There are many “heroes” in the recent withdrawal of a rule that would have created a new type of corporation out of whole cloth. The SEC withdrew the rule on Natural Asset Companies (NAC), which it had tried to sneak through in October. It’s a model of how regulatory push-back can be effective against Biden Administration regulatory overreach even with such a slim Republican majority in the House. When red states work in conjunction with congressional oversight, meaningful change can occur.
And I’m not trying to be partisan here. It’s just a fact on how this one went down. There were other victories earlier this year with what I’ll call Model A. Congress passed a Congressional Review Act (CRA) resolution to overturn the Biden Department of Labor rule on retirement investments, a rule that elevated ESG over material financial factors in pensions and 401(k) plans. That model involved enlisting a few moderate Senators, in this case just Joe Manchin (D-WV). Although it was vetoed, it is helpful in our case challenging the rule, as we just filed our appeal last week. Besides its use blunting hard-left regulations, Model A was also used for getting rid of Ann Carlson as head of the National Highway Traffic Safety Administration.
What I’m calling Model B from the NAC success started in the states, particularly Utah. The Utah Treasurer, Marlo Oaks, was the driving force with his Wall Street Journal op-ed on the proposed rule when SEC tried to sneak it through with a 21-day comment period in October. Utah’s Public Lands Coordinating Office (PLPCO) then wrote an excellent comment letter raising the red flags on the impacts on public lands.
Meanwhile, Senator Wicker (R-MS) noticed the rule and was alarmed. Even though Mississippi is not a hub for public lands, to put it mildly, he enlisted Senators Risch and Crapo of that public-lands bastion Idaho, and they sent a letter to SEC along with Senator Ricketts (R-NE) asking the right questions. Representative Harriett Hageman ran an amendment through the Rules Committee to defund the rule, which passed out of committee on November 6th.
I did a bit of a minor freakout when I found out about NACs from a stakeholder I work with in Nevada, right after the first comment period closed in October. I was embarrassed to have missed the comment period on a rule that would so obviously affect public lands. I relaxed a bit once I found out that a lot of people, other than the State of Utah, had missed the boat as well.
But then the effort started to open another comment period. Twenty-three state treasurers wrote a letter asking for another comment period. Unfortunately, the House committee of jurisdiction, the Financial Services Committee, declined to do anything. Luckily, Chairman Bruce Westerman of the Natural Resources Committee found a way to assert his committee’s jurisdiction over the rule, since it affected public lands, and initiated a congressional inquiry.
That may have been the straw that broke the camels back. SEC relented and opened up another comment period, which commenced in late December. More good comments were developed and the information started to flow. Twenty-five state Attorneys General submitted a letter succinctly showing the rule’s legal violations. American Stewards of Liberty was on top of the original comment period and conducted grassroots work in the property rights circles.
I had to take a step back, block out all the good information for a bit, and just read the rule, since I wanted to bring some of my experience to our comments and see if I couldn’t add something new. I believe my point about the rule allowing NACs only to share revenue with “local communities” based on share price and not a royalty was unique. I drew the parallel with the royalties our members pay for producing on federal lands, regardless of the vicissitudes of their stock price. Plus the definition of “local communities” bypassed state, county, and municipal governments run by elected representatives of the people in favor of potentially ideologically based “communities.” This seemed like a scheme for taking more taxpayer money and sending it to environmental or other left-wing groups, something the inaptly named Inflation Reduction Act does in spades.
All told, 2,000 comments were submitted with only about 10 in favor. The Center for Western Priorities was the only environmental group that came out in favor. As it turns out, the far-left hates the thought of bringing capitalism to public lands and having companies profit off of natural resource values. Who could have seen that coming?
Although the rule is withdrawn for now, I think it’s still worth looking into why the Administration, despite the lack of support from its left flank, ever moved this rule forward. Why was one obscure organization, Intrinsic Exchange Group Inc (IEG), given a monopoly to oversee and profit off of NACs?
Meanwhile, Model A and B give us lots to work with as we initiate meaningful change on a whole host of regulatory issues this year, regardless of the outcome of the election.