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Environment & Energy Report

BP, Others Tell Court Climate Case Aims to ‘Punish’ Industry (1)

Dec. 11, 2019, 4:40 PMUpdated: Dec. 11, 2019, 5:36 PM

Energy industry lawyers are urging federal judges to block the city of Baltimore from using state courts to “punish” production of “socially useful” oil and gas.

BP Plc and other companies faced off with Baltimore lawyers Dec. 11 in the U.S. Court of Appeals for the Fourth Circuit in Richmond, Va., the latest showdown in a multifront legal campaign to get companies to pay up for greenhouse gases spewed from fossil fuel combustion.

The issue at the Fourth Circuit is whether Baltimore’s climate case against energy companies belongs in state or federal court. The city’s end game is to get the industry to pay for local damages from storms, sea level rise, drought, and other harms linked to climate change.

But industry lawyers say the case is a veiled attempt to regulate through state courts emissions that spread throughout the atmosphere, and the case should instead be transferred to federal jurisdiction.

Judge Stephanie D. Thacker called the industry’s argument “intellectually appealing.”

“How and why does a single state get to preside over that case?” she asked, probing oil and gas companies’ claims about the global nature of the issue.

One of Many Climate Cases

The Fourth Circuit arguments come a day after Exxon Mobil Corp.—the largest publicly traded oil company and a defendant in Baltimore’s case—notched an important victory over New York state’s claims that the company misled investors about financial risks associated with climate change.

Baltimore’s lawsuit, filed in 2018, uses a different legal argument, accusing Exxon, BP, and others of failing to warn the public about the harms of fossil fuels, and creating a public nuisance and violating other elements of state common law by producing and promoting oil and gas.

Similar cases are pending from Rhode Island, New York City, and local governments in California, Colorado, and Washington state.

While local court proceedings advance in many of those cases, federal appellate courts across the country are weighing whether federal courts should take over.

‘It’s Inconceivable’

During the Fourth Circuit arguments, Gibson Dunn & Crutcher LLP attorney Theodore J. Boutrous Jr., representing the energy companies, focused on a legal rule that allows defendants to move state-level cases to federal court when they involve federal officers.

“They’re seeking to punish oil and gas production on federally controlled lands subject to federal law,” he said.

Chief Judge Roger Gregory and Judge Henry Franklin Floyd pressed Boutrous to explain whether oil and gas development on public lands is enough to trigger the so-called federal officer doctrine. Boutrous argued that the federal government directs work in those areas, effectively contracting with drillers.

He added later that Baltimore itself benefits from burning fossil fuels, which he called a “socially useful product” everyone uses.

He also argued that the claims involve interstate and global emissions, which implicate federal common law, despite Baltimore’s effort to frame the case under state law. He pointed to the Supreme Court’s 2011 decision in American Electric Power Co. v. Connecticut, which said the Clean Air Act trumped states’ federal common law claims related to greenhouse gas emissions.

“It’s inconceivable that the court intended to with that ruling turn lose 50 states” to litigate similar questions under state law, Boutrous said.

Sher Edling LLP attorney Vic Sher, representing Baltimore, countered that the city’s case involves “corporate bad behavior,” which is a matter of traditional state concern. He likened the case to state-court litigation over drug companies’ marketing of opioids.

Baltimore isn’t focused on emissions, but on alleged deception by the industry, Sher said.

Climate Change Damage

Suzanne Sangree, public safety counsel and director of affirmative litigation for Baltimore, noted after arguments that the city is dealing with the costs of raising streets, enhancing stormwater infrastructure, and making other local investments to address damages linked to climate change.

Oil and gas companies bumped Baltimore’s case from state to federal court shortly after it was filed, but a federal district judge in Maryland sent it back to the state level in June. The companies appealed to the Fourth Circuit.

Industry lawyers also pleaded for the Supreme Court to block the state proceedings while the Fourth Circuit appeal advanced, but the justices in October rejected that request.

State court proceedings are inching forward in Maryland while the federal appeal plays out. Baltimore is in the early stages of its case in the Circuit Court of Maryland. Sangree said the city expects to start the discovery process next year.

The case is Mayor & City Council of Baltimore v. BP Plc, 4th Cir., No. 19-1644, oral arguments 12/11/19.

(Additional reporting throughout.)

To contact the reporter on this story: Ellen M. Gilmer at egilmer@bloombergenvironment.com

To contact the editors responsible for this story: Gregory Henderson at ghenderson@bloombergenvironment.com; Renee Schoof at rschoof@bloombergenvironment.com; Anna Yukhananov at ayukhananov@bloombergenvironment.com

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