Rex Tillerson, former chief executive officer of Exxon Mobil Corp., center, exits Manhattan Supreme Court Wednesday, Oct. 30. Photo: Peter Foley/Bloomberg

The legal team representing ExxonMobil attacked the idea that projected greenhouse gas costs were material to the company's decision-making during the tenure of former CEO and chairman Rex Tillerson, who testified in Manhattan Supreme Court on Wednesday.

The New York Attorney General's Office sued Exxon in 2018 under the state's Martin Act, which is aimed at protecting shareholders from fraud. Prosecutors say the company released confusing and inconsistent information about how it calculates the future cost of climate change and related regulation, which allegedly misled investors.

In a Martin Act case, prosecutors must prove that any false statements were material. During his questioning of Tillerson, Exxon lawyer Ted Wells of Paul, Weiss, Rifkind, Wharton & Garrison set up the argument that greenhouse gas-related cost assumptions were not material to the way Exxon evaluated future projects.

At one point, Tillerson held both his arms out, demonstrating the broad "basket" of issues he dealt with as CEO. He said his entire job involved risk management, but climate change was only one risk on Exxon's long list.

"I don't ever recall greenhouse gas costs being a determining factor in any of the decisions we made," Tillerson said.

Tillerson testified that he knew the global response to climate change would affect Exxon's business and so he took the issue seriously. The company needed to make its future projections accurate because it takes a long time for such a big enterprise to change direction, he said.

"If there was a view that light duty vehicles were going to be (affected) to the point that no one would need gasoline ever again, we certainly needed to know that," he said.

The government's arguments have returned repeatedly to Exxon's use of two kinds of cost assumptions, "proxy costs" and "GHG costs," referring to greenhouse gases. Kim Berger, chief of the internet and technology bureau in the attorney general's office, questioned Tillerson closely about the use of those terms in the materials Exxon released to shareholders.

Tillerson said proxy costs were embedded in the corporate planning basis used across the company. The proxy cost was an estimate of how climate change regulation and changing demand were expected to affect the world, he said. GHG costs, in contrast, were a local analysis of the effect of greenhouse gas regulation on a particular project, he said, and the leaders of that project were responsible for it.

Berger pointed out that the phrase "GHG proxy costs" was also used, building on the government's argument that the difference between the terms was not made clear to investors.

Read more:

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