Exxon climate change ‘fraud’ probe recalls tobacco windfall

After winning an $800 million settlement last year against Hess Oil, Virgin Islands Attorney General Claude E. Walker was eager to find what he described as other litigation “targets.”

He found one such deep pocket in Exxon Mobil. But his investigation into whether the company engaged in climate change “fraud” is drawing accusations that the end game for Mr. Walker and other like-minded attorneys general is a mammoth payday modeled after the 1998 tobacco settlement.

Mr. Walker has been the most aggressive member of AGs United for Clean Power, an unprecedented coalition of 17 attorneys general aimed at pursuing fraud accusations against Exxon Mobil and other fossil fuel companies.

“I believe this $800 million settlement gives the Virgin Islands Attorney General a lot of credibility in being involved in the inner circle of this because he’s proved that he can shake down a major company,” said Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute, one of Mr. Walker’s targets.

And the Exxon investigation may be just the beginning.

“In talking about widening the investigation, the goal is to bring in the entire oil industry. It’s not just Exxon they’re after,” Mr. Ebell said.

Already comparisons have been drawn between AGs United for Clean Power and the state officials who secured the 1998 deal in which five major tobacco companies agreed to pay $10 billion per year indefinitely to the states.

“It was a combined effort in which the state attorneys general played the crucial role in securing a historic victory for public health,” said former Vice President Al Gore Jr. at the coalition’s March 29 press conference in New York City.

“From the time the tobacco companies were first found out, as evidenced by the historic [Surgeon General’s report] of 1964, it took 40 years for them to be held to account under the law,” Mr. Gore said. “We do not have 40 years to continue suffering the consequences of the fraud allegedly being committed by the fossil fuel companies where climate change is concerned.”

Pushing for a parallel effort at the federal end is Sen. Sheldon Whitehouse, Rhode Island Democrat, who reiterated his call Wednesday for the Justice Department to launch a probe into the oil-and-gas industry.

“There are obvious similarities between the fossil fuel industry’s denial of its products’ climate effects and the tobacco industry’s denial of its products’ health effects,” Mr. Whitehouse said in a speech on the Senate floor. “These similarities are sufficient that a proper inquiry should be made about pursuing a civil lawsuit like the one the Justice Department brought and won against Big Tobacco.”

Given the sizes of the industries involved, however, the tobacco settlement could look like peanuts next to the prospect of a financial windfall from the fossil fuel business.

“You need to compare the relative size of the oil industry and the tobacco industry,” Mr. Ebell said. “Tobacco is tiny compared to oil. So if they could get $10 billion out of the tobacco industry, think of what their goals are for the oil industry.”

A questionnaire obtained by the free market Energy & Environmental Legal Institute shows that Mr. Walker had already served Exxon Mobil with a subpoena and was actively seeking other companies to investigate when coalition members met in March.

“We are interested in identifying other potential litigation targets,” Mr. Walker said in response to a question asking for input on the coalition’s goals “beyond the federal/EPA advocacy and litigation.”

The only independent in the coalition — the rest are Democrats — Mr. Walker also said he was “eager to hear what other attorneys general are doing and find concrete ways to work together on litigation to increase our leverage.”

Born in England and educated in New York, Mr. Walker was appointed attorney general in August 2015 by Virgin Islands Gov. Kenneth E. Mapp. Months later Mr. Walker secured an $800 million settlement with Hess after the company closed its St. Croix refinery despite receiving what he called “billions of dollars in tax breaks.”

He said the settlement would be used in part to create an “environmental response trust that will deal with cleanup of the site and help convert part of it to solar development, we hope.”

At the press conference he described Mr. Gore as “one of my heroes,” while New York Attorney General Eric T. Schneiderman said Mr. Walker brought “tremendous energy” to the climate change coalition.

“We have launched an investigation into a company that we believe must provide us with information about what they knew about climate change and when they knew it, and we’ll make our decision about what action to take,” Mr. Walker said.

He described the investigation as “David and Goliath, the Virgin Islands against a huge corporation, but we will not stop until we get to the bottom of this and make it clear to our residents as well as the American people that we have to do something transformational.”

Mr. Walker has issued three subpoenas, including one to Exxon that calls for its communications with more than 100 universities, academics and think tanks. Exxon is challenging the subpoena, saying it violates the company’s First Amendment rights.

Matt Pawa, a lawyer affiliated with the Climate Accountability Institute who briefed the attorneys general before their press conference, said that Exxon needs to “come clean about its commercial relationships with those it has paid to peddle its message of climate denial.”

“Commercial speech is different, and the First Amendment does not protect fraud,” Mr. Pawa said in an email. “Exxon paid various individuals and groups as part of a sophisticated and far-reaching disinformation campaign on global warming.”

Despite his position as the Virgin Islands’ top law enforcement official, however, Mr. Walker isn’t necessarily waiting for all the evidence before making a judgment on the oil industry’s guilt.

“We cannot continue to rely on fossil fuel. Vice President Gore has made it clear we have to rely on renewable energy. That’s the only solution,” Mr. Walker said. “It’s troubling that as the polar caps melt, you have companies that are looking at that as an opportunity to go and drill, to go and get more oil. Why? How selfish can you be? Your product is destroying this earth.”

Mr. Schneiderman launched his own state investigation last year into whether Exxon covered up its knowledge of the risks of global warming and lied to investors about the impact to its bottom line from catastrophes produced by climate change.

Exxon has denied suppressing climate change research, while skeptics argue that no scientific connection has been established between disasters like hurricanes and elevated levels of carbon dioxide in the atmosphere.

Mr. Ebell said the playbook for the climate change investigation mirrors that used in the tobacco litigation: First, stop Exxon from defending itself and funding its supporters, and then make a deal.

Exxon officials have come out in support of a carbon tax and announced that the company would no longer fund skeptics’ groups, “so what’s left, except to get a settlement?” he asked.

The difference is that there are many more reputable scientists and researchers today disputing the impact of greenhouse gases than there were disputing the health effects of smoking.

“Now with the tobacco settlement, there was an actual basis for that case. The tobacco industry had concealed things, it knew about the health effects of smoking tobacco for a long time, and it had lied under oath,” Mr. Ebell said. “This is entirely different, but you can see we’re going down the same road here.”