ExxonMobil Corp. has asked a Texas court to quash a subpoena issued last month that is seeking decades of documents for an investigation into whether the supermajor covered up information about how its fossil fuels production may contribute to climate change.
The investigation violates ExxonMobil's "constitutional rights to speak freely and be protected from unreasonable searches and seizures," according to the lawsuit to block a subpoena by U.S. Virgin Islands Attorney General (AG) Claude Earl Walker.
"The chilling effect of this inquiry, which discriminates based on viewpoint to target one side of an ongoing policy debate, strikes at protected speech at the core of the First Amendment," said ExxonMobil's legal team. Walker "issued the subpoena without the reasonable suspicion required by law and based on an ulterior motive to silence those who express views on climate change with which they disagree."
Walker earlier this year joined an investigation of ExxonMobil that was launched in November by New York AG Eric Schneiderman (see Daily GPI, Nov. 6, 2015). Massachusetts also is part of the probe. Schneiderman has claimed that ExxonMobil misled investors and withheld internal research ongoing for years into climate change risks from fossil fuels.
Schneiderman has subpoenaed ExxonMobil's financial records, emails and other documents that date back to the 1970s. New York's Martin Act passed in 1921 gives the state AG extraordinary powers and discretion to investigate financial fraud, exceeding those given any regulator in any other state. Several politicians and conservation groups also have called for a probe (see Daily GPI, Oct. 23, 2015).
‘Flagrant’ Misuse of Power
ExxonMobil's filing said Walker's demand for records is a "flagrant misuse of law enforcement power" that violates the company's "constitutionally protected rights of freedom of speech, freedom from unreasonable searches and seizures, and due process of law and constitute the common law tort of abuse of process."
Walker claims that ExxonMobil may be violating two Virgin Island laws, by allegedly obtaining money under false pretenses and conspiring to do so. However, the Irving, TX-based producer said it has no "physical presence" in the Virgin Islands, and therefore its courts have no jurisdiction. In addition, ExxonMobil said it had "widely and publicly confirmed" that it recognizes the risk of climate change and "its potential impacts on society and ecosystems may prove to be significant."
ExxonMobil since 2007 has published information about the business risks of climate change in its annual U.S. Securities and Exchange Commission (SEC) 10-K filings, corporate citizenship reports and other documents provided to shareholders. About a decade ago ExxonMobil also began using a proxy cost for carbon in its internal planning.
As to why ExxonMobil has turned its legal focus to the Virgin Islands was not disclosed. However, earlier this month the Competitive Enterprise Institute (CEI), a conservative think tank and energy industry ally, said Walker also had filed a lawsuit in U.S. District Court for for the District of Columbia demanding to see 10 years of documents and records of donors and activities involving CEI's climate change policy.
CEI said it would "vigorously fight to squash" the subpoena as it "requests a decade's worth of communications, emails, statements, drafts and other documents regarding CEI's work on climate change and energy policy, including private donor information. It demands that CEI produce these materials from 20 years ago, from 1997-2007, by April 30, 2016."
The CEI called the effort "an intimidation campaign to criminalize speech and research on the climate debate," led by Schneiderman and former Vice President Al Gore. CEI General Counsel Sam Kazman said the lawsuit was "an affront to our First Amendment rights of free speech and association for AG Walker to bring such intimidating demands against a nonprofit group. If Walker and his allies succeed, the real victims will be all Americans, whose access to affordable energy will be hit by one costly regulation after another, while scientific and policy debates are wiped out one subpoena at a time."
During a press conference to discuss the subpoena, Walker said the fossil fuel investigation "could be David versus Goliath, the Virgin Islands against a huge corporation. But we will not stop until we get to the bottom of this and make it clear to our residents as well as the American people that we have to do something transformational."
Pressure on ExxonMobil and many other producers, large and small, has been unrelenting in recent months. For years, ExxonMobil has faced activists at its annual meetings who have pressed for more environmental disclosures. This month a cache of industry documents also purports to suggest that the energy industry knew about fossil fuel impacts to the environment as long as 60 years ago. The Center for International Environmental Law, an activist group, published the documents on its website.
"From 1957 onward, there is no doubt that Humble Oil, which is now Exxon, was clearly on notice" about increased carbon dioxide emissions, according to director Carroll Muffett. The documents also suggest, he said, that the industry began to work years ago against regulating air pollutants.
The allegations are ludicrous, an ExxonMobil spokesman said.
"To suggest that we had definitive knowledge about human-induced climate change before the world’s scientists is not a credible thesis," said Alan Jeffers.
But it's not only unsubstantiated documentation that is vexing producers, and in particular, ExxonMobil. Investors holding more than $5 billion total in ExxonMobil shares also are urging the company and many of its peers yet again to disclose how their businesses would be affected by warming atmospheric temperatures. More than 30 investment groups, including the Church of England, New York State Common Retirement Fund, Vermont State Employees' Retirement System, the University of California Retirement Plan and the Brainerd Foundation, have committed support to the climate change resolutions. The California Public Employees Retirement System (CalPERS) also for the first time has begun an effort to push for climate change disclosures.
Royal Dutch Shell plc and BP plc have embraced similar shareholder resolutions, and last year the European majors joined Mexico's Petroleos Mexicanos and seven other global exploration companies, declared their support for an effective climate change agreement (see Daily GPI, Oct. 16, 2015). While some U.S.-based independents have embraced more transparency in their operations, climate change resolutions never have exceeded 35% in support at ExxonMobil, or Chevron Corp., annual meetings.
Climate Change Now ‘Mainstream,’ Says CalPERS
"This isn't an environmental issue," said CalPERS' Anne Simpson, investment director of global governance. "This has moved into the mainstream following the Paris agreement" last December, in which almost 200 countries, including the United States and Canada, pledged to maintain the rise in average global temperatures to less than 2 degrees C above pre-industrial levels (see Daily GPI, Dec. 14, 2015).
In March, the SEC dismissed requests by ExxonMobil and Chevron to block a repeat of the resolutions (see Daily GPI, March 24). Last May their shareholders once again overwhelmingly defeated resolutions to develop quantitative goals to reduce greenhouse gas emissions and to install environmental experts on their boards (see Daily GPI, May 28, 2015).
In this year's annual meeting proxy statements, ExxonMobil and Chevron have recommended votes against mirror initiatives. One shareholder proposal submitted by the Sisters of St. Dominic of Caldwell, NJ, which holds 200 shares of ExxonMobil, requested a policy to limit global warming to 2 degrees C to "assert moral leadership with respect to climate change."
"The board believes the company has an obligation to shareholders to continue to invest in economically attractive energy sources in an environmentally responsible manner," ExxonMobil said in its recommendation to vote against the proposal. "The board further believes the company’s capabilities are best utilized finding practical, achievable solutions to address climate change risks consistent with the company’s mandate, rather than focusing on a future global temperature stabilization outcome that ultimately will be dictated by many variables beyond the company’s control."
The company, it said, has for many years "held the view that a revenue-neutral carbon tax is the best option to fulfill these key principles. Instead of subsidies and mandates that distort markets, stifle innovation and needlessly raise energy costs, a carbon tax could help create the conditions to reduce greenhouse gas emissions in a way that spurs new efficiency and technology solutions at the lowest cost to society and consumers."
Two years ago ExxonMobil published "Energy and Carbon -- Managing the Risks," to provide shareholders an enhanced description of global energy demand and supply, climate change policy and carbon asset risks (see Shale Daily, Oct. 1, 2014). The report also describes how the company integrates consideration of climate change risks into planning processes and investment evaluation. The board said it was "confident that the company’s robust planning and investment processes adequately contemplate and address climate change related risks, ensuring the viability of its assets..."