Boyden C. Gray – former White House counsel, U.S. ambassador to the European Union, and U.S. special envoy to Europe for Eurasian energy – recently published an editorial in the Wall Street Journal spotlighting the increasing trend of financial institutions, primarily banks, swearing off providing capital to fossil fuel projects. He contends: “America’s largest financial institutions are picking winners and losers in the energy sector for political reasons…”
This rings truer than ever as a number of institutions, including Citibank, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo have moved to cut liquidity for projects and sworn off lending to projects in the artic or coal mining altogether. Further, as Gray notes, “BlackRock, the world’s largest investment firm, announced in January that it would divest from companies deriving more than 25% of their revenue from thermal coal and has joined a pact called ‘Climate Action 100+’”
These developments come as a result of pressure campaigns from the likes of Extinction Rebellion and others that have exhausted their resources in the courtroom and now hope to undermine projects by cutting access to capital.
Gray’s larger point is that the gentlemen’s agreement and blatant pacts among financial institutions may well be in violation of antitrust laws, explicit collusion or not. He writes:
“These announcements look a lot like invitations to collude on a boycott of a critical segment of the U.S. economy. The Federal Trade Commission has maintained that such invitations—even if they go unheeded—can violate federal antitrust law. As the FTC and the Department of Justice reiterated in April, “Even absent a collusive agreement,” antitrust enforcers may “pursue a civil enforcement action against companies and individuals that invite others to collude.” If made with an intent to invite or signal competitors to join a group boycott, these announcements could violate the law.
Federal antitrust law also prohibits boycott agreements instigated by a third party to prod firms that compete with each other into unreasonably restraining market competition. In these “hub and spoke” conspiracies, competitors may violate the law without communicating with each other, and even though the relevant agreements they make are with a third party, not a competitor.
Pressure campaigns by activist groups (possible hubs)—followed by the pattern of announcements and parallel conduct by banks (possible spokes)—present more evidence of potential conspiracies. For example, Green America proclaims it “is pressuring banks world-wide to stop funding fossil fuels” as part of the “Fossil Banks, No Thanks” campaign, which aims “to stop large commercial banks from financing the fossil fuel industry.” The Sierra Club shares the same goal and even reports that it has “met with representatives from major banks to discuss . . . why action by the financial industry is necessary.” As a result, five of the six largest banks in the United States will no longer finance oil and gas drilling in the Arctic National Wildlife Refuge. Bank of America is the lone holdout.
Activist investors have also joined the pressure campaign, encouraged by business leaders’ embrace of “stakeholders” over shareholders. Any of this third-party activity could be the hub for tacit collusion between the spokes—i.e., banks collectively boycotting certain energy projects.”
Activist tactics to pull down these projects have become more and more potent as we saw with the Atlantic Coast pipeline, as well as recent litigation against the Dakota Access pipeline.
This rejection of American infrastructure and energy, which is certainly a competitive advantage, undermines the wellbeing of the country and offers opportunities for competitors to step up and seize influence in the energy space. GAIN advisor and retired Army Major General James “Spider” Marks recently wrote about this very development as evidenced in Russia’s Nord Stream 2 project that is nearing completion.
As Marks wrote: “The United States is in a global leadership position when it comes to energy. To sustain that role, attention must be given to improving domestic energy strength and reiterating to allies that we are capable and eager to support them.”
American energy is resource to be used to better the wellbeing, standard of living, and prosperity of our country and our allies. Domestic movements to stifle energy infrastructure development work against American interests.