N.Y. says Exxon’s climate change proxy costs may be a ‘sham’

New York’s top cop told a judge that his probe into Exxon Mobil Corp. uncovered “significant evidence” the oil giant may have misled investors about how it calculates the impact of climate change on assets and project decisions.

New York Attorney General Eric Schneiderman said in a court filing Friday that the investigation into Exxon’s public statements about climate change revealed that for the last decade it may not have been pricing-in the future impact of greenhouse gas emissions as it claimed.

“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 non-binding resolution urging the Irving, Texas-based company, which owns Fort Worth XTO Energy, 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 before regular business hours on 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. The attorney general said 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 state court in New York.

“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 it 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.

Exxon has repeatedly denied wrongdoing and claims the state probe 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 impact the company’s finances. Exxon sued to block their subpoenas for millions of pages of documents, while Republicans in Washington have sought to derail the investigations from Capitol Hill.

Schneiderman also referenced for the first time the existence of a second alias email account that was discovered in the course of the investigation, months after he accused Exxon of failing to disclose former Chief Executive Officer Rex Tillerson’s secondary email account. He used the alias Wayne Tracker to discuss sensitive topics with the board. Tillerson now serves as U.S. Secretary of State.

The identity of the owner of the new alias account, which has the name “J.E. Gray,” wasn’t disclosed in Friday’s filing.

Sworn testimony of Exxon’s lawyers suggested the company may have withheld the existence of the alias accounts as a “test of whether the Attorney General’s office is reading the documents,” according to Schneiderman.

Schneiderman filed the additional material in support of his May 8 subpoena to Exxon. The case was transferred to Manhattan by a federal judge in Dallas who said it belonged in New York, effectively restarting the litigation from scratch. Schneiderman has used the opportunity to make fresh allegations.

This story was originally published June 2, 2017 at 3:54 PM with the headline "N.Y. says Exxon’s climate change proxy costs may be a ‘sham’."