5 things to know about the Exxon Mobil probe
Climate change is a divisive issue, with only about half of Americans saying it's caused by human activity. If the New York state attorney general is right, that divide could be partially due to alleged efforts of the world's biggest oil explorer to downplay those risks.
Attorney General Eric Schneiderman issued a subpoena on Wednesday evening to Exxon Mobil (XOM) to find out if the company has been honest with the public and investors about its own internal research into climate risks, according to The New York Times. Exxon Mobil spokesman Scott Silvestri wrote in an email to CBS MoneyWatch that the company has "received a subpoena for production of documents relating to climate change from the attorney general of New York and are assessing our response." The attorney general's office didn't return a request for comment.
The investigation reportedly requests information going back as far as the 1970s, with the attorney general looking at whether the company lied to the public about the impact of burning fossil fuels and its relationship to profits. While Exxon Mobil, because of its size, represents the industry's highest-profile energy company for Schneiderman to investigate, other energy companies may also be targeted in the probe, according to The Times.
Exxon Mobil has included information about the risks of climate change on its business "for many years" in shareholder reports and other filings, Silvestri noted. "We unequivocally reject allegations that Exxon Mobil suppressed climate change research contained in media reports that are inaccurate distortions of Exxon Mobil's nearly 40-year history of climate research that was conducted publicly in conjunction with the Department of Energy, academics and the UN Intergovernmental Panel on Climate Change," he added.
Activists applauded the investigation, with Greenpeace USA director Annie Leonard saying in a statement, "The oil giant's ongoing public climate denial is something that should concern us all, and has rightfully attracted the attention of the country's judicial watch dogs."
So what does the investigation mean to Exxon Mobil investors? And what exactly has Exxon Mobil said publicly about climate change? Read on to learn five things about the probe and its implications.
What led up to the investigation? The probe comes after the Pulitzer Prize-winning Inside Climate News published an October report alleging that Exxon Mobil "turned ordinary scientific uncertainties into weapons of mass confusion." According to the report, Exxon allegedly pressured the White House under President George W. Bush to hire scientists who disputed climate change research to work with the U.N.'s Intergovernmental Panel on Climate Change. The company also allegedly pressured the Bush administration to fire scientists who supported research that climate change is caused by human activity, such as burning fossil fuels.
The report also cited statements from Exxon senior scientists who said the research was clear that burning fossil fuels was linked to global climate change, as opposed to public statements from executives such as former CEO Lee Raymond, who said the evidence was "inconclusive."
On top of Inside Climate News' investigation, a joint project from the Los Angeles Times and Columbia University's Graduate School of Journalism published a report last month that found a "gulf between Exxon's internal and external approach to climate change" starting in the 1980s.
What climate change research has Exxon Mobil funded? Exxon scientists started producing research on how burning fossil fuels was impacting the climate starting in the 1970s, according to Inside Climate News. One Exxon researcher warned executives that increasing carbon dioxide in the Earth's atmosphere could raise the average global temperature by as much as 5 degrees Fahrenheit.
Its research unit was modeled after the famed Bell Labs, which funded scientists and engineers to investigate and invent new technology, ranging from the transistor to the Unix operating system. While Exxon spent millions to fund research, including $1 million for a tanker to assess how the world's oceans were absorbing carbon dioxide from the atmosphere, some of those efforts were cut back in the 1980s when an oil glut caused a price collapse.
What has the company publicly said about the risks of climate change?
While it was funding its in-house research, the company's annual reports didn't specify what its researchers had found between the link between burning fossil fuels and atmospheric carbon dioxide, Inside Climate News alleges.
Starting in the 1980s, the company appeared to engage in "climate denial," the report notes. In 1997, for instance, former CEO Raymond said, "It is highly unlikely that the temperature in the middle of the next century will be significantly affected whether policies are enacted now or 20 years from now."
Nevertheless, climate change appears as a risk factor in Exxon Mobil's regulatory filings. In its most recent 10-K, the company says regulation over greenhouse gas emissions poses a risk, given it could make its products more expensive and reduce demand for hydrocarbons.
How much is at stake for Exxon Mobil? What about for investors?
Wall Street analysts say it's unclear what the long-term impact of the investigation might be on Exxon Mobil or investors, with Oppenheimer & Co. analyst Fadel Gheit telling The New York Times, "It's a negative, though how much damage there will be to reputation or performance is very hard to say."
Some are viewing the probe as analogous to the investigations into the tobacco industry's methods, which led to lawsuits and billions of dollars in fines. Those investigations were also spearheaded by state attorney generals.
Greenpeace, for one, is urging other state attorney generals to join New York in the investigation.
How long will the investigation take?
That's another unknown, but it will likely take quite some time. The tobacco industry lawsuits, for instance, spanned years, with Philip Morris in 2000 ordered to pay $51.5 million to a California smoker with lung cancer. The Master Settlement Agreement, which included the attorneys general of 46 states, wasn't reached until 1998.