A federal judge has blocked Texas from enforcing a 2021 law that bars state funds from investing in companies that “boycott” the fossil fuel industry.
Senate Bill 13 was explicitly designed to sideline companies that use environmental, social, and governance (ESG) considerations when making investment or business decisions.
Last week, U.S. District Judge Alan Albright granted a motion for partial summary judgment in American Sustainable Business Council v. Hegar, declaring Senate Bill 13 unconstitutional under the First and Fourteenth Amendments to the U.S. Constitution.
The decision permanently blocks enforcement of the law, pending a reversal on appeal.
Background
The Texas Legislature enacted SB 13 in 2021 to prevent state-controlled investment funds and public entities from supporting companies that discriminate against oil, natural gas, and coal producers.
SB 13 directs the comptroller’s office to maintain a blacklist of companies engaged in such boycotts—triggering divestment by state funds if those companies fail to cease boycotting within 90 days.
Prospective government contractors were required to verify that they would abstain from boycotting oil and gas companies for the duration of the contract. Minor contractors were exempt from the statute if their contract was under $100,000 or they had less than 10 employees.
The law did not limit business owners’ activities, allowing them to speak out against the oil and gas industry in their personal capacities.
According to case filings, “This carefully crafted law ensures that Texas tax dollars are not conscripted into the service of boycotting the economic lifeblood of the State while respecting private parties’ rights to hold and espouse opinions as they may deem appropriate.”
The Lawsuit
American Sustainable Business Council (ASBC)—a membership group that advocates against reliance on fossil fuels—filed a federal lawsuit in 2024, in the U.S. Western District Court of Texas in Austin.
Two ASBC companies—Etho Capital LLC and Our Sphere, Inc.—had been blacklisted under SB 13 for “boycotting energy companies.” Both companies publicly promote reduced reliance on oil and gas.
The council therefore challenged the constitutionality of SB 13, claiming the law unconstitutionally restricted its freedom of expression and was written to be overly broad and vague.
Named as defendants in the lawsuit are former Texas Comptroller Glenn Hegar and Attorney General Ken Paxton in their official capacities. Hegar has since resigned to become the chancellor of the Texas A&M University System, leaving Kelly Hancock as acting comptroller.
ASBC asked the court for a declaration that SB 13 is unconstitutional, blocking the defendants from implementing and enforcing it.
On February 3, Judge Albright issued his opinion, agreeing with the plaintiffs.
He reasoned that SB 13’s application to protected speech under the First Amendment is “substantial,” making the law “unconstitutional and unenforceable” on this basis alone.
“The plain meaning of the phrase ‘taking any action that is intended to penalize’ fossil fuels includes, for example, speaking about the risks posed by fossil fuels, advocating against reliance on fossil fuels, and associating with like-minded organizations—all forms of expression in which ASBC’s members, including Etho and Sphere, regularly engage,” wrote Albright.
He determined that these forms of speech or conduct are constitutionally protected.
Albright further ruled that SB 13 is unconstitutionally vague in violation of the Fourteenth Amendment’s Due Process Clause, as it does not specify precisely what type of conduct is prohibited. He reasoned the statute is not susceptible to objective measurement or determination, potentially opening the door to discriminatory enforcement.
The ruling therefore declared SB 13 unconstitutional under both the First and Fourteenth Amendments, blocking the state from enforcing it.
What Happens Next
On February 6, the State filed a notice of appeal to the U.S. Fifth Circuit Court of Appeals in New Orleans.
Albright’s ruling does not signify a prohibition on future ESG-related legislative action. Should the order stand, it does set constitutional boundaries for how that legislation may be written.
If you or anyone you know has information regarding court cases, please contact our tip line: [email protected].
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