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.

Gov. Mark Gordon speaks to lawmakers on the opening day of the 2020 Legislative session. (Andrew Graham/WyoFile)

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.”

Power lines running to the Jim Bridge Plant. The right of ways to corridors for such transmission lines are one way Wyoming might earn revenue by buying 1 million acres of surface land from Occidental Petroleum, Gov. Mark Gordon said. (Angus M. Thuermer Jr./WyoFile)

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.

A GoogleEarth view of landscape near Anadarko checkerboard holdings west of Rawlins.

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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Andrew Graham

Andrew Graham is reporting for WyoFile from Laramie. He covers state government, energy and the economy. Reach him at 443-848-8756 or at andrew@wyofile.com, follow him @AndrewGraham88

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  1. Oxy was concentrated in the Permian basin in TX and was not interested in some of Anadarko’s assets that fall outside the wheelhouse. The State of WY leadership seems to be aware that OXY wants to dump the Rockies assets and gas prices have fallen steeply in the last few months. OXY is getting desperate and the governor no doubt thinks it is time to make a really good deal for WY. Another angle to it – If the state is spending more than it is bringing in, funneling money into investment may force financial discipline. Business owners tighten their belts and borrow to buy out competitors during recessions, and cutting back on spending b/c of a purchase of a huge undervalued swath of land may serve several purposes. WY also has the structure to take advantages of ROW, hunting, and the other activities that private ownership likely never tried to fully exploit.

    Now to clear up some misconceptions. From bottom to top:
    Beau Hill –
    1. “This is primary gas extraction country, and forecasts continue to show depressed gas futures due to an extreme surplus. How long would it take for this land to payout at current oil and gas strip prices?” – If gas futures were high, the price would start high and surpass WY’s ability to meet the demanded payment.. Every investment entails risk. When value hinges on commodity price, there is not a way to prove it is a safe/dependable investment.
    2. “This land would contain a substantial amount of producing Oxy wells. Is the State going to develop a government-run Oil and Gas company to continue to operate these wells?” – Purchasing mineral rights/surface rights does not make you the operator of the property. It bestows the right to collect royalty payments.

    Jeff Hansen
    1. [The purchase] “….needs to earn at least 4 to 4.5%….” That’s an extremely poor return expectation given the risk involved (a recent stock chart of Occidental (“OXY”) speaks volumes to this risk). – OXY’s stock price reflects the market’s expectation of OXY’s ability to earn and maintain profits. APC’s Rockies holdings is a tiny part of the whole, and is not a major influence on Oxy’s fortunes. Commodity prices would be a better proxy than OXY’s stock price.
    2. “I would suggest Wyoming not make a bid for the assets, but rather partner with the ultimate bid winner to then exchange out the “checkerboard” with BLM and perhaps then negotiate to buy the surface acreage where it makes sense.” – Fed govt doesn’t ever get anything done. WY is not going to swap sections with the Feds.

    Benjamin Wilson
    1. “Just a quick question , is this a buy out / bailout of Occidental petroleum who for years received tax breaks from Wyoming ?” – If WY lowballs the price then I would assume not.

  2. If they had savings invested in a diversified market portfolio then the 1 year performance looks pretty poor right now, although the 2010 – > 2020 numbers look good.. Safe bonds will yield less than 4.5%. It’s probably the time to sell stocks and buy land/minerals.

  3. Just a quick question , is this a buy out / bailout of Occidental petroleum who for years recieved tax breaks from Wyoming ?

  4. I apologize for not understanding some of this. I’m a citizen of Wy. and when I buy land its done in the same manner 1st Are the upfront cost justifiable as to my expectations for the property. 2nd what are my immediate expectations of return in 1st year what yearly expectation . 3rd Will the purchase grant me immediate appreciation or is it long term are just a few, the most important evaluation I make on a purchase is what would be the cost of self sustaining this property and producing its own form of income to defray or pay off the purchasing price saving millions in interest. This the Legislators debate and Seems all I hear about every year is we are broke or will be in the new future, So would this purchase be more beneficial than investing in State rural access to regain our Reputation of taking care of our own.

  5. Mark Gordon should absolutely pursue the Occidental Land purchase. If the deal can be made, this would be a true investment in Wyoming’s future and is therefore the type of expenditure that we should contemplate for our State savings fund. The legislature may finally be forced to tighten their spending belts. Let’s invest and not just spend!

  6. This ‘deal’ needs to be thoroughly examined. With oil, gas, and coal prices currently depressed, and a strong possibility of emphasis on ‘renewable’ energy…is there a possibility of even paying off the initial purchase price, much less making a profit? Does the land involved have sites that will require an environmental cleanup? And at what cost? If Occidental Petroleum, an oil and gas company, is willing to sell this land, does that mean that it determined the return on minerals is not enough to justify holding on to it? Transparency and both legislative and public input here are essential before making this decision.

  7. They will just take the land we already have access to and close it off with wind farms and solar power that looks like hell.

  8. Allow for an added tourism tax – hotels, camping, etc. to impact the economics. Those of us that love visiting Wyoming, would not (likely) object. An extra $100.-or so, on a several $1000’s Wyoming trip is insignificant. As an example, look at add-on fees at major airports for car rental – just to support the airport.

  9. This potential purchase makes a lot of sense. The state needs to diversify it’s holdings in it’s various savings accounts. Real estate is a great way to do that. Plus there are innumerable side benefits to residents and recreationists, These are folks who generate a lot of economic activity for local businesses. The outdoor economy is real and it’s extremely important in efforts to even things out during the continual boom bust cycles of the energy industry. .

    If a person looks at a map of the checkerboard areas covered by this proposal, these lands control access for recreation, energy development and grazing to a vast area. Certainly more than double the size of the actual purchase itself. This appears to be a very wise place to for the state to invest it’s savings.

    1. “Robert B Crooks says

      “The outdoor economy is real and it’s extremely important in efforts to even things out during the continual boom bust cycles of the energy industry. .

      If a person looks at a map of the checkerboard areas covered by this proposal, these lands control access for recreation, energy development and grazing to a vast area. Certainly more than double the size of the actual purchase itself. This appears to be a very wise place to for the state to invest it’s savings.”

      Robert:

      Tell me if I am wrong, but most of the checkerboard parcels that the state is looking at are for underground mineral rights, not surface rights. Wouldn’t that mean that you will not have access to those lands that the state has no surface rights to?

      If you look at state land in Teton County, most of it is off limits to state residents……NO TRESPASSING signs everywhere. And some is leased to private parties that also deny public access.

      So, don’t expect recreational opportunities to suddenly appear for anyone except those who can buy those rights.

  10. It is hard to lose money over time over owning land, if you can pay a reasonable price. Right now the legislature can readily access our savings. If it is land, it can not. Depending on your point of view, that is good or bad.
    Mark Gordon has a great deal of financial acumen managing assets. Yet, it is easy to be suspect of such a purchase.

  11. ” the biggest government purchase since Alaska. ”

    I am all for it if the State can negotiate the same deal the the US did for Alaska. At 2 cents an acre I could get behind this deal too.

    Seems to me that there are a lot more pressing issues for the Legislature.

  12. I’m so glad Wyomingites are commenting and asking questions. Please ask those questions of your Rep and Senator as well. https://www.wyoleg.gov/Legislators/2020/H & https://www.wyoleg.gov/Legislators/2020/S If you don’t know who represents you in Cheyenne the legislature’s website has a “find your district” tool. It’s easy to use. You can also comment on the bills directly by going to the “Comment” tab of https://www.wyoleg.gov/Legislation/2020/SF0138 & https://www.wyoleg.gov/Legislation/2020/HB0249

    And with those links, I highly encourage everyone to read the bills.

  13. So Occidental Petroleum had a great 2018 with a net income of $4.1 billion. In 2019 they acquired Anadarko with the help of Warren Buffett who received an 8% preferred stock dividend on his $10 billion dollar investment. The third quarter of 2019 was a disaster for Occidental (the showed a loss of $794 Million with a special expense item of $897 Million). I’m not sure what the special expense item relates too or if it relates to the Anadarko acquisition. Clearly, though the Anadarko acquisition is weighing on their performance with the price of natural gas and oil being so low.

    I can’t imagine that there are any other logical or interested buyers. It seems like the state is an ideal position to make a very lowball offer and be prepared to walk away if Oxy doesn’t take the offer.

    Also, looking at the map. The Utah property seems to be in Wasatch or Summit County which may actually be the most valuable real estate in the transaction. I am not sure if that comes with the deal as it doesn’t make much sense for the State of Wyoming to own land in Utah.

    Thank you Andrew for your prompt and diligent work on this.

    1. thanks for that insight and additional background info, Travis. I agree this is a great time for the state to act.

  14. The State of Wyoming has never been an effective land manager, ex: School Trust Lands. With over 3M acres of school trust land from which Wyoming has a fiduciary obligation to maximize returns in order to fund our schools, Wyoming still must kick in a huge amount of money to fund the school guarantee. Rather than liquidate school trust holdings to pay for education, the State Land and Investments Board is more worried about hunter access.
    And, what about the local and state property taxes that will evaporate once this million acres goes into state ownership? The oil company owners are now paying property taxes. There better be good data to show that an acquisition such as this will benefit taxpayers from a financial standpoint. There is no data anywhere to show that any government or government agency does a good job managing land. That’s why there is so much animosity in this Wyoming for the US Forest Service, BLM and Park Service. Now, our Governor wants to expand that list to include Wyoming.

    1. Kate, excellent points. Thanks. Will the net ROI, after adjusting for the property tax effects you point out, surpass other ways to invest these funds? I admire OSLI, but managing these assets will take a lot of time and talent- not cheap. Best / phil hocker

    2. There was a comment in the Legislature debate yesterday (Tuesday Feb 25) that the purchase “….needs to earn at least 4 to 4.5%….” That’s an extremely poor return expectation given the risk involved (a recent stock chart of Occidental (“OXY”) speaks volumes to this risk).

      I would suggest Wyoming not make a bid for the assets, but rather partner with the ultimate bid winner to then exchange out the “checkerboard” with BLM and perhaps then negotiate to buy the surface acreage where it makes sense (trona, wind farms, power & transmission lines, grazing, etc.) Really hard for me to see how it’s in the State’s best interest to own the oil & gas mineral interests in this package once you remove the obvious historical & cultural desire to “extract stuff from the ground.” A rational investment horizon doesn’t currently exist to make that kind of investment by a State government.

      I applaud the Governor and Legislature for the bold thinking here, but the risk here for the State seems extreme, and it’s not any governments’ job to take on risk like that, in my opinion

  15. I’m a bit skeptical on this purchase. I’m all for more public access, but the revenue side of things don’t seem to justify this purchase.

    1) It puts even more of reliance on energy development for State revenue. This is primary gas extraction country, and forecasts continue to show depressed gas futures due to an extreme surplus. How long would it take for this land to payout at current oil and gas strip prices? How will the State influence development of this property to ensure the payout is met?

    2) This land would contain a substantial amount of producing Oxy wells. Is the State going to develop a government-run Oil and Gas company to continue to operate these wells? Will they hire a company to operate? Will they urge a working-interest partner to take over operator-ship? Either way, I’m not sure it is in the best interest of this State to become an Oil and Gas operator.

    I understand the urge to move quickly, but it seems the State needs to conduct thorough due diligence and make sure this is in the best interests of Wyoming moving forward. The value may be $700 million to a low-overhead E&P company that can maximize revenues from oil/gas extraction, but that may not be the case for a State government.