State could spend hundreds of millions on Occidental land

After months of quiet discussions with an oil company, Wyoming officials announced Monday they are considering a massive land buy that one lawmaker said would be the biggest government purchase since Alaska. If completed, the transaction could entail dipping deep into the state’s savings funds.

Gov. Mark Gordon announced Monday that he and other top elected officials are exploring the purchase of 1 million acres and another 4 million acres of underground mineral rights across southern Wyoming, Utah and Colorado from Occidental Petroleum. The vast majority of the property is in Wyoming, running roughly along the I-80 corridor and Union Pacific rail line. 

Officials declined to offer a price estimate for the purchase, cautioning that a long process of appraising the land and mineral value will have to take place over the coming months. 

Officials hope to buy the acreage and additional mineral rights spread across the state’s “checkerboard” — a mix of privately held, state and federal lands — from Occidental, Gordon said Monday. The company is attempting to divest assets that came with its purchase of Anadarko Petroleum Corp. in August 2019. 

Occidental’s acquisition of Anadarko has drawn some criticism for the amount of debt the company took on to complete the purchase. Critics include the famed investor Carl Icahn, who owns 2.5% of Occidental.

Gordon and other officials suggested Occidental’s urgency to pay off debt offers Wyoming a “once-in-a-lifetime” opportunity. It could be some time before the public learns the true figure Wyoming would pay, even as lawmakers debate opening the states’ billion-dollar savings accounts for the significant expenditure.

“It’s a lot of land and it’s a lot of money,” Gordon said when asked about the price during a press conference Monday. Leaders of both the House and Senate, as well as the state treasurer and state auditor joined him in the announcement.

Officials hinted during the conference that they have a rough sense of the ultimate price, but declined to provide figures. “We are I think very conscious what the cost might be and very thoughtful about announcing that,” Gordon said. 

“Occidental has its idea of value, we have to form our idea of value,” Senate President Drew Perkins (R-Casper) said. 

A news report said Occidental sought $700 million for just a portion of its regional properties last fall. In November 2019 Occidental solicited bids for 200,000 acres in Wyoming and Colorado, and hoped for $700 million, according to Reuters. The “drilling acreage” offered was mostly in Wyoming, and sources familiar with the offer put the value between $500 million and $700 million, according to the report.

It’s not clear what relation Occidental’s offer last year might have with the purchase Wyoming officials are considering. The acreage that fell in Wyoming is likely part of the proposed deal, a member of the governor’s staff said. 

Reuters listed Royal Bank of Canada Capital Markets as the broker. That’s the same entity that’s brokering a prospective deal with Wyoming, according to discussions in the Senate Appropriations Committee on Tuesday.

Biggest since Alaska

“If the state were to move forward with this purchase, it would potentially be the biggest land purchase by a government in the U.S. since the federal government purchased Alaska,” Perkins wrote colleagues in a letter obtained by WyoFile on Wednesday.

Gordon has been talking to the company for six months, Gordon said on Monday. Speaker of the House Steve Harshman (R-Casper) indicated discussions had taken place for longer.

“Soon after the governor was elected all of us were hearing conversations,” Harshman said. “Around people that work for Occidental … that there was maybe some interest. The conversation has been out there for a while.”

The first step Gordon needs to take to advance the sale is passage of one of a pair of identical bills before the House and Senate. The bills authorize the use of various savings accounts to pay for the land, categorizing the purchase as an investment of those funds that would earn the state money. 

Few entities have the kind of cash Wyoming could bring to make such a large purchase, and the state could earn money from the land in a variety of ways, officials said at Monday’s announcement. 

“We can benefit in a way that perhaps no other entity can [by] doing the whole deal,” Gordon said. “We can get the graze land, we can get the trona, we can get the oil and gas, we can get the hunting, we can get the rights of way for the corridors for transmission [lines]… for wind, for solar, all of those assets really accrue to the benefit of Wyoming citizens.”

Even as the House and Senate voted to introduce the pair of bills last week, no word of the deal reached the public. Some representatives told WyoFile that leadership discussed the House version during a closed door caucus last week without offering specifics, informing representatives details would emerge soon. 

The surface ownership is concentrated in Sweetwater County, with other aggregations in Lincoln, Uinta and Carbon counties and a smaller cluster in Albany County, according to a map provided by the governor’s office. There is also a cluster of surface land in Utah and at least one parcel in Colorado. Mineral rights extend into Colorado and there is substantive mineral acreage in Utah, the map indicates. 

Land grant history

Occidental owns 7 million acres of land-grant property interests, according to the company’s third-quarter, 2019 earnings conference call. Land grant was the method the federal government used to encourage construction of the Union Pacific Railroad. In return for building a rail line across Wyoming, the government, starting in 1862, gave the rail company every other 640-acre section for 10 miles on either side of the track. The government later increased that to 20 miles on either side and threw in mineral rights.

Occidental secured its land grant holdings in August 2019 when it bought Anadarko Petroleum Corp through a $55 billion cash and stock deal. The acquisition raised continuing questions regarding how Occidental would cover its debts and maintain investor dividends. 

Anadarko itself bought Union Pacific Resource Group in 2000. Checkerboard holdings along the Union Pacific Line remain under Anadarko Land Co.’s name.

Betting savings? 

Depending on the eventual price tag, the purchase outlined in the bills could have a significant impact on the state’s savings accounts at a time when the Legislature has been leaning on them to cover government spending. 

The legislation allows up to 75% of the purchase price to come from the Legislative Stabilization Reserve Account. That account, nicknamed the “rainy day fund,” holds almost $1.6 billion right now. 

Lawmakers are using the fund to cover a structural deficit in funding the state’s public schools. Barring any new taxes or steep spending cuts — two steps the Legislature has declined to take over the last three years — fiscal analysts predict the account will drain fairly quickly. 

Already, the state will spend the account down to $632 million by the end of 2024, according to estimates the Legislative Service Office provided the Joint Appropriations Committee this year. The analysis did not contemplate the land purchase.

Under the proposed bills, money for the purchase above the 75% level could come from either the Permanent Wyoming Mineral Trust Fund, the Common School Fund — a similar trust fund that supports public education — or other available funds.

Officials are hoping the land and mineral rights can be acquired for the right price and subsequently become a revenue earner. The state treasurer, however, suggested that making the purchase and subsequently making investments to turn the land and minerals profitable might tighten belts further in Wyoming. 

“There’s going to be a period where we may not have the funds that we’ve had in the past as far as our cash flow,” Wyoming State Treasurer Curt Meier said Monday. “We’re going to do an analysis on that,” he said, as well as analyzing the state’s potential for a return on its investment.

“If we can make this thing work it will add a future to our investment portfolio that we don’t have right now,” Meier said. 

If the bill passes, the process will move fairly quickly, officials said. The legislation expires after a year. “The opportunity is now,” said Senate Appropriations Committee Chairman Eli Bebout (R-Riverton). “You don’t study this and think on it for a year or two.” 

The State Land and Investment Board and the Office of State Lands and Investments will conduct much of the analysis. The board is made up of the five statewide elected officials — Gordon, Meier, State Auditor Kristi Racines, Secretary of State Ed Buchanan and Superintendent of Public Instruction Jillian Balow. 

Once the board settles on a price, the bill requires it to report to the Legislature with that figure, a description of the assets included in the purchase and where the funding would come from. The Legislature would then have 60 days to act on the report before the state enters into a purchase agreement.

Angus M. Thuermer Jr. contributed to this story. 

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