Occidental Petroleum ended weeks of anticipation Wednesday when the company announced that it would sell land grant assets in Wyoming, Colorado and Utah to Orion Mine Finance.
The transaction will amount to approximately $1.33 billion and is expected to close in the fourth quarter this year.
The purchase includes 4.5 million mineral acres and 1 million surface acres. In this transaction, Orion is acquiring mineral rights to the world’s largest known trona deposit.
Trona is a mineral used to make soda ash, the principal ingredient in baking soda, global glass manufacturing, pollution control systems, as well as other critical chemical applications.
Gov. Mark Gordon’s office announced last week that its bid for the Occidental land was on hold, as the company was in negotiations with another bidder whose name wasn’t announced at the time.
The governor and other members of the State Loan and Investment Board planned to use Wyoming’s Permanent Mineral Trust Funds for the purchase.
Gordon announced in a release Wednesday that he was disappointed about the outcome of the sale.
“I am disappointed that Wyoming was not the ultimate buyer of the Union Pacific Land Grant lands and minerals,” he said in a statement. “We worked hard to prepare a responsible, good faith bid, which we believe would have augmented Wyoming’s investment returns, bringing in more revenue to keep taxes in Wyoming low.
“Had Wyoming’s bid been accepted, the rate of return was expected to be in the range of 8% to 12%, depending on the assets and how quickly the economy recovers. This predicted rate of return is currently better than our current average rate of return.”
The purchase was expected to provide benefits to Wyoming citizens by making it easier to manage public lands in southwestern Wyoming and providing more and better public access for recreation and hunting on the land. It was also seen as a way to give Wyoming more flexibility to manage the land for multiple uses, including grazing and the development traditional and non-traditional energy resources.
“We felt the purchase would have been a good investment at the bid we submitted,” state Treasurer Curt Meier said in the release. “However, we believe our existing investment opportunities will also serve the needs of the state and its constituents. Exceeding our target bid was a risk we were not willing to take.”
According to the Wednesday release, Occidental will retain all cash flow from the currently producing oil and gas properties on the land, which are primarily cost-free royalties.
“This transaction significantly advances the progress against our $2 billion plus divestiture target for 2020,” Occidental President and CEO Vicki Hollub in a company news release. “We will retain our core oil and gas assets in the Rockies, including the prolific DJ Basin in Colorado and the highly prospective Powder River Basin in Wyoming.”
The acquired properties will be held under Sweetwater Royalties, a new base metals and industrial minerals royalty company, which will be managed by Orion.
“Acquiring high-quality producing royalties is a core component of our investment strategy and we are thrilled to be partnering with Occidental in this transaction,” Oskar Lewnowski, chief investment officer of Orion, said in the release. “This transaction offers significant royalty cash flow from the trona mines and has strong potential for mineral development.” He added, “As a firm we recognize the importance of US mineral and energy production and are pleased to be able to offer our support to the existing world-class operators and their associated communities.”
