Legal Challenge Against Blackrock and Others May Jeopardize Trump's Energy Policy

Lawsuit Filed Against Blackrock and Others Threatens Trump's Energy Policy

In a significant development, Texas Attorney General Ken Paxton has led a coalition of state attorneys general in suing major investment firms BlackRock, Vanguard, and State Street. The lawsuit, filed in a Texas federal court in December 2020, alleges that these asset managers illegally colluded to buy up stock in various coal companies and force them to lower output.

The complaint accuses the defendants of creating a "cartel to rig the coal market, artificially reduce the energy supply, and raise prices." This move comes at a time when America's mineral energy renaissance has transformed the country's outlook, enhancing its energy security. Last year, the U.S. produced more mineral energy than ever before, and output is projected to increase further this year.

Shoring up resilience and reliability on the nation's power grids by ensuring the maintenance of adequate 24/7 baseload generating capacity is a major piece of the energy agenda. However, U.S. coal prices have dropped dramatically since 2023, and overall coal production has been in decline throughout the 21st century. This decline has been a concern for many, including Secretary Wright and other Trump officials who believe coal still has a big role to play in the energy sector.

The lawsuit proposes a remedy that asks the government to force these asset managers to divest their holdings in coal companies entirely, which could strip the industry of nearly $18 billion in capital. This move could potentially undermine the President's vision, which requires serious investment by the private sector, much of which must be provided by the defendant firms in this case.

The companies that joined the coalition of state attorneys general led by Ken Paxton of Texas include Alabama, Arkansas, Florida, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Montana, Nebraska, New Hampshire, North Dakota, South Dakota, Tennessee, Utah, and West Virginia. The litigation raises the specter of the tables being reversed when the political pendulum swings back, potentially chilling investment and raising the cost of capital.

Former Texas Governor Rick Perry called the lawsuit "misguided" and warned that a decision for the plaintiffs would likely undermine Trump's energy agenda. It isn't as if alternative investors are clamoring at the gates to invest in the coal business these days. The lawsuit isn't the only challenge the coal industry has faced. President Trump, in his all-of-the-above energy plan, promised to reinvigorate "beautiful, clean coal," but many oil and gas companies have adopted ESG-focused internal policies to adapt to political and market realities, as advised by major advisory firms.

The last election served as a referendum on the Biden-Harris administration's aggressive green agenda. While the outcome of this lawsuit remains to be seen, it underscores the ongoing debate about the role of fossil fuels in America's energy future. Trump and his cabinet officials claim that their agenda made a mess of America's energy security, while others argue that the transition to cleaner energy is necessary for the country's long-term prosperity. Regardless of the outcome, one thing is clear: the energy sector will continue to be a hot topic in the years to come.