Did Exxon Mislead Investors About Climate-Related Risks?

Closing arguments in the oil giant’s investor fraud trial presented two competing narratives.

Protesters outside court on the opening day of the Exxon trial in 2019. Credit: Eduardo MunozAlvarez/VIEWpress via Getty Images
Protesters held signs outside the courthouse on the opening day of the Exxon trial. Two and half weeks later, on Nov. 7, the trial ended. A judge expects to issue a ruling within weeks. Credit: Eduardo Munoz Alvarez/VIEWpress via Getty Images

NICHOLAS KUSNETZ reports for Inside Climate News

Lawyers for New York State and ExxonMobil wrapped up a landmark climate fraud trial on Thursday, shaping a tangle of testimony and evidence into competing narratives on whether the oil company misled investors about the risks it faces from climate regulation.

Jonathan Zweig, who gave the closing arguments for the New York attorney general’s office, described the case as a classic securities fraud trial that happened to be about climate change, which he said “may well be the defining risk for oil and gas companies like ExxonMobil in the coming decades.”

Zweig said the evidence showed clearly that Exxon had misled investors by downplaying those risks significantly.

Theodore Wells, the lead lawyer for Exxon, argued that the same evidence shows “that this case is meritless, that each and every allegation in the complaint is not true and not connected to the reality or the truth, and that ExxonMobil has done nothing wrong.”

The two sides actually agree on many of the core facts of the case, chiefly that Exxon used two different estimates for the cost to its business from future climate regulations.

The company disclosed one of those estimates in numerous public reports. A second estimate, which was lower than the public figure, was not disclosed to investors until 2014 when it appeared in one sentence in one report. Much of the case hinges on whether that disclosure was clear and adequate, or whether anyone noticed it at all.

The closing statements capped an investigation that began four years ago after reports by InsideClimate News and the Los Angeles Times detailed what Exxon knew about the impact of fossil fuels on global warming from its own climate science research decades ago. The proceedings have grown contentious at times—the attorney general’s office tried to have Justice Barry Ostrager removed from the case last year after learning he owned shares of Exxon stock. But Ostrager ended the trial by congratulating both sides for their diligent and professional preparations and performance. He has said he will issue a ruling before the end of the year.

While the case centers on discussion of climate change risks, the trial itself—and the legal questions the judge will decide—revolve around relatively narrow questions of New York securities law.

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Can nature beat tech on air pollution?

Restoring native vegetation could cut air pollution and costs

Newswise — Adding plants and trees to the landscapes near factories and other pollution sources could reduce air pollution by an average of 27 percent, new research suggests.

The study shows that plants – not technologies – may also be cheaper options for cleaning the air near a number of industrial sites, roadways, power plants, commercial boilers and oil and gas drilling sites.

In fact, researchers found that in 75 percent of the counties analyzed, it was cheaper to use plants to mitigate air pollution than it was to add technological interventions – things like smokestack scrubbers – to the sources of pollution.

“The fact is that traditionally, especially as engineers, we don’t think about nature; we just focus on putting technology into everything,” said Bhavik Bakshi, lead author of the study and professor of chemical and biomolecular engineering at The Ohio State University.

“And so, one key finding is that we need to start looking at nature and learning from it and respecting it. There are win-win opportunities if we do – opportunities that are potentially cheaper and better environmentally.”

The study, published today in the journal Environmental Science & Technology, found that nature-based solutions to air pollution might, in many cases, be better than technology at combating air pollution.

The analysis found that for one specific sector – industrial boilers – technology is cheaper at cleaning the air than ecosystem upgrades. And for the manufacturing industry – a broad sector – both ecosystems and technology could offer cost savings, depending on the type of factory.

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National plastics draft bill gaining momentum

Credit: Flickr

E.A. Crunden reports for WasteDive

Dive Brief:

  • Sweeping national plastics legislation could be inching closer to reality after two lawmakers debuted a draft bill this month. The effort would codify into federal law both extended producer responsibility (EPR) and a national “bottle bill” in the form of a 10-cent container deposit system. Certain lightweight products, including carryout plastic bags, disposable foodware made from expanded polystyrene, cotton buds, and straws would be banned from sale and distribution as of January 2022, with some exceptions for people with disabilities.
  • Revenue generated from a fee on non-reusable carryout plastic bags would also go toward recycling infrastructure and litter clean-up projects. In one potentially controversial measure, the bill calls for a moratorium on new plastics facilities, giving environmental agencies leeway to consider impacts on air, water and climate in assessing those sites. The bill would also update Environmental Protection Agency (EPA) regulations to reduce plastic contamination in waterways.
  • The draft comes amid a push by beverage industry giants to capture more PET bottles through a new $100 million initiative, which has been presented as an alternative to federal legislation. But the proposed bill could gain momentum, especially given growing concerns about plastic pollution and increasing pressure to act. Jan Dell, an independent engineer with the Last Beach Cleanup, told Waste Dive the draft provisions “are cost-effective and proven approaches for reducing plastic pollution.” 

Dive Insight:

Authored by Sen. Tom Udall of New Mexico and Rep. Alan Lowenthal of California, the bill is seen as the first of this magnitude in many years, with major implications for the waste and recycling industry. Big players like the National Waste and Recycling Association (NWRA) criticized the initial outline of the legislation when it was released in August, arguing that it would increase contamination and put too much pressure on MRF infrastructure.

Under the draft bill, plastics producers would be required to take responsibility for collecting and recycling materials. They would be encouraged to implement cleanup programs with EPA approval, in addition to covering the costs of waste management. This EPR plan would come coupled with a number of other measures, including a nationwide container deposit requirement, regardless of material. The 10 states that already have bottle bills would be allowed to continue their programs if they meet federal requirements.

Heidi Sanborn, executive director for the National Stewardship Action Council, told Waste Dive that the bill is a “game changer” with positive implications for public health and the environment.

“This is truly the circular economy, when the producer is held responsible for what they’re putting on the market,” Sanborn said. 

Dell offered similar sentiments, emphasizing the national container deposit component in particular, which she said would create “a clean stream of PET bottles” that the beverage industry has repeatedly said it wants to use again. 

But it is unclear whether the legislation will see any support from major industry players who have historically sought to undermine bottle bills and regulatory efforts.

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How would you like to charge your e-car in the time than it takes to say the title of the Penn State researcher who discovered the new method?

Solar-powered EV charging station (Inhabitat photo)

Editor’s Note: The head of a research team at Pennsylvania State University knows that Americans are not likely to move fully to electric vehicles until the cars can be fully charged quickly. Really quickly. Like in the time it takes to pull into a Turnpike rest stop, eat lunch and get back on the road. The head engineer, Chao-Yang Wang, explains it all in the story below. Oh yes, his title? William E. Diefenderfer Chair of mechanical engineering, professor of chemical engineering and professor of materials science and engineering, and director of the Electrochemical Engine Center at Penn State. Sir, your car is ready. — FB

By the Editorial Team at pvbuzz:

Electric vehicle owners may soon be able to pull into a fueling station, plug their car in, go to the restroom, get a cup of coffee and in 10 minutes, drive out with a fully charged battery, according to a team of engineers.

bmwblog photo

“We demonstrated that we can charge an electric vehicle in ten minutes for a 200 to 300-mile range,” said Chao-Yang Wang, William E. Diefenderfer Chair of mechanical engineering, professor of chemical engineering and professor of materials science and engineering, and director of the Electrochemical Engine Center at Penn State. “And we can do this maintaining 2,500 charging cycles or the equivalent of half a million miles of travel.”

Lithium-ion batteries degrade when rapidly charged at ambient temperatures under 50 degrees Fahrenheit because, rather than the lithium ions smoothly being inserted into the carbon anodes, the lithium deposits in spikes on the anode surface. This lithium plating reduces cell capacity, but also can cause electrical spikes and unsafe battery conditions.

Batteries heated above the lithium plating threshold, whether by external or internal heating, will not exhibit lithium plating.

In a battery, ions flow from the cathode to the anode, resulting in a positive energy charge for the unit (IMAGE: CHAO-YANG WANG LAB, PENN STATE).

The researchers had previously developed their battery to charge at 50 degrees F in 15 minutes. Charging at higher temperatures would be more efficient, but long periods of high heat also degrade the batteries.

“Fast charging is the key to enabling the widespread introduction of electric vehicles,” said Wang.

Wang and his team realized that if the batteries could heat up to 140 degrees F for only 10 minutes and then rapidly cool to ambient temperatures, lithium spikes would not form and heat degradation of the battery would also not occur. They report their results in today’s (Oct 30) issue of Joule.

“Taking this battery to the extreme of 60 degrees Celsius (140 degrees F) is forbidden in the battery arena,” said Wang. “It is too high and considered a danger to the materials and would shorten battery life drastically.”

The rapid cooling of the battery would be accomplished using the cooling system designed into the car, explained Wang. The large difference from 140 degrees to about 75 degrees F will also help increase the speed of cooling.

“The 10-minute trend is for the future and is essential for adoption of electric vehicles because it solves the range anxiety problem,” said Wang.

Adding to the reduction of range anxiety — fear of running out of power with no way or time to recharge — will be, according to Reuters, the establishment of 2,800 charging stations across the U.S., funded by the more than $2 billion penalty paid by Volkswagen after admitting to diesel emissions cheating. These charging stations will be in 500 locations.

The self-heating battery uses a thin nickel foil with one end attached to the negative terminal and the other extending outside the cell to create a third terminal. A temperature sensor attached to a switch causes electrons to flow through the nickel foil to complete the circuit. This rapidly heats up the nickel foil through resistance heating and warms the inside of the battery.

Also working on this project from Penn State are Xiao-Guang Yang, assistant research professor; Teng Liu, graduate student; Yue Gao, post-doctoral scholar; Shanhai Ge, assistant researcher professor; Yongjun Leng, assistant research professor; and Donghai Wang, professor, all in the Department of Mechanical Engineering.

The U.S. Department of Energy supported this work.

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Your town’s climate change risk? Ask a bond broker

The underwriters of municipal bonds are disclosing more about cities’ exposure to higher temperatures and rising seas.

Homes damaged by Hurricane Maria are seen in an aerial photograph taken over El Negro, Yabucoa, Puerto Rico, on Sept. 17, 2018.
Homes damaged by Hurricane Maria are seen in an aerial photograph taken over El Negro, Yabucoa, Puerto Rico, on Sept. 17, 2018. PHOTOGRAPHER: XAVIER GARCIA/BLOOMBERG

Danielle Moran reports for Bloomberg
November 5, 2019, 5:00 AM EST

Investment banks have begun quietly sounding alarm bells about climate change. Their worries are showing up in the documents that accompany municipal bonds they underwrite.

When state and local governments issue debt, federal securities laws hold their bankers accountable for making sure that states and cities adequately disclose the risks bond buyers will be taking on. These might include any lawsuits a town is facing, or how the sales taxes used to pay back bondholders could fluctuate in a recession. Now many of these documents include language about climate change, hurricane risks, and rising seas. “Every bank should be asking their clients about this risk,” says Christopher Hamel, a senior fellow at Municipal Market Analytics and former head of municipal finance at RBC Capital Markets.

Bloomberg News analyzed more than a dozen due diligence questionnaires prepared by banks or legal counsels and sent to governments in coastal Florida, and over 40 official statements for prospective bond investors. About half of the questionnaires and the majority of the statements included language on storm-related risks or climate change. The questions about climate risk sometimes come from the banks or their lawyers, and sometimes from disclosure counsels who are hired by cities to prepare for a bond deal.

relates to Muni Bonds Contain New Fine Print: Beware of Climate Change
Rescue and aid volunteers look for people who survived Hurricane Irma in Big Pine Key, Fla., on Sept. 15, 2017.PHOTOGRAPHER: CHIP SOMODEVILLA/GETTY IMAGES

During the preparations for Jacksonville’s sale of $197 million in bonds in August, a disclosure counsel asked if the city had long term plans to implement projects that increased resilience against storm-related risks. Questions like that are new, says Randall Barnes, the treasurer of Jacksonville, Florida’s largest city. “We had been asked about impacts of hurricanes before, but not specifically on what we are doing for the future,” he says.

Scientists predict that global warming and rising seas could lead to more intense storms such as Hurricane Maria, which devastated Puerto Rico in 2017. Tidal flooding—already happening in such cities as Miami Beach, Fla.—could force residents to move farther inland. BlackRock Inc. says that within a decade, more than 15% of debt in the S&P National Municipal Bond Index will come from regions that could suffer average annualized losses from climate change of as much as 0.5% to 1% of their gross domestic product.

The questions asked by the banks or legal counsels in the documents Bloomberg reviewed varied in specificity. For example, before JPMorgan brought $162 million in bonds to market for Miami Beach, one of its counsels asked the officials to answer three questions that directly address climate change and its impacts on the city’s financial health. The Florida Keys Aqueduct Authority was asked by Citigroup to explain the impacts of Hurricane Irma on the utility system. Michael Carlson, JPMorgan’s head of public finance infrastructure, says that the climate discussion is “very much a part of our due diligence,” and he’s seen an “exponential increase” in disclosures in recent months.

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With industry economics crushing newspapers, the Salt Lake Tribune tries new tact: Going non-profit

Editor’s Note: Nieman Labs reports on a major daily newspaper’s attempt to stay alive. The Salt Lake Tribune has received a green light from the IRS to become a non-profit. It’s the first in the nation to try this approach. We join many others in rooting for its success. You can help get them started with a contribution. – FB

It’s a big step for Salt Lake City — but also a major opening for other newspapers who might find nonprofit status a more appealing alternative than selling or closing down.

 CHRISTINE SCHMIDT@newsbyschmidt  reports for Nieman Lab. 

It was a “happy surprise,” Fraser Nelson said when The Salt Lake Tribune received a letter from the IRS on Friday giving the 148-year-old news outlet nonprofit 501(c)(3) status — no questions asked.

A final verdict on whether the Tribune could become the first legacy newspaper in the U.S. to go fully nonprofit wasn’t expected until early 2020, Nelson (vice president of business innovation) and Jennifer Napier-Pearce (editor-in-chief) told me. It had received approval for the parallel Utah Journalism Foundation a few months ago — also with no questions, but that was a more straightforward request. This approval opens the doors for many more commercial legacy newspapers to seek tax-deductible status and philanthropic funding — a potential lifeline for local news outlets whose owners agree to give up control.

“We argued that our business will not change and we will continue to support the community that we serve and left it open to interpretation,” Napier-Pearce said. “We figured if they do go ahead with it, our circumstance is not going to match the circumstance of local newspapers around the country. We wanted maximum flexibility so other people could tinker with this recipe for their particular needs. Our argument is we’re already doing the work of a nonprofit. We should qualify for that tax status.”

“Without a lot of feedback from the IRS, we’re grateful that we have a pretty blank slate,” Nelson said. “We want to make sure we’re making a decision that makes sense for us as an institution, make sure they are in the context of the larger national — what this means for other papers and for journalism generally.”

(They asked me to share the donate link, which will probably become very familiar to Tribune readers once the paper figures out some infrastructure questions. The Tribune also received funding from the Google News Initiative to work on these items last month.)

Here’s The Salt Lake Tribune’s plan for securing 501(c)(3) status June 3, 2019

The Tribune announced the news this morning, just five months after it submitted its application to the IRS. (I reached out to the IRS for comment and will update if I hear back.) In June, we unpacked the various hoops the application would have to jump through with Nelson and media law expert Jeff Hermes, such as:

“Are you using commercial revenue streams such as advertising or subscription fees without attempting fundraising?”

The Tribune had offered up advertising as unrelated business taxable income to the IRS, meaning that it would be outside the purview of their tax deductibility, but the IRS didn’t issue any instruction on how to treat it. Subscriptions may become tax-deductible, but Fraser said they’ll have to figure out if that status would vary between digital and print subscriptions (since a print edition involves more business operations, like printing and distribution). So for now, TBD.

RELATED ARTICLENonprofit news outlets aren’t relying as heavily on foundations — but journalism philanthropy continues to grow – September 18, 2019

But the nonprofit newspaper will be able to attract a new mix of revenue streams, reliant on philanthropic giving, smaller donations from readers and supporters, and the endowment of the separate Utah Journalism Foundation. (Nelson said earlier this year that they were aiming to raise $60 million for that. Today she said she couldn’t share anything about the amount raised thus far. UJF grants will also go to other Utah news organizations besides the Tribune.)

Reminder: “Nonprofit” doesn’t mean “no business plan.” Nonprofit journalism, in general, has seen a remarkable boom over the past ten years, but the outlets still need to invest in their business and fundraising operations to sustain the editorial operations.

“We’ll be forthcoming about where that is but one thing that’s really important is to stress again that the purpose of this foundation is to help sustain The Salt Lake Tribune in perpetuity but also to make sure that we’re doing as good a job as we can with promoting and supporting independent journalism in the state,” Nelson said.

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