March 2024, Vol. 251, No. 3


Under-the-Radar SEC Land Grab Foiled by Public Scrutiny

By Richard Nemec, Contributing Editor, North America   

(P&GJ) — In the weeks ending the year 2023 and those starting the one, a stealth part of the Biden administration’s green agenda with ramifications for the oil patch was sliding under the radar of most major fossil fuel organizations. Its origin was an unusual place for oil and natural gas policy, namely the federal Securities & Exchange Commission (SEC) and the New York Stock Exchange (NYSE).

Strangely, when P&GJ questioned some of the leading oil and gas trade and lobbying organizations in January, they knew little or nothing about the proposal even though some state energy officials were already quietly planning how to combat the NYSE’s proposal that emerged in the Fall last year and was noted by SEC in the Federal Register.  

The NYSE proposed and the SEC reviewed the creation of a new kind of company, a natural assets company (NAC) amending the stock exchange’s Listed Company Manual to adopt listing standards for NACs. 

The new companies’ sole purpose would be to acquire federal and private lands to keep them from being developed for oil and natural gas production or other commercial purposes. It turned out that the proposal was being pushed by one company, the Rockefeller Foundation-supported Intrinsic Exchange Group (IEG). No major environmental organizations were supporting the proposal. 

As what is designated as a “self-regulatory organization” (SRO), the stock exchange can propose rule changes, but the SEC, by law, has to review them and decide whether the proposed changes are consistent with the requirements of the federal Securities Exchange Act and whether they are applicable to the SRO. The SEC never made a determination in this regard and its Washington, D.C.-based spokesperson Stephanie Claire Allen referred P&GJ to the NYSE for any detailed comments. 

Thus, when the dust settled in mid-January, the NYSE pulled the plug on the proposal, and public scrutiny uncovered the caper as a push for IEG to have a monopoly in a budding Climate Change-driven new business sector that could sequester natural resources without paying any royalties to American taxpayers.  

In late January, P&GJ asked IEG officials if the company intended to resurface the proposal at the stock exchange or SEC, and they did not answer the question specifically, but indicated the company will continue to press forward with the concept, according to IEG spokesperson Peter Kadushin. 

“NACs are a voluntary, free market opportunity to strengthen property rights, create jobs, and spur innovation that IEG is committed to bringing to market,” said Kadushin, noting the company has “exclusively” developed this as a free market solution, contending that NACs are “voluntary tools” and cannot be imposed on public or private landowners. 

Officials contacted at the American Petroleum Institute (API), Natural Gas Supply Association (NGSA), Marcellus Shale Coalition (MSC), Colorado Gas Association (COGA), and the Permian Basin Petroleum Association (PBPA) either didn’t know about the proposal, or if they did, didn’t want to comment on it.  

“It is really not something that our members are weighing in on,” MSC’s spokesperson Ava Iuliucci said in response to a query from P&GJ. Similarly, the Washington, D.C.-based NGSA spokesperson Daphne Magnuson indicated NAC was not an issue the association was tracking. Other major associations on background would say only that they were aware of the NAC proposal, but it wasn’t an issue they were “actively engaged on.” 

It turns out that the proposal nearly squeaked by under the radar when a vigilant Treasurer’s Office in Utah spotted the potential impact on future development and alerted other states. More than 25 attorneys general eventually filed opposing comments.

Ultimately, among more than 2,000 comments filed at the SEC, only a handful were in support of the NYSE change, according to Kathleen Sgamma, president of the Western Energy Alliance (WEA).  

P&GJ learned of the proposal initially from Lynn Helms, director of the Department of Mineral Resources in North Dakota. Helms flagged it during one of his monthly webinars reporting production from the Bakken shale play in the Williston Basin.  

He promised that North Dakota planned to loudly protest the proposal and it did. In clear terms, a filing signed by Gov. Doug Burgum called the proposal counter to the Exchange Act and basically unlawful because it would “transform the NYSE into a natural resources and environmental regulatory agency.” More appropriately, states have the right to regulate natural resources, Burgum told the SEC. 

“Finally, the proposed NAC rule is aimed at regulating the use of natural resources – not securities – and would unlawfully interfere with North Dakota’s sovereign recognized rights to regulate natural resources in the state,” Burgum reiterated. 

With virtually no support from reputable environmental organizations and more than 2,000 comments in opposition from states, the industry and individuals, in mid-January the NYSE told the SEC it was withdrawing the proposal.  

While most concerned parts of the industry are fairly confident the proposal will not surface in the near future, even if President Joe Biden wins re-election, they note that the anatomy of this threat is a good object lesson, particularly for industry professionals who track proposed regulatory changes that can impact oil and gas operations. 

“We applaud the SEC for withdrawing this incredibly flawed rule,” WEA’s Sgamma reacted in mid-January. “Never before has such an extreme proposal been pushed to allow corporations to package up and control land, including tribal lands and public lands that all Americans own, and allow anyone from day traders to foreign nations to buy, sell and short their stocks. SEC’s attempt to set broad policy on the novel concept of monetizing ecological values was advanced without any mandate from Congress.” 

It was the swift push back from up to 25 mostly red states, led by vigilant Utah officials, and action by the U.S. House of Representatives Natural Resources Committee Chair Bruce Westerman (R-Ark) that killed the proposal. Sgamma called the NYSE/SEC proposal “crony capitalism disguised as conservation,” allowing “one obscure company [IEG] monopoly power to set reporting and accountability standards while sharing in revenue of every single NAC created.” 

Initially, the SEC closed the first comment period in the Fall and targeted a Jan. 2 decision until 32 House Republican members accused the agency of fast-tracking approval of a new type of land-management company that would funnel investments into ecosystem services on public and private land and prohibit mining, drilling, logging and industrial agriculture. Following the political pressure, the SEC opened a second, 21-day comment period and started formal agency proceedings that could have taken up to six months. 

“Institution of such proceedings is appropriate at this time in view of the issues raised by the proposed rule change,” the SEC stated in a public statement. “Institution of proceedings does not indicate that the commission has reached any conclusions.” 

As a legal champion for western oil and gas companies Sgamma’s alliance holds extensive experience with federal public lands issues. Its operations area consists of about half of the total federal lands in the United States. 

“The vast majority of federal lands and the federal mineral estate is in the West,” Sgamma said.  

As such she reiterated to the SEC that WEA viewed the NAC idea with considerable alarm. There would have been a direct conflict between a NAC rule and the jurisdiction of federal land management agencies and their governing status,” according to WEA’s filing. 

Utah state Treasurer Marlo Oaks was the first to sound the alert, recognizing that the proposal presented a real danger to other interests and regulators besides the oil and gas sector. Oaks particularly highlighted the proposal’s threat to rural communities. 

“Under the proposal, private interests, including foreign-controlled sovereign wealth funds, could use their capital to purchase or manage farmland, national and state parks, and other mineral-rich areas and stop essential economic activities like farming, grazing, and energy extraction,” Oaks said. 

“[The states] had really good strong technical comments and legal arguments from 25 state attorneys general, and treasurers weighing in, and the House Natural Resources Committee initiated an inquiry on it,” Sgamma said. “There were tons of push back.” 

According to what Sgamma calls a “very reliable source,” of the more than 2,000 comments submitted to the SEC, only 10 supported the NAC proposal. WEA’s approach basically was that the proposal to create a whole new company type was based solely on one group that had a proprietary interest in forming these type companies.  

“It was backed solely by the Rockefeller Foundation,” she noted. According to oil and gas industry officials, the Rockefeller Foundation funds millions of dollars annually for anti-oil and gas efforts around the nation.  

“It’s beyond ironic now,” said Sgamma, thinking about the historic formation of the Rockefeller family wealth coming from the oil and gas industry. “It is a good example of what can happen when there our heirs [to vast fortunes] who could care less about what the family once believed in.”   

Just before the holiday season last December, North Dakota’s oil and gas guru Helms sent up some verbal flares warning about the NAC proposal, calling it a “material change” for the SEC review of the NYSE.  

“Traditionally, to get authorized corporate status, companies had to demonstrate that they would provide returns-on-investment to shareholders,” he said at the time. “NACs are not designed to do that. Rather, they are designed to take trust fund money or environment-social-governance [ESG] money and purchase land to remove the acreage from production. The only possible return on those investments would be carbon credits, or increased value of the land.  

“We’re deeply concerned about this,” Helms reiterated Dec. 21, 2023, emphasizing the position of North Dakota’s political leaders. “North Dakota is always concerned about land purchases, and so we are preparing comments. Again, you wouldn’t expect the SEC to be one of the avenues that the Biden administration would use to reduce fossil fuel production, but that appears to be the case here with this proposed regulatory change. This is an all-federal government anti-fossil fuel administration, and North Dakota intends to push back very strongly against that.” 

Led by Utah’s Oaks, a group of about two dozen state financial officers wrote to SEC Chair Gary Gensler asking that the SEC extend the public comment period to allow other stakeholders to weigh in on the potential impact of the proposal.  

“We have many concerns regarding the substance of the rule and the implications it would have on the markets and the lands of states we represent,” Oaks and the other officials wrote to Gensler, adding that the SEC’s stated role is to protect investors and promote capital formation. “We believe this rule, if adopted, would act in direct opposition to the stated goals of the SEC.” 

NACs were introduced in 2021 as a new type of ESG investment. State officials alleged that they were a joint venture between Intrinsic Exchange and the NYSE, which owns a minority stake in IEG. 

The proposed rule stated that these “sustainable enterprises” will end overconsumption and underinvestment in nature by “bringing natural assets into the financial mainstream.”  The NYSE said natural assets that could benefit from the NAC structure include natural landscapes such as forests, wetlands and coral reefs, as well as working lands such as farms. 

“The SEC’s proposed rule creating natural asset companies will not only upend the accepted standards of value by which businesses are judged, it would pave the way for ESG fanatics to remake the American landscape,” according to Derek Kreifels, CEO of the State Financial Officers Foundation, speaking to news media last Fall. 

At the end of 2023, IEG’s Chief Economist Tania Briceno joined eight others in writing a scientific article in Nature (Dec. 18, 2023) arguing that ecosystems generate a wide range of benefits for humanity, including some market goods, but climate change is going to change the distribution of those benefits, most likely favoring the already wealthy nations over the poor ones. But they also acknowledge that it is too soon to predict the precise changes in human welfare that will occur by 2021: 

“It is crucial to note that the ecosystem benefits assessed here [in this research] represent only a fraction of nature’s diverse contributions to people. In collaboration with stakeholders, local communities and indigenous groups, an active field of research has [now] developed a framework to better capture complex human–nature relationships. This framework includes the intrinsic value of nature, the role of nature in our world views and its utility to society,”  

Briceno and her co-authors concluded in an article IEG highlights on its website. 

Oil and gas industry strategists most likely will not take their eyes off of the proposal anytime soon given that IEG officials seem to be committed to the concept and no matter which way the political wind blow, climate change is likely to hover around future energy policy and financial considerations for the industry. The message is: stay tuned! 

Richard Nemec is a regular contributor to P&GJ and is based in Los Angeles. He can be reached at 

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