Justin Gillis & Clifford Krauss, 06 November 2015
The New York attorney general has begun a sweeping investigation of Exxon Mobil to determine whether the company lied to the public about the risks of climate change or to investors about how those risks might hurt the oil business.
According to people with knowledge of the investigation, Attorney General Eric Schneiderman issued a subpoena Wednesday evening to Exxon Mobil, demanding extensive financial records, emails and other documents.
The focus includes the company’s activities dating to the late 1970s, including a period of at least a decade when Exxon Mobil funded groups that sought to undermine climate science. A major focus of the investigation is whether the company adequately warned investors about potential financial risks stemming from society’s need to limit fossil-fuel use.
Kenneth Cohen, vice president for public affairs at Exxon Mobil, said Thursday that the company had received the subpoena and was still deciding how to respond.
“We unequivocally reject the allegations that Exxon Mobil has suppressed climate-change research,” Mr Cohen said, adding that the company had funded mainstream climate science since the 1970s, had published dozens of scientific papers on the topic, and had disclosed climate risks to investors.
The people with knowledge of the New York case also said Thursday that, in a separate inquiry, Peabody Energy, the nation’s largest coal producer, had been under investigation by the attorney general for two years over whether it properly disclosed financial risks related to climate change. That investigation has not been previously reported, and has not resulted in any charges or other legal action against Peabody.
Vic Svec, a Peabody senior vice president, said in a statement, “Peabody continues to work with the New York attorney general’s office regarding our disclosures, which have evolved over the years.”
The Exxon Mobil investigation might expand further, to encompass other oil companies, according to the people with knowledge of the case, though no additional subpoenas have been issued to date.
The people spoke on the condition they not be identified, saying they were not authorised to speak publicly. The Martin Act, a New York state law, confers on the attorney general broad powers to investigate financial fraud.
Mr Schneiderman’s decision to scrutinise the fossil-fuel companies may well open a sweeping new legal front in the battle over climate change. To date, lawsuits trying to hold fossil-fuel companies accountable for the damage they are causing to the climate have been failing in the courts, but most of those have been pursued by private plaintiffs.
Attorneys general for other states could join in Mr Schneiderman’s efforts, bringing far greater investigative and legal resources to bear on the issue. Some experts see the potential for a legal assault on fossil-fuel companies similar to the lawsuits against the tobacco companies in recent decades, costing those companies tens of billions of dollars in penalties.
“This could open up years of litigation and settlements in the same way that tobacco litigation did, also spearheaded by attorneys general,” said Brandon Garrett, a professor at the University of Virginia law school. “In some ways, the theory is similar — that the public was misled about something dangerous to health. Whether the same smoking guns will emerge, we don’t know yet.”
The New York Times
Extracted in full from the Australian Financial Review.