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Trial begins for Exxon, accused of misleading investors on climate change costs

Eddie Burkhalter

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Editor’s note: Eddie Burkhalter is a staff writer at Alabama Political Reporter and a fellow at the Poynter-Koch Media and Journalism Fellowship. The program is a partnership between the Poynter Institute and the Charles Koch Institute. Charles G. Koch is director of the Charles Koch Institute and CEO of the multinational petroleum company Koch Industries.

An historic trial began Tuesday in New York to determine whether Exxon Mobil Corporation intentionally mislead investors about the costs of climate change to the giant oil company.

Alabama attorney generals since 2015 have fought on behalf of Exxon in the climate change challenges, writing to courts in part that they believed such cases were attacks on Exxon’s First Amendment protection of free speech, and that courts shouldn’t be intervening in matters handled by the Environmental Protection Agency. 

The complaint filed Oct. 24, 2018, in New York alleges that Exxon used two sets of books. One set, disclosed publicly to investors, showed the company was using a “cost of carbon” estimate of $80 per ton to pay for the cost of climate change regulation, but in private the company was doing no such thing. The complaint alleges Exxon was using a much lower “cost of carbon” estimate, thereby hiding the vulnerability of the company’s assets and inflating stock prices. 

New York Attorney General Letitia James estimates that Exxon’s actions cost shareholders between $476 million and $1.6 billion. 

“This case seeks redress for a longstanding fraudulent scheme by Exxon, one of the world’s largest oil and gas companies…concerning the company’s management of the risks posed to its business by climate change regulation,” New York wrote in a complaint. 

“The New York Attorney General’s allegations are false,” Exxon said in a statement. “We tell investors through regular disclosures how the company accounts for risks associated with climate change. We are confident in the facts and look forward to seeing our company exonerated in court.”

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The trial is the first such legal battle for a major greenhouse gas producer over climate change, and could set the stage for many more such lawsuits. 

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Alabama attorneys general push back

Former Alabama Attorney General Luther Strange in May 2016  joined the Texas Attorney General in support of a lawsuit by Exxon aimed at stopping a separate investigation by U.S. Virgin Island Attorney General into whether the company had mislead the public and its shareholders about the cost of climate change regulation to Exxon. 

In June 2017 Alabama Attorney General Steve Marshall joined the top lawyers in 11 other states, all members of the Republican Attorneys General Association (RAGA), in a court filing on behalf of Exxon in the company’s lawsuit against investigations by attorneys general in New York and Massachusetts. 

RAGA, a tax exempt 527 political organization, was formed in 1999 by former Alabama Attorney General Bill Pryor, and the nonprofit quickly began amassing donations from large corporations and making campaign contributions to Republican attorney general candidates. 

Marshall in June 2018 joined 14 other Republican attorneys general, all RAGA members, in asking a federal judge to intervene in the lawsuit for which Exxon’s trail began Tuesday, arguing in part that courts shouldn’t be involved in punishing an industry regulated by the Environmental Protection Agency, according to Forbes. 

Strange in 2014 accepted a $50,000 campaign contribution from RAGA’s political action committee, made through a separate Political Action Committee registered in Alabama. Strange returned the $50,000 after Alabama Media Group asked about the money transfer, but said the contribution didn’t violate state law banning transfers between PACs, AL.com reported. 

Marshall, an executive committee member of the Republican Attorneys General Association, accepted $735,000 in campaign contributions from the Republican Attorneys General Action Fund PAC in 2017. 

Marshall’s opponents during that election cycle accused him of accepting an illegal PAC-to-PAC contribution, but the Alabama Ethics Commission declined to act on a complaint on the same. 

Marshall’s campaign told reporters at the time that the donation was legal, as the state’s law doesn’t apply to federal PACs, although, as AL.com noted, the Alabama Ethics Commission director had told other campaigns that such contributions were illegal. 

According to the Center for Media and Democracy (CMD), a progressive nonprofit watchdog group, ExxonMobile has contributed at least $100,000 to RAGA since 2015. 

In total, fossil fuel companies and special interest groups connected to them have donated more than $2.5 million to RAGA since 2015, according to CMD, including $350,000 from Koch Industries, $85,000 from Southern Company, $378,250 from the American Coalition for Clean Coal Electricity, and $250,000 from Murray Energy. 

Former Alabama Attorney General Luther Strange spoke alongside fossil fuel industry lobbyists at a closed-door meeting at the July 2016 summit hosted by RAGA in Colorado, according to audio recordings of the event, published by CMD

In attendance and another speaker at the meeting was the notable climate change denier, Myron Ebell, who is the director of Competitive Enterprise Institute (CEI), a libertarian think tank that promotes climate change denial and receives funds from the fossil fuel industry, including Exxon, which contributed at least $2.1 million to the group until it stopped doing so in 2007.

Dark money contributions to CEI from the secretive Donors Trust and Donors Capital Fund ballooned in the years following 2007, however. CEI received $4.3m over three years from those two dark money funds, according to The Guardian. Among the Donors Trust and Donors Capital Fund’s biggest contributors, according to The Independent, have been indirect contributions from Charles Koch, the billionaire CEO of Koch Industries. 

“So right now the climate inquisition is in retreat,” Ebell told attendees, according to the transcript. “It’s in retreat because of what ExxonMobil has done. What CEI has done. And what a number of the attorneys general here today have done, in supporting our rights to free speech and freedom of association.”

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