An EOG Rig located in the Powder River Basin (H/t Robert Coy)
Local ranchers, attorneys and state legislators asked the Campbell County Board of Commissioners at their Tuesday meeting to formally oppose a land exchange proposed by Houston-based EOG Resources, Inc. to the Office of State Land Investment (OSLI).
The request follows the unanimous decision by the Converse County Board of Commissioners to adopt a resolution in opposition of the proposal.
Last month, the Campbell County Board of Commissioners held a work session in which EOG Government Relations Director Eric Dille and Government Relations Advisor Spencer Kimball presented the company’s plan to trade 5,300 acres of surface land located in Laramie County for eight OSLI-owned parcels scattered throughout Campbell and Converse counties, covering a total surface area of 5,120 acres.
EOG is looking to exchange its Laramie County lands for Campbell and Converse county school sections, which were given to the state by the federal government as part of Wyoming’s statehood. School sections, currently referred to as state trust lands, are tied to surveying and townships, wherein the 16th section of every township was set aside to generate revenue for schools.
As part of their role in administering state trust lands, OSLI manages the properties to “create a diverse and productive portfolio to generate the maximum amount of revenue for the State’s trust beneficiaries,” according to their website.
Per statute, revenues from the sale of state school trust lands are deposited into the Common School Permanent Land Trust Fund. OSLI also leases state trust land surface and minerals for annual income in support of Wyoming schools.
The scattered eight Campbell and Converse county sections would be traded for a single concentrated parcel in Laramie County.
If approved, in addition to the land which would be exchanged, EOG’s proposal guarantees annual payments of $300,000 to the state for up to 10 years or until such time as the company has drilled 10 wells.
The state would also retain the mineral rights for the eight sections in Campbell and Converse counties, and would receive royalties on EOG-produced minerals in addition to its traditional severance taxes and ad-valorem taxes for state and local governments.
Under the proposal, when the property is no longer used by EOG for oil production and has been reclaimed, the lands will first be offered to the State of Wyoming for purchase at a 10% discount to the land’s then appraised value.
For those who currently have grazing leases on the eight sections in Campbell and Converse counties, EOG’s proposal would allow the lessees to continue grazing the sections, minus areas where facilities are constructed, under the same rate and terms as the lessees currently have with the state. Dille explained in a text message that EOG will build fences around all equipment that could potentially harm livestock.
Local ranchers fight back
Lee Isenberger currently has grazing leases for two of the state school trust lands in question and owns the land surrounding them, where he operates his family ranch, which straddles the Campbell and Converse county line. Together, these two sections account for 20% of the pastures where he grazes his cattle.
“This will cut my operation by 20% across the board,” Isenberger said during the commission meeting.
Isenberger recalled prior agreements he’s made with oil and coal companies, explaining that typically landowners are able to negotiate a surface use agreement. However, since in this case Isenberger leases the state-owned land, he was presented with a set agreement, in which he claimed EOG offered the ranch 10% of what he usually earns on his private land.
“This is why they’re wanting to come to state lands,” Isenberger explained, “because they get it for a lot cheaper than they can from the private landowners.”
Isenberger was accompanied Tuesday by attorney Tad Daly, who advised the commissioners against supporting the company’s proposal, claiming that the land exchange could be “dangerous” for OSLI and residents of Campbell County, especially those who’ve leased these state trust lands for decades.
“By allowing EOG to take ownership of these lands, you’re going to have commercial and industrial facilities constructed and developed in the middle of these large agricultural properties,” Daly said during the meeting.
Daly subsequently voiced concerns about the company’s access to landlocked sites, mitigation of the land use as well as the physical impact that EOG will have on the plots. He noted that by overlooking long-standing agricultural businesses in order to focus on energy, public officials will eventually drain Campbell County of opportunities to diversify its fossil fuel-oriented economy.
“Wyoming shouldn’t belong to the highest bidder,” Daly said.
Isenberger did not provide information on his annual lease payments during the meeting, nor did Daly have the necessary information to speak to Isenberger’s current leasing terms with the state for the two school sections, per a follow-up call Wednesday.
The intersection of minerals and ag
Across the West, agriculture and energy development frequently overlap. Practices are regulated through statutes, mandates and policies that land agencies follow.
The Bureau of Land Management (BLM), who has an outsized influence on mineral development in Campbell County because of federal mineral ownership, has a multiple use mandate in which energy production and agriculture regularly interact. State lands also regularly see overlap between agriculture and energy, as OSLI leases surface for grazing and minerals for development. In Wyoming, the mineral estate is the dominate estate.
The difference in this case, and feedback from grazing lessees, appears to be over the transfer of ownership of the surface lands from the state to EOG.
Attorney Mike Fuller, who is representing Floyd Reno and son, also commented during the meeting on behalf of his clients, who are currently involved in a civil lawsuit with EOG. Fuller spoke to the damages that EOG allegedly left behind at multiple sites when they finished drilling. Because of this, Fuller said land greatly decreases in value after being owned and operated by the Texas-based company.
“The land they want to give us is not the same quality as it was before they bought it,” Fuller said. “It’s just not a fair trade.”
Fuller went on to say that by working with the state rather than private sellers, EOG is avoiding the essential costs and responsibilities associated with drilling for Wyoming oil.
“When EOG says they want to buy school sections from the state, they really mean they want to put industrial sites on these ranches and not have to pay for it,” he said.
Fuller did not respond to a request for comment Wednesday afternoon.
Dille disagreed with the attorney’s characterization of the land exchange. Joining the commissioners meeting Tuesday via phone from his office, as EOG is still enforcing COVID-19 related travel restrictions, Kimball said that the proposed EOG facilities would not feature a dumpsite, noting that he and his team are happy to answer questions from concerned members of the communities.
A legislative solution?
Wyoming House District 3 Representative Eric Barlow announced during the meeting his intentions to close nuances in state statutes that he said allow for local landowners and lessees to be blindsided by OSLI’s actions. He noted that several of the surrounding landowners have been denied access to information regarding the land exchange due to state legislation.
Per Barlow, Wyoming statute requires full disclosure of information for individuals and companies who are selling land. Meanwhile, those purchasing land are able to complete the buying process confidentially.
“When you sell land, it’s public, but when you’re buying, it’s confidential,” Barlow reiterated. “So, when you mix those processes and do a land exchange, you definitely run into some issues.”
Barlow went on to explain that OSLI is being expected to maintain a confidential status in regard to the land exchange, while EOG is already requesting support from regional governmental entities, such as boards of commissioners.
“Obviously, there’s something going on there that needs to be handled,” Barlow said.
Following the process
EOG’s application proposing the land exchange was received by OSLI July 29, starting the one-year time frame during which they must act upon the application to the State Board of Land Commissioners (SBLC), which is comprised of the top five state elected officials, OSLI Land Transaction Contact Jessica Murkin explained Wednesday.
One of the first steps undertaken by OSLI staff is to visit all affected properties. Because of the organization’s current COVID-19 travel restrictions, OSLI staff has yet to make the onsite visits to these multiple land parcels, Murkin said. Subsequently, all exchanges submitted to OSLI for review are currently on hold, she clarified.
For this reason, OSLI staff have not yet sent the proposal to their own director for approval, Murkin noted, a required step in the process before the proposal can be taken to SBLC for consideration.
When considering exchanges, SBLC first receives information from OSLI in executive session, she said. This is to protect the values assigned to the properties and prevent artificially inflating prices based upon information that the state may be interested in the land.
According to Campbell County Commissioner Rusty Bell, the government regularly enters executive session when they consider a property purchase for the same reason, government interest in the land can often lead to the prices being impacted by other influences.
Should the SBLC decide they want to explore the transaction, they reenter their public meeting for discussion and action on preliminary approval, Murkin said. Only after SBLC’s preliminary approval would appraisals and a detailed review be undertaken by OSLI regarding the potential exchange.
Murkin also stated that when it comes to valuing the properties proposed for exchange, OSLI policy requires that the same appraiser conduct the appraisals of all of the property for consistency in valuation, with OSLI’s own appraiser being part of all site visits. And though OSLI does have some flexibility, it rarely accepts an exchange if the property received is valued at less than the property being exchanged.
OSLI also holds public hearings and accepts comments as part of the deeper review.
Any individual, per OSLI rules, can request that a state section be considered for disposition, and many landowners have previously bought state-owned sections contiguous to their private land holdings. The process requires an application nominating the parcel and approval by the SBLC. Appraisals are then done, and a minimum price is set for the property. A public auction is held for the nominated lands.
Murkin was not able to easily confirm whether the Isenberger or Reno lands had ever been nominated for sale by either of the landowners.
The nomination, review, public auction, and sale process happened twice recently in Campbell County when Campbell County Commissioners nominated and subsequently bought the “Centennial Section” north of Gillette at the intersection of Northern Drive and Highway 14-16. The City of Gillette went through the same process to purchase the lands that are now home to the Energy Capital Sports Complex.
What’s Next?
Wrapping up comments Tuesday, Commission Chairman DG Reardon reminded those in attendance that Tuesday’s meeting was a public hearing session and that no definitive action would be taken until a resolution either supporting or opposing the land exchange is proposed to the board for potential adoption.
Reardon, as well as Bell, said they were in favor of the EOG land exchange when the company asked the board for political support with the project in July.
While neither of the commissioners updated their stances, two other board members – Commissioners Del Shelstad and Bob Maul openly opposed the EOG proposal.
“I won’t probably say this as politically correct as Colleen just did,” Shelstad said, following comments from Commissioner Collen Faber who empathized with the ranchers. “But I’m opposed to this land exchange and I’m not going to stand for it.”
Faber, who was employed by Anadarko Petroleum before serving as a commissioner, said that she would be “following the state’s lead” on this issue, noting that her position on the board of commissioners does not grant her authority over state lands.
“I know there’s been some conversation that as a commission board, we have the ability to change the outcome of this situation,” Faber said during a phone interview Wednesday,
“but I just don’t think we dictate what happens on state lands.”
