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The Attorney General (AG) of New York state sued Exxon Mobil last fall after a four-year investigation into the question of whether the company misled investors on the costs to the company of future regulation of the industry that would be needed to curb greenhouse gas emissions. The state alleges that “Exxon’s internal calculations didn’t match its public representations,” and that those misrepresentations caused investors to pay more for the stock than they should have — to the tune of “between $476 million and $1.6 billion.”
Why This Matters: This is the definition of a “bet the company” lawsuit — maybe even a “bet the industry” case since they all would be guilty by association. Of the many lawsuits brought against big oil and gas companies (by kids, cities, states and fishers) this one has the biggest potential to burn them. Investor disclosure laws are strict — and the government alleges that the decisions regarding what they did not disclose went all the way up to Exxon’s CEO at the time, Rex Tillerson, who is expected to testify. If NY wins, there will be a slew of additional lawsuits to join the other similar ones pending in New Jersey and Texas. If the company wins, it will insulate the company and the industry from further climate change legal challenges.
What NY State Argues
As Inside Climate News explains, “[f]or 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.”
In essence, the Company argues it was impossible to know — they did the best they could to estimate the cost of future regulations. So in the Alberta tar sands example above the Company argues that “regulation in Alberta ‘has been and remains in flux, with rival political factions enacting and repealing climate regulations regularly.'”
President Trump trumpeted his trade deal with China, but so far it has been a bust, according to The Wall Street Journal — the Chinese have not purchased nearly the amount of energy (in terms of total dollars) as they promised — only $2B in oil and gas purchases against a commitment of $25B for this year.
A federal judge in Washington, DC ruled yesterday that the Dakota Access Pipeline must shut down and empty all its oil until the government completes an environmental review of the pipeline’s impacts, giving the Standing Rock Sioux Tribe, whose reservation lies downstream, a huge victory. Similarly, late in the day, the Supreme Court refused to overturn the order of a district judge that shut down construction of parts of the Keystone XL pipeline so it is also blocked for now.
Why It Matters: The Dakota and Keystone XL news is greatly tempered by the fact that numerous other pipeline projects can go ahead despite their inadequate permit unless they are individually challenged in court and blocked.
Yesterday, Dominion Energy and its partner, Duke Energy, announced they were ending a 600-mile natural gas project that would have cost at least $8 billion to complete. As the Richmond Times-Dispatch wrote, Dominion and Duke canceled the construction of the Atlantic Coast Pipeline in the face of mounting regulatory uncertainty caused by a federal court […]
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