Judge halts enforcement of Oklahoma law punishing fossil fuel 'boycotters'

An Oklahoma judge issued a temporary injunction preventing enforcement of a state law that led to four investment banks being banned from underwriting municipal bonds and the targeting of other financial firms for divestment purposes.

Tuesday's ruling came in a lawsuit filed last year against Oklahoma Treasurer Todd Russ by a state pension recipient who challenged 2022's Energy Discrimination Elimination Act, which prohibits state and local government contracts worth $100,000 or more with companies determined by the treasurer's office to be "boycotting" the fossil fuel industry. 

Bloomberg News

"Because plaintiff's challenges allege a violation of constitutional rights, this court finds that plaintiff has established a threat of irreparable harm should the act be enforced," Oklahoma County District Court Judge Sheila Stinson's order stated.

Russ' office last week updated its list of "boycotters" with the addition of Barclays, which joined Bank of America, JP Morgan Chase, Wells Fargo, BlackRock, State Street Corp., and Climate First Bank. Wells Fargo resigned in May 2023 as lead underwriter for a $500 million Oklahoma Turnpike Authority revenue bond deal after it landed on the list and was replaced with RBC Capital Markets.

The lawsuit, brought by retired state worker Don Keenan, came after the Oklahoma Public Employees Retirement System determined that commissions, taxes, and fees related to divesting from firms on the list would cost an estimated $9.7 million and tried to use an exemption in the law to avoid divestment.

The judge's order noted "divesture or transfers of assets and investments has the potential to affect the financial soundness of the investment accounts," as well as the treasurer's contention the law aims to counter certain financial companies' political agendas.

"The court finds a substantial likelihood that this stated purpose of countering a 'political agenda' is contrary to the retirement system's constitutionally stated purpose," which is to benefit its members or beneficiaries, according to the order.

Russ said he will appeal the ruling.

"I am solely looking out for the financial interests of the citizens of Oklahoma and its industries," he said in a statement. "This ruling is not going to stop the fight for Oklahomans against activists using ESG in the state."

A study released last month found Oklahoma's law boosted municipalities' borrowing costs by 59 basis points on average.

An effort to apply the act only to state agencies failed in the Republican-controlled legislature. Senate Bill 1510 passed the Senate in a 42-1 February vote, but fell short of passage in the House in a 40-44 vote on April 25.

A report Wednesday by Pleiades Strategy pointed to a proliferation of anti-environmental, social, and governance legislation, with 370 bills introduced in 39 states since 2021 and 41 laws enacted in 18 states.