Just before Christmas, the Securities and Exchange Commission (SEC) announced that it would reopen public comments for a proposed rule that would completely transform the economy. The SEC proposed a rule to allow the creation of a new type of company to be listed on the New York Stock Exchange (NYSE) called “Natural Asset Companies (NAC).” This decision to reopen comments came after heavy criticism of the SEC for its unusually quick comment period for a rule that could significantly impact the economy.
If finalized, this proposal would open the doors to the biggest transfer of federal land in the history of the country to wealthy special interests – including foreign adversaries – with the effect of forever prohibiting any responsible development from taking place. The cherry on top is that the rule uses a new accounting scheme to value land “assets” (aka things like “air”) to be moved on to these private NAC balance sheets at around 5 quadrillion dollars. Perhaps not conveniently, this accounting scheme would be regulated by a company in which the NYSE itself invests.
Many have rightly focused upon the danger of the Natural Asset Companies as a concept. But another question remains: does the SEC have the authority to approve such a historically significant rule?
In West Virginia v. EPA, the Supreme Court struck down the Environmental Protection Agency’s (EPA) so-called Clean Power Plan. Under the Plan, EPA relied on a seldom-used section of a fifty-year-old statute to find for itself the authority to drive an “aggressive transformation in the domestic energy industry,” seizing the power to control the entire electric system from beginning to end, from generation through consumption. The transformation was to be achieved by compelling a rapid transfer of power generating capacity from existing sources to unproven wind and solar.
According to the Supreme Court, even “EPA’s own modeling concluded that the [Plan] would entail billions of dollars in compliance costs (to be paid in the form of higher energy prices),” reduce the amount of electricity generated, including by “requir[ing] the retirement of dozens of coal-fired plants, and eliminate tens of thousands of jobs across various sectors.” Other government agencies similarly concluded that the Plan would cause retail electricity prices to remain persistently higher in many states and would reduce GDP by at least a trillion 2009 dollars by 2040.
Significantly, Congress had conspicuously and repeatedly declined to enact the very authority that EPA sought to grant itself. The Supreme Court ruled that federal agencies cannot claim authority to regulate if the regulations have major political or economic significance without Congress explicitly granting that authority and that the EPA’s Clean Power Plan improperly usurped this power.
The Court’s reaffirmation of the “major questions” doctrine, is embodied in the late Justice Scalia’s famous line stating “the Congress does not hide elephants in mouseholes.” Despite the Supreme Court’s clear holding, federal agencies appear to be taking their turns thumbing their noses at this doctrine.
The latest egregious example is the SEC’s NAC proposed rule. One would be right to think that this type of decision should probably be made by the People’s elected officials in Congress, not by unnamed and unaccountable bureaucrats at a financial regulatory agency.
Far from protecting against fraud, the SEC’s stated mission, this proposal empowers these NACs to effectively monetize the non-use of land and nature. Monetizing air may seem difficult to understand. And it is. These companies produce nothing. The way they amass value is to arbitrarily assign value to air and unusable (only by virtue of being deemed unusable) soil and minerals.
The SEC’s proposal preys upon the all-too-common theme in government where administrative agencies contort their statutory mission and authority to advance their policy agenda. These natural asset companies would be given authority to “license (rights to natural resources) from sovereign nations or private landowners.” This type of change in federal land management policy can be seen elsewhere in the Biden administration. The Bureau of Land Management (BLM) has recently proposed to elevate “conservation” above other “multiple uses” of public lands that it manages. Although similar, the BLM proposes to wall off public land for none to use. The SEC goes further by proposing that the non-use of land amounts to money in the pockets of special interests.
This ideology driven effort is not authorized by Congress, however. The proposed Rule suggests that Congress delegated this authority through a statute stating that “the rules of the exchange are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, [etc.].”
But the rule would create an entirely new type of company that can take over assets belonging to the People and private landowners. That statute could not have contemplated such a significant policy change. Indeed, it was to prevent fraudulent practices. This proposal would be a classic example of the major questions doctrine.
It is telling that NACs themselves invite fraud. Their very existence would require the NYSE to create entirely new accounting standards. The NYSE has a conflict of interest with the company that develops those standards. Further, a company that creates nothing, yet profits from the resulting absence of tangible creation, establishes an appearance of “manipulative acts and practices.”
To ask that this issue be handed to Congress is a humble one. In the alternative, the SEC subjects itself to a court reminding the commission that it does not in fact have the authority to hand over America’s national parks, land and other natural treasures to environmental special interests through notice and comment.