Should Congress consider a master settlement against Big Oil?

President Biden’s much anticipated and widely reported day one action to rejoin the Paris Climate Accord puts the United States on track to dramatically reduce the greenhouse gases that are warming the planet. 

Less noticed or reported was the oral argument before the Supreme Court on the day before Biden’s inauguration. It was another chapter in the city of Baltimore’s fight for “equitable relief” from over 20 major oil companies for the many climate-related impacts on the city. Baltimore alleges that the production and marketing of fossil fuel products, along with the concealment of the products’ known hazards, is a direct cause of climate change impacts. 

Even as the court battles rage, it is time to give some serious thought to what equitable relief might look like for Baltimore, the other communities suing oil companies and the country more generally.

To date, federal courts have been unpersuaded by arguments that oil companies should contribute to managing the impacts of a changing climate. Several federal courts have dismissed such cases. Judge John Keenan wrote, “Climate change is a fact of life…but the serious problems caused thereby are not for the judiciary to ameliorate.”

Undaunted, Baltimore and some 23 other state and local governments continue to press their cases, shifting their attention to state courts thought to be more open to recognizing climate impacts and punishing misleading conduct by oil companies. Among the governments bringing these cases is Rhode Island, whose Democratic Gov. Gina Raimondo has supported the climate case and is now nominated to be the U.S. secretary of Commerce. 

Baltimore won a decision from the Fourth U.S. Circuit Court of Appeals that it could proceed in state court and the appeal of that decision by the oil companies led to Tuesday’s hearing at the Supreme Court. The Supreme Court might point Baltimore to federal court where similar cases have died. Or, the court might agree to send the case back to state court, which might support Baltimore’s claims or dismiss them. 

If communities begin to win cases in state courts, oil companies might seek to settle cases individually or collectively. Communities not party to the litigation, but also coping with climate change impacts, might seek to frame a national settlement that would balance national needs against the oil companies’ ability to pay. 

Big oil companies have a plausible claim to being the original “deep pockets,” with reported combined profits of $55 billion in 2019 from just the six largest companies. Since 1990, these same companies recorded profits of over $2.4 trillion. 

As impressive as these profits are, they are dwarfed by the magnitude of the projected costs of adapting to a changing climate. Researchers say adaptation costs in the United States could reach tens or hundreds of billions of dollars per year by the middle of this century. The costs of adapting to rising sea levels alone is estimated to be as high as $3 trillion by 2100.

It seems clear that successful claims for equitable relief would quickly empty even the deepest oil company pockets, creating a scenario with some big winners and many losers. Is there a way to hold big oil companies accountable for their role in the climate crisis while making the best possible use of the resources these companies can contribute?

One possible model is the Master Settlement Agreement (MSA) established among 46 state attorneys general and four big tobacco companies in 1998. The agreement released companies from past and future legal claims for costs incurred by the states for smoking-related illnesses and death and for equitable relief. It provides for continuing payments to states to support smoking-related costs, estimated to be $27 billion in 2021 and totaling $246 billion over the past 25 years. It also restricts company actions, including limiting marketing to youth. 

It is important to remember that in the year before the MSA was signed, the tobacco companies facing a growing number of successful suits petitioned Congress for a comprehensive resolution. Congress considered but failed to pass a Global Settlement Agreement sponsored by the late-Sen. John McCain (R-Ariz.). 

Applying the example of the tobacco settlement to climate change would require considerable advancement of pending suits to bring the companies to the negotiating table. Should that come to pass, some key questions arise: How much companies should pay and for how long? What liability should be addressed? Whether funds should funds be used for addressing impacts or limiting greenhouse gas releases or both? How funds should be allocated? Whether funds should be restricted to climate purposes? Whether an agreement should also restrict company actions, including greenhouse gas releases. 

These are difficult questions. A master settlement needs full and wide consideration in an open forum. Doing this right will take time and bipartisan cooperation. Congress should start now by framing key issues, gathering public input, and documenting needed information. 

Jeff Peterson is a retired senior policy advisor at the Environmental Protection Agency and the author of “A New Coast: Strategies for Responding to Devastating Storms and Rising Seas.”