportionately burdening low-income workers and hampering economic growth. Should they fail, they will represent a waste of taxpayer dollars. Either way, no one but the lawyers comes out ahead.
Instead, tapping into existing federal funds for environmental resilience and mitigation offers a more prudent and effective approach. Unfortunately, some local governments and interest groups seem more interested in double-dipping at the expense of taxpayers. It’s high time to put an end to these legal charades and focus on sensible, efficient solutions.
Demian Brady is the Vice President of Research for the National Taxpayers Union Foundation