vscode-python: (Black) Formatter & Pytest fail with .env in Python

Environment data

VSCode: Most recent non-insider version. Python: 3.7 Black: Most recent.

Expected behaviour

Black is registered as a formatter. Code is formatted.

Actual behaviour

Nothing happens.

Steps to reproduce:

Working:

1. Register black as the formatter of choice.
2. Create a directory with the following structure:

root
- project
  - file_to_be_formatted.py

1. Add some code into file_to_be_formatted.py that has formatting issues.
2. Run black with alt + shift + f. It formats the code!

Failing:

1. Register black as the formatter of choice.
2. Create a directory with the following structure:

root
- .env (This contains "PYTHONPATH=./project" to make properly configure package detection, etc.)
- project
  - file_to_be_formatted.py

1. Add some code into file_to_be_formatted.py that has formatting issues.
2. Run black with alt + shift + f. It does not format the code

So having a .env file will silently make black fail. Running black from the command line on file_to_be_formatted.py does still work

I follow this: https://github.com/microsoft/python-language-server/blob/master/TROUBLESHOOTING.md#unresolved-import-warnings