The elbowing for advantage between ExxonMobil and the California cities and counties suing the oil giant for billions of dollars in climate change damages has spread to the U.S. Securities and Exchange Commission.

Exxon alleged in a Texas court earlier this year that in selling municipal bonds, the local governments may have withheld critical information from buyers about their vulnerability to sea level rise. That would cast a poor light on the cities’ claims that Exxon knew about climate risks but ignored them in its own financial disclosures.

Now two industry-friendly groups are turning the tables and asking the SEC to investigate the cities and counties for possible fraud. The Competitive Enterprise Institute and the National Association of Manufacturers complained to the SEC’s Public Finance Abuse Unit of a breach of federal disclosure laws.

The two conservative trade groups have been attacking the credibility of the cities and counties for months though blistering blog posts and social media assaults. CEI blogger and senior fellow Marlo Lewis, Jr. wrote in a post titled “ExxonMobil Strikes Back” about the bond argument: “The  California officials are either falsely alarming the public or scamming their bondholders. As my colleague, attorney Christopher Horner might say if he were conducting the deposition, ‘Which time were you lying?’”

Five of the eight California municipalities are firing back. Imperial Beach, Santa Cruz, and the counties of San Mateo, Marin and Santa Cruz are calling the allegations “inaccurate and meritless.”

In a report on Monday to the SEC rebutting Exxon’s contention, a former head of the SEC’s Office of Municipal Securities said she had reviewed the disclosure documents at the request of the municipalities and found no inconsistencies or conflicts between the allegations made by the local governments in their lawsuits regarding sea level rise and the disclosures they made in their bond documents.

A review by Martha Mahan Haines, a bond attorney who worked as the chief of SEC’s Municipal Securities Office between 2001 and 2011, said that none of the cities’ disclosure documents had either included “an untrue statement of a material fact” or “omitted such a material fact” involving sea level rise or climate change.

Exxon: Cities Didn’t Warn of Climate Risk Earlier

The bond disclosures enable potential buyers of municipal bonds to assess the risks of investing. Exxon called the local governments’ disclosures into question as part of a campaign to convince a Texas judge to allow the company to question city and county officials under oath about their motives for suing.

Exxon alleges in a court filing that while it and dozens of other fossil fuel companies are being blamed by the cities and counties for sea level rise damages in lawsuits filed over the last nine months, the cities and counties had made little reference to the same risks over the last 27 years in dozens of bond offerings that netted the local governments more than $8 billion to pay for municipal projects.

The industry groups are now using those allegations against the cities and counties, including San Francisco, Oakland, Richmond, Imperial Beach, Marin and San Mateo counties and Santa Cruz city and county in California, and New York City. Three Colorado governments that filed a similar suit two weeks ago haven’t been included.

An example cited by Exxon to the Texas court involves Imperial Beach, a small coastal town near the border with Mexico. The city claims in its lawsuit that coastal flooding will cause more than $38 million in damages and estimates its overall economic vulnerability at more than $106 million. However, Exxon says, the city never specifically warned investors in the city’s bonds that such disasters were imminent.

The most explicit acknowledgment Exxon said it found by Imperial Beach to sea level risk was in a 2013 tax allocation bond for $17. 2 million in what Exxon termed a boilerplate disclosure that “earthquake …, flood, fire, or other natural disaster, could cause a reduction in the tax revenues securing the bonds.”

Exxon claims the other governments were similarly ambiguous when disclosing climate risks to potential bond investors. A 2017 disclosure by San Francisco reads: “The city is unable to predict whether sea level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the city and the local economy.”

Exxon says the difference between the benign bond disclosures and the dire claims in the lawsuits creates a “stark and irreconcilable conflict.”

“It is reasonable to infer that the municipalities brought these lawsuits not because of a bona fide belief in any tortious conduct by the defendants or actual damage to their jurisdictions, but instead to coerce ExxonMobil and others operating in the Texas energy sector to adopt policies aligned with those favored by local politicians in California,” Exxon said in the Texas court filing.

Cities Say They Didn’t Know the Full Risk 

In the response, the former SEC official hired by the cities pointed out that Exxon and the two organizations were using examples of bond discloses made years before the cities and counties were fully aware of the threat posed by climate change and sea level rise.

“Issuers of municipal securities are not required to disclose information that is not yet available or reasonably reliable,” Haines, wrote in her report.

Haines cited the Imperial Beach bonds to illustrate that point: The city issued the bonds cited by Exxon in 2010 and 2013, years before it became fully aware of the jeopardy the city faced, she said.

To be sure, there were many dire warnings of sea level rise long before that time.

But it wasn’t until a 2016 study commissioned by Imperial Beach showed sea level had already risen significantly along the city’s ocean side and bay side, and appeared certain to continue to rise, that the city was confronted by the enormity of the devastation ahead, Haines wrote.

The 2016 study concluded that about 30 percent of Imperial Beach will be directly impacted by coastal flooding by the end of the century with a sea level rise of 6.5 feet. As many as 700 homes and commercial buildings could be lost. An estimated 40 percent of the city’s roads, nearly 30 miles in all, could become impassable. And more than 15 miles of sewer lines could fail.

Similar studies were completed last year for San Mateo, Marin and Santa Cruz counties.

Because the future impacts of climate change to these California cities and counties is just now coming into clear focus, Haines told the SEC, none of the municipalities violated disclosure law. They were working with the best information at the time they made the disclosures and have since learned greater details of the risks being faced, she said.

“Issuers cannot include in disclosure documents information that does not yet exist,” she said.

To some extent, this argument echoes what Exxon lawyers say to defend it against charges that it should have warned its own investors about the risks of global warming. Exxon, where scientists in the 1970s and `80s warned executives about the risks the burning of fossil fuels posed for the climate, has been fighting to shut down two state fraud investigations into whether it misled the public and investors about climate risk.

Lawyers for the five cities and counties issued a statement calling Exxon’s argument “just another well-funded, choreographed public relations scheme from the fossil fuel industry. It is designed to delay the legal process, deceive the public, and deny responsibility for what they’ve done.”