After more than three years of investigation, New York Attorney General Barbara Underwood filed a lawsuit against Exxon Mobil on Wednesday that claims the company defrauded shareholders by downplaying the financial threat climate change poised to its business.
The investigation, also known as the #ExxonKnew probe, against Exxon Mobil by the New York Attorney General began back in 2015 and was meant to determine whether the company lied to the public about the risks of climate change or to investors about how much such risks might hurt the oil business.
— NY AG Underwood (@NewYorkStateAG) October 24, 2018
“Investors put their money and their trust in Exxon – which assured them of the long-term value of their shares, as the company claimed to be factoring the risk of increasing climate change regulation into its business decisions. Yet as our investigation found, Exxon often did no such thing,” Underwood said in a statement.
The statement continues, “Exxon built a facade to deceive investors into believing that the company was managing the risks of climate change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations.”
The litigation not only poses a financial risk to Exxon but exposes the company to other litigation and seriously hurts the company’s efforts at trying to build an image of being concerned about climate change. This new litigation doesn’t attempt to hold Exxon accountable for their role in climate change, but instead claims that the company engaged in a “longstanding fraudulent scheme” to deceive investors, analysts and underwriters “concerning the company’s management of the risks posed to its business by climate change regulation.”
Exxon led their investors, and the rest of the world, to believe that they were prepared for stringent regulations that would inevitably be required to combat climate change, but in reality they “employed internal practices that were inconsistent with its representations, were undisclosed to investors, and exposed the company to greater risk from climate change regulation than investors were led to believe.”
Wow wow wow. Big oil may actually face some consequences. This is huge news https://t.co/MGhDjBPt8D
— Bill McKibben (@billmckibben) October 24, 2018
The suit demands that Exxon turn over all the money it made through this alleged fraud and make restitution to investors.
The Attorney General’s office also listed the following impacts the lawsuit could potentially have:
- For 14 of Exxon’s oil sands projects in Alberta, Canada, Exxon’s failure to apply its publicly represented proxy costs resulted in undercounting of projected greenhouse-gas related expenses by more than $25 billion over the projected lifetime of the projects.
- Exxon undercounted projected greenhouse gas-related costs by as much as 94 percent – equal to about $11 billion – in an economic forecast for its Kearl oil sands asset in Alberta.
- Exxon failed to apply the proxy costs it represented to the public in estimating company reserves at Cold Lake, a major oil sands asset in Alberta, resulting in an overestimation of its projected economic life by 28 years, and an overestimation of company reserves volumes by more than 300 million oil-equivalent barrels, representing billions of dollars of revenues.
Exxon’s climate denial has long been under scrutiny. The company has been named in multiple climate liability lawsuits at the city, county, and state level. As Naomi Ages of Greenpeace USA notes, Exxon’s “colossal climate denial operation significantly impacted how the climate change debate played out in business, science, and politics.”
The company has a history of conducting research into climate change while funding groups that denied serious climate risks but stopped doing so in the mid-2000s. However, in 2016 DeSmog uncovered documents from the company dating back to the late 1970s stating unequivocally “there is no doubt” that carbon dioxide from the burning of fossil fuels was a growing “problem” well understood within the company. Exxon shelved these concerns and proceeded to launch “a sophisticated, global campaign to sow doubt and create public distrust of climate science.”