Exxon Mobil Corp., Exxon, has sued California, arguing that two new state laws violate the First Amendment by forcing it to agree to a certain climate change viewpoint, conflicting with other provisions of the Constitution as well as federal laws and regulations.
The lawsuit alleges that the two new laws have the purpose of compelling Exxon to “profess to believe”, viewpoints on climate change that Exxon does not agree with. For its part, California wants to require large corporations with revenues above $500 million that are doing business in the state to be more transparent about greenhouse gas emissions and financial exposure to climate change risk.
On their face, the California laws are a publicity stunt designed to harm the goodwill and reputations of Exxon and other energy producers. California knows that climate change is global. For example, China is the leading coal producer and heavily relies on the energy produced by its coal-powered plants. China’s actions are arguably more relevant to the issue of global climate change than any activities undertaken by Exxon.
Regardless, Exxon is right on multiple grounds. The new California laws conflict with rights under the First Amendment and violate the Commerce Clause of the Constitution. The climate change laws deny Exxon equal protection. Only large companies are subject to the new laws. In addition, California’s laws are preempted by federal securities laws enacted by the Congress of the United States. Federal law takes precedence over state law.
The Constitution is first and foremost about liberty. Neither the federal government nor any state government, including the California government, can compel a person or corporation to express beliefs with which they disagree. Climate change is complex. The science regarding climate change is not settled. Moreover, even if climate change is real, the causes of climate change are arguably not completely known. For example, climate change experts still cannot accurately predict the intensity of the annual hurricane season for the U.S. and surrounding geographies. It is a fact that the scientific community is often guilty of groupthink.
Scientists and scholars know that professing an opinion at odds with far-left sentiment can be a career-ending move. Exxon does enjoy the basic constitutional right of freedom of belief. States cannot compel religious beliefs or adherence to as yet unsettled climate change beliefs.
The California laws infringe on the Interstate Commerce Clause of the Constitution. California is attempting to make Exxon and other large energy companies responsible for global climate change. One state cannot impose its laws across the nation. California cannot act in place of Congress. The Interstate Commerce Clause gives Congress the power to regulate commerce among the states. The production of oil, natural gas, and other carbon-based fuels affects interstate commerce. Fuels are readily transported across state lines. America’s drivers of internal combustion engines often drive across state lines. Clearly, California’s new laws would burden interstate commerce.
It is settled law that corporations are ‘people’ for purposes of the law. This was established by the United States Supreme Court in the 1886 case Santa Clara v Southern Pacific Railroad. The Supreme Court ruled that corporations are entitled to the same equal protection rights as citizens. As such, Exxon is constitutionally guaranteed the equal protection of the law. Exxon cannot be denied equal protection because of its size. California laws can not discriminate because of size.
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Under the Supremacy Clause of the Constitution, federal laws take precedence over state laws. The provisions of the federal securities laws already mandate disclosure of financial and environmental risks. Federal securities laws preempt California’s new laws.
Exxon Mobil is right on this matter, legally and in common sense.
James Rogan is a former U.S. foreign service officer who has worked in finance and law for 30 years. He writes a daily note on the markets, politics, and society. He can be followed on X and reached at [email protected].
