On Thin Ice: Climate Change, Exxon, NYAG and the Martin Act

The New York Attorney General, Eric T. Schneiderman, created a stir this month by opening an investigation of Exxon Mobil pursuant to the Martin Act (New York’s “Blue Sky” statute).¹ Various Congressmen, Senators and environmental groups also asked SEC Chairman Mary Jo White and Attorney General Loretta Lynch to start similar investigations, but to this point only the NYAG has responded. The exact scope of this investigation is unclear (which is entirely understandable at this stage), but it appears to relate to charges, widely announced in the press in recent weeks, that Exxon “lied” about climate change, allegedly stressing the “uncertainty” of existing research when its own research confirmed to it the true severity of the risks. Much emphasized in these stories has been the alleged fact that Exxon contributed heavily to researchers and advocacy groups who expressed skepticism about climate change (or at least about the impact of fossil fuels on it).² In this view, the asserted fraudulent conduct consisted, at least in part, of supporting and subsidizing those who took a stronger position (either scientifically or politically) than Exxon, itself, believed to be justified. But is this really fraud? More generally, to what extent is Exxon required to disclose risks and dangers which its activities aggravate (even if only to a statistically trivial degree)?

The reaction to the announcement of this investigation has been symptomatic and polarized. Those who pushed for an investigation argue that this episode parallels the tobacco industry’s long campaign to deny the adverse health effects of tobacco (which eventually contributed to a nationwide, multibillion dollar settlement between the tobacco industry and the state attorneys general).³ Conversely, the Wall Street Journal has editorialized that the NYAG’s investigation amounts to “Prosecuting Climate Dissent” and denounced it as a “dangerous new escalation of the left’s attempt to stamp out all disagreement on global warming science and policy.”⁴