The Energy 202: Rex Tillerson takes the stand in New York’s climate change lawsuit

Source: By Dino Grandoni, Washington Post • Posted: Thursday, October 31, 2019

Rex Tillerson, former chief executive officer of ExxonMobil, departs from state court in New York on Wednesday. (Jeenah Moon/Bloomberg)

An ex-chief executive of ExxonMobil, the largest oil and gas company in the country, took the stand Wednesday to defend his former firm against accusations of misleading investors about the threat climate change posed to its bottom line.

Rex Tillerson, who led Exxon for a decade before serving for a tumultuous year as President Trump’s first secretary of state, rejected the charges from the state of New York and testified that his former company took climate change seriously during his tenure.

“We knew it was a serious issue and we knew it was one that’s going to be with us now forever more,” he said in court on Wednesday. “It’s not something that was just suddenly going to disappear off of our concern list because it is going to be with us for certainly well beyond my lifetime.”

Under cross examination, Tillerson denied the allegations and told the court that under his watch Exxon supported a federal tax on carbon emissions, as well as U.S. participation in the Paris climate accord. Tillerson was among a handful of top Trump officials who unsuccessfully urged the president to stay in the Paris agreement.

Even while acknowledging the reality of climate change, Tillerson said he knows of no time concern about the potential cost associated with releasing carbon prevented Exxon from going forward with a drilling or refining project.

“I don’t ever recall [greenhouse gas] cost being a determining factor in any of the decisions we made,” Tillerson said.

But prosecutors have put Tillerson near the center of what they allege was a scheme to deceive shareholders about the future profitability of the company because of such climate-warming emissions.

On the line for the energy giant are potentially millions of dollars in penalties as well as a blow to the reputation of Exxon, which soon after Tillerson took over as CEO in 2006 acknowledged that climate change is real. Defeat also opens the door for more investigations and lawsuits against Exxon and other oil majors over climate change.

But a win by Exxon will make other state and local governments think twice before suing the oil giant, which has a reputation for not settling lawsuits.

Often punctuated by blunt “yes,” “no” or “I don’t recall” answers, Tillerson’s testimony was a remarkable moment for a company that through the 1990s underplayed climate science as well as for an environmental protest movement that for years has painted Exxon as its ultimate boogieman.

“Rex Tillerson is a climate criminal,” said Dominique Thomas, a regional organizer for the green group, which last week helped organize protests outside the courthouse. “As wildfires rage across California and the West, it’s momentous to see Exxon’s former CEO in court.”

Under Tillerson’s watch, Exxon calculated in two different ways how future regulations on releasing carbon dioxide — a byproduct of burning gasoline and other Exxon-made fuels — could affect the company. The goal, he said, was to find the “best assessment.”

But it’s that assessment — or assessments, plural — that are at the heart of the securities-fraud case nrought by New York against against the oil giant.

New York Attorney General Letitia James (D) says Exxon kept two sets of books for estimating those regulatory costs. Her office is alleging that by doing so, Exxon may have duped the investing public by underplaying just how exposed the multinational oil company was to a deluge of climate-related regulations around the world.

One estimate for the cost of complying with future rules was presented to investors and suggested the company was taking into account potentially aggressive action from developed countries when making investment decisions.

But the other cost estimate, used internally, was much lower and led Exxon planners to invest in projects extracting particularly dirty fuels, such as tar sands in the Canadian province of Alberta, that may one day be subject to stiff regulations.

Tillerson and Exxon said they did nothing wrong in gauging future climate costs. Exxon’s two different estimates, Tillerson said, “were for different uses within the organization.”

“That’s what’s going to give you your best assessment, is to consider both of them and that’s why we structured it that way,” Tillerson said on the stand.

New York prosecutors spent their time questioning Tillerson himself rather focusing on his alias: “Wayne Tracker.”

In the millions of Exxon documents used by to build the case, James’s staff found that Tillerson used a second email address under the pseudonym Wayne Tracker to discuss the proxy carbon prices and other issues. (Wayne is Tillerson’s middle name.)

During the investigation, the attorney general’s office savaged Exxon for failing to turn over the Wayne Tracker emails. With no court order forcing Exxon to hold those old emails, many of them were deleted under a standard company policy. Exxon said the deletion was unintentional and New York Supreme Court Judge Barry Ostrager, who is overseeing the trial, found no fault.

Despite the pretrial drama, the attorney general’s office did not ask Tillerson about the email account.

During his testimony, Tillerson expressed sympathy for current Exxon employees entangled in the lawsuit. “I feel badly for the men and women of the ExxonMobil Corporation … because they’re being accused of a fraud as well, and it is not fair to them,” he said.

Tillerson’s testimony comes during the second week of the three-week trial. And it caps off what has been an eventful month for Exxon.

Last week, the top prosecutor for Massachusetts, Maura Healey (D), filed a lawsuit alleging Exxon misled consumers about the company’s role in accelerating global warming.

That suit comes on top of a number of other court cases from states, counties and municipalities from Rhode Island to Hawaii aimed at trying to hold Exxon and other oil companies liable for damage that climate change is causing on seaside cities and drought-prone farms.

And in Washington, Democrats on the House Oversight subcommittee on civil rights held a hearing to highlight Exxon’s past efforts to emphasize doubts about climate science, even as the company’s own researchers were studying it.

“They spread doubt about the dangers of climate change when its researchers were confirming how serious a threat it is,” Martin Hoffert, a consultant for Exxon Research and Engineering in the 1980s, told the panel.