(The Center Square) – A new lawsuit filed over a Texas law that went into effect nearly three years ago is “absurd,” “frivolous” and “intellectually dishonest,” Texas Comptroller Glenn Hegar said.
After the Texas legislature passed a bill that Gov. Greg Abbott signed into law in 2021, the American Sustainable Business Coalition sued last week arguing it violates the First and Fourteenth amendments.
Gov. Abbott signed SB 13 into law after state lawmakers expressed concerns that prominent financial institutions and investment funds targeting the Texas oil and gas industry to financially penalize them in favor of alternative energy based on their compliance with “environmental, social, governance” standards, The Center Square reported. The law prohibits certain state agencies from investing funds in financial companies taking “any action that is, solely or primarily, intended to penalize, inflict economic harm on or limit commercial relations with [an energy company that] does not commit or pledge to meet environmental standards beyond applicable federal and state law.”
The lawsuit “seeks to undermine state sovereignty and force the state of Texas and Texas taxpayers to invest their own money in a manner inconsistent with their values and detrimental to their own economic well-being. That is absurd,” Hegar said.
“Texas has taken a very open, transparent and methodical approach, so it is ironic that this left-wing group suing Texas is hiding their true intent: to force companies to follow a radical environmental agenda that is often contrary to the interests of their shareholders and to punish those companies that do not fall into lockstep and put politics above earnings. The ink used to print this frivolous lawsuit is made by the very industry they are trying to eliminate.
“This is exactly the type of intellectual dishonesty that I have been fighting against. During a time when experts are revising long-term fossil fuel demand projections drastically upward, these groups continue to shove their radical agenda onto consumers and ignore the critical role this sector plays, and will continue to play, in our daily lives.”
The coalition argues the law was created “to coerce and punish businesses that have articulated, publicized, or achieved goals to reduce reliance on fossil fuels,” according to the lawsuit. It also claims that according to a study conducted for the Texas Association of Business, SB 13 and a companion law “cost Texans approximately $668 million in lost economic activity and 3,034 fewer jobs in the 2022–2023 fiscal year … and directly increased State entities’ costs for banking, investment, and finance by approximately $270 million.”
It also claims that the law “impermissibly infringes rights of free speech and association under a scheme of politicized viewpoint discrimination, based on no legitimate state interest.”
The bill was filed because “the burgeoning fossil fuel discrimination movement is denying capital to our responsible, hard-working energy businesses, which means the energy we need will be less affordable and less secure,” state Sen. Brian Birdwell, R-Granbury, argued in a bill analysis explaining its purpose in 2021. “Along with this, investment and pension managers who invest based on political trends undermine their fiduciary duty and threaten our workers’ and retirees’ futures.”
The Texas oil and natural gas industry accounts for nearly one third of Texas’s GDP and funds more than 10 percent of the state’s budget.
It generates over 43% of the electricity in the U.S. and 51% in Texas, according to 2023 data from the Energy Information Administration.
As of July, 42.8% of all U.S. crude oil production and 28.3% of all U.S. natural gas marketed production comes from Texas, according to Texas Oil & Gas Association estimates.
The Texas industry broke multiple records in 2023 and again this year, The Center Square reported, including record production, exports, refining outcomes and crude oil supply.
At the same time, the industry propelled Texas to lead the U.S. in emissions reductions, The Center Square reported.
The Texas oil and natural gas industry also paid the largest amount in tax revenue in state history of more than $26.3 billion in 2023. This translated to $72 million a day to fund public schools, universities, roads, first responders and other services.
Industry production taxes and royalties nearly exclusively finance three state funds. The Permanent School Fund and the Permanent University Fund, which support Texas public education, each received $1.8 billion last year. Texas’ Rainy Day Fund has received more than $31.2 billion from industry production taxes since it was created in 1987.
As of August, there are 16 companies and 353 publicly traded investment funds on the state’s Financial Companies that Boycott Energy Companies list, up from 15 companies on the list a year ago, The Center Square reported.
The law prohibits the Employees Retirement System of Texas, Teacher Retirement System of Texas, Texas Municipal Retirement System, Texas County and District Retirement System, Texas Emergency Services Retirement System and the Texas Permanent School Fund from investing in listed companies.
The lawsuit was filed in the U.S. District Court for the Western District of Texas Austin Division and names Hegar and Attorney General Ken Paxton as defendants. It asks the court to declare the law as unconstitutional and block the state from enforcing it.
