Thankfully the FERC agreed. As then-FERC Chairman Mark Christie wrote, while BlackRock’s environmental advocacy raises concerns, “public utilities face already large and still growing capital needs, including to fund investment in greatly needed utility assets, such as power generation.” Given these capital needs, and BlackRock’s pledge “not to use its holdings to influence utility management,” extending BlackRock’s blanket authorization will help ensure the utility sector has access to the resources it needs to continue expanding the grid’s capacity

Having just dodged that bullet, a new threat to increased energy investment threatens to do the same – a lawsuit led by the Attorney General of Texas. The lawsuit alleges Vanguard, BlackRock, and State Street conspired to artificially depress the coal market through anti-competitive practices.

The lawsuit is a response to these investment manager’s investments in coal companies given their public support and past membership in these same environmental organizations, which are promoting policies that are detrimental to the coal industry. As I have previously argued, the asset manager’s support of these environmental, social, and governance (ESG) policies is troubling and creates significant conflicts of interest between the asset managers fiduciary responsibilities and their ESG commitments.

However, in practice, the AG actions will simply restrict the coal industry’s ability to raise capital – clearly contradicting the AG’s stated purpose. As the FERC decision emphasizes, prioritizing the need for an efficient allocation of capital is essential if the U.S. grid is going to deliver Americans cheap and plentiful electricity.

The lawsuit also fails to account for fundamental market changes created by the fracking revolution. This market-driven innovation increased the supply – and subsequently drove down the costs – of natural gas. Relatively cheaper and lower-emission natural gas radically changed the economics of electricity generation. It is mostly thanks to relatively cheaper natural gas that coal operations have decreased across the country.

In 2005, coal was the largest source for electricity, generating about 50 percent of the nation’s electricity. Natural gas generated roughly 19 percent. Over the latest 12 months, natural gas accounted for 42 percent of total generation while coal accounted for a mere 16 percent; their shares of electricity generation have swapped. This reversal of generation share was fostered by over 100 coal-fired plants that were converted to, or replaced by, natural gas-fired plants between 2011 and 2019. As the energy generation mix shifted towards natural gas and other technologies, coal’s downstream consumption and production subsequently declined.

Although Attorney General Paxton claims to be protecting the coal industry, if the lawsuit is successful these investment firms would likely be forced to divest their holdings in the coal companies listed in the suit. This forced liquidation will deny the coal industry access to a significant source of capital. According to an analysis by the American Council for Capital Formation’s chief economist, the forced divestments would deny the collective coal industry more than $17.5 billion in capital. This downstream effect stands in stark contrast to the needs of the energy sector, which needs significantly more capital investment to keep up with our energy infrastructure.

Ultimately addressing the expected growth in electricity demand will require more capital investment in energy production, transportation, and infrastructure. Cutting off investment sources – whether through FERC rule making or AG lawsuits – increases the likelihood of future blackouts and higher costs for consumers. If the goal is to promote widespread prosperity, such actions are simply the wrong policy path.