Cities and counties who are suing energy companies for the risks posed by climate change may have downplayed those risks themselves, according to a petition filed yesterday in a Texas District Court, raising the prospect of potential securities fraud.

The Wall Street Journal reports that ExxonMobil petitioned the court yesterday to allow it to depose and obtain documents from public officials involved in the various climate change lawsuits recently brought by several California communities against the energy industry, as well as #ExxonKnew campaigner Matt Pawa, who is representing San Francisco and Oakland in their lawsuits. The legal filing accuses the communities of either exaggerating the risks of climate change in their lawsuits against energy companies or downplaying the risks of climate change when issuing municipal bonds to investors.

Discrepancy on Risks of Climate Change

Although the plaintiffs claimed in their lawsuits that climate change poses a massive and imminent risk to their communities, they told a very different story when they were persuading investors to buy their municipal bonds. ExxonMobil’s petition this morning is the first time anyone has highlighted this discrepancy:

“…a number of California municipal governments recently filed civil tort claims against ExxonMobil and 17 other Texas-based energy companies. In those lawsuits, each of the municipalities warned that imminent sea level rise presented a substantial threat to its jurisdiction and laid blame for this purported injury at the feet of energy companies.

“Notwithstanding their claims of imminent, allegedly near-certain harm, none of the municipalities disclosed to investors such risks in their respective bond offerings, which collectively netted over $8 billion for these local governments over the last 27 years. To the contrary, some of the disclosures affirmatively denied any ability to measure those risks; the others virtually ignored them. At least two municipal governments reassured investors that they were ‘unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect…’

“The stark and irreconcilable conflict between what these municipal governments alleged in their respective complaints and what they disclosed to investors in their bond offerings indicates that the allegations in the complaints are not honestly held and were not made in good faith.” (emphasis added)

Comparison of climate change statements in Oakland’s lawsuit and its bond offerings

It All Goes Back to La Jolla

The filing accuses the California communities of following the playbook created by anti-fossil fuel activists at the infamous 2012 conference held in La Jolla, Calif., where activists laid out their plans to bring legal action against energy companies. The La Jolla participants believed civil litigation, like the California lawsuits, could achieve their goals. “Even if your ultimate goal might be to shut down a company,” one attendee said, “you still might be wise to start out by asking for compensation for injured parties.”

The California lawsuits even go so far as to cite the flooding modeling provided by one of the La Jolla activists. The Marin County complaint, for example, states, “[T]here is a 99% risk that the County experiences a devastating three-foot flood before the year 2050, and a 47% chance that such a flood occurs before 2030.” The source they cite for these figures is Climate Central, a donor-supported group which was represented by Claudia Tebaldi at the La Jolla conference. In fact, the figures cited by Marin County in their complaint rely on modeling by Tebaldi, and modeling is easy to manipulate to show exactly what you want it to show.

Matt Pawa, a lawyer and member of the #ExxonKnew campaign, was a featured presenter at the La Jolla conference. In 2015, he followed through on the La Jolla playbook by sending a memo to billionaire environmental activist Tom Steyer, proposing that Steyer push California communities to bring climate litigation against energy companies. Two years later, Pawa was hired by San Francisco and Oakland to lead their lawsuits against oil and gas companies, following a $30,000 donation from Steyer to the mayor of San Francisco.

Pawa also attended a secret closed-door meeting at the Rockefeller Family Fund (RFF) offices in January 2016 to discuss the “[g]oals of an Exxon campaign.” Those goals included:

  • “To establish in [the] public’s mind that Exxon is a corrupt institution that has pushed humanity (and all creation) toward climate chaos and grave harm.”
  • “To delegitimize [ExxonMobil] as a political actor.”
  • “To force officials to disassociate themselves from Exxon, their money, and their historic opposition to climate progress, for example by refusing campaign donations, refusing to take meetings, calling for a price on carbon, etc.”
  • “To drive divestment from Exxon.”

    Comparison of climate change statements in San Mateo County’s lawsuit and its bond offerings

The activists at the RFF meeting also debated “the main avenues for legal actions & related campaigns,” which included “AGs,” “DOJ,” and “Torts.” They discussed which of those options had the “best prospects” for “successful action,” “getting discovery,” and “creating scandal.”

California’s Hypocrisy 

ExxonMobil’s filing also identified an example of hypocrisy in California: the state recently “sued the federal government for allegedly shortchanging California taxpayers of the fair market value of the fossil fuels extracted from the state’s public lands.” ExxonMobil continues:

“In this lawsuit, California has expressed an unambiguous financial interest in the continued development of the state’s natural energy resources, and it has acted zealously to protect that financial interest. Far from seeking to bar energy companies from continuing to operate in the state, California endeavors to increase the share of profits it receives from those operations. As a matter of official policy, California supports continued extraction of fossil fuel from within the state because it provides benefits to the state that exceed any perceived costs.” (emphasis added)

In other words, California wants all of the benefits of fossil fuels – namely cheap, reliable energy and tax revenue – but it doesn’t want responsibility for any of the perceived costs. The plaintiffs specifically refuse to acknowledge that climate change, and any potential consequences of climate change, are a result of their own “policies, practices, and preferences,” according to ExxonMobil’s petition:

“The seven municipalities suing energy companies are not only eager consumers of energy, enjoying the benefits of the lifestyle it facilitates, but they also emit substantial quantities of greenhouse gases generated by activities promoted by state and local government…

“San Francisco reported that it emitted 4.4 million metric tons of carbon dioxide equivalent in 2015. The San Francisco International Airport alone emitted 10.5 million metric tons of greenhouse gas in a single year.”

However the lawsuits shake out, the revelations this week indicate that the plaintiffs may have opened themselves up to a costly legal battle that they likely never saw coming – and it will be taxpayers living in those communities picking up the tab.