Alex Epstein Testifies

Fossil Fuels Advocate Alex Epstein Denounces AG Subpoena: “F**K Off, Fascist”

When fossil fuels advocate Alex Epstein learned that his organization, the Center for Industrial Progress (CIP), was listed in a subpoena to Exxon from Massachusetts Attorney General Maura Healey demanding forty years of communications regarding climate change, Epstein sent Healey’s office a terse reply: “F**k off, fascist.”

CIP was one of “a dozen free market groups and universities” listed in the April 19 subpoena, the Washington Times reports.

That article continues:

ExxonMobil released a copy of the subpoena Wednesday [June 15] as part of its motion for an injunction filed in U.S. District Court for the Northern District of Texas, in which the fossil fuel giant accused Ms. Healey of waging a politically motivated fishing expedition aimed at muzzling her ideological foes. . . . The investigation centers on whether Exxon committed consumer and securities fraud stemming from the company’s challenging of the catastrophic climate change narrative.

Healey’s subpoena is part of an overtly political attack on Exxon and other energy producers in which “former vice president Al Gore and a coalition of attorneys general from across the country announce[d] historic state-based effort to combat climate change,” a March 29 news release from the office of New York AG Eric T. Schneiderman stated.

This “unprecedented coalition vows to defend climate change progress made under President Obama and to push the next president for even more aggressive action,” the release continues.

The organization exists not only to legally hound energy companies but to promote and defend new federal regulations of fossil fuel industries. Schneiderman’s release states:

Many of the states in the coalition have worked together on previous multi-state environmental efforts, including pressing the EPA to limit climate change pollution from fossil-fueled electric power plants, defending federal rules controlling climate change emissions from large industrial facilities, and pushing for federal controls on emissions of the potent greenhouse gas methane emissions from the oil and natural gas industry.

The action by attorneys general coincides with a broader political movement seeking to publicly shame Exxon and other oil producers and to advocate that universities and pension funds divest from fossil fuel companies. Many of the related views have been expressed via the “#ExxonKnew” hashtag.

Epstein, author of the 2014 book The Moral Case for Fossil Fuels (which I have reviewed positively), responded angrily to the news that his private, for-profit business had been named in the subpoena. On June 15, Epstein emailed Healey’s office, including the terse message “F**k off, fascist” in an email with the subject, “Your demand to seize my emails.”

The next day, Epstein also directly challenged Al Gore, Tweeting: “.@algore for 10 years you refuse to debate opponents. Now you prosecute us?? Enough. I will pay you $100,000 to publicly debate me. Deal?”

Epstein explained via email why he felt such a provocative message to Healey’s office was warranted:

Persecutors get away with violating rights in large part because the victims treat them as civilized. The Massachusetts Attorney General is demanding my emails at gunpoint because I have prominently voiced opinions that are contrary to hers. She is a fascist, acting profanely. “F**k off, fascist” was therefore the response she deserved.

For the general public, who may innocently misunderstand the issues regarding ExxonMobil, I explained them fully in a Forbes article. But I’m not responding to that thug (who calls herself an Attorney General) with an article.

Epstein also explained what he hopes will come of his efforts to criticize the attorneys general in question and to debate Gore:

Everyone involved in the persecution should be publicly shamed and resign. The climate fascists’ willingness to destroy free speech should be taken as evidence of their invalid position.

There should be massive public pressure for Al Gore to accept my $100,000 challenge to debate him, to the point where he actually accepts.

Once that debate occurs it will be clear that the benefits of using fossil fuels are incomparably larger and more important than the mild warming effects of CO2. More people will want to learn about the moral, pro-human case for fossil fuels and they will discover that the climate catastrophists have already been definitely refuted. Then the debate will be over—in the proper sense.

Once people understand how to think about the benefits and risks of fossil fuels in a careful, big-picture way, the catastrophists will keep losing and eventually move on to their next anti-industrial scare scenario. But they will be discredited from their previous sophistry and thus be unable to do anywhere near the damage they have done by demonizing CO2. Relieved of the burden of the anti-industrial movement, human progress will accelerate and human flourishing will proliferate.

How should we evaluate the related facts and claims?

The issue at hand is whether Exxon engaged in legally actionable fraud. Healey said, “Fossil fuel companies that deceived investors and consumers about the dangers of climate change should be, must be held accountable.” She referred to the “troubling disconnect between what Exxon knew, what industry folks knew and what the company and industry chose to share with investors and with the American public.”

In response to the fraud allegations, Epstein offers two basic counterarguments.

First, Epstein writes, fraud involves material misstatement or omission of demonstrated facts. But at issue are opinions:

The government has no right to demand a single email of mine or Exxon’s unless it has evidence that we are committing fraud by concealing or fabricating evidence. In the case of the climate impact of CO2, this is impossible–because all the evidence about CO2 and climate is in the public domain, largely collected and disseminated by government agencies or government-funded educational institutions.

What ExxonMobil is being prosecuted for is expressing an opinion about the evidence that the government disagrees with. Or, in the case of the #ExxonKnew meme, they are being prosecuted for failing to express an opinion the government agrees with. . . . There is a fundamental distinction in civilized society between fraud and opinion.

Second, Epstein argues, claims about catastrophic climate change are simply false, so Exxon cannot have committed fraud if the company expressed skepticism about impending catastrophe:

The “knew” in #ExxonKnew refers to the fact that certain Exxon employees, like anyone else who followed climate science, knew about and discussed the existence of speculative claims that increasing atmospheric CO2 would lead to runaway global warming and catastrophic climate change. As I document in “The Secret History of Fossil Fuels,” chapter 1 of The Moral Case for Fossil Fuels, many of these claims asserted that we would be experiencing catastrophic climate change today.

Apparently, Exxon was (rightly) suspicious of these claims and the Al Gore-led funding bonanza of scientists who agreed with them. Exxon refused to endorse climate catastrophism and funded alternative research–which they had every right to do even if they ended up being wrong.

But they ended up being right. The speculative claims turned out to be false. We have experienced mild (not runaway) warming that is only loosely correlated with CO2–and global fossil fueled development has helped bring climate-related deaths to an all-time low. How can you say #ExxonKnew about an imminent climate catastrophe that wasn’t real?

The fundamental issue is that fraud involves specific sorts of willful omissions or misstatements of demonstrated facts that specifically affect consumers’ decisions to buy or use a product or service. For example, if you roll back your car’s mileage and lie about it to sell the car for more, that’s fraud. If you say that your cigarettes are healthy but you know they cause cancer, that’s fraud.

Fraud does not encompass any possible statement that is or might be false. As Epstein says, fraud does not encompass the expression of opinions. And fraud involves clearly demonstrated facts, not speculative claims that might turn out to be true or false. Although the legal lines are not always obvious in a given case, properly these lines do and must exist. It is improper for government (or other parties) to claim fraud after the fact, if a once-speculative claim later is disproved.

A June 15 letter signed by thirteen attorneys general, led by Luther Strange of Alabama, outlines the key problems with the legal effort led by Schneiderman and Healey (see the original for references):

We routinely investigate fraud, and have done so with many of the states present at the press conference. But this investigation is far from routine. We are unaware of any fraud case combining the following three characteristics: 1) the investigation targets a particular type of market participant; 2) the Attorneys General identify themselves with the competitors of their investigative targets; and 3) the investigation implicates an ongoing public policy debate. . . .

[T]his fraud investigation targets only “fossil fuel companies” and only statements minimizing climate change risks. If it is possible to minimize the risks of climate change, then the same goes for exaggeration. If minimization is fraud, exaggeration is fraud. Some have indicated that Exxon Mobil’s securities disclosures regarding climate change may be inadequate. We do not know the accuracy of these charges. We do know that Exxon Mobil discloses climate change and its possible implications as a business risk. See Exxon Mobil Corporation SEC Form 10-k, FY 2014 (listing “Climate change and greenhouse gas restrictions” as an item 1A risk factor). If Exxon’s disclosure is deficient, what of the failure of renewable energy companies to list climate change as a risk? See, e.g., SolarCity Corporation SEC Form 10-k, FY 2014 (omitting from item 1A risk factors any mention of climate change or global warming). If climate change is perceived to be slowing or becoming less of a risk, many “clean energy” companies may become less valuable and some may be altogether worthless. Therefore, any fraud theory requiring more disclosure of Exxon would surely require more disclosure by “clean energy” companies.

Similarly, it has been asserted that “fossil fuel companies” may have funded nonprofits who minimized the risks of climate change. Does anyone doubt that “clean energy” companies have funded non-profits who exaggerated the risks of climate change? Under the stated theory for fraud, consumers and investors could suffer harm from misstatements by all energy-market participants and the non-profits they support. Yet only companies and non-profits allegedly espousing a particular viewpoint have been chosen for investigation. . . .

[Next], this investigation inescapably implicates a public policy debate and raises substantial First Amendment concerns. As our colleagues must know, a vigorous debate exists in this country regarding the risks of climate change and the appropriate response to those risks. Both sides are well-funded and sophisticated public policy participants. Whatever our country’s response, it will affect people, communities, and businesses that all have a right to participate in this debate. Actions indicating that one side of the climate change debate should fear prosecution chills speech in violation of a formerly bi-partisan First Amendment consensus. As expressed by Justice Brandeis, it has been a foundational principle that when faced with “danger flowing from speech . . . the remedy to be applied is more speech, not enforced silence.” Whitney v. California, 274 U.S. 357, 377 (1927) (Brandeis, J., concurring). Here, the remedy chosen is silence through threat of subpoena. This threat distorts the debate and impoverishes consumers and the general public who may wish to better educate themselves by hearing and evaluating both sides.

Once the government begins policing viewpoints, two solutions exist. The first solution is to police all viewpoints equally. Another group of Attorneys General could use the precedent established by the “AGs United for Clean Power” to investigate fraudulent statements associated with competing interests. The subpoenas currently directed at some market participants could be met with a barrage of subpoenas directed at other market participants. No doubt a reasonable suspicion exists regarding a number of statements relating to the risks of climate change. Even in the press conference, a senior partner at Kleiner Perkins Caufield & Byers (“Kleiner Perkins”) identified “manmade global warming pollution” as “the reason” for 2015 temperatures, the spread of Zika, flooding in Louisiana and Arkansas, Super Storm Sandy, and Super Typhoon Haiyan. Some evidence may support these statements. Other evidence may refute them. Do these statements increase the value of clean energy investments offered for sale by Kleiner Perkins? Should these statements justify an investigation into all contributions to environmental non-profits by Kleiner Perkins’s partners? Should these questions be settled by our state courts under penalty of RICO charges? May it never be.

Epstein’s colleague Eric Dennis offers similar arguments in an article for the Daily Caller:

[T]he AG [Healey] has authored a novel constitutional theory: “The First Amendment does not protect false and misleading statements in the marketplace.”

Like hell it doesn’t. Let us momentarily ignore the fact that Exxon’s stated position is actually true. . . .

Imagine a world in which someone could be convicted for simply making a false statement in the course of marketing his product. The History Channel (producers of “Ancient Aliens”)—in jail [as one example]. . . .

Every judge in every court in the United States could be consumed 24 hours a day for a century by all the abstract, philosophical, political statements made by businessmen and disagreed with by someone else. Fraud is not any false statement. It is the knowingly false assertion of specific, concrete things about one’s product on which the seller can be reasonably assumed to have special expertise.

The only sensible conclusion is that the sorts of views allegedly expressed by Exxon simply are not the sorts of views relevant to any possible, legitimate claim of fraud.

(All that said, Exxon hardly argues that global warming isn’t real, anyway; one Exxon spokesman said, “[W]e’ve acknowledged the risks of climate change for more than a decade, have supported a carbon tax as the better policy option and spent more than $7 billion on research and technologies to reduce emissions.” I disapprove of a carbon tax, but that’s an issue for another day.)

There is yet another problem with the persecution of Exxon: Even if Exxon’s disclosures could in any context be deemed fraudulent, action by attorneys general is not an appropriate way to address the matter.

Consider this statement from Schneiderman’s release:

The participating states are exploring working together on key climate change-related initiatives, such as ongoing and potential investigations into whether fossil fuel companies misled investors and the public on the impact of climate change on their businesses. In 2015, New York State reached a historic settlement with Peabody Energy—the world’s largest publicly traded coal company—concerning the company’s misleading financial statements and disclosures. New York is also investigating ExxonMobil for similar alleged conduct.

The New York Times reports about the Peabody case:

Peabody Energy . . . has agreed to make more robust disclosures to its investors about the financial risks it faces from future government policies and regulations related to climate change and other environmental issues that could reduce demand for its product.

The coal giant’s concessions came in response to a two-year investigation by the New York attorney general that found that Peabody had not been forthright with investors and regulators about threats to its business that the company projected in private.

There is no possible reason why regulators would need to know about potential threats to Peabody’s business, so that’s a red herring.

Schneiderman’s core claim, then, is that his office needed to protect Peabody’s investors from Peabody’s misstatements or omissions of relevant facts.

Even if fraud were at play, the proper legal mechanism to address it would be for Peabody’s investors to demand changes in the company’s leadership or to sue the company in regular court proceedings. Interfering in contractually established interactions among a corporation’s participants is not normally a proper function of an attorney general’s office.

More significantly, Schneiderman’s position is laughable on its face: Obviously he wishes to destroy Peabody’s business, not protect its investors. This attorney general misused the fraud laws—the purpose of which is to protect a business’s participants and customers from material deceit—for the political purpose of subjecting Peabody to two years of legal proceedings, which Schneiderman got to pursue with taxpayers’ funds while Peabody defended itself out of its earnings.

And the allegation, in large part (as the Times article reveals), was that Peabody failed to adequately state the possible future impacts of regulations on its business—as though any business leader could predict the whims of politicians and bureaucrats.

Regarding potential investors, they have the same access to the facts and claims about climate change and regulatory conditions as do Peabody’s leaders. Obviously the legal action was about legally damaging Peabody, not about making a good-faith effort to assist investors.

As Schneiderman feigns concern for Peabody’s investors, consider the impact that the sorts of regulatory burdens actively supported by Schneiderman’s alliance have had on Peabody: “Shares of Peabody, which is based in St. Louis, have lost more than 90 percent of their value over the last year as the entire industry has been overwhelmed by crippling debts and more stringent regulations on coal burning by electric utilities,” the Times reports.

I suspect that many of Peabody’s investors have some well-developed attitudes regarding Schneiderman’s efforts to “help” them.

Of course, the issues at stake are much broader regarding the case of Exxon and the wider effort by these attorneys general to target producers of fossil fuels.

If any parties should now be under legal investigation in this matter, they are the attorneys general who abused their offices and violated citizens’ civil rights in the pursuit of politically-motivated witch hunts designed to publicly shame and financially drain their ideological adversaries. Epstein should be applauded for standing up to these bullies—as he rightly calls them, these fascists.

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