SITLA’s Trillion Dollar Opportunity
Utah Attorney General Sean Reyes recently announced that his office has hired an outside law firm to explore the potential to litigate the recent decision by President Biden to expand the Bears Ears National Monument and the Grand Staircase Escalante National Monument. Attorney General Reyes and Governor Cox should be commended for their willingness to stand up against egregious abuse of the Antiquities Act.
It is important to note that Chief Justice John Roberts has acknowledged that the limiting factors of the Antiquities Act are not clearly defined. The Antiquities Act requires that national monuments be limited to the smallest area compatible with the proper care and management of an object to be protected. Presidents have acted as if the word “object” could mean the entire known universe.
Anyone who has ever read a legal document knows that a definition of terms is crucial for the understanding of the law. That we have gone so long without creating a workable definition for the word “object” in a vaguely worded law that gives presidents immense power is a blight to the rule of law, the republic, and especially to the state of Utah. To the extent that Congress has spoken to what the limiting factors of the Antiquities should be, Congress has passed strict limits. In the states of Wyoming and Alaska presidents are forbidden from designating monuments larger than 5,000 acres.
In Utah, four different presidents have identified four different boundaries for the areas encompassed by these monuments, which shows that the determination of the size of a monument is arbitrary and capricious. Utah should challenge Biden’s monument expansions to the level of the Supreme Court, so that the Justices can interpret the vagaries of the Antiquities Act in a case where Congress has done an extremely poor job of defining the standards of the legislation it passes.
While clarifying the ambiguities of the Antiquities Act would be an important step to check presidential power and prevent abuse, it is also important to consider the impact of expansive national monuments on Utah’s State Institutional Trust Lands Administration – often referred to as SITLA.
If you look at a map of property ownership for the State of Utah, you will notice a checkerboard of blue parcels that are owned by SITLA. SITLA has the fiduciary responsibility to manage the lands in a way that produce economic value for a trust fund it manages for the purpose of funding Utah’s education system.
While SITLA’s stewardship of these lands has produced notable returns on investment for Utah’s education system, even during the best of times it has only played a marginal role in funding our schools. This is largely due to the way SITLA lands are allocated through a seemingly random designation of square parcels throughout the state. SITLA and casual observers will generally acknowledge that many of these parcels are relatively worthless because their valuation is determined by the standard practice in real estate of comparing real estate to comparably valued real estate nearby. Since most SITLA land is located in the midst of vacant, federally managed, rural land, it is valued like vacant, federally managed, rural land. There just hasn’t been a good market mechanism for determining a fair value for these properties in an environment where land ownership is monopolized by the federal government.
If you look at the footprint for Bears Ears National Monument, you will see that many SITLA parcels are included in the Monument. A rough count shows almost 200 separate SITLA parcels, which usually average on 640 acres a parcel.
Precedent suggests that the most prudent thing to do with a monument designation is to trade out the scattered SITLA parcels to acquire adjacent blocks of parcels from the Bureau of Land Management in other areas where it is more likely to see financial returns. For example, when the Grand Staircase Escalante National Monument was created, a big parcel of land was acquired near Big Water (See blue block of land below) in Kane County. Very little financial return has been realized from this trade, so it begs the question whether swapping SITLA parcels out of monuments is really the best strategy for funding our schools.
Since Biden expanded the Bears Ears National Monument, it is reported that SITLA is aggressively trying to structure a deal to swap out parcels in Bears Ears for BLM land elsewhere. This is most likely a terrible idea and arguably a breach of trust in the fiduciary responsibility that requires the agency to produce economic value for our education system.
Instead of a potentially worthless swap, SITLA should consider challenging the monument designation as a property taking through litigation. The Fifth Amendment of the Constitution requires the federal government to provide just compensation for taking of property that results from government action. The swapping of SITLA land for BLM land is rooted in the principle that monuments do in fact damage SITLA and the education system of Utah, and the federal government is required to make SITLA whole. These swaps are usually governed by a “value for value” swap instead of an “acre for acre” swap. As a result SITLA goes into these negotiations with an arguably faulty starting point that it has to see its estate dwindle in size in order to accommodate a “value for value” standard that doesn’t reflect the changing priorities of markets over time.
Land rich in lithium resources might have been valued poorly when Clinton designated the Grand Staircase Escalante National Monument. Those resources would be more valuable now. Somehow, someone at SITLA convinced themselves that walking away from an estimated $1 trillion in coal deposits in the Kaiparowitz Plateau was worth it to get a few thousand acres of sandy desert in Big Water near Lake Powell. There just simply hasn’t been a good standard for SITLA to define the value of its holdings, so it goes into any negotiation for a swap with a weak position.
This is a disaster for our education system. Education in Utah is funded primarily through property tax. Many counties in Utah have land that is owned almost entirely by the federal government, who pays no property taxes on the land. SITLA was supposed to be the solution to this problem, and it just hasn’t worked out.
New developments on immediate horizons suggest that SITLA should shift course and adopt a new strategy for valuing its assets and protecting the value of those assets against abusive national monument designations. In September of this year, the New York Stock Exchange announced the launch of a new asset class jointly developed by the InterAmerican Development Bank and the Rockefeller Foundation for Natural Asset Companies. A Natural Asset Company or NAC is a sustainable enterprise that will be listed on the NYSE that holds the rights to ecosystem services produced by natural, working or hybrid lands.
According the developers of this new asset class, NACs enable natural asset owners – Like SITLA – to convert nature’s value into financial capital. Anaylsis of this new asset class values the global ecosystem services market to be four quadrillion dollars. While the verdict is still out as to whether the introduction of NACs to the financial scene will be a good thing for humanity, this is certainly a good thing for SITLA.
Before SITLA trades away the birthright of Utah’s families to have an education system lavishly funded by our Trust Lands for the mess of pottage of a BLM swap, SITLA should hire some of the financial analysts from the Intrinsic Exchange Group, the InterAmerican Development Bank and/or the Rockefeller Foundation to do a bona fide valuation of the ecosystem services of its assets. Once it has a number that can be defended by expert witnesses in a court of law, SITLA should sue the Biden Administration in a takings claim that would scrutinize any impairment to its assets by the monument designation.
It is not unimaginable for this takings claim to measure in the hundreds of billions of dollars. There is an estimated $1 trillion in coal reserves in at least one of the monuments, so maybe SITLA should just start there at a cool $1 trillion dollars. While the idea sounds far-fetched, rural counties in Oregon have sued the state of Oregon for mismanaging their Secure Rural Schools parcels and won a $1 billion settlement. For reference the SITLA trust fund after years of prudent financial management is sitting on a little over $2 billion.
The bottom line is that the biggest a best way to extract cash out of the federal public land system is through lawsuits. Extraction through litigation is an innovation brought to our public land system by the same environmental groups that have been the biggest cheerleaders of abusive and expansive national monuments. It’s time for SITLA to start playing from this playbook and clean house.
It could be argued that adventurous litigation is not consistent with SITLA’s fiduciary responsibility, since litigation is expensive with no guarantee of success. For this reason, the Utah State Legislature should appropriate money to create an office within the Attorney General’s office, whose only purpose is to extract the full value of SITLA’s holdings through litigation against the federal government. SITLA is already appropriated money from OHV registration fees to perfect access to its holdings, which could arguably include asserting legal rights of access.
Because its holdings are scattered throughout the federal estate as inholdings, SITLA parcels are impacted by almost every decision reached by a federal land manager. SITLA has impeccable legal standing to be challenging every single one of these decisions, and with the advent of Natural Asset Companies, SITLA now has a model of valuation it can use to justify large legal settlements when the value of its holdings are impaired by implementation of federal policy.
There is no reason to rush a swap of the Bears Ears SITLA parcels. The land isn’t going anywhere. There is a potential legal challenge pending from the State of Utah, which could dramatically change the outcome of the monument designations. Instead of rushing a swap, the leaders of SITLA should be exploring every opportunity to capitalize on the monument designations.
Ultimately, any transfer of a state-owned land to the federal government, such as a land swap, will require a vote of consent from the Utah Legislature. Our legislators have no business voting away a birthright asset of our state for pennies. Their track record with the Big Water parcel shows there is a real risk they really will trade trillions in value for almost nothing in return. It would be entirely reasonable to pass a resolution in the upcoming legislative session requiring SITLA and the Utah Treasurer to assess the value of securitizing SITLA’s holdings into a Natural Asset Company. Our leaders should be working to find a way to fully-fund SITLA and give every Utahn a permanent cut – if not complete elimination of – their property taxes.