The Texas legislature passed two bills in May designed to protect the oil and gas industry from environmental activists’ efforts to block investment in the industry and to prevent the use of natural gas.
Environmental Politics Shouldn’t Drive State Investments
Senate Bill 13 requires state entities, including pension funds and the state’s substantial K-12 school endowment, to divest from companies that boycott or cut ties with fossil fuel producers. The measure strikes at Wall Street investors and hedge funds who have, or have threatened to, curtail or terminate financial support for petroleum companies as part of a larger anti-carbon initiative.
The legislation was a response to specific divestment threats from investment firms such as BlackRock, whose founder and CEO, Larry Fink, announced to shareholders last year the firm intended to make climate change a defining factor in its investment strategy moving forward.
A second measure, House Bill 17, was a direct response to the strain placed on the state’s power grid during February’s winter storm that left more than 2 million Texans without power and was responsible for more than 120 deaths. The bill targets environmental initiatives by cities or municipalities seeking to prohibit natural gas in new construction by barring them from restricting use of natural gas appliances.
Governor Greg Abbott has previously signaled he supported and would likely sign these bills into law if they reach his desk.
‘Lifeblood of the Texas Economy’
The oil and gas industry are critical to the Texas economy, so efforts to divest from the industry based on political rather than financial considerations is a direct attack on Texans’ well-being, said state Rep. Phil King (R-Weatherford) on the House floor, explaining why the bill is necessary.
“Oil and gas is the lifeblood of the Texas economy,” King said. “In the world of capital, there’s a movement to deny funds to businesses that will not sign on to extreme anti-fossil fuel policy.”
Early in the legislative session, Lt. Gov. Dan Patrick publicly said enacting legislation to prohibit the state from doing business with firms that “boycott” oil and gas companies was a priority.
It is unclear whether laws forcing divestment from firms boycotting the oil and gas industry will prevent firms managed by activists from reconsidering their divestment decisions, says Alexander Stevens, a policy analyst at the Institute for Energy Research.
“It’s difficult to say whether or not SB13 will have a major impact on curbing these boycotts, especially among the very large asset managers such as BlackRock,” said Stevens. “On the one hand, the state pension funds and the K-12 endowment are large enough that denying the large asset managers access to these funds should put pressure on them to stop these boycotts.
“On the other hand, these large asset managers have already made the decision to put politics over profits by pursuing Environment, Social, and Corporate Governance investing, which seems to upend the fiduciary duties portfolio managers owe to their clients,” Stevens said.
Preventing Gas Bans Is Valuable
The House bill barring localities from banning new natural gas hookups is absolutely in the interests of the state and its people, says Stevens.
“I think HB17 is a necessary measure to promote energy freedom in Texas,” said Stevens. “Environmentalists have a long history of campaigns designed to restrict our ability to make creative use of our natural resources, and they have turned their attention to the local level where natural gas bans have started to spring up across the country.
“By my count, there are currently 76 cities in the U.S. that have placed some sort of restriction on natural gas hookups, representing the indifference the environmental movement shows towards low- and middle-income energy consumers as it forces consumers to use more electricity, which generally costs more than natural gas,” Stevens said. “Additionally, bans on natural gas hookups don’t make sense because they force more energy consumption onto the electric grid, which, as February’s winter storm showed us, could be a recipe for additional blackouts as more demand would place a greater strain on the grid in Texas.”
Kevin Stone (email@example.com) writes from Dallas, Texas.
Texas state Rep. Phil King (R-Weatherford): https://house.texas.gov/members/member-page/?district=61; https://house.texas.gov/members/member-page/email/?district=61&session=87