School Trust Lands—Challenges and Opportunities

Aaron C. GarrettSchool Children’s Trust Section, USOE

November 12, 2014

OUTLINE

•What are Trust Lands?•What are the Opportunities?•What are the Challenges?

TYPES OF LAND

•Private•Federal•State•Trust Lands

Where Did Trust Lands Come From?

Statehood Deal

• State Agrees Not to Tax Federal Domain• Federal Government Grants Land to State for

Support of Free, Public, Nonsectarian Schools

Utah Enabling Act

• Law passed by Congress offering entrance into the Union• Contains terms and promises of both parties• Confirmed by Utah in its Constitution

How Did Trust Lands Come to Be?

Thomas Jefferson

Congressional Land Grant Intent

School in Every Township Section 16

Ohio (1803) – Minnesota (1858)

The Arid West Sections 16 and 36

Oregon (1859) – Wyoming (1890)

The ‘Really’ Arid West Sections 2, 16, 32 & 36

Utah, Arizona and New Mexico

Currently:3.4 million surface acres of Trust Landin Utah

Lands Earn Revenue From:•Minerals•Surface•Development•Grazing•Forestry

When did the trust lands really start making money to help fund schools?

1994 Trust Lands Management Act

• Created School and Institutional Trust Lands Administration (SITLA)

• Codified a fiduciary duty to manage trust lands for the best financial interests of the beneficiaries (public school system)

• At SITLA’s Creation, Permanent State School Fund had approximately $50 million, now approaching $2 BILLION.

Growth in Permanent Fund (log scale)

12/3

1/18

9812

/31/

0012

/31/

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2

$100,000

$1,000,000

$10,000,000

$100,000,000

$1,000,000,000

$10,000,000,000

Growth in Permanent Fund

• June 30, 1987 Balance: $ 15,271,659• Sept. 30, 2014 Balance: $1,914,763,501

Growth Rate of 1240%

Growth in Permanent Fund

• FY 2014 SITLA contribution to Fund: $122 Million• FY 2014 Investment Growth: $155 Million• FY 2014 Distribution: $39 Million

Biggest Current Opportunities

OIL/GAS

• Natural Buttes (Kerr McGee) (66 leases)

OIL/GAS

• Natural Buttes (Kerr McGee) (66 leases)• Past 5 Years Grand Total: $103,349,772.61

OIL/GAS

• Natural Buttes (Kerr McGee) (66 leases)• Past 5 Years Grand Total: $103,349,772.61– Approximately 21% of ALL SITLA Revenues

OIL/GAS

• Drunkards Wash (Conoco/Dominion & Chevron) (76 leases)

OIL/GAS

• Drunkards Wash (Conoco/Dominion & Chevron) (76 leases)• Grand Total Past 5 Years: $29,648,963.34

MINING

Top Three Revenue Producers, Past 5 years

MINING

Top Three Revenue Producers, Past 5 years• Andalex

MINING

Top Three Revenue Producers, Past 5 years• Andalex– Produces Coal

MINING

Top Three Revenue Producers, Past 5 years• Andalex– Produces Coal– $17,889,480.13 in Revenue

MINING

Top Three Revenue Producers, Past 5 years• Moab Salt

MINING

Top Three Revenue Producers, Past 5 years• Moab Salt– Produces Potash

MINING

Top Three Revenue Producers, Past 5 years• Moab Salt– Produces Potash– Royalties of $5,302,483.47

DEVELOPMENT

Top 3 Revenue Producing Projects, all time

DEVELOPMENT

Top Revenue Producing Project, all time• South Block

DEVELOPMENT

Top Revenue Producing Project, all time• South Block– Started in 2005

DEVELOPMENT

Top Revenue Producing Project, all time• South Block– Started in 2005– Revenues of $45,282,556

DEVELOPMENT

Top Revenue Producing Project, all time• South Block– Started in 2005– Revenues of $45,282,556

Timeline: 10+ years (25-50 years)

DEVELOPMENT

Top Revenue Producing Project, all time• South Block– Started in 2005– Revenues of $45,282,556

Timeline: 10+ years (25-50 years)Potential: $45,000 per acre = $360,000,000

BIGGEST FUTURE OPPORTUNITIES

The Book Cliffs

The Book Cliffs

The Book Cliffs

Resource: Oil/Gas

The Book Cliffs

Resource: Oil/GasPotential: 20 wells at $6 million/year = $120 million/year

The Book Cliffs

Resource: Oil/GasPotential: 20 wells at $6 million/year = $120 million/yearRisks:– Extent of resource speculative/unknown– Terrain– Political/Environmental

Graymont Mine

Graymont Mine

Graymont Mine

• Resource: Limestone

Graymont Mine

• Resource: Limestone• Location: Cricket Mountain

Graymont Mine

• Resource: Limestone• Location: Cricket Mountain• Potential: $300,000 per year in royalties

Graymont Mine

• Resource: Limestone• Location: Cricket Mountain• Potential: $300,000 per year in royalties• Lifetime: 35-40 years, in process of expanding

Graymont Mine

• Resource: Limestone• Location: Cricket Mountain• Potential: $300,000 per year in royalties• Lifetime: 35-40 years, in process of expanding• Total Potential Income: $12 million

Magnum Salt Cavern Project

Magnum Salt Cavern Project

• Near Delta, Utah• Huge Underground Salt Deposits• Store:– Natural Gas– Natural Gas Liquids– Wind– Carbon Capture/Sequestration– Anything

• Unlimited Potential

Utah County Real Estate

Mid Valley (Eagle Mountain)

Utah County Real Estate

Hidden Valley (Saratoga Springs)

Potash/Phosphate

Potash/PhosphateBlawn Mountain

Potash/Phosphate

Potash/Phosphate

• Projects: Blawn Mountain, Ashley Creek

Potash/Phosphate

• Projects: Blawn Mountain, Ashley Creek• Potential: $1 billion in royalties

Potash/Phosphate

• Projects: Blawn Mountain, Ashley Creek• Potential: $1 billion in royalties• Risks:– Market– Environmental

Bonanza Block

Bonanza Block

Bonanza Block

Resource: Oil Shale

Bonanza Block

Resource: Oil ShaleLessee: Enefit

Bonanza Block

Resource: Oil ShaleLessee: EnefitTimeline: 25 years out

Bonanza Block

Resource: Oil ShaleLessee: EnefitTimeline: 25 years outPotential: ??????

Bonanza Block

Resource: Oil ShaleLessee: EnefitTimeline: 25 years outPotential: ??????Risks:– Technology– Environmental– Political

Utah’s Oil Shale Potential

• 1.32 trillion barrels of oil– 77 billion recoverable

• Most on BLM Land

Seep Ridge Block

Seep Ridge Block

Seep Ridge Block

Resource: Oil Shale

Seep Ridge Block

Resource: Oil ShaleLessee: Red Leaf

Seep Ridge Block

Resource: Oil ShaleLessee: Red LeafSize: 17,000 acres

Seep Ridge Block

Resource: Oil ShaleLessee: Red LeafSize: 17,000 acresTimeline: Commercial scale in 12-16 months

Seep Ridge Block

Resource: Oil ShaleLessee: Red LeafSize: 17,000 acresTimeline: Commercial scale in 12-16 monthsPotential: ???????

Seep Ridge Block

Resource: Oil ShaleLessee: Red LeafSize: 17,000 acresTimeline: Commercial scale in 12-16 monthsPotential: ???????Risks: Same (technology, environmental, political)

Tar Sands

Tar Sands

Resource: Tar SandsLessee: US Oil SandsPotential: – Utah: 30 billion barrels– 32,000 acres leased in Utah– Have a test pit and test plant

Tar Sands

Risks– Political

Tar Sands

• Risks:– Political– Technological

Tar Sands

• Risks:– Political– Technological– Legal

Challenges to the Trust

• Outside Interest Groups• Political Risks• Highly Dependent on oil/gas• Technological Changes• Mismanagement of the Land or the Fund• And on…and on…and on…

The End

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