Coal and Tobacco Companies Could Have More in Common Than We Think

Chevron's (NYSE: CVX  ) legal victory this week over its gross misconduct in Ecuador may have undermined attempts to hold fossil-fuel companies accountable for the damage they do, but coal is still likely following in the familiar footsteps of tobacco and asbestos. Indeed, the lawsuit the Sierra Club filed this week against Ameren (NYSE: AEE  ) stands a good chance of holding up in court. As scientific evidence amasses of the harm people suffer from pollution and greenhouse gas emissions, successful litigation will surely follow.

Just a matter of time ...
So far, legal challenges based on the harmful effects of dirty coal specifically and carbon emissions more broadly have not enjoyed much success. In Kivalina v. ExxonMobil (NYSE: XOM  ) , an Alaskan village tried unsuccessfully to hold coal companies (including Chevron) to account for the profound damage the village had suffered as a result of climate change.

The plaintiffs also contended that the companies had deliberately suppressed scientific evidence of the negative effects of their products and practices. Sounds like a page from the Big Tobacco playbook, no? Nevertheless, the courts dismissed the case for reasons that didn't address whether it was legitimate to link that harm back to ExxonMobil and Chevron.

In Chevron's ongoing Ecuadorian saga, all parties basically accepted the fact that the company had trashed the Amazon and ruined life for tons of villagers there. The judge found in Chevron's favor based on legal factors that were completely independent.

Be that as it may, we have to remember that Big Tobacco was successful at fighting off lawsuits at first too, even as the tide was turning against cigarettes. When consumers started backing off of cigarettes as their deadliness became plain, and as legislation finally appeared in the face of overwhelming scientific evidence, Big Tobacco bolted for unregulated overseas markets. Big Carbon is doing the same thing now.

The thing is, when you peddle a product that's hurting people, you can't run away forever. The lawsuit against Ameren is the Sierra Club's response to the company's persistent pollution beyond Clean Air Act limits. The type of pollution from Ameren's coal plants, known as particulate matter, can lead to cancer and premature death. No matter how the case goes, it's sure to be just one of many more to come.

Watch the following video below to hear more about coal's uncomfortable similarity to tobacco, and what it could mean.

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 09, 2014, at 10:37 AM, mememine69 wrote:

    10 out of 10 doctors are 100% certain smoking WILL cause cancer and 9.5 out of 10 "scientists" "believe" their own 32 year old CO2 crisis with only 95% certainty. YOU cannot "believe" until science does. It's as if you "believers" wanted this misery to have been real. Why?

  • Report this Comment On March 09, 2014, at 10:38 AM, aeci96 wrote:

    Ms. Murphy,

    "In Chevron's ongoing Ecuadorian saga, all parties basically accepted the fact that the company had trashed the Amazon and ruined life for tons of villagers there. The judge found in Chevron's favor based on legal factors that were completely independent." This is not accurate. Texaco was involved. Chevron bought Texaco. And, the national Ecuadoran oil company, Petroecuador, was the majority owner.

    This is from an article by Michael Krauss, in Forbes 3/5/2014:

    "While working Lago Agrio, Texaco Petroleum complied with all Ecuadorean laws, so far as I can tell. The company was in fact rather innovative on the environmental front. It pioneered the use of helicopters to move equipment in order to minimize road creation in sensitive areas, a practice since adopted by other companies operating in Amazonia. Texaco Petroleum also began an extensive, $40 million remediation program at the end of its concession in 1993, which program it completed in 1998. Producing wells and pits utilized by Texaco Petroleum were closed, produced water systems were modified, cleared lands were replanted, contaminated soil was replaced. Two internationally recognized consulting firms conducted audits of this remediation. Each independently concluded that Texaco Petroleum acted responsibly and that there was no lasting or significant environmental impact from the consortium operations — indeed, the remediation program undertaken by Texaco led it to spend three times more than the auditing firms had recommended. All remediation activities were inspected and certified by the Ecuadorian government, which (to repeat) had managed the entire operation and owned most of it. Ecuador then”absolved, liberated and forever freed” Texaco Petroleum from “any claim or litigation by the Government of Ecuador.”

    Subsequently, the state agency (not unlike other state agencies in other countries, made an environmental mess of the area. By its own admission, Petroecuador has created thousands of oil spills ..."

    Mr. Krauss isn't the only source of this information. And the recent verdict should give us pause when painting with such a broad brush, which you've apparently done.

    If Texaco got away with a subpar cleanup, there may be grounds for legal action, which would be the responsibility of Chevron. However, painting Chevron as the Evil Empire isn't going to get us the truth, which is a resolution as to what role everyone played, including most importantly the government of Ecuador.

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Sara Murphy

Sara has been writing about and analyzing companies from a sustainable investment perspective for the last 15 years. An ardent optimist, she believes that it is entirely possible for all stakeholders to benefit and profit from companies' ingenuity and innovation.

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