What They’re Saying: Third Time “Not the Charm” for Meandering Schneiderman Investigation

Earlier this week, a number of news outlets reported that SEC is in the process now of taking a look at how ExxonMobil assesses the value of its proven reserves, a move that the company welcomed as “appropriate.”

SEC’s involvement is being viewed as a way to move the investigation out of the political arena – where New York attorney general Eric Schneiderman had been grandstanding for months in a desperate bid to drum up support for his gubernatorial bid – and into the authority of the proper federal agency. As the #ExxonKnew campaign collapses all around him, the SEC announcement gives Schneiderman the chance to exit quietly, stage left.

Except! It does not appear that the media is willing to cooperate with this plan. Here’s what news outlets and columnists are saying about these latest developments:

  • Reuters: “Legal scholars have said Schneiderman’s casting about over the last year suggested he did not have strong case to press in court or use to force the company into a settlement. With the SEC now stepping in, Schneiderman could take credit for creating the impetus for the inquiry without having to win a case.” (emphasis added)
  • New York Post: “The Securities and Exchange Commission just handed Eric Schneiderman a face-saving way to drop his fast-imploding probe of Exxon…Schneiderman started with a broader witch-hunt. But he’s already dropped his bid to ‘prove’ Exxon lied about what it knew about global warming. Best to pocket the praise (and donations) he’s won from anti-fossil-fuel fanatics, and let the SEC take over. Heck, he can even claim credit for nudging the agency to act. The commission is clearly the most appropriate regulator of the valuation issue — even though it has zero chance of making any charges stick…The anti-Exxon train is on a fast track to disaster — Scheiderman’s smart move is get off the case.” (emphasis added)
  • Politico: “Exxon Mobil today welcomed as ‘appropriate’ the SEC’s inquiry into its accounting practices in what appeared to be a subtle jab at New York Attorney General Eric Schneiderman, who has drawn the oil and gas industry’s ire for pursuing multiple avenues of investigation against the company.”
  • Wells Fargo analysts Roger Read and Lauren Hendrix: “We rate the likelihood of a negative outcome from a reported SEC investigation into ExxonMobil’s accounting/climate practices as very slight…ExxonMobil has historically avoided asset write-downs during periods of dramatic price declines and in general. That this fact stands out might say as much or more about its competitors/peers’ willingness to over-capitalize assets as it does ExxonMobil’s aversion to writing them off. We have asked ExxonMobil on multiple occasions how it avoids the asset write-down trap. Their answer is they are conservative on when and how much is capitalized…The final reason to believe ExxonMobil is not over-capitalized is that its returns on capital employed (ROCE) have consistently outperformed its peers – a harder performance to deliver without write-downs…”
  • Financial analyst Dave Forest: “[M]ost of today’s in-ground reserves will be produced at some time in the future — maybe a month from now, or a year out, or even a decade away…Does it really make sense then to apply today’s oil price when assessing the value of oil and gas holdings? Firms like Exxon Mobil argue that it doesn’t — with managers preferring to use forecasts on forward pricing to draw conclusions about reserves value (the futures curve on West Texas Intermediate crude, for example, is back above $55/bbl by 2021 right now). The bottom line is, it’s very hard to definitively nail down the net present value of a long-life asset like an oil field. And yet we live in an age where investors and regulators want hard metrics — which may mean Exxon Mobil is going to get rapped on the knuckles.”
  • Bloomberg’s Mark Drajem: “We’re on the record with our skepticism of the state probes into #ExxonKnew. Without context, the news that the SEC is investigating Exxon’s accounting practices would seem to put some heft behind those state efforts. But what the SEC is after is something different, despite what the anti-oil activists would have you believe: The SEC is investigating whether the oil giant should be writing down assets as a result of the oil slump, something not related to its climate change research…As Steve Everley pointed out, that puts Schneiderman’s climate investigation squarely in the past tense.” (emphasis added)

Before the SEC investigation was announced, experts were busy criticizing Schneiderman’s third change of tune regarding what his investigation was actually about (first he said it was about what Exxon “knew,” then he said it was about what it “predicts” then he finally claimed it was about what Exxon “failed to predict.”)

Sara Silver, a columnist for Reuters‘ Breaking Views, said Schneiderman’s change of focus is “looking like a stretch,” adding:

“The attorney general’s pursuit of Exxon has brought accusations that it’s politically motivated. However ambitious he may be, though, Schneiderman is entitled to scrutinize companies’ disclosures. The trouble is, it’s beginning to look as if he is struggling to find any incriminating evidence. If he can’t produce it soon, he’d be better off backing down.” (emphasis added)

Forbes columnist Tim Worstall wrote:

“There are a number of problems with this chain of logic – one of them being that Exxon has always been the most conservative in the industry in measuring its reserves. The second is that oil stocks aren’t valued by their reserves. There really is no correlation at all between, say, the enterprise value of Shell, BP and Exxon and the reported reserves of the three companies. But, you know, Schneiderman’s under political pressure to find something that Exxon has done wrong so why not?” (emphasis added)

Tristan Brown, a lawyer and assistant professor of Energy Resource Economics at State University of New York, wrote his third critique of Schneiderman’s investigation shortly before the SEC’s investigation was revealed. Brown noted that Schneiderman’s “stranded assets” theory:

“…is the weakest argument in a market economy. If the market believed that fossil fuels will have zero value in the future due to climate policy, then today’s market price would reflect this. Of course, today’s low prices are a reflection of high current supply rather than low future demand; global demand for petroleum and natural gas is at record levels and still rising. Furthermore, recent history indicates that the type of policy required to completely devalue the type of fossil fuel assets that Exxon Mobil holds is becoming less rather than more probable. Australia implemented a price on carbon emissions before repealing it in 2014. The United States was unable to muster enough political support to impose its own price on emissions in 2010 despite having a Democrat in the White House and Democratic majorities in the House of Representatives and Senate. Even the European Union, which has operated a cap-and-trade scheme for several years, has allowed its carbon price to hover at a level that is too low to devalue fossil fuels for most of its existence.”

Even green investment guru Jeff Siegel wrote a column defending Exxon against Schneiderman:

“Although questionable, Exxon has not done anything illegal. Its results are in accordance with the standards set by the SEC. Certainly Schneiderman knows this. But the bottom line is that the New York Attorney General wants to put more heat on Exxon. And that’s exactly what he’s doing.” (emphasis added )

The general counsel for the Energy and Environmental Legal Institute, David Schnare, wrote a blistering op-ed noting the “Green 20” AGs are abusing their power for political gain:

“Recent efforts by several liberal state attorneys general to investigate those who have contrary views on manmade global warming has become an ugly campaign of intimidation and harassment. In a betrayal of public trust as well as the First Amendment, several attorneys general transformed their offices into partisan political machines, launching probes and issuing subpoenas of individuals, groups and businesses that dared to question whether factors other than man might be responsible for climate change.”

Austin Yack wrote in the National Review about the eleven state attorneys generals, led by Texas AG Ken Paxton, who had filed an amicus brief in support of Exxon’s lawsuit against Massachusetts AG Maura Healey:

“Paxton’s brief called into question Healey’s use of her law-enforcement authority in the context of an ‘ongoing public policy debate of international importance,’ noting that it is a threat to freedom of speech. In this, Paxton is correct; government does not have the authority to silence or bully those who disagree with its preferred policy agenda…

At a March press conference, Attorney General Healey demonstrated the extent to which Green 20 is playing politics. A month before the subpoenas were even issued, Healey forcefully highlighted the Commonwealth of Massachusetts’s climate-change-policy achievements while promising to hold ExxonMobil accountable for its supposed fraudulent activity. That timetable and Healey’s overheated rhetoric make it clear that the ‘investigation’ has been nothing but a witch hunt from the very beginning — with politics, not the law, in mind. Green 20 is a political coalition. Unfortunately, it’s a political coalition that is abusing law-enforcement authority.”

Elizabeth Price Foley, a constitutional law scholar who testified at a House Science Committee hearing last week, wrote a piece for the Federalist Society’s blog supporting the Committee Chairman’s subpoena of the state AGs investigating Exxon. She writes:

“Regardless of where one stands on climate change, when Congress issues subpoenas against state officials on a topic for which legislation may be had, assertions of states’ rights or privileges give way because of the Supremacy Clause. No state official—whether judicial, legislative or executive—has a right to resist a legitimate congressional demand for information.”

These are just a few of the latest voices speaking out against Schneiderman’s investigation. They join the rapidly growing chorus of legal experts and editorial boards from across the country calling on Schneiderman to take a bow because, quite frankly, he simply doesn’t have a case.


  1. […] have tried to switch the focus of their investigations. But even their new arguments have been heavily criticized by legal experts. In his eulogy for #ExxonKnew, SUNY professor Tristan Brown […]

  2. […] Schneiderman has continuously changed the rationale for his investigation in an endless search for something he can label as […]

  3. […] General Eric Schneiderman, who has changed the focus of his own ExxonMobil investigation at least three times, shifting from what ExxonMobil knew about climate change, to what it predicted, to what it […]

  4. […] General Eric Schneiderman, who has changed the focus of his own ExxonMobil investigation at least three times, shifting from what ExxonMobil knew about climate change, to what it predicted, to what it […]

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