Latest update April 3rd, 2025 6:51 PM
Is Exxon Conning Its Investors?(Taken from The New York Times)
A New York State lawsuit charges that the oil giant has not properly accounted for the climate risks at the core of its business.
In August, a lawyer for Exxon Mobil told a state court in Manhattan that New York’s attorney general should either sue the company for misleading investors about the impact of climate change on its finances or drop the case.
“They should put up or shut up,” the lawyer, Theodore Wells Jr., said of a tangled case that had dragged on for more than two years. The weary judge, Barry Ostrager, agreed. “This cannot go on interminably,” he said.
Put-up time has arrived. Late last month, Attorney General Barbara Underwood filed a fraud lawsuit against the company. Exxon responded with a 38-page brief basically denying everything. And Judge Ostrager has set a trial date for October of next year.
Much can happen between now and then. But the judge’s decision to allow the case to proceed could provide a rare teaching moment that allows the public to see a powerful company grappling with the kinds of choices that all legacy fossil fuel companies will surely face in a carbon-constrained world.
The case is not a rehash of the copiously documented charge that Exxon had for years subsidized climate change denialist groups even as its own scientists were acutely aware of the dangers of global warming. That charge is partly what inspired Ms. Underwood’s predecessor, Eric Schneiderman, to begin investigating the company in the first place.
But Exxon has since agreed that climate change is a problem, supported the Paris agreement and invested in cleaner fuels. Nor does the suit hold the company responsible for climate change, unlike several cases against the fossil fuel industry brought by New York City and other localities seeking damages from the rise of sea levels and other consequences of a warming world. Most of these suits have been thrown out of court.
Instead, the suit is a straightforward shareholder fraud case contending that Exxon deceived investors by saying publicly that it had fully accounted for the risks of climate change while in fact deliberately minimizing and, in some cases, ignoring these risks when making its business decisions.
These actions, the suit charges, inflated the company’s value by making it appear to be on firmer financial footing than it actually was.
The case is also numbingly complex, involving competing claims about arcane “proxy costs” — theoretical calculations of the expenses the company would be likely to incur when stringent government regulations kick in to limit the emissions of climate-altering compounds.
The suit claims that even as Exxon assured investors that it was applying rigid accounting to operations and holdings, in practice it was not, thus avoiding painful write-downs on oil and gas reserves it might have to abandon if the true costs of regulation were taken into account.
In one example, the suit charges, the company failed to apply publicly stated proxy costs to 14 oil sands projects in Alberta, leading to undercounting future regulatory expenses by $25 billion.
To all of this, Exxon has two main responses. First, it says, the attorney general misunderstands the way the company calculates and applies costs. Scott Silvestri, an Exxon spokesman, said in a statement, “The company looks forward to refuting these claims as soon as possible and getting this meritless civil lawsuit dismissed.”
Second, echoing what the company has said from the beginning, it claims that the inquiry is basically a witch hunt inspired by interest groups and Mr. Schneiderman, a politically ambitious Democrat.
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