Dive Brief:
- Oklahoma’s 2022 law barring financial institutions who boycott fossil fuels is having “deeply adverse effects” on the state’s rural communities, according to a report the Oklahoma Rural Association released Monday.
- The report found the state has spent an additional $185 million since the enactment of the Energy Discrimination Elimination Act and municipalities have incurred a 15.7% rise in borrowing costs due to this law.
- The report’s findings come as Republicans in the state legislature are weighing amendments to the law, including an exception for state entities, if they can prove a divestment would lead to a “materially negative financial impact” for the divesting entity.
Dive Insight:
The state’s law restricts Oklahoma governmental institutions from putting money in financial institutions that “do not invest in oil and gas for environmental reasons.” The list — most recently revised in August — includes BlackRock, Wells Fargo, JPMorgan Chase, Bank of America, State Street and Climate First Bank.
Oklahoma is one of several states — including Florida, Texas, Kentucky, Louisiana, Missouri and West Virginia — with an anti-ESG law that targets firms over their fossil fuel stances. ORA’s study found that Oklahoma’s restrictions have raised borrowing costs for municipalities by 0.59% and locked in nearly $11 million in additional costs and rates each month since its enactment.
ORA President Monica Collison said that the EDEA and similar policies are “burdening taxpayers and hampering investment in and development of critical public projects.”
“While these policies were presented as a ‘solution’ to combat the misguided perception of boycotting by financial institutions of certain industries, they have resulted in politically motivated attacks to remove certain banks from operating in the state,” Collison said.
ORA wrote that the increased borrowing costs are harming Oklahoma municipalities in a “myriad” of ways. Projects that are still financed with higher borrowing rates will need to be offset by reducing costs or a need for higher taxes, which will also result in “delays or complete abandonment of projects intended to improve critical infrastructure or improve basic quality of life aspects.”
“These forgone projects would benefit the community but now they cannot, and these forgone and delayed projects harm economic opportunities for those who would have been hired to complete the projects,” the report said.
This isn’t the first time the state has faced opposition over its restrictive fossil fuel boycott law. Last November, Oklahoma State Treasurer Todd Russ was sued over the EDEA by a state pensioner who said the law was unconstitutional. Don Keenan, a retired state employee, argued the law also violated the First Amendment because it restricts state retirement fund managers from operating for “the exclusive benefit” of its beneficiaries.
The Republican state legislature is revisiting the law during the 2024 legislative session. Oklahoma state senator Chuck Hall first introduced the bill excluding “political subdivisions” from the law in December, with state representatives Nick Archer and Mark Lepak picking up the action in the House. Archer’s House version of the bill, introduced April 10, specifically lists municipalities as a political subdivision excluded from the rule.
Meanwhile, Lepak introduced an amendment Tuesday that would expand law’s application to private financial firms and add “boycotts against timber, mining and agricultural companies” as a reason for divestment. However, in addition to removing a contracting prohibition for municipalities, the amendment would also give state entities the ability to seek an exception to the rule if they can prove the cost to divest is “greater than 0.05% per year of the net asset value” of their total holdings, not including administrative costs.
The amendment would keep the contracting prohibition in place for all state agencies, while the investment divestment requirement would only be applicable to state retirement systems.
