An investigation into Exxon Mobil Corp.'s public statements about climate change uncovered "significant evidence" that the oil giant misled investors about how it calculates the effect of the Earth's warming on its assets.
In a court filing Friday, New York Attorney General Eric Schneiderman said Exxon for the past decade may not have been pricing in the future effect of greenhouse gas emissions as it claimed, telling concerned investors one thing and using "secret" numbers on the side.
"That evidence suggests not only that Exxon's public statements about its risk management practices were false and misleading, but also that Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public," Schneiderman said.
If true, the allegations risk inflaming investors who this week backed a nonbinding resolution urging the Irving, Texas-based company to consider whether it can prosper under strict greenhouse gas limits. While Exxon opposed the vote, it has accepted climate-change science and opposed President Donald Trump's decision to pull the U.S. out of the 2015 Paris climate accord.
Alan Jeffers, an Exxon spokesman, didn't immediately return a call for comment Friday. A message left with the company's media line wasn't immediately returned.
The allegations center on Exxon's claim that it applies so-called proxy costs to greenhouse gas emissions, which the company says "reasonably approximates the range of potential future government actions with respect to climate change," according to the filing. Schneiderman alleged that Exxon regularly cites the proxy costs to "assure investors that none of Exxon's projects or assets will be materially affected by future climate change-related regulations."
That claim may be vastly exaggerated, Schneiderman said in his filing in New York state court.
"Exxon has identified only a single, anomalous instance in which a proxy cost was actually applied," the attorney general said. "Exxon's documents reveal a widespread lack of awareness among employees of the proxy cost policy, or how it should be applied."
The use of proxy costs "may be a sham," and Exxon also has "secret internal versions of proxy costs," Schneiderman alleged. The company told an employee from its majority-owned Imperial Oil Ltd. not to apply them to its Canadian oil sands projects, according to the filing.
Exxon has refused to make the employee available to testify, "contending for the first time that it lacks control over its majority-owned subsidiary from which it has been producing documents for months," he said.
The proxy costs match a dollar amount to projected tons of greenhouse gases by a certain future year, according to the filing. In one example outlined in court documents, Exxon told investors it applied proxy costs that reached $60 per ton of greenhouse gases by 2030, and $80 per ton by 2040 for projects in developed countries. But documents provided by Exxon under a subpoena show that lower dollar amounts were being used internally, according to the filing.
"It appears that this discrepancy was known at Exxon's highest levels," John Oleske, a senior enforcement lawyer for New York, said in another filing on Friday.
Schneiderman claims an Exxon climate change manager wrote in a 2010 email that publicly disclosed proxy cost figures were "more realistic" than those used internally. Then-Chief Executive Officer Rex Tillerson wrote in an email in 2011 that he was "happy with the difference" because using a lower proxy cost was "conservative" from the perspective of investing in projects, such as carbon capture and storage, that allow Exxon to claim emissions reduction credits, according to the filing.
Exxon has repeatedly denied wrongdoing and claims the state investigation was started in "bad faith" because the outcome had been predetermined based on ideological coordination with environmental groups and even former Vice President Al Gore, an outspoken opponent of climate change.
Schneiderman and his Massachusetts counterpart, Maura Healey, have been investigating since 2015 whether Exxon misled the public and investors by withholding information about how climate change could affect the company's finances. Exxon sued to block their subpoenas for millions of pages of documents, while Republicans in Washington have sought to derail investigations from Capitol Hill.
Schneiderman also referred to the existence of a second Exxon alias email account that was discovered in the course of the investigation, months after he accused Exxon of failing to disclose Tillerson's secondary email account. He used the alias "Wayne Tracker" to discuss sensitive topics with the board.
Business on 06/03/2017