Exxon Former CEO Says Climate Change ‘With Us Forever More’

(Bloomberg) -- It’s rare for a current or former leader of one of the world’s largest energy firms to testify under oath about climate change. That’s why a New York courtroom was packed on Wednesday to see ex-Exxon Mobil Corp. Chief Executive Officer Rex Tillerson take the witness stand and explain, in the context of a securities-fraud trial, that the company knew for years how global warming was a significant threat.

“We knew, we knew it was a real issue,” said Tillerson, 67. “We knew it was a serious issue and we knew it was one that’s going to be with us now, forevermore, and it’s not something that was just suddenly going to disappear off of our concern list because it is going to be with us for certainly well beyond my lifetime.”

Tillerson, who resigned in 2016 to become President Donald Trump’s first Secretary of State, was testifying in a trial over a lawsuit by the New York attorney general. The state alleges Exxon intentionally misled investors about the way the company accounted for the financial risk of climate change. Tillerson rejected the claim, but also took the opportunity to weigh in on the existential threat of global warming.

During 3 1/2 hours of testimony, he made few concessions under questioning by New York’s attorney. He used a lengthy cross-examination by Exxon’s lawyer to cast the company in a favorable light, in contrast to claims by environmentalists and some government officials that it helped trigger climate change and exacerbated the crisis by hiding it from the public.

Tillerson didn’t deny Exxon’s role in creating the problem -- which isn’t what the trial was about. But in his nuanced view, the company did its best to address the issue once it became apparent. He also said there may be plenty of blame to share, given that Exxon was providing products demanded by society.

Humanity, he said, has a hard time making changes to address the impacts of climate change because of the world’s never-ending demand for economic development and improved standards of living, which is tied directly to fossil fuels.

‘Keep Growing’

“If the economies are going to continue to not just perform, but grow, if people are going to continue to want to improve their quality of life, sustain their quality of life, they’re going to have to have energy, a lot of it, and the demand is going to keep growing,” Tillerson said.

“So there’s this natural tension” between that desire for growth and fixing climate change, “and that’s really the challenge that policymakers and legislators are confronted with,” he said.

One example of that challenge may be in Alberta, Canada, where Exxon has multibillion-dollar oil sands projects. Tillerson said it may not be unrealistic to assume that those projects will operate for decades without an increase in provincial taxes on greenhouse gas emissions.

That’s notable because New York claims Exxon was deceiving investors by predicting the province’s tax on greenhouse gas would remain steady, even as the company forecast rising levies on other projects through 2040.

“We have been through many changes in Alberta provincial government,” Tillerson said while being questioned by the state’s lawyer. “What I do know is the Alberta government doesn’t want to put the oil sands out of business. It’s important to them from a jobs, economic, tax revenue. And they always -- in Alberta -- the industry has always had a very kind of healthy dialogue with them, and they listened.”

Estimating Cost

The ex-CEO was also asked to explain why Exxon put in place proxy costs for carbon to estimate demand and greenhouse gas costs for expenses when it wasn’t required to do so. In short, his answer was that Exxon was worried about global warming early on and sought to protect the business long-term for the sake of investors. (Those costs are at the center of the New York lawsuit. The state claims they were a sham.)

“We took the issue quite seriously,“ Tillerson said. “We recognize the risk of climate change, and we recognize that it was becoming increasingly important to society, more broadly, and that policymakers and legislators were going to be responsive to their constituents and to the concerns of society, and they would begin to want to find ways to mitigate, if not reverse the effects of climate change.”

“We had been following the signs of climate change for many, many years,” he said.

But such costs weren’t the same everywhere Exxon operates, he said.

“It may be emissions are so de minimis that they’re inconsequential, or you may be in a business environment where the government is just not likely to do anything,” Tillerson said. “You know, if you’re in a third-world developing country.”

When he was CEO, Tillerson said the company had sought to promote the idea of a carbon tax to help ease society off fossil fuels.

“We had watched the European emission-trading system evolve and, in fact, we were a participant in it because of our operations there,” Tillerson said. “We had to be part of the trading system, and we saw a number of flaws with that system. In fact, if you look at what it has accomplished over its existence, it never has accomplished what it was intended to do. It hasn’t reduced any emissions.”

“We felt a carbon tax was the most simplistic. It is transparent,” he said. “You can’t game a carbon tax.”

Exxon’s early views of climate change, and what actions it took in response, may become more relevant in a series of so-called public nuisance lawsuits that accuse the industry’s biggest players, including Exxon, of selling products that led to global warming.

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth, Peter Blumberg

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