Guest petard hoisting by David Middleton
Hamlet:
There’s letters seal’d, and my two schoolfellows,
Whom I will trust as I will adders fang’d—
They bear the mandate, they must sweep my way
And marshal me to knavery. Let it work;
For ’tis the sport to have the enginer
Hoist with his own petard, an’t shall go hard
But I will delve one yard below their mines
And blow them at the moon.
OK… New York, California, Massachusetts, Vermont and other Peoples Republic entities have filed nuisance lawsuits and waged other forms of lawfare against ExxonMobil and other “Big Oil” companies. The general complaint is that “Big Oil” has caused climate change and all of the bad things that models predict will be caused by climate change.
They have also accused “Big Oil” of failing to disclose the risks that climate change and the regulation thereof may pose to their investors (i.e. mythical stranded assets). Well, I just read a very interesting article on Seeking Alpha which suggests that California may just be hoisting itself with their own petard… (blowing themselves up with their own mine).
Have California Munis Misled Investors And Bond Insurers About Climate Risk?
Jan. 9, 2018
Josh Rosner
Special situations, research analyst, banks, event-driven
[…]
Last summer, seven California cities and counties sued 17 oil and gas energy producers claiming that they have created a public nuisance and have caused climate change related damage that has increased sea levels in California and exposed the plaintiff governments to massive damages from natural disasters. Exxon Mobil (XOM) has now filed a petition, in District Court, to depose a number of people in the matter.
This is the latest in a series of lawsuits brought by California, Massachusetts, Vermont, and New York and a small number of other cooperating state and local governments against auto, utility, and energy-producing businesses.
Given the severity and specificity of the claimed harm and damages sought, it is peculiar that the disclosures in the plaintiff’s municipal and city bond issuance documents make very limited disclosures of any climate change risks. As a result, it appears these suits will either (A) create new economic risks and hazards for bond investors and, in the case of ‘wrapped’ deals, the bond insurers that wrap those California municipal debts or (B) provide the investors and bond insurers with the information with which to claim they have been defrauded by those municipalities.
Ironically, as a result of the subprime mortgage crisis, many of the same California counties that brought these latest environmental lawsuits filed suits against the five largest municipal bond insurers for “forcing” local governments to needlessly buy bond insurance in order to get higher credit ratings and issue debt with lower interest rates.
[…]
Have the tables turned?
The lawsuits against Chevron (CVX), Exxon Mobil, BP (BP), Shell Oil (RDS.A) (RDS.B) and over a dozen other firms now may provide the bond insurers and investors with a cause of action against the California plaintiffs in this case for failure to disclose, in bond deals, what it claims are massive environmental risks and damages to those counties and cities.
While the lawsuits claim significant harms to those cities and counties, those harms were not disclosed in the hundreds of bond issuances by those governments. In fact, while the plaintiffs in the suits claim grave and specific harms, their bond filings were largely silent on those risks and harms. As The Wall Street Journal highlighted in a headline today: “California Municipalities’ Debt Disclosures Contrast With Climate Warnings.” As a result, the issuers were almost certainly able to benefit from lower issuance costs that they would have been had they disclosed the risk to investors and, in the case of bonds that were wrapped by bond insurers, they likely paid lower insurance premiums than they would have had they fully disclosed the risks to the insurers.
As example, the City of Oakland claimed, in the lawsuits massive fossil-fuel production causes a gravely dangerous rate of global warming and ongoing and increasingly severe sea level rise harms to Oakland and that by 2050, a hundred year flood will occur every 2.3 years. These claims are in stark contrast to Oakland’s disclosures in its bond disclosures in this they state:
“The City is unable to predict when seismic events, fires or other natural events, such as sea rise or other impacts of climate change or flooding from a major storm, could occur, when they may occur, and, if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City or the local economy.”
Similarly, San Francisco, another plaintiff, claims it is planning to fortify its Seawall in an effort to protect itself from rising sea levels and that the short-term costs of doing so will be more than $500 million with long-term upgrade costs of $5 billion. In San Francisco’s bond disclosures, it has stated:
“The City is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City and the local economy.”
Similar inconsistencies exist between the claimed harms and bond disclosures of Marin County, San Mateo County, the City of Imperial Beach, the County and City of Santa Cruz (the other plaintiffs in the lawsuits).
[…]
Basically… “Seven California cities and counties sued 17 oil and gas energy producers claiming that they have created a public nuisance and have caused climate change related damage that has increased sea levels in California and exposed the plaintiff governments to massive damages from natural disasters.”
The municipalities are certain enough that they have or imminently will suffer damages from anthropogenic climate change caused by Big Oil, that they have filed these massive nuisance lawsuits… But they were so uncertain about the risks from anthropogenic climate change, that they failed to disclose such risks in municipal bond offerings.
The Democratic Peoples Republic of California and many of its counties and cities also failed to reveal the potential risks/costs of being run by madman who thinks cow farts are a risk to global climate, but lack of affordable, reliable energy is just a mild speed bump in the progress towards a Nirvana of meat-free, fossil fuel-free, climate change-free, living where everyone owns their own unicorn and a Tesla paid for by poor day laborours.
I’m going to hold my breath until California declares itself a fossil fuel free state…… Humm, maybe not!
the oil companies can start by doubling the fuel prices in California to cover costs of litigation.
Only one way too handle this – like any bully, you’ve got to break their faces.
Exxon & other oil companies,
Get together and raise prices enough to cover potential cost of lawsuits in the USA. Characterize the funding as proactive customer share reimbursement, rather than collusion.
Create a fund … put the money in a fund the will be distributed directly to each USA individual, at 7 year interval payouts as “remediation” share payment. Work with republicans to create a government program that will accept payments that are not accepted by any individuals.
Let everyone know that every 7 years they will be getting about $400. And that if the if the government gets in the way, the fund will be much less. Lawsuits against the companies will essentially be against the fund and the voluntary payout to public will be reduced by each local nuisance lawsuit.
What percentage increase in oil (product) costs (in USA) would be necessary create a billion per year fund?
I recognize that this can’t work in reality, but it would be interesting.
So, when a criminal enterprise is convicted under RICO, the entire membership of the enterprise, and everyone who made money in the illegal scheme, is convicted, and their assets forfeited.
Tell me again how much tax money governments make off the sale of oil and oil products?
The most interesting part for me is the opportunity for discovery on the data and the internal mechanisms and the merit scores that the modelers will certainly (well ok… \sarc…sarc/ ) have created and rigorously applied over the decades the models have been running in order to be in compliance with scientific and engineering standards as well as the basic grant requirements.
Just think of the information that will result from these pre-trial discoveries! Think of the ability to review and evaluate for the jury the diligence and effort-intensive valor displayed by the tireless workers that have painstakingly built reliable, traceable and repeatable datasets with transparent and repeatable adjustments to the raw data that have been fed into the physics-based simulation engines.
Where can I send a dollar to ensure that they continue with their lawsuit? I don’t want the knowledge explosion to end too soon.
Ask them if they have a legal fund, because you would like to donate a little to it to help out.
Given that it takes more energy to manufacture, install and run solar panels than they will ever produce, will California be suing renewable energy companies next? Solar panels do not generate energy, they waste it. See, for example: https://www.sciencedirect.com/science/article/pii/S0301421516301379
Here is a complete refutation of that paper (including a link to all the other studies which prove it wrong)
http://www.resilience.org/stories/2016-11-08/another-failure-of-scientific-peer-review-a-completely-wrong-paper-on-the-energy-return-of-photovoltaic-energy-1/
Isn’t it you Griffie who usually claim that peer-reviewed papers trump blog-posts? But not in this case apparently.
And griff CHOOSES to be mis-informed, yet again. !!
Well, now that my soup is simmering away, I have to say that from my view, this is going to be come the biggest gigglesnorrrttt ever, mostly because of the “discovery” process regarding the vast differences between the bond disclosures and the claimed harm.
If Exxon, et al., do not come out of this way ahead of the game, I will be surprised. It may wind on for years, but in the end, the proof of harm will be on the states in question, not on the oil companies.
Big and Little Oil brought the USA (and the world) low oil prices and low natural gas prices! Their investments in technology (horizontal drilling, fracking, pipelines, process efficiency) have restored low cost reliable fossil fuel energy to the USA. The entire worldreaps the benefits, of both the technology created and the low cost reliable energy that results.
The current litigation brought by California, Massachusetts, Vermont, and New York not only opens these states to potential ‘failure to disclose’ lawsuits from bond investors but also from real estate investors, corporations, and insurance companies. If their baseless lawsuits should cause price fluctuations in oil and gas energy costs, the rest of the world may have cause to sue these States for real economic harm! My sincere hope is the oil companies can legally give California, Massachusetts, Vermont, and New York ‘the shaft’. Drill them ’till they beg for relief… then frack ’em and cap ’em. It would set a beautiful precedent.
Here at home, low cost reliable oil and gas combined with a pro-American/pro-business President Trump administration has allowed the USA to shed the 8 year malaise of Obama crony socialism to become a vibrant and growing economy once more. Thank you, Capitalism! Thank you, Technology! Thank you, Big Oil! Thank you, President Trump!
And now, a bit of levity: Remember Barack Hussein Obama’s now obviously stupid quip “…We can’t just drill our way to lower gas prices.”?
https://youtu.be/Z96ZiaQbwqw
And he was correct, we can’t just drill our way to lower gas prices
We must Frac our way there
Did you forget the /Sarc tag?
Interesting, Is there a case for those people who suffered in the recent wild fires in California to mount a class action on the basis that the State knew of the risks of climate change but did nothing. No decent fire breaks were built to help mitigate the risk.
If California is now so sure about the damage being wreaked by big oil, why are they allowing any to be sold in the State?
Surely they should be shutting down all oil refineries, petrol stations, closing all fossil fuel power stations, stopping importing power from out of state unless such power is guaranteed low carbon, banning all petrol cars, gas heating etc etc.
Not to mention the use of all goods produced with the help of fossil fuels, and the use/sale of all agricultural produce that have not been made with purely non fossil fuel assistance.
They should… and they are working towards that.
They are also sensible enough not to do so at a rate which damages their state.
It’s all about money, which, in the end, is charged to us. But California isn’t bashful about fleecing it’s citizens.
Apology for pedantry but a petard is a small bomb (from French for fart) with a short fuse in a cast iron or clay pot used to blow in a door. A ‘nice’ bit of work prone to ending with the engineer blown up too, hence ‘hoist with his own petard’. Mining and countermining are other parts of the engineer’s work (tunneling under fortifications to collapse them). Vimy Ridge being a famous example.
http://www.durandgroup.org.uk/Vimy_Ridge.htm
Last time I used the quote, I thought petards were the spikes mountain climbers hammer into rock faces… I could have used a little pedantry in advance of that…. 😉
Hi David – those spikes are called pitons. Hammered in quite a few in my youth.
cheers edi
Who says old dogs can’t learn new tricks?
CA state is the 3rd highest producer of oil in the USA – they know how to shoot themselves in the foot:
https://www.investopedia.com/financial-edge/0511/top-6-oil-producing-states.aspx
Nope. Now sixth highest. Alaska, North Dakota, Oklahoma, New Mexico and Texas produce more. And soon Colorado will be producing more as well:
https://www.eia.gov/dnav/pet/pet_crd_crpdn_adc_mbbl_m.htm
Fraccing is redrawing the map.
California, New Mexico, Oklahoma and Alaska are all around 500,000 bbl/d. The numbers bounce around. California ranks 3rd if you use annual bbl/d. They rank 6th if you use monthly bbl/d. North Dakota is a distant second place to Texas and the other four are a distant third to sixth place.
I have a question: What is the ultimate source of power that provides electricity to light courtrooms?
… to power the computers that lawyers use to compose their notes, forms, and communications involved with carrying on lawsuits?
… to light and run the banks that handle funds to pay the lawyers and, per chance, to pay the winners of lawsuits?
… to power industries to provide vehicles that use fossil fuels to transport all concerned wherever they need to travel to handle the business of lawsuits?
The hypocrisy runs so much deeper, when you get right down to the practical details of life in civilization as we know it.
Based on the paleoclimate record and work done with climate models, one can conclude that the current climate change is caused by the sun and the oceans over which mankind has no control, including big oil. There is no real evidence that CO2 has any effect on climate and plenty of scientific rational to support the idea that the climate sensivity of CO2 is really zero. But even if CO2 were responsible for climate change the fossil fuel companies are not the responsible parties here but rather the actual people that make use of goods and or services that make use of fossil fuels. These are the people who are ultimately responsible for adding CO2 to the atmoslhere and it if is their money that keeps the fossil fuel companies in business. By far the source of the largest amount of greenhouse gases being added to the atmosphere are the oceans of the world and no one is taking action to stop that from happening. The real climate change culprit in terms of climate change is Mother Nature and that is who the state of California should be litigating.
I wonder what would happen if the oil companies, in response to these law suits, stopped selling their products in these states???
Have pension funds counted risks of the next glaciation?
With 11 interglacials over the last 800,000 years, there is a very high likelihood of natural variations causing a descent into the next glaciation – UNLESS we can generate enough global warming to prevent that. Current climate change wisdom expects CO2 warming to prevent that.
Characterizing Interglacial Periods over the Past 800,000 Years
However, current model warming temperature predictions are 260% of actual for the anthropogenic signature tropical tropospheric temperature. See John R. Christy 2016 testimony and John Christy 2017 testimony.
Los Angeles and San Francisco bays would probably dry up! Catastrophic famines would ensue – far worse than during the Little Ice Age.
Why have public or private pension funds not addressed these far higher risks of descending into the next glaciation?
“The combination of minimal reduction in northern summer insolation over the next few orbital cycles, owing to low eccentricity, and high atmospheric greenhouse gas concentrations implies that the next glacial inception is many tens of millennia in the future.”
Highly unlikely. It implies that we live in a completely unique interval. The last time such a long, warm interval occurred was in the Middle Pliocene 3.5-4 million years ago when climate and geography was very different (no Panamanian isthmus for one thing):
http://lorraine-lisiecki.com/stackfig.gif
Tweets going around regarding ocean acidity, like this one:
“Ocean acidity from climate change has gone from 8.2 to 8.05. That doesn’t sound like much but at 7.8 crustaceans can’t form shells & the food web collapses. When the oceans die, we die. Every city must divest from fossil fuels like NYC just did! ”
Is this bullshit or what?