Former Exxon Mobil Corp. Chief Executive Officer Rex Tillerson rejected the New York attorney general’s claim that for years he spearheaded a secret scheme to defraud investors by lying about how the oil company planned for the financial risks of climate change.
Tillerson, called as a witness by the state, testified for 3 { hours in Manhattan on Wednesday in the securities-fraud trial. He was CEO during the central event in the case: Exxon’s adoption of a “proxy cost” metric for carbon to predict decreasing demand for oil and gas.
Under cross-examination by Exxon’s lawyer, Theodore Wells, Tillerson denied that the company’s decade long proxy-cost system was like a fake “Potemkin village” meant to dupe investors concerned about climate change, as the state claims.
“It was a real system,” Tillerson said. “It was robust.”
He later said he felt bad that so many people at Exxon had been accused of wrongdoing when they had put so much effort into accounting for climate-change risks instead of “putting our heads in the sand.”
“It was the right thing to do,” he said.
New York doesn’t dispute that Exxon uses a conservative proxy cost rising to $80 per ton in 2040 to hedge against risks in its annual outlook for energy pricing. Instead, the state claims Exxon, with Tillerson’s blessing, used a lower metric internally when weighing decisions on financing for individual projects, such as oil sands in Alberta.
But the internal lower metric was a greenhouse gas (GHG) cost, which serves a completely different purpose, Tillerson said under questioning from the state’s lawyer. Using the proxy cost instead of the GHG cost to weigh investments would’ve essentially tricked Exxon into making bad decisions, he said.
“You don’t fool yourself,” Tillerson said.
Exxon argues New York Attorney General Letitia James, who took office in January, is conflating the two metrics to allege a discrepancy where none exists. Tillerson said the differing costs balance the need to both be realistic and not scare the company away from profitable projects.
“There’s always this natural effort underway to make sure we’re doing both,” the former executive said.
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