AUDIE CORNISH, HOST:
ExxonMobil is on trial in New York City today. The oil and gas company is facing a civil suit from the New York attorney general, who says Exxon misled investors by playing down the costs of carbon emissions. It's the first time an energy company will face a major climate case in court. Nicholas Kusnetz is a reporter at InsideClimate News. He joins me now from New York.
Welcome to the program.
NICHOLAS KUSNETZ: Hi. Thanks for having me.
CORNISH: So the accusation here is that Exxon is somehow defrauding investors. Can you explain what is the center issue here?
KUSNETZ: Sure. It's accused of using two sets of books, essentially, to assess the risks that the business face from climate regulations down the line. One of those was made public and shared with investors and the public in general. The other was just used internally.
CORNISH: So why would that make a difference? What could they do with those internal numbers that the public wouldn't get access to?
KUSNETZ: So this all revolves around something that's known as a proxy cost of carbon, which is a way that businesses try to estimate the financial impact of future policies that would limit emissions - things like a carbon tax or even fuel efficiency standards for cars.
CORNISH: So when it came to its own investors, they would say, look. Here's how much climate change policies could cost our projects in the future. But when it came to their own investments, they used a different set of figures?
KUSNETZ: That's right. I mean, what the attorney general is alleging here is that by using this other set of figures that it wasn't disclosing to the public, it was effectively exposing investors to greater risk than they were led to believe. The internal set was lower. In other words, it assumed that policies wouldn't be as strict. So the allegations are that investors were led to believe Exxon was being very cautious with its internal investments when, in fact, those strict policies would impose huge costs on that project. And Exxon does not dispute that it used two different sets of estimates, but what it says is these are looking at different things. One was used to model oil and gas demand globally. The other, it said, was trying to get a sense of what their costs might be at a specific, say, oil sands project or refinery.
CORNISH: Speaking of which, you mentioned the oil sands. And I know that there was a project in the Canadian oil sands that comes into play here. Can you explain how these different models were used in this context?
KUSNETZ: Exxon is one of the biggest producers in Canada's oil sands. There's one major project that's called Kearl. So this is a huge store of low-grade oil, essentially. It's one of the largest single stores of oil in the world. And extracting oil from this resource takes a ton of energy, so it costs a lot. It also has much higher emissions than your average barrel of oil. So if there's anywhere that the risks of climate regulations are going to show up, this is one of the first places to do it. And what the attorney general says is that when Exxon started applying the higher public costs to these investment decisions, the planners there started flagging, hey, this is going to result in huge costs on that project.
CORNISH: This case is a first in some ways, so what are the implications for states, municipalities who basically want to go after energy companies for their roles when it comes to climate change?
KUSNETZ: Yeah, there are more than a dozen other lawsuits now pending against Exxon and other major oil and gas companies. There are a couple different kinds of suits. Some are shareholder suits like this one. But there's also a lot of cases where cities, counties - and in one case, a state - is trying to get damages from oil and gas companies to help pay for the costs of adapting to climate change. This is the first one of all of them to go to trial, so whatever kind of ruling comes out of this is sure to be cited in all of these other cases.
CORNISH: That's Nicholas Kusnetz, reporter at InsideClimate News.
Thank you so much.
KUSNETZ: Thanks a lot for having me.
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