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ExxonMobil Moves to Block New York, Massachusetts Investigations

ExxonMobil Corp asked a Texas court on Monday to quash subpoenas issued by the attorneys general (AG) from New York and Massachusetts, who have demanded decades of internal documents as part of a wide-ranging probe.

In a motion, the nation’s largest natural gas producer and the world’s largest publicly owned oil and gas operator challenged a subpoena issued last year by New York AG Eric Schneiderman. The motion before Judge Ed Kinkeade in U.S. District Court for the Northern District in Fort Worth seeks to add Schneiderman to an existing lawsuit in which ExxonMobil is trying to prevent Massachusetts AG Maura Healey's demand for certain documents.

Schneiderman and Healey are part of a conspiracy against the company that has been fueled by "improper bias and unconstitutional objectives," according to ExxonMobil's motion.

Schneiderman "has publicly accused ExxonMobil of engaging in a 'massive securities fraud' without any basis whatsoever, and Attorney General Healey declared, before her investigation even began, that she knew how it would end: with a finding that ExxonMobil violated the law," the company stated.

Kinkeade last week gave ExxonMobil an opening to examine Healey's internal phone records and depositions to determine whether she may have acted in bad faith (see Daily GPI,Oct. 14). In his ruling, Kinkeade said if Healey had prejudged ExxonMobil and issued her subpoenas in bad faith, the Texas court could intervene, as the company is headquartered in Irving. However, before he rules on the injunction, he said he needed more information.

More than a dozen AGs have joined Schneiderman in his quest for documents about climate change research, as well as reserves estimates and impairments.

In November 2015, Schneiderman issued a sweeping subpoena to ExxonMobil "that demanded the production of essentially every document in the company's possession concerning global warming or climate change for a period of nearly 40 years," the memorandum stated. The subpoena was directed at ExxonMobil’s historic research on climate change, as well as its interactions with groups that the AG perceived as opposing "his preferred policy responses to climate change."

Within a week of issuing the subpoena, New York's top cop appeared on a PBS NewsHour segment and "explained that the focus of his investigation was ExxonMobil's purported decision to 'shift [its] point of view' and 'change tactics' on climate change after 'being at the leadership of doing good scientific work' on the issue during the 1980s." Schneiderman said his probe extended to ExxonMobil’s "funding [of] organizations."

Less than a month later, he reiterated that his investigation pertained to alleged "aggressive climate deniers," and claimed that ExxonMobil had funded these deniers.

As the investigation has unfolded events suggest that Schneiderman's inquiry had "more to do with politics than law enforcement," according to the brief. Climate change research no longer is the "focus of this investigation," but instead it has shifted to directing ExxonMobil to produce documents concerning how it estimates its oil and gas reserves.

"This sharp investigative shift shows that the attorney general is simply searching for a legal theory that will justify his efforts to use legal tools to pressure ExxonMobil to alter its position on matters of public concern."

Probing the reserves and impairments to assets "is particularly egregious because it cannot be reconciled with rules and regulations imposed by the Securities and Exchange Commission (SEC), which governs the estimation of proved reserves and the process for analyzing possible impairment of assets." The SEC prohibits producers from considering the impact of future regulations when estimating reserves but instead calculate them based on existing economic conditions, operating methods and government regulations.

The theory that Schneiderman has promoted requires ExxonMobil to adopt "his assumptions about the likelihood of possible future climate change regulations and then incorporate those assumptions into its estimation of proved reserves and its determination of whether an asset has been impaired. But that theory of 'massive securities fraud' cannot be reconciled with SEC rules and regulations."

Last month ExxonMobil confirmed that the SEC is investigating the value of its oil and gas reserves (see Daily GPI,Sept. 21). The SEC sought information and documents in August and the company is "fully complying" with the request. Rep. Lamar Smith (R-TX), who is holding hearings about the ExxonMobil probe by the AGs as chair of the House Committee on Science, Space and Technology, requested information about the SEC's separate investigation. However, SEC Chair Mary Jo White said she could not comment nor "acknowledge the existence or nonexistence of an investigation unless and until charges are filed."

In response to ExxonMobil's claim that advocacy groups were helping the AGs in their probe, the chief climate scientist of the Union of Concerned Scientists (UCS) Peter Frumhoff, said ExxonMobil "is complaining that a science advocacy organization provided scientific information to state attorneys general to inform their investigations.

“Sorry, ExxonMobil, this is what we do. And we are completely transparent about it. We gather and share scientific research to inform better decisions and policies. Your complaint is baseless. State attorneys general routinely consult with external experts in the course of their investigations. Like UCS, the New York attorney general is just doing his job. End of story."

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