Exxon Mobil Corp.: Dealing With An Uneasy Climate

Aug. 1, 2007
Oil giant faces increased scrutiny by environmentalists while second-quarter profit falls slightly.

If Exxon Mobil Corp. is feeling a little green these days, it's probably not from any major environmental initiatives. Rather, the world's largest oil company and IW 50 Best Manufacturer for 2007 is likely feeling queasy from a lawsuit filed in July for a decades-old oil spill and more questions about its commitment to reduce its carbon footprint.

The company's latest battle has to do with a 17-million-gallon oil spill in Newtown Creek, a waterway that separates the New York boroughs of Brooklyn and Queens. The spill was discovered in 1978 when the U.S. Coast Guard complained about oil seeping into Newtown Creek from Exxon's refinery and storage operations, contaminating the groundwater and surrounding soil.

The suit, filed by state Attorney General Andrew Cuomo on July 17, seeks financial penalties and compensation for damages to the affected area and additional testing and cleanup of the contaminated groundwater and soil.

In a July 17 statement Cuomo chastised Exxon Mobil for not addressing the situation.

"Exxon Mobil -- the largest and most profitable oil corporation in the world -- has continually refused to accept responsibility for what is one of the worst environmental disasters in the nation's history," he said. "This company cannot ignore the harm its oil spill has caused to the environment and residents of Greenpoint, Brooklyn. With [this] action, we will hold Exxon Mobil accountable for the damage it has created. This suit sends a message that even the largest corporations in the world cannot escape the consequences of their actions."

The company plans to fight the lawsuit, according to Reuters news service. Exxon Mobil spokesman Barry Wood told Reuters that the allegations are "unfounded" and not based on facts.

"Exxon Mobil takes its environmental responsibility very seriously, and our policy is to comply with all applicable environmental laws and regulations," Wood told Reuters.

Exxon Mobil also is one of several oil companies answering to claims made by Rep. Dennis Kucinich, D-Ohio, that consumers are overpaying for gasoline because the companies are not factoring in hotter temperatures that cause fuel to expand and provide less energy.

Kucinich claims that oil companies support temperature adjustments in Canada where the gasoline is exposed to cooler temperatures but oppose them in the U.S. where it's typically warmer. During a July 25 House hearing, Exxon Mobil retail sales director Ben Soraci said gas station operators would have to pass the additional cost of implementing measuring devices that factor in temperature changes onto customers, according to the Associated Press.

Exxon Mobil Corp.
At A Glance

Exxon Mobil Corp.
Irving, Texas
Primary Industry: Petroleum & Coal Products
Number of Employees: 82,100
2006 In Review
Revenue: $377.6 billion
Profit Margin: 10.66%
Sales Turnover: 1.69
Inventory Turnover: 19.9
Revenue Growth: 11.77%
Return On Assets: 16.69%
Return On Equity: 36.3%

Meanwhile, Exxon Mobil continues to be a target of environmentalists who say the company has not only ignored its impact on climate change but has funded global warming skeptics. In a June 21 speech to Chatham House, a U.K.-based international policy think tank, Exxon Mobil Chairman and CEO Rex Tillerson acknowledged that signs of global warming exist and that CO2 emissions also have risen during this time period but said "many more questions remain and require continued research."

Tillerson noted that Exxon Mobil has made progress in developing a fuel system that generates hydrogen on board a vehicle as needed. The system is expected to be more fuel efficient than the standard internal combustion engine without the need for a dedicated hydrogen distribution infrastructure.

Despite these challenges, Exxon Mobil's second-quarter performance was the fourth-most profitable ever for a U.S. company -- even with a 1% drop in profit from the year-earlier period. The company's net income was $10.26 billion for the second quarter compared with $10.36 billion earned in second-quarter 2006.

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