Wyoming plans to move forward with a bid on a million acres of land and four million acres of mineral rights from Occidental Petroleum. After hearing from the public for the first time since the legislative session on the deal, the State Loan and Investment Board (SLIB), made up of five elected officials, amended its motion to make room for more transparency.
The all-day hearing consisted primarily of testimony voicing frustration around the deal regarding lack of transparency, possibility of diversification, the use of certain funds, and potential politicization.
The meeting also provided significant new information regarding the purchase. An important marker for some citizens who have felt out of the loop.
"Until this morning, there has only been two specific concrete facts that Wyoming citizens have known about this proposed land deal. One is the map that shows the physical and mineral acreage of the land. And then the second is that it's called Project Bison," said citizen Brenda Mongold.
What We Learned
"To me, this investment seems the opposite of diversification."
State Treasurer Curt Meier expressed doubt that the deal itself would even come to fruition. He said this is just the beginning of the process and that there will be much discussion if Wyoming does end up being the high bidder, but that he still has doubts.
"Essentially, I don't believe we are going to be the high bidder," he said. "I think we may have an opportunity to buy part of it from someone else at some point in time."
Meier's office said later it's their understanding that multiple parties are interested in the property; depending on how the valuations come back, the treasurer's spokesman said it's safe to assume there's a chance another party will make a higher bid.
Randall Luthi, the Governor's Chief Energy Advisor, also gave details to how the process will look as the bid moves forward. Occidental will return to either accept, decline, or continue to negotiate the offer. If the bid is accepted, a Purchase Sale Agreement (PSA) will be put together and agreed upon in principle.
The public will then have an opportunity to comment in four public meetings around the state and to review non-confidential details. It's then up to the SLIB to make the final decision. Up until that point, the bid is considered non-bonding.
Rebecca Gratsinger, CEO of the investment consultant RVK, gave details to how Wyoming could see returns on its investment, as the state is currently considering using investment funds to make the purchase.
Gratsinger explained Wyoming has the option of purchasing assets including trona reserves. If Wyoming did purchase those reserves, expected return on investment would be 7.5 percent; without would be 11.1 percent. There would be less risk to the portfolio, though, if the state chose to buy the trona reserves.
Treasurer Meier said the portfolio is currently seeing significantly less returns on its investment via treasuries and that rates sit around zero and negative.
The five elected officials that make up SLIB are Gov. Mark Gordon, State Auditor Kristi Racines, State Treasurer Curt Meier, Secretary of State Ed Buchanan, and Superintendent of Public Instruction Jillian Balow. They repeated that the ultimate decider for the land purchase would come down to just that: the highest risk-adjusted return on investment.
"This is strictly an investment decision and has the need to price [sic] discipline that is absolutely necessary to make it a successful investment," Gov. Mark Gordon said. "If it doesn't seem like that is going to play out over whatever circumstances, I think we have to reconsider."
Gordon went on that the land isn't just about one asset or another. In response to a question about how the state expects to make money from this, he said the land has oil, gas, gravel, geodes, and potential for renewables, real estate, and grazing.
Overall, RVK's Gratsinger said it could have a beneficial impact on the portfolio.
"We find that they provide diversification overall with the rest of the financial assets we have in the portfolio," said Gratsinger.
Pushback
Legislators, citizens, and citizen groups alike raised concerns around the deal, including whether the land would help diversify the state's economy.
"To me, this investment seems the opposite of diversification. Because the state's investment policy that you just updated a few weeks ago says that we should avoid investments in natural resources and that's what this investment is," said Rock Springs Rep. Clark Stith.
Casper Rep. Chuck Gray reiterated the point saying the Permanent Mineral Trust Fund (PMTF) is meant to help diversify the tax structure and give the state financial lee-way in a boom-bust situation.
"Essentially, I don't believe we are going to be the high bidder."
The use of the PMTF itself was also an issue for Gray. He explained the state has come to rely on the fund for revenue. He called it a top-two revenue source for schools and the budget. Gov. Gordon later added that the PMTF is sometimes the highest financial contributor.
"The stakes here are incredibly high," said Rep. Gray. "Property taxes on the lands will have to be paid, the lands will have to be managed. This is certainly not a job the SLIB can handle with current staff levels."
Several pieces of testimony raised the same concern. Treasurer Meier said SLIB has estimated management fees to between $2.5 and $3 million, though didn't clarify over how much time.
Rock Springs Rep. Stith also worried about the possibility of politicization if Wyoming ends up the owner of the acreage in question.
"If there's a downturn in [the] trona industry, the temptation will be for the trona industry to come to the Governor, to the legislature, to the state treasurer, to say 'Hey, give us a break on our rent or we're going to have to lay people off.'"
The biggest point of contention, though, was transparency. The hearing itself was the first public meeting regarding the land deal in its current form.
"What are we, the ignorant public, supposed to comment on on the merits of this undertaking? What is this public meeting supposed to be about if we know nothing about it," asked citizen Larry Wolfe. "We've been rightly critical that over those five months that you collectively have dissembled, misdirected, stonewalled, and hidden what you're doing."
Other citizens pushed for the state to step back and take the process more slowly in order to be more open with the public.
"The secrecy of this deal has led to an erosion of public trust," said citizen Brenda Mongold.
Patrick Fleming, the Chief Investment Officer for Wyoming, said that too much transparency would put the state at a disadvantage.
"We would have our cards facing everyone else. They would know what our cards are, you would never win. This is something that, for the betterment of the fund, we have to do it this way, or otherwise everyone who we're bidding against will know what the costs will be."
SLIB members later went into executive session for several hours to decide the fate of the bid. When they returned, it was clear some members of the board agreed the state should be more forthcoming.
"I think we heard loud and clear that there's understandable frustration with the pickle that we're in where... wanting to put this out into the public as much as possible and being pretty severely restricted by the circumstances of trying to do the best for the fund and the best for the state of Wyoming," said the State Auditor Kristi Racines.
Next Steps
With that in mind, SLIB members amended the motion to bid to include an additional four public meetings. Prior to those meetings, the public will have access to a report detailing non-confidential aspects of any potential transaction.
It remained unclear whether the state would announce the results of the bid. Gov. Gordon said, if people are seeing notifications for hearings, it's safe to say the state was the successful bidder.
Have a question about this story? Contact the reporter, Cooper McKim, at cmckim5@uwyo.edu.
