New York filed a lawsuit against ExxonMobil on Wednesday, alleging that the company has deceived investors for years by deliberately downplaying the climate risks to its business and long-term financial health.
The lawsuit, filed by Attorney General Barbara Underwood in state court, is the culmination of a more than three-year investigation into Exxon’s actions and communications about climate change. The suit alleges that “this fraud reached the highest levels of the company” to include former chief executive Rex Tillerson, who left the company in 2017 to become President Trump’s first Secretary of State.
“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.
“Instead, 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,” she added.
The state began investigating whether Exxon misled shareholders and the public about the impact of climate change in 2014 and in 2015, then-Attorney General Eric Schneiderman issued sweeping subpoenas of Exxon documents as part of his investigation.
Underwood, who succeeded Schneiderman when he resigned earlier this year, gave hints for how she was building the case when she sought a court order in June to compel Exxon to turn over more documents. She said those documents would show that the company used different sets of numbers to estimate climate risks internally and externally and the numbers released to the public presented a rosier picture of the company’s sales of oil and gas for decades to come.
Exxon fought the state’s investigation by asking initially a Texas court to stop it, arguing that the investigation was politically motivated and violated its free speech and other constitutional rights. The case was transferred to New York, where U.S. District Court Judge Valerie Caproni dismissed Exxon’s challenge in March.
Exxon has also gone to court to try to derail a similar investigation by the Massachusetts Attorney General Maura Healey, without success so far.
Exxon did not respond to a request for comment on the New York lawsuit.
Today’s lawsuit is simply the latest in a string of attempts to target manufacturers in America,” said Lindsey de la Torre, executive director of the Manufacturers Accountability Project, an advocacy arm of the National Association of Manufacturers. “Rather than focus on productive solutions, Attorney General Underwood moved ahead with this politically-motivated lawsuit, wasting even more taxpayer resources in an effort to infringe on manufacturers’ First Amendment rights. Manufacturers will continue to stand strong and fight back against these abuses of our legal system and efforts to undermine our sector, while maintaining our commitment to addressing environmental challenges.”
The lawsuit seeks to force Exxon to correct its climate risk accounting method and pay unspecified damages, restitution and any money it’s generated based on fraudulent public disclosures of climate risks.
Investors who have been misled by the company included the New York State Common Retirement Fund and the New York State Teachers Retirement System, which collectively hold about $1.5 billion in Exxon shares, the lawsuit said.
“It’s past time to demand transparency from Exxon and the fossil fuel industry. Exxon ran a colossal climate denial operation for decades, which significantly impacted how the climate change debate played out in business, science, and politics,” Naomi Ages, who leads the climate liability campaign for Greenpeace U.S., said in a statement.
The lawsuit laid out allegations that Exxon lied to investors about the effect of increasing climate regulations on its investment decisions and global operations.
The company came up with two different sets of numbers to represent the regulatory risk — the higher numbers corresponded with a greater and increasing risk over time. Instead of using what it knew to be the more accurate set of numbers, Exxon secretly used lower figures for calculating the regulatory impact on its oil and gas holdings and the future demand for its products, the lawsuit said. Later, the company stopped using those estimated costs and maintained that existing regulations would stay the same indefinitely.
The lawsuit lists what it says is the result of Exxon’s fraudulent counting. For example, the company undercounted $25 billion worth of expenses related to the projected emissions from its 14 oil sands projects in Alberta, Canada. The company also overestimated both the amount of reserves by 300 million barrels and the economic value of an oil sands deposit at Cold Lake, Alberta.
Exxon has been a high-profile target for climate lawsuits. The company is named in several lawsuits by cities and counties across the country, as well as the state of Rhode Island.
“This kind of wrongdoing is one of the main reasons that communities across the country have recently filed lawsuits seeking to recover some of the costs of climate change from Exxon and other companies,” Marco Simons, general counsel at EarthRights International, said in a statement. EarthRights is providing legal support to the climate lawsuit filed by three communities in Colorado. “Climate change did not come about by accident; Exxon’s own scientists have been warning of the risk of catastrophic climate impacts for at least 50 years, and their response has been to mislead the public about climate science while profiting handsomely from unchecked fossil fuel production.”