Ruling offers relief for oil giants
LONDON • Oil companies have for now managed to avoid the legal liability of paying potentially billions of dollars for protection against the impact of climate change. But the fight could only just be beginning.
A judge this week dismissed lawsuits from the cities of San Francisco and Oakland, Calif,, against Exxon Mobil Corp., Royal Dutch Shell PLC, BP PLC
and other oil majors, saying it was unfair to lay all the blame for climate change at the feet of companies that helped create “historic progress” in the world.
The victory is significant for Big Oil, but it may need many more as activist groups and investors turn on the pressure. The demand for the companies to play their part in tackling climate change is growing louder. While they argue they care deeply about the environment and are acting to cut emissions and build renewable-energy sources, some shareholders, governments and environment groups want more.
“Litigation’s always a risk, but I think when you have a specific ruling that is such a seeming rebuke to the plaintiffs, that certainly makes you feel a little bit better,” said Jason Gammel at Jefferies LLC. “But there’s other courts that it could play out in.”
Lawsuits are ongoing in New York City and King County, Wash. Separately, a group of U.K. investors, which together oversee about US$10 trillion of funds
and include Standard Life Aberdeen PLC and Legal
& General Group PLC, last month urged firms take action on emissions.
Environmental groups are also turning the screws. In preparation for the annual general meetings of BP, Shell and others, a group called ShareAction earlier this year trained activists to apply pressure to board members on climate.
“Shareholder activism in the form of resolutions and AGM interventions, by investors and ordinary citizens, has only just started to show its true potential,” said Jeanne Martin of Share Action. “Share Action will make sure oil executives continue to feel the heat.”
Oil bosses know what they are up against. BP chief executive Bob Dudley refused to answer questions from two groups at a shareholder meeting last month, saying he believed they were setting up the company for classaction lawsuits. The British explorer faced a slew of such legal challenges in the wake of the catastrophic 2010 oil spill in the Gulf of Mexico, leaving it with more than US$65 billion in legal claims.
The impacts of climate change could cost many times that amount, making it critical for the companies to fight off lawsuits aiming to saddle them with what could even be limitless liabilities.
BP and Shell’s recent AGMs became a template for what the companies could expect. Climate change and the energy transition quickly became the primary focus as board members were bombarded with questions.