By coincidence, a 784-page state-commissioned study on the viability of Utah taking control of all federal land within its borders was released on the same week U.S. crude fell to $65.69 per barrel. That price still is dropping.
Proponents of the land transfer, which is mandated by a 2012 state law but isn’t likely to get beyond the objections of Washington, would find this coincidence unfortunate. It is, rather, instructive — and cautionary.
Oil prices have fluctuated greatly through the years, generally returning to higher averages. However, U.S. energy extraction has added a new wrinkle to this equation through newly refined technologies such as fracking, enabling greater production from shale that has begun to flood the world’s supply. Middle Eastern oil cartels are desperately trying to maintain market share by letting prices fall. Their hope is to force U.S. producers out of business as low prices make production unprofitable.
But the outcome of this strategy is unknown. The cartels never have felt this kind of pressure before. Producers in the U.S. and Canada, some experts say, can remain profitable at prices as low as $25 a barrel.
However, what is known — thanks to the thoroughness of the state-commissioned report produced by researchers at the University of Utah and Utah State University — is that a state takeover of public land cannot be profitable with oil prices so low.
If oil were to stabilize at $92 per barrel on average, the state would make hundreds of millions of dollars per year from the transfer. But, the report said, an average as low as $62 per barrel could result in huge losses for Utah taxpayers.
The report contains much useful information that puts federal control of roughly 65 percent of Utah’s land in perspective. Even the economic growth stimulated by federal ownership evaporates in 20 of the state’s 29 counties where that ownership exceeds 40 to 45 percent.
However, state leaders ought to think a little more carefully about whether they want to head into the uncertain and potentially stormy waters of assuming management of 31.2 million more acres. Wresting control of the land from Washington likely would be a difficult and costly process, and oil prices could make victory even more costly.
In a recent speech, former Interior secretary Gale Norton said states ought to look instead at “sophisticated approaches that can provide benefits that are more obvious to the public.”
Fortunately, Utah already has shown how this can be done.
Difficult negotiating processes led by Rep. Rob Bishop resulted in a recent agreement in Daggett County among major stakeholders, including environmentalists and county residents. If approved by Congress, this would lead to intelligent land swaps that help all sides without focusing on traditional political rhetoric, which is debilitating to this process.
It is understandably frustrating to all with interests in the stewardship of public lands how the priorities of the federal “landlord” seem to change with each new administration. Some have argued that state ownership could reduce that variability. But negotiating thoughtful and legally binding uses as between interests — as seems to be unfolding with the "Bishop bill" — may be “a sophisticated approach” that could reduce the capriciousness in administrative priorities.
We also would suggest Utah begin to levy a severance tax on coal production. Its refusal to do so for competitive reasons rings hollow when next-door Wyoming levies 3.5 percent on underground coal and 7 percent on surface coal. Utah could charge a competitive rate, enhancing its coffers while not hurting its market position.
The state law that demands ownership of federal land is likely to end up as little more than a symbolic gesture. Even if successful, it would come with significant risk to Utah taxpayers. Why not put more energy into a process that could solve problems while gaining support from all sides?