In the latest development on ExxonMobil’s long (and ongoing) history of deceiving the public and decision makers on climate change, the Conservation Law Foundation (CLF) announced this week that it is preparing for the first official lawsuit against the oil and petrochemical giant for its climate deception. This move follows on the recent announcement that several state attorneys general are investigating ExxonMobil given recent revelations that the company knew the risks of climate change as early as the 1960s and yet chose to launch a disinformation campaign to shed doubt on climate science.
In the new case, CLF will argue that given this knowledge of climate change and its impacts, ExxonMobil should have prepared its facilities, specifically an oil storage and transfer station in Everett, Massachusetts. The Everett Terminal has in the past been charged under the Clean Water Act for oil spills into the Mystic River and surrounding communities. Knowing this recent history and knowing about the predicted rising seas and greater frequency of high rainfall events, ExxonMobil should have fortified its facilities here, CLF says. Failing to do so exposes Exxon’s investors to financial risk and exposes the surrounding communities to a very tangible risk of spills, leaks, and explosions in their backyards.
Are companies preparing their facilities for climate risks?
The answer is that we might not know because of the lack of transparency around companies’ risk disclosures. The U.S. Securities and Exchange Commission (SEC), the federal agency responsible for overseeing public companies, issued landmark guidance in 2010 asking companies to disclose climate-related risks to their investors. The SEC wrote, “Significant physical effects of climate change …. Have the potential to have a material effect on … business and operations… They can include the impact of changes in weather patterns, such as increases in storm intensity [and] sea level rise.”
Since the SEC wrote those words, more scientific research has found connections between climate change and the proportion of more intense storms in the North Atlantic basin, and that climate change will lead to more extreme precipitation events (i.e. downpours), especially in the Northeast US.
Is ExxonMobil ready for climate change impacts?
When it comes to disclosing climate risks, ExxonMobil doesn’t lead the pack. This was my finding in a 2014 Union of Concerned Scientists report, Stormy Seas, Rising Risks, that looked at oil companies’ disclosure of climate risks at refineries. ExxonMobil doesn’t disclose any substantive information to its investors through the SEC on physical climate risk. But what we can look at is the vulnerability of ExxonMobil’s facilities and how they’ve fared in past weather events.
Boasting more than 5 million barrels per calendar day in crude-refining capacity, Exxon Mobil is the largest refiner in the world. In the 2014 report, we modeled ExxonMobil’s Baytown complex (above), the largest petroleum and petrochemical complex in the US. We found that even a Category 1 storm could inundate parts of the facility, with a Category 3 storm having the potential to leave some infrastructure under 15 feet of water. On top of that, sea level rise will only worsen such impacts, we found.
In 2005, Hurricane Rita caused both Exxon’s Baytown and Beaumont facilities to shut down. Hurricane Katrina also caused major damage to the Chalmette Refinery, causing it to shut down for many months. With continued sea level rise as well as potential increases in storm intensity as the climate warms, future shutdowns are likely.
Despite the vulnerable placement of these facilities and others, Exxon Mobil has not reported physical risks from climate change impacts to the SEC. Though the company’s SEC filings have noted that “hurricanes may damage our offshore production facilities or coastal refining and petrochemical plants in vulnerable areas,” the only direct reference to climate-related risks discussed climate regulations.
With these findings in hand, the Union of Concerned Scientists, along with Ceres and several investors, sent a letter to ExxonMobil asking about this lack of transparency; the company wrote us back, citing their (very limited) discussion of physical climate risk in their Corporate Citizenship report and their contribution to an industry climate risk adaptation report.
If Exxon is thinking about and preparing for climate-related risks in these venues, why not share it with their shareholders and share it with nearby communities like Everett?
Fossil fuel companies should be held accountable for considering climate risks
As a result of this lack of transparency, we don’t know whether ExxonMobil has prepared its Everett facility for climate impacts, as CLF claims it hasn’t. Without further information disclosed from companies and without stronger demands from the SEC and investors for this information to be shared, it is difficult for us to know whether companies have sufficiently prepared for risks presented by sea level rise and extreme rain events. We need greater transparency from companies and greater consideration of climate-related risks.
When companies fail to disclose and prepare for climate change, others will feel the impact. Investors are exposed to undue financial risk. The public pays at the pump when refineries are shut down. And the public pays again in their tax dollars when the government needs to fund loans and cleanups. And nearby communities like Everett pay when they are exposed to harm from facility spills, accidents, and other damages. Companies owe it to these people to be more responsible corporate actors; they should consider, disclose, and prepare for the impacts of climate change.