Published on 13 November 2019

CSR

Exxonmobil heads to trial after being accused of deceiving clients and investors on climate change

Exxon has lied to its investors and underestimated, or rather neglected to consider, the costs associated with climate change regulations. This mistake has had a significant impact on the profitability of the oil giant’s business operations and became the focus of a climate change trial that began last month in New York City. Meanwhile, consumers in Massachusetts are suing ExxonMobil for deception.

Raffinerie Exxon Slagen Norvege 01
ExxonMobil refinery in Slagen, Norway.
@ExxonMobil

Tuesday October 22nd was the start of a major legal battle in the United States. Serving as defendant was the oil giant ExxonMobil, suspected of having lied about climate-related risks.  This trial was authorized by New York Supreme Court Justice Barry Ostrager after the state of New York filed a complaint in October 2018, which had been postponed until all judicial processes had been exhausted.

What’s unique about this trial is that ExxonMobil has not been singled out for its direct impact on climate change via CO2 emissions from fossil fuel production. The prosecutor accuses the oil giant of misleading investors on the company’s profitability at a time when a growing number of governments are imposing strict regulations to fight against global warming.

Billions of dollars lost

In official documents, ExxonMobil ensured that a carbon tax has been accounted for in its products and business operations. But in fact, the company privately based its investments in new projects on very low climate regulation figures or did not even account for them at all. This has resulted in "billions of dollars" in additional costs and significantly lower returns on investment from high-carbon activities, such as the tar sands in Alberta, Canada.

According to the New York Attorney General, the shortfall for investors is between $500 million and $1.6 billion. Furthermore, even if former CEO and Secretary of State Rex Tillerson is not directly concerned by the lawsuit, he is accused of having known "for years that the company's claims about these costs were misleading".

New York State is requiring the company to publish corrected information for investors and to reimburse the sums lost. ExxonMobil immediately launched a counterattack: "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,” said the company in a statement after the trial was announced.

SEC drops its investigation

The company has a valuable card to play. Last August, ExxonMobil was exonerated from further enforcement action after a two-year investigation by the US Securities and Exchange Commission (SEC). It questioned the way in which the company valued its oil assets in a context of increasing regulation on climate change and lower oil prices per barrel, and how corporations besides ExxonMobil were carrying out write-downs of their oil assets.

Since October 24th, ExxonMobil has been faced with a larger lawsuit in the state of Massachusetts. In a 200-page lawsuit filed at a Boston court, Attorney General Maura Healey accuses Exxon of misleading not only investors by underestimating the impact of climate change on its activities, but also its consumers.

"Exxon has known for decades about the catastrophic climate impacts of burning fossil fuels—its chief product," Healey said in a statement. "Yet, to this day, Exxon continues to deceive Massachusetts consumers and investors...We are suing to stop this illegal deception and penalize the company for its misconduct".

#ExxonKnew

Rather than sharing this research, the company has embarked on a massive "campaign to mislead consumers and investors on the climate impact of its products." In addition, Massachusetts accuses the company of "deceptive advertising" when it claims that certain types of oil and gasoline sold in its service stations "reduce emissions", or when it claims to be at the forefront of research on clean energy.

Beyond these lawsuits, it has been established that Exxon has known for years that the oil industry has a major impact on the planet. In 2017, two Harvard researchers revealed, after studying the company’s internal documents, that ExxonMobil had become aware of major climate conditions years before the international community became aware of them. In a 1982 internal report, a researcher writes that there is unanimous agreement in the scientific community that the Earth’s temperature is rising and that "the warming was already underway and significant enough to be detected," the authors report.

What’s worse, in a 1994 paper, Exxon researchers defined “mean global warming of 2 °C from preindustrial time to 2100 as Illustrative Reference Values for climate and ecosystem protection". That is 21 years before the Paris Agreement proposed the same goal to its signatories. At that time, Exxon was already calculating carbon budgets (the maximum amount of carbon to be emitted) to meet this warming limit.

Ludovic Dupin, @LudovicDupin


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