Exxon braces for high stakes
Firm is accused of covering up climate findings
The pope, the president and other influential voices have characterized climate change as the most urgent danger facing the planet. For decades, energy industry leaders and their political allies have disputed evidence of an adverse human hand in biodiversity, temperatures and polar ice levels.
Now, on the eve of a great global climate summit, one of the most powerful and prominent energy companies in the world faces accusations of covering up research on the harms of petroleum exploration and consumption.
As Exxon Mobil braces for the scrutiny of a criminal investigation, tarnish to its brand name and financial liabilities as yet unseen, some view the case as a chance to firmly shift the culture of energy exploration, production and consumption.
“The playbook the industry hatched back in the early 1990s has now been disclosed; it’s a playbook that obviously is based on dishonesty and selfishness,” said Demo-
cratic state Sen. Kirk Watson of Austin. “In a football game, if you have the playbook, it may take a while to beat the playbook, but it gives me a chance. It’s ammunition.”
One potential path to policy change has been demonstrated by cases involving asbestos, tobacco, football concussions and automobile safety. But legal experts say pinning the effects of climate change on the behavior of a particular company will bring a key question to the fore: Who, exactly, are the victims?
“Exxon is different because the harm is diffuse,” said Alexandra Lahav, a complex litigation expert at the University of Connecticut School of Law. “Cars driven in one place will send out emissions that can harm environments many miles away.”
At first blush, the news reports appear to be the kind of smoking gun long sought by environmental protection groups. They reveal findings dating to the 1970s by top company technical experts who described the burning of fossil fuels as a primary source of global warming and its potentially catastrophic effects. They describe how Exxon Mobil and other major energy companies have publicly contradicted that research for years, partly by financing public relations efforts to question those scientific conclusions.
Alan Jeffers, a spokesman for Exxon Mobil, said the company has consistently funded and publicized accurate research.
“We absolutely reject the allegations,” Jeffers said. “They are inaccurate distortions of our climate research.”
Climate change, he added, “represents a great risk; we need to take prudent steps.”
As the responsible party in one of the most environmentally destructive industrial accidents of all time, the Valdez oil spill of 1989, Exxon Mobil has developed the public relations to limit its financial exposure. It also has spent years preparing for litigation, according to the Stanford Law Review. In 2008, the peer-reviewed journal documented efforts by Exxon to pay legal scholars for favorable research it could cite to argue against punitive damages in environmental cases.
Exxon Mobil and other industry groups “continue to fund research for the purpose of presenting their findings to courts in order to discredit jury verdicts that awarded punitive damages against them,” the law review reported. “This kind of hired-gun research would be problematic even if the results were accurate.”
Probe launched
But for the publicly traded company, based in Texas with worldwide employees of 75,000 and revenues of $263 billion, some legal perils are already becoming clear.
Following the reports by Inside Climate News and the Los Angeles Times, the New York attorney general has subpoenaed documents to investigate whether the company lied to its investors. Former Vice President Al Gore and several members of Congress have urged the Securities and Exchange Commission to begin a parallel investigation.
“We’ve received the subpoena and are assessing our response,” said Jeffers, the company spokesman.
The muscle of state prosecutors in New York could prove formidable on its own. Traditionally a leader in consumer protection law, the state attorney there has special tools including the Martin Act, a corporate fraud statute.
For environmental advocates who have long awaited a day of reckoning for Big Oil, though, even successful charges of investor fraud may seem like a hollow victory. To achieve broader policy and cultural change, the case would have to spread beyond New York.
Legal experts say the comparisons to a sweeping change reminiscent of cigarette marketing may prove limited. In the tobacco litigation, a corporate whistleblower helped provide evidence that fueled massive class actions. As news reports unearthed documentation of cigarettes manipulated with nicotine spikes, state attorneys general joined the fray, suing to recover medical costs. The companies paid billions of dollars in settlements, and the culture around smoking changed.
‘All 7 billion’
In those cases, the parties on each side were clear. In any potential litigation over the role of petroleum in climate change, though, “the victims potentially include all 7 billion citizens of earth,” said Howard Erichson, a civil procedure expert at Fordham University. “And the perpetrators potentially include all 7 billion humans as well, although obviously not in equal proportions. This makes climate change a less obvious candidate for mass tort litigation than, say, pharmaceutical product liability, air crashes, cigarettes, or even oil spills.”
Investor fraud may prove to be a solid starting point for the climate change case against Big Oil, he added: “To me, the more interesting question is what other sorts of claimants will emerge.”
Jeffers, the spokesman, said other distinctions separate the case from the tobacco litigation.
“The tobacco companies were accused of making junk science and publishing it,” he said. “In our case, there’s no supporting evidence to support that.”
Wherever the case leads, he said, “we’re going to continue to reject these allegations. We are going to defend ourselves against this misinformation campaign.”
Meanwhile, some class- action lawyers are digging for evidence of a broader conspiracy.
While BP famously broke ranks with the industry a decade ago, acknowledging the role of petroleum among many factors in climate change, efforts to demonstrate that multiple companies worked together to hide unfavorable research could open new lines of argument.
“The question now is: ‘Is Exxon Mobil doing it by itself ?’ ” said Brent Coon, a Houston lawyer whose firm specializes in complex litigation. “Is there a more sinister organized effort to do it?”
Those answers, he said, might not necessarily lead to obvious civil liabilities. But they could make the companies answerable to criminal charges or censure by Congress.
In the meantime, much of the work may fall to city and state governments, many which have documented effects on their populations and budgets. In a recent report, for example, researchers at Texas A&M University described increased flood risks in Houston and other vulnerable cities. Houston and Austin have joined C40, a London-based group studying the causes and effects of climate change.
“Cities and states have different consumer protection laws, statutory authorities to bring claims over costs,” said Alexandra Klass, an expert on environment and energy law at the University of Minnesota. Many of those consumer protection statutes require no causal link.
“The harm is the failure to disclose,” Klass said. “You’re not supposed to lie.”