In 2022, the Oklahoma Legislature passed the Energy Discrimination Elimination Act of 2022 which prohibits state entities from using investment firms who boycott the oil and gas industry. After litigation concerning the law, legislation is being considered that would result in revising the law in ways that would make it less effective. These proposed changes appear to be in response to rulings of the Oklahoma County District Court. But it would be wise to see how the litigation plays out before rushing to amend the law.

Since states like Oklahoma passed ESG laws, the financial sector has been “more welcoming” to the energy industry. And while these laws have been good for Oklahoma’s economy, for core government functions that rely on associated tax revenue, for energy-producing companies, and for the thousands of Oklahomans employed by those companies, these laws would also benefit pensioners. The reason is that ESG funds have been shown to consistently underperform non-ESG funds.

We have documented that liberal activist judges in Oklahoma’s judicial system are notorious for concocting grounds to dismiss conservative legislation liberals do not support. Additionally, liberals were aided by bureaucrats at the Oklahoma Public Employees Retirement System who used an incomplete analysis to determine that complying with Oklahoma’s anti-energy-discrimination law would have a “cost.”

Not long after the law went into effect, a former (very liberal) lawmaker with an appetite for laws that benefit trial lawyers sued the state treasurer to enjoin the law. The District Court of Oklahoma County first granted a temporary restraining order prohibiting the law from being enforced during the litigation, then granted a permanent injunction, and finally ruled, as a matter of law, that the statute was unconstitutional for various reasons. Among those reasons was that the statute was unconstitutionally vague.

It appears many of the amendments to the Energy Discrimination Elimination Act of 2022 are designed to address findings by the Oklahoma County District Court. For example, the district court found “‘otherwise taking any action’ . . . [is] not defined in the Act, but are vital to the function and application of the Act.” To conform the bill to the rulings of the Oklahoma County District Court, the bill just removes the language about “taking any action.” But this would be a mistake.

That section prohibits ESG funds from using their proxy votes to engage in shareholder activism to change the makeup of corporate boards that cause companies to pursue ESG policies rather than maximizing shareholder value. Eliminating this section would allow ESG funds to continue this practice. It’s possible the Oklahoma Supreme Court will find the language is not vague. After all, legislatures are allowed to broadly address multiple areas rather than spelling out every single possible violation. Allowing an Oklahoma County District Court ruling to determine what is or isn’t “unconstitutionally vague” is premature.

Another change that waters down the law also appears to conform the bill to the Oklahoma District Court ruling on appeal. The district court similarly found the phrase “without an ordinary purpose” was not defined. While definitions can be helpful—and this may be one of those times where a definition would be best—there’s no requirement to define all terms. In fact, that should be the job of courts—to interpret the law as it applies to the parties before them.

But to conform the law according to the Oklahoma County District Court, the proposed legislation defines “ordinary business purpose.” It takes three paragraphs to do so, and in the process, creates a small loophole for ESG funds to exploit. Embedded in the definition is the requirement that actions be “predominately in furtherance of environmental, social, political, or ideological interests.” Even a little ESG activism should be enough to trigger the law. In a recent court decision from a federal district court in Texas, the judge there noted:

If the investment manager’s negative response [to an oil company ramping up production due to forecasts of increased demand] is based on its non-pecuniary climate change agenda, this is a form of ESG investing. The investment manager’s response still qualifies as ESG investing even if it believes there are simultaneously some financial benefits to reducing fossil fuel production (essentially, a mix of both ESG and financial benefits) should the company choose to forego the more lucrative financial strategy of increasing fossil fuel production.

The Oklahoma Supreme Court may very well uphold the Oklahoma County District Court ruling in total. But there also appear to be some holes in the lower court’s analysis that could be cleared up if patience with the current law is pursued. Rather than dilute the law to conform with a ruling from the Oklahoma County District Court, lawmakers should wait to see what happens and only act once the litigation is finalized.