Texas resumes enforcing fossil fuel 'boycotter' law after appeals court action

Enforcement of a Texas law that prohibits state and local government contracts with businesses, including municipal bond underwriters, that "boycott" the fossil fuel industry is back on after a federal appeals court stayed a lower court ruling that found the law to be unconstitutional.

"Because the order is stayed, we will resume enforcing Senate Bill 13 as passed by the Texas Legislature and signed into law by the governor of Texas," according to a state attorney general advisory to bond counsel on Wednesday.

Texas appealed the February ruling by a U.S. District Court judge in a lawsuit brought by the American Sustainable Business Council against the state's comptroller and attorney general in 2024.

The district court judge, Alan Albright, found the 2021 law is unconstitutional under the First Amendment for being "facially overbroad" and under the Fourteenth Amendment for being "impermissibly vague."

The Fifth Circuit Appeals Court on Friday ordered the stay pending resolution of the state's appeal. One member of the three-judge panel wrote a concurrence that cited a 2023 Eighth Circuit Appeals Court decision in an Arkansas case, which the U.S. Supreme Court let stand without hearing the case, finding the First Amendment protects speech and association in support of a boycott, but not economic decisions against the target of a boycott.

"SB 13 is about spending, not speech," Judge James C. Ho wrote. "The Constitution permits ? and citizens expect ? government agencies to care about how public funds are used. State officials have the right to champion nondiscrimination by refusing to engage with those who discriminate. They're allowed to boycott those who boycott others."

The plaintiff in the Texas case had nothing to share at this time, according to a spokesperson.

Texas was an early enactor of anti-environmental, social, and governance laws that were subsequently passed in some other states. The Lone Star State's two measures, which prohibit governmental contracts worth $100,000 or more with entities that "boycott" or "discriminate" against the fossil fuel or firearm industries, led to more than a dozen financial firms being blacklisted.

A challenge to Oklahoma's 2022 Energy Discrimination Elimination Act resulted in an April state Supreme Court ruling that the law is unconstitutional only when applied specifically to public pensions.