Cities and counties in Oklahoma are facing confusion over whether a new law prohibiting the state from conducting business with banks perceived as unfavorable to the oil and gas industry also applies to their pension funds, bond sales, or bank loans. This uncertainty has resulted in a frozen project in Stillwater and discussions about taking unilateral action against banks on a list of restricted financial companies at the retirement system for Tulsa County.
State Treasurer Todd Russ released the list of banned companies in May, which includes BlackRock Inc., JP Morgan Chase & Co., Wells Fargo & Co., Bank of America, and State Street Corp. The list is a result of the Oklahoma Energy Discrimination Elimination Act, passed by lawmakers in 2022.
Many states now have laws prohibiting business with financial institutions that have committed to reducing their exposure to oil and gas companies or have plans to reduce their carbon footprints. Conservative groups supporting this backlash have provided model legislation to lawmakers and talking points to financial officials, including those in Oklahoma.
Stillwater is currently unable to proceed with an energy efficiency upgrade project due to uncertainty surrounding the law. Mayor Will Joyce explained that Bank of America requires additional assurance that a pending loan will not be affected by its appearance on the state treasurer’s list. Rising interest rates and higher material costs further complicate the situation.
The state’s seven pension systems, managing over $47 billion in assets, are also affected. The largest exposure to restricted financial companies is found in the Oklahoma Public Employees Retirement System (OPERS), with over 60% of its assets managed by companies on the list. OPERS trustees are considering exercising an exemption in the law to avoid divesting approximately $6.9 billion in assets managed by BlackRock and JP Morgan Chase.
Legal opinions from city and county officials suggest that the state law only applies to “state government entities” that are pension systems. This means that the pension systems run by Tulsa and Oklahoma counties, as well as those run by Oklahoma City and Tulsa, are not covered by the Oklahoma Energy Discrimination Elimination Act.
The uncertainty surrounding the new law has implications for cities and counties across the state, many of which have their retirement assets managed by OPERS. The Association of County Commissioners of Oklahoma has clarified that the law does not directly apply to the counties in their financial realms, but rather to the state retirement systems and dealings with the state treasurer.
Tulsa County Treasurer John Fothergill confirmed that the law does not apply to the county’s pension system. However, the pension system does have a contract with State Street, one of the restricted financial companies on the state treasurer’s list. Fothergill expects the list to be updated to remove State Street, which did not respond to the state treasurer’s letter earlier this year.
The uncertainty surrounding the application of this law has left cities and counties in Oklahoma in a state of limbo, unable to proceed with projects and unsure of the impact on their pension funds, bond sales, and bank loans.
