The state of Wyoming signed a contract in late April with banking giant Barclays to pay it $2.5 million to evaluate the purchase of 1 million surface acres and 4 million mineral acres from Occidental Petroleum.
The state has already paid Barclays $1 million of that sum. An initial $500,000 payment in May was debited from an account for state construction project overruns, and another $500,000 was paid last week out of the governor’s budget, according to the governor’s spokesperson and data provided by the state auditor’s office.
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The fact that the state had contracted with Barclays and was within weeks of submitting a bid to Occidental was not made public until WyoFile reported it last week. If Wyoming buys the land, Barclays could make more money depending on the ultimate purchase price, according to a copy of the contract.
On Tuesday, the news agency Reuters reported that the state of Wyoming has postponed submitting a bid to Occidental until July 8, with the company’s agreement. The State Land and Investment Board, which is made up of Wyoming’s top five elected officials, will hold a public meeting before the state submits a bid, members of Gov. Mark Gordon’s staff previously told WyoFile.
The executive branch is pursuing a purchase process that does not require a vote of approval from the Legislature — despite a purchase price in the hundreds of millions or perhaps more than a billion dollars. The disclosure that the state is nearing a purchase has raised the hackles of some lawmakers who feel they’ve been wrongfully excluded. Others say they’ve been informed of the governor’s advancement of the deal over the last few months.
On Tuesday, Gordon’s spokesperson Michael Pearlman said the first payment came out of the Capital Construction Contingency Fund. That account, which is used to cover project overruns in construction, had a balance of around $3.4 million in April — before the first Barclays payment.
The second payment of $500,000 came from the governor’s budget, and “the source of funds for the third payment is still being determined,” Pearlman said. “The governor will be evaluating his options as the process moves forward.”
The state hired Barclays to analyze the purchase, advise on bidding tactics and potentially assist in negotiating the purchase and transaction documents, according to the contract.
If a purchase goes through while Barclays is contracted or within a year following the contract’s end, the state will pay Barclays a success fee. The more the state pays for the land, the more Barclays will earn. The fee could be as high as $8 million, if the purchase price surpasses $1.5 billion.
The agreement also gives Barclays a chance to intervene in public-records requests made under Wyoming public records laws for information and documents in the custody of the Office of State Lands and Investments, the state agency contracting with Barclays. The agreement states that OSLI will consult with Barclays and give it the opportunity to seek a protective order from a judge against records requests if needed.
In a press conference on Wednesday, Gordon promised transparency and public involvement on the land deal. “I want to assure the people of Wyoming that they will have every opportunity to understand the details of this potential bid and not only that, that they will have every opportunity to comment on the approach,” he said.
The state would hold public hearings in counties that hold the land if Occidental accepts a Wyoming bid but before the purchase is completed, Gordon said.
The executive branch had to find money to pay the consultants because the Legislature did not pass a bill funding state construction this year, Gordon said. The failed construction bill included money to explore the land purchase, Gordon said.
The state’s agreement with Barclays is dated April 29. In a step to tighten budgets because of COVID-19’s impact to the economy and state revenues, Gordon on April 15 ordered state agencies to halt purchase contracts for more than $100,000.
Though Barclays was expensive, the state needed such a large institution’s assistance, Gordon said.
“Frankly it was important that we get an entity like Barclays in order to do a proper analysis for what this opportunity means for the state of Wyoming,” Gordon said.
Rep. Chuck Gray (R-Casper) called the contract an “insider consultant contract” that could cost the state of Wyoming as the governor uses his statutory authority to shift some funds out of agency budgets to pay for it.
“It is absolutely wrong for this exorbitant contract to be carried out,” Gray wrote in an email. “This is a time of economic and budgetary challenges in our state. It is wrong for politicians to use taxpayer funds for this insider consultant contract.”
Legislators dislike process
The state’s interest in purchasing Occidental’s massive land and mineral holdings — which stretch along the I-80 corridor in southwest Wyoming into Utah and northeast Colorado — first became public following a surprise announcement at the start of the 2020 Legislative session. At that time, Gordon said he was seeking legislative involvement in the purchase, which lawmakers speculated could be paid for using the state’s “rainy day fund.” Gordon vetoed a bill setting parameters and creating a more public process for the purchase, which included holding public meetings in the counties containing the land.
Instead, the executive branch chose to pursue the deal using the state’s investment funds, which do not require legislative approval provided the purchase is considered a “prudent investment” under state statutes.
Rereading from his March veto letter during this week’s press conference, Gordon said he had committed to holding public meetings on the purchase. Should the state’s bid advance, “there will be further opportunity for detailed discussion,” Gordon said. The Legislature had given him a nod to pursue the purchase by passing a bill to advance the land deal, Gordon said, even though he vetoed that legislation because of the details in it.
But several Republican lawmakers told WyoFile this week they are troubled by Gordon’s process to pursue the deal.
“Without question I think that the state purchasing that much land and that many mineral rights, that should have been a public decision and a public process,” House Speaker Pro Tempore Albert Sommers (R-Pinedale) told WyoFile on Tuesday.
“I still don’t know where I lie on whether I support it or not,” Sommers said of the deal. “I just think that we the public, and the Legislature that’s the arm of the public, because of the extraordinary purchase, that this is should have had the ability to examine and make that decision.”
There may be good reasons for the state to buy the land, much of which is part of a checkerboard pattern of land ownership that has long bedeviled ranchers, public land users and minerals companies alike, Sommers said.
“It’s a huge swath of land and I worry who might get it,” he said. “I know livestock producers that run down there in those checkerboards and times aren’t easy for them. So there are certainly reasons that I feel that it’s a real asset to the state of Wyoming.
“It’s some of the heart of the Red Desert,” he continued. “It has wildlife value, livestock grazing value … if some other company buys it and just decides to just annihilate the whole thing, would we in the state of Wyoming really like that? I don’t know if we would.”
Sommers reiterated claims from the governor’s office last week that Gordon has kept some leading lawmakers informed on the steps being taken in the deal. But more rank-and-file lawmakers have said they were kept in the dark.
State statute gives the executive branch and particularly the Wyoming State Treasurer’s office leeway to make decisions on how to invest billions of dollars from various trust funds. Such leeway is necessary to allow the state’s investment officers to play in national and global markets, lawmakers interviewed by WyoFile this week said. But the nature of the Occidental purchase makes it a different issue, those lawmakers said.
“This is not just an investment, this is something that requires active management on the ground in the communities of Wyoming,” said House Majority Floor Leader Eric Barlow (R-Gillette). Evaluating whether Wyoming should own the land is more than just a fiscal question, he said.
“Due diligence is not just a fiscal thing in my mind,” Barlow said. Without a public process, the state won’t know how the various communities and industries in that large part of the state view the idea, he said.
The state’s valuable trona mining industry is watching the developments “very carefully,” said Travis Deti, the executive director of the Wyoming Mining Association. The minerals under consideration include much of the state’s trona supply, and the mining companies could soon be dealing with new mineral owners, whether the state or not. With little information to go on, industry leaders have not reached a consensus on whether they want Wyoming to buy the land and minerals, Deti said. “There is a lot of speculation there’s a lot of rumor flying around,” he said.
A representative from Rock Springs, which lies near much of the land proposed for purchase, also said “investment” was too mild a word for the momentous land deal. “I don’t think the Legislature should or needs to be involved in a decision to buy General Motors stock … but this feels like a different kind of investment,” Rep. Clark Stith (R-Rock Springs) said.
Stith for now opposes the purchase, he said, because he thinks the state’s trust funds, which are derived from mineral wealth, should not be used to double down on oil, gas and trona mining assets.
Gordon’s spokesperson told WyoFile last week the governor views the purchase as diversification and is not focused solely on developing the asset’s mineral wealth. It’s unclear, however, what other financial incentives the massive property brings the state.
“From a recreational point of view there might be advantages of having ownership [of the land],” Stith said, “but I don’t believe that should be a driving concern — That’s a pretty expensive hunting license.”