A report from the American Energy Institute (AEI) seeks to correct misperceptions about Oklahoma’s Energy Discrimination Elimination Act (EDEA) spread by an earlier report from some organization calling itself the “Oklahoma Rural Association” (ORA).
EDEA is an anti-“environmental, social and governance” (ESG) law that bars state and local governments from conducting business with financial institutions that purposefully do not invest in the fossil fuel industries for ideological, non-fiduciary reasons.
ESG scores are essentially a risk assessment mechanism increasingly being used by investment firms and financial institutions that forces large and small companies to focus upon politically motivated, subjective goals which often run counter to their financial interests and the interests of their customers. Companies are graded on these mandated commitments to promote, for example, climate or social justice objectives. Those that score poorly are punished by divestment and reduced access to credit and capital.
(A temporary injunction was placed on enforcement of EDEA in May by an Oklahoma court.)
The ORA paper, authored by Dr. Travis Roach, associate professor and chairperson of the Department of Economics at the University of Central Oklahoma, claims EDEA has increased municipal borrowing costs by 15.7 percent with nearly over $184 million in increased expenses to the state as well due to these increased costs. “Overall,” he concludes, “my findings suggest that the EDEA policy has had significant unintended consequences for Oklahoma’s local governments, ultimately harming taxpayers and communities across the state through potentially higher taxes, reduced public services, and delayed infrastructure investments.”
In response, the AEI report charges the ORA paper failed to establish a true causal relationship between EDEA and higher municipal borrowing costs. “Rising interest rates,” AEI states, “driven by the Federal Reserve’s rate hikes since 2022 following excessive expansionary monetary policy due to the COVID-19 pandemic, increasing economic uncertainty in oil-producing states caused by Biden administration policy, inflation expectations, and declining credit availability, present far more plausible explanations for increased borrowing costs.”
Further, AEI claims the ORA paper “does not adequately control other factors influencing borrowing costs, such as changes in Treasury bill rates, economic conditions, and local fiscal policies. Oklahoma’s tax cuts in January 2022 further complicate the analysis by potentially impacting the attractiveness of local governments issuing tax-free municipal bonds, creating greater demand in Oklahoma for borrowed funds and differentially increasing borrowing costs for Oklahoma communities.”
Finally, AEI notes, “comparing these states and periods does not accurately reflect the broader economic and financial environment, introducing biases into the results. For example, the author selected neighboring states as controls but omitted New Mexico, raising questions about whether the chosen states moved in parallel with Oklahoma before the EDEA’s implementation. There was also a substantial outflow of funds from municipal bonds nationwide in 2022 and 2023. The ORA paper’s author also ignored wider trends in Oklahoma’s municipal interest rates compared to broader indexes, further begging the issue of cherry-picked data. The paper’s failure to establish parallel movement introduces significant biases in the analysis.”
Roach, who was potentially paid around $6,800 for his work on the report by ORA, admitted to an economist colleague at Lake Forest College that ESG issues were “a topic I know almost nothing about” in a email seeking help gathering data for the paper.
ORA, for its part appears to be an astrorturf lobbying organization purportedly “dedicated to the development and advancement of policies that promote and protect the rural quality of life through enhancing rural Oklahoma communities in the areas of economic growth and development, energy, education, health and other issues impacting business and residents in communities across Oklahoma.” The organization lists no staff, other than it’s president Monica Collison, and it’s physical address is just a P.O. box in Edmond, a suburb of Oklahoma City.
The contact phone number on the ORA website appears to belong to Collison’s husband, John R.H. Collison, founder of The BlackOak Group, another lobbying organization with no listed staff or physical address, outside of the same P.O. box also used by ORA. Financial records show ORA has reported only $6,150 in revenue since 2020, which is less than what they seemingly paid Roach to write his paper on EDEA, although records for 2023 are unavailable.
“The Oklahoma Rural Association’s report…fails to establish a causal relationship between the EDEA and higher municipal borrowing costs,” AEI’s report concludes. “Changes in federal policy with respect to the oil industry, first positive under President Trump and now decidedly negative under President Biden, are more plausible explanations for Oklahoma’ relatively increased borrowing costs. Furthermore, the push towards ESG investing overlooks the opportunity costs associated with divesting from reliable energy sources like oil and gas, which are crucial to Oklahoma’s economy. Given the methodological flaws in the ORA study, it should not be used as a reason to question or delay the implementation of protections put in place by the elected representatives of states like Oklahoma and Texas against asset managers using the assets of those states to push ESG-aligned political objectives.”
Nothing in this Research & Commentary is intended to influence the passage of legislation, and it does not necessarily represent the views of The Heartland Institute. For further information on this subject, visit Environment & Climate News, The Heartland Institute’s website, and PolicyBot, Heartland’s free online research database.
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Tim Benson joined The Heartland Institute in September 2015 as a policy analyst in the Government Relations Department.
