The high costs of climate ‘justice’ through lawfare

The anti-energy left has weaponized consumer protection laws in the United States to punish oil and gas companies simply for carrying out their core business. If their lawfare succeeds, there will be serious repercussions for the energy security of North America and the West.

According to a recent Frontline story, at least 20 cities and states across the U.S. have filed lawsuits against energy industry companies over a variety of alleged infractions relating to climate change. Defendants include usual suspects like Exxon Mobil, Chevron, and BP, but also the American Petroleum Institute, a trade association that represents oil companies.

This is, as the story notes, a “relatively new legal tactic,” and one favoured by left-leaning prosecutors and attorneys-general to inflict pain on perceived villains — and, one would imagine, stir up their own political base. The trend started (unsurprisingly) with a handful of California cities, and these were followed by reliably left-leaning attorneys-general in Rhode Island, Massachusetts, Connecticut and Minnesota, among others.

Though each suit is slightly different analysts note that they are broadly modelled after common-law torts and statutes used in lawsuits against tobacco and pharmaceutical companies for allegedly misrepresenting the effects of some of their products to consumers.

In this case, the plaintiffs’ theory seems to be that energy companies had secret knowledge about the nexus between fossil fuels and climate change that they knowingly and maliciously hid from the public. The companies, for their part, sensibly point out that they have no special monopoly on climate science — quite the contrary! Furthermore, they point out that they sell their products within the confines of extensive and ever-tightening regulations set by various levels of government.

But this type of “climate justice” legal activism is picking up speed, both in the U.S. (the number one export destination for Canadian energy) and here in Canada as well. For example, Vancouver’s city council recently voted to fund a 2023 class-action lawsuit against so-called “Big Oil.”

Almost none of these cases has yet reached trial, and the one that did was — correctly, in my view — dismissed. But given the importance of the issues at stake and the political incentives involved I don’t expect the plaintiffs to quit any time soon, especially since the structure of the court system in the United States gives them a potentially decisive advantage. In particular, U.S. plaintiffs are arguing that these trials should happen in state and local courts, where they can shop around and cherry-pick more favourable jurisdictions.

American oil companies have countered that these cases need to be tried in federal, not state courts. As Phil Goldberg, special counsel for Manufacturers’ Accountability Project, told Pew in April 2022: “Climate policy is federal and regulatory in nature — not (something) that can be decided by state courts.”

I think Goldberg has it right and the anti-energy crusaders have it wrong. As a former U.S. Department of Justice official put it in a Legal Newsline piece, trying these cases in regional courts “would create a patchwork of legal standards that would directly impact national energy policy, which impacts not only domestic energy production but also foreign policy decisions.”

As if to underscore the obvious truth that energy policy is national (and international) policy, U.S. President Joseph Biden has spent the past year both promising to “decarbonize” the U.S. economy and chastising U.S. producers for not pumping more oil and gas to relieve rising prices that he blames on global events.

Indeed, at a time when energy costs are soaring, we need this type of legal activism like we need a hole in the head. Should any of the enormous damages sought by plaintiffs in these lawsuits ultimately be awarded the costs will almost certainly be passed on to consumers. And since through production and/or transportation costs the price of fossil fuels is embedded in the price of a lot of the other things we consume this would inevitably create even more inflation.

Furthermore, increasing costs for Canadian and American oil producers in such a discriminatory manner might also very well provide an unfair competitive advantage to oil producers from such genteel and human-rights-respecting countries as Saudi Arabia, Venezuela, and Russia.

North American governments should not create a policy environment that disadvantages domestic producers in favour of foreign ones, so let us hope that this lawfare against energy companies fails. Policy-makers need to create an energy policy framework that is both comprehensive and predictable, as opposed to a grab-bag of different standards brought into being by ambitious prosecutors and attorneys-general who care more about pleasing their activist base than about energy security and economic vitality.

Michel Kelly-Gagnon is President and CEO of the MEI. The views reflected in this opinion piece are his own.

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