11 U.S. States Sue Major Investment Firms Claiming ‘Collusion’ to Suppress Coal Production

A group of U.S. states are suing three major investment companies in a Texas court for allegedly colluding to use their market power to suppress coal production.

“Texas won’t tolerate the illegal weaponization of the financial industry in service of a destructive, politicized ‘environmental’ agenda,”  Texas Attorney General Ken Paxton, representing one of the states in the lawsuit, said on social media.

“Their conspiracy has harmed American energy production and hurt consumers. This is a stunning violation of state and federal law.”

Along with 10 other states, Texas has filed a complaint [pdf] claiming that companies BlackRock, Inc., The Vanguard Group, Inc., and State Street Corporation violated the 1914 Clayton Antitrust Act and the 1890 Sherman Antitrust Act, as well as state laws. The plaintiffs say the companies “individually acquired substantial stockholdings in every significant publicly held coal producer in the United States.” These stockholdings gave them “power to influence the policies” of competitors, which the companies used to bring about “a substantial reduction in competition in coal markets.”

The states claim the companies were in collusion because all three had joined two organizations—Climate Action 100+ and Net Zero Asset Managers—that aimed to pursue net-zero targets. Two of them later left Climate Action 100+, the complaint notes.

For some companies in their investment portfolios, such as those that produce coal, the only way to comply with a net-zero goal was to reduce their output. The companies’ alignment therefore resulted in a coordinated attempt to reduce coal output, the complaint claims, which in turn “yielded supra-competitive profits for [the defendants] and their portfolios.”

“In sum, the data demonstrates that publicly held domestic coal producers were not responding to the laws of supply and demand,” the plaintiffs write.

The case was filed in the Eastern District of Texas court. That court is overseen by the Fifth Circuit Court of Appeals, which hears cases from Texas, Mississippi, and Louisiana. It has a reputation for conservative-leaning, politically motivated rulings from a high proportion of Trump-appointed judges, reports Axios.

Though the complaint was filed in a sympathetic court, some legal experts say it doesn’t have a strong basis.

Climate coalitions are “voluntary associations and therefore don’t include any form of collusion and coercion, so it’s hard to see a legal basis for this claim,” Lisa Sachs, director of sustainable investment at Columbia University’s law school, told Bloomberg. But “coal-financed politicians are now using the bully pulpit to scare financial institutions, which won’t in any way benefit the coal sector and will harm the constituents these [attorneys general] purport to represent.”

Despite the states’ insistence that the companies are wielding influence to constrict coal production, some Biden-era regulations are putting pressure on coal-burning power plants to slash emissions or shut down. Coal is also increasingly being replaced with cheaper alternatives, like natural gas and renewable energy, as a power source for generating electricity. These regulations and market forces themselves could effectively reduce or remove demand for coal, notes Axios.

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