A Checkerboard Blunder?

Note:  This was teed up to run prior to the Governor's recent announcement confirming that the land had, in fact, been sold to another party.

This is one of those stories where I feel that I've really missed something

For the basic outline of what this is about, in the 1860s Congress gave a big swatch of property to the Union Pacific Railroad in an every other section pattern.  That is, every other square mile, for several miles north and south of the railroad, was given to the Union Pacific.  The huge swatch of territory involved in this goes all the way across Wyoming and into Nebraska, Utah, and Colorado.

It's big.

It's referred to as a "checkerboard" because that's the pattern it has on the ground, all across the state and into neighboring states.

Part  of the UP checkerboard down around Medicine Bow.

It also effectively blocked up land in Wyoming along the path like nothing else.  The United States retained the other parts of the checkerboard for homesteading, but due to a variety of factors, much of it was never claimed by homestead entrants.  And while the thought was that the UP would sell the land to agriculturalist and thereby be helped in recouping its investment, much of it was never sold either.  Indeed, if you could homestead in the neighboring section for free, why would you buy from the UP?

Not that the UP didn't benefit.  It did.  It leased the surface to ranchers and, over time, the land proved to be rich in mineral wealth, particularly coal, oil and natural gas.  The UP made a bundle on it in that fashion.

Ultimately the UP's mineral branch separated and became another company, Anadarko Petroleum.  A few  years ago Anadarko pulled out of Wyoming to concentrate on the Permian Basin in Texas. When it did, it sold the checkerboard to Occidental Petroleum.  It went into debt to purchase it.

Occidental has been in financial trouble in recent years, which doesn't make it unique in the oil and gas industry by any means, and it is now seeking to sell the checkerboard itself.

Enter the State of Wyoming.

Or maybe not.

Somehow the land was made available to the State, and Governor Gordon went before the legislature in the last session to seek approval to make an offer to Occidental.  At that time opposition developed to the purchase, although I frankly don't understand it.  The money was coming from the permanent mineral trust fund and was regarded as an investment.  But conservative criticism developed ranging from the land costing too much to this simply being something the state shouldn't be getting into.

I frankly thought the criticism was wrong headed right from the start.  Or, looking at it perhaps more realistically, far too short sighted.  The state would make its money back over time without a doubt. And the value of the land will go up with out a doubt.  Weighting the cost in the short term makes sense if you are a human being, and in the case of most legislatures that means you are going to be dead in 20 or so years, but it doesn't make sense if you are a  political entity that will live on and on.

It simply doesn't..

Which has nothing to do with why I think this was a great idea.

And has everything, I suspect, to do with why some people think it was a horrible idea.

More on that in a moment.

When the legislature first heard of it, it approved it in the House right away, and then the opposition became organized and it bogged down. 

Much of the questioning at that point was centered on the price.  Frankly, to most outsiders familiar with land values the prices being discussed looked really good.  I.e., it looked like the state as about to get a great deal. But comments were made, as are sometimes heard from the ill informed, which seem to assume that ranch land values are frozen in the 1950s.  It's odd.

Following that, Governor Gordon withdrew it from legislative consideration taking the position that he could act without legislative approval, which may be correct in this instance.  Nobody challenged that.

Well, now somebody else is bidding.

Much Anticipated Wyoming Bid To Purchase Occidental Land "On Hold"

And it looks like they, whoever they are, will get it.

Some are rejoicing, including some whose rejoicing I can't grasp.  Take into account, for example, the statement from the Powder River Basin Resource Council:

Powder River Statement on Wyoming’s Failed Occidental Petroleum Land Bid

Powder River Basin Resource Council says Wyoming has been saved from a potentially serious financial blunder.

Powder River Basin Resource Council expressed optimism that Wyoming’s bid for millions of acres of land and mineral rights has apparently failed. Occidental Petroleum (OXY) is negotiating with another bidder instead.

“Luckily, Wyoming seems to have dodged a bullet, and escaped what was shaping up to be a very costly investment mistake – sinking maybe a billion dollars of public money into land and minerals. This ill-conceived use of our state’s “permanent” investment funds would have broken an elementary investing rule of sovereign wealth funds, by doubling down on Wyoming’s primary source of existing revenue. And that mistake would have been magnified in this economy where our foundational revenues are sinking fast,” said Bob LeResche, Powder River Board member.

“We remain concerned that there has never been transparency from the state in this process. The Administration and a few insiders hatched this idea behind closed doors, and the Governor vetoed legislation that required public review. The only reason we know what little we do is that the public, organizations such as Powder River, and the press forced disclosure of how a few politicians and bureaucrats were intending to spend Wyoming’s Permanent Mineral Trust Fund. It is unfortunate that the government has wasted so much time and so much money on this speculative deal.

“This so called ‘bold bid’ looks more like we may have averted a bold blunder. We hope that now our government can concentrate on its real job, such as diversifying our economy, slowing the plunge in our revenues, and revising our unsustainable tax structure. And we hope that the managers of our assets can improve their returns without resorting to further unconventional investments like ‘the biggest land purchase in state history.’”

That statement makes their view clear, but I still don't get it.

Here's why.

That big swath of land right through the middle of the state which is effectively off limits to average people.

Because every other section is private, the public land can't be legally accessed.

Now, not all that land remains in Occidental hands.  Some sections were ones in which Occidental only owns the mineral estate.  But that's still worth a lot.

But the fact that Occidental is the surface owner of a lot of it, and every other section was public lands, essentially meant that you simply couldn't get to the public lands.  It's not legal to "step over a corner", as so many Wyomingites believed at one time, and a decreasing number continue to believe.

This would have changed all that.

I frankly can't see a downside to this sale.  Perhaps we're about to enter a new energy realm in which coal and oil don't matter anymore, although that's presuming a lot, and the mineral estate will suddenly be worthless.  Okay, if that's the case, the economic value of the land would be hugely reduced.  But most analysts think that petroleum will continue to matter for a long time.  Even the most optimistic environmentalist would generally conceded that petrochemicals will matter for a long time, and for that reason petroleum will matter for a long time.  

And the land has value beyond that.  It has leasing value for grazing, and it has logging value in some places.

But most of all, in my view, it has hunting, fishing and camping value.  

And that value could have gone on and on.

But now, that opportunity will be lost .