California Municipalities' Debt Disclosures Contrast With Climate Warnings
January 08 2018 - 7:39PM
Dow Jones News
By Andrew Scurria
California communities demanding oil companies protect them from
rising sea levels weren't as sure about their vulnerability to
climate change when they sold debt to investors, according to court
filings and bond documents.
Seven local governments in California are suing Exxon Mobil
Corp. and other major oil producers for court orders forcing those
companies to cover the costs of sea walls and other infrastructure
projects meant to fortify low-lying areas.
Now Exxon, one of the defendants, is launching a new
counterattack by highlighting past bond disclosures in which its
government critics suggested they couldn't predict whether and when
sea levels would rise. The company filed court papers in Texas on
Monday seeking to force government officials to answer questions
under oath about those statements.
The underlying lawsuits are part of an aggressive strategy to
hold fossil-fuel companies responsible for climate change costs
that the plaintiffs estimate could run to billions of dollars.
Local officials are arguing that Exxon, BP PLC and other companies
knew or should have known about the potential impacts of burning
oil and gas but instead tried to sow public doubt about the science
behind global warming.
The companies dispute those allegations, casting the lawsuits as
an abusive campaign by California law-enforcement officials to
target political opponents through the legal system and stifle
debate on climate change. Scientists have linked rising sea levels
to fossil-fuel emissions and warming global temperatures.
City attorneys for Oakland, San Francisco, Imperial Beach and
Santa Cruz didn't immediately respond to requests for comment.
Attorneys for San Mateo County, Santa Cruz County and Marin County
also didn't respond.
The legal battle is intensifying while awareness grows among
investors about the potential credit risk to U.S. municipalities
from future changes in world-wide temperatures. In November,
Moody's Investors Service flagged environmental disruptions as a
"growing negative credit factor" for coastal municipalities and
said it would adjust its ratings methodology to take climate change
into account.
Moody's didn't issue any credit downgrades but warned local
governments to start dealing with climate risks or else possibly
lose their access to low-cost financing.
Exxon's Monday filing in Tarrant County, Texas, laid out what it
said was a disconnect between the claims in those lawsuits and what
the municipalities told their bond investors about their exposure
to climate risks.
San Francisco's lawsuit said it faced "imminent risk of
catastrophic storm surge flooding," while a general obligation bond
offering last year said the city "is unable to predict whether
sea-level or rise or other impacts of climate change...will
occur."
Santa Cruz County said in its complaint it was experiencing more
frequent and extreme droughts, precipitation events, heat waves and
wildfires, and faced a 98% chance of a "devastating" three-foot
flood by 2050. Yet a bond offering last year mentioned only
"unpredictable climatic conditions, such as flood, droughts and
destructive storms" as a risk factor.
"Each of the municipalities warned that imminent sea level rise
presented a substantial threat to its jurisdiction and laid blame
for this purported injury at the feet of energy companies," Exxon
said. "Notwithstanding their claims of imminent, allegedly
near-certain harm, none of the municipalities disclosed to
investors such risks in their respective bond offerings."
The lawsuits against Exxon, BP, Chevron Corp., ConocoPhillips
and Royal Dutch Shell PLC allege the companies are a "public
nuisance" and ask courts to force them to create a fund for local
governments to pay for climate change-related infrastructure.
The lawsuits have drawn comparisons to U.S. states' legal
campaign against tobacco manufacturers in the 1990s, which netted
multibillion-dollar settlements to offset the public costs of
smoking-related disease.
In 2015, New York Attorney General Eric Schneiderman began an
investigation into Exxon Mobil that was joined by Massachusetts
Attorney General Maura Healey. Mr. Schneiderman, a Democrat, has
alleged that Exxon misled investors about how it accounts for the
impact of climate change on its business.
Exxon has alleged the investigation is part of a conspiracy by
activists and oil antagonists to smear the company. A number of
Republican lawmakers and attorneys general have sought to join
Exxon's effort to fight the probe and have also sought to
investigate Mr. Schneiderman.
Alejandro Lazo and Bradley Olson contributed to this
article.
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
January 08, 2018 19:24 ET (00:24 GMT)
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