Wyoming could become one of Utah’s largest mineral holders under a massive land deal the Cowboy State is exploring with a leading Western energy producer.

Gov. Mark Gordon is looking to buy at least 4 million acres of mineral rights and 1 million surface acres along Interstate 80 across southern Wyoming and into northern Utah, land the debt-burdened Occidental Petroleum Corp. acquired last year when it merged with Anadarko Petroleum, Utah’s largest natural gas producer.

Occidental has little appetite for developing these lands, but Wyoming’s Republican governor envisions a productive future for them if his state acquires them for “multiple use,” according to an explanation his office posted this week.

“The State sees it as a rare opportunity to acquire minerals, recreation, and other types of assets in Wyoming,” the message states. “These natural resources could be developed by private companies, not the State, and provide additional revenues to the State.”

Such a deal could be the nation’s largest government land acquisition since 1867, when the United States paid $7.2 million to buy Alaska from Russia. But what makes the Wyoming deal even more interesting is that the 300-mile corridor includes 190,000 acres in Colorado and about three times that amount in northern Utah.

(Christopher Cherrington | The Salt Lake Tribune)
(Christopher Cherrington | The Salt Lake Tribune)

Utah Attorney General Sean Reyes was not ready to say much this week on the matter. “The purchase of surface and mineral rights within Utah by another state raises numerous complex legal issues that would require substantial research and analysis," said his spokesman, Richard Piatt.

There is little precedent for one state owning large tracts in other states, and such a scenario could open some novel legal issues, said University of Colorado law professor Mark Squillace, an expert in mineral leasing and the Antiquities Act.

According to a map posted on the Wyoming governor’s website, the subsurface rights in play blanket Utah’s Morgan County and portions of Summit, Rich, Weber, Davis and Salt Lake counties. If the Cowboy State owned minerals in another state, could it still assert sovereign immunity over those minerals as if they were in Wyoming? posed Squillace.

"It's an unusual situation," he said. "I don't think there is any clear law that applies."

The Navajo Nation recently acquired coal assets in Wyoming’s Powder River Basin. As a condition of the sale, the Navajos had to agree that the coal would be subject to Wyoming’s laws.

If the Wyoming deal moves forward, Squillace suggested Utah and Colorado could insist on the same consideration and take steps to ensure the land and minerals trading hands remain under their jurisdictions.

The land in play was once owned by the federal government, which deeded it to the Union Pacific Railroad as partial compensation for constructing the Transcontinental Railroad in the 1860s. The railroad received thousands of sections, “checkerboarded” with parcels that remained federal, along a swath across southern Wyoming measuring 20 miles on either side of the rail line. The vast land grant extended into Utah as far as Ogden.

Through the years, much of the surface acreage was sold, but subsurface mineral rights generally remained consolidated in the hands of the railroad and successive owners under an arrangement common in the West known as “split estate.” Western law recognizes minerals as the “dominant estate,” meaning they can be developed regardless of the surface owners’ wishes.

Those mineral rights, along with another million acres where the surface and mineral rights were not split, remained with singular owners, recently Anadarko Petroleum.

Occidental acquired Anadarko last year in a highly leveraged $57 billion deal, and the new owner looked to shed some of its new assets that were not part of its core hydrocarbon-producing portfolio.

Last November, for example, it put up for sale its interest in 190,000 acres in Utah’s Greater Natural Buttes gas field, according to media reports.

Seeing an opportunity that no private-sector entity would pursue, Wyoming officials quietly entered into negotiations with Occidental to acquire the vast Union Pacific land grant, much of which has been leased for energy development and trona extraction. The possibility of a state buyout became public last month, but the governor’s office said it not yet proposing to buy the land, just exploring the feasibility of acquiring the vast area that sprawls across six Wyoming counties and extends into two neighboring states.

“To move forward, due diligence must show that this property could be a meaningful long-term investment, providing state revenues for generations to come,” Gordon’s office posted on its website. “This purchase would also need to prove to be an opportunity to open up vast acreage to multiple use, including grazing, recreation, public access, energy (including wind, solar, coal, oil and gas), and mineral (trona and other minerals) development.”

The mineral royalties currently coming off the land would go to Wyoming.

States typically do not pay property taxes, but Gordon assured the Wyoming counties they would receive payments from the state to cover the lost tax revenues if the state were to own the land and minerals. His statement did not make clear whether such a consideration would be extended to affected counties in Utah and Colorado.

An Occidental spokeswoman declined to comment.

The Wyoming Legislature, which is in the final days of its 2020 session, is considering a bill that would authorize the purchase and related activities, such as hiring consultants, distributing income from the property and payments to local governments. If the bill passes, according to Gordon’s spokesman Michael Pearlman, the state would commission an outside investment back to conduct an appraisal.