#ExxonKnew is Dead: Top Three Things to Know

With the Science Committee set to hold a hearing on Congress’ oversight jurisdiction, in light of the state attorneys general engaged in #ExxonKnew investigations refusing to turn over documents, it’s worth having a look exactly how the #ExxonKnew strategy – the attempt to link ExxonMobil to Big Tobacco – has completely failed, with even New York Attorney General Eric Schneiderman leaving it for dead. Here are the top three things to know:

#1. After intense criticism, Schneiderman changes strategy, abandoning #ExxonKnew

In a surprising August interview with the New York Times, Schneiderman completely abandoned the #ExxonKnew campaign – now claiming his investigation is no longer about what “Exxon knew” but instead about what it “predicts.” From the Times article:

“But in an extensive interview, Mr. Schneiderman said that his investigation was focused less on the distant past than on relatively recent statements by Exxon Mobil related to climate change and what it means for the company’s future.

In other words, the question for Mr. Schneiderman is less what Exxon knew, and more what it predicts.

For example, he said, the investigation is scrutinizing a 2014 report by Exxon Mobil stating that global efforts to address climate change would not mean that it had to leave enormous amounts of oil reserves in the ground as so-called “stranded assets.”

A Bloomberg article published this week essentially explains why Schneiderman was forced to retreat. As Bloomberg succinctly puts it, “Schneiderman doesn’t have a slam-dunk case”:

Schneiderman doesn’t have a slam-dunk case. ‘The New York attorney general has a plausible theory, but he’ll need more than the results of the journalistic investigations,’ says Michael Gerrard, a law professor at Columbia who directs the Sabin Center for Climate Change Law. ‘It’s not enough to show that Exxon had internal knowledge of climate change when external knowledge was widespread. The government would have to show that there were things that only Exxon knew and that were material to investors and that Exxon kept from investors. Such evidence might be there, but we don’t know yet.’” (emphasis added)

That Michael Gerrard is the one claiming #ExxonKnew is “not enough” is important considering that FOIA’d emails show he’s been working behind the scenes with activists on the campaign.

Gerrard isn’t alone in that opinion. Columnists, editorial boards and legal experts have weighed in, noting that Schneiderman’s new strategy isn’t going to work either. Bloomberg Government First Word Energy Editor Mark Drajem wrote in a piece this week about Schneiderman’s change of tune, pointing out that he’s looking at a 2014 company report claiming that international efforts wouldn’t require leaving large amounts of fossil fuels in the ground.  Drajem writes,

Once again, really?

First off, is it clear that Exxon is wrong about this? McKibben thinks large quantities of oil and natural gas will be left unexploited, but the oil industry has been arguing that fracking — and cheap natural gas — is bringing down emissions by replacing coal. This may end up being wrong, but, as Exxon spokesman Alan Jeffers told the New York Times: “If it turns out to be wrong, that’s not fraud, that’s wrong.”

Second, Exxon has a four-page document on its web site for investors that lists “factors affecting future results.” It specifically mentions greenhouse-gas restrictions as one risk: “These requirements could make our products more expensive, lengthen project implementation times, and reduce demand for hydrocarbons.”

Holman W. Jenkins Jr., a columnist for the Wall Street Journal said,

In an Aug. 19 interview with the New York Times, Mr. Schneiderman now admits this approach has come a cropper. He reveals that he’s no longer focusing on what Exxon knew/said but instead on how it goes about valuing its current oil reserves. In essence, Mr. Schneiderman here is hiding his retreat behind a recent passing fad in the blogosphere for discussing the likelihood that such reserves will become “stranded assets” under some imaginary future climate regime.

The New York Post editorial board put it this way,

Attorney General Eric Schneiderman must have hit a wall with his Exxon climate-change probe, since he’s suddenly changed his target.

[…]

The new excuse? The AG says Exxon might be overstating the value of its reserves, by failing to discount for the risk that climate warriors might drastically limit the use of carbon fuels. Collectively, he says, Big Oil may be “overstating their assets by trillions” — for “massive securities fraud.”

It’s a ludicrous stretch: Predicting such political risk is far from a science — and the company discloses the assumptions behind its valuations. Even if Exxon turns out to be wrong, as a spokesman notes, it’s not fraud.

Tristan Brown, a lawyer and assistant professor at State University of New York, said in a Seeking Alpha piece that Schneiderman’s change of focus for his investigation sets “yet another worrying precedent.” He goes on to note, “If Mr. Schneiderman’s previous climate change ‘fraud’ rationale was dangerous to fossil and renewable energy investors alike, however, then the most recent rationale is even more so.”

#2. New emails show AGs in Schneiderman’s climate coalition running as far as they can away from #ExxonKnew investigations

Schneiderman’s shift in the narrative comes curiously after new emails revealed that the AGs in is climate coalition have been running as far away as they can from his investigation.

As a bit of background, Schneiderman organized a press conference on March 29 featuring Al Gore to announce a climate coalition of 17 AGs. Yet even from the outset, there were questions about how involved the other AGs wanted to be in investigating ExxonMobil. Now, newly released emails over the past few weeks confirm suspicions that the other AGs were actually running for the hills.

Just a few days ahead of the March 29 press conference the communications director of the Virginia AG’s office wrote to Schneiderman’s staff saying that their attempts to link them to these investigations makes them “nervous.”

“At this point, we don’t know what we’re going to agree to, or really what Virginia’s laws and our authorities could allow us to do, so it makes me nervous to say we’ve ‘agreed to work together on key investigations. Is there any room to dial that back one notch?” (emphasis added)

In a previous batch of FOIA’d emails, we learned that the Vermont AG’s office also asked Schneiderman’s staff to dial back the rhetoric:

“Not all of the states have yet opened a formal investigation and there is some sensitivity here (and I suspect in some other states) to saying or indicating that we have.”

The Iowa AG’s office was apparently wishing they hadn’t signed on to join in the event at all. As Eric Tabor of the Iowa AG’s office writes to Iowa Deputy Attorney General Tam Ormiston on March 25th, “Tam — Just talked with Tom [Miller, Iowa AG]. He thinks we may be locked in on this and have to ride it through.”

On March 28, Ormiston pings the Iowa AG’s Communications Director Geoff Greenwood saying, “I just returned from the evening’s activities. I will update you tomorrow but clearly Eric is himself the wild card for all.”

These emails are only further evidence that the only folks left standing on #ExxonKnew are Schneiderman, Senator Sheldon Whitehouse (D-RI), and 350.org activist Bill McKibben, who are engaging in increasingly desperate stunts to keep the campaign alive.

Other documents released in August show that these investigations targeted certain organizations as a means of providing support to the Administration’s climate agenda – not, as the AGs have claimed, because the investigations themselves were meritorious in their own right. In a letter dated March 7 inviting the AGs to join in the March 29 press conference with Al Gore, the attorneys general from New York and Vermont write:

“The commitments of the United States and other nations at last year’s Paris climate change conference are very significant steps forward, but states must still play a critical role in ensuring that the promises made in Paris become reality.”

Finally, earlier this summer, emails revealed that the AGs had signed a Common Interest Agreement in order to keep their correspondence on climate investigations secret. However, a number of AGs offices refused to disclose the agreement, but in early August, Reuters broke the news that Common Interest Agreement was finally made public through litigation with the District of Columbia by the Energy & Environment Legal Institute (E&E Legal).

#3. Legal experts come out of the woodwork to say Schneiderman’s use of Martin Act is legally flimsy

Lots of legal experts and editorial boards have stepped up over the summer to declare these investigations an abuse of the office and of protected free-speech rights.

Columbia Law Professor Merritt B. Fox published an op-ed in the National Law Journal with a scathing review of Schneiderman’s use of the Martin Act to investigate ExxonMobil, noting that the whole affair is an “abuse” of “extraordinary powers.” As Fox states,

“The Martin Act grants the attorney general extraordinary powers to subpoena private documents without either obtaining a court order, which is required in most ordinary New York criminal proceedings, or the filing of a complaint, which is required in an ordinary civil action and is subject to court review. The Exxon subpoena is an abuse of these extraordinary powers.” (emphasis added)

Fox continues,

“The bigger, more unambiguous problem for Schneiderman’s investigation, however, is its misuse of tools designed for another purpose. The Martin Act regulates speech made in connection with transactions in securities. Its subpoena powers are to assist investigations of possible violations. It is very unlikely, no matter what the subpoena turns up, that the attorney general will be able to plausibly argue that Exxon in fact committed such a violation.” (emphasis added)

This abuse of power sets a troubling precedent because “At the extreme, the Martin Act subpoena power could be used to bully corporations into any kind of desired reform under the guise of a securities investigation.”

Fox goes on to explain that the Martin Act only works if a corporation makes an omission that would have been material to securities, which means that what was omitted would have had a substantial impact on the body of available information. Fox notes that the views of Exxon’s scientists were “very much in the public realm” and that they “did not deny the possibility that carbon emissions were causing warming,” only “stressed the scientific uncertainties concerning the extent of carbon’s contribution.” Therefore, Fox notes, “Neither Exxon’s statements, nor those of its scientists, would likely have added significantly to the total mix of information in a way that would have affected most investors’ decisions.”

Philip Hamburger, also a law professor at Columbia University, recently wrote that New York’s investigation of Exxon is “a prosecutorial threat to liberty and due process”:

“But with the usurped subpoena power, he can engage in a roving investigation, unlimited by any formal accusation, and then can use the results to bring criminal charges. This is a dangerous amalgam of grand-jury and prosecutorial power in one person. Mr. Schneiderman’s subpoena to Exxon Mobil thus stands apart. His ability to demand information in this way is a quintessential case of the fox guarding the henhouse.

The threats to privacy in our society are not merely technological; they also are legal. In addition to electronic surveillance, nonjudicial subpoenas allow government to examine private documents as if they were an open book. And as shown by Mr. Schneiderman, when attorneys general can issue such subpoenas, a valuable judicial power becomes a prosecutorial threat to liberty and due process.”

Harvey Silverglate, an attorney and a member of the ACLU, said recently that the Exxon investigation is “pure harassment.” He continued, “It is outrageous for any law enforcement official to be seeking to win this battle for minds by flexing law enforcement muscle and trying to shut up the other side.”

Brooklyn Law School professor James Fanto told Bloomberg News that the investigation seems “completely politically motivated.” Former U.S. attorney Matthew Whitaker recently called the investigations “unconstitutional and unethical.”

Tristan Brown, a lawyer and assistant professor of Energy Resource Economics at State University of New York who even admitted that he “empathizes” with the #ExxonKnew campaign, noted that the AGs launching climate investigations are essentially changing the definition of what it means to commit fraud, which sets a “dangerous” precedent.

Walter K. Olson, senior fellow at the Cato institute, said pursuing fraud charges against Exxon is like pursuing fraud charges against candy or ice cream makers.

“Every ice cream maker is disliked by some obesity expert, but it doesn’t mean that every time an ice cream maker tells its stockholders, ‘Everything is great, we’re selling more ice cream this year,’ they’re committing consumer fraud,” said Cato Institute senior fellow Walter K. Olson. “It doesn’t matter even if the critique of ice cream is correct. You still don’t have fraud.”

Brendan Collins, a partner with the law firm Ballard Spahr and an expert on environmental regulations, put it this way:

“The evidence brought against the tobacco industry two decades ago is “pretty substantially different from the idea that Exxon may have duped me from getting a low-mileage [car] and now the island of Tuvalu is going to get covered by water,” Collins said. It’s a “very big leap” to link what Exxon “did or didn’t do” to the harm posed by climate change.

And as Kevin Ewing, an attorney with the Houston law firm Bracewell, explained,

“Tobacco was shown to cause specific harm to specific individuals,” he added. “Not so with climate change, where we cannot yet discern the factual connection between a company’s conduct and individual harm, even though we can observe the global effects of climate change at large.”

 

 

Comments

  1. Smoky Joe says:

    Exxon is worse than the tobacco companies of the 1950s. Put all the officers in prison, and throw away the keys.

  2. Smoky Joe says:

    Exxon is the next Peabody Coal – Bankrupt. The investment community will eventually understand that the world can’t burn all of Exxon’s current resources without driving the earth’s climate irrecoverably out of control. Bye Bye Exxon

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