The U.S. Supreme Court opened its new term by hearing arguments in a climate case involving the city and county of Boulder, CO, ExxonMobil Holdings (XOM Quick QuoteXOM - Free Report) and Suncor Energy (SU Quick QuoteSU - Free Report) . Boulder’s city and county governments sued the two companies under state law, seeking compensation for costs they link to climate change, including damage tied to wildfires, droughts, floods, infrastructure repairs and public-health effects. Boulder also alleges that ExxonMobil and Suncor misled the public about the risks associated with fossil fuels. The companies deny the allegations.

The case began in 2018 and has spent years moving through the courts. Colorado’s Supreme Court allowed the lawsuit to continue in state court. ExxonMobil and Suncor then asked the U.S. Supreme Court to intervene. The main question now is whether federal law prevents Boulder from pursuing these claims under Colorado law.

What ExxonMobil and Suncor Are Arguing

ExxonMobil and Suncor argue that climate change is national and international in scope, so claims involving greenhouse-gas emissions should be handled under federal law rather than through individual state courts. Their lawyers contend that federal environmental law, including the Clean Air Act, prevents lawsuits such as Boulder’s from going forward under state law.

The companies have also warned about the wider effect of allowing the case to proceed. Similar climate lawsuits have been filed by state and local governments around the country. According to ExxonMobil and Suncor, nearly 60 state and local governments have brought such cases, with plaintiffs seeking billions of dollars in damages. The companies say allowing Boulder’s claims to continue could leave energy producers facing many separate lawsuits under different state laws.

How Boulder Sees the Dispute

Boulder says its lawsuit is not an attempt to set emissions policy. Instead, local officials say they are seeking money for alleged damage and costs tied to the companies’ conduct and marketing. Boulder argues that state courts regularly hear cases involving companies based elsewhere when their products or actions allegedly cause harm inside the state.

Several justices questioned both sides during the hearing. Some asked why claims involving alleged marketing deception should automatically be blocked by federal law. Others raised concerns about what would happen if municipalities across the country filed similar cases. The discussion also touched on earlier lawsuits involving tobacco and opioid companies, although ExxonMobil and Suncor argued that those cases involved a more direct connection between the product and the alleged harm.

Why the Supreme Court Decision Matters

Justice Samuel Alito recused himself, leaving eight justices to decide the case. That creates the possibility of a 4-4 split. If that happens, the Colorado Supreme Court ruling would remain in place and Boulder’s lawsuit could continue, but the split would not create a nationwide Supreme Court precedent.

A broader ruling for Zacks Rank #3 (Hold) ExxonMobil and Zacks Rank #1 (Strong Buy) Suncor could affect dozens of other climate cases brought around the United States. A ruling allowing Boulder to proceed would not decide whether the companies are ultimately liable. It would mainly determine whether the claims can continue through the state-court process. You can see the complete list of today’s Zacks #1 Rank stocks here.

For investors following ExxonMobil and Suncor, the immediate issue is the path of the litigation rather than an existing damages award. The Supreme Court has not yet decided the case, and questions during oral arguments did not point to a clear outcome. A ruling is expected by the end of June 2027.