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ExxonMobil goes on trial over charges it defrauded investors about climate change.
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ExxonMobil statement regarding New York Attorney General civil trial; October 2019
The New York Attorney General’s allegations are false. We tell investors through regular disclosures how the company accounts for risks associated with climate change. We are confident in the facts and look forward to seeing our company exonerated in court.
The New York Attorney General’s case is misleading and deliberately misrepresents a process we use to ensure company investments take into account the impact of current and potential climate-related regulations.
In the absence of a uniform, globally accepted cost of carbon, ExxonMobil uses two distinct metrics to account for the impact of current and potential climate-related regulations. The first is a “proxy cost” which is intended to reflect the impact of all climate polices that could reduce demand for oil and natural gas globally. The other, a greenhouse gas cost or “GHG cost”, reflects actual costs that might be imposed directly on the emissions of oil and gas projects as a result of specific laws in a jurisdiction, for example.
ExxonMobil applies proxy costs and GHG costs precisely as disclosed and takes both into account to help make sound business decisions and meet its fiduciary responsibilities to shareholders.
It’s been well established that the New York Attorney General’s investigation and resulting civil lawsuit were politically motivated and resulted from a coordinated effort by anti-fossil fuel groups and contingency-fee lawyers involved in other lawsuits against industry.
The Attorney General’s allegations are the third legal theory put forward since starting an investigation into ExxonMobil in November, 2015.
As a publicly traded corporation, ExxonMobil files regular reports with the Securities and Exchange Commission in accordance with its rules, including annual audited financial statements and other publicly available reports, such as the Outlook for Energy and Energy and Carbon – Managing the Risks, which inform investors of the company’s strategy, approach and performance.
ExxonMobil believes that climate change risks warrant action and it’s going to take all of us — business, governments and consumers — to make meaningful progress. We’re focused on reducing our emissions, helping consumer reduce their emissions, conducting breakthrough research into lower-emission technologies, and supporting public policy, such as a uniform cost of carbon, to reduce emissions at the lowest cost to society.
Since 2000, ExxonMobil has invested about $10 billion in projects to research and develop lower-emission energy solutions, including energy efficiency initiatives, biofuels, flare reduction and carbon capture and storage. In 2018, the company announced greenhouse gas reduction measures that are expected to lead to significant improvements in emissions performance including a 15 percent decrease in methane emissions and a 25 percent reduction in flaring by 2020.
InsideClimate News: "Exxon and Oil Sands Go on Trial in New York Climate Fraud Case" — "In late 2013, ExxonMobil faced increasing pressure from investors to disclose more about the risks the company faced as governments began limiting greenhouse gas emissions. Of the many costs climate change will impose, oil companies face a particularly acute one: the demand for their product will have to shrink.
"For years, Exxon had been using something called a proxy cost of carbon to estimate what stricter climate policies might mean for its bottom line. But as pressure from shareholders grew, a problem came sharply into focus: An internal presentation warned top executives that the way the company had been applying this proxy cost was potentially misleading. That's because Exxon didn't have one projected cost of carbon. It had two.
"The contents of that presentation are at the heart of a trial set to start next week in a civil case brought against the company by the New York attorney general. Exxon is accused of disclosing one set of these projected carbon costs to investors while planners used an entirely different set internally for evaluating investments. The public set was more conservative and projected that climate policies would be more stringent, while the internal one assumed more modest attempts to limit emissions. The effect of using these dueling estimates, the attorney general says, was that Exxon hid tens of billions of dollars in potential costs, downplaying the risk to investors and inflating the company's value.
"If the company is found guilty of defrauding stockholders, the penalties it faces could be substantial. Exxon's stock is among the most widely held in the country, nestled in pension funds, 401Ks and IRAs."
Wall Street Journal: "Exxon's Climate-Change Accounting Goes on Trial" — "Exxon Mobil Corp. and New York’s attorney general are headed for a showdown this week over accusations the company deceived investors, a rare trial over how the oil industry accounts for the impact of climate change.
"The trial, which begins Tuesday in state court in Manhattan, is the culmination of a sprawling investigation into Exxon and its accounting practices that spanned four years and three New York attorneys general. It is expected to include as a witness former Secretary of State Rex Tillerson, who was Exxon’s chief executive from 2006 to 2016.
"The attorney general’s office said the company told investors that it was taking into account the future costs of regulations it expected governments to adopt in response to climate change. But Exxon’s internal calculations didn’t match its public representations, the office said.
"The attorney general’s office said the company’s misrepresentations caused investors to overvalue its stock. It estimated the damage to shareholders to be between $476 million and $1.6 billion."
InsideClimate News: "Exxon: The Road Not Taken Series " — "At a meeting in Exxon Corporation's headquarters, a senior company scientist named James F. Black addressed an audience of powerful oilmen. Speaking without a text as he flipped through detailed slides, Black delivered a sobering message: carbon dioxide from the world's use of fossil fuels would warm the planet and could eventually endanger humanity.
"In the first place, there is general scientific agreement that the most likely manner in which mankind is influencing the global climate is through carbon dioxide release from the burning of fossil fuels," Black told Exxon's Management Committee, according to a written version he recorded later.
"It was July 1977 when Exxon's leaders received this blunt assessment, well before most of the world had heard of the looming climate crisis.
"A year later, Black, a top technical expert in Exxon's Research & Engineering division, took an updated version of his presentation to a broader audience. He warned Exxon scientists and managers that independent researchers estimated a doubling of the carbon dioxide (CO2) concentration in the atmosphere would increase average global temperatures by 2 to 3 degrees Celsius (4 to 5 degrees Fahrenheit), and as much as 10 degrees Celsius (18 degrees Fahrenheit) at the poles. Rainfall might get heavier in some regions, and other places might turn to desert."
Los Angeles Times: "Report details how ExxonMobil and fossil fuel firms sowed seeds of doubt on climate change" — "Two days before ExxonMobil goes to court Wednesday, facing New York state accusations the oil company misled investors about climate change, a team of researchers released a report Monday outlining the company and the broader fossil fuel industry’s decades-long campaign of deception, and its success at confusing the American public.
"The report, which was published by scientists at Harvard, George Mason and Bristol universities, draws parallels between the campaigns launched by tobacco companies and oil industries to mislead the public about their products, both with a goal of delaying government policies and regulations that could cut into their profits.
"Revelations about ExxonMobil’s campaign came from 2015 news reports in the Los Angeles Times and Inside Climate News, and studies previous to the one Monday have documented its efforts to manipulate public opinion.
"ExxonMobil has previously dismissed such research as the work of anti-oil activists. But on Wednesday, New York’s lawsuit, alleging the company mislead investors, is set to go to trial in state Supreme Court in Manhattan."
New York Times: "Despite Their Promises, Giant Energy Companies Burn Away Vast Amounts of Natural Gas" — "When leaders from Exxon Mobil and BP gathered last month with other fossil-fuel executives to declare they were serious about climate change, they cited progress in curbing an energy-wasting practice called flaring — the intentional burning of natural gas as companies drill faster than pipelines can move the energy away.
"But in recent years, some of these same companies have significantly increased their flaring, as well as the venting of natural gas and other potent greenhouse gases directly into the atmosphere, according to data from the three largest shale-oil fields in the United States.
"The practice has consequence for climate change because natural gas is a potent contributor to global warming. It also wastes vast amounts of energy: Last year in Texas, venting and flaring in the Permian Basin oil field alone consumed more natural gas than states like Arizona and South Carolina use in a year.
"Exxon’s venting and flaring has surged since 2017 to record highs, both in absolute terms and as a proportion of gas produced, the numbers show. Exxon flared or vented 70 percent more gas in 2018 than it did the previous year, according to the data, bringing an end to several years of improvements."
This program aired on October 22, 2019.
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