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Pending lawsuits against the oil and gas industry, brought by dozens of US state and local governments, could be greenlighted or face derailment as a result of an upcoming decision by the Supreme Court. Plaintiffs allege that fossil fuel producers should be responsible for billions of dollars in damages caused by the effects of climate change, which they argue many firms were aware of decades ago. Defendants, which include ExxonMobil, Chevron, BP, Shell, ConocoPhillips, and Phillips 66, claim that their emissions would be an interstate issue that should not be handled by state courts, but federal venues instead.

Whether or not this current lineup of cases go forward as planned, the effort may be symptomatic of a deep shift in sentiment among not only governments but those who elect officials and, in turn, officials that appoint judges. Capex budgets have fallen among many major oil producers operating in the US and their output growth has slowed accordingly. Domestic field output of crude oil is virtually unchanged compared to where it was in early 2020 and elevated oil prices are becoming a major facet of the upcoming Presidential election.

Related ETF: Energy Select Sector SPDR Fund (XLE)

The US Supreme Court yesterday delayed an eventual ruling on whether it would hear an appeal that could derail a slew of lawsuits filed by local governments against oil and gas companies. The case in question is Sunoco LP v. City and County of Honolulu, just one of 40 climate liability lawsuits that have been filed against oil companies in the US since 2017. Several of the defendants, which include ExxonMobil, Chevron, BP, Shell, ConocoPhillips, and Phillips 66, as well as trade association American Petroleum Institute (API), have sought to dismiss the suits based on grounds that the regulation of interstate emissions or commerce is a power reserved for the federal government, while these cases are currently being moved through state courts. A decision favoring the defendants would not summarily kill efforts to bring suit against “big oil”, but it could force a refiling of litigation within the federal court system or a search for alternative legal theories that may also put them back at square one.

However, if the Justices were to refuse to hear the case against Sunoco and did not choose to dismiss it, that litigation and the assortment of similar cases could pose a more imminent multi-billion-dollar threat to some of the world’s top energy firms, putting them on the hook for calculable damages which plaintiffs claim are the result of climate change. The Supreme Court’s delay will allow the US Solicitor General to file a brief expressing the views of the United States on petitions relating to whether federal law preempts Honolulu’s state law claims. This is essentially a review of the Hawaii Supreme Court’s previous decision, which sided with the City of Honolulu and allowed it to take legal action against Sunoco. The Guardian notes that an October 2022 climate accountability case brought by Colorado communities referred a similar petition, wherein the solicitor general sided with the plaintiffs. The sitting Solicitor General, Elizabeth Prelogar, was appointed by President Biden in 2021.

The potential liability facing the oil and gas industry would stem from allegedly hiding the dangers of their products from the public. In addition to Sunoco, the laundry list of additional defendants across several cases include ExxonMobil, Chevron, BP, Shell, ConocoPhillips, and Phillips 66, as well as…

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