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Showdown Between Exxon And State AGs Has Big Implications For Corporate America
As Exxon hosts its annual shareholder meeting, a legal battle looms over whether the company disclosed to investors what it knew about climate change. If successful, the investigation by two state AGs could serve as a testament to the power states have in guarding against corporate climate abuse, writes EPIC's Mark Templeton.
Exxon Mobile’s new CEO Darren Woods will hold his first annual meeting with shareholders on Wednesday, and climate change will be on the agenda. That’s not new for Exxon, which—like many other international oil majors—has grown accustomed to hearing calls from activist shareholders to reduce its carbon emissions and acknowledge climate risk. Yet, there is a unique element this time around: the meeting comes in the midst of an investigation by the New York and Massachusetts Attorneys General over whether Exxon fully disclosed to investors what it knew about the impacts of climate change.
Exxon’s role in—and understanding of—climate science has received a fair amount of public attention, including an environmentalist campaign aimed at demonstrating that Exxon knew about climate risks for decades. However, the implications of the legal case are actually far more expansive in scope than a simple examination of what Exxon knew or didn’t know, and when. On a broader level, it is a fairly significant test of the ability of states attorney generals to hold corporations accountable for their actions related to climate, with far-reaching consequences for the United States and global energy system.
If you haven’t been following the case, here’s a recap.
New York’s Martin Act—a law similar to, but in some ways more stringent than, federal securities laws—authorizes the New York Attorney General to investigate companies thought to be defrauding investors. Under this authority, in 2013 New York AG Eric Schneiderman launched an investigation of Peabody Energy—then the largest publicly-traded coal company in the world—into whether the company made false statements to shareholders about the financial and regulatory risks posed by climate change. The eventual settlement between AG Schneiderman and Peabody led to more robust public disclosures.
Two years later, a series of investigative reports questioned whether Exxon fully disclosed the risks to its business posed by climate change. Under his broad Martin Act authority, AG Schneiderman issued a subpoena to Exxon in late 2015, seeking documents or information relevant to this possible deceptive conduct. His Massachusetts counterpart, AG Maura Healey, launched a similar investigation a few months later.
In response, Exxon produced more than 1 million pages of internal documents before ultimately halting further responses. Last July, Texas Representative Lamar Smith, Chair of the U.S. House Committee on Science, Space, and Technology, followed up by issuing his own subpoenas to the Attorneys General, demanding the production of documents related to their investigation. Smith claimed he was trying to determine whether the AGs were seeking to “stifle scientific discourse, intimidate private entitles and individuals, and deprive them of their First Amendment Rights.”
The AGs are not complying with Smith’s subpoena, saying that in this case Congress has no authority to proscribe the conduct of state law-enforcement officials. And, although Exxon has challenged the AG’s subpoenas, last week a NY appeals court upheld an earlier state court decision requiring Exxon to turn over the documents. Exxon says it is considering next steps, which may mean appealing the decision.
Who is on the right side of the law?...