New York’s AG Takes New Aim at Exxon Over Climate Change Accounting Methods

by | Jun 5, 2017

Exxon Mobil Corp. is in the spotlight again now that New York’s attorney general is alleging in new court documents that the oil giant’s internal accounting practices were a “sham” — all tied to how it had been disclosing its climate risks to investors. Specifically, the state’s top prosecutor said that its internal figures differed from those it had provided the public and his office named Rex Tillerson who had been its CEO but who is now US Secretary of State.

The court documents say that between 2010 and 2014, the company used “secret internal figures” that were less than the numbers it had provided to investors: Internally, it applied a cost of $40 per ton of CO2 in 2030 while externally, it said it had been using $60 a ton in 2030. That made the company’s financials look better, the AG alleges.

“Exxon’s documents show that former Chairman and CEO Rex Tillerson was specifically informed of, and approved of, this inconsistency,” Attorney General Eric Schneiderman said, in the filing. “Exxon may still be in the midst of perpetrating an ongoing fraudulent scheme on investors and the public.” 

According to the AG’s office, the information became available to it as it was looking closely at other accusations — that Exxon had apparently known of the ill-effects resulting from climate change but that it had kept that information hidden from public view. As a result of that investigation, Exxon has turned over millions of documents, resulting in the latest allegations.

It’s a bit arcane. But the AG says that Exxon showed something called “proxy cost” to account for how it would represent climate risks to investors. But Schneiderman said that the oil giant may not have applied that cost, adding that the exercise may have been a “sham.” 

“Exxon’s own documents suggest that if Exxon had applied the proxy cost it promised to shareholders, at least one substantial oil sands project may have projected a financial loss, rather than a profit, over the course of the project’s original timeline,” Schneiderman wrote.

The US Securities and Exchange Commission is also examining how Exxon accounted for potential climate change risks and exactly what it has been disclosing to investors.

For Exxon’s part, it has publicly backed the Paris climate accords and said that climate change is real. Secretary of State Tillerson had encouraged President Trump to remain in the global agreement, which is advice that the president didn’t listen to. Exxon’s own shareholders, meanwhile, passed last week a non-binding resolution to make the company reveal even more information about its climate exposure.

As it relates to the latest investigation by New York, Exxon said that it has done nothing wrong and that the attorney general is playing politics. “The fact that the Attorney General gave its filing to the media before the court illustrates, once again, this investigation is about politics and publicity, not law enforcement,” the company said in a statement

“For many years, ExxonMobil has applied a proxy cost of carbon to its investment opportunities, where appropriate, in order to anticipate the aggregate financial impact of potential future government policies,” it added. “ExxonMobil’s external statements have accurately described its use of a proxy cost of carbon, and the documents produced to the Attorney General make this fact unmistakably clear.”  

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