[House Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


        MONETIZING NATURE AND LOCKING UP PUBLIC LAND: THE IMPLICATIONS 
            OF BIDEN'S STRATEGY FOR NATURAL CAPITAL ACCOUNTING

=======================================================================

                            OVERSIGHT HEARING

                               BEFORE THE

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                                 OF THE

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             SECOND SESSION
                               __________

                        Thursday, March 7, 2024
                               __________

                           Serial No. 118-103
                               __________

       Printed for the use of the Committee on Natural Resources
       
       
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        Available via the World Wide Web: http://www.govinfo.gov
                                   or
          Committee address: http://naturalresources.house.gov
                               __________

                    U.S. GOVERNMENT PUBLISHING OFFICE
                    
55-080 PDF                 WASHINGTON : 2024             
          
          


                     COMMITTEE ON NATURAL RESOURCES

                     BRUCE WESTERMAN, AR, Chairman
                    DOUG LAMBORN, CO, Vice Chairman
                  RAUL M. GRIJALVA, AZ, Ranking Member

Doug Lamborn, CO	      Grace F. Napolitano, CA
Robert J. Wittman, VA	      Gregorio Kilili Camacho Sablan,
Tom McClintock, CA	          CNMI
Paul Gosar, AZ		      Jared Huffman, CA
Garret Graves, LA	      Ruben Gallego, AZ
Aumua Amata C. Radewagen, AS  Joe Neguse, CO
Doug LaMalfa, CA	      Mike Levin, CA
Daniel Webster, FL	      Katie Porter, CA
Jenniffer Gonzalez-Colon, PR  Teresa Leger Fernandez, NM
Russ Fulcher, ID	      Melanie A. Stansbury, NM
Pete Stauber, MN	      Mary Sattler Peltola, AK
John R. Curtis, UT	      Alexandria Ocasio-Cortez, NY
Tom Tiffany, WI		      Kevin Mullin, CA
Jerry Carl, AL		      Val T. Hoyle, OR
Matt Rosendale, MT	      Sydney Kamlager-Dove, CA
Lauren Boebert, CO	      Seth Magaziner, RI
Cliff Bentz, OR		      Nydia M. Velazquez, NY
Jen Kiggans, VA		      Ed Case, HI
Jim Moylan, GU		      Debbie Dingell, MI
Wesley P. Hunt, TX	      Susie Lee, NV
Mike Collins, GA
Anna Paulina Luna, FL
John Duarte, CA
Harriet M. Hageman, WY

                    Vivian Moeglein, Staff Director 
                      Tom Connally, Chief Counsel 
                Lora Snyder, Democratic Staff Director 
                   http://naturalresources.house.gov
                                 ------                                

              SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

                       PAUL GOSAR, AZ, Chairman 
                     MIKE COLLINS, GA, Vice Chair 
               MELANIE A. STANSBURY, NM, Ranking Member 

Matt Rosendale, MT                   Ed Case, HI
Wesley P. Hunt, TX                   Ruben Gallego, AZ
Mike Collins, GA                     Susie Lee, NV
Anna Paulina Luna, FL                Raul M. Grijalva, AZ, ex officio 
Bruce Westerman, AR, ex officio 

                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, March 7, 2024..........................     1

Statement of Members:

    Collins, Hon. Mike, a Representative in Congress from the 
      State of Georgia...........................................     1
    Stansbury, Hon. Melanie A., a Representative in Congress from 
      the State of New Mexico....................................     3
    Gosar, Hon. Paul, a Representative in Congress from the State 
      of Arizona, Statement for the Record.......................    27

Statement of Witnesses:

    Oaks, Marlo, State Treasurer, State of Utah, Salt Lake City, 
      Utah.......................................................     5
        Prepared statement of....................................     7
    Butcher, Ross, Commissioner, Member District 1, Fergus 
      County, Montana............................................    12
        Prepared statement of....................................    13
    Sgamma, Kathleen, President, Western Energy Alliance, Denver, 
      Colorado...................................................    14
        Prepared statement of....................................    15

Additional Materials Submitted for the Record:

    Submissions for the Record by Representative Stansbury

        David Wilkinson, Executive Director, Yale University, 
          Tobin Center for Economic Policy, Statement for the 
          Record.................................................    29
        Eli Fenichel, Professor, Yale School of the Environment, 
          Statement for the Record...............................    34
        Ranking Member Melanie Stansbury, Statement for the 
          Record.................................................    38
                                     


 
   OVERSIGHT HEARING ON MONETIZING NATURE AND LOCKING UP PUBLIC LAND:
  THE IMPLICATIONS OF BIDEN'S STRATEGY FOR NATURAL CAPITAL ACCOUNTING

                              ----------                              


                        Thursday, March 7, 2024

                     U.S. House of Representatives

              Subcommittee on Oversight and Investigations

                     Committee on Natural Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10:16 a.m. in 
Room 1334, Longworth House Office Building, Hon. Mike Collins 
[Member of the Subcommittee] presiding.
    Present: Representatives Collins, Rosendale, Curtis, 
Hageman; and Stansbury.

    Mr. Collins. The Subcommittee on Oversight and 
Investigations will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the Subcommittee at any time.
    The Subcommittee is meeting today to hear testimony on 
``Monetizing Nature and Locking up Public Land: The 
Implications of Biden's Strategy for Natural Capital 
Accounting.''
    Under Committee Rule 4(f), any oral opening statements at 
hearings are limited to the Chairman and the Ranking Minority 
Member. I therefore ask unanimous consent that all other 
Members' statements be made part of the hearing record if they 
are submitted in accordance with Committee Rule 3.
    Without objection, so ordered.
    I now recognize myself for an opening statement.

    STATEMENT OF THE HON. MIKE COLLINS, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Collins. Good morning, everyone, and thank you to our 
witnesses for coming all the way to Washington, DC, to testify 
on this important matter.
    Today, we will examine the massive impact that the Biden 
administration's National Strategy for Natural Capital 
Accounting will have on a diverse range of stakeholders, 
including state and local governments, as well as industry, and 
examine the strategy's many shortcomings.
    Just a few weeks ago, this Committee held a hearing on the 
National Strategy for Natural Capital Accounting. However, the 
authors of the report, including the Office of Management and 
Budget, the Office of Science and Technology Policy, and the 
Department of Commerce refused to show up, despite the far-
reaching consequences of their work. Instead, the 
Administration sent a young staffer with zero knowledge of the 
topic. Now, he was a nice, young enough man. I even offered him 
help with finding a new job, but clearly, he was not the right 
person to come and testify on this important issue. Needless to 
say, I think the Biden administration sent him by design.
    Sitting here in the Natural Resource Committee, I didn't 
think that we would be spending a lot of time here talking 
about accounting. But it turns out, if the Biden administration 
gets its way, the strategy will impact not only the natural 
resources policy, but the way Americans live their lives at 
every level. The American people deserve seriousness and 
clarity from this Administration, rather than the disregard and 
deceit that we have observed so far.
    I am sure that my colleagues on the other side of the aisle 
will simply write today's hearing off as a partisan crusade, 
but I implore them to look past party lines. This is not simply 
an issue for Republicans. Many on the left argue that 
monetizing nature, according to the Biden administration's 
national strategy, could fundamentally shift the use and 
control of lands and waters from local communities and 
stakeholders, including Indigenous populations and 
democratically-elected governments, to the financial elites and 
foreign interests for decades to come.
    And that is just part of the problem. The inherent 
complexity of ecosystems make them extremely difficult, if not 
impossible, to quantify under a national system of natural 
capital accounting and eco-services valuation. Monetizing and 
oversimplifying the vast expanse and interconnectedness of 
nature in this way will only give the Federal Government a 
dangerous illusion of environmental control, and a distorted 
assessment of our nation's precious natural assets.
    Additionally, the White House Office of Information and 
Regulatory Affairs and Office of Science and Technology Policy 
just issued an alarming guidance, the Accounting for Ecosystem 
Services and Benefit Cost Analysis, to incorporate natural 
capital accounting and ecosystem services valuation into 
Federal actions, decisions, and rulemaking. Right off the bat, 
this is a terrible idea that will impact Federal policy 
decisions across the board and throw yet another roadblock in 
the way of critical resource development projects.
    Moreover, the directive to incorporate natural accounting 
and ecosystem services valuation into benefit-cost analysis 
will provide activist litigants with another weapon in their 
anti-use, sue-and-settle arsenal.
    As the ongoing bipartisan work over permitting reform 
shows, we need to make it easier to build things and get stuff 
done, not more difficult by creating yet another layer of 
government analysis. President Biden and his Department of the 
Interior have repeatedly attacked resources developed 
throughout his presidency, canceling and blocking oil and gas, 
critical mineral, and even certain renewable energy projects, 
not to mention the shortsighted LNG export ban, the deficient 
final 2024-2029 National OCS oil and gas leasing program, 
cancellation of leases in the Arctic National Wildlife Refuge, 
and countless other examples. I could go on all day.
    The Biden administration is aligned with the radical, anti-
use eco-activists and non-profits, whose ultimate goal is to 
eliminate fossil fuel production by any means and lock up our 
public lands and water, no matter the harm done to our nation. 
The National Strategy of Natural Capital Accounting will aid 
this effort by informing and reinforcing dangerous policies, 
including the America the Beautiful 30x30 Initiative, the 
Bureau of Land Management's proposed Conservation and Landscape 
Health Rule, and the ongoing work to develop Natural Asset 
Companies, or NACs. Together, these policies and many others 
will affect stakeholders at every level.
    Considering the far-reaching consequences of the National 
Strategy for Natural Capital Accounting, the American people 
deserve serious conversations on its many related initiatives 
and its implications for stakeholders on the ground. I hope my 
colleagues on the other side of the aisle agree.
    I also hope my colleagues on the other side of the aisle 
actually address the substance from the marginalized voices who 
are concerned about the natural capital accounting, including 
from those on the left who label it as a form of green 
colonization, instead of broadly labeling critics as conspiracy 
theorists.
    It is a sad day when Members of Congress are unwilling or 
unable to engage in a serious policy discussion, and resort to 
dismissive red herring attacks instead.
    I now recognize the Ranking Member Stansbury for her 
opening statement.

STATEMENT OF THE HON. MELANIE A. STANSBURY, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW MEXICO

    Ms. Stansbury. Good morning, everyone. Happy State of the 
Union Day. And I want to just start by welcoming our guests.
    We know that you travel from far and wide to be here, and 
it is always a joy to have people visiting from our 
communities, especially elected officials. So, welcome. Thank 
you for coming to DC.
    I want to thank the Committee leadership for holding 
another hearing on a topic that is of great interest, and 
something that we must have bipartisan conversations about, but 
I want to just take a moment here at the beginning to note that 
we attempted to invite several witnesses on our side of the 
aisle, but because of the behavior of some of the Members who 
are not present here this morning towards witnesses in the last 
hearing and previous hearings, people don't want to participate 
in this setting because of the lack of respect and the 
partisanship that has been shown in what should be a bipartisan 
oversight committee.
    So, I just ask my colleagues, and although Mr. Chairman is 
always very kind, he has his southern manners, to show proper 
respect to our witnesses who travel at great length and 
personal expense, including the Administration witnesses who 
come to testify in front of this Committee.
    Addressing climate change, the integrity of our ecosystems, 
and the ability of our communities to use our natural resources 
in a sustainable manner is, of course, the work of this 
Committee. It is why this Committee exists. As we all know, we 
are facing a significant climate threat. We are seeing the 
warmest years in history on record happening right now on the 
planet. We are measuring sea level rise. We are seeing changes 
in our hydrologic systems.
    And as we will hear tonight in the State of the Union, for 
those of you that haven't followed the details of what this 
Administration and our Congress and the previous Congress has 
done, I think it is important to note that we have taken some 
of the most aggressive actions to address climate change ever 
in the history of the planet.
    [Slide.]
    Ms. Stansbury. Last Congress, we passed the Inflation 
Reduction Act, which is the most significant climate bill to 
ever pass, not only in the United States, but in the history of 
this planet. We also passed legislation to address the 
manufacturing and science needs of this country through the 
CHIPS Act, the Bipartisan Infrastructure Law, and have 
protected millions of acres of land through administrative 
action, including this beautiful and sacred place behind me, 
known as Chaco Canyon, which was protected within New Mexico 
through a public land rule very similar to the one that we are 
here to discuss today. And in fact, we had our state land 
manager here to discuss this months ago, when we first 
discussed this rule.
    So, as I understand it, the purpose of this hearing is to 
examine a set of three different policies that the Biden 
administration has undertaken to try to protect our public 
lands, to take action on climate change, and to protect the 
integrity of our ecosystems. And I think it is important to 
talk about what these policies are and what they are not.
    Ecosystem services is a natural accounting system. As we 
developed the vast infrastructure, water projects, roads, and 
other pieces of infrastructure that made this nation great, we 
also did so at great expense to the environment, to cultural 
resources. And we understand now in the 21st century that we 
must account for those services as we are making decisions.
    That is what ecosystem services is all about. It has been 
for decades a bipartisan effort to really fully account for the 
system benefits of our environment. It was championed during 
the Bush administration by the leadership of the Department of 
the Interior. It was continued by the Trump administration when 
they came in. And the Biden administration is now continuing 
those efforts. It is not a partisan attack on the environment 
or our public lands, but an accounting system for making fair 
and appropriate decisions.
    The BLM rule that we are also here to discuss has been the 
subject of many hearings in this Committee over the last year, 
and what we have seen is a continued effort to try to paint 
this rule as a land grab. I hate these kinds of discourses 
because they mislead the American people. They make ranchers, 
farmers, and people who work the land feel like the government 
is trying to do something to take away their land, and that is 
not the case.
    This is a modernization of existing Federal land rules, 
according to statute and the authority of the Department of the 
Interior to ensure that we are accounting for and managing our 
lands in the most sustainable manner. And when we had a hearing 
on this rule a few months ago, and we brought in New Mexico's 
state land manager, she helped us understand that by doing so 
we were actually able to optimize and maximize the benefits to 
our state while protecting lands like this and still having 
record profits from natural resource development, including oil 
and gas, on our public lands. So, no, it is not going to lock 
up our public lands or take away people's access.
    Finally, I just want to say that over 80 countries in the 
world have adopted policies using ecosystem services and have 
modernized and taken an ecosystems approach to how they manage 
their natural resources. This is really about bringing the 
United States into the 21st century so that we can manage our 
lands in a scientifically-based, economically sound, and a 
community-wise and informed way. And that is really what we are 
here to discuss.
    But, unfortunately, I do very much look forward to hearing 
the perspectives of those who have traveled here and will offer 
their point of views on these policies, but I fear that we will 
not get the whole story today because some of our witnesses 
were not willing to come here and be berated by Congressional 
Members.
    I thank you, and I yield back.

    Mr. Collins. Thank you.
    I ask unanimous consent that the gentlewoman from Wyoming, 
Ms. Hageman, and the gentleman from Utah, Mr. Curtis, be 
allowed to sit and participate in today's hearing.
    Without objection, so ordered.
    Now I will introduce our witnesses. We have Mr. Marlo Oaks, 
Treasurer of the state of Utah, Salt Lake City, Utah; Mr. Ross 
Butcher, a Fergus County Commissioner, Montana; and Ms. 
Kathleen Sgamma, President of Western Energy Alliance from 
Denver, Colorado.
    The witness for the Minority, Mr. David Wilkinson, 
Executive Director of the Tobin Center for Economic Policy at 
Yale University, is unable to attend in person, but will send 
written testimony.
    Let me remind the witnesses here today that under the 
Committee Rules, you must limit your oral statement to 5 
minutes, but your entire statement will appear in the hearing 
record.
    To begin your testimony, please press the ``on'' button on 
the microphone.
    We use timing lights. When you begin, the light will turn 
green. At the end of 5 minutes, the light will turn red, and I 
will ask you to please complete your statement.
    The Chair now recognizes Mr. Oaks for 5 minutes.

 STATEMENT OF MARLO OAKS, STATE TREASURER, STATE OF UTAH, SALT 
                        LAKE CITY, UTAH

    Mr. Oaks. Vice Chair Collins, Ranking Member Stansbury, and 
members of the Subcommittee, thank you for inviting me to 
testify.
    The White House strategy is a deeply flawed attempt to 
financialized ecosystem services to the detriment of Americans, 
especially local economies in resource-rich states like Utah 
with dominant Federal land holdings.
    As part of this effort, the NYSE recently submitted a 
proposal to the SEC to allow for the listing of a new type of 
company for public investment: a Natural Asset Company. Under 
the facade of free market capitalism and supported by its most 
esteemed institution, the NYSE, NACs would lock up America's 
natural resources by removing public and private lands from 
productive use. An NAC would raise money from investors 
globally, including from China and Russia, and acquire the 
rights to manage the ecosystem services of land. Economically 
essential activities, including energy production, grazing, 
logging, mining, hunting, and industrial agriculture would be 
prohibited on NAC-managed land.
    Although the proposal was withdrawn due to public outcry, 
including from members of this Subcommittee, efforts to 
leverage backdoor land use regulation continue. The White House 
approach includes creating natural capital accounts and 
conservation leases on public lands, both of which are based on 
valuing ecological services. This means fixing a value to 
things like clean air and productive soils. These values would 
end up on public and even corporate balance sheets as natural 
capital accounts.
    A natural capital framework relies heavily on subjective 
valuations like aesthetic value in an attempt to attain an 
objective measure. This is futile and dishonest. Importantly, 
this framework is not possible under U.S. accounting standards, 
as many ecological services do not generate traditional 
economic activity.
    An alternative accounting system based on United Nations 
standards of assigning an arbitrary value to natural processes 
is contemplated. However, that system can't be squared with 
GAAP accounting. Public goods like clean air should not be 
financialized because they belong to society. Financializing 
public goods opens a Pandora's box to these becoming 
commodities that are bought and sold, traded, and owned.
    In addition, ecological performance rights are not 
recognized as legal property since they pertain to non-
exclusive public goods. Consequently, NACs would essentially be 
shell entities lacking tangible assets.
    The financialization of natural processes, combined with 
the Administration's efforts to preserve 30 percent of 
America's lands by 2030, raises serious questions about how 
conservation easements could be affected by the agenda. Under 
NACs, farmland would need to be farmed using poorly-defined 
regenerative agricultural practices. Perpetuating industrial 
agriculture would be prohibited as an unsustainable activity.
    At what point do ecological services enter as a right over 
other land uses like agriculture? For instance, a landowner 
might be allowed to continue farming, but only use organic 
fertilizer and no fossil fuel-based machinery or grazing to 
avoid perpetuating industrial agriculture.
    With public lands, the BLM has put forward a conservation 
rule that attempts to redefine its multiple use mandate under 
FLPMA to include conservation as a use, bypassing Congress to 
effectively amend this statute. The BLM would then issue 
conservation leases to private actors to manage the lands for 
undefined conservation purposes.
    When the Federal executive branch limits the multiple uses 
of public lands, our local communities feel the effects. Utah 
has faced economic challenges due to administrative decisions 
aimed at scaling back natural resource-based industries. The 
decline of sawmills, mines, and processing facilities has 
resulted in diminished employment opportunities and investments 
in crucial infrastructure.
    Additionally, the lack of management in forests, 
exacerbated by the reduction in logging and active oversight, 
has heightened wildfire risks and associated costs.
    Finally, the ability for foreign governments to invest in 
NACs would present serious national security and natural 
resource risks. What better way for a foreign adversary to 
cripple the United States than by locking up our natural 
resources and food supply without a fight?
    The mixed use approach to managing public lands in Utah and 
the care farmers and ranchers have for their lands are far more 
effective than a proposal that involves prohibiting productive 
uses of the land by assigning an arbitrary value and placing 
the lands under the control of private investors.
    Natural Asset Companies, natural capital accounts, and 
conservation leases on public lands are deeply flawed ideas. By 
attempting to assign a financial value to ecological services 
and performance rights, we open the door to subjective 
interpretations and potential abuse. These efforts circumvent 
legislative processes and threaten the livelihoods of those who 
rely on multiple use economic activities. These efforts should 
continue to be scrutinized and ultimately stopped.
    Thank you.

    [The prepared statement of Mr. Oaks follows:]
      Prepared Statement of Marlo M. Oaks, State Treasurer of Utah

    Chairman Gosar, Ranking Member Stansbury, and Members of the 
Subcommittee, thank you for inviting me to testify.
    On Sept. 27, the New York Stock Exchange (``NYSE'') submitted a 
proposal to the Securities and Exchange Commission to allow for the 
listing of a new type of company for public investment. The purpose of 
a Natural Asset Company (``NAC'') is to manage land not for economic 
activity but to maximize ``ecological services.'' The proposal posed a 
significant risk by creating a mechanism for public and private lands 
to be permanently removed from productive use to address a laundry list 
of ill-defined resource values, such as climate regulation, ornamental 
resources, and visual amenity resources.\1\ Guised under the facade of 
free-market capitalism and bolstered by the support of one of its most 
esteemed institutions, the NYSE, NACs would lock up America's natural 
resources. While this would be bad for all Americans, local and state 
economies and tax bases in resource-rich western states like Utah with 
dominant federal land holdings would be hardest hit.
---------------------------------------------------------------------------
     \1\ See p. 19-24 of IEG. ``Ecological Performance Reporting 
Framework,'' available at https://www.sec.gov/files/rules/sro/nyse/
2023/34-98665-ex3.pdf.
---------------------------------------------------------------------------
    If a NAC proposal were allowed to go forward, an investment group 
would file to list a NAC on the NYSE. The NAC would raise money from 
investors globally, including from sovereign wealth funds, perhaps from 
China, Russia, and other nations. The NAC would then turn around and 
acquire the rights to manage the ecosystem services of land in the 
United States. The owner of the land or a land trust would enroll the 
``ecological performance rights'' into the NAC, giving the NAC the 
management authority over those rights and therefore every activity 
that occurs on the land. The NAC could manage federal, state, and 
private land, including conservation leases on public lands and 
conservation easements on private lands. NACs could enroll conservation 
easements through a land trust without the landowners' consent.
    Economically essential activities that NACs would consider 
unsustainable include energy production, grazing, logging, mining, 
hunting, and industrial agriculture (meaning the use of synthetic 
fertilizer and machinery). These activities would be prohibited on NAC-
managed land. Recreating on public lands could also face significant 
curtailment. In states like Utah, where the federal government owns 67% 
of the land and is pushing for more conservation easements, placing 
lands under the control of private investors, including foreign actors, 
who may not have our best interest at heart, would be devastating.
    The NYSE proposal had serious and far-reaching ramifications, yet 
it was initially only assigned a 21-day comment period and almost flew 
under the radar. I learned of it a day after the comment period closed. 
Due to significant outcry about the proposal, including from members of 
this subcommittee, state and local governments, and other public and 
private organizations from across the country, the SEC extended the 
decision twice and reopened public comments. The NYSE ultimately 
withdrew the proposal on January 17, the day before the comment period 
closed. This had the effect of excluding from the record many 
commenters who were on the verge of filing--another reason why 
continued congressional oversight is so important.
    Although the proposal was withdrawn, efforts to leverage backdoor 
land-use regulation to address climate change and biodiversity issues 
continue. The Biden Administration's approach includes creating Natural 
Capital Accounts (``NCAs'') and conservation leases on public lands, 
both of which are based on valuing ``ecological services'' or 
``ecological performance rights,'' the core concepts undergirding the 
NAC proposal. Unfortunately, this likely is not the last we will see of 
this proposal and others like it.
 Valuing Natural Processes

    Measuring ecological services simply means fixing a value to 
natural processes (e.g., clean air, water supply, flood protection, 
productive soils for agriculture, climate stability, and habitat for 
wildlife). NCAs attempt to identify and capture these values that would 
end up on public and even corporate balance sheets.\2\ Importantly, 
this is not possible under U.S. accounting standards, as many 
ecological services do not generate traditional economic activity. For 
that reason, NCA-boosters contemplate an alternative accounting system 
based on United Nations standards of assigning an arbitrary value to 
natural processes. However, that system can't be squared with GAAP 
accounting.
---------------------------------------------------------------------------
     \2\ National Strategy to Develop Statistics for Environmental-
Economic Decisions: A U.S. System of Natural Capital Accounting and 
Associated Environmental-Economic Statistics. (2023, January). Office 
of Science and Technology Policy, Office of Management and Budget & 
Department of Commerce. https://www.whitehouse.gov/wp-content/uploads/
2023/01/Natural-Capital-Accounting-Strategy-final.pdf
---------------------------------------------------------------------------
    Even organizations in support of the effort like Ernst & Young (EY) 
highlight some of the associated challenges in their comments on the 
NAC rule. As EY points out, accounting firms that audit the yearly 
financial statements and other disclosures required of publicly traded 
companies do not have the expertise to assess ``biophysical measures 
for different types of ecosystems'' without ``rely[ing] heavily on 
external specialists.'' \3\ This would allow the accounting firms to 
essentially outsource their audit of natural asset accounting on 
company books to unknown actors outside the financial statement audit 
process. Audits would presumably require the involvement of scientists 
who are not registered with the Public Company Accounting Oversight 
Board and are not experienced with GAAP. Consistent with the increasing 
government-sponsored censorship on scientific matters around issues 
like climate change and COVID, presumably these outside experts would 
have carte blanche to drive valuations as they see fit, while remaining 
above reproach and immune from challenge.
---------------------------------------------------------------------------
     \3\ See EY comment to SEC on NAC proposal available at https://
www.sec.gov/comments/sr-nyse-2023-09/srnyse202309-281019-686302.pdf.
---------------------------------------------------------------------------
    With that said, the goal was to create not just a new kind of 
company, but also a new asset class. A new company might attract 
millions or billions of investment dollars. A new asset class could 
attract trillions. The financial incentives are huge. The value of 
traditional economic assets is estimated to be worth $1.5 quadrillion. 
The value of the assets that produce ecosystem services (like 
photosynthesis) is estimated at $5 quadrillion globally. Valuing 
ecosystem services is largely subjective, so this number is fairly 
meaningless other than to provide some insight into how proponents are 
thinking of them.
    Accounts are supposed to be grounded in something materially solid. 
At the end of the day, NCAs are built on sand. University of Reading 
Professor Tom Oliver points out that referring to nature as capital 
implies it is equivalent to other forms of capital, while it is 
fundamentally different since some natural assets are not substitutable 
for other assets. He additionally highlights that while financial 
capital can be invested, spent to derive benefits, or even borrowed, 
the same is not true for natural capital. He stated, ``Treatment of 
natural assets in identical ways to other capital would be catastrophic 
for the environment.'' \4\
---------------------------------------------------------------------------
     \4\ Oliver, Tom. ``Is the concept of `Natural Capital' useful?'' 
Debating Naturals Value--The Concept of `Natural Capital' (2018) Ed 
(Victor Anderson) Palgrave Pivot, doi: 10.1007/978-3-319-99244-0, 
available at https://research.reading.ac.uk/social-and-applied-ecology/
wp-content/uploads/sites/148/2020/10/Is-the-concept-of-Natural-Capital-
useful  _Palgrave-Macmillan.pdf
---------------------------------------------------------------------------
    Furthermore, certain natural assets should not be financialized. 
Public goods and common goods are and should belong to the community. 
Financialization leads to ownership, and assigning ownership to public 
goods like the air we breathe is a scary proposition that threatens to 
benefit the most wealthy at the expense of the average citizen. In 
short, financializing public goods opens the door to these becoming 
commodities that are bought and sold, traded and owned.
    The organization that partnered with the NYSE in pursuing the ill-
advised NAC proposal, the Intrinsic Exchange Group (IEG), proposed a 
natural capital framework that relies heavily on subjective valuations, 
like aesthetic value, in an attempt to attain an objective measure. 
This is futile and dishonest. Even measures that are objective, like 
the costs associated with flooding from not maintaining wetlands, are 
difficult to quantify in any sort of real value.
    Because some aspects of natural capital are subjectively quantified 
and valued, NCA frameworks cater to ideological goals and would likely 
mislead investors and others interested in the valuation. This bias is 
most clearly seen in the fact that IEG's framework includes ``option 
value,'' which it defines as benefits from nature that are ``currently 
unknown.'' \5\ This plainly suggests that natural assets are, if 
anything, systematically undercounted. IEG's framework doesn't consider 
the possibility that it systematically over-values undisturbed nature. 
This bias cannot be explained except through an ideological lens.
---------------------------------------------------------------------------
     \5\ See page 10 of IEG. ``Ecological Performance Reporting 
Framework,'' available at https://www.sec.gov/files/rules/sro/nyse/
2023/34-98665-ex3.pdf.
---------------------------------------------------------------------------
    In addition, ecological performance rights are not recognized as 
legal property since they pertain to non-exclusive public goods. These 
rights are defined as the value derived from natural assets and 
ecosystem services within designated areas. Consequently, NACs would 
essentially be shell entities lacking tangible assets. Since ecological 
performance rights don't align with established property law 
categories, any licenses granted for them would be revocable and 
unenforceable. Even if entities attempted to secure rights through 
leases, the lack of enforceability would render such arrangements 
legally precarious and devoid of economic value.
 Natural Accounting Framework Detrimental to Property Rights and Public 
        Land Management

    The natural accounting framework is detrimental to property rights 
and public land management. In the case of NACs, somebody other than 
the landowner could purchase and manage the land's ecological services. 
Relatedly, NCAs create the value of ecological services, and, as is 
noted, ``what gets measured gets improved,'' implying management of 
those natural processes.\6\ Whether through coercive regulation or 
outside private entities determining land usage, this management 
implies less local control and economically destructive outcomes.
---------------------------------------------------------------------------
     \6\ See page 3 of National Strategy to Develop Statistics for 
Environmental-Economic Decisions: A U.S. System of Natural Capital 
Accounting and Associated Environmental-Economic Statistics. (2023, 
January). Office of Science and Technology Policy, Office of Management 
and Budget & Department of Commerce. https://www.whitehouse.gov/wp-
content/uploads/2023/01/Natural-Capital-Accounting-Strategy-final.pdf
---------------------------------------------------------------------------
    In the case of public lands, the Bureau of Land Management 
(``BLM'') has put forward a ``Conservation Rule'' that attempts to 
redefine the BLM's multiple-use mandate under the Federal Land Policy 
and Management Act of 1976 (``FLPMA'') to include ``conservation'' as a 
use, bypassing Congress to effectively amend this statute in the 
process. To further ``conservation'' as a use, the BLM would then issue 
``conservation leases'' to private actors to manage the lands for 
undefined conservation purposes.
    The current administration's ``America the Beautiful'' 30x30 land 
preservation program far exceeds any efforts by prior administrations 
to conserve land. This initiative incentivizes and rewards the 
voluntary conservation efforts of fishers, rangers, farmers, and forest 
owners, as part of an effort to preserve 30 percent of America's lands 
and waters by 2030.\7\ Further, with 30x30 in mind, researchers are 
exploring incorporating additional requirements to conservation 
easements to enhance the environmental benefits to the public, since 
the public is paying for the easements through tax breaks.\8\
---------------------------------------------------------------------------
     \7\ U.S. Department of Interior. America the Beautiful. Annual 
Reports. https://www.doi.gov/priorities/america-the-beautiful
     \8\ Utah State University. Making Private Lands Count for 
Conservation: Policy Improvements toward 30x30. (2022, March). https://
www.thecgo.org/wp-content/uploads/2022/03/Private-Lands-30-x-30-1.pdf
---------------------------------------------------------------------------
    This raises serious questions about how conservation easements, 
which have been in existence for decades, could be affected by the 
agenda. If ecological services are separate from landownership and the 
government is introducing the valuation of natural processes, what 
happens with a conservation easement that never contemplated ecological 
services? The valuation of ecological services could potentially open 
the door for the federal government to determine how those services are 
managed and enforced on conservation easements, depending on how the 
contracts are written.
    Under NACs, farmland would have needed to be farmed using poorly 
defined ``regenerative agriculture'' practices, and ``perpetuating 
industrial agriculture'' would be prohibited as an ``unsustainable 
activity.'' In conservation easements funded in part by federal funds, 
the federal government retains the right to enforce the easement. That 
right kicks in if the government determines the land trust holding the 
easement is not appropriately enforcing it. At what point do ecological 
services enter as a right over other land uses like industrial 
agriculture and require a change in practice?
    For instance, a landowner might be allowed to continue farming but 
only use organic fertilizer and no fossil fuel-based machinery because 
the use of synthetic fertilizer, machinery, and even grazing may be 
considered as ``perpetuating industrial agriculture.'' As stated in a 
comment letter to the SEC on the NAC proposal by Utah's Public Lands 
Policy Coordinating Office (``PLPCO''), ``Generally speaking, 
agricultural production, especially livestock grazing, is often falsely 
viewed negatively when discussing climate change.'' \9\ As climate 
change language increasingly appears in federal funding priorities, is 
there a risk that industrial agricultural activities will be 
challenged?
---------------------------------------------------------------------------
     \9\ Public Lands Policy Coordinating Office. (2023, October 25). 
Comment letter to the SEC opposing Natural Asset Companies. Pg. 7. 
https://www.sec.gov/comments/sr-nyse-2023-09/srnyse202309-281221-
687202.pdf
---------------------------------------------------------------------------
 Potential Impact of Natural Capital Accounting

    In Utah, agricultural employment represents one percent of all jobs 
statewide (compared to 1.3% nationwide) and generates nearly $2.1 
billion in cash receipts annually.\10\ Of this sum, the sale of cattle 
contributes $378 million.\11\ These figures underscore the significant 
role agriculture, particularly livestock grazing, plays in Utah's 
economy.
---------------------------------------------------------------------------
     \10\ Headwaters Economics. 2019. Economic Profile System: 
Agriculture, available at: https://headwaterseconomics.org/apps/
economic-profile-system/49000
     \11\ 2017 Census of Agriculture. 2017. State Profile: Utah, 
available at: https://www.nass.usda.gov/Publications/AgCensus/2017/
Online  _Resources/County  _Profiles/Utah/cp99049.pdf
---------------------------------------------------------------------------
    According to PLPCO, responsible public land use for livestock 
grazing is crucial for Utah's agricultural economy, especially with 
urbanization encroaching on available agricultural space. Livestock 
grazing on federally administered lands is vital, constituting 73% of 
Utah's 45 million acres of grazing lands (with 9% state-owned and 18% 
privately owned). The federal government, particularly the BLM 
overseeing 67% of federal grazing land, significantly influences the 
success of livestock grazing in Utah. However, concerns arise as 
grazing has declined by over 66% on BLM lands and about 50 percent on 
Forest Service lands in Utah over the past century.\12\
---------------------------------------------------------------------------
     \12\ See generally Hayden Ballard, Killing Kaibab Industries, 
Idaho Critical Legal Studies Journal, available at: https://
www.uidaho.edu/-/media/UIdaho-Responsive/Files/law/critical-legal-
studies/issues/volume-14/hayden-l-ballard-killing-kaibab-industries-13-
the-crit-critical-stud-j-
2020.pdf?la=en&hash=6343683CACC6F77FB76DDDC4D70AEBC3E621705E (2020).
---------------------------------------------------------------------------
    The mixed-use approach to managing public lands in Utah and the 
care farmers and ranchers have for their land are far more effective 
than a proposal that involves prohibiting productive uses of the land 
by assigning an arbitrary value and placing the lands under the control 
of private investors, including foreign actors, who cannot possibly 
care about the land more than those presently managing it.
    When the federal executive branch implements measures to limit the 
multiple uses of public lands, our local communities often feel the 
direct repercussions. For instance, over the past few decades, Utah 
communities have faced economic challenges due to administrative 
decisions aimed at scaling back mining, logging, and other natural 
resource-based industries. The decline of sawmills, mines, and 
processing facilities has resulted in diminished employment 
opportunities and investments in crucial infrastructure, both in Utah 
and neighboring states.\13\
---------------------------------------------------------------------------
     \13\ See generally Hayden Ballard, Killing Kaibab Industries, 
Idaho Critical Legal Studies Journal, available at: https://
www.uidaho.edu/-/media/UIdaho-Responsive/Files/law/critical-legal-
studies/issues/volume-14/hayden-l-ballard-killing-kaibab-industries-13-
the-crit-critical-stud-j-
2020.pdf?la=en&hash=6343683CACC6F77FB76DDDC4D70AEBC3E621705E (2020).
---------------------------------------------------------------------------
    Additionally, the lack of management in forests, exacerbated by the 
reduction in logging and active oversight, has heightened wildfire 
risks and associated costs, extending well beyond the immediate 
economic impacts and contributing significantly to the creation of 
economically disadvantaged rural communities in Utah.\14\ When 
wildfires inevitably break out, climate change is often blamed. 
However, reduced logging and management neglect are major contributing 
factors.\15\
---------------------------------------------------------------------------
     \14\ See generally Hayden Ballard, Killing Kaibab Industries, 
Idaho Critical Legal Studies Journal, available at: https://
www.uidaho.edu/-/media/UIdaho-Responsive/Files/law/critical-legal-
studies/issues/volume-14/hayden-l-ballard-killing-kaibab-industries-13-
the-crit-critical-stud-j-
2020.pdf?la=en&hash=6343683CACC6F77FB76DDDC4D70AEBC3E621705E (2020).
     \15\ See generally The Senate and Congressional Western Caucuses. 
``Western Conservation Principles: An alternative proposal to conserve 
and restore America's landscapes,'' available at https://
westerncaucus.house.gov/uploadedfiles/10.5.2021  _western  
_conservation  _principles  _final. pdf. Also see generally Little 
Hoover Institute. ``Fire on the Mountain: Rethinking Forest Management 
in the Sierra Nevada,'' available at https://lhc.ca.gov/report/fire-
mountain-rethinking-forest-management-sierra-nevada/.
---------------------------------------------------------------------------
    At least the executive branch operates within a system of political 
accountability. Delegations from western states can write letters to 
and make information requests of agencies, as well as call hearings and 
witnesses to bring sunlight and local perspectives to bear on the 
activity of public land managers. Short of acquiring an ownership stake 
in a company holding conservation leases, it's unclear what recourse 
local and state governments or congressional delegations would have to 
influence public land management once it's been delegated to private 
parties.
 National Security Implications

    The ability for foreign governments to invest in private NACs 
presents serious national security and natural resource risks. What 
better way for a foreign adversary to cripple the United States than by 
locking up our natural resources and food supply without a fight? This 
concern stems in part from recent events in Utah where foreign 
corporations, such as the Chinese-owned WH Group, have caused 
significant economic distress by acquiring and subsequently downsizing 
major hog farming operations. Despite terminating contracts with local 
hog farms and laying off a large portion of the workforce, WH Group 
intends to retain ownership of vast agricultural land and water rights 
and keep it out of production, preventing new farmers from entering the 
market and exacerbating economic challenges.\16\ If foreign entities 
are permitted to invest in NACs, they could withhold productive 
agricultural resources, potentially leading to artificial food and 
resource shortages nationwide. Similar situations involving energy 
production could arise. This prospect is unacceptable.
---------------------------------------------------------------------------
     \16\ Amy Joi O'Donoghue, How the end of hog farming can kill a way 
of life in rural Utah, Deseret News, available at: https://
www.deseret.com/2023/12/8/23992293/how-end-of-hog-farming-can-kill-a-
way-of-life-in-rural-utah (2023). And Dave Sebastian, Chinese Owned 
Pork Producer Smithfield Prepares for U.S. Listing, The Wall Street 
Journal, available at: https://www.livemint.com/news/chineseowned-pork-
producer-smithfield-prepares-for-u-s-listing-11697733802038.html 
(2023).
---------------------------------------------------------------------------
 Conclusion

    Natural Asset Companies, Natural Capital Accounts, and conservation 
leases on public lands are deeply flawed ideas. By attempting to assign 
a financial value to ecological services and performance rights, we 
open the door to subjective interpretations and potential abuse.
    Furthermore, attempts to value non-exclusive public goods are 
incompatible with established accounting standards and property laws 
and threaten the rights of property owners. The proposed Conservation 
Rule by the BLM exacerbates these concerns by circumventing legislative 
processes and threatening the livelihoods of those who rely on 
multiple-use economic activities in rural areas, particularly in the 
western United States. It is crucial that we resist these backdoor 
attempts at land-use regulation. We must be cognizant of the notion 
that ``what gets measured gets improved,'' particularly if it comes at 
the cost of coercive regulation and diminished local input and 
economically destructive outcomes. The withdrawn NYSE proposal, the 
White House strategy on natural capital accounting, the BLM 
Conservation Rule, and related efforts are based on subjective 
valuation of non-exclusive public goods and should continue to be 
scrutinized and ultimately stopped.
                                 ______
                                 
    Mr. Collins. I thank the witness for his testimony. The 
Chair now recognizes Mr. Butcher for 5 minutes.

  STATEMENT OF ROSS BUTCHER, COMMISSIONER, MEMBER DISTRICT 1, 
                     FERGUS COUNTY, MONTANA

    Mr. Butcher. Thank you, Mr. Chair, Ranking Member, and 
members of this Committee. I appreciate the opportunity to 
address our concerns of Federal agency actions that are putting 
our public lands in jeopardy. My name is Ross Butcher, and I am 
testifying today representing Fergus County, Montana, the 
Boundary Line Foundation, Montana Natural Resource Coalition of 
Counties, and the Coalition of Arizona and New Mexico Counties.
    In April 2023, the Bureau of Land Management proposed a 
rule change of such deep significance that the public lands 
counties in Montana, Arizona, and New Mexico coalitions were 
compelled to provide substantive comments, demonstrating the 
BLM's departure from their congressionally delegated authority.
    I recognize that the discussion on the Conservation Land 
Health Rule is ancillary to the specific conversation on the 
natural asset class concerns. However, this particular rule 
change proposal is directly linked to the ability to move 
forward with that operation and that scheme. The Conservation 
Land Health Rule would change dramatically the process in which 
these lands that are held in reservation under the Taylor 
Grazing Act and codified under FLPMA, the Federal Land Policy 
Management Act, are reserved for very specific purposes.
    And as it was mentioned before, this idea of conservation 
as a seventh principle use, is not allowed. And when lands that 
are in reservations for specific purposes, the only way to 
remove them from those reservations is by congressional action, 
not by a rule change. So, this Bureau is in a situation of 
trying to create a legislative action without the authority to 
do it, and that concerns us deeply.
    The other issue that pops up is that it is very similar to 
the planning 2.0 rule that was brought forth some years back 
and was summarily rejected under the Congressional Review Act. 
And, of course, once an action has been rejected by the 
Congressional Review Act, it is not eligible for 
reintroduction. Once the congressional decision has been made, 
it is there. These rules can only be adjusted by you. You are 
the congressional delegation that makes this decision, not the 
bureaucrats that work for the BLM.
    And I want to say that, generally, my experience working as 
a local government official with our local Bureau of Land 
Management field offices is good. We have some good people 
working in the BLM that are just trying to do their job, which 
is to manage and maintain these properties in the fashion that 
they were set aside for. The real issue comes when you start 
seeing top-down delegation pushing those local land managers to 
make decisions that they themselves know are not healthy for 
the range.
    Some of the issues that came up are things like Indigenous 
knowledge, which, once again, is being pressed. And it is a 
concern because it bypasses the process of determining best 
practices. Scientifically, we have spent a lot of time looking 
at the best way to manage lands, and that doesn't do it.
    One of the issues that also came up was local government 
input. FLPMA requires that these agencies work with local 
government that they coordinate with. We asked for cooperating 
status on this particular rule, and we were denied. We were 
denied because they said we lacked expertise. Well, I can tell 
you that is taken pretty hard by my fellow commissioner in 
Valley County, who spent 30 years as a range management 
specialist for the very bureau that says he is not qualified to 
have input as a local government-elected official, as required. 
So, I believe that that is an issue at hand that needs to be 
rectified. FLPMA requires coordination with local government, 
and our expectation is that we get that.
    The real issue comes down to how does this affect our folks 
on the ground, and I see that every day. As a local elected, I 
see my constituents daily. And these concerns are real. They 
look at it and say, if we allow a singular use of conservation 
to come into play in these leased lands, it is going to 
dramatically impact how they run their operations. And if our 
Ag operations, our extraction industries are unable to maintain 
those economies, our local communities suffer. And that is 
schools, and roads, and emergency services. All of those things 
are impacted, which is why it is essential that local 
government is included in these decision-making processes. 
Thank you.

    [The prepared statement of Mr. Butcher follows:]
        Prepared Statement of Ross Butcher, County Commissioner,
                         Fergus Conty, Montana

    Thank you Mr. Chairman and Members of the House Subcommittee on 
Oversight and Investigations for the opportunity to address concerns of 
federal agency actions that are putting our public lands in jeopardy.
    My name is Ross Butcher and I am testifying today representing 
Fergus County MT BOCC, The Boundary Line Foundation, The Montana 
Natural Resource Coalition of Counties, and the Coalition of AZ/NM 
Counties.
    In April, 2023 the Bureau of Land Management proposed a rule change 
of such deep significance, that the public lands counties in the 
Montana, Arizona, and New Mexico coalitions were compelled to provide 
substantive comments titled `` Survey of the History, Background, and 
Compliance of the Proposed BLM Conservation and Landscape Health Rule 
(CLHR) with The Public Land Laws of the United States'' demonstrating 
the BLM's departure from their congressionally delegated authority.
    A century of US public land statutes and policies enacted by the 
Taylor Grazing Act (TGA), the Federal Land Policy Management Act 
(FLPMA), and the Public Rangelands Improvement Act (PRIA) demonstrate 
that BLM's core mission is to manage the Taylor Grazing Act CVG 
District lands for the Principal Use of domestic livestock grazing, 
range development, and stabilization of the US livestock industry 
dependent on range access--not wildlife conservation.
    The Landscape, Conservation and Health Rule proposed by the BLM has 
irreconcilable flaws and should not be adopted. Fergus County and our 
coalition partners point this out in the above-mentioned report which 
is filed in the administrative record as official government comments 
to the proposed BLM rule. The purpose of this testimony is to bring the 
Boundary Line Foundation report to the attention of the subcommittee, 
and give context to the gravity of the situation to all those who live 
and work on these lands in the west.
    We point out that one central mandate of the Federal Land Policy 
and Management Act (FLPMA) is the requirement for the BLM to coordinate 
land use management activities with local governments, and that statute 
even requires the BLM to attempt consistency with county land use 
plans. It is also important to note that during enactment of FLPMA the 
Taylor Grazing Act was adopted in its entirety by the Congress, and 
this includes all the policies, procedures and the 135 million acres of 
mapped grazing districts throughout the western United States.
    On two separate occasions the TGA lands were determined by the 
Solicitor of the Interior to be classified as Reservations under the 
Federal Power Act of 1920. FPA provides the authority to retain TGA 
lands under reservation status, verses setting them aside as ``public 
lands,'' which would make them subject to appropriation and disposal 
under the public land laws of the United States. The actions of 
agencies tasked with managing TGA lands held in reservation are limited 
to the original purpose and intent for which those lands were reserved.
    The CLH Rule is substantively the same as the 2016 BLM Resource 
Management Planning (Planning 2.0) Rule that was determined by 
Comptroller General to be a Major Federal Action and that was rejected 
by the Congress under the Congressional Review Act (CRA). Once a Rule 
has been rejected by Congress under CRA, federal agencies are 
prohibited under the Administrative Procedures Act from adopting a 
similar or new rule. This fact alone makes the adoption of the CLH Rule 
illegitimate.
    A certification by the Secretary of the Interior and the Office of 
Information and Regulatory Affairs that the CLH Rule would not have an 
impact on a significant number of small entities is arbitrary, not 
publicly verifiable, and erroneous. A Regulatory Flexibility Act impact 
analysis is required to determine if the CLHR would have a significant 
impact on small business or entities. The implications of landscape 
level conservation would have a dramatic impact on communities whose 
economies rely on the multiple use sustained yield model defined in 
FLPMA. The position that there would be little impact is absurd on its 
face.
    The first step in monetizing and selling natural assets requires 
the development of a natural asset inventory and a mechanism to hold 
those assets for their conservation value. The introduction of a 7th 
principal use, conservation, for these reserved federal lands aligns 
well with the scheme of monetizing our public lands. Not only does this 
scheme lack any authority for its action it is in direct conflict with 
the statutory intent that public lands be used for productive pursuits.
    These are just a few of the specific and irreconcilable flaws in 
this rule, I once again point to the report filed, and on record, in 
comments to the BLM. I encourage the Committee to review the report 
submitted by Boundary Line Foundation and the Counties represented in 
the Coalitions. Thank you for the opportunity to comment on these 
important issues. I will stand for questions.
    Mr. Collins. Thank you. The Chair now recognizes Ms. 
Sgamma.

    STATEMENT OF KATHLEEN SGAMMA, PRESIDENT, WESTERN ENERGY 
                   ALLIANCE, DENVER, COLORADO

    Ms. Sgamma. Thank you, Mr. Chairman.
    It is interesting that the Ranking Member said that the 
minority witness wouldn't attend because he was afraid of mean 
questioning from Members of Congress. This individual is, as 
far as I can tell, the leading proponent of natural capital 
accounting. And it is a sad state of academia, if academia 
can't attend to defend its academic ideas, that they can't be 
challenged. So, I think that is kind of telling about the sad 
state of academia today.
    Anyway, I agree wholeheartedly with the comments of the 
previous witnesses. I am struck by natural capital accounting 
and eco-service systems valuation as another layer of 
bureaucracy on top of all the different whole-of-government 
initiatives from the Biden administration. And I perhaps should 
be happy as they encumber themselves with all these layers of 
bureaucracy within the Federal Government, because when they do 
that they probably have less time to over-regulate my industry.
    But I rather suspect the idea is to use all these different 
layers of bureaucracy over time to stop responsible development 
of oil and natural gas in America, and particularly on public 
lands. And that is how natural capital accounting relates to 
the BLM Conservation Rule and to the Natural Asset Companies 
rule that the SEC was forced to rescind.
    And I really applaud Treasurer Oaks, the excellent work 
that the state of Utah did in bringing public scrutiny to that 
rule which the Securities and Exchange Commission tried to 
sneak through in a 21-day comment period. And then, of course, 
Chairman Westerman's oversight through the Natural Resources 
Committee was kind of the straw that broke the camel's back.
    Ms. Hageman, your letter and your activity on this was very 
much appreciated, as well.
    So, it is important that we understand the interaction of 
those two rules with attempts to account for natural assets 
within some type of economic, environmental, statistical 
system. When we look at, for example, the NACs rule, it was 
intended to prioritize so-called sustainable uses on public 
lands above productive uses, like ranching, mining, and energy 
development. And if you do that, what happens is the things 
that can actually be quantified through natural capital 
accounting are really those productive uses of public lands.
    So, what you are left with is some kind of qualitative 
assessment of the value of a bird call or the beauty of nature. 
And what you are really left with is a collapsing of revenue on 
Federal lands, because energy, mining, and ranching supplies 
the vast majority of revenue that comes from public lands. So, 
you have the situation where, in conjunction with the BLM 
Conservation Rule, it would lead to a collapse of that revenue.
    And in no way does that natural capital accounting somehow, 
quantifying things that are hard to quantify, confusing to 
quantify, have dubious value on the marketplace, or are of such 
intrinsic value to everyone like clean air and scenery that to 
assign a monetary value to that is almost meaningless. So, what 
you would have is a collapse of revenue from Federal lands.
    And I would add that since we, in the oil and natural gas 
industry, provide 94 percent of the revenue for conservation 
that comes from the Great American Outdoors Act, you would also 
have a collapsing of conservation funding on Federal lands.
    So, I am really happy to be here today. Thank you for the 
opportunity to discuss these rules, and I look forward to 
questions.

    [The prepared statement of Ms. Sgamma follows:]
           Prepared Statement of Kathleen Sgamma, President,
                        Western Energy Alliance

    Chairman Gosar, Ranking Member Stansbury, and Committee Members, 
thank you for the opportunity to testify. The Biden Administration has 
implemented various ``whole-of-government approaches'' to climate 
change, drug addiction, supply chain resilience, housing, diversity, 
equity, environmental justice, and any other number of societal 
problems. Countless announcements from the White House proclaim that 
all government agencies will be mobilized to tackle whatever problem is 
at hand. One of the outcomes of this whole-of-government approach is 
that more agencies are regulating in more areas and with more 
redundancy than every before. We've seen agencies beyond the 
traditional energy regulatory agencies, from the Securities and 
Exchange Commission (SEC) to the Department of Labor, engaged in an 
ill-fated attempt to overregulate and defund domestic oil and natural 
gas if not completely out of existence, to as small and controlled an 
entity as possible.
    When everything is a priority for everybody, then nothing is. 
Layered on top of this all-encompassing government approach are 
multiple new initiatives conjured up through various executive orders. 
Besides spawning their own regulatory actions, these initiatives add 
more layers of bureaucratic process to both the public and private 
sectors. More analysis is required for every regulatory action or 
decision. Climate change risk must be assessed and each agency employee 
is asked to consider their impact on the climate. Diversity, equity, 
and inclusion must be factored into every decision. Environmental 
justice communities must be defined and screened and the regulatory 
impact determined. Each action must be assessed to ensure that good 
jobs are being created.
    None of this is codified in U.S. law. When government agencies are 
focused on all these initiatives and requirements, when do they 
actually have time to do the work they are supposed to do? If they must 
spend considerable time and resources figuring out how to tie their 
work to climate change and DEI while identifying underserved 
communities, when do they actually have time to provide those services 
to the American people, including to those underserved communities?
    The initiative on natural capital accounting is but another example 
of bureaucratic encrustation.\1\ Twenty-seven federal agencies are now 
busily figuring out how to account for the natural resource and 
ecosystem services values they control or advise on. Like other 
initiatives that have no basis in U.S. law, the Biden Administration 
looks outside the country for justification. The environmental-economic 
statistics are to be based on the United Nations' System of 
Environmental-Economic Accounting. As the federal government struggles 
to provide services at a reasonable cost to taxpayers and our national 
debt has swelled to nearly $35 trillion because the government cannot 
keep to its means, it is now to apply a whole new accounting framework 
for often subjective ecosystem services valuations.
---------------------------------------------------------------------------
     \1\  National Strategy to Develop Statistics for Environmental-
Economic Decisions: A U.S. System of Natural Capital Accounting 
Associated Environmental-Economic Statistics, Office of Science and 
Technology, Office of Management and Budget, Department of Commerce, 
January 2023
---------------------------------------------------------------------------
    We're told that 80 other nations have adopted these U.N. standards 
and that we must ``modernize'' our accounting practices. But since when 
has the U.N. become a paragon of efficiency and the standard for 
stewardship of economic resources? The fiasco of the U.N. sending 
billions of dollars of aid money to fund Hamas terrorism is but the 
latest example of U.N. ineffectiveness and lack of accountability. U.N. 
technocrats not only do not set U.S. policy but helpfully provide a 
model for doing the opposite. And besides pronouncements by these 80 
nations of adopting the standards, I rather suspect that their level of 
implementation is comparable to their compliance with Paris Treaty 
climate goals, which somehow are never achieved.

    I am struck by the fact that most of the elements to be addressed 
by the National Strategy to Develop Statistics for Environmental-
Economic Decisions are those that are already accounted for because 
they have true market value.\2\ Those that do not are to be assigned 
subjective values that would be highly politicized. As quoted from the 
strategy:
---------------------------------------------------------------------------
     \2\  National Strategy to Develop Statistics for Environmental-
Economic Decisions: A U.S. System of Natural Capital Accounting 
Associated Environmental-Economic Statistics, Office of Science and 
Technology, Office of Management and Budget, Department of Commerce, 
January 2023.

     ``Nature starts many supply chains. Critical minerals 
            underlie many new technologies, water and pollinators help 
            grow the fruits and vegetables eaten at the dinner table, 
            and trees create much of the timber framing American 
---------------------------------------------------------------------------
            houses.'' Markets already value minerals, food, and timber.

     ``Nature motivates many modern innovations. Plants and 
            wild animals inspire designs and provide critical models 
            and raw materials for many drugs and cosmetics.'' The 
            inspiration from nature is a common good that is of such 
            intrinsic value that to attempt to valuate it would be 
            imprecise at best. Yet those inspired designs are most 
            definitely accounted for when an artist sells a sculpture, 
            an architect creates the blueprints for a home nestled into 
            its mountain setting, or a new drug or natural supplement 
            is sold to consumers.

     ``Nature undergirds many firms' successes, across many 
            sectors. Natural landmarks drive much of the tourism 
            industry, and wild fish provide food for grocery stores and 
            restaurants to sell.'' The recreation and tourism services 
            delivered near national parks are well evaluated by the 
            market, and of course, food is accounted for whether sold 
            at the grocery store or at a restaurant.

     ``Nature protects property and other infrastructure. 
            Reefs, dunes, and forests reduce the damage caused by 
            storms, floods, and other extreme weather events.'' The 
            insurance industry is very adept at setting premiums based 
            on the risk a property faces in different ecosystems, where 
            the forces of nature are accounted for by differences in 
            premiums between a property in hurricane-prone Florida 
            compared to mild-weathered southern California.

     ``Nature provides recreational opportunities and community 
            and cultural connections. Forests, beaches, and wildlife 
            underpin recreational and cultural services that are 
            important to Americans, and these services are often free 
            of charge.'' Those recreational opportunities are accounted 
            for with every hotel room or camping ground space occupied, 
            while those intrinsic values of nature are rightfully 
            shared for free.

     ``Nature promotes health. Green and blue spaces and clean 
            air facilitate mental health, and reduce heat stress, 
            saving money on health care, increasing productivity, and 
            improving quality of life.'' The Environmental Protection 
            Agency (EPA) already conducts cost-benefit analyses of air 
            and water quality regulations, although the politicization 
            of those analyses, use of inflated factors, and the double- 
            and triple-counting of environmental benefits indicate the 
            problems of applying subjective factors to supposedly 
            quantitative economic analyses. Attempting to ascertain and 
            assign monetary values to the portion of mental and 
            physical health benefits that derive from nature are 
            imprecise and fraught with so much subjectivity as to be 
            unreliable at best.

    Each of those points from the Natural Capital Accounting strategy 
paper essentially buttress continuing to rely on the Gross Domestic 
Product (GDP) and standard accounting practices instead of a revised 
system. Further, in its guidance for assessing environmental and 
ecosystem services, the Office of Information and Regulatory Affairs 
(OIRA) encourages agencies to make subjective, qualitative assessments 
of value when quantitative data are lacking.\3\ If this is an exercise 
in subjective assessments where true market value is not applicable, 
then this is truly just another layer of bureaucracy. The point of 
accounting and cost-benefit analyses is to provide the hard economic 
data to decision makers, who then balance those data with their 
political values and policy goals, whether that's social justice or 
energy dominance. The way governmental cost-benefit analyses have been 
skewed to support pre-determined policy outcomes offers a cautionary 
note about how baking subjective factors into economic accounting 
contorts the data.
---------------------------------------------------------------------------
     \3\ ``Guidance for Assessing Changes in Environmental and 
Ecosystem Services in Benefit-Cost Analysis,'' OIRA, February 28, 2024.
---------------------------------------------------------------------------
 Natural Asset Companies

    Given the complexity and additional bureaucracy that this Natural 
Capital Accounting strategy would impose and the lack of statutory 
authority for it, I appreciate that this subcommittee is providing 
oversight. Such influential policy decisions should only be made with 
full democratic debate before statutory authority is granted. Likewise, 
I applaud the oversight the Natural Resources Committee provided for 
SEC's ill-fated rule to list Natural Asset Companies (NAC) on the New 
York Stock Exchange. I especially wish to thank the State of Utah for 
its excellent work when SEC attempted to sneak in the rule in October. 
The cooperation between the states and Congress is a model for ensuring 
accountability over the executive branch. Utah led the charge revealing 
the dangers of monetizing ecological values on public, private, and 
tribal lands without any mandate from Congress or meaningful engagement 
with the public, thereby convincing the NYSE to stand down.
    Perhaps SEC was unaware of the impact of the NAC rule on public and 
tribal lands and the interaction its proposed rule would have had with 
inconvenient federal lands statutes. The Bureau of Land Management's 
(BLM) organic statute, the Federal Land Policy and Management Act 
(FLPMA), mandates that the ``principal or major uses'' of public lands 
include ``mineral exploration and production.'' See 43 U.S.C. 
Sec. 1702(l). SEC's proposed rule envisioned companies controlling 
resource values on public lands rather than federal land managers. 
Perhaps privatization of federal lands would be a better way to 
monetize their resource values, but short of that, the NAC rule was an 
ill-conceived, roundabout method of doing so in conflict with current 
statute.
    More likely however, given the Biden Administration's whole-of-
government approach, the rule was a purposeful effort to circumvent 
existing law regarding multiple-use public lands. The NAC rule seemed 
to assume that the ten-year conservation leases proposed in BLM's 
conservation rule would be finalized and stand legal scrutiny such that 
NACs could then hold and monetize federal conservation leases. As BLM's 
proposed conservation leases are on shaky legal grounds, SEC's proposed 
NACs rule assigning ecological performance rights would have been just 
as susceptible.\4\ While SEC has withdrawn the rule, there are signs 
that the concept is far from dead as the administration moves forward 
with the Natural Capital Accounting strategy.
---------------------------------------------------------------------------
     \4\  Western Energy Alliance et al. comment letter to BLM on the 
Conservation and Landscape Health Rule, July 5, 2023; Western Energy 
Alliance comment letter to SEC on the Natural Asset Companies Rule, 
January 17, 2024.
---------------------------------------------------------------------------
    Another aspect of the interaction of the NAC rule and BLM's 
conservation rule is the circumvention of FLPMA's multiple-use mandate. 
Together or singly, these rules are intended to stop oil and natural 
gas leasing and development on the federal mineral estate. Yet with 
FLPMA, Congress directed that ``the public lands be managed in a manner 
which recognizes the Nation's need for domestic sources of minerals, 
food, timber, and fiber from the public lands[.]'' 43 U.S.C. 
Sec. 1701a)(12). Courts have expressly recognized that one use that BLM 
must balance with others includes ``the nation's immediate and long-
term need for energy resources.'' Theodore Roosevelt Conservation 
P'ship v. Salazar, 744 F. Supp. 2d 151, 157 (D.D.C. 2010). Despite 
FLPMA's clear mandate and case law, the Biden Administration continues 
to look for ways to circumvent the multiple-use mandate on non-park, 
non-wilderness federal lands that are appropriate for energy 
development and other productive uses.
    The ill-conceived NAC rule failed to consider how NACs would return 
a fair share of their proceeds from monetizing natural resource values 
on public lands with the American people. For years and continuing to 
this day, politicians and special-interest groups cry that the oil and 
natural gas industry does not pay its fair share, even though costs 
were increased substantially by the mis-named Inflation Reduction Act. 
My industry pays billions in royalties and leasing revenue back to the 
American taxpayer every year from public lands. The NAC rule would have 
allowed companies to profit from federal lands yet pay no royalties. 
The Biden Administration seems to be on a path to allowing companies to 
profit from public lands over time without paying their ``fair share.''
    As a practical matter, the values on federal lands that the Natural 
Capital Accounting system would track quantitatively involve productive 
natural resource activities like ranching and energy development. Yet 
the NAC and BLM conservation rules are intended to limit today's FLPMA-
approved principle uses on federal lands and replace them with so-
called sustainable uses. The preferred ``sustainable'' activities 
contemplated by these rules would generate much less value for local 
communities. It is far from clear how successful NACs would be in 
monetizing ecosystem services, especially in comparison to those FLPMA 
principle uses that provide resources Americans use every day and have 
intrinsic value in the marketplace.
    Perhaps the qualitative nature of the NCA system is intentional. 
Were the BLM conservation rule to stand as proposed, revenue generated 
from federal lands would fall precipitously and there would not be much 
left to account for except those intrinsic, qualitative values that 
nature provides. As a nation, we have already set aside hundreds of 
millions of acres of public lands for preservation only in national 
parks, wilderness areas, wildlife refuges, other protective 
designations. The BLM conservation rule would ensure multiple-use lands 
appropriate for productive activities would be treated the same. The 
result would be to deprive local communities near public lands and the 
American taxpayer of the jobs, tax revenue, royalties, conservation 
funding,\5\ and economic impact deriving from those activities that 
provide true value in the marketplace.
---------------------------------------------------------------------------
     \5\ Oil and natural gas onshore and offshore leasing revenue and 
royalties provide 94% of the conservation and public lands 
infrastructure funding under the Great American Outdoors Act. See 
Conserving the Great American Outdoors, Western Energy Alliance, 2022.

---------------------------------------------------------------------------
                                 ______
                                 

    Mr. Collins. I thank the witnesses for their testimony. The 
Chair will now recognize Members for 5 minutes each for their 
questions. The Chair now recognizes the gentlewoman from 
Wyoming, Ms. Hageman, for 5 minutes.
    Ms. Hageman. Thank you very much. Thank you for letting me 
join your Committee today.
    I do find it fascinating that the advocates for this type 
of a radical reorganization of our Federal lands and the 
relationships between our Federal and state partners refuse to 
participate in something of this significance, both in terms of 
the Member of Congress, as well as the witness that came up 
with this, what I would describe as a harebrained idea.
    While we may be tough in our questioning, when you are 
attempting to literally take trillions of dollars of value out 
of our economy, perhaps you should be subjected to difficult 
questioning. And if you can't, then maybe the rule ought to be 
you don't get to participate in this kind of a policy 
discussion if you are not willing to have your ideas subject to 
our scrutiny.
    I want to thank each of the witnesses for being here. You 
have all been instrumental in addressing these NACs and what 
they portend for our economy and for the future of our ability 
to produce affordable food, energy, and housing.
    Mr. Oaks, your testimony refers to natural capital 
accounting, ecosystem services valuation, and the proposal to 
redefine conservation as a ``use'' under the Federal Land 
Policy and Management Act, or FLPMA, all as backdoor land use 
regulation. And I think that is a great way to put it, and 
something I dealt with a lot during my career as a lawyer.
    It seems the Federal Government is always attempting to 
control Wyoming's resources one way or another, and through 
these various backdoor regulations or guidance documents or 
responses to frequently asked questions and that sort of thing. 
But I would love to hear more from you on this because, from 
where I am sitting, the Biden administration is trying to 
rewrite the rules through executive power, and they are 
attempting to bypass Congress and shove state and local 
governments out of the way.
    Mr. Oaks, my question for you is, can you please elaborate 
on how the Biden administration is engaging in backdoor land 
use regulation?
    Mr. Oaks. Yes, thank you for that question.
    So, of course, under FLPMA, we have that multiple use 
doctrine. And FLPMA, of course, Congress is delegating the 
management of public lands with that multiple use.
    With the conservation lease, if you elevate conservation 
leases to the same level as multiple use, then you can replace 
multiple use with conservation. And I think that is really the 
key issue, is that if the Administration creates a conservation 
rule outside of congressional processes, then you have 
effectively elevated conservation to the same level of multiple 
use, and can replace multiple use with conservation, and 
replace those activities that are critical to states out in the 
West, certainly Wyoming and Utah, with a conservation mission 
as opposed to multiple use.
    Ms. Hageman. Well, and when I read the rule proposed by the 
SEC related to changing the rules for the New York Stock 
Exchange, they specifically state that there cannot be multiple 
use. They will not allow for logging, grazing, mineral 
development, mining, et cetera. It is only this concept of 
conservation that is never defined.
    And there are a couple of things that have struck me about 
this entirely. One is, as I said, the complete reordering of 
the relationship between the Federal and state government and a 
complete reordering of how we manage our Federal lands. The 
Federal Government owns over 600 million acres of land. The 
Federal Government owns 48 percent of the surface estate in the 
state of Wyoming and 65 percent of our mineral estate.
    A couple of weeks ago we had a gentleman from the BLM 
appear in front of the Natural Resource Committee, and I asked 
him about NACs, about Natural Asset Companies, and the BLM's 
involvement with this rule. And the BLM manages 245 million 
surface acres in this country and 700 million mineral acres, 
the largest landowner in the United States.
    The way that this rule is set up is that, literally, the 
BLM could lease all 245 million surface acres and the mineral 
acres to China, portions of it to Bill Gates. You could have 
Mr. Bloomberg come in and decide that he was going to lease the 
natural assets of Shoshone National Forest, thereby stopping 
all sheep and cattle grazing, all bison production, all 
logging, all water development, all of those things. Someone 
like Mr. Bloomberg or Mr. Gates would have the ability to do 
that, which just shocks my socks off.
    But what really shocked me was, when I asked the gentleman 
from the BLM about this, he didn't know anything about it. Does 
that surprise you?
    Mr. Oaks. Yes.
    [Laughter.]
    Ms. Hageman. Well, it surprised me, and I kept pushing him. 
``Are you telling me that the SEC never contacted you about the 
idea of monetizing and securitizing all of the natural assets 
of the BLM?'' And he said that they did not.
    And I think that that demonstrates either maybe he wasn't 
being entirely forthcoming; maybe there are people in the BLM 
that they contacted, but not him; perhaps the SEC and the New 
York Stock Exchange are arrogant enough to move forward with a 
rule like this without actually contacting the land use 
agencies.
    I mean, there are all kinds of things that we could surmise 
from that. But the one thing that I think is very evident is 
that none of this was ready for prime time. They attempted to 
move forward with a rule that was going to dramatically impact 
states like ours, dramatically impact our ability to produce 
food, affordable housing, produce energy, and that they never 
even talked to the land agency that was responsible for 
management. I think that it just demonstrates how incredibly 
bankrupt this entire process was.
    I just want to make one more point, and that is that I want 
to read from the rule. The exchange states that the reporting 
framework is based on the natural capital accounting standards 
established in the United Nations system of environmental 
economic accounting. So, in addition to all the other terrible 
things related to this rule, it would be the United Nations 
that would establish the accounting standards that we would 
have to live with as they stole our lands.
    Thank you. With that, I yield back.
    Mr. Collins. The gentlelady yields. The Chair now 
recognizes the gentleman from Montana, Mr. Rosendale, for 5 
minutes.
    Mr. Rosendale. Thank you very much, Mr. Chair, and thank 
you for all the witnesses for coming in today to try to shed 
some light on this subject.
    This Administration has consistently and actively sought 
ways to appease the climate activists. The latest attempt 
involves allowing climate activists to capitalize on the 
unproductive use of Americans' cherished Federal public lands. 
While certain initiatives have been temporarily halted, there 
is still the looming prospect of attempting to turn America's 
public lands into a commodity for extremists.
    Unfortunately, these lands, the BLM lands, are held in 
trust for their respective states, and these actions that they 
are trying to take are in complete contrast, as Mr. Butcher 
mentioned, with the Taylor Grazing Act and other statutes that 
mandate that they be used for productive purposes, prioritizing 
agriculture at the top of that list for food for our nation, 
specifically livestock production and crops.
    And this Administration continuously tries to take and 
utilize rules to bypass the statutes that are in place, because 
they know that they don't have the support throughout this body 
to actually amend the laws. And this is where the problem is. 
So, it is left to us to make sure that we shed light on these 
subjects, that the general public hears what is going on, that 
they have an outpouring of support throughout the rest of 
Congress so that we can make sure that these rules never see 
the light of day.
    Mr. Butcher, it is so great to see you again. I appreciate 
you traveling from Fergus County and Lewistown to come and be 
with us today. I hope the family is all doing well. Could you 
please elaborate for me on the potential impact of the 
Conservation and Landscape Health Rule in our home state of 
Montana?
    Mr. Butcher. Yes. Thank you, Mr. Chair.
    The concern is real, and we see it in our neighborhood 
because there is already a non-profit entity that has come in 
and started playing a game, I would say, they purchase 
commensurate properties, deeded land that are tied to BLM 
leases, and the intent is to turn those acres into 
conservation, whatever that means. And the BLM at this point is 
being questioned in court, determining whether they have the 
authority to change major use in the way that they are.
    This Conservation Land Health Rule just turns it on its 
end. And the reality is they do not have this authority. I am 
not sure if they are going to just try to push it through, but 
I put a link with my comments to our report that we put in, and 
I recommend that the body look at that because it does a great 
job of laying out specifically why they are out of their 
wheelhouse in trying to do this.
    Mr. Rosendale. So, let me ask you this. When you take those 
lands out of production, forget about future opportunities that 
are eliminated. But when that land gets taken out of production 
now, agricultural production, how does that impact the local 
sale yard? How does that impact the local implement dealer? How 
does that impact the local school district and the local 
hospital medical facilities?
    Mr. Butcher. Yes, we have already seen that in Fergus 
County, because the entity bought a large working operation. It 
used to have about two families that were there managing the 
operation. Now those are gone, and the implement dealership is 
losing sales. I hear from them. It is felt. The school has lost 
students. EMS, we rely on volunteers for our ambulance crew and 
our fire crews. And those people are gone. It is losing those 
folks in our communities that actually keep our communities 
going.
    And the dollar figure is dramatic. When you start removing 
hundreds of cattle for sale that go through a ring, that is not 
just steaks that you are missing, that is actual dollars that 
go through our community. And as most of you know, agriculture 
has a thin margin, but they run a lot of dollars. So, those 
dollars are what are missing, turning through our economy, as 
well as the concerns if this grows beyond a small area of 
conservation where these activities are removed, it is of 
national security. We need to feed ourselves. And in the 1930s, 
the legislative body understood that and said these lands need 
to be held for this purpose because they recognized feeding a 
nation is important.
    Mr. Rosendale. The last thing that I would like to ask, do 
the best range management practices which have been established 
over the last 70, 80 years by a lot of trial and error, range 
management experts and ranchers working together to determine 
how these entities and the utilization or lack of utilization 
of this land, impact that range management?
    Mr. Butcher. Well, it will impact it dramatically. The 
proposals in conservation, you are already seeing it in this 
non-profit group, is to remove the improvements on these BLM 
lands. That is the water improvements. That is the fencing.
    And it has been proven over time, best practices, this is 
how you maintain a healthy range. And conservationists really, 
at their heart, they have never gone to the Montana State 
University Ag Sciences Department and really studied what does 
it take to improve production on the land. And you see it. They 
don't understand that.
    And when you speak production, oftentimes the folks that 
are worried about the environment think that somehow that is 
harmful. Yet, productive landscapes are productive for 
everything, the wildlife as well as the cattle or sheep that 
you are grazing. And it is that symbiotic relationship that we 
have developed in the last 70 years on these lands that have 
improved them dramatically. And they are much, much more 
productive now than they were 50 years ago.
    Mr. Rosendale. What I like to say is if you take care of 
the land, it will take care of you.
    Mr. Butcher. Absolutely.
    Mr. Rosendale. Thank you very much. Thank you all for being 
here today.
    I yield back, Mr. Chair.
    Mr. Collins. The gentleman yields. The Chair now recognizes 
myself for 5 minutes for questioning. And I have a list of 
questions here.
    Before I get started, though, I really want to make an 
observation. I am a freshman up here, but I have had the 
opportunity to go across this country to hold field hearings 
and to look at our witnesses and the people, the stakeholders 
that are sitting behind them. And it is very evident that what 
we are looking at today are people that are concerned, that 
actually work in the industry, that are actually hands-on of 
what is going on on your land and in your community. And I want 
to tell you I appreciate you being here for that and to 
testify.
    Mr. Oaks, I appreciate you being here again today. In your 
role as Treasurer of the state of Utah, it is very safe to say 
you are familiar with the best accounting practices, correct?
    Mr. Oaks. Yes.
    Mr. Collins. Thank you. In your written testimony, you 
stated that valuing ecosystem services is largely subjective. 
Can you elaborate on that?
    And how is the accounting system for the ecosystem services 
valuation so subjective?
    Mr. Oaks. Sure. So, really, accounting is grounded on 
economic activity. And that makes it very objective. And, 
unfortunately, with ecosystem services there is a lot of 
subjectivity because there is no underlying economic activity 
associated with ecosystem services.
    That is not to say that it isn't valuable. We have always 
valued ecosystem services. But the question is, how do you deal 
with something that does not really have economic activity 
underlying it?
    So, even the intrinsic exchange group that proposed the 
Natural Asset Companies, or was behind Natural Asset Companies, 
their framework relied heavily on subjective valuations like 
aesthetic value. What is the value of a sunset, for example, to 
someone?
    So, it is very difficult, if not impossible, to put a value 
on that. Even organizations that were supportive of that, like 
Ernst and Young, highlight some of the challenges associated 
with the NAC rule and this valuation issue. Basically, they 
point out that accounting firms that audit these financial 
statements and other disclosures required for publicly-traded 
companies, they don't have the expertise to assess biophysical 
measures for different types of ecosystems without relying 
heavily on outside experts.
    So, this would allow, really, the accounting firms to 
essentially outsource that function of auditing, natural asset 
accounting, to unknown actors outside the financial statement 
audit process. And audits presumably would require the 
involvement of scientists who are not registered with the 
Public Company Accounting Oversight Board and not experienced 
with GAAP.
    Mr. Collins. I am sure you would say that that would impact 
the reliability of the numbers.
    Mr. Oaks. Absolutely. It is really anybody's guess as to 
what the real value is.
    Mr. Collins. Do you think it is prudent to base national 
policy on valuations that are so subjective?
    Mr. Oaks. No.
    Mr. Collins. I figured that was your answer.
    Ms. Sgamma, the Biden administration has stated the 
National Strategy for Natural Capital Accounting and subsequent 
guidance incorporating ecosystems services valuation into 
benefit cost analysis will be used to support a number of 
partisan goals regarding public land management, including 
America the Beautiful's 30x30 Initiative and BLM's Conservation 
and Landscape Health Rule. I think many Americans have concerns 
with this, given how President Biden has issued a plethora of 
mandates on American consumers, kind of like a dictator.
    And government bureaucrats attack domestic resource 
development from every angle to satiate the rabid eco-activists 
and the anti-use non-profits driving Biden's agenda.
    Given President Biden's terrible track record with natural 
resource development, are you concerned that the Department of 
the Interior and the Bureau of Land Management will abuse a 
national system for natural capital accounting to lock up 
public lands and waters from resources development?
    Ms. Sgamma. I do, Mr. Chair, and I think it is hand in 
glove with the BLM Conservation Rule, which seeks to elevate 
conservation as a multiple use, which it is not, according to 
FLPMA, above productive uses on Federal lands.
    Mr. Collins. All right. And I want to ask this of all the 
witnesses. Let's discuss the public consultation process just a 
little bit.
    To your knowledge, has anyone in the Biden administration 
reached out to local officials or industry stakeholders 
regarding the National Strategy for Natural Capital Accounting 
Ecosystem Services Valuation, or the updated guidance 
incorporating natural accounting, capital accounting, and 
ecosystem services valuation into the benefit cost analysis?
    Mr. Butcher, I would love to start with you.
    Mr. Butcher. The answer would be no. We have not heard 
anything. And once again, that was an initiative that seemed to 
be pushed through in the eleventh hour without much notice. So, 
no, we have not been brought into this conversation.
    Mr. Collins. Would anybody else like to----
    Ms. Sgamma. I think the Administration has so many 
different initiatives, and they are all extremely complex, 
whether it is DEI, or climate change, or natural capital 
accounting, that I don't think that the agencies can keep track 
of it all. So, it doesn't surprise me that the BLM didn't know 
about the NACs rule and what SEC was doing. How could they 
possibly keep track?
    Mr. Collins. I think, needless to say, the Biden 
administration hasn't adequately consulted with any local 
stakeholders on these issues.
    Before I wrap up, oh, goodness. Well, the Chair yields 
back, and the Chair now recognizes Mr. Curtis for 5 minutes.
    Mr. Curtis. Thank you, Mr. Chairman. I found myself already 
prepared in the wrong committee room, and I looked around and 
Marlo Oaks wasn't in the room, so I knew I was in the wrong 
spot.
    I am really pleased to be here today. And thank you to all 
of our witnesses. Marlo, thank you for traveling from Utah. I 
am thrilled to be here, and be with Treasurer Oaks, who has 
been critical in Utah to push back against corporate ESG.
    I am also glad we have a Western voice on this panel to 
talk about the implications of Wall Street locking up our 
public lands. This issue is especially relevant in Utah, where 
two-thirds of our land is federally managed. Think about that 
for just a minute, two-thirds. A high percentage of the 
districts that I represent are over 90 percent Federal lands.
    Grazers, farmers, recreationalists, the energy industry, 
and more rely on access to these lands. They are critical to 
our national security and our livelihoods. National Asset 
Corporations are a proposed vehicle to allow Wall Street to 
effectively lock up public lands to meet their ESG goals. This 
is why, with Treasurer Oak's support, I introduced a bill that 
would prohibit Natural Asset Companies from entering into any 
agreement involving Utah's land or natural assets.
    Mr. Oaks, thank you for being here. While the NAC rule is 
temporarily on pause, it was a clear test to see how Wall 
Street can take over public lands for their own benefits. Why 
did you support my bill to ban natural asset companies or any 
similar rule from impacting Utah?
    Mr. Oaks. Well, thank you for that question, Representative 
Curtis.
    I think, really, the financialization of Mother Nature is 
an incredibly scary concept. When you can financialize a public 
good, and that is really what we are talking about, we are 
talking about taking public goods that are a benefit to society 
and financializing them, you are really creating ownership and 
assigning a value to a public good like air that we breathe. 
That can commoditize that public good, and that opens the door. 
It is really, as I stated, a Pandora's box to ownership and 
trading and valuing something that should be for the benefit of 
society.
    And Wall Street certainly sees a lot of dollar signs 
associated with that, just given the value that they have 
thrown out as what these natural processes would be worth: $5 
quadrillion; in relation to financial assets globally, $1.5 
quadrillion. So, we are talking three times the value. That is 
a lot of money that could be made potentially from Wall Street.
    Mr. Curtis. Good. And then, if you would, comment just 
briefly on how that impacts the state, with two-thirds of its 
land being federally owned.
    Mr. Oaks. It is a tremendous impact. When we have the 
growth of the state of Utah, where we are trying to create 
enough housing for people, we don't have a lot of private land. 
And then you add on to that all of the activity that happens in 
rural Utah on the Federal land that is critical to our economy, 
everything from oil extraction, to grazing, to recreation, 
outdoor recreation, I think we are the No. 1 state for outdoor 
recreation, these are key economic issues that will severely 
impact our state negatively.
    Mr. Curtis. Could you also just comment briefly on Utahns' 
perspective?
    Sometimes when we push back on something like this, it 
gives the brand that somehow we also don't want to preserve and 
protect these areas. Could you just comment on that from a 
Utahn's perspective about how we feel ourselves about the 
importance of preserving and protecting these lands?
    Mr. Oaks. Absolutely. I think, really, in the West, we are 
the original conservationists. I mean, this is the land that we 
grew up on. And the people that are closest to the land care 
about it the most. It is the farmers, and the ranchers, and the 
people that are in rural communities. This is their 
livelihoods. And we absolutely care about this land.
    Mr. Curtis. You mentioned they are the original 
conservationalists. I think they like that word better. 
Sometimes I call them the original environmentalists.
    [Laughter.]
    Mr. Curtis. And indeed, they are. And perhaps they are a 
little uncomfortable with that word. But thank you for that, 
and thank you for being here today.
    Mr. Chairman, I yield back.
    Mr. Collins. The gentleman yields back.
    Before we conclude, I really wanted to end with a couple of 
observations. Most notably, I said that I had attended a lot of 
field hearings. And in those field hearings, there were none of 
our colleagues from the other side that showed up. When we are 
actually talking to people that are being affected by this 
Administration's policies, and it is just a reflection of the 
Administration, they don't really care what you think. They 
don't care what the implications may be on you or anybody in 
your area or in your community. They have an agenda that they 
are going after, and they have an agenda that they are going to 
try to achieve, and they are going to cram it down the throats 
of the American people.
    You can also see that in the witnesses that they try to 
provide. I mean, we have some fellow from some elite Ivy League 
school that is going to come and talk to us and know better 
about your community and your area than you do. That just shows 
you the arrogance and the disdain for anybody else and anybody 
else's thoughts, or what they may have an opinion on.
    It kind of reminds me of a lot of times, I am in the 
trucking industry, and we get new trucks in, and some engineers 
engineered something that they thought was just fantastic over 
here. But in the real world, it doesn't work. And it is because 
they sit behind a desk, or a computer screen, and they are not 
actually out there in the trucking world, driving.
    So, I appreciate your testimony, and I appreciate you being 
here, because I can guarantee you one thing. We are not going 
to stop fighting this issue, and we are looking forward to the 
next administration taking over, and we will fix a lot of these 
problems.
    I want to thank the witnesses for their valuable testimony 
and the Members for their questions.
    The members of this Committee may have some additional 
questions for the witnesses, and we will ask you to respond to 
these in writing. Under Committee Rule 3, members of the 
Committee must submit questions to the Subcommittee Clerk by 5 
p.m. on March 12. The hearing record will be held open for 10 
business days for these responses.
    As there is no further business, without objection, the 
Subcommittee stands adjourned.

    [Whereupon, at 11:13 a.m., the Subcommittee was adjourned.]

            [ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

                    Statement of the Hon. Paul Gosar
         a Representative in Congress from the State of Arizona
      Chairman of the Subcommittee on Oversight and Investigations

    In accordance with the rules of the House and this Committee, I am 
pleased to submit this statement for the record.

    First and foremost, I was extremely disappointed in the Minority 
for failing to produce a single witness. The failure of the Minority to 
defend their party and President Biden's strategy for natural capital 
accounting demonstrates the absolute absurdity of these policies when 
challenged, proponents of these ideas buck under the pressure. No one 
is willing to defend President Biden's policies, because they know that 
they are indefensible. But because they are beholden to radical leftist 
groups, they refuse to stand up against them.

    Natural capital accounting and ecosystem services valuation are 
described by proponents as ways to calculate and place a monetary value 
on our public lands and natural resources. While there may be some 
merit to a bipartisan approach to accounting for some key natural 
assets, the Biden administration's National Strategy for Natural 
Capital Accounting and its implementation is nothing more than a 
continuation of his partisan land grab and an attempt by progressives 
to circumvent Congress and grant even more arbitrary power to unelected 
bureaucrats.

    Natural capital accounting and ecosystem services valuation have 
united the left and right, with conservative and liberal critics alike 
criticizing the attempts to monetize natural activity as a shift in 
property rights away from local stakeholders to nameless financiers 
from the other side of the country or around the world. Natural capital 
accounting and ecosystem services valuation would allow nonprofits and 
other organizations funded by global financiers to lock up our federal 
lands and block the use natural resources for local productive 
activity. Conservatives argue that enacting these concepts will lead to 
our natural resources and lands being further restricted because we are 
removing stewardship from local communities and placing it in the hands 
of nameless financiers. Liberals argue that removing local control will 
increase injustice and abuse of our natural resources. The shared 
concerns about property rights cannot and should not be ignored when 
considering solutions for protecting our natural resources and public 
lands.

    Despite the substantive criticisms from across the political 
spectrum, the Biden administration is moving ahead and formally 
integrating natural capital accounting and ecosystem services valuation 
across the federal government. Notably, the Biden administration has 
recently published guidance directing agencies to incorporate natural 
capital and ecosystem services valuation into benefit-cost analysis, a 
fundamental shift to a key component of agency rulemaking.

    This directive, stemming directly from the Executive Office of the 
President, will have a tremendous impact on how agencies operate and 
carry out their duties. Yet the Biden administration has yet to provide 
Congress on the development and implementation of the guidance and the 
Biden administration's strategy writ large. Indeed, last month the co-
authors of the Biden administration's National Strategy for Capital 
Accounting--the Office of Budget and Management, Office of Science and 
Technology Policy, and the Department of Commerce--all declined the 
Committee's invitation. Meanwhile, the one witness the Biden 
administration did send was a junior employee from the Bureau of Land 
Management who was curiously devoid of information on the Biden 
administration's policies on natural capital accounting and ecosystem 
services valuation.

    Proponents argue that natural capital accounting and ecosystem 
services valuation will help inform policy makers as we try to craft 
bipartisan environmental solutions. However, natural capital accounting 
and ecosystem services valuation cannot accomplish their stated goals. 
Ecosystems are impossible to accurately measure. Beyond the practical 
difficulty, accounting systems fail to capture nature's intrinsic 
value. And, perhaps above all, the estimates are not precise enough for 
policy decisions.
    Additionally, I have grave concern with how Democrats plan to use 
natural capital accounting and ecosystem services valuation. The 
President has made clear he is intent on locking our Natural Resources 
and Public Lands from responsible uses. For example, as explained on 
our February 15, 2024, hearing, The Natural Capital Accounting and 
Ecosystem Services Valuation will serve to help implement the America 
the Beautiful Initiative's 30x30 goal to lock up 30% of our nation's 
land by 2030. Likewise, natural capital accounting and ecosystem 
services valuation will also help enact more radical policies, such as 
the Bureau of Land Management's Conservation and Landscape Health which 
would lock off more federal lands in the name of conservation.

    Natural capital accounting and ecosystem services valuation are 
nothing more than a continuation of the Biden administrations assault 
against our natural resources and public lands.

    Protecting our natural resources and public lands is an issue which 
should unite us all. However, rather than foster bipartisan cooperation 
and work together to find solutions, the Biden administration is 
bypassing Congress through Executive overreach to force natural capital 
accounting and ecosystem services valuation on the Federal government 
and American people.

                                 ______
                                 

 Submissions for the Record by Rep. Stansbury

                             Yale University

                    Tobin Center for Economic Policy

                                                 March 13, 2024    

    Dear Chairman Gosar, Ranking Member Stansbury and Members of the 
Committee:

    I am David Wilkinson, Executive Director of the Tobin Center to 
Economic Policy at Yale University. My written testimony is intended to 
represent views of economists, affirm the long-standing consensus among 
mainstream economists regarding the national statistical accounts, and 
to agree with the primary theme of this hearing that for natural 
capital accounting to be of value to our nation, it must continue to 
remain nonpartisan.

    My role at the Tobin Center is to coordinate academic economists 
and help convey complex economic concepts in the fast-paced policy 
process at the federal, state and local levels. We work across issue 
areas offering nonpartisan and evidenced-based solutions. Since our 
founding in 2018 we have partnered with and assisted the Trump and 
Biden administrations (receiving appreciation and citations by both) as 
well as leaders in ``red'' states and ``blue'' states to help resolve 
complex issues using data and evidence.

    It is important to clarify, as I would have in spoken testimony had 
I been able to be present, that am not a researcher, economist, or deep 
expert in the topic of natural capital accounting. Rather I was 
invited, and regrettably had to decline, to speak to the core issue 
presented by, and at the heart of, the hearing: the critical importance 
of nonpartisanship in any effort to develop national statistical 
accounts. (While I cannot speak for other invitees, I would have loved 
to be there with you and regretted my inability to accept the 
invitation to attend.)

    On the matter of economic consensus around development of impartial 
objective statistics, I am qualified to testify based on my work 
collaborating with over 50 mainstream academic economists to summarize 
a consensus response to the Sept 2022 Request for Information (``RFI'') 
on the draft National Strategy to Develop Statistics for Environmental-
Economic Decisions (the ``National Strategy''). My testimony will 
therefore quote and paraphrase heavily from that document (``The Joint 
Comment of Economists'' or ``The Joint Comment''--attached in full 
hereto). In addition, it reflects themes I gathered in subsequent work 
assembling economists and statisticians--as well as former Republican 
and Democratic appointees--on the occasion of the 50th anniversary of 
the seminal paper that is credited with leading to the broadly held 
academic consensus around the importance of accounting for value of the 
natural assets (which mainstream U.S. economists believe is important 
to our national economic growth and prosperity). A co-author of that 
paper, the late Nobel laureate James Tobin is my center's namesake. The 
other, Nobel laureate Bill Nordhaus, is on faculty at Yale.

    The primary purpose of this testimony is to agree with key themes 
expressed by Sub-Committee Chairman Gosar and Committee Chairman 
Westerman in the Feb 15th hearing on this subject.

    In that hearing Chairman Gosar stated that:

        ``We must take great care so that our natural capital 
        accounting system will best serve our nation, rather than serve 
        as a weapon to achieve partisan goals.''

    Based on my work with economic experts on the subject at 
universities around the country, I believe Chairman Gosar's core 
statement is one that would garner unanimous and enthusiastic support 
from academic economists and statisticians. As detailed below, 
economists believe we must take great care and that it is essential to 
do so in a way that is nonpartisan.

    At the same hearing, Chairman Westerman voiced concern that the US 
may fall behind the rest of the world in the development of these 
statistics and that in the absence of US leadership--accurately noting 
the US has historically ``been a leader in standards development''--we 
may become subject to standards that are not impartial and may serve 
foreign interests.

    Economists also strongly insist on impartial, objective, 
nonpartisan statistical accounts. They have warned against any 
alternative, while also advocating for the US to be leader in their 
development.

    Drawing largely from The Joint Comment of Economists, the remainder 
of my comments below in are intended to highlight for the committee the 
consensus opinion of mainstream academic economists as related to some 
of the issues raised at the heart of the hearing--and that further 
substantiate and support the alignment of economists with the 
priorities expressed above by the both the committee and subcommittee 
chairs. Where there is emphasis added in quotes herein, it is my own, 
intended to help draw out key points for the committee's consideration.
 1. The motivation behind natural capital accounting is better 
        statistics to advance economic growth and prosperity both now 
        and in the future.

    Economists broadly share a consensus that it is important to 
reflect the key economic role of nature in our national accounts. As 
stated in the Joint Comment of Economists:

        Economic statistics are the lens through which we observe the 
        economy and are the tools for shaping its future. [The then 
        draft National Strategy] advances a more complete set of 
        economic statistics for the United States . . .

        Nature offers key inputs to the US economy across sectors. 
        Natural resources--such as timber, water, fish, and minerals--
        underpin multiple supply chains. Forests and wetlands enhance 
        water supplies and storm resilience while supporting outdoor 
        recreation and tourism . . .. In these ways and many more, 
        nature enables growth and prosperity in the present and is 
        essential to future economic success. How we manage nature 
        today will either enhance or deplete future opportunities. 
        These characteristics, among others, are why economists have 
        referred to nature as a form of natural capital.

         Despite the fact that nature supports, and is intertwined 
        with, our economy, and despite the fact that environmental 
        change is important to economic decision making, natural assets 
        are not included in the tools for measuring and monitoring the 
        economy: our national economic accounts.
 2. The Strategy is grounded in well-established research spanning over 
        decades and its objectives reflect the consensus of mainstream 
        economists.

    The briefing for this hearing refers to demand for natural capital 
accounts among ``pockets of economists, ecologists, and scientists.'' 
While would not claim to represent the sentiment of ecologists or 
scientists, the question at hand is primarily around the statistical 
tools of economists and statisticians. For that population support goes 
far beyond pockets of support, and more resembles a consensus.

         The Strategy is well-founded in the rich, well-developed 
        history of thinking and practice on natural capital economics.

        The need to include natural assets on our nation's balance 
        sheet is grounded in decades of research by leading academics, 
        including multiple Nobel Laureate economists, federal 
        economists, statisticians and scientists.

    Based on my experience I would say the question for U.S. economists 
is not whether America should reflect nature's contribution to our 
national wealth, but how, by what means and to what degree. That 
important and complex question, in turn, would be answered what the 
National Strategy calls for to be an open and transparent 15-year 
process.
 3. The approach proposed to develop statistics in National Strategy is 
        reasonable and prudent.

    The Joint Comment expresses that the National Strategy appears to 
be consistent with--and if properly executed as designed--would be true 
to the long-standing consensus of economists.

         The Strategy properly suggests a conservative and purposeful, 
        phased approach. It proposes shepherding an efficient 
        transition from research grade environmental-economic 
        statistics and natural capital accounts to Core Statistical 
        Products . . .
        The 15-year phased approach also sets a realistic time horizon 
        for full adoption . . . Our national economic accounts have 
        continually evolved over time. The Strategy charts a realistic 
        path to address an important gap in our economic understanding, 
        strengthening our accounts and their ability to inform better, 
        smarter economic decision making in policy and business.

        Thus, in summary, The Strategy represents a timely, actionable, 
        and much needed opportunity to develop and deploy a system of 
        account that better represents the balance of natural assets on 
        which our prosperity currently draws.

    Some non-economists concerned about a partisan valence have 
inquired ``why now''. In addition to the fact that other nations are 
taking this up ( see below, #6), the Joint Comment also notes that new 
technology now makes it practical and possible when it previously was 
not, noting that the National Strategy:

        Takes advantage of new and emerging technologies, including 
        secure, `big-data' techniques and developments in environmental 
        monitoring that were not available in earlier federal attempts 
        to develop environmental-economic statistics . . .
 4. For statistical accounts to be useful we must have nonpartisan, 
        objective standards.

    The briefing memo for this hearing highlights:

    ``There may be legitimate, nonpartisan reasons for NCA [meaning 
natural capital accounting] . . . such as ensuring responsible natural 
resource development, effective conservation, and stabilizing America's 
economy and environment. However, instead of using NCA . . . to promote 
nonpartisan aims..'' . . . the memo authors then express concern that 
the Biden Administration may intend to use the future national 
statistical accounts to advance partisan aims.
    I know of no academic economist critique of present policy 
proposals (from the left or right) that may imply partisan manipulation 
of the ultimate statistics. Without speaking to current initiatives or 
intentions of a time-bound administration, I can say that the National 
Strategy itself--as a 15-year plan for non-partisan statistical 
agencies to transparently and methodically develop statistical 
standards--is something that academic economists have praised as a 
sensible approach that is well-suited to yield the desired outcome 
nonpartisan, objective statistics. It would seem to me any plans a 
current administration may have for partisan uses of standards will be 
irrelevant in a 15-year time horizon.

    Indeed, economists have expressed encouragement that the 15-year 
development window not only allows ample time for transparent process 
to get these important statics right, but it also signals that the 
current administration understands that the ultimate statistical 
accounts must be nonpartisan if they are to come into existence. In 
other words, it is encouraging to economists that the administration 
did not seek to ``rush'' statistical development to fit its 
administrative timeline, which it could have attempted to do.

    Rather, it embraced the recommendation of impartial statical 
leaders, `pushing the boat out to sea,' knowing that for it to succeed 
it must survive partisan scrutiny on both sides. Over the course of 15 
years, development of the strategy will likely pass through the 
administrative leadership of both parties. This provides ample 
opportunity to review, expose and eliminate unhelpful partisan agendas 
from either political valence on the path to well-pruned, objective, 
impartial statistics. Such a time horizon, among other aspects of the 
plan (e.g., coordination by nonpartisan statistical agencies, a plan 
for transparent development with feedback from communities and 
industry, and the bipartisan authorities from which it stems), is thus 
seen as encouraging. These factors helped motivate the Joint Statement 
of Economists in praising the National Strategy as a sensible, prudent, 
nonpartisan approach.

    Chairman Westerman, while expressing concern that the US may be 
falling behind other nations in a way that might compromise US 
interests, also clearly pointed out ``the distinction between 
developing standards and using those standards in a nefarious way''. By 
``nefarious,'' I think the Chairman means anything that would resemble 
insincere effort to hide behind standards as a ruse for partisan 
objectives.
    The authors of the Joint Statement offer a similar warning that the 
approach to establishing and implementing the statistics must be 
nonpartisan:

         The Strategy, which, if executed as planned in a non-partisan 
        manner, will enhance the ability of government and business to 
        manage capital efficiently in pursuit of national prosperity.

    It seems this was also the sentiment of Congressmen Gosar's 
statement (as quoted above) in the February hearing on this topic.
 5. Development of the Strategy should be an open, inclusive, and 
        transparent process.

    As a nonexpert in the topic but as someone who has worked across 
the aisle on nonpartisan initiatives in a partisan environment, I also 
submitted a comment in response to the RFI on the National Strategy 
alongside a colleague who has worked in administrations of both parties 
(see attached ``Tobin Center Comment''). With the blessing of 
mainstream economists interested in the development of objective 
statistics, we made recommendations on effectively executing an open 
transparent process:

         Be transparent in goal setting and execution: The Strategy is 
        exemplary in its transparency and accessibility. Each aspect of 
        each phase of the initiative will involve similarly significant 
        complexity and detail. In execution of each aspect, the federal 
        government should strive for a similar level of transparency 
        and accessibility where practical and allowable. A lead 
        communicator should be identified for each relevant 
        subcomponent and whether the same entity or varying should 
        adhere to a somewhat standard reporting format and cadence with 
        actions, objectives and target timelines so that industry, 
        researcher, and the public may easily access and interpret the 
        ongoing work and results . . .

         Engage relevant, affected, interested and expert communities: 
        We encourage the involvement of the private sector in the 
        development of the accounts to ensure that the accounts are 
        also useful by business and financial decision makers. This 
        engagement process will also contribute to having consistency 
        between natural capital information produced by business and 
        finance and facilitate the flow of information among private 
        and public sectors . . . Federal leaders should be aware of the 
        appropriate mechanisms of such engagement and plan for it from 
        the beginning. In addition to compliance with relevant statute, 
        this should include user-cantered [sic --(centered)] approaches 
        to engagement and information sharing.

    The ultimate strategy sets out a path that calls for just such 
transparency and multi-stakeholder engagement, as called for by 
multiple commenters.
 6. It is in American interests for the United States to lead, as it 
        has historically done in statistical standard development.

    Natural capital accounting is an American idea. Despite rich 
bipartisan history advancing these concepts dating back to the Nixon 
Administration, the US has more recently fallen behind. This has 
occurred on the watch of administrations of both parties. In the Joint 
Statement, economists expressed the importance of a return to US 
leadership:

        While the US has [historically] been a catalytic leader in 
        recognizing the untapped potential value in accounting for 
        natural assets, the concept is also underpinned by a broad 
        research community and considerate academic and policy 
        leadership internationally, with over 80 countries formalizing 
        natural capital accounting in economic-statistical systems . . 
        .. It is once more time for the U.S. to lead its peers in this 
        area and this practical strategy positions the United States to 
        do so.

    At the February hearing, Chairman Westerman noted:

        And I do want to make a clarification here. The idea of valuing 
        our natural assets I don't think is a bad idea, and I think the 
        US is probably behind in that, in creating standards. And my 
        understanding is that some foreign entities, even China, are 
        working on international standards that could be used against 
        us, be used against products produced in America.
    He later stated:

        I am concerned that we are getting behind, and we are allowing 
        people who don't have our best interests at heart to develop 
        these standards, where the US has generally been a leader in 
        standards development around the world.

    Some have expressed concern about a partisan agenda in development 
of the Strategy or the intended use of the resulting statistics. If 
there are partisan designs on either side, the evidence does support 
the case that such partisan goals are the intention of the economists 
and statisticians who would actually develop and use the resulting 
statics to advance growth and prosperity. Further, the multi-year, 
transparent design does not support the conclusion of partisan intent. 
Rather, these characteristics have been applauded by economists as 
partisan insulation. I suspect economists would also applaud any 
sincere concern about the objectivity of standard development and would 
welcome oversight that helps keep partisan agendas out of the process.

     For their part, if there is any agenda here, it is this: for half 
a century, US economists and statisticians have seen an obvious and 
significant gap in how we account for and assess our national wealth. 
New technology has begun to make it practical to correct this long-
standing shortcoming in our national accounts. Statistics and 
accounting being universal languages, economists and statisticians in 
other countries see the same problem in their statistical systems as 
well as the new opportunity to solve for them. And they are acting.

     The US has historically led the world in developing standards and 
statistics--something that has widely been seen as working in US 
national interests. This is not a case where inaction is 
inconsequential. If America does not lead, other nations will. 
Economists I have spoken to believe the result may compromise US 
interests, for instance in international trade (as well as the quality, 
accuracy and impartiality of the statistics themselves). I would 
venture to say many would agree with Chairman Westerman's concerns, as 
he framed them.

                                 ______
                                 

                     Yale School of the Environment

                                                 March 12, 2024    

 House Committee on Natural Resources
 Subcommittee on Oversight and Investigations

    Dear Chairman Gosar, Ranking Member Stansbury and members of the 
Subcommittee:

    I am a professor of natural resource economics at Yale. For over a 
decade, I have done research on how to measure the changing value of 
natural resources, by applying capital theory to them. I was cited 
multiple times in your briefing memo. In June 2021, I took leave from 
Yale to serve the country in the Office of Science and Technology 
Policy. I returned to Yale at the end of January 2023, and this 
statement should not be interpreted as a statement for OSTP or for 
Yale.
    I believe that nonpartisan, careful accounting for our natural 
resources elevates the conversation and is a useful tool in economic 
decisions and in natural resource decisions. This is why I have spent 
so much of my career working on the methods to measure the changing 
value of natural resources as assets. In November 2016 I was invited to 
Kansas to speak at the Governor's Water Conference about a groundwater 
natural capital account that colleagues and I had built. The farmers at 
the conference were interested in the account and told me they found it 
helpful to structure their conversations about how the farmers 
themselves managed the groundwater in Kansas. They also expressed 
interest in having a regularly updated account. I offered to work with 
economists from Kansas to do so, but I did not have the capacity to 
maintain the account myself at the time. My experience in Kansas 
convinced me that it is possible to do natural capital accounting in a 
way that helps local decision makers who are closest to the resource.
    Treating natural resources as assets is not a new idea. Teddy 
Roosevelt famously said, ``The nation behaves well if it treats the 
natural resources as assets which it must turn over to the next 
generation increased, and not impaired, in value; and behaves badly if 
it leaves the land poorer to those who come after it.'' \1\ Roosevelt 
was advised by leading thinkers of his time: Gifford Pinchot, a founder 
of American forestry, and Irving Fisher, a founder of American 
economics. The writings of those two foundational American scholars 
make it clear that Roosevelt likely took this statement literally. Yet, 
it is only recently that we have had the data and methods to provide 
the type of measurements to formally be accountable to the standard 
Roosevelt called for. And, accounting helps with accountability. 
Accounting facilitates resource management in the form of wise use, 
i.e., conservation.
---------------------------------------------------------------------------
     \1\ Roosevelt, T. 1910. Conservation: Speech at Denver before the 
Colorado Live Stock Association in A. H. Lewis, editor. Compilation of 
the Messages and Speeches of Theodore Roosevelt.
---------------------------------------------------------------------------
    The idea of treating natural resources as assets and accounting for 
them is well established in economic thought. At least half a dozen 
Nobel laureate economists have written on the topic. Many prominent 
American economists went on record in the public comments in favor of 
the national strategy for natural capital accounts, which they 
characterized as ``well-founded in the rich, well-developed history of 
thinking and practice on natural capital economics.'' The National 
Research Council, The National Bureau of Economic Research, and the 
Government Accountability Office have all said we need some form of 
environmental-economic and/or natural capital account. And, for 
national statistics to be useful they, of course, must be nonpartisan 
and adhere to high standards.
    I was heartened watching the first hearing, because I saw consensus 
on a common theme: accounting for natural assets is important, and it 
must be nonpartisan. Chairman Gosar said, ``we must take great care so 
that our natural capital accounting system will best serve our Nation, 
rather than serve as a weapon to achieve partisan goals.'' 
Representative Stansbury laid out a compelling case for natural capital 
accounts. Chairman Westerman said, ``The idea of valuing our natural 
assets I don't think is a bad idea, and I think the U.S. is probably 
behind in that, in creating standards. And my understanding is that 
some foreign entities, even China, are working on international 
standards that could be used against us, be used against products 
produced in America.'' I believe that the 15-year process is itself a 
mechanism for nonpartisan development since neither party is likely to 
control the Presidency for a 15-year run.
    I would like to clarify some relationships related to international 
accounting standards for national accounts, prior to relaying a story 
about their development. The System of National Accounts and the System 
of Environmental Economic Accounting (SEEA) are developed through a 
process of negotiation among national statistical offices; the role of 
the UN is merely as a convener and secretariat--the UN Statistics 
Division does not make statistical policy. Traditionally, the United 
States has provided international leadership on statistical standards. 
Other countries have followed the examples that the United States 
implements. The United States co-led (with the UK) the establishment of 
the System of National Accounts in the wake of the second World War 
(the U.S. began work in the wake of the Great Depression). Historians 
and economists credit this system with helping contain the Soviet Union 
during the cold war.
    Around 2019, I was invited as an expert to advise on the System of 
Environmental Economic Accounting, which I would characterize as a 
daughter standard to the System of National Accounts. Many of the 
people in the conversations that I was involved with around the System 
of Environmental Economic Accounting were delegates from various 
national statistical offices. I watched the experts from the U.S. 
Government work to make sure the standards adhered to the high, 
nonpartisan standards of the U.S. statistical system. I had colleagues 
from other European countries say things to the effect of, ``The U.S. 
ideas sound nice, but it is hard to back them and convince our 
governments to adopt the high quality standard because the U.S. is not 
actually implementing environmental-economic accounting.'' I saw the 
penultimate draft, and there are many reasonable features within SEEA. 
While many of these reasonable features were retained in the final 
version, I was shocked in 2021 when China's ``Gross Ecosystem Product'' 
idea was included in the final standard. It had not been in the draft 
that I saw. I don't think the ``Gross Ecosystem Product'' idea is 
broadly supported by economists. I believe this is why the U.S. 
national strategy says, ``Incorporate the internationally agreed-upon 
SEEA to guide development of U.S. natural capital accounts and 
environmental-economic statistics, where the SEEA standards are 
relevant and robustly developed.'' I believe the approach in the US 
strategy is good. It enables the U.S. to lead from within, but being 
very clear that there are elements of SEEA that are not relevant or 
robustly developed for use in the United States. The proposed approach 
will enable the U.S. to steer the future development of SEEA.
    Other countries will use an international standard, multilateral 
development banks will use an international standard, sovereign credit 
rating agencies will use the data based on the international standard. 
It appears that either the United States can resume its traditional 
leadership role of leading on statistical standards, leading by 
example, or it seems likely China will attempt to step in.
    In the first hearing, Chairman Westerman asked about the 
relationship of U.S. natural capital accounts to other countries. About 
three months ago, a student and I took data from the OECD--for 
countries that report to the OECD and looked at which countries report 
non-financial, non-produced assets (and produced assets called 
cultivated biological assets, like orchards and plantation forests) on 
their official national balance sheets. To be clear, this is part of 
the main System of National Accounts that lead to internationally 
comparable measures of GDP (not the SEEA Ecosystem Accounts). The 
categories are the headline categories. Fish and non-plantation forests 
would be non-cultivated biological assets (assuming there is a 
management plan). Chile, Iceland, Colombia, Turkey, and Switzerland 
also report to the OECD, but report no data. These are official, not 
experimental or pilot accounts. You can see the U.S. is indeed behind.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    A consensus opinion among U.S. economists and statisticians is 
that the omission of natural resources from our national balance sheet 
is a shortcoming in the system of national accounting, and it should be 
rectified. New technologies and increased computing power are now 
making it possible to fill the hole and address this well recognized 
problem.
    In 1972, Nobel laureates Nordhaus and Tobin pointed out that when 
something is omitted from the accounts, it is treated as if it is free, 
and they write, ``There are serious consequences of treating as free 
things which are not really free. This practice gives the wrong signals 
of the direction of economic growth.''
    A common way this shows up is that following a forest fire, some 
media pundit says, ``The fire was good; the rebuilding will boost 
GDP.'' It is technically correct that rebuilding boosts GDP (though 
usually only for the quarter of, or the quarter immediately after, the 
disaster). But, uncontrolled forest fires clearly can't make good 
economic sense. This happens because GDP is a measure of how much money 
we spend (though studies show that disasters generally depress GDP 
starting 3 or more quarters after the disaster, because of the loss of 
the unaccounted-for capital base). What we should be looking at instead 
is the change in the balance sheet. It records the stock of national 
wealth, rather than the flow of spending. Putting natural assets on the 
balance sheet will show how failure to manage forest fire reduces 
national wealth.
    High quality economics requires robust economic information about 
the role of natural assets in supporting economic development through 
industries such as forestry, fishing, mining, and tourism or helping 
lower costs elsewhere, like the role of forests in lowering costs for 
water treatment facilities or the role of clean air in boosting worker 
productivity and lowering health care costs. Importantly, natural 
resources do contribute to our economy even when they are not used up 
in the process. This is similar to the way produced capital, like 
machines, boost production without being used up (though may require 
maintenance like ecosystems).
    In the first hearing, Chairman Gosar, asked about mining having 
something to sell, but clean air is not something to sell. I understand 
why someone would ask that question. First, a land manager who owns 
land with a mineral resource should record the income from selling a 
mineral, but should also record the decline in value of the land from 
selling the resource, because the opportunity to mine certainly 
capitalizes into land value and that land value is reduced after the 
mineral is extracted. This is simply how double entry accounting works. 
Right now, we don't keep track of the decline in land value from 
separating the land from the mineral, including potential impairments 
(e.g., tailing piles) that may leave the land less suitable for 
alternative uses. Second, with respect to air quality, cleaner air 
reduces health care costs and increases worker productivity (sort of 
like computers). So, there is something to show for it as far as real 
financial flows. The challenges of measuring it are not that different 
from assessing the value of a firm with specialized capital assets that 
must be repaired from time to time--just as the U.S. has greatly 
improved air quality over the last 3-4 decades (and for which our 
national accounts don't give us credit: see Muller 2014, Science). 
Importantly, the U.S. strategy lays out a plan for separating these 
processes through developing accounts that adhere to a small number of 
accounting boundaries. This small number (3 in the strategy) of 
accounting boundaries will enable people to disagree about what is 
important, and then see if that disagreement actually matters or if 
even though they don't agree perfectly, they would ultimately reach a 
similar decision.
    Also to be clear, as I understand it, national economic statistics 
are almost never directly used for regulatory benefit-cost analysis. I 
would expect the same to be true of environmental-economic statistics. 
There seemed to be some mixing of these two, admittedly confusing, 
topics in the briefing memo. I would expect the statistics to be used 
in ways similar to the way that our current economic statistics are 
used.
    I am willing to spend some time with Republican and Democratic 
staffs to have a conversation on technical details of natural capital 
accounting. I realize there are questions, and I doubt that I can do 
justice to these technical questions in this letter. I will simply say 
that the methods are very similar to the way we already account for 
owner occupied housing, computers, and forms of specialized capital for 
which there are not large markets. I believe we can do for natural 
assets as well as we do for many other sectors of the U.S. economy, and 
we can avoid highly subjective measurements. Moreover, the fact that 
not all the value of nature can be measured, does not mean that 
measuring some value is not important. It is important to value the 
parts that we can and strive to improve over time. That is what we have 
done over the past 70 or so years of national accounting.
    It may well be that a great winner from establishing natural 
capital accounts is congressional oversight of land and resource 
management agencies. Imagine being able to ask the head of the US 
Forest Service, `how did our forest portfolio perform last year?' Or 
ask the Administrator of NOAA, `how did our fish portfolio perform last 
year?' Once the national strategy is fully implemented, the information 
to answer these sorts of questions will be in official U.S. statistics 
that will enable Congress and the American people to look and see if we 
are turning over our natural assets ``increased, and not impaired, in 
value.''
    I believe the implementation details in the national strategy 
document from OMB, OSTP, and DOC lay the foundation for a data-driven, 
nonpartisan process for accounting for the changing value of our 
natural assets as well as the flows of income from those assets.

            Sincerely,

                                           Eli Fenichel    
                           Professor of Natural Resources Economics

                                 ______
                                 
                        Statement for the Record
                    Ranking Member Melanie Stansbury
                              March 7, 2024

        After I left the hearing, some of my majority colleagues 
        mischaracterized my words by claiming that the minority-invited 
        witness was unwilling to answer questions. That is incorrect. 
        In fact, he was on the way to DC to do exactly that, but had to 
        return home due to a family illness.

                                 [all]