Like schoolyard fisticuffs at recess, the fight between ExxonMobil and the attorney general of New York has been playing out contentiously in courtrooms, legal briefs and public statements for more than a year.

Exxon lawyer Ted Wells once described New York prosecutor Eric Schneiderman’s investigation into whether the oil giant mislead investors about climate risks as a politically inspired “witch hunt.” After Exxon went to federal court to block Schneiderman’s investigation, the attorney general’s spokesman, Eric Soufer, retorted that Exxon’s motion was “stunt litigation.”

That tense rhetoric typified the simmering contempt between the adversaries ever since Schneiderman opened his investigation of the oil giant in 2015, shortly after InsideClimate News published an account of Exxon’s knowledge of climate risks since the late 1970’s. If anything, it grew more intense in 2017 as it became known that former Exxon Chief Executive Rex Tillerson, now the U.S. secretary of state, had sent emails under the alias “Wayne Tracker” and some of those emails were missing.

But even as the investigation expanded to include documents of Exxon’s auditor, PricewaterhouseCoopers, the clamor surrounding the climate fraud investigation waned in recent months.

The name-calling has ceased, the derision has tempered and the indignation has chilled—at least in the public arena.

As the year drew toward a close, Exxon suddenly promised to improve its reporting of climate risks to shareholders. Formally, this was a concession to the managers of New York State’s pension funds, a big shareholder. But it can also be seen as a concession to Schneiderman—maybe even a prelude to a settlement.

Facing Uncertainty and Rising Costs 

What does this signal? A truce? A reevaluation of the investigation? Settlement talks?

Exxon and Schneiderman may have gone to their neutral corners to evaluate the status of the investigation and the path and pitfalls of moving forward, said David Shapiro, an assistant professor of public management at New York’s John Jay College of Criminal Justice.

It’s that uncertainty that may have both sides assessing how to bring the investigation to a conclusion without investing millions in the fight, slogging through the courts for years and facing the disconcerting potential of losing in the end, said Shapiro, a forensic accountant and former FBI agent who specialized in financial crimes.

“It may just be that both sides are taking a time-out to see if there is a way out,” he said. “They may be looking for a way to claim victory to their respective sides; so that when you pick up the newspaper you see both the Exxon and the AGs respectively saying they won the fight.”

It’s not unusual for cases like this to end up in a settlement, as happened with another big fossil fuel company, Peabody, at about the same time the Exxon probe was made public. The settlement negotiated by Schneiderman’s office two years ago demanded the coal giant make more detailed disclosures to investors about the financial risks the company faces from climate matters, a keystone issue of the Exxon investigation.

Against a Backdrop of Legal Setbacks

Until recently, as the Exxon case wended its way forward, there were few signs of compromise.

“This is not a normal investigation,” Wells, the attorney for Exxon, told Justice Barry R. Ostrager in a New York courtroom in June. “It is a political witch hunt. That’s what it is. They cannot clear Exxon. The Attorney General cannot be in a position of clearing the largest fossil fuel oil company in the world. They know it. I know it.”

The new silence comes against the backdrop of a string of legal setbacks for Exxon:

• One particularly telling blow came when investigators disclosed that Tillerson, while CEO, had used a shadow email account under the name “Wayne Tracker”. The account was set up to provide anonymity where top executives could address sensitive business matters—including the hot-button issue of climate change. Exxon technical staff, questioned by New York investigators, acknowledged that up to seven years of emails from that alias account may have been erased.
   
• When Exxon began to balk at providing New York investigators records, authorities subpoenaed the company’s auditor, PricewaterhouseCoopers. Exxon lost a fight to keep secret the documents, which could provide a glimpse into the oil giant’s calculations of the business risks posed by climate change.
   
• Exxon’s legal battle in federal court has been both embraced and questioned by different judges who the oil giant has asked to block investigations by both Schneiderman and Massachusetts Attorney General Maura Healey. It lost its home court advantage in March when a federal judge in Texas surrendered jurisdiction of the lawsuit to a federal court in New York. A final ruling could come sometime in the spring.
   
• Schneiderman called ExxonMobil’s climate accounting a “sham” in court filings that alleged the company kept two set of books. He said he found evidence the company used one set of numbers when describing risks to investors but used a second set internally.

In the Hands of a Federal Judge

Exxon and Schneiderman may simply be biting their tongues out of practicality, said Michael Gerrard, a law professor and director of Columbia University’s Sabin Center for Climate Change Law.

The fate of Schneiderman’s and Healey’s investigations is in the hands of a federal judge in New York, who has been weighing Exxon’s arguments for shutting down the probes since April and appears set to rule early in 2018.

“It seems to be plausible that while the judge is actively considering the future of the investigation neither side wants to make a misstep that would adversely affect them in the federal case,” Gerrard said.

There may be other reasons for Exxon not wanting to create waves that extend beyond the courtroom, said Joel Schwartz, a former federal prosecutor who worked on the prosecution of the tobacco industry.

The company may be thinking that a low profile is the best tactic to preserve its credibility so it can maintain its legitimacy to influence domestic policy and regulatory matters, as well as keeping its place near the head of the table mapping the international energy pathway.

“If they are exposed as hiding the ball on climate change, they risk losing their voice on the energy agenda going forward,” he said.

Coming next: Advances in climate science