The state of California versus Big Oil

Big changes sometimes come without big headlines. One such took place last month in California, the largest and the most productive state in the US, which contributes around 15 per cent of the US GDP and would, by itself, form the world’s fifth largest economy.

California took the unusual step of suing global giants of the oil and gas industry and their trade association and mouthpiece, the American Petroleum Institute (API).

The charges include accelerating climate change, deception, and lying to the people. The case will test new waters as it pushes to extend the damages that can be imposed on American corporates, with regards to the standards they follow, the integrity of their operations and public messaging, as well as the nature and character of the business in the age of climate change.

The five companies that have been sued are Exxon Mobil, Shell, BP, ConocoPhillips and Chevron. In 2022, they reported a combined net profit of around $180 billion, riding on increased demand in the aftermath of Covid-19, aided by price gouging amid the disruption and uncertainties caused by events like the conflict in Ukraine.

Some might see this unprecedented comeback as the expansion that comes ahead of a star moving towards certain death, the self-destroying explosion of a supergiant. Yet, the numbers reveal that Big Oil has ample profits to rake in even if it’s all downhill from here.

For a sunset sector which proclaims transformation while staying rooted in the business of drilling and flaring, the trick is to stay relevant in a rapidly changing landscape.

Thus, the API on its website quotes the International Energy Agency (IEA) as stating that ‘under the IEA’s Sustainable Development Scenario, natural gas and oil will furnish nearly half the world’s energy in 2040, even if every nation meets the goals of the Paris Climate Agreement’.

This reinforces the story that there is no easy escape from the oil and gas sector, and the world will just have to live with the carbon footprint it brings if economies are to grow and nations are to thrive.

What, after all, can run without energy in the modern world, and who can provide this energy but the oil giants? In the words of API: ‘Our industry is essential to supplying energy that makes life modern, healthier and better—while doing so in ways that tackle the climate challenge: lowering emissions, increasing efficiency, advancing technological innovation, building modern infrastructure and more’.

Environmentalists would disagree. They are now joined by the State of California that has come out in the strongest possible way to hold Big Oil accountable for its actions.

Just consider the language of the statement issued by California governor Gavin Newsom: ‘For more than 50 years, Big Oil has been lying to us—covering up the fact that they’ve long known how dangerous the fossil fuels they produce are for our planet. It has been decades of damage and deception. Wild fires wiping out entire communities, toxic smoke clogging our air, deadly heat waves, record-breaking droughts parching our wells. California taxpayers shouldn’t have to foot the bill. California is taking action to hold big polluters accountable and deliver the justice our people deserve.’

Rob Banta, the attorney general of California, put it this way: “Oil and gas companies have privately known the truth for decades—that the burning of fossil fuels leads to climate change—but have fed us lies and mistruths to further their record-breaking profits at the expense of our environment. Enough is enough. With our lawsuit, California becomes the largest geographic area and the largest economy to take these giant oil companies to court.”

While it is possible to see this as a politicised lawsuit replete with sweeping statements, the colour and flavour of the case also showcases it as a gamechanger. It has the potential to forever change notions of corporate accountability, as it shifts the paradigm from working with oil companies to going all out against them.

California is not the only one to have filed for damages. According to the New York Times, similar lawsuits have been filed by local area municipalities and at least seven other states. California is the most significant of these, as it pushes to make the oil companies pay big time for climate change and all the associated damages that are directly being attributed to the sector.

One of the highlights of the case is evidence being presented that the oil giants were aware of the damages but painted a different picture before the people. For example, Shell claims online that it is ‘tackling climate change’ and aiming to become a net-zero emissions energy business by 2050. However, Shell’s CEO told the BBC on 6 July 2023 that cutting oil and gas production would be “dangerous and irresponsible”. How do these two go together?

Holding companies to account for greenwashing, naming and shaming them publicly and making them pay damages is a means of forcing change. No business leader in any sector can ignore the message embedded in the California lawsuit. It must send warning bells across the globe and make many businesses rethink their actions, statements, and product and service offerings.

At a time when big business faces a serious trust deficit that is declining further; when sustainability is becoming a game of manipulation—whereby small sidelights are showcased as big achievements, while the main business continues to drain resources and negatively impact environment and society—California provides a test case for the road ahead and likely responses from regulators.

While this will have no immediate impact in India, just consider how many companies can come under the radar for advertisements that misguide, mislead or are outright wrong in the claims being made and the benefits being sold.

It is possible to see the California case as a “watershed moment to hold polluters accountable”, to quote actress, author and activist Jane Fonda. It carries implications that businesses can ignore only at their own peril.

(Jagdish Rattanani is a journalist and faculty member at SPJIMR, Mumbai. Courtesy: The Billion Press)