Fighting suit, Exxon says it is accounting for climate rules
Exxon Mobil says it has prepared itself for the impact climate change regulations will have on its finances, denying allegations from New York’s attorney general that the energy giant has deceived the public about how stricter emissions rules will affect its business.
Attorney Ted Wells said in a trial that began Tuesday that former Exxon CEO Rex Tillerson created a robust, effective system to account for increasing climate regulations in 2007.
The state has accused Exxon Mobil Corp., which is based in Irving, Texas, of misleading investors about its financial health as governments impose stricter regulations to combat global warming.
“Exxon Mobil did nothing wrong. Absolutely nothing wrong,” Wells said. “The evidence will show that the allegations in the complaint are bizarre and twisted and not connected to the reality of the truth.”
Exxon has not always applied the appropriate regulation costs when estimating the increasing price of climate rules on its carbon-intensive business, said Kevin Wallace, an attorney arguing for New York’s Attorney General Letitia James.
In some cases, Exxon used existing local regulations to calculate the cost of new projects, when it should have assumed regulations would become stricter, and more costly, over time, Wallace said.
“The company failed to manage the risks in the ways it promised,” Wallace said. “The cost of that failure is staggering.”
Wallace asked for a comprehensive review and $476 million to $1.6 billion in damages to shareholders.
“Having been misled on these issues, investors are entitled to an accurate picture,” Wallace said.
Wells countered that Exxon has two distinct ways of accounting for increasingly strict climate regulations. One metric, called “proxy costs,” deals with the demand side of Exxon’s business, and attempts to predict how demand for oil and gas may decrease around the world due to regulations. Another measure, known as “GHG costs,” or greenhouse gas costs, measures how local regulators may tax, for example, emissions from a refinery.
Exxon examines those costs, where appropriate, when it evaluates new projects, to determine the project’s viability, Wells said.
“This notion that we would be using lower costs than are appropriate, it makes no sense,” Wells said. “We would not be in the business of cheating ourselves.”
Wells also said the state’s planned witnesses could not have been materially harmed as they claimed, because they were not making investment decisions.