October 25, 2018 Read More →

New York attorney general sues ExxonMobil on climate risk reporting

The Washington Post:

New York Attorney General Barbara D. Underwood sued ExxonMobil on Wednesday, accusing the oil giant of defrauding investors about the financial risks of climate change and lying about how it was calculating potential carbon costs.

The New York lawsuit accuses ExxonMobil of assuring its investors that it was using theoretical prices for carbon in evaluating projects — from $20 to $80 a ton depending on the country — when in fact it often used a lower price or none at all.

The lawsuit said that “this fraud reached the highest levels of the company,” including former Exxon chief executive and former secretary of state Rex Tillerson, who the lawsuit said knew for years that the company “was deviating” from public statements and was using two sets of calculations about future regulation of greenhouse gas emissions.

“The attorney general is effectively charging them with keeping two sets of books — one for internal purposes, one for external,” said Tom Sanzillo, director of finance at the Institute for Energy Economics & Financial Analysis, which conducts research on energy and the environment. “The result is a distortion of the value of the company.”

The lawsuit says that ExxonMobil’s dual accounting calculations had a huge impact on the purported value of the company. It says that the company’s failure to apply an internal price on carbon at 14 of its oil sands projects in Alberta, Canada resulted in undercounting future greenhouse gas expenses by more than $25 billion over the lifetime of the project. It also said that the oil giant did not apply any such proxy costs to the company’s reserves at Cold Lake, a major oil sands asset in Alberta, “resulting in an overestimation of its projected economic life by 28 years.”

The New York attorney general’s suit zeros in on the company’s financial reporting. “Exxon told investors that it accounted for the risk of governmental regulation of climate change by applying a ‘proxy cost’ of carbon,” the attorney general’s office said in a statement. “Exxon told its investors that it used that proxy cost in its investment decisions, corporate planning, estimations of company oil and gas reserves, evaluations of whether its long-term assets remain viable, and estimations of future demand for oil and gas.” Yet, the complaint alleges, “Exxon frequently did not apply the proxy costs as represented in its business activities. Instead, in many cases Exxon applied much lower proxy costs or no proxy cost at all.”

More: New York sues ExxonMobil, saying it ‘misled’ investors about climate change risks

 

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