By Greg Trefz
Texas has long been America’s premier energy capitol. This status is central to our economic dominance and helps power our booming economy that has become the envy of every other state and – indeed – the entire world. We are proud to see that, last year, Texas shattered records for oil and gas production, producing as much as 5.6 million barrels a day and contributing $26.3 billion in state and local tax revenues – exceeding the total general fund of 36 states.
Against this backdrop of unprecedented economic success of the industry, environmentalist groups continue to target the financiers of fossil fuel projects – with a recent report “Banking on Climate Chaos” pointing the finger at the world’s largest banks for being the ‘top offenders’ for financing fossil fuels to the tune of $6.9 trillion since 2016.
Ironically, while these financial titans are being shamed by environmental groups for supporting growth of the fossil fuel industry in Texas and around the world, Texas has simultaneously suggested many of these same banks are ‘boycotting’ the oil and gas industry, placing some on lists of financial institutions that are prohibited from doing business with public entities in Texas.
This begs the question: Are the world’s largest banks funding or boycotting oil and gas? It certainly can’t be both.
Take, for example, UBS Group, which won a bid to finance an $18.6 million bond for Normangee ISD in 2022. However, before the deal could be finalized, the Attorney General’s office determined that UBS was prohibited from underwriting the bond because it ‘boycotted’ fossil fuel companies.
This would certainly be news to environmental groups like the Rainforest Action Network and Sierra Club, whose recent report on fossil fuel financing identified UBS among its ‘Dirty Dozen – The Worst Banks Since the Paris Agreement,’ having financed more than $210 billion in fossil fuel projects over the last 8 years.
If Texas leaders truly want to send a message that firms who ‘boycott’ the oil and gas industry are not welcome in Texas, there needs to be clarity on what ‘boycott’ means, as the current standard appears to ignore empirical evidence that the banks on the state’s blacklist are, in fact, the world’s largest financiers of fossil fuels.
This clarity is particularly important at a time when Texas needs more – not fewer – sources of financing to help ramp up new energy projects to help power our state’s grid. With electricity demand expected to nearly double over the next six years, according to top officials with the Electric Reliability Council of Texas (ERCOT), cutting out major banks from doing business in Texas is the wrong approach if we want robust, predicable financing of power generation projects to meet this growing demand.
Major banks like Wells Fargo and HSBC, despite being named among the ‘Dirty Dozen’ banks that are top financiers of fossil fuels, have already been kicked out of doing business with Texas public entities, reducing competition in the municipal bond market and raising interest rates that increase local debt and, ultimately, put more financial burdens on Texas taxpayers.
At a time when our economic and energy engines should be firing on all cylinders, lawmakers need to provide clarity on the rules for disallowing companies – including the world’s biggest banks – to do business in and with our state. It stretches credulity when banks deemed to ‘boycott’ the oil and gas industry are also the largest global financiers of fossil fuels.
If we are truly going to embrace the industry that has supported the Texas economic miracle, we need to make sure the rules of the road are consistent and fair for the institutions that have helped finance the astronomical growth of the fossil fuel industry in the Lone Star State.
Greg Trefz is Managing Director at Icon Midstream, a midstream energy services company based in Houston.
