An Oklahoma court has issued a temporary injunction on a state law designed to prevent investments in companies that do not align with the state’s primary economic interests, particularly the oil and gas industry. While the law aims to protect this vital sector, critics argue it could result in substantial financial losses for Oklahoma residents.
In 2022, the Oklahoma legislature enacted a bill prohibiting the state and its municipalities from engaging in business with specific banks deemed by the Oklahoma Treasurer to be anti-oil and gas. This legislation, known as the Energy Discrimination Elimination Act, places major financial institutions like JP Morgan Chase, Bank of America, Wells Fargo, and BlackRock on a prohibited list. According to State Treasurer Todd Russ, these companies have been excluded from state investments due to their environmental, social, and governance (ESG) policies.
Russ defended the law, stating, “It is to force the investors of state’s dollars to focus on profits and earnings and returns, not all of these political ideologies like climate change.”
However, Travis Roach, an Associate Professor of Economics at the University of Central Oklahoma, conducted a study highlighting the financial repercussions of excluding some of the nation’s largest banks. Roach’s findings suggest a 16% increase in costs for municipalities seeking to issue bonds directly due to the Energy Discrimination Elimination Act.
“What I ultimately found is there is a 16% increase in cost to municipalities that look to issue a bond, strictly due to the Energy Discrimination Elimination Act,” Roach explained. “This is upwards of $180 million so far that has been locked in as additional spending.”
When asked by FOX25 about the potential financial losses incurred due to this law, Treasurer Russ responded, “As far as I know we haven’t lost any money.” He further clarified, “Some of the administrative costs of day-to-day and having to do trades or transactions, they’re making the claim that those are costs and they assume those as loss. That’s not really a loss in the asset value in the holding.”
Beyond financial concerns, the law also faces significant legal challenges. This week, an Oklahoma court issued a temporary injunction against enforcing the law, stating that any attempt by the Treasurer to divest for purposes other than benefiting the state violates the state constitution. The court’s documents indicated that the Treasurer’s actions appeared to be politically motivated rather than focused on the state’s financial interests.
“They’re striking it down saying that I can’t take that position because it looks like it’s a political position, which is very confusing to me because the state is trying to stop these outside interests from using these political motives with the way they vote our shares of stock in these pensions,” Russ said.
While the court has not yet made a final decision on the case, Treasurer Russ has expressed his intention to appeal the temporary ban. He argues that the law is essential for ensuring that state investments are made based on financial returns rather than political ideologies.
The temporary injunction and the ongoing legal battle underscore the contentious nature of the Energy Discrimination Elimination Act. Supporters of the law argue it is necessary to safeguard Oklahoma’s vital oil and gas industry from financial institutions that may prioritize ESG policies over profits. Critics, however, caution that the law could lead to increased costs for municipalities and potentially significant financial losses for the state.
As the case progresses, it will be crucial to monitor the court’s decisions and their implications for state investment strategies. The outcome could set a significant precedent for how states navigate the complex intersection of financial management and political considerations. For now, the temporary injunction serves as a reminder of the delicate balance between protecting state interests and adhering to constitutional mandates.
