On Wednesday, New York Attorney General Barbara D. Underwood sued the nation's largest petroleum company, ExxonMobil, for allegedly lying to investors about the financial risk climate regulations posed to its business.
Underwood is relying on a particularly powerful, nearly 100-year-old securities law unique to New York. Other lawsuits by state and local governments — including three counties and cities in Colorado and the entire state of Rhode Island — do not have a similar measure backing them up.
The New York statute gives the state's attorney general sweeping power to investigate and prosecute companies for potential financial fraud.
"Contrary to Exxon's attempts to spin this as a political witch hunt," said Patrick Parenteau, an environmental law professor at Vermont Law School, "this is a very serious enforcement action alleging illegal conduct that reaches to the highest levels of the corporate structure."
For the past three years, Underwood and her predecessor as New York's top prosecutor, Eric Schneiderman, have used their authority under the Martin Act of 1921 to probe the company for documents related to its scientific research into climate change and to business decisions it made because the Earth is warming.
The New York AG's office says it has found evidence that ExxonMobil kept two sets of numbers — one internal and one external — for calculating the cost of future greenhouse gas regulations. Doing so, the office alleged, gave investors the false impression that the company was on better financial footing than it actually was.
ExxonMobil told The Post's Steven Mufson the allegations are “baseless” and “a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing.”
ExxonMobil and other oil companies have succeeded in court swatting down other lawsuits from left-leaning municipalities.
At the beginning of the year, New York City separately filed a lawsuit against ExxonMobil and four other oil majors for allegedly concealing the consequences of climate change to the public. The district court judge threw out the lawsuit in July, saying that climate change should be dealt with by Congress and the White House — not by the court system. A lawsuit filed by the cities of San Francisco and Oakland suffered a similar defeat over the summer.
In those suits, the cities sought financial damages that would have helped them prepare for coastal flooding and other climate impacts.
But the state of New York isn't seeking those sorts of damages to average citizens. Rather, it wants to protect ExxonMobil's own investors.
And New York, the nation's investing epicenter, has significant power to protect stockholders. Unlike federal securities law, New York's Martin Act does not require the state to prove a company intended to defraud investors. Prosecutors only need to show that a firm misrepresented information or withheld it from investors.
"It's an unusually strong state-level securities law," said Michael Gerrard, an environmental law professor at Columbia Law School. "New York State's law is stronger than that of most other states."
The Martin Act has been the bane of Wall Street banks for years as New York's attorneys general have wielded it to police the financial sector. Earlier this year, for example, Bank of America Merrill Lynch agreed to pay a record $42 million penalty after admitting to fraudulent practices in electronic tradings.
Even through Exxon moved from its Manhattan headquarters to Irving, Tex., in 1990, the New York statute applies to all companies doing business in the state.
The law's broad power has earned it the ire of many conservatives who say it is often used by overambitious attorneys general to target politically vulnerable industries, like the financial sector and now the oil business. The Wall Street Journal's editorial board has even called for its repeal.
"Today’s lawsuit filed against ExxonMobil in New York is nothing more than a contortion of the securities litigation system," Lisa Rickard, president of the U.S. Chamber of Commerce's Institute for Legal Reform, said in a statement Wednesday. "In bringing this case, the state is yet again using the Martin Act as a political weapon. Litigation will not help us confront the challenge of climate change."
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— The Trump administration just approved a plan to drill for oil in Alaska’s federal waters: The oil industry in Alaska won a major victory when Interior Secretary Ryan Zinke announced he is greenlighting the first oil and gas production facility in federal waters in the state. Zinke called the decision another step forward for Trump’s “American energy dominance” agenda.
What it will look like: The project undertaken by Houston-based Hilcorp will take two years to complete and will produce up to 70,000 barrels a day at peak production two years after that, The Post's Darryl Fears reports.
What is worrying environmentalists: "Hilcorp, a major player in Alaska, has had a few environmental mishaps. In December 2017, Hilcorp Alaska discovered crude oil leaking from a subsea pipeline that connected a pair of oil production platforms in the Cook Inlet."
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What the move means: Chatterjee's nomination to be chair does not need Senate approval since he is already a commissioner. And it does not change the overall composition of the five-member panel. But it does put at its helm a Kentucky native and former energy policy adviser to Senate Majority Leader Mitch McConnell (R-Ky.) who is seen as sympathetic to the coal industry.
What will change the panel: There is one opening on the panel and Trump earlier this month nominated the Energy Department's Bernard McNamee to fill it. Members of the Trump administration, including McNamee and his boss, Energy Secretary Rick Perry, unsuccessfully pushed for FERC to approve a plan to subsidize struggling coal and nuclear plants.
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“Rescue and relief operations have begun, but officials say their efforts are hampered by still-dangerous weather conditions and widespread destruction," they add. The “extreme strike” from the storm happened with little warning, as the storm intensified in just a day from a Category 1 to a Category 5 storm.
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But: Princeton University biologist and chair of the panel behind the report warned the AP that carbon removal is not a substitute for massive reductions in emissions but “tools to get overall emissions down.”
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Meanwhile: The company’s Model S sedan dropped off six spots in the Consumer Reports annual reliability survey, losing its “recommended rating,” according to Reuters. Every U.S. automaker fell to the bottom of the rankings, including Tesla, General Motors and Ford.
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