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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.'”
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