HR-9035-119
Referred to the Committee on the Judiciary, and in addition to the Committee on Natural Resources, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.
Sponsored by Dave Min (D-CA)
What it does
This bill would amend federal bankruptcy law (Title 11) to prevent oil, gas, and coal companies from discharging environmental cleanup and reclamation obligations through bankruptcy. It would give those obligations high priority in the repayment order, prohibit abandonment of fossil fuel assets to avoid cleanup costs, extend the look-back period for fraudulent transfers from 2 years to 10 years for fossil fuel company debtors, and impose strict joint-and-several liability on parent companies, private equity firms, and hedge funds that own stakes in a bankrupt fossil fuel company. It would also prohibit the transfer of federal mineral leases by a company that has filed for bankruptcy.
Who benefits
State and federal governments that currently bear cleanup costs when fossil fuel companies go bankrupt without fulfilling reclamation obligations. Communities near abandoned oil wells, coal mines, and gas facilities that would otherwise remain unreclaimed. Taxpayers who fund government-led cleanups of orphaned sites. Non-executive employees of bankrupt fossil fuel companies, whose wages and benefits are prioritized above environmental claims. Environmental bond holders whose claims would be made non-dischargeable. Competing energy companies that have already paid for reclamation, who would no longer face a cost disadvantage against companies that shed those obligations in bankruptcy.
Who is hurt
Oil, gas, and coal companies facing financial distress, who would have fewer tools to restructure debts and may face liquidation rather than reorganization. Secured creditors (banks, bondholders) whose recovery in bankruptcy would be reduced because environmental claims would be paid ahead of or alongside their claims. Private equity firms, hedge funds, and parent companies that own stakes in fossil fuel companies, who would face new strict liability exposure even as minority investors. Executive officers of bankrupt fossil fuel companies, whose compensation over the prior 5 years could be clawed back. Shareholders of fossil fuel companies, whose recovery priority is explicitly subordinated. Workers at fossil fuel companies that might close rather than reorganize under the new cost structure, potentially losing jobs.
Supporters argue
Supporters argue that fossil fuel companies have a documented history of using bankruptcy to abandon environmental obligations, leaving taxpayers and communities to pay for cleanup. They point to the estimated 3.2 million orphaned oil and gas wells in the U.S. — many left by bankrupt operators — which the EPA estimates could cost $280 billion or more to remediate. They contend that the current bankruptcy system effectively subsidizes the fossil fuel industry by allowing it to socialize cleanup costs while privatizing profits, and that extending strict liability to parent companies and investors closes a well-documented loophole where assets are stripped before bankruptcy is filed.
Opponents argue
Opponents argue that imposing open-ended, non-dischargeable environmental liabilities and strict liability on investors would make it nearly impossible to reorganize distressed fossil fuel companies, forcing liquidations that eliminate jobs and leave sites in worse condition than a managed restructuring would. They contend that extending liability to minority shareholders — such as hedge funds or private equity firms with small ownership stakes — without regard to their control or conduct violates basic principles of corporate law and could deter investment in energy companies broadly. They further argue that the 10-year fraudulent transfer look-back and executive compensation clawback provisions may face Due Process challenges under the Fifth Amendment as retroactive liability.
Constitutional context
Congress has broad authority to establish uniform bankruptcy laws under Article I, Section 8, Clause 4, and to regulate interstate commerce under the Commerce Clause. However, the bill's strict liability provisions extending to minority investors regardless of their control or conduct, and the retroactive 10-year clawback of executive compensation, could face Fifth Amendment Due Process and Takings Clause challenges. Under Cedar Point Nursery v. Hassid (2021), courts have expanded scrutiny of government actions that effectively compel transfers of private property without compensation. Post-Loper Bright (2024), any agency rules implementing these provisions would face independent judicial review without deference.
Checks and balances
Congress would expand the power of bankruptcy courts and trustees to recover assets and impose liability; bankruptcy judges retain discretion in individual cases, and affected parties — including investors and executives — could challenge provisions through federal courts under the Fifth Amendment's Due Process and Takings Clauses.
Historical precedent
Several coal companies, including Peabody Energy (2016) and Arch Coal (2016), used Chapter 11 bankruptcy to shed or reduce environmental reclamation obligations, prompting congressional and regulatory debate about closing this gap in existing law.