Oklahoma may be hurting itself with a ban on some big banks and financial firms

Stillwater officials had worked for months on a plan to update the city’s heating and cooling systems, install new street lights and improve water infrastructure in an effort to significantly reduce rising energy costs. In April, the city council voted to borrow money for the $13.5 million project from Bank of America, which offered the lowest interest rate. 

But less than a week later, Oklahoma’s treasurer announced Bank of America was no longer allowed to do business with government entities across the state. The bank was one of 13 deemed to be “boycotting” oil and gas companies in violation of a new state law.

The next best lender had an interest rate 0.7% higher, which would cost Stillwater nearly $1.2 million in additional costs.

“It was frustrating,” said Will Joyce, Stillwater’s mayor. “It means we have to do less of the project, we've got to take stuff out of it.”

Stillwater's inability to choose the bank with the lowest interest rate is an example of how the state’s ban on so-called oil and gas “boycott” firms is already costing taxpayers money. Financial observers believe it will only get worse. A recent study by Econsult Solutions Inc., estimated Oklahoma could pay nearly $50 million more in bond interest costs annually because of the ban. 

“Oklahoma’s (ban) is one that banks and financial institutions are generally against because it forces them to limit the kinds of risk analysis they can do and it undermines competition in the municipal bond market,” said Jordan Haedtler, a climate financial consultant who works with Sunrise Project, a pro-clean energy organization that commissioned the Econsult Solutions report.

Oklahoma's Republican Legislature approved the ban last year because they said some financial firms were pushing “political agendas” by moving more investments to clean energy companies.

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But Haedtler said investment firms looking for long-term growth are wisely considering a partial move away from fossil fuels. They disagree that such a strategy is costly to Oklahomans who depend on their retirement through state pension programs. 

“I would argue that when you are dealing with pensions and the retirement savings of people who may not retire for 10, 20 or 30 years, it is foolish and quite costly to force investment managers to not consider these long-term strategies,” Haedtler said. 

Oklahoma lawmakers claim banks are pushing 'woke' financial policies

The ban follows a trend among some Republican states that have complained of “woke” finances. Oklahoma's law targets firms that have adopted ESG standards, which stands for environmental, social and governance and refers to a business strategy that considers environmental impacts when making investment decisions.

The anti-ESG push in Oklahoma has appeared to hamper the state's business development efforts. Volkswagen recently referenced that opposition in not selecting the state for a new manufacturing plant. 

Gov. Kevin Stitt, who signed the financial ban into law last year, said he still supports the ban.

More:Is Oklahoma's fight against pro-environmental policies hurting business recruitment?

“As soon as you stop attacking the oil and gas industry and as soon as you stop pushing a political agenda with our pension funds we are happy to do business with you,” Stitt said. 

But critics of the ban said lawmakers are pushing their own political agendas by tapping into the anti-"woke" rhetoric common within the Republican base.

And some banks on the state's list deny they "boycott" oil and gas firms.

“As the nation’s largest bank, we are among the top financers across the energy sector, including traditional energy sources. Between 2021 and 2022 we provided over $2 billion in financing and other services to 40 Oklahoma companies in the oil and gas space," JPMorgan Chase officials said in a statement.

"Our business practices are not in conflict with this anti-free market decision, and we look forward to continuing to serve customers and communities in Oklahoma."

The financial impact of 'boycott' law is much higher than a legislative estimate

Oklahoma's financial ban required state Treasurer Todd Russ, a Republican, to compile a list of firms that were “boycotting” oil and gas companies. 

Claiming he “thoroughly” reviewed information from more than 160 firms, Russ blacklisted 13 financial companies, including Blackrock, JPMorgan Chase and Wells Fargo. The names of two of the firms, however, were misspelled on the treasurer’s initial list. 

"The energy sector is crucial to Oklahoma’s economy, providing jobs for our residents andhelping drive economic growth," Russ said in a statement. “It is essential for us to work with financialinstitutions that are focused on free-market principles and not beholden to social goals thatoverride their fiduciary duties.”

More:Oklahoma Legislature reaches deal on school funding, teacher pay and tax credits

When the law was presented to lawmakers last year, legislative staff reported a fiscal impact of just $250,000 for administrative work within the treasurer’s office. 

But Joyce, the mayor of Stillwater, said the true financial impact already has shown itself to be much higher. 

“While we certainly understand the intent behind this state law, I think it is important that we kind of go back through and look at what are all the other consequences that might come into play,” Joyce said. 

“It's frustrating because clearly there are other costs with this.”