Last week, New York Attorney General Eric Schneiderman revealed that his office is investigating ExxonMobil to see if the oil giant has misled its investors with regard to the risks that climate regulation poses to its business. ExxonMobil is not alone in Schneiderman's climate crosshairs. Yesterday, the AG's office issued a press release touting the fact that the attorney general has extracted an agreement from the coal producer Peabody Energy to include a statement that recognizes that regulations aimed to protecting the climate might reduce its profitability.
Schneiderman evidently believes that investors are ignorant sheep that can be misled by wily corporate wolves. But is it really plausible that investors in fossil fuel producing companies could have somehow missed the clamor over the risks of future climate change that burning coal, oil and natural poses. The trend of Peabody's stock price suggests otherwise. It has dropped from over a $1,000 per share in 2011 to around $15 per share today.
Schneiderman's investigation found that the company had considered various regulatory scenarios that could substantially reduce demand for its coal and failed to put that information in its annual reports. However, beginning in 2011, the company has evidently stated in its annual reports:
Enactment of laws or passage of regulations regarding emissions from the combustion of coal by the U.S. or some of its states or by other countries, or other actions to limit such emissions, could result in electricity generators switching from coal to other fuel sources.
So what did the company agree to do? Among other things, the agreement reached with the NYAG states:
Enactment of laws or passabe of regulations regarding emissions from the combustion of coal by the U.S., some of its states or other countries, or other actions to limit such emissions, could result in electricity generators switching from coal to other fuel sources or coal-fueled power plant closures. … The potential financial impact on us of future laws, regulations or other policies will depend upon the degree to which any such laws or regulations force electricity generators to diminish their reliance on coal as a fuel sources. … From time to time, we attempt to analyze the potential impact of the Company of as-yet-unadopted, potential laws, regulations and policies. These analyses sometimes show that certain potential laws, regulations and policies, if implemented in the manner assumed by the analyses, could result in material adverse impacts on our operations, financial condition or cash flow, in view of the significant uncertainty surrounding each of these potential laws, regulations and policies. We do not believe that such analyses reasonably predict the quantitative impact of future laws, regulations or other policies may have on our results of operations, financial condition or cash flows. (emphasis added)
With regard to the agreement, Peabody Energy noted in its press release:
Peabody Energy (NYSE: BTU) announced today that it has reached a resolution with the New York Attorney General's (NYAG) office regarding the company's disclosures involving climate change. Following an extensive eight-year investigation initially discussed in the company's 2007 disclosures, Peabody has agreed to amend its disclosures. There is no other action associated with this settlement, no admission or denial of wrongdoing and no financial penalty. (emphasis added)
In the AG's the press release Schneiderman declares:
"As a publicly traded company whose core business generates massive amounts of carbon emissions, Peabody Energy has a responsibility to be honest with its investors and the public about the risks posed by climate change, now and in the future. I believe that full and fair disclosures by Peabody and other fossil fuel companies will lead investors to think long and hard about the damage these companies are doing to our planet."
Is Schneiderman's crusade to extract meaningless disclosures about future climate risks from fossil fuel companies really a good use of New York state taxpayer dollars?
Disclosure: I own 50 or 100 shares (I'm too lazy to check my statements) of ExxonMobil stock that I bought with my own money. The stock prices is down from $103 in 2014 to $83 yesterday.