• 4 minutes WTI Heading for $60
  • 6 minutes OPEC Builds Case For Oil Supply Cut
  • 15 minutes Major News---Bigger Picture
  • 39 mins Good Sign for US Farmers: Soybean Prices Signals US-China Trade Deal Progress
  • 13 hours Starbucks slashing its corporate workforce
  • 4 hours Your idea of oil/gas prices next ten years
  • 7 hours Plastic Myth-Busters
  • 33 mins Here We Go Again: EU Will Hit Back If U.S. Imposes Car Tariffs
  • 5 hours Could EVs Become Cheaper than ICE Cars by 2023?
  • 1 day Solid-State Batteries At Least a Decade Away From Mass Adoption
  • 11 hours what's up with NG?
  • 16 hours Zohr Giant Gas Field Increases Production Six-Fold
  • 1 hour Soybean sale to China down 94%
  • 2 days Big Brother Is Watching You: Chinese ‘Gait Recognition’ Tech IDs People By How They Walk
  • 11 hours Pros and Cons of Coal
  • 12 hours WTI @ 69.33 headed for $70s - $80s end of August

Breaking News:

Crude Build Halts Oil Price Recovery

Alt Text

Oil Prices Hit Multi-Month Lows

Oil prices have hit a…

Alt Text

Are Oil Markets Overreacting?

Russian Energy Minister Novak tried…

Alt Text

The Future Of Mexico’s Energy Industry Is In The Air

Mexico’s president-elect has not stated…

Nick Cunningham

Nick Cunningham

Nick Cunningham is a freelance writer on oil and gas, renewable energy, climate change, energy policy and geopolitics. He is based in Pittsburgh, PA.

More Info

Trending Discussions

New York Sues ExxonMobil For Investor Fraud

The New York attorney general is suing ExxonMobil, arguing that the oil major misled investors regarding its risks related to climate change.

The case amounts to an allegation that Exxon defrauded its investors by downplaying the financial risks the company faces regarding climate regulation. The New York attorney general’s office has already investigated the oil company for several years.

Unlike other lawsuits, this one does not focus on Exxon’s role in contributing to climate change. Other cases hinge on Exxon’s contribution, as one of the largest oil companies in the world, to the burning of fossil fuels. In this case, the NY AG is focusing on investor fraud, which hinges on the company knowingly misleading investors as to the risks related to climate regulation.

As the New York Times reports, ExxonMobil has assured investors that it can handle a carbon-constrained world and that it will continue to operate along as business-as-usual trajectory. The company is continuously reducing emissions in its operations, Exxon argues, and is investing more in fuels like natural gas that are comparatively cleaner and should thrive even in a world of more stringent regulation.

Exxon’s investments have been guided by a “proxy cost” to account for likely forthcoming regulations or taxes on carbon. After factoring in that shadow cost of carbon, if a project still made economic sense, Exxon could justify the investment as one that would still do well in the future, even if governments cracked down on carbon.

However, New York’s attorney general argues that Exxon had “discounted the potential future costs of climate policies,” as the New York Times puts it, which means that it was telling investors that it isn’t as financially exposed to potential regulation as might actually be the case. It minimized the proxy cost, using two sets of accounting figures, the suit alleges, which amounted to defrauding shareholders. Ultimately, if the real proxy cost is much higher – if likely future costs from regulations and/or taxes are much steeper than Exxon let on – then the company may not actually be able to produce all of the oil and gas that it says it can. Related: Fact Checking Bernie Sanders On Renewable Energy

Or, put more simply, the company’s value is not what it says it is. Thus, the attorney general says, it is ripping off shareholders.

The suit cites the case of an oil sands investment in Canada. Exxon did not apply an appropriate proxy cost, which led to the company understating the long-term impact on cash flow by $25 billion.

“Exxon built a facade to deceive investors into believing that the company was managing the risks of climate-change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations,” New York Attorney General Barbara Underwood said in a statement.

“Investors put their money and their trust in Exxon, which assured them of the long-term value of their shares, as the company claimed to be factoring the risk of increasing climate change regulation into its business decisions,” she said. “Yet as our investigation found, Exxon often did no such thing.” The case alleges that former Exxon CEO Rex Tillerson was involved in these practices. The NY AG’s lawsuit was filed in the New York Supreme Court. Related: The Quiet Swing Producers: Iraq, Libya, Nigeria

A spokesman for Exxon argues that the New York attorney general has “doubled down on its tainted, meritless investigation by filing a complaint against Exxon Mobil.” The company says that the case is baseless, and the more than three years of investigating has turned up nothing.

The U.S. SEC had been looking into the company a few years ago, pursuing a case that was somewhat similar. That case was based on the notion that Exxon refused to write down its oil and gas reserves, even though oil prices had crashed in the years following the 2014 market meltdown. Much of the rest of the oil industry had written down assets, acknowledging that some reserves couldn’t be produced in such a poor pricing environment. The SEC was investigating whether or not Exxon’s refusal to do so amounted to fraud as well. The case was dropped under the Trump administration.

There are a handful of other separate lawsuits against the oil majors, some of which have failed to advance. Some cities and counties have sued oil companies for damages related to the expenses they will incur over sea level rise. Also, a group of young people are suing the U.S. government over its failure to adequately address climate change, which violates their “fundamental constitutional rights to freedom from deprivation of life, liberty, and property.” This case was just delayed by Supreme Court Chief Justice John Roberts.

It is unclear if the latest case from the New York Attorney General will prove more dangerous for ExxonMobil. At a minimum, it will tie the company up in court and add new legal expenses.

More important is the reputation damage that Exxon will continue to incur, which is not a trivial matter, as Liam Denning of Bloomberg Opinion points out. Oil companies are not the darlings of Wall Street in the way they used to be, so investors could grow increasingly wary of the sector. Divestment campaigns have already inflicted a toll in terms of reputation, but as time goes on, the oil industry will become increasingly targeted. Moreover, the more reputational damage a highly visible company like ExxonMobil receives, the more politically viable future climate regulation becomes. At some point, investors will abandon ship.

By Nick Cunningham of Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment
  • Mitch on October 25 2018 said:
    Seeing as this suit also is using the "might happen in the future" as other suits have used, it will be thrown out. Governments and regulations are unpredictable over the long term in many democratic countries.

    As for the young person suit... imagine if the US government banned fossil fuels starting in 2025. Fees and costs to fund other energy forms would eat up all of our disposable income. And more
  • Funny on October 26 2018 said:
    Gee, Did we forget to put valves on the pipelines to New York?
  • Randy Verret on October 26 2018 said:
    Anyone who has followed this case the past 3 years realizes that the New York AG should be embarrassed. Does not seem to matter that after producing over 4 million pages of internal documents NO EVIDENCE of any Exxon Mobil conspiracy on climate change. ALL SMOKE and very little fire. This latest attempt, I'd wager, will end up with the same result. If the SEC dismissed allegations earlier this year of alleged shareholder fraud, then this case will likely end up in the trash bin (as well).

    The ongoing "vilification program" of all things fossil fuels continues unabated. Masterful disinformation campaign in recent years by the activists & environmental NGO's and their political enablers. BRAVO! Great theater. Problem is that this isn't about drama, it's about PHYSICS. So, rather than continuing to push peas around on our plate, I offer a simple energy transition challenge to the endless & ever growing list of detractors of fossil fuels: What CLEAN, SCALABLE, SUSTAINABLE alternative do you recommend to replace 95% of our transportation fuels, 65% of our electric generation capability & HUNDREDS of useful consumer products EACH & EVERYONE of us use in modern civilization?

    ANYONE can be a critic. It takes thoughtful & informed citizens to engage in intelligent debate and look for CONSTRUCTIVE solutions. Oversimplification, misguided assumptions & demonization of energy PROVIDERS does not contribute (ultimately) to a long needed (rational) U.S energy policy. The sooner we start asking the RIGHT QUESTIONS, then we will more effectively advance the coming 21st century energy transition...
  • John Brown on October 26 2018 said:
    This is nothing but very biased, unfair, Democrat, political legal harassment.

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News