New York AG Investigates Exxon Mobil

WEDNESDAY, NOVEMBER 11, 2015


Exxon Mobil is the target of an investigation regarding whether it purposely misled the public and shareholders about climate change and the impact it would have on the oil industry.

As part of the probe, New York Attorney General Eric Scheiderman issued a subpoena Nov. 4 asking for Exxon Mobil’s financial records, emails and other documents, The New York Times reported Thursday (Nov. 5).

Under New York state law, the attorney general’s office has the broad enforcement authority to investigate and take enforcement action against securities fraud.

Misleading Statements?

The AG’s office will look into claims that, over a period of at least 10 years, the company was supporting groups who worked to challenge climate science and related policies while its own scientific research was informing executive staff of concerns and potential harmful effects.

As such, the subpoenaed documents may provide the paper trail to show the company purposely misled the public by misrepresenting or omitting known facts about climate change when offering securities to shareholders.

While the Times indicates Exxon Mobil is still formulating its response to the subpoena, its vice president for public affairs, Kenneth P. Cohen, said, “We unequivocally reject the allegations that Exxon Mobil has suppressed climate change research.”

According to Cohen, the company has supported mainstream climate science since the 1970s, published scientific papers on the topic and disclosed climate risks to investors.

Such internal research actually prompted the investigation, the Christian Science Monitor reported. It referred to another news organization’s exposé that indicated—based on concerns raised by the company’s own scientists—Exxon Mobil knew of the impact fossil fuels had on climate change since the 1970s.

iStock.com / Ekton
© iStock.com / Ekton

The company is said to have been supporting groups that challenged climate science and related policies while its own  research informed executive staff of concerns and potential harmful effects.

Citing similar concerns, U.S. Rep. Ted Lieu (D) of California is asking the U.S. Securities and Exchange Commission (SEC) to launch an investigation of the company as well.

While the SEC has not yet commented on whether it will pursue an investigation, the Monitor explained that the agency would need to prove intent or knowledge of wrongdoing in order to claim federal securities fraud against the company, unlike in New York State, where no such grounds need to be shown.

Challenges to Climate Science

According to the attorney general, the inquiry will focus on the company's funding of third-party organizations that worked to undermine climate science while its own researchers presented risk speculation to Exxon executives.

In a follow-up piece, the Times suggested that companies that had funded or participated in associations that actively challenged climate science and related policies may be at at risk of investigation as well.

This means Exxon Mobil may not be alone in the spotlight for long.

“There was a concerted effort by multiple American oil companies to obscure the emerging climate science consensus throughout the 1990s,” Paul Bledsoe, a former White House aide to President Bill Clinton on climate issues, said. “This group may be vulnerable to legal challenge.”

iStock.com / lagereek
© iStock.com / lagereek

The question is whether Exxon Mobil released information about the business risks of climate change as soon as it understood them, and whether those disclosures are considered sufficient.

One group, Global Climate Coalition, included member companies such as British Petroleum (now BP), Shell Oil, Texaco (now part of Chevron) and Exxon. The coalition is reported to have started an ad campaign rallying against Washington’s involvement in initiatives to reduce greenhouse gas emissions.

Although the group disbanded in 2002, it would provide a source by which to compare a participating company’s public and private stances on the issues.

Another group, the American Legislative Exchange Council, joined in opposition of government mandates, subsidies and other measures that would guide companies toward more renewable energy sources.

Shell, Occidental Petroleum and other unnamed companies have left this group, but Chevron and Exxon Mobil are reported to remain as members.

A New ‘Legal Front’

According to the Times, the attorney general’s action regarding fossil fuel companies may lead to a new “legal front” in the climate change battle, not unlike that seen in the fight against tobacco companies.

While reports indicate that past attempts to hold fuel companies responsible for climate impact have failed in court, the paper points out that private plaintiffs filed the majority of those lawsuits.

Now, if other states’ attorneys general are spurred to undertake similar investigations, they will bring more research and legal resources to the issue.

Some see a similarity to suits against tobacco companies, which had also pursued internal research that showed the harmful effects of tobacco use yet actively led the public to believe otherwise.

“This could open up years of litigation and settlements in the same way that tobacco litigation did, also spearheaded by attorneys general,” Brandon L. Garrett, a professor at the University of Virginia School of Law, told the Times.

“In some ways, the theory is similar—that the public was misled about something dangerous to health. Whether the same smoking guns will emerge, we don’t know yet.”

A Gray Area

Still, a case against oil and gas companies may not be so clear cut. While the tobacco companies deliberately hid important information from the buying public, many fuel companies are participating in renewable energy pursuits, meaning the case is not so one-sided.

According to the Times, Chevron has long been active in geothermal energy. Exxon Mobil is pursuing a way to convert algae into biofuel that soaks up carbon (and became the largest producer of natural gas in the U.S. after a 2009 acquisition). BP is heavily involved in wind power. The companies’ scientists routinely present papers on climate change at conferences and contribute to related research groups.

“The oil and gas industry has probably been the biggest funder of research into decarbonization, maybe more even than the federal government,” Michael Webber, deputy director of the Energy Institute at the University of Texas, told the paper.

The question that remains for Exxon Mobil is whether it released information about the business risks of climate change as soon as it understood them, and whether those disclosures are considered sufficient.

According to Hal Harvey, chief of Energy Innovation, an energy consultancy: “Unless they directly lied in Congress, the legal case against them is kind of thin,” although he adds that the information now being uncovered discredits all of the companies from remaining a “credible spokesman on science” going forward.

   

Tagged categories: Government; Laws and litigation; North America; Oil and Gas; Program/Project Management

Join the Conversation:

Sign in to our community to add your comments.