The New York State Attorney General hit oil giant Exxon Mobil with a lawsuit on Wednesday, claiming that the company misled its investors about climate change and the risks that it would cause for their investment.

The lawsuit has been in the works for years. New York started investigating Exxon Mobil in November 2015 , when it subpoenaed the company for financial records as well as internal documents and communications.

Wednesday's lawsuit (PDF) claims that the company told investors it was managing risks from existing and potential climate change regulations, while it allegedly wasn't. Failing to build political risk into its financial models would have made Exxon Mobil look more profitable, and, consequently, investing in the company might have seemed like a better bet to investors.

Specifically, the complaint says that Exxon told investors it was applying a "proxy cost" of carbon dioxide to all of its existing and future investments. This would help the company estimate how much profit it would lose if, say, its wells were located in a country that instituted a carbon cap or a carbon tax, or if a major country decided to institute a policy that would reduce demand for oil and gas.

"Exxon’s proxy cost representations were materially false and misleading because it did not apply the proxy cost it represented to investors," New York's attorney general claims. "This was especially true of investments with high GHG emissions, where applying the publicly represented proxy cost would have had a particularly significant negative impact on the company’s economic and financial projections and assessments."

The lawsuit specifically names former Exxon Mobil CEO and former Secretary of State Rex Tillerson, who it says knew that the company's proxy costs were not being applied. At some point, an Exxon manager alerted other management that the proxy costs were not being applied to the company's balance sheets. "However, after Exxon revised its internal guidance, Exxon’s planners realized that applying the newly increased proxy cost figures would result in severe consequences to its economic projections," the NY AG alleges. Instead, Exxon reportedly started applying only the proxy costs of existing greenhouse gas (GHG) emissions rules, assuming that existing regulations would be maintained indefinitely into the future.

Apparently, applying this modified cost instead of the proxy cost that Exxon told its investors it was applying led to the company understating costs associated with a group of its oil sands projects in Alberta, Canada by nearly $25 million. Using the proxy cost structure that Exxon claimed it was using would have also shortened the life of many of its projects and reduced the available reserves that the company told investors it had.

“Highly misleading analysis”

The lawsuit also states that Exxon "presented a highly misleading analysis to investors to reassure them that the company faced little or no risk of its assets becoming stranded under a two degree scenario." Stranded assets are investments that are not able to reach full return before using that asset becomes impossible, in this case, due to climate policy. Recent research has shown that if a country's oil and gas assets become stranded, it could undercut a country's economic growth significantly. The lawsuit claims that Exxon said "that its analysis was supported by reputable academic and government sources, when it was not. Even after being warned by an author of the key source upon which Exxon purported to rely that the company’s analysis was 'misleading,' Exxon continued to present this analysis to investors."

New York's lawsuit isn't the first to come to these conclusions. In August 2017, a group of Harvard researchers analyzed a trove of 187 internal Exxon documents leaked to journalists and found that, compared to the public information Exxon was putting out concurrently, the company did mislead the public about its assessment of climate change.

The lawsuit is seeking to force Exxon to do a full review of its finances, applying the proxy costs it told investors it would apply. It also seeks an unspecified amount in damages for investors who were misled.

In a statement on Wednesday afternoon, Exxon wrote: "These baseless allegations are a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing.

"The company looks forward to refuting these claims as soon as possible and getting this meritless civil lawsuit dismissed."

"There is no evidence to support these allegations," Exxon added, "which come after a 2016 press conference by former New York Attorney General Eric Schneiderman, Al Gore and other Democrat attorneys general, a discredited media campaign and lobbying by anti-fossil fuel activists."