Climate activists struck out in federal court again last week after a judge dismissed their class action lawsuit against ExxonMobil, whom they accused of inadequate disclosure of climate risk. The dismissal could pose a challenge for New York State Comptroller Tom DiNapoli, who recently announced that his office is pressing ExxonMobil for more disclosure on the same issue.

Last week’s rule comes on the heels of another federal judge dismissing activist allegations that oil and natural gas companies engaged in a conspiracy to suppress climate science, suggesting activists may be losing ground in convincing public officials to join a fringe environmentalist campaign against energy producers.

In February 2017 some current and former ExxonMobil employees filed a class action lawsuit against the company, alleging that it was inflating its stock and misleading its investors about the risks posed by climate change.

The case was given to Judge Keith Ellison, a President Bill Clinton-appointee who presided over a similar case brought against BP over the Deepwater Horizon incident. The attorney representing the plaintiffs had previously praised the judge, telling Climate Liability News, “No judge has thought more about these types of cases, so we’re at least going in front of someone who really gets the issues.”

The shareholders’ assumption – shared by the state attorneys general of New York and Massachusetts, who are also investigating the company – is that if the public had known what ExxonMobil knew about climate change, they would have stopped using oil and natural gas.

Judge Ellison found the argument unconvincing:

“Plaintiffs have alleged that Exxon studied the risks of climate change for decades. During the Class Period [November 1, 2015 through October 28, 2016], however, the insider information could only be that Exxon had studied the risks for decades; information about the risks of climate change was publicly available during 2015 and 2016. Even if Exxon knew more about climate change than the company publicly let on, an efficient market can incorporate other information than what a company discloses

To pretend that environmental risks about climate change were unknown until Exxon itself shared information about climate change is an affront to scientists, academics, and government bodies, not to mention the people who were already experiencing the effects of climate change by 2015.” (emphasis added)

As Judge Ellison suggests, the public has been well-informed of climate change for decades. It is unrealistic to assume that simply producing glossy reports about climate change would allow a single company to change the course of human history. Indeed, Shell even distributed a film warning of climate risks in 1991, and oil and natural gas production has only increased since then.

Judge Ellison also takes aim at New York Attorney General Eric Schneiderman’s latest justification for his multi-year investigation, which asserts that ExxonMobil used a different internal assumption for a price of carbon than what it externally reported, and thereby somehow defrauded its investors.

But as Energy In Depth reported at the time, there is no agreement domestically or internationally on the appropriate price of carbon, either today or in the future, or how it will implemented in different countries. Any assumptions made by energy companies are just guesses. Judge Ellison agreed, writing:

“Plaintiffs allege that Exxon employed an inaccurate ‘price of carbon’ when evaluating the value of its reserves…In the Amended Complaint, Plaintiffs reproduce language from Exxon’s 2015 Corporate Citizenship Report, which explains that Exxon estimates a ‘proxy cost of carbon’ which ‘may approach $80 per ton by 2040.’…Plaintiffs do not allege any facts to show why this particular price of carbon was a misrepresentation or did not account for the current or an anticipated regulatory landscape. Plaintiffs seem to believe that the estimated price of carbon was wrong, but they do not plausibly link inaccuracies about the price of carbon to the eventual write-down in reserves or stock price decline. Nor do they allege a regulatory landscape that would change the price of carbon.” (emphasis added)

The shareholders further alleged that ExxonMobil should have written off some of its reserves in response to anticipated action on climate change. Instead, the company only wrote down some of its assets when the price of oil dropped so low that the company wouldn’t be able to economically extract the product at that price. Judge Ellison wrote that the company’s actions were appropriate:

“The alleged link between climate change and the stock price—or climate change and the fluctuating price of oil—is not clear in Plaintiffs’ Amended Complaint. If Plaintiffs are trying to allege that climate change risks are why the reserves were overstated and therefore the stock price inflated, then they have failed to allege sufficient facts. Even in Plaintiffs’ own summary of their argument the stock price was correlated to the price of oil, not to climate change. Alternatively, if Plaintiffs are trying to allege that climate change regulations caused the reserves to be overstated and therefore the stock price inflated, then they again have failed to state sufficient facts. Plaintiffs have not identified a single climate-related regulation that would impair the oil business. Finally, if Plaintiffs are trying to allege that the reputational damage of a government investigation about Exxon’s climate change research and knowledge caused the stock price to drop, then yet again they have failed to state sufficient facts. Inflated prices and government investigations have been part of several other failed ESOP stock-drop claims.” (emphasis added)

The last point is especially salient. Climate activists are pushing energy companies to disclose how they would be impacted by climate regulations that do not exist. There is no law, regulation, or even a standardized price on carbon to which they can point, and it is impossible for companies to disclose how they would impacted by imaginary policies.