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Oil Companies Make Extraordinary Plea to Supreme Court to Stop Colorado Climate Case

Filed Under: Colorado Lawsuit, Liability Litigation, Uncategorized

By Karen Savage

Exxon and Suncor have filed an extraordinary appeal with the U.S. Supreme Court to prevent a climate liability suit filed by three Colorado municipalities against it from going to trial in state court.

The companies on Thursday filed an application asking the high court to recall—or reverse—U.S. District Judge William J. Martinez’s order sending the case to state court. It is thought to be the first time such a request has been made at this stage of a lawsuit.

“The oil companies are really pulling out all the stops, and asking for unprecedented action by the courts, in order to keep this case away from a local Colorado court and jury,” said Marco Simons, general counsel for EarthRights, who is representing the communities along with the Niskanen Center, a libertarian think tank, and Denver attorney Kevin Hannon.

Following a pattern similar to other climate liability cases, Exxon and Suncor have filed repeated appeals to higher courts to keep the case in federal court, which they believe is more favorable to them. In this case, they are using an extraordinary step of asking for the Supreme Court to recall an order by a local court because they have exhausted their avenues for halting the case.

The companies filed a motion to stay in September, but Martinez declined to pause the case, prompting the companies to file an emergency motion to stay, which he also rejected. Exxon and Suncor then tried their luck with the Tenth Circuit, filing another emergency motion to stay, but the appellate court shot down that motion last week.  

The city and county of Boulder and the county of San Miguel allege that Exxon and Suncor have known for decades that their products contribute to climate change, but deliberately downplayed that risk to policymakers and the public. In the suit, which was filed last year, the communities assert state law claims of public nuisance, private nuisance, trespass, unjust enrichment, violation of the Colorado Consumer Protection Act and civil conspiracy and are seeking to force the companies to help pay for the costs of climate change impacts.

It is similar to suits filed by Rhode Island and Baltimore, which also involve public nuisance claims and allege that fossil fuel companies have known for decades that their products drive climate change but deliberately failed to inform the public about those risks.

Exxon, which is facing trial for climate fraud in New York starting Tuesday, is named in each of the three suits, which have proceeded further than any of the dozens of climate liability suits filed across the country.

In an effort to avoid facing trial—and a potentially damaging discovery process—in state court, defendants in the Baltimore and Rhode Island suits have appealed to the Supreme Court, asking it to extend stays in those cases while they argue their appeal that the cases should be returned to federal court. 

They have also indicated that if that appeal is denied, they will ask the Supreme Court to weigh in. 

Exxon and Suncor want to halt the proceedings in Colorado while they appeal the ruling returning the case to state court, but aren’t able to ask for an extended stay because their motions to stay have all been rejected.

Instead, they are asking the Supreme Court to recall the order returning the case to state court pending appeal and pending jurisdictional decisions in the Baltimore and Rhode Island suits.

In a statement, a Suncor spokesperson said the company believes the Colorado lawsuit is polarizing and counterproductive. “Climate change is a global issue that needs to be addressed collectively, and Suncor has long contributed to that effort,” the spokesperson said. 

Doug Kysar, a deputy dean and professor at Yale Law School, said while the request by Exxon and Suncor is extremely unusual, it may not be effective, at least not at this stage.

“To me, this reflects a sense on the part of the fossil fuel defendants that the Roberts court is so decidedly pro-business that it will pay no heed whatsoever to orderly procedure,” Kysar said.

“But I don’t think the conservative justices will take the bait—there will be plenty of opportunity for them to weigh in on the cases after they have percolated in lower courts, federal and state.”

Trump Order Takes Aim at Shareholders Pushing Companies to Address Climate Risks

Filed Under: Featured, Uncategorized

By Marco Poggio

President Donald Trump has ordered a review of the influence of proxy advisory firms on investments in the fossil fuel industry, a move that could ultimately help oil and gas companies prevent shareholders from voting on resolutions aimed to address the risks of climate change

The executive order Trump signed last week got the most attention for fast-tracking oil and gas pipelines, but the order went further: it also seeks a review of existing laws allowing investors to weigh in on environmental, social and governance issues that affect their investments.

The order addresses retirement plans subject to the Employee Retirement Income Security Act (ERISA), a federal law regulating private-sector pensions. Under the law, shareholders and proxy advisory firms hired to assist them can bring resolutions for shareholders to vote on concerning various issues.  Trump ordered the Department of Labor to review the fiduciary responsibilities for proxy voting “to determine whether any such guidance should be rescinded, replaced, or modified.”

Trump’s move drew immediate criticism from shareholder advocacy groups, which see it as an attempt to scale back investors’ efforts to pressure fossil fuel companies about climate change and its related risks.

“This executive order appears to be part of that ongoing debate over the years over whether investors, who are acting as fiduciary and are investing on behalf of their clients, are supposed to maximize returns,” said Rob Berridge, an expert on climate risk at Ceres, a sustainability nonprofit organization that helps investors engage with companies.

In recent years, shareholders have been the target of pro-oil trade groups, such as the National Association of Manufacturers (NAM), which has been lobbying Congress for tighter regulations on proxy firms, arguing the advice they give is politically motivated.

“The debate is over whether [shareholders] are allowed to include environmental and social issues in their investment decisions,” Berridge said, adding that the order casts climate change as a moral and political issue, not a financial one.

But with abundant evidence that climate change poses immediate and long-term financial risks to many companies—much of that evidence supplied late last year by the federal government’s own Fourth National Climate Assessment—that will be a difficult argument to make, he said.

“The horse has left the barn,” Berridge said. “Climate change is a financial risk. Everyone knows it’s a financial risk.”

Investors are increasingly aware of the physical impact of climate change, such as rising sea levels, wildfires and heatwaves, which imperil the financial stability and threatens the viability of some companies.

In a dramatic example, California’s largest utility, Pacific Gas & Electric, filed for bankruptcy earlier this year after two years of catastrophic wildfires that were made worse by climate change. Fueled by rising temperatures and drought, the fires caused billions of dollars in damages. PG&E faced liability in several of the large fires and faces multiple lawsuits seeking to recoup millions in losses.

“The risks to these companies are real, and asset owners are very concerned. A president who doesn’t understand or deal with reality, issuing an executive order, doesn’t change that reality,” said Robert Litterman, former head of risk management at Goldman Sachs and current board member of the Climate Leadership Council, a conservative-backed lobbying group that supports a carbon tax in exchange for the elimination of climate liability suits.

Investors in the fossil fuel industry have increasingly pushed companies to be more transparent about climate risks and have asked them to change their business plans to address climate change.

Shell announced in December it would support shareholder resolutions asking the company to align its business plan with the Paris Climate Agreement and pledged to reduce the carbon footprint from its energy products, not just its direct operations.

While the announcement drew praise from investors, seven environmental groups recently filed suit against the Dutch oil giant for not aligning its business model to meet international climate goals. The groups contend that a reduction in the company’s carbon footprint is not the same as a reduction in emissions.

Under the Obama administration, the Department of Labor allowed climate change-related issues to be considered financially relevant in the creation of private 401(k) retirement plans and pension funds—an acknowledgement that investments in fossil fuels are increasingly risky, in part because of climate change.

Trump’s executive order now seeks to change that.

“For an investor to a private pension fund, or people who manage 401(k)s, for them to say ‘we’re going to divest from fossil fuels, or reduce the carbon intensity of our portfolio,’ I think that there are serious financial risks that that strategy addresses,” Berridge said. “The administration is trying to say that this kind of investing is done for political reasons, for moral reasons, and not for financial reasons.”

Danielle Fugere, president of As You Sow, a shareholder advocacy organization, thinks the executive order will not have that effect.

“Shareholders have been focusing on oil and gas companies and asking them to address climate change, asking them to think about what their future is,” Fugere said. “What we’ve come to see is that ESG—environmental, social and governance factors—absolutely affect the bottom line.”

“The Department of Labor could look at this but I don’t think that they will be able to conclude that ESG should not be considered, that investors should not spend time on it,” she said.

Trump’s order also calls on various departments to loosen existing regulations that would make it easier to transport fossil fuels across the country. The order also weakens environmental protection against air and water pollution, and other hazards associated with oil and natural gas infrastructure.

He ordered the Environmental Protection Agency to review portions of the Clean Water Act and asks the Department of Transportation to allow liquefied natural gas to be transported by rail, which is currently banned.

“The Federal Government must promote efficient permitting processes and reduce regulatory uncertainties that currently make energy infrastructure projects expensive,” Trump said in the order.

The executive order seeks to streamline the permitting process for fossil fuel infrastructure, including pipelines and drilling facilities. In the order, Trump touts the “dominant” role of the United States in the energy market.

“The Trump administration is trying to push through oil and gas projects. And this is a time when the world is moving away from fossil fuels and moving toward a low- carbon economy,” Fugere said. “Not every state wants to have pipelines.”

Exxon Can Block Shareholder Climate Proposal, SEC Rules

Filed Under: Uncategorized

By Kaitlin Sullivan

The Securities and Exchange Commission (SEC) will allow Exxon to block its shareholders from voting on a proposal calling on the oil giant to set and disclose targets for reducing greenhouse gas emissions.

The SEC decision, which was issued Tuesday, is in response to a shareholder submission filed in January by the New York State Common Retirement Fund, the Church of England and dozens of co-filers, asking Exxon to set a series of emission targets that would align its business plan with the goals of the Paris Climate Agreement.

In an effort to sidestep the proposal, Exxon sent a letter to the SEC asking for permission to block a shareholder vote on the proposal, which it said was “vague and misleading” and would undermine its management responsibilities.

In its decision, the SEC agreed with Exxon and said passage of the proposal would “micromanage” the company.

Andrew Logan, senior director of oil and gas at the sustainability nonprofit organization Ceres, said investors will continue to push for disclosure of the company’s plan to reduce emissions.

“Contrary to the SEC’s incorrect determination that the resolution amounted to micromanagement, what shareholders are really looking for is large-scale realignment of the company’s business plan to address climate-related risks,”  said Logan in a statement.

Exxon said it released the requested targets in its 2018 Energy and Carbon Summary, which was released after a landmark investor vote passed in 2017. The resolution forced the company to produce an annual report that details how the company will be impacted by global efforts to align with a reduction in greenhouse gas emissions under the Paris Climate Agreement. The report downplayed the threat posed by international climate goals, which prompted the latest shareholder request.

Exxon is facing a growing number of climate change-related lawsuits and investigations related to its climate change disclosures.  

The Rhode Island attorney general filed suit against the company and four other oil companies last July for knowingly contributed to climate change and failing to adequately warn Rhode Island citizens about the risks posed by their products. New York filed suit in October after a lengthy investigation found the company had deceived shareholders for years by deliberately downplaying the climate risks to their investments.

The Massachusetts Attorney General’s office is investigating whether Exxon deceived Massachusetts shareholders by failing to warn them of potential climate change-related risks to their investments and in March, the attorney general in Washington DC indicated the city is seeking outside legal counsel in support of an investigation and potential litigation against Exxon for possible fraud.

The company is also a defendant in more than a dozen climate liability suits brought by municipalities across the country.

What Exxon ultimately discloses could impact litigation, but the SEC’s ruling itself is likely to have little impact on the pending lawsuits and investigations.

“Companies frequently refuse to put shareholder resolutions to a vote, and in reviewing such refusals, the SEC applies technical rules that don’t have much bearing on the other sorts of climate cases pending against Exxon,” said Michael Gerrard, a professor of environmental and climate change law at Columbia University and chair of the faculty at Columbia’s Earth Institute.

Proposals urging companies to reduce their carbon footprint and be more forthcoming about the climate risks to their bottom line are on the rise and shareholders have grown increasingly concerned about climate liability suits and other climate-related risks to the companies’ bottom lines.

“While the SEC is limiting specific points that can be put in shareholder resolutions, investors are putting more specific and sophisticated requests before management,” said Timothy Smith, director of environment, social and governance shareholder engagement for Boston Trust and Investment Company.  

Exxon did not immediately respond to a request for comment.

Other companies have complied with similar shareholder requests, including BP, which agreed in February to publish a plan by the end of the fiscal year outlining its strategy for holding temperature rise to well below 2 degrees Celsius and reducing carbon emissions to net zero by the second half of the century.

Logan said the SEC’s decision only deepens the fissures between Exxon and its investors, who remain undaunted in their efforts to engage the company on climate.

“The agency’s flawed ruling does nothing to stem the tide that has brought climate risk into the financial mainstream, nor does it change the reality that oil and gas companies must dramatically reduce greenhouse gas emissions and adjust to a carbon-constrained world,” said Logan.

Smith said the Exxon’s actions could fuel further calls for transparency.

“If anything, ExxonMobil has fueled the intensity of the critical scrutiny of their climate actions.”