XOM Exxon Mobil Corp

By Corinne Ramey and Bradley Olson 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 25, 2018).

The state of New York sued Exxon Mobil Corp. on Wednesday, accusing the oil giant of misleading investors about the risks that climate-change regulations pose to its business.

The lawsuit, filed in state Supreme Court in Manhattan, said that for years Exxon told its investors that it adequately accounted for greenhouse-gas regulations by applying a so-called proxy cost -- an estimate of the effects of future events such as climate regulations -- to its business planning and investment decisions. In reality, Exxon applied either a lower proxy cost or no cost at all, the lawsuit claims.

"Exxon built a facade to deceive investors into believing that the company was managing the risks of climate-change regulation to its business when, in fact, it was intentionally and systematically underestimating or ignoring them, contrary to its public representations, " New York Attorney General Barbara Underwood said in a statement.

In 2015, the New York attorney general's office began an investigation into the matter, for which Exxon produced more than 3 million pages of documents. The U.S. Securities and Exchange Commission also looked into whether the oil giant misled investors about its accounting practices and climate-change risks, but ended the probe earlier this year without penalizing the company.

The New York suit alleges Exxon executives, including former chairman and chief executive Rex Tillerson, knew for years that the company was using a second set of proxy costs, from undisclosed internal guidance, that were lower than the ones publicly disclosed.

"These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general's inability to admit that a three-year investigation has uncovered no wrongdoing," Exxon spokesman Scott Silvestri said in a statement in response to Wednesday's filing.

Mr. Tillerson couldn't immediately be reached for comment.

The attorney general's office is requesting damages to correct what the lawsuit says are inaccurate past representations and to change its practices going forward.

"Through its fraudulent scheme, Exxon in effect erected a Potemkin village to create the illusion that it had fully considered the risks of future climate-change regulation and had factored those risks into its business operations," the lawsuit says.

In one instance, the suit claims, Exxon failed to apply appropriate proxy costs to oil sands projects in Canada, which led to the company understating the projects' long-term impact to its cash-flow forecasts by more than $25 billion.

The suit expands on allegations the state filed in court last year attempting to compel Exxon to release additional documents and comply with requests in its investigation. Exxon said at the time that the allegations were "inaccurate and irresponsible" and that the documents it had produced showed it had accurately described how it uses a proxy cost of carbon.

The company has alleged that Ms. Underwood's predecessor, Eric Schneiderman, was part of a growing campaign involving other state attorneys general and environmental activists to force Exxon to pay for climate-change effects and mitigation due to its previous research on the issue. Exxon has denied those allegations.

"The company looks forward to refuting these claims as soon as possible and getting this meritless civil lawsuit dismissed," Mr. Silvestri said.

Several recent federal lawsuits in which municipalities such as New York City and San Francisco sought damages from Exxon and other companies have been dismissed. A federal judge in July said global warming must be fixed "by our political branches," not through litigation.

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Patrick Thomas contributed to this article.

Write to Corinne Ramey at Corinne.Ramey@wsj.com and Bradley Olson at Bradley.Olson@wsj.com

(END) Dow Jones Newswires

October 25, 2018 02:47 ET (06:47 GMT)

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