The Subversive Legal Crusade Against Fossil Fuel Production
When should state politicians prevent a multinational company from conducting business in their jurisdiction? That question has entered the national policy debate after the New York Post reported last week that activist and political dynasty scion Robert F. Kennedy, Jr. held “numerous discussions” with New York’s then-attorney general Eric Schneiderman about imposing what the memo termed the “corporate death penalty” on Exxon Mobil’s operations in the state.
The discussions occurred after Pace Law School’s Environmental Litigation Clinic, of which Mr. Kennedy was the supervising attorney at the time, sent a legal memo to Mr. Schneiderman laying out the grounds for the imposition of such a penalty on the company. The memo was sent soon after Mr. Schneiderman’s November 2015 announcement that his office was investigating Exxon Mobil over its research into climate change and subsequent public statements in the 1970s and 1980s, and shortly before several other state attorneys general launched their own investigations into the company.
The Pace memo pulled no punches. It flatly stated that Exxon Mobil’s past public skepticism of climate change, which contrasted with the company's own internal research into climate change’s causes, and continued production of fossil fuels constituted a “crime against humanity.” The appropriate punishment for that crime, the memo argued, was for Mr. Schneiderman to revoke the company’s ability to do business in New York. Such an action would have forced Exxon Mobil to exit a state in which it holds a 21 percent share of the retail fuels market and to shut down or sell more than 1,000 gas stations in the process. While Mr. Schneiderman does not appear to have acted on the memo’s recommendation prior to his sudden downfall last month, the memo makes clear that officials in states such as New York hold vast powers over marketplaces in their jurisdictions.
As the Pace memo showed, there is precedent for taking such a drastic step, albeit an extreme one. Attorneys general in New York have revoked several corporate charters over the last century for either “transacting … business in a persistently fraudulent … manner” or by the “abuse of its powers contrary to the public policy” of the state. A comparatively recent revocation occurred in 1998 when New York’s attorney general acted against two tobacco industry non-profits on the grounds that they were lying to the public about smoking’s health effects. By drawing a direct connection between the tobacco industry’s public statements on smoking’s health impacts and Exxon Mobil’s public statements on fossil fuel consumption’s climate change impacts, the Pace memo adopted a line of reasoning that has been used to justify lawsuits by municipalities (including New York City) and Mr. Schneiderman’s own investigation, all targeting Exxon Mobil. Even the memo’s proposed punishment has gained traction among local politicians, as was seen when New York City Mayor Bill de Blasio stated on a podcast earlier this year that he wanted to “bring the death knell” to the oil and gas industry.
The commonalities between the municipality lawsuits, the state investigations, and the Pace memo are not coincidental. As the “AGs United for Clean Power” coalition has explicitly stated, these actions are intended to “defend climate change progress under President Obama” and to “push the next [U.S.] president for even more action.” They are intended, in other words, to do what Congress has not done: restrict the use of fossil fuels in the U.S. The lack of action by the federal government to implement a carbon tax, cap-and-trade program, or regulatory restrictions on carbon emissions has driven those who favor such constraints, including Messrs. de Blasio, Kennedy, and Schneiderman, to resort to what might be described as “policymaking by punishment.” If the American people fail to elect federal politicians who are willing to reduce the country’s carbon emissions, as was the case in the 2016 general election, then Democratic state and local politicians will work to achieve the same result by imposing the corporate death penalty and other punitive measures.
Supporters of these efforts argue that such drastic measures are necessary given the magnitude of the threat posed by climate change and, following the ratification of the Paris Climate Accord, to ensure that the U.S. remains a contributing member of the global community. The drawback to this approach is that it requires shoehorning the U.S. judicial system into the policymaking role that is usually filled by Congress and the White House.
It is absurd to conflate Exxon Mobil’s past opposition to carbon regulations with genocide and ethnic cleansing, as the Pace memo did, given the many improvements to the human condition that have resulted from fossil fuel production along with its contribution to global warming. Such hyperbole was necessary to achieve its intended purpose, though. How else to justify revoking Exxon Mobil’s business operations in a state that allows tobacco sales and subsidizes gambling, two activities that have done much less to support human development than fossil fuel production? Likewise, New York City has asked the court hearing its lawsuit against Exxon Mobil to penalize the extraction of sequestered carbon, rather than the production of carbon dioxide emissions, so as to avoid legal precedent that places the regulation of emissions within the remit of Congress and the White House. Both examples are driven by a belief that the policy goals justify the unorthodox means, even if that process involves using the courts to subvert Congress and the White House.
Climate change is a serious problem, the magnitude of which only increases with every additional year that humanity fails to take meaningful steps to reduce global carbon dioxide emissions. That said, the world continues to remain heavily dependent on fossil fuels even today because of the many advantages that their combustion brings to people. Representative political systems exist to weigh the benefits of such forms of economic activity against their costs and to craft policies that reflect this accounting. Those, like de Blasio and Kennedy, who disagree with how the current Congress has weighed those two factors, would do better to focus their efforts on convincing voters that their representatives should be implementing more stringent policies.
The present strategy of changing existing legal precedent for the single-minded purpose of hindering and ultimately ending Exxon Mobil’s fossil fuel activities is unlikely to succeed. But if it does, the negative ramifications will be felt by far more than just fossil fuel producers.
Tristan R. Brown is an assistant professor of Energy Resource Economics at the State University of New York in Syracuse, NY.