The attorney general of New York has once again changed the focus of his investigation of Exxon Mobil, shifting from his original claim that the company was publicly trying to downplay the risks of global warming to a position that the company may have actually inflated the risks.
The new focus marks the second time the attorney general has changed his justification for probing the energy company over the issue of climate change, raising questions about whether his probe is a legitimate legal pursuit or a politically-motivated fishing expedition.
Shifting with the Wind
When New York Attorney General Eric Schneiderman announced in November 2015 that he was investigating Exxon Mobil over its position on global warming, his purpose was clear: he was interested in what the company had said “over the last 20 years or so,” and whether its past remarks were consistent with its internal research on climate change.
As he told Judy Woodruff with PBS shortly after the investigation was announced:
We have been looking at the energy sector generally for a number of years, and have — had several investigations that relate to the phenomenon of global warming, climate change, and the human contribution to it.
So we have subpoenaed, issued a broad subpoena to Exxon because of public statements they have made and how they have really shifted their point of view on this in terms of their public presentation and public reporting over the last few decades.
But by the end of the following summer, Schneiderman’s campaign had gone nowhere. He had appeared alongside former Vice President Al Gore in a press conference to announce a coalition of state attorneys general to combat climate change, but experts had also criticized Schneiderman and the so-called “Green 20” for engaging in a political campaign that threatened free speech.
So Schneiderman changed his tune. Instead of talking about the past, which was presumably what gave him cause to launch his investigation, the New York Attorney General told the New York Times in August 2016 that he was now more interested in the future. He was now justifying a probe he launched nearly a year earlier with a new set of talking points, citing the potential for what he deemed “massive securities fraud.”
In any other state, trying to apply a new justification retroactively for a year-long investigation may have led to legal rebukes. But in New York, the powerful Martin Act gives the state attorney general broad powers to investigate, even with little or no probable cause.
But that strategy also failed, and the “Exxon Knew” campaign continued to fizzle. By early 2017, Bloomberg News wrote that the campaign had “quietly faded” because “activists overreached.”
Undeterred and looking to revive the effort, Schneiderman’s office sent information to the press last week accusing Exxon Mobil of “sham” calculations regarding the potential cost of climate regulations. The accusations were given to reporters before they were filed in court, a fact the company used to declare that the “investigation is about politics and publicity, not law enforcement.”
— ExxonMobil (@exxonmobil) June 2, 2017
The latest change was such a departure from where Schneiderman began that even the Washington Post said, “New York Attorney General Eric Schneiderman has gotten very far away from where he started in his office’s investigation into ExxonMobil.”
Schneiderman’s latest claim is that Exxon publicly discussed the costs of climate regulations in 2030 with investors to present a fair market picture of their assets and future operations, based on the company’s own internal projections. But internally, Schneiderman argues, the company used a lower cost of compliance.
To be clear, Exxon Mobil’s assumption of a price on carbon is just that – an assumption. There is no agreement about of what the effective price of carbon will be in 2030 or beyond, or how it will be deployed in different locations. As President Trump’s recent withdrawal from the Paris climate accord has shown, nothing is certain.
Schneiderman began his probe by suggesting the company had publicly downplayed the risks of climate change, even though the company’s internal research suggested it was a problem. Now he is saying the exact opposite: Exxon’s internal assessments about climate change were more conservative than what the company presented publicly.
Schneiderman’s latest justification may not revive the #ExxonKnew campaign, but it does raise questions about the legal basis for the investigation in the first place – not just the one waged by the New York Attorney General, but also the probes led by attorneys general from the Virgin Islands and Massachusetts.
Last summer, Sam Kazman with the Competitive Enterprise Institute – one of many free-market groups that the AGs targeted in their investigations – called the campaign a “massive fishing expedition.”
A few months earlier, Kazman and CEI’s president, Kent Lassman, wrote in the Washington Postthat the Schneiderman-Gore press conference in March 2016 was about something more sinister than just addressing climate change:
ExxonMobil was singled out by name at the news conference, but the coalition appears to be following the script perfectly. Now it’s on to the fishing-expedition stage.
On April 7, our organization, the Competitive Enterprise Institute, was subpoenaed by coalition member and U.S. Virgin Islands Attorney General Claude Walker for all CEI material on climate change and energy policy, as well as information on our supporters, over 10 years beginning in 1997. The subpoena’s purported focus is on our contacts with ExxonMobil, a former CEI donor that publicly ended its support for us after 2005. Nonetheless, the subpoena calls for practically all of our material on climate change and energy policy, as well as information on any donors who directly or indirectly supported that work.
That’s one hell of a burden to slap on a nonprofit. The coalition’s purported justification is that the risks of global warming are so important and the scientific basis for them so settled that disputing them constitutes fraud. But the rhetoric of the AGs is blissfully oblivious to the First Amendment.
Kazman and Lassman also accused Schneiderman of “censorship and intimidation.”
Tim Worstall wrote in Forbes last year that Schneiderman would change the focus of his investigations as many times as it took to find something to pin on Exxon Mobil:
And here’s the problem with the regulatory state of today. In criminal justice we’ve got the double jeopardy rule – they can’t keep coming after you, you can be tried once and that’s it. But in the world of regulation there’re two problems. Firstly, everyone’s guilty of something – it is not possible to be 100% in accordance with the Federal Register. Secondly, there’s no double jeopardy rules. They find nothing on the first probe they can just switch focus. Here [Schneiderman’s] first focus was that Exxon knew all about climate change but didn’t tell anyone. That rather fizzled out when what Exxon knew was what everyone else knew from the scientific literature – not all that surprisingly as that’s where Exxon got it from. Then the move on to whether Exxon was properly taking account of the risks of significant carbon taxes being imposed – that rather fizzled when, as everyone should already have known they did and I did and I do economics not the oil business, Exxon pointed out that they already valued reserves and so on using a model containing rising carbon taxes.
So, now, let’s switch the focus once again and see if Exxon should have lowered the book value of reserves. Ho hum, – but why not eh? If Schneiderman can find something wrong then huge fines can be levied. Who knows, maybe Rex Tillerson curbed his dog on a fire hydrant once? How much would that be worth?
This latest announcement by Schneiderman led Tristan Brown, a lawyer and SUNY professor, to conclude that the New York AG’s investigation has failed to meet his supporters’ expectations:
Supporters of Mr. Schneiderman’s investigation into Exxon Mobil must be disappointed with the results thus far even as the argument by the company’s supporters that a fishing expedition is afoot gain[s] credibility. If the worst “fraud” (to use Mr. Schneiderman’s language) committed by the company was its decision to use an overly-conservative assumed carbon price rather than a very overly-conservative assumed carbon price, then I don’t see the investigation having much of an impact…
Time will tell if Schneiderman will once again change his justification, but it’s clear that the shifting goalposts say more about the merits of the investigation itself than any supposed wrongdoing by Exxon Mobil.