Exxon Rebuts Allegations it Misled Investors on Climate -- Update

Exxon Mobil Corp. pushed back on Friday against accusations that it misled investors on how it accounts for climate-change risks, saying in a legal filing that the claims by New York's attorney general are "inflammatory, reckless and false."

The oil giant was responding to a motion filed by New York Attorney General Eric Schneiderman in state court last week that seeks to force Exxon to turn over reams of additional documents to aid the state's ongoing probe of the company. As part of that motion, Mr. Schneiderman said he had found evidence suggesting that the way Exxon evaluates the impact of future climate regulations on its business was a "sham."

Mr. Schneiderman claimed Exxon has used two sets of estimates for potential future carbon prices -- a public number given to investors, and another internal figure used privately for decision-making. That could mislead investors by making Exxon seem more resilient to potential climate risks than it really is, he argued.

In its response Friday, Exxon appeared to concede that it has used varying carbon price figures in the past, but said the numbers were used for different purposes. One process, the one used in an oil outlook shared publicly, involved estimates of potential future carbon costs to assess energy demand and future prices, while another, the one used internally, related to gauging the profitability of specific oil and gas projects.

"ExxonMobil's use of different metrics, in different circumstances, to accomplish different goals evinces prudent financial stewardship, applying appropriate assumptions in appropriate cases," Exxon's lead lawyer, Ted Wells of law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, wrote in the brief. "There is nothing untoward or surprising about any of this."

Mr. Wells reiterated Exxon's claim that the investigation by the attorney general, a Democrat, is politically motivated, saying he has been "working backwards from an assumption of Exxon Mobil's guilt, searching in vain for some theory to support his prejudgment."

The state "has a substantial basis to suspect that Exxon's proxy cost analysis may have been a sham," said Amy Spitalnick, a spokeswoman for Mr. Schneiderman. "This office takes potential misrepresentations to investors very seriously."

Exxon's arguments underscore the challenge New York's top prosecutor may face in asserting that the company is guilty of fraud in how it has accounted for climate risks.

Regulations on such disclosure are in the early stages of being developed, and many oil-and-gas companies have been slow to make changes or meet increasing investor demands for transparency on the subject.

Exxon and Mr. Schneiderman have repeatedly crossed swords over how Exxon has complied with the investigation's subpoenas. Mr. Schneiderman has alleged that Exxon is attempting to stall and delay the progress of the probe.

He has argued that, despite a subpoena issued in late 2015 when the investigation started, Exxon appears to have permanently deleted emails used by former Chief Executive Rex Tillerson under the alias "Wayne Tracker."

New Chief Executive Darren Woods also had an alias account under the name "J.E. Gray," although he doesn't appear to have used it, documents in the investigation show.

Exxon has acknowledged that several months of emails from the alias account of Mr. Tillerson, now U.S. secretary of state, were inadvertently deleted, but said it was able to recover most of the requested documents.

The company has submitted nearly 3 million pages of documents for the investigation and asked the New York court to reject Mr. Schneiderman's pursuit of additional documents and information.

Write to Bradley Olson at Bradley.Olson@wsj.com

Exxon Mobil Corp. pushed back on Friday against accusations that it misled investors on how it accounts for climate-change risks, saying in a legal filing that the claims by New York's attorney general are "inflammatory, reckless and false."

The oil giant was responding to a motion filed by New York Attorney General Eric Schneiderman in state court last week that seeks to force Exxon to turn over reams of additional documents to aid the state's ongoing probe of the company. As part of that motion, Mr. Schneiderman said he had found evidence suggesting that the way Exxon evaluates the impact of future climate regulations on its business was a "sham."

Mr. Schneiderman claimed Exxon has used two sets of estimates for potential future carbon prices -- a public number given to investors, and another internal figure used privately for decision-making. That could mislead investors by making Exxon seem more resilient to potential climate risks than it really is, he argued.

In its response Friday, Exxon acknowledged that it has used varying carbon price figures in the past, but said the numbers were used for different purposes. One process, the one used in an oil outlook shared publicly, involved estimates of potential future carbon costs to assess energy demand and future prices, while another, the one used internally, related to gauging the profitability of specific oil and gas projects.

"ExxonMobil's use of different metrics, in different circumstances, to accomplish different goals evinces prudent financial stewardship, applying appropriate assumptions in appropriate cases," Exxon's lead lawyer, Ted Wells of law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP, wrote in the brief. "There is nothing untoward or surprising about any of this."

Mr. Wells reiterated Exxon's claim that the investigation by the attorney general, a Democrat, is politically motivated, saying he has been "working backwards from an assumption of Exxon Mobil's guilt, searching in vain for some theory to support his prejudgment."

The state "has a substantial basis to suspect that Exxon's proxy cost analysis may have been a sham," said Amy Spitalnick, a spokeswoman for Mr. Schneiderman. "This office takes potential misrepresentations to investors very seriously."

Exxon's arguments underscore the challenge New York's top prosecutor may face in asserting that the company is guilty of fraud in how it has accounted for climate risks.

Regulations on such disclosure are in the early stages of being developed, and many oil-and-gas companies have been slow to make changes or meet increasing investor demands for transparency on the subject.

Exxon and Mr. Schneiderman have repeatedly crossed swords over how Exxon has complied with the investigation's subpoenas. Mr. Schneiderman has alleged that Exxon is attempting to stall and delay the progress of the probe.

He has argued that, despite a subpoena issued in late 2015 when the investigation started, Exxon appears to have permanently deleted emails used by former Chief Executive Rex Tillerson under the alias "Wayne Tracker."

New Chief Executive Darren Woods also had an alias account under the name "J.E. Gray," although he doesn't appear to have used it, documents in the investigation show.

Exxon has acknowledged that several months of emails from the alias account of Mr. Tillerson, now U.S. secretary of state, were inadvertently deleted, but said it was able to recover most of the requested documents.

The company has submitted nearly 3 million pages of documents for the investigation and asked the New York court to reject Mr. Schneiderman's pursuit of additional documents and information.

Write to Bradley Olson at Bradley.Olson@wsj.com

(END) Dow Jones Newswires

June 09, 2017 17:07 ET (21:07 GMT)