Arthur J. Villasanta – Fourth Estate Contributor
Irving, TX, United States (4E) – ExxonMobil Corporation, the largest of the world’s Big Oil companies, is being sued by New York State for using climate change to defraud investors out of billions of dollars.
Attorney General Barbara Underwood said ExxonMobil courted investors such as the state’s public pension funds with inaccurate information. ExxonMobil has long claimed it factors in future risks to its business by using a “proxy cost” for the price of carbon. Thiss proxy cost assumed carbon will become more expensive in the future.
In fact, “Exxon repeatedly and consistently underestimated the potential financial risk that increasing climate change regulation posed to its assets and value,” said Underwood.
The state isn’t accusing Exxon of contributing to climate change, although fossil fuels undoubtedly increase global warming. Rather, New York alleges the company didn’t properly calculate how the risks would affect its business.
Underwood is suing ExxonMobil for defrauding investors about the financial risks of climate change and lying about how it calculates potential carbon costs.
The lawsuit accuses ExxonMobil of assuring its investors it uses theoretical prices for carbon in evaluating projects when in fact it often used a lower price or none at all. These theoretical prices range from $20 to $80 a ton depending on the country.
The lawsuit also claims ExxonMobil’s dual accounting calculations had a huge impact on the company’s. It says ExxonMobil’s failure to apply an internal price on carbon at 14 of its oil sands projects in Alberta, Canada caused the undercounting of future greenhouse gas expenses by more than $25 billion over the lifetime of the project.
It also said the firm didn’t apply any such proxy costs to its reserves at Cold Lake, a major oil sands asset in Alberta, “resulting in an overestimation of its projected economic life by 28 years.”
The lawsuit also said “this fraud reached the highest levels of the company,” including former ExxonMobil CEO and former Secretary of State Rex Tillerson. The lawsuit claims Tillerson knew for years the company “was deviating” from public statements and was using two sets of calculations about future regulation of greenhouse gas emissions.
“The attorney general is effectively charging them with keeping two sets of books — one for internal purposes, one for external,” said Tom Sanzillo, director of finance at the Institute for Energy Economics & Financial Analysis that conducts research on energy and the environment. “The result is a distortion of the value of the company.”
ExxonMobil spokesman Scott J. Silvestri called the lawsuit meritless. “These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing.”
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