“While assessing the details of the Rhode Island lawsuit, we went back and read the prospectus for the state’s latest bond offering, dated April 3, 2018. Nowhere in the 25-page section on the economics of Rhode Island was there mention of economic risk from the climate damages the state alleges.”

“‘Send money’ seems to be the message. We wondered how the Defendants could stop from committing the acts they are accused of without stopping their sales of oil and gas products in the state. That would send the state back to an economy and society when Roger Williams founded Rhode Island.”

From sea to shining sea, the climate change movement is cranking up its legal actions against oil companies. The latest comes from the State of Rhode Island and Providence Plantation.

On July 2, the state filed suit against 121 oil and gas companies for damage caused to the state from their continued production and marketing of oil, coal and natural gas, while ignoring the impact burning these fuels has on climate change, which has altered the hydrologic and meteorological cycles contributing to sea level increases, droughts, extreme participation events, and heatwaves.

The Complaint

According to the lawsuit:

Defendants, major corporate members of the fossil fuel industry, have known for nearly half a century that the unrestricted production and use of their fossil fuel products create greenhouse gas pollution that warms the planet and changes our climate. They have known for decades that those impacts could be catastrophic and that only a narrow window existed to take action before the consequences would be irreversible. They have nevertheless engaged in a coordinated, multi-front effort to conceal and deny their own knowledge of those threats, discredit the growing body of publicly available scientific evidence, and persistently create doubt in the minds of customers, consumers, regulators, the media, journalists, teachers and the public about the reality and consequences of the impacts of their fossil fuel pollution.

Signed by State of Rhode Island Attorney General Peter F. Kilmartin, the suit was filed with the state’s Superior Court.

California Redux

But the suit was also signed by lawyers from Sher Edling LLP, a San Francisco firm representing California municipalities suing oil companies over climate change. This law firm currently represents Imperial Beach, Marin and San Mateo counties, Richmond, Santa Cruz, and Santa Cruz County in suits against oil companies and industry association groups. A federal judge ordered three of the law suits be directed to state court.

Another law firm involved in these climate suits is Hagens Berman Sobol Shapiro LLP, which represents Oakland and San Francisco in a suit recently dismissed by the judge.

U.S. District Judge William Alsup became famous for holding a climate science tutorial in his court with the respective parties presenting expert testimony on climate change and its impact. The judge called his tutorial a fact-finding session since no one testifying was under oath and only the judge asked questions.

While a Chevron executive acknowledged that the climate is warming, which was the position of the plaintiff’s climate experts, the issue is the uncertainty of its future impact. Chevron’s lawyer made the point after the hearing that climate change should be decided as a policy matter. The lawyer said, “The key argument we made is you can’t resolve issues like this in court. You can’t resolve these sorts of global issues in one case.”

That would appear to be consistent with the federal precedent established in American Electric Power Co. v. Connecticut in 2004, which said corporations cannot be sued for greenhouse gas emissions because the Environmental Protection Agency regulates them through the Clean Air Act. Judge Alsup’s decision said that while climate change science is established, the court was not the proper venue for resolving the issue.

After the California climate lawsuits were filed and various state fraud investigations (New York and Massachusetts) began, the primary targets – Exxon Mobil Corp. (XOM-NYSE) and Chevron Corp. (CVX-NYSE) – began to fight back. While the companies waged their own efforts, the Manufacturers’ Accountability Project (MAP), an oil industry supporter, and an arm of the National Association of Manufacturers, moved to obtain records relating to how these law suits were started from the eight municipalities under California’s open records law.

Most of the municipalities denied the requests, claiming the documents were covered under attorney-client protection. San Francisco, however, did provide its contract with the Hagens firm. That contract said the law firm would keep 23.5% of damages, plus certain costs. The remaining 76.5% would go to San Francisco for “abatement, adaptability, and other costs related to the global warming injuries at issue.” Sher Edling LLP is participating in the Rhode Island law suit on a contingency basis.

Early Problems

An interesting point in the lawsuit was the mischaracterization of one of the defendants, Motiva Enterprises, LLC. The lawsuit said:

At times relevant to this Complaint, Motiva Enterprises LLC has been a wholly owned subsidiary of Royal Dutch Shell PLC that acts on Royal Dutch Shell PLC’s behalf and subject to Royal Dutch Shell PLC’s control.

That description decades out of date, referring to 1988–97. Motiva is 100% owned by Saudi Refining, which, in turn, is owned by Saudi Aramco, the national oil company of Saudi Arabia. Much also changed in the interim. [1]

We’re sure the lawyers would say that this is a minor issue, but the lawsuit was filed by Rhode Island’s legal team, which has experienced several major problems. First, lawyers missed a court response date that cost Rhode Island $24 million.

Secondly, it was revealed that several state lawyers did not have valid law licenses. Those mistakes reflect someone not paying attention to details. The Motiva information (we were familiar due to our analyst career) could have been found with a couple of Google searches.

Sea Level Rise: A Linchpin Issue

The focus of the climate change endangerment claims revolves around the impact and cost of rising sea levels. The lawsuit states:

54. Historical greenhouse gas emissions alone through 2000 will cause a global mean sea level rise of at least 7.4 feet. Additional greenhouse gas emissions from 2001-2015 have caused approximately 10 additional feet of committed sea level rise. Even immediate and permanent cessation of all additional anthropogenic greenhouse gas emissions would not prevent the eventual inundation of land at elevations between current average mean sea level and 17.4 feet of elevation in the absence of adaptive measures. 55. The relationship between anthropogenic CO2 emissions and committed sea level rise is nearly linear and always positive. For emissions, including future emissions, from the year 2001, the relation is approximately 0.25 inches of committed sea level rise per 1 GtCO2 released. For the period 1965 to 2000, the relation is approximately 0.05 inches of committed sea level rose per 1 GtCO2 released. For the period 1965 to 2015, normal use of Defendants’ fossil fuel products caused a substantial portion of committed sea level rise. Each and every additional unit of CO2 emitted from the use of Defendants’ fossil fuel products will add to the sea level rise already committed to the geophysical system.

According to a National Oceanic and Atmospheric Administration (NOAA) report,

In 2014, global sea level was 2.6 inches above the 1993 average—the highest annual average in the satellite record (1993-present). Sea level continues to rise at a rate of about one-eighth of an inch per year.

This sounds ominous, until you translate the inches into centimeters (cm) and millimeters (mm), which is the format used by the scientists researching sea level rises. The 1993–2014 increase is 7 cm and the rate of increase is 3.5 mm per year.

According to NOAA, there are differences between local sea levels and the ocean level – the former is measured by tidal gauges while the latter is done with satellites. NOAA further makes the point that the sea level isn’t rising or falling uniformly around the world, largely because the ocean’s bottom is no flatter than the earth’s surface.

The Rhode Island lawsuit uses the work of Peter U. Clark to justify their claims of the magnitude of sea level rise the state could experience. The UN Intergovernmental Panel on Climate Change Fifth Assessment report said that sea levels by 2100 could rise by 26 cm (10.2 inches) to 82 cm (32.3 inches).

The worst case suggests less than three feet of sea level increase over the next 80+ years. The estimates reflect the minimum and maximum projections for sea level rises based on four scenarios for global temperature increases.

Exhibit 1. Range Of IPCC Projected Sea Level Rises

Source: carbonbrief.com

Under scenario RCP2.6, drastic emissions cuts from 2020 onward are achieved, which keeps sea levels from rising dramatically. They are projected to rise by between 26 cm (10.2 inches) and 54 cm (21.3 inches) by the end of the century. The average increase is 40 cm (15.7 inches).

In scenarios where emissions stabilize by the end of the century (RCP4.5) or soon afterwards (RCP6.0), sea levels are projected to rise by between 32 cm (12.4 inches) and 62 cm (24.4 inches). The average is 47 cm (18.5 inches).

If emissions continue to rise rapidly (RCP8.5), then sea levels are projected to rise by between 45 cm (17.7 inches) and 82 cm (32.2 inches). The average in these scenarios is 62 cm (24.4 inches).

Interestingly, a new paper on sea level increases was published July 3rd in Environmental Research Letters. The study was led by the UK National Oceanographic Centre (NOC), and it found that flooding from rising sea levels could cost $14 trillion worldwide annually by 2100 if the target of holding the global temperature rise below 2º C above pre-industrial levels is missed.

NOC’s Dr. Svetlana Jevrejeva led the study. She stated:

More than 600 million people live in low-elevation coastal areas, less than 10 meters [33 feet] above sea level. In a warming climate, global sea level will rise due to melting of land-based glaciers and ice sheets, and from the thermal expansion of ocean waters. So, sea level rise is one of the most damaging aspects of our warming climate.

This statement would support the concerns expressed in the Rhode Island lawsuit.

On the day the law suit was filed, Governor Gina Raimondo (D) released “Resilient Rhody,” a report that came from a task force she organized last year to study the challenges the state faces from climate change, principally sea level increase, and to develop plans to address them.

The press conference announcing the filing of the law suit featured top government officials, including U.S. Senator Sheldon Whitehouse (D), and Representatives James Langevin (D) and David Cicilline (D). Senator Whitehouse is famous for his weekly climate change speeches on the floor of the Senate. The press conference came at the start of the campaign for the fall election, as a result, people wonder whether this law suit filing was a photo op.

In “Resilient Rhody,” the section dealing with sea level increases reported the following:

According to the Newport tide gauge, the historic rate of sea level rise from 1930 to 2016 (an 86-year period) is around 2.73 mm/year, or more than an inch per decade. In other words, sea level has risen over 10 inches in Rhode Island since 1930. Global mean sea level from 1993 to the present has accelerated to 3.1 mm/year as measured by satellite altimetry. Recent research confirms that if sea level continues to change at this rate and acceleration, the sea level rise by 2100 will more than double the amount if the rate was constant at 3 mm/yr. According to the Permanent Service for Mean Sea Level, the mean annual rate of sea level rise in Newport is 3.98 mm/year for the 30-year period from 1986-2016, a rate greater than the global average mean for the same period. In January 2017, the National Oceanic and Atmospheric Administration (NOAA) published revised projections for sea level rise globally and, in the United States, regionally. NOAA projects a high sea level rise scenario for Newport of 2.20 feet by 2040, 8.99 feet by 2100 and a substantial increase in the frequency of nuisance tidal flooding. NOAA recommends considering worst-case scenarios in coastal risk management due to the growing evidence of accelerated ice loss from Greenland and West Antarctica.

The 2017 NOAA report, which addresses regional sea level changes, reported the following basic conclusion:

The projections and results presented in several peer-reviewed publications provide evidence to support a physically plausible GMSL [global mean sea level] rise in the range of 2.0 meters (m) to 2.7 m, and recent results regarding Antarctic ice-sheet instability indicate that such outcomes may be more likely than previously thought.

The range of sea level increases NOAA says are “physically plausible” range from 6.6 to 8.9 feet, which is consistent with the Rhode Island report.

Caveats on Sea Level Rise

It is important to acknowledge that the latest information about melting ice in Antarctica shows that a previously unknown volcano underlies the glacier. Thus, whenever the volcano is active, there will be more rapid melting of the ice. When it is inactive, presumably there would be no melting. This would counter some of NOAA’s fear about rapid melting of the Antarctic ice. In other words, it is not (manmade) climate change as portrayed by climate activists but rather a geological feature we have no idea how to control.

It is also important to note another conclusion from the 2017 NOAA report. The study was an attempt to adjust the GMSL to account for key factors at the regional scale. These include:

1) shifts in oceanographic factors such as circulation patterns;

2) changes in the Earth’s gravitational field and rotation, and the flexure of the crust and upper mantle, due to melting of land-based ice;

and 3) vertical land movement (VLM; subsidence or uplift) due to glacial isostatic adjustment (GIA, which also changes Earth’s gravitational field and rotation, as well as the overall shape of the ocean basin), sediment compaction, groundwater and fossil fuel withdrawals, and other non-climatic factors.

The first conclusion impacts Rhode Island. NOAA wrote:

Along regions of the Northeast Atlantic (Virginia coast and northward) and the western Gulf of Mexico coasts, RSL [regional sea level] rise is projected to be greater than the global average for almost all future GMSL rise scenarios (e.g., 0.3-0.5 m or more RSL rise by the year 2100 than GMSL rise under the Intermediate scenario).

Note that all these conditions are outside of climate change, and have little to do with fossil fuels, other than their withdrawal from the ground, which would impact the Gulf of Mexico coastal forecasts and not the East Coast since no oil and gas production is done offshore.

The July 3rd sea level rise study referenced earlier followed on research Dr. Jevrejevra has been conducting, including a major study published in 2013 in the journal of Global and Planetary Change. That study, “Trends and acceleration in global and regional sea levels since 1807” contained a chart of sea level reconstruction since 1807 to 2010.

Exhibit 2. 150 Years Of Steady Sea Level Rise

Source: Global and Planetary Change

The abstract for that report concluded the following:

There is a good agreement between the rate of sea level rise (3.2 ±mm/yr) calculated from satellite altimetry and the rate of 3.1 ±. 0.6 mm/yr from tide gauge based reconstruction for the overlapping time period (1993-2009). The new reconstruction suggest a linear trend of 1.9 ± 0.3 mm/yr during the 20th century, with 1.8 ± 0.5 mm/yr since 1970.

In the July 3rd study, the objective was to find out what might happen to sea levels if the world achieved the Paris Accord goal of keeping global temperatures from increasing by more than 1.5oC by 2100. Dr. Jevrejeva concluded:

We found that with a temperature rise trajectory of 1.5°C, by 2100 the median sea level will have risen by 0.52m (1.7ft). But, if the 2°C target is missed, we will see a median sea level rise of 0.86m (2.8ft), and a worst-case rise of 1.8m (5.9ft).

Even under her worst-case scenario, for sea levels to rise by 8.99 feet as NOAA projects, or the 17.4 feet the lawsuit claims, there must be other considerations than anthropogenic climate change at work.

Paul Homewood, who posted the July 3rd article, was asked to go back and integrate the latest projections from Dr. Jevrejeva and her colleagues with the sea level history from her earlier study. He posted the following chart, which certainly raises questions about the reality of the latest projection.

Exhibit 3. Sea Level Forecast Looks Aggressive

Source: Paul Homewood

Rhode Island: Of Two Minds

While assessing the details of the Rhode Island lawsuit, we went back and read the prospectus for the state’s latest bond offering, dated April 3, 2018. Nowhere in the 25-page section on the economics of Rhode Island was there mention of economic risk from the climate damages the state alleges.

If they truly believed that there would be such a devastating impact on the state from rising sea levels and increased weather events as cited in the lawsuit, then one has to question the future of the state’s finances. In fiscal 2017, personal income taxes contributed 34% of the state’s revenues, with business taxes adding another 11%. State sales taxes brought in 27% of the revenue, while the state’s lottery and gambling industry contributed 10%.

In the claims for action in the suit, the state cites: “By the end of the century, 6,660 Rhode Island coastal properties, worth roughly $3.6 billion, will be at risk under a high-sea level rise scenario, reducing property tax revenue by as much as $47.8 million.” Earlier, it cited that “3,765 buildings and residences of over 10,000 people” would be impacted by a seven-feet sea level rise. With 6,660 properties damaged, it means nearly 20,000 people would be impacted state-wide, with employment and tax revenue impacts.

The largest, and fastest growing, employment category is tourism, which would be subject to significant impact if the predicted massive change to Rhode Island’s seashore happens. Not only would expensive shoreside homes be impacted, but so would marine businesses and tourist-related activities. This would result in lost revenue for the state so desperate for income it is installing tolls for trucks traveling through Rhode Island on Interstate 95.

One repercussion coming from the California climate law suits is the launch of an investigation into fraudulent disclosure in municipality bond offerings undertaken by the Securities and Exchange Commission. Not disclosing the climate change risk, if known, would be securities fraud. If the communities knew of this risk, as they claim, then they look to have a legal problem by not disclosing it. Rhode Island may have the same problem.

Remedy?

We were also intrigued with the remedy the state wants. The following language is in every cause of action:

Therefore, the State requests an award of punitive damages in an amount reasonable, appropriate, and sufficient to punish these Defendants for the good of society and deter Defendants from ever committing the same or similar acts.

“Send money” seems to be the message. We wondered how the Defendants could stop from committing the acts they are accused of without stopping their sales of oil and gas products in the state. That would send the state back to an economy and society when Roger Williams founded Rhode Island.

At this point, we believe the law suit is a publicity stunt designed to help the governor’s re-election campaign. However, based on our experience with Rhode Island courts, don’t be surprised if the oil companies hit turbulence.

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[1] The history of Motiva is convoluted and begins in 1988 when Texaco agreed to form a joint venture, known as Star Enterprise, in which Saudi Refining would own a 50% share of Texaco’s refining and marketing operations in the eastern United States and Gulf Coast.

In 1997, Texaco and Shell (RDS.A-NYSE) merged their respective marketing and refining operations into two joint ventures – one, Equilon, held the western and midwestern assets of the companies, while the second, Motiva, held the eastern and Gulf Coast operations. At that time, Motiva’s ownership was split between Shell with 35% and Texaco and Saudi Refining each with 32.5%. Shell controlled the joint venture.

In 2000, Texaco was acquired by Chevron and Shell and Saudi Refining purchased Texaco’s interest in Motiva, making it a 50-50 joint venture operated by Shell. That relationship ended in 2017 when Saudi Refining purchased Shell’s interest. Without seeing the partnership agreement, it is not clear if Shell controlled Motiva.