Oklahoma treasurer adds bank to blacklist weeks after it sold bonds for University of Oklahoma

Oklahoma Treasurer Todd Russ added global bank Barclays to his list of financial firms thought to be discriminating against the oil and gas industry just weeks after it led the sale of $230 million in bonds for the University of Oklahoma.

Russ’s addition to his restricted financial company list brings to seven the number of financial firms forbidden to do business with state pension funds, state agencies, cities and other entities under a 2022 law, the Oklahoma Energy Discrimination Elimination Act. Other companies on the list include Bank of America, State Street Corp. and BlackRock Inc.

Unlike previous versions of the restricted company list, Russ’s office did not send a survey to Barclays to find out if it had pledged to reduce its fossil-fuel investments or signed on to industry lists on environmental, social and governmental corporate policies. Instead, the treasurer added Barclays based on a combination of its publicly available statements and other research, said Jordan Harvey, chief of staff.

The timing calls into question the arbitrary nature behind the compilation of the list. The treasurer has carte blanche to decide how to compile the list, and there haven’t been any public statements on how companies named to the list can be removed from it. The treasurer’s office also hasn’t promulgated any rules under the law.

More: AG Drummond fires attorney in company 'blacklist' lawsuit, will take on case himself

Judge put law on hold

Russ’s revised list came just days before an Oklahoma County district judge put enforcement of the Energy Discrimination Elimination Act on hold, granting a temporary injunction. District Judge Sheila Stinson said the law was vague and violated a constitutional provision that said pension system assets and income can’t be diverted for other purposes such as a political agenda.

Tulsa retiree Don Keenan sued Russ in November over the state’s anti-ESG law. Keenan is a former human resources director of a Sinclair refinery in Tulsa, worked for the state for 11 years and is a beneficiary of the Oklahoma Public Employees Retirement System.

The temporary injunction sparked a spat between Russ and Oklahoma Attorney General Gentner Drummond. The attorney general on Thursday filed court documents to take over the case, saying he was disappointed with Russ’s outside counsel.

“It is extremely disappointing that the counsel hired by Treasurer Russ was unable to secure a favorable ruling in defense of Oklahoma’s anti-ESG law,” Drummond said in a news release. “Because of this failure, the law is now on hold and at risk of being struck down entirely. Oklahomans deserve better.”

More: District Court judge halts enforcement of 'blacklist' law that restricts investments

Russ said he asked the attorney general to handle the case but was rebuffed. Emails between the attorney general and treasurer show Drummond referred Russ to attorneys from the McAfee & Taft law firm on a temporary basis. But Russ instead wanted to pick Cheryl Plaxico of the Plaxico Law Firm.

“As we discussed, it is my intention that the Solicitor General Unit will assume full representation of this case,” Drummond said in the Nov. 28 email. “In the interim, my staff will continue to work with outside counsel at no cost to your agency. For these reasons, your November 27th letter requesting legal representation from the Plaxico Law Firm PLLC is ill-timed as additional legal services are not required or necessary.”

Barclays sold OU bonds

OU Regents issued a request for proposal for the $230 million bond sale last fall, with the proceeds to go toward new student housing and athletic facilities. Barclays’ October contract to be lead underwriter includes a statement that it doesn’t boycott the oil and gas industry. The attorney general in March signed off on the bond sales, which were offered in two tranches.

A spokesman for Barclays said the company had no comment on being added to the Oklahoma treasurer’s list of prohibited financial companies.

Oklahoma has tended to follow Texas’ lead on anti-ESG issues. Oklahoma’s law is modeled after one passed in Texas in 2021. Russ’ office also used a Texas survey of financial companies as its basis for a survey to compile the first version of the restricted financial company list in May 2023.

Texas Attorney General Ken Paxton in January forbade Barclays from participating in bond sales after he said it failed to respond to questions about its net zero carbon emissions goals.

Barclays has been under pressure from environmental groups for its European investments in the oil and gas industry. At the company’s annual meeting last week in Glasgow, Scotland, activist investors asked Barclays to end its membership in the U.S. Chamber of Commerce because it wasn’t aligned with the company’s broader climate goals.

The bank told shareholders it recognizes the need to move to lower-carbon energy and said it still invests in both clean energy and existing fossil fuels. Barclays said it helped provide $1.55 in financing for lower-carbon energy projects for every $1 invested in fossil fuel energy.

“Barclays must play a dual role: financing the energy system of tomorrow, while continuing to finance companies that are meeting the world’s current energy needs,” the company said in response to questions raised by shareholders.

Harvey, Russ’s chief of staff, said there were no internal discussions to hold off naming Barclays until after the OU bond sale in April. Under the law, the treasurer must update the restricted financial company list at least once per year, but not more than once per quarter.

“His staff had not yet finished their research on Barclays PLC so did not have a reason for them to not proceed with their transaction,” Harvey said in an email. “No discussion was had to wait; the list was published exactly one year after the initial list, which as you know lines up with our annual requirement.”

Does blacklist cost cities money?

Travis Roach, chairman of the Economics Department at the University of Central Oklahoma, said the addition of Barclays to the Oklahoma list seemed arbitrary.

“It seems like the treasurer is going after anyone who has a little three-letter acronym,” Roach said, referring to ESG. “Their absence means there’s even less competition in this market. You have even fewer places for municipalities to go for a good, competitive rate if they need to, say, improve a dam or a hospital.”

The city of Stillwater last year put a project on hold as it sought advice about whether the law applied to a potential loan the city was interested in getting from Bank of America. Ultimately, a letter from Drummond said the city could exercise an exception in the law.

Roach recently wrote a research paper for the Oklahoma Rural Association looking at the implementation of the Oklahoma Energy Discrimination Elimination Act. The study found municipalities were spending an additional 15% in interest costs because of the financial blacklist. That amounted to an estimated $185 million in additional expenses.

“This increase in borrowing costs imposes an unnecessary financial burden on Oklahoma municipalities, potentially forcing them to cut spending on important public services or infrastructure projects, or raise taxes to cover the higher debt servicing costs,” Roach said in the report.

In the Legislature, a bill that would have exempted cities and counties from the law failed in an April 25 House vote. Senate Bill 1510, by Sen. Chuck Hall, R-Perry, sailed through the Senate and a House committee before failing 40-44 on the House floor.

Russ, who said the law was never meant to apply to cities and counties, said he was disappointed lawmakers didn’t pass the exemption. But he said he remained hopeful it would pass next year.

Russ himself took an exemption in the law that applies to the treasurer’s office. Bank of America, which is on the restricted financial company list, manages the state’s credit cards. In a May 2023 letter, Russ told the bank it would remain a vendor for credit cards.

Russ was the lone no vote when trustees of the Oklahoma Public Employees Retirement System took an exemption to the anti-ESG law in August. The pension system estimated it could cost more than $10 million in administrative costs and fees if it had to divest its assets from BlackRock Inc., which manages 60% of its holdings.

Dozens of states now have laws forbidding business with financial institutions that have pledged to reduce their exposure to oil and gas companies or have plans to reduce their carbon footprints. Backers claim such policies discriminate against oil and gas interests, which are major contributors to the state’s economy and tax base. That backlash has been supported by conservative groups who have provided model legislation to lawmakers and talking points to state treasurers and other financial officials, including those in Oklahoma. Among the most active is the State Financial Officers Foundation, a Kansas-based nonprofit that counts Russ and State Auditor and Inspector Cindy Byrd as members.

Oklahoma Watch, at oklahomawatch.org, is a nonprofit, nonpartisan news organization that covers public-policy issues facing the state.

Paul Monies has been a reporter with Oklahoma Watch since 2017 and covers state agencies and public health. Contact him at (571) 319-3289 or pmonies@oklahomawatch.org. Follow him on Twitter @pmonies. 

This article originally appeared on Oklahoman: Barclays added to Oklahoma bank blacklist by state treasurer Todd Russ