Exxon Chooses War in New York’s Probe of Climate Change Research

(Bloomberg) -- ExxonMobil Corp. has finally made its move to block a New York state investigation into whether the oil giant covered up its knowledge about climate change.

New York Attorney General Eric Schneiderman launched a sweeping fraud probe of Exxon in November 2015, based on suspicion that the energy company had misled investors, regulators, and the public on what it knew about global warming dating all the way back to the late 1970s. Even as it has fought parallel investigations by Massachusetts and the Virgin Islands, Exxon has cooperated with the New York probe, turning over more than 1 million pages of documents to Schneiderman’s office.

People familiar with the company’s thinking have said that New York’s unusually broad securities-fraud statute, the Martin Act, left Exxon no choice but to comply with Schneiderman’s investigation.

On Monday, that seemingly cooperative stance changed dramatically. In a filing in federal court in Fort Worth, Tex., near Exxon’s headquarters in Irving, the company asked a federal judge to invalidate New York’s investigative subpoena and effectively shut down the Schneiderman probe as based on “political bias.” For months, Exxon has made the same argument against Massachusetts Attorney General Maura Healey, alleging that she and Schneiderman are part of a broader conspiracy involving environmental and private legal activists seeking to harm the fossil fuel giant. 

“The improper political bias that inspired the New York and Massachusetts investigations disqualifies Attorneys General Schneiderman and Healey from serving as the disinterested prosecutors required by the Constitution,” Exxon said in its court filing. Both Healey and Schneiderman have vehemently denied the bias claim.

Schneiderman spokesman Eric Sofer said Monday via e-mail: “As we’ve seen for months, Exxon will do everything in its power to distract, delay, and avoid any investigation into its actions, which may have violated state securities and consumer-fraud laws. Exxon’s latest claims in its stunt litigation in Texas are meritless and are the same type of claims that have been rejected by courts for years.”

The timing of Exxon’s filing wasn’t happenstance. Last week, U.S. District Judge Ed Kinkeade in Fort Worth said in writing that he was concerned that Healey may have engaged in a “bad faith” pursuit of Exxon’s climate science files by presupposing she’d uncover evidence of wrongdoing. Exxon on Monday essentially asked Kinkeade, an appointee of Republican President George W. Bush, to treat New York’s investigation with the same skepticism—and stop both probes on the basis of the alleged bias.

In a procedural order allowing Exxon to look further into its allegations of unfairness by Massachusetts, Kinkeade said last week he was especially concerned that Healey participated in a closed-door meeting last March hosted by Schneiderman and featuring presentations by environmental and legal activists. This meeting took place the day before a New York press conference, also hosted by Schneiderman, at which multiple attorneys general committed to a joint plan to go after Exxon.

A well known federal law doctrine generally forbids U.S. courts from interfering with state prosecutions and investigations. But an exception to the doctrine—one Kinkeade seems interested in vis-à-vis Exxon—allows federal courts to get involved in cases tainted by official “bad faith.”

In another part of its court filing, Exxon noted that Schneiderman has lately indicated he may also be investigating whether the company’s oil and gas reserves can actually be produced in the future because of regulatory efforts to address climate change. “It is now apparent that Attorney General Schneiderman is simply searching for a legal theory, however flimsy, that will allow him to pressure ExxonMobil on the policy debate over climate change,” the company said. This possible thrust of the New York investigation is “particularly egregious because it cannot be reconciled with binding regulations issued by the SEC, which apply strict guidelines to the estimation of proved reserves,” Exxon added.

In fact, the U.S. Securities and Exchange Commission separately is looking into Exxon’s reserves accounting. The company said in a statement Monday that it is “fully cooperating with an SEC request for information and is confident its financial reporting meets all legal and accounting requirements.”

To contact the author of this story: Paul Barrett in New York at pbarrett17@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.