ExxonMobil statement regarding New York Attorney General civil trial verdict; December 10, 2019
Today’s ruling affirms the position ExxonMobil has held throughout the New York Attorney General’s baseless investigation. We provided our investors with accurate information on the risks of climate change. The court agreed that the Attorney General failed to make a case, even with the extremely low threshold of the Martin Act in its favor.
Lawsuits that waste millions of dollars of taxpayer money do nothing to advance meaningful actions that reduce the risks of climate change. ExxonMobil will continue to invest in researching breakthrough technologies to reduce emissions while meeting society’s growing demand for energy.
ExxonMobil statement regarding New York Attorney General civil trial; October 2019
The New York Attorney General’s allegations are false. We tell investors through regular disclosures how the company accounts for risks associated with climate change. We are confident in the facts and look forward to seeing our company exonerated in court.
The New York Attorney General’s case is misleading and deliberately misrepresents a process we use to ensure company investments take into account the impact of current and potential climate-related regulations.
In the absence of a uniform, globally accepted cost of carbon, ExxonMobil uses two distinct metrics to account for the impact of current and potential climate-related regulations. The first is a “proxy cost” which is intended to reflect the impact of all climate polices that could reduce demand for oil and natural gas globally. The other, a greenhouse gas cost or “GHG cost”, reflects actual costs that might be imposed directly on the emissions of oil and gas projects as a result of specific laws in a jurisdiction, for example.
ExxonMobil applies proxy costs and GHG costs precisely as disclosed and takes both into account to help make sound business decisions and meet its fiduciary responsibilities to shareholders.
It’s been well established that the New York Attorney General’s investigation and resulting civil lawsuit were politically motivated and resulted from a coordinated effort by anti-fossil fuel groups and contingency-fee lawyers involved in other lawsuits against industry.
The Attorney General’s allegations are the third legal theory put forward since starting an investigation into ExxonMobil in November, 2015.
As a publicly traded corporation, ExxonMobil files regular reports with the Securities and Exchange Commission in accordance with its rules, including annual audited financial statements and other publicly available reports, such as the Outlook for Energy and Energy and Carbon – Managing the Risks, which inform investors of the company’s strategy, approach and performance.
ExxonMobil believes that climate change risks warrant action and it’s going to take all of us — business, governments and consumers — to make meaningful progress. We’re focused on reducing our emissions, helping consumers reduce their emissions, conducting breakthrough research into lower-emission technologies, and supporting public policy, such as a uniform cost of carbon, to reduce emissions at the lowest cost to society.
Since 2000, ExxonMobil has invested about $10 billion in projects to research and develop lower-emission energy solutions, including energy efficiency initiatives, biofuels, flare reduction and carbon capture and storage. In 2018, the company announced greenhouse gas reduction measures that are expected to lead to significant improvements in emissions performance including a 15 percent decrease in methane emissions and a 25 percent reduction in flaring by 2020.
The New York Attorney General’s Investigation of ExxonMobil
The New York Attorney General’s lawsuit against ExxonMobil is not about the science of climate change or what ExxonMobil knew about the subject and when. After reviewing hundreds of thousands of pages of ExxonMobil’s internal documents, the NYAG abandoned this investigative theory in 2016. The case the NYAG filed against ExxonMobil in October 2018 instead relies heavily on conflating and misapplying assumptions ExxonMobil uses internally for business planning and other purposes, specifically its Proxy Cost of Carbon and GHG (greenhouse gas) Costs. ExxonMobil uses these two separate assumptions for two distinct purposes.
The NYAG pursued at least three different theories over the course of its three-year investigation into ExxonMobil, which began November 4, 2015.
ExxonMobil cooperated with the NYAG throughout this shifting investigation. The company provided more than four million pages of documents from 172 company custodians and made 22 witnesses available for examination by the NYAG’s office. Collectively, the 22 witnesses testified for more than 200 hours.
The New York Attorney General’s Lawsuit against ExxonMobil
After nearly three years of investigation, the presiding judge stated that the NYAG’s investigation could not continue indefinitely. The NYAG then filed a complaint, on October 24, 2018, in the New York Supreme Court. In its complaint, the NYAG alleges that ExxonMobil claimed in public filings that it used a proxy cost of carbon to address the risks of climate change, but in reality did not live up to what it promised shareholders.
NYAG Distorts, Conflates and Misapplies Accounting Metrics
ExxonMobil uses accounting processes to assess the potential costs of climate policies to help the company make sound business decisions and meet its fiduciary responsibilities to shareholders.
In the absence of a uniform, globally accepted cost of carbon, multinational energy and industrial companies take different approaches to account for the potential future costs of climate policies. As it has stated publicly, ExxonMobil considers how those policies will affect both the overall global demand for energy (at a macro level) and the expense projections for its operations in specific regions of the world (on a project-by-project level). To do this, ExxonMobil uses two different metrics. They are:
- Proxy Cost of Carbon is a broad assessment of how potential government climate policies might affect global demand for energy. It has long been referenced in ExxonMobil’s annual Outlook for Energy report, which states that its Proxy Cost of Carbon may approach $80/ton by 2040 in some geographies.
- GHG (greenhouse gas) Costs provide a way to consider how existing and potential future climate regulations might affect the projected expenses of potential investments and other operations on a project-by-project basis.
Rather than acknowledge that ExxonMobil considers the impact of potential climate regulations in two different ways, the NYAG disingenuously alleges that ExxonMobil kept two sets of books – one secret and one public. To make this claim, the NYAG’s suit conflates and misapplies these two different metrics used by the company to evaluate the impact of potential climate regulation. Indeed, the NYAG combines these metrics into one manufactured term, which it designates “proxy cost of GHG emissions.”
ExxonMobil’s analyses of projected global demand for oil and natural gas are reasonable, well substantiated and in line with forecasts of independent third parties.
The analysis that ExxonMobil provided in its 2014 Energy and Carbon – Managing the Risks report tracked energy demand projections published by leading academic and government sources at the time.
ExxonMobil’s assumption that policies contemplated in various scenarios designed to limit global warming to the two-degrees Celsius was unlikely to pose significant risk to year-end 2017 proved reserves is supported by the demand analysis reflected in Energy and Carbon – Managing the Risks, as well as by third-party organizations including the International Energy Agency (IEA) and the U.S. Energy Information Administration (IEA). Despite the allegations made, ExxonMobil properly accounted for the risk that climate change regulations posed to its assets. The NYAG has identified no evidence to the contrary.
The U.S. Securities and Exchange Commission (SEC)
The SEC opened a parallel investigation, but closed that investigation in August 2018, months before the NYAG filed its complaint.
The SEC initiated its probe of ExxonMobil in September 2016. According to sources cited in news accounts (the SEC does not comment publicly on such matters), the agency was reviewing ExxonMobil’s approach to accounting for the impact of potential future regulations to curb greenhouse gases as it evaluates the economic viability of its projects. The SEC investigation lasted nearly two years, overlapping with the NYAG investigation.
The SEC was given the same four million-page record of discovery ExxonMobil provided to the NYAG. It also included information provided by the ExxonMobil’s auditor, PricewaterhouseCoopers.
In August of 2018, the SEC ceased its investigation and issued a closure letter to the company, noting that it would not recommend that the Commission pursue any enforcement action against ExxonMobil.
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