THE LIGHTBULB
Over the past few years, several state and local governments have sued big oil companies, seeking to hold them responsible for damages from rising seas and inland wildfires connected to climate change.
So far, none of these lawsuits have seen much success. But that may soon change with a lawsuit just filed by the state of New York.
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 ExxonMobil 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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POWER PLAYS
— 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."
— Trump names a new FERC chairman: The White House announced Wednesday it will elevate Neil Chatterjee to the chairmanship of the Federal Energy Regulatory Commission. The move comes as the previous chair, Kevin McIntyre, stepped down from leading the independent panel this week due to a "serious health setback," according to his resignation letter. McIntyre, who was diagnosed with a brain tumor last year, will still stay on as a commissioner.
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.
THERMOMETER
#NOAA20 captured the moment the eye of Super Typhoon #Yutu passed directly over Tinian Island, one of three main islands of the Northern Mariana Islands and a U.S. commonwealth. More imagery: https://t.co/GIDRRoo6c0 pic.twitter.com/itZuR4INFp
— NOAA Satellites (@NOAASatellites) October 24, 2018
— “We’re all grateful to God to be alive”: A Category 5 typhoon barreled through the U.S. commonwealth of the Northern Mariana Islands on Thursday and residents were already calling it the worst storm they had experienced, The Post’s Chris Mooney, Juliet Eilperin and Allyson Chiu report. “Tied for the strongest storm anywhere in the world this year, Yutu packed sustained winds of 180 mph and its gigantic eye enveloped much of Saipan and all of Tinian, leaving the Pacific islands 'mangled,' as one local official described,” they write.
“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.
—Bring on El Niño: Conditions suggest that an El Niño weather pattern could bring some relief to the drought-stricken areas in the southwestern United States,, the Associated Press reports.
— Report warns efforts to suck carbon from air must be ramped up: A new report from the National Academy of Sciences warns the United States needs to do a better job of using available technology to suck carbon out of the air in an effort to combat climate change. The report says that “technology to do so has gotten better, and climate change is worsening,” the Associated Press reports. “By mid-century, the world needs to be removing about 10 billion metric tons of carbon dioxide out of the air each year. That’s the equivalent of about twice the yearly emissions of the U.S.”
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.”
OIL CHECK
Under chief executive Elon Musk, Tesla earned a profit and increased deliveries of its new Model 3 sedan in the third quarter. (David McNew/AFP/Getty Images) (David Mcnew/AFP/Getty Images)
— The road ahead for Tesla: The electric automaker turned a profit in its third quarter, which chief executive Elon Musk called “truly historic.” The quarter helped Musk fulfill a vow that Tesla would be profitable even amid months of scandal as well as production issues and delays. “Tesla logged $312 million in profit, swinging into the black for the first time since late 2016,” The Post’s Drew Harwell reports. “It had $6.8 billion in revenue, compared with analysts' estimates of roughly $6.3 billion, and more than doubled its revenue compared with the same quarter last year."
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.
DAYBOOK
Today
- The World Resources Institute’s Washington Forest Legality Week 2018 continues.
- The Energy Department holds a Better Buildings Residential Network discussion on “horror stories from the field.”
EXTRA MILEAGE
— Late-season swarm of tornadoes: A rare set of late October tornadoes touched down from Massachusetts to Rhode Island on Tuesday, The Post’s Matthew Cappucci reports.
#Timelapse and video of the tornado-warned cell that moved over North Providence, Rhode Island earlier this afternoon. #RIwx @ericfisher @NWSBoston @ryanhanrahan @tony_tpetrarca @JenCarfagno pic.twitter.com/sDmhlv3utJ
— Mike Cohea (@MikeCohea) October 23, 2018
