Alex Constantine - May 10, 2016
Facing hundreds of billions of dollars in potential damages, the fossil-fuel giant is trying to change the subject.
MAY 5, 2016
When in trouble, change the subject—or at least try to. So it is that the world’s oldest, richest, and most powerful oil company, under investigation for apparently lying to investors and the public for decades about the deadliness of its products, has launched a high-stakes counterattack under the unlikely flag of the First Amendment. On April 13, ExxonMobil filed suit to block a subpoena issued by the attorney general of the US Virgin Islands. Following revelations from the Los Angeles Times and InsideClimate News, the subpoena charged that the company may have violated the territory’s anti-racketeering law. It questioned whether Exxon told investors, including the territory’s pension fund, one thing about climate change (that it wasn’t a danger) while its own scientists were privately telling its management the opposite.
New York Attorney General Eric Schneiderman raised the same question when he subpoenaed Exxon in November. The oil giant turned over some 10,000 pages of documents, which Schneiderman’s staff is reviewing. But when Virgin Islands Attorney General Claude Walker requested many of the same documents, Exxon not only refused; it went on the offensive. The company’s countersuit asserted that Walker’s subpoena was an attempt “to deter ExxonMobil from participating in ongoing public deliberations about climate change…. The chilling effect of this inquiry, which discriminates based on viewpoint to target one side of an ongoing policy debate, strikes at protected speech at the core of the First Amendment.”
Soon, in an exercise in mass ventriloquism, myriad voices on the right—including the Heritage Foundation, National Review, the New York Post, Reason, and the Hoover Institution—took up the refrain. Outraged that 16 other state attorneys general had pledged action against the fossil-fuel industry, Washington Post columnist George Will charged that the law-enforcement officials were trying “to criminalize skepticism about the supposedly ‘settled’ conclusions of climate science.” Fox News accused the AGs of “collusion” with activists, citing a meeting that a member of Schneiderman’s staff had with a representative of the Union of Concerned Scientists.
The right-wing chorus predictably glided past the fact that, as a matter of law, the First Amendment is no shield for fraud. And telling one thing to investors while privately knowing the opposite to be true, as Big Tobacco once did, is plainly fraud. But now, it was all about Exxon as the victim, with the usual left-wing villains—overreaching government and environmental extremists—trampling the oil company’s free-speech rights because it had dared to take an unconventional position on climate change. Exxon even used the same law firm that defended Big Tobacco—Paul, Weiss, Rifkind, Wharton & Garrison—to file its countersuit.
Will crying “free speech” succeed in blunting the effort to bring Exxon and its fellow fossil-fuel giants to justice? It’s too soon to know, and compelling evidence runs in both directions.
Framing Exxon as a victim isn’t an easy sell beyond the right-wing echo chamber. Nor is climate denial. The vast majority of voters and policy-makers now understand that climate change is a real and growing danger. And most people have little trouble believing that Exxon knew full well about this danger, even as it spent decades and tens of millions of dollars portraying climate change as a “premise that defies…common sense,” to quote former CEO Lee Raymond.
What’s more, by enabling increased global warming, Exxon’s alleged lying has damaged many people around the world. Crucially, the victims include investors and business owners. The poor suffer first and worst from climate change, but they rarely file—much less win—lawsuits against polluters. But when people of means are damaged, they don’t hesitate to sue for compensation.
Exxon’s exposure on this front is immense. If the allegations are true, the oil giant has in effect transferred massive amounts of risk and loss onto the rest of the market and virtually every business enterprise in it. By confusing the debate, Exxon helped delay government action against climate change. The company made buckets of money, but the resulting higher temperatures and extreme weather events have cost investors, governments, businesses, and ordinary people many billions, with much larger costs ahead. Mark Carney, the governor of the Bank of England, has warned that as climate change intensifies, “parties who have suffered loss or damage [may] seek compensation from those they hold responsible.”
Nor is the right’s cheerleading without its complications for Exxon. The right conflates the First Amendment argument with its cuckoo belief that climate change is a hoax, but Exxon has a different goal: to protect its public image. Exxon needs to be perceived as a good corporate citizen, and in 2016 a good corporate citizen doesn’t deny climate change.
On the other hand, no one familiar with Exxon’s history would underestimate the resources it brings to this battle. As Steve Coll documented in Private Empire, Exxon has long exercised political power and global reach more akin to that of a nation-state than of a corporation. And it is as calculating and tough as it is mighty and rich. When a jury awarded $5 billion in damages for the Exxon Valdez oil spill, the company fought the decision to the very end. The world had seen the tragedy unfold on television—the oil-drenched seabirds, the idled fishing boats—but Exxon simply refused to accept guilt. Instead, lawyers filed appeal after appeal, dragging out the proceedings for 20 years. By the time Exxon finally paid up in 2009, the damages had been whittled down to a tenth of the original amount.
Exxon will fight this new battle even more ferociously, for the “Exxon Knew” scandal poses an immeasurably graver threat. Exxon’s potential exposure on the Valdez spill was a $5 billion fine, a sum it could have paid with ease. By contrast, Exxon Knew could involve hundreds of billions of dollars in damages, enough to bankrupt the company. It also comes when the world’s governments have committed to phasing out Exxon’s products over the next decades. These twin threats endanger not merely Exxon’s revenue but its very identity as a company that made its name by pulling oil out of the ground. For Exxon, this is shaping up as a fight to the death, and the First Amendment offers scant protection against that.