Suing Big Oil

Steam rises from the Miller coal power plant in Adamsville, Ala., on April 11, 2021.

recent wave of government climate change lawsuits against oil and gas firms may prove deeply harmful, actually inhibiting the growth of new, greener technologies by diverting resources that would otherwise fuel innovation, according to a May 16 issue brief from the Pacific Research Institute.

“There are many serious adverse consequences from state and local litigation against traditional energy companies, but no societal upsides should the plaintiffs in these cases prevail,” economist Wayne Winegarden asserted in the brief.

“Global climate change policies should solely focus on creating positive incentives for innovation.

“The court cases filed by the municipalities worsen the market environment and are, consequently, an obstruction to the development of these next-generation technologies.”

OVER THE PAST half-decade, high-profile suits have pitted San Francisco and Oakland, California; New York City; Baltimore; Boulder, Colorado; and other municipalities against heavy hitters in the traditional energy sector.

In its initial 2017 complaint directed at five oil companies, San Francisco’s city attorney Dennis Herrera stated that global warming is behind flooding, shoreline erosion, and damages to the city, saying this creates liability for those firms because of their greenhouse gas emissions in recent decades.

A California judge dismissed that suit as well as an associated Oakland suit in 2018. He argued that the judicial branch isn’t the place to address climate change, stating that “the court will stay its hand in favor of solutions by the legislative and executive branch.”

An economist argues that much of the financial burden of successful climate lawsuits will be borne by consumers.

“This order accepts the science behind global warming. So do both sides. The dangers raised in the complaints are very real. But those dangers are worldwide. Their causes are worldwide. The benefits of fossil fuels are worldwide. The problem deserves a solution on a more vast scale than can be supplied by a district judge or jury in a public nuisance case,” wrote Judge William Alsup, a Clinton appointee, in his order granting dismissal of the cities’ complaints.

“The concept that they can assess these damages and attribute them to oil companies is far-fetched,” Winegarden told Insight on May 17.

A key point of contention has been whether those suits belong in federal or state courts. Fossil fuel companies favor the former venue, while governments prefer the latter.

Just weeks ago, the 4th Circuit Court of Appeals again ruled that Baltimore’s climate damages lawsuit against oil companies should be heard in the State of Maryland’s court system. The court’s previous ruling on the suit had been reversed by the Supreme Court in 2021.

“The state court is a more favorable jurisdiction for these cases,” Winegarden said.

“FOSSIL FUEL COMPANY defendants want the cases heard in federal court, where they can argue that the cases should be quickly dismissed on the grounds that federal common law climate claims are displaced by the Clean Air Act,” Korey Silverman-Roati of Columbia University’s Sabin Center for Climate Change Law wrote in a 2022 blog post.

That Clean Air Act precedent stems from an 8–0 Supreme Court decision in 2011, “American Electric Power Co., Inc. v. Connecticut.”

The majority opinion, authored by Associate Justice Ruth Bader Ginsburg, noted that the Clean Air Act delegates decision-making on emissions to the Environmental Protection Agency (EPA).

“Local and state government plaintiffs want the cases to remain in state court, where they can argue that climate nuisance claims are similar to past common law efforts to hold companies accountable for misleading the public about their products’ harms, like those against tobacco companies,” Silverman-Roati wrote.

Donald Kochan, an economist at Virginia’s George Mason University, doesn’t buy the tobacco comparison.

“Tobacco was not a regulated industry, whereas coal, oil and gas are all heavily regulated,” Kochan told Insight.

Notably, the Supreme Court ruled that tobacco isn’t subject to Food and Drug Administration (FDA) authority.

Both Congress and the EPA can come up with new laws for the hydrocarbon sector.

It’s also much easier to trace individualized harms to tobacco—say, a case of lung cancer in a long-time cigarette smoker.

Yet in both cases, similar incentives may be at play. Kochan pointed out that the tobacco cases netted billions for plaintiffs’ lawyers.

Lawyers on the other side also profited. In 1997, defense attorneys reportedly

Flared natural gas is burned off at Apache Corp.’s operations at the Deadwood natural gas plant in the Permian Basin in Garden City, Texas, on Feb. 5, 2015.

cost the tobacco industry $600 million per annum.

A climate litigation database that shows up near the top of Google search results is maintained through a venture between Columbia’s Sabin Center and the law firm Arnold & Porter Kaye Scholer LLP. It focuses in part on litigation, including climate change litigation.

Last year, Arnold & Porter surpassed $1 billion in revenue.

IN HIS BRIEF, Winegarden argued that much of the financial burden of successful climate lawsuits will be borne by consumers.

“While tracing out the impacts from all these costs is difficult, the close historical relationship between the price of oil and the price of gasoline provides a partial sense of the costs that will be imposed on the broader economy,” he wrote.

Republican lawmakers have often linked the current spikes in energy prices to policy decisions under the Biden administration. Their Democratic colleagues, by contrast, have frequently blamed costlier gasoline on price-gouging by corporations.

One new bill approved by the House would, if enacted, allow the Federal Trade Commission to penalize companies deemed to be selling gasoline at “unconscionably excessive” prices.

President Joe Biden could grant it that authority by declaring an “energy emergency.” He could extend that emergency indefinitely.

Kochan, like Winegarden, has doubts about the legal basis of cities’ lawsuits against energy companies.

“The argument for common law development is that it evolves slowly and incrementally. It is not meant to be an open vehicle through which dramatic changes in liability assessment or liability formations can be suddenly and quite dramatically changed by courts,” he said.

John Dernbach, a professor at the Widener University Commonwealth Law School specializing in environmental law, has a different perspective.

“The municipalities and other plaintiffs in these cases are claiming that the actions of the fossil fuel companies damage them. These cases are intended to compensate the plaintiffs for real damage they have suffered and will continue to suffer. They have every right to be heard in court on these claims,” he wrote in an email to Insight.

CLIMATE NUISANCE LITIGATION, Winegarden argued, is in line with a broader attempt to implement expansive climate policy at every level, including across the federal government.

Although he is skeptical of a carbon tax, Winegarden noted that such a measure might at least be within the purview of Congress. (Some scholars have argued EPA also has the authority to impose a carbon tax.)

“Litigation just doesn’t fit into that,” Winegarden said, in an echo of Alsup’s concern about judicial overreach.

Winegarden would like to cut the marginal tax rates of companies working on innovations that might curb greenhouse gas emissions. Yet, such cuts shouldn’t tip the scales in favor of particular technologies or firms.

“When we get political favorites, you skew the trade-offs, because you start not looking at the costs of some technologies or the benefits of others,” he told Insight.

One example of that politicized disfavor may be natural gas. Winegarden’s brief noted that it has been the subject of climate change litigation despite its major role in reducing U.S. carbon intensity in recent years.

Insight has sought comment from New York City, one of the municipalities suing energy companies over climate change.

Insight also has sought comment from legal scholars and lawyers known to support climate litigation, as well as The Wilderness Society, an environmental nonprofit focused on preserving open public lands.