On Wednesday, New York City Mayor Bill de Blasio announced that the city would both divest its pension plans from fossil fuels and also start a lawsuit against Exxon Mobil Corp (NYSE:XOM), Shell, BP, Chevron, and Conoco-Phillips, the world’s five largest oil companies. The suit is only the latest in a long string of lawsuits filed by state attorneys general and mayors against energy companies. NYC’s suit, filed in federal court, shows how legal actions against big oil companies may be more effective at making headlines than actually changing policy.
New York’s case attempts to use nuisance law to target the companies. However, legal observers say that this strategy is unlikely to succeed since a 2011 case, American Electric Power Co. v. Connecticut, found that the federal common law of nuisance was superseded by the Clean Air Act.
“The Supreme Court ruled that the federal common law of nuisance was preempted by the Clean Air Act even though the government had not done much with the Clean Air Act,” explained C. Boyden Gray, former ambassador to the E.U. and a special envoy to the E.U. for energy issues. The comments were made during a teleforum hosted by the Federalist Society.
On the whole, Gray was skeptical that the cases would accomplish much at all in court because of flaws in the legal arguments used.
“It is still a PR effort more than a legal one,” he said of de Blasio’s announcement.
The most recent attempt to target big oil companies with lawsueits alleging responsibility for climate change impacts was first discussed in a now infamous 2012 meeting in La Jolla, CA. The meeting laid out a strategy to link big oil companies to global warming through a series of lawsuits modeled after those that took down Big Tobacco.
To Gray, there is little corollary between the tobacco case and those being filed against big oil companies today, primarily because the link between any one of these companies and specific harm in a given city is so tenuous.
“The two situations are so different. There was a very substantial amount of public health evidence linking tobacco with personal health harm and a lot of epidemiology went into that. The proof over the years became quite compelling,” Gray said of the tobacco lawsuits. In terms of the harms of climate change, however, the connection between the companies and any harm that cities may see in the future is much more speculative.
“In this set of facts, we have no way of tracing the 11 percent of methane allegedly produced by these oil companies down to a manageable declaration of damages for some municipality,” he said.
Meanwhile, Exxon has been striking back against several California cities engaged in lawsuits over alleged climate change harms. Exxon argues that the cities are being disingenuous about the risk of property loss due to global warming and rising sea levels.
“It is reasonable to infer that the municipalities brought these lawsuits not because of a bona fide belief in any tortious conduct by the defendants or actual damage to their jurisdictions, but instead to coerce ExxonMobil and others operating in the Texas energy sector to adopt policies aligned with those favored by local politicians in California,” the company wrote in its filing.
Exxon’s countersuit argues that the cities and municipalities in California made contradictory statements to investors and in court. Although the climate change lawsuit argues that the area faces massive harms from rising sea levels, these potential harms were either minimized or left out of information the municipalities gave to potential bond buyers. Examples include Marin County, which alleges that a 99 percent risk of a devastating flood before 2050 in its suit against Exxon, which was not disclosed to bondholders, and San Mateo County, which said in court that it was “particularly vulnerable to sea level rise,” while telling investors that it was unable to predict if flooding would occur.
Although he admits that there is not much precedent for the lawsuits, Gray did say the countersuit is not without merit.
“The way Exxon and the other oil companies are being treated here from a strict legal perspective is quite irregular. I think they have a good argument that they are being censored, dispossessed of their rights as a company,” he said.