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Exxon Mobil Sued by New York State for Deceiving Stockholders on Future Costs of Greenhouse Gas and Carbon Rules

New York’s attorney general, Barbara Underwood, has sued Exxon Mobil for allegedly misleading investors about how the company managed risk related to the ever-increasing costs and restrictions of climate change regulations. While it may sound like an accounting blip, the suit states that Exxon is undercounting costs by many billions of dollars over coming decades.

This includes what the suit says is over $25 billion of understated costs related to greenhouse gases for some of Exxon’s Alberta, Canada, oil sands projects, and as much as $11 billion for another set of Albertan oil sands.

The suit wants Exxon to have to revise its financial statements, and pay damages, restitution, and any gains made through alleged misrepresentation.

This could result in hundreds of millions of dollars of payments, a small price for a company that mints billions in profits each quarter. But it could have a bigger impact on the firm’s attempt to reshape how it’s viewed by customers and investors.

Exxon has recently embraced publicly findings it previously discussed in private about the human causes of global climate change. In September, along with Chevron and Occidental Petroleum, Exxon joined an industry organization dedicated to addressing climate change. The company also supports the Paris Agreement for reduction of emissions, from which the Trump administration said it would withdraw.

The attorney general’s suit said that the company represents itself as a stable long-term investment in part because it has acknowledged upcoming challenges and said it had factored them into the future effects on its business. The complaint doesn’t make any claims about whether Exxon has contributed to climate change, however: It’s entirely focused on public statements and private accounting.

Exxon Mobil didn’t respond to a message left by Fortune for comment on the lawsuit. A spokesperson told the New York Times that the company considers the lawsuit the result of a “tainted, meritless investigation” and that the suit relies on “baseless allegations” that “are a product of closed-door lobbying by special interests, political opportunism and the attorney general’s inability to admit that a three-year investigation has uncovered no wrongdoing.”

The suit maintains that Exxon didn’t, as it stated publicly, fully take into account the increasing efforts by governments around the world to tighten regulations to reduce the emission of greenhouse gases. The attorney general’s complaint says Exxon told investors it had applied a “proxy cost” on its book to stand in for the expected increasing costs of carbon over the next several decades.

However, the suit alleges that Exxon applied “much lower proxy costs or no proxy costs at all,” because they would result in large write-downs. Instead, the attorney general says that the company had two sets of accounting: one that it represented publicly as incorporating proxy costs, and another used internally that relied on lower expenses.

As a result, the attorney general claims that investments could be at risk for a tumble when inevitable costs come due.

The investigation began three years ago in New York, which can sue on the basis of shareholders in the company who reside in the state, such as large retirement funds, which hold over $1.5 billion in Exxon shares.