THE CONDITIONS · PART TWO Granted, Not Guaranteed | Open Position by Steven Feldman

OPEN POSITION

FROM THE DESK OF STEVEN FELDMAN

The postwar order assumed two things about contracts: that the ones already signed would be honored, and that the next ones would be won rather than granted. Both are now discretionary.

Last year, the Bureau of Ocean Energy Management ordered the work on Revolution Wind, a sixty-five turbine project off Rhode Island, to stop work . The project was 80% complete. All of the offshore foundations were in. Forty-five of sixty-five turbines were standing.

This was not a permit denied. The project was fully permitted — its construction and operations plan approved in 2023. Ørsted, the developer, had spent billions of dollars building this 704-megawatt project against twenty-year power purchase agreements with Rhode Island and Connecticut. The federal government was withdrawing the use of something already granted.

For eighty years, private business could rely on the sanctity of a federal contract. Not anymore.

In Part One I argued that the postwar order made four guarantees reliable enough that investors stopped pricing them. This letter is about the first: that property and contract rights survive politics. It is one claim at two moments: what the government granted, it can now revisit; what it has yet to grant, it now negotiates. (Note that this series was announced as four parts. It has grown to five, one letter per guarantee.)

THE RELIANCE PROBLEM -- What a Commitment Used to Be Worth

Ørsted went to court. The judge granted a preliminary injunction, finding the developers likely to succeed and likely to suffer irreparable harm.  The stoppage was deemed arbitrary and capricious, and the developer was losing at least $2.3 million per day while the work sat idle.

Construction resumed. Then the BOEM issued a second order — suspending the leases, for reasons of national security, on all five offshore wind projects then under construction in the United States. By that time Revolution Wind was 87% complete. Shortly thereafter another judge overturned that order too.

Granted, suspended, restored, suspended again, restored again. All in under five months. The asset never changed. The lease never changed. What changed was the number of times its owner had to go to a courtroom to keep using it.

The same pattern appears in several other places. The federal government contracted for foreign-aid work, the work was performed, and the government declined to pay the $2B tab; a federal court disagreed and order that it be paid, and the Supreme Court declined to disturb that order. The principle underneath is the oldest one in commerce. Work ordered, work performed, payment to be made. Not that hard.

Lawyers call this reliance interests. A company obtains a lease, finances against it, and builds. If the commitment can be revisited after an election, the lease is not an asset. It is a legal claim.

Fortunately, the government lost nearly all of these cases. Unfortunately there are exceptions. For example, late last year the Supreme Court let roughly $4 billion of appropriated foreign aid be rescinded. Apparently if the money has only been committed, and not spent, the commitment is not so sacrosanct.

WHO GETS PICKED -- Discretion Replaces Process

The second direction doesn’t create a lawsuit. Only a press release.

Since mid-2025 the federal government has taken or proposed ownership positions in as many as thirty companies, roughly $27 billion of equity and quasi-equity. A golden share in U.S. Steel, carrying veto rights over closing plants or moving production abroad. Roughly ten percent of Intel, converted from CHIPS Act grants, making the government its largest shareholder. Fifteen percent of MP Materials — the only fully integrated rare-earth producer in the country — taken by the Department of Defense, which is now its largest shareholder too.

The Pentagon is the name to remember. Its Office of Strategic Capital also holds 35% of a new joint venture with North American Blue Energy Partners, which received hundred-year concessions on seventeen Venezuelan oil fields reported to hold some 65 billion barrels.

One department. Minerals at home, oil abroad. The instrument does not stop at the water’s edge.

When an award turns on discretion rather than process, the value of an asset stops being a function of grade, jurisdiction and cost of capital, and starts being a function of access.

You can model a permitting timeline. You can model a bid. You cannot model a relationship. An input you cannot model does not get a higher discount rate. It cannot be priced at all, which is a different and much worse problem.

And if all that is not enough, there is a second order problem.  We now have firms negotiating a contract with the Pentagon while the Pentagon is its largest shareholder. The Pentagon sits on both sides of the table, which would be okay if the Pentagon were the only shareholder in these companies.  It is not – so taxpayer dollars are enriching these “chosen” shareholders.

WHAT THIS IS NOT -- Precision, Before the Argument Goes Further

Governments change rules. Tax rates, tariff schedules, permitting standards, subsidy programs — all of it is fair game, all of it is prospective, and none of it is what this letter is about. Industrial policy is not new either, and allied governments hold equity in strategic firms as a matter of routine.

Nor is every one of these cases a violation: government contracts carry termination-for-convenience clauses, and a federal grant is not a commercial contract. None of this is a takings claim.

And none of the Four Guarantees was ever absolute — ask anyone who held an Iranian asset in 1979. They were simply dependable enough, for long enough, that a rational investor didn’t need to ascribe such a high cost to this particular risk.

So here is the narrow claim that I will continue to defend: outside the financial emergency of 2008 and 2009, this administration has shown a substantially greater willingness than any recent predecessor to revisit commitments after counterparties have relied on them, to take ownership in companies that were not failing, and to allocate new awards by negotiation rather than by process.

THE COUNTERARGUMENT -- Where the Skeptics Have a Point

This is the argument from the skeptics that I will indulge. In the examples above, the courts worked.

The stop-work orders were enjoined twice, the administration let the appeal deadline pass, and Revolution Wind is now delivering power. The invoices were ordered paid. The IEEPA tariffs were struck down six to three in February, and the refunds are not a theory — U.S. Customs and Border Protection opened its refund channel on April 20 and had repaid $86.3 billion, interest included, against $166 billion collected, by July 10. The system held.

All true. Three answers.

The outcome held. The cost of the outcome is new. Two stoppages, a loss the court put at $2.3 million a day, an impairment charge on the books, and a board that now carries political reversal as a line item rather than a footnote. A guarantee has become a contingent legal claim that you enforce yourself, at your own expense, over a duration nobody can quote you.

The courts cannot reach the second direction. Nobody sues over a deal they signed. Intel and MP Materials took the government’s money, and MP’s shares jumped on the announcement. The cost lands on the competitors that were not picked and on the investor who can no longer model who will be.

The precedent cuts the other way. Skeptics will point out that in 2008 and 2009 Washington took about 60% of General Motors and a controlling stake in AIG. Those were rescues: the companies were failing, and the government sold its stakes as they recovered. Intel was not going out of business, and its stake was converted from grants it had already been awarded. The question is not whether the government owns equity. It is why, and whether it leaves.

There is a third pattern in this record: when a ruling or a rule becomes inconvenient, the rule moves. It showed up in the tariff authorities this year, in Nasdaq’s index rules in May, and in the yen workarounds in August. That is a different guarantee. It is Part Three.

WHAT THIS MEANS FOR INVESTORS -- You Cannot Underwrite Access

Jurisdiction has always been a discount rate. Every mining investor knows what a Malian asset trades at relative to a Nevada one, and why. The claim in this letter is narrower and more uncomfortable: the United States now has to be asked the question we used to reserve for Mali.

So the positioning, stated plainly: keep building exposure to assets whose value does not depend on being chosen.

Gold first, and held the way it should be held — allocated, unencumbered, in your own name, in a jurisdiction you would be willing to litigate in. Then tier-one deposits in places where the award process is still a process. Then farmland, and the physical infrastructure that earns its cash flow without a license that somebody renews at their discretion.

Nobody can take a golden share in an ounce. Gold has no cap table.

A disclosure: GBI sells allocated gold, and I have business interests in farmland and mining. Weigh the positioning with that in mind.

What would change my mind: two consecutive major federal awards in minerals or energy made through published competitive process rather than a negotiated equity stake, alongside the IEEPA refunds completed on the court’s schedule rather than the agency’s. That would tell me process is reasserting itself, and that I am early rather than right.

A lease is only an asset while somebody honors it.

Steven Feldman

Steven Feldman is the co-founder & CEO of GBI. This newsletter is for informational purposes only and does not constitute investment advice.

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