Michael P. Morris_ Chairman Kevin S. Carter_ Director MINUTES OF

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Michael P. Morris_ Chairman Kevin S. Carter_ Director MINUTES OF Powered By Docstoc
					                                                         Michael P. Morris, Chairman
                                                         Kevin S. Carter, Director

                            BOARD OF TRUSTEES

DATES:               MAY 9 AND 10, 2007
ATTENDING:           BOARD                                      STAFf

                     Michael P. Morris                          Kevin Carter
                     John Ferry                                 Kim Christy
                     James Lee                                  LaVonne Garrison
                     Gayle McKeachnie                           Tom Faddies
                     James Eardley                              John Andrews
                     John Scales                                Dave Hebertson
                     Michael Brown                              Kay Burton
                                                                Ron Carlson
                                                                Lisa Schneider
                                                                Doug Buchi
                                                                Jeff Roe
                                                                Lynda Belnap
Margaret Bird, State Office of Education
Paula Plant, State Office of Education
Karen Rupp, State Office of Education
Natalie Gordon, Utah PTA

May 9 Only:                                       May 10 Only:
Ivan Djambov, Legislative Fiscal Analyst’s Off.   Mike Styler, Dept. of Natural Resources
Dennis Strong, Division of Water Resources        Leonard Blackham, Dept. of Agriculture
Jim Butler, Parsons Behle & Latimer               Janet Cannon, Board of Education
Allen Freemyer                                    John Njord, Dept. Of Transportation
Mark Eckels, Wind River                           Tauni Pack-Downing, Governor’s Office
Hutch Henrie, Energy Strategies                   Mark Habbeshaw, Kane County
Rick Anderson, Energy Strategies                  Michael McKee, Uintah County
Scott Gutting, Energy Strategies                  Jean Arbuckle, Washington City
Tom Shaw, Decision Strategies                     Gary Esplin, St. George City
Alex Jok, Decision Strategies
Jeff Tomlinson & Matt Medura, Decision Strategies
Bill Hedden, Grand Canyon Trust
Chris Montague, The Nature Conservancy
Scott Groene, SUWA
Page No. 2


ITEM                                                                    PAGE NO.

Welcome - Chairman Morris                                                     3

New Business Opportunities and Directions
       Presentation of Upstream Oil and Gas Opportunities                     3
              Risk and Reward in Aggressive Oil and Gas Projects              3
              Participating in Oil & Gas Wells - A Utah Producer’s Perspec.   6
              Update on Gas Marketing Strategies                              9
       Use of Proceeds for Investments in Real Property                       10
       Long-term Water Issues Facing the State of Utah                        16
Public Land Issues
       Washington Landscape                                                   18
       Mining Law Reform                                                      23
Finding Common Ground With Public Land Constituencies
       Dave Livermore - The Nature Conservancy                                28
       Chris Montague - The Nature Conservancy                                29
       Scott Groene - SUWA                                                    30
       Bill Hedden - Grand Canyon Trust                                       31
Dinner and Meeting With Legislative Leaders
       Lt. Governor Gary Herbert                                              36
       Representative Barrus                                                  37
       Senator Stowell                                                        39
Stakeholder Input
       State Leaders and Associates:
       Mike Styler, Executive Director, Department of Natural Resources       40
       Tauni Pack-Downing, Governor’s Office                                  43
       John Njord, Executive Director, Department of Transportation           44
       Commissioner Leonard Blackham, Department of Agriculture               47
       Janet Cannon, Vice-Chairman, State Board of Education                  50

       Local Government Partners and Associates:
       Commissioner Mike McKee, Uintah County                                 54
       Councilwoman Jean Arbuckle, Washington City                            56
       Commissioner Mark Habbeshaw, Kane County                               58
       Gary Esplin, St. George City Manager                                   60
Legal Input From Agency Counsel Re. Trust Obligations                         63
Board Review and Discussion of Issues                                         67

Page No. 2
Page No. 3


Welcome - - Chairman Michael Morris

Chairman Morris welcomed everyone to the Retreat. He thanked Staff for putting this together.
He thanked the Board, Staff, and guests for attending. The primary goal for a forum like this is
to learn, have respect for whoever has the floor, and let them tell their story. It is incumbent
upon Trust Lands Administration (TLA) to reflect upon our mandate - - what is the fiduciary
duty, what is our responsibility, what is our mandate? We need to make sure we are operating
at peak levels. Therefore, we need to bring industry in to tell us about new technology, etc. This
is a great tradition that the Board has started - - the Retreat.


Presentation of Upstream Oil and Gas Opportunities

Ms. LaVonne Garrison, Assistant Director/Oil and Gas, noted that this was the last portion of an
objective dealing with whether we should deal with oil and gas ourselves, be partners, etc. This
is to help us understand more about whether we should be doing these types of things. She
thinks the Board can listen to the discussion today and; tomorrow or sometime later, we could
decide whether we should be pursuing any of these things further. Because these presentations
are long, she encouraged the Board, Staff, and guests to ask questions as we go along.

       Risk and Rewards in Aggressive Oil and Gas Projects

She introduced those from Decision Strategies: Jeff Tomlinson, Principal; Dr. Tom Shaw, Senior
Consultant; and Alex Jok, Senior Consultant. Mr. Shaw gave the Board a power-point
presentation on the risk and reward of oil and gas land strategy. This power-point is included as
part of these minutes. The Executive Summary is:

*      Utah is a marginal-cost producer with basis volatility
*      Current fiscal strategy is aligned with other state trust lands, but lacks incentives for
*      SITLA should have a coherent Value Proposition for seeking equity participation
*      Only CBM provides better risk-adjusted NPV than the current royalty strategy, but only
       at WI> 20 percent
*      For an equity strategy to be viable, future well performance must be better than historical
*      Subsurface technical expertise and improved cost structure required to manage downside

Page No. 3
Page No. 4


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Risk and Rewards in Aggressive Oil and Gas Projects (cont’d)

Chairman Morris asked if the Trust had a coherent Value Proposition that is inherent where the
asset can be contributed to a venture without being subject to capital costs? Mr. Tomlinson
stated that geologic opportunities are scarce and precious. This is what industry is always
looking for. You have to have that data to prove you have the resource. Right now, TLA is not
staffed to do that.

Mr. Andrews stated that we are trying to build that value by acquiring some large BLM blocks.
We have done some investigations; we have not done current geologic exploration. Large
blocks of unleased BLM lands are non-existent. The CBM on BLM land is all leased. We are
taking a step in the right direction, but there is not much more to get from BLM. Mr. Tomlinson
stated they have not really looked at TLA’s portfolio, but he knows Staff is aware of it.

Marc Eckels stated you can have a higher royalty rate on trust lands because there are lower
costs in permitting, etc. He thinks we should have another “bucket”. In the South Book Cliffs,
there is other geology that is amenable to 3-D seismic. TLA has lots of land in this area. Ms.
Bird stated she doesn’t understand why, when we have limited pipeline capacity that is affecting
our prices, would we want to incentivize anyone right now rather than waiting.

Mr. Tomlinson stated it is a strategy play - - there is a balance of high cost structures right now
even though there is not enough pipelines. Costs of production go up with production.
Director Carter noted that they have to have a balance in areas and their costs. If you lease at a
lower royalty rate, some times you only get speculators. Mr. Tomlinson stated this is correct.
Some times you have to have a lower royalty rate, however, to get something going in an area.

Mr. Scales stated he doesn’t think 10 or five-year leases make a difference. Anyone who is
going to do something is going to do it in five years. Ms. Garrison stated we also have an Other
Business Arrangement (OBA) process available to us so that, if someone needs a longer-term
lease in some area, they can work something out with us. She is of the opinion that we don’t
want everything blocked. Having a scattered pattern of ownership gives us more opportunities
in more plays. We don’t know how lands are until they are drilled. Mr. Eckels noted that it
might be interesting to build into a lease an obligation for a lessee to participate in seismic work
nearby. It doesn’t make sense to do seismic on a one square mile when they are doing 3-D.

Page No. 4
Page No. 5


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Risk and Rewards in Aggressive Oil and Gas Projects (cont’d)

Chairman Morris asked if we have any working interest or in-kind deals? Ms. Garrison stated
we don’t. It is difficult to participate in just one or two leases. It is a matter of scale in an area.
Chairman Morris asked that, if we were going to contribute capital to an operation, what would it
look like - - what would the funding be? Mr. Andrews stated we would have to do it with
appropriated funds. We could not use operating capital. Mr. Tomlinson stated that their costs
are not a fixed number. Ultimately, the working interest operator is responsible for whatever the
well costs are. Ms. Garrison stated it also requires some geotechnical expertise to participate this
way. We would need more Staff that would be readily available at all times. These are all things
to consider in making a final decision on whether we would participate or not.

Mr. Lee noted that Staff has had an opportunity to see what has been done. He asked what Ms.
Garrison would advise the Board to do. Ms. Garrison stated that, if it were her decision today,
we would not want to participate in a working interest. She thinks there are some other things
we could do in royalty interests, etc. Even at Drunkards Wash there are problems and dry holes.
There is a lot of capital input before we would start getting money out. The likelihood of finding
another Drunkards Wash is probably very slim. Oil and gas is a very risky business. She is very
conservative, and she would worry about the fiduciary responsibility to the Trust in investing in
working interests.

Mr. Scales stated he thinks there are ways to reduce the risk to the Trust, but he is not sure we
have enough opportunity. We need more large blocks in the right place. Mr. Andrews stated the
only way we could do this would be an occasional lease exploration that has not been drilled in a
production area in the Uinta Basin.

Page No. 5
Page No. 6


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Participating in Oil and Gas Wells - A Utah Producer’s Perspective

Ms. Garrison introduced Mr. Marc Eckels of Wind River Resources. Mr. Eckels stated he agrees
with 95 percent of the previous presentation. A royalty is a beautiful thing. He agrees with the
TLA structure and what it is to do. He thinks it would be a mistake for TLA to get into being a
working interest. He is going to talk about the risk of working interest vs. the royalty owner.

The royalty is a beautiful thing. That is especially true for TLA. Royalty comes straight off the
top and bears no cost. TLA is exposed to risk at several stages even as a royalty owner, but that
is different because it just involves TLA not making money in lieu of putting money into it. Our
gas market has always been pretty poor, and it continues to have challenges. The state might be
able to play a larger role than it has where the refineries take the crude from because of the taxes
that they can charge. Also TLA does not get a royalty on the oils that are going through the
refineries. There is a huge price difference in crude oil in Utah and that outside of Utah. Natural
gas also has that price difference.

These things that can be done to minimize the downside could also minimize the upside. We
need to understand the risks that different owners have:

1. Operator risk - - he is not sure how TLA could deal with this. There is a huge range of
operating companies. Some are excellent companies and some are not. On TLA lands, he
knows of a well that was drilled on trust lands and operator judgment resulted in plugging that
well. He things it could have been a nice paying well if done correctly. When TLA grants a
lease, it doesn’t make any judgment on the qualifications of the operator. He thinks TLA could
make more money if a bonus bid were not the only consideration - - that they also looked at the

2. Working interest - - Any scenario where TLA would contemplate being a working interest
owner would require expensive consulting. The first risk TLA would have as a working interest
owner would be “who is a suitable operator”? Going with a large operator is not a guarantee you
will get the best operator. TLA would need to be able to identify operators that meet its

Page No. 6
Page No. 7


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Participating in Oil and Gas Wells - A Utah Producer’s Perspective (cont’d)

3. Exploration risk - - You take a piece of land and decide what you do with it. This generally
involves the use of 3-D seismic, which is a challenge in Utah’s topography. The costs are
greater now that there is more competitors in the oil and gas industry. Seismic is expensive in
Utah, and TLA would have to bear its share. Seismic can identify a potential target or can
identify no target, which prevents you from drilling a dry hole. Seismic doesn’t tell you where
hydrocarbons reside - - it tells you where the house is but doesn’t tell you who is living in the
house. After something is identified by seismic, you still have to spend the money to drill to find
out what is there.

A seismic study is an asset. Mr. Morris asked if everyone would buy in to it if you owned a
seismic study? Mr. Eckels stated that, if you did it well, companies would buy it. It is an asset
that has a life span. Each time it is processed, you get more information. Ms. Garrison noted we
do acquire seismic data. Mr. Morris asked if that information is an asset to contribute to a
working interest? Mr. Scales stated that, if our seismic survey shows nothing, we have
condemned our acreage. If the information is good, we could probably lease it for more.

Ms. Garrison noted that, when we do an OBA, we require that we get access to the seismic data.
Mr. Eckels stated that they are a small company. They only operate in areas where they
understand the geology. They only operate on trust lands and Tribal lands due to the time
involved in getting a lease.

TLA has a long-time horizon to look at. This is a cyclical business. When the cycle goes down,
TLA can try to figure out areas that would be good to do “speculative surveys” - - have a
company pay for the survey and require whoever gets the lands pay for the seismic. Ms. Garrison
stated that closing Federal lands could be a problem in directing this to be done. Mr. Eckels
stated the geology in Utah is complex and varies a great deal. Finding the kind of risk TLA
would be comfortable with is hard.

4. Drilling risk - - For the same reason that it is hard to find oil and gas in Utah, it is expensive
to drill in Utah. The geology makes drilling costs high. Rig availability is not as bad as it was
last year. It is not uncommon to lose circulation during drilling. This is very costly. There are
all kinds of calamities that happen during drilling that working interest owners are exposed to
that royalty owners are not.

Page No. 7
Page No. 8


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Participating in Oil and Gas Wells - A Utah Producer’s Perspective (cont’d)

While drilling problems are more of a problem with exploration wells, they still have problems
on most wells. Any damage that the royalty owner suffers because of drilling problems is that of
lost opportunities.

5. Completion Risk - - You can still mess a well up during completion. This actually costs more
than just drilling it if it goes wrong. There is much controversy on how to design and complete
these wells. He noted you generally log the well after it is cased, but sometimes you have to do
it before. This is another important tool of the process.

6. Transportation and Market Risk - - This was well covered in the previous presentation. Mr.
Eckels reviewed what happens in the Uinta Basin area. The demand for gas changes during
certain times of the year. Market and transportation are serious risks to wells.

Mr. Eckels noted he doesn’t think TLA should risk participating in working interests.

Ms. Rupp asked Mr. Eckels what his opinion is of TLA participating in a pipeline? Would the
public buy into this? Is the cost something that would sink what we have? Mr. Eckels stated
there are two kinds of pipelines - - those that leak and those that are going to leak. He thinks,
however, an investment in a pipeline would be a great investment. In Utah the rate of return is
regulated by the Federal Regulatory Commission. Ms. Bird asked what would happen if the
pipeline went to the salt dome, and we had provisions that the gas is stored until it is a certain
price? Mr. Eckels stated you have to have a lot of gas to make storage work. Ms. Garrison
noted that John Andrews is going to address the salt dome issue at a later meeting. It was noted
there are other ways we could participate in pipelines; i.e., handling permitting, donating rights
of way, etc. Chairman Morris noted that possibly the Board could hear at another time how we
could be involved in a pipeline.

Page No. 8
Page No. 9


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Update on Gas Marketing Strategies

Ms. Garrison noted that this is a follow-up to a presentation made by Matt Medura a few months
ago in a Board meeting. She introduced Hutch Henrie, Rick Anderson, and Scott Gutting, all of
Energy Strategies.

Mr. Anderson noted that Mr. Medura, who was also in attendance, made the presentation in
March regarding marketing. Today is about hedging. Mr. Scott Gutting gave the Board a
power-point presentation, which printed presentation is made a part of these minutes. It was
noted the first six steps on Page 12 of the power-point would set us up to be able to transact
business. It doesn’t mean we would have to transact business, but we would be ready. Those
steps are:

       1.      Discuss with Board risk issues and draft resolution/policy for hedging program
       2.      Identify and review lease operator in-kind logistics with SITLA Staff.
       3.      Survey physical Questar southern system marketing players for interest in
               producer services contracts.
       4.      Identify and review financial counter-party players with SITLA
       5.      Recommendation on appropriate counter-party(s).
       6.      Negotiation of base standard contract with recommended counter-party and legal
               review with SITLA counsel.

Chairman Morris noted we have heard business perspective risks, etc. What are our political
risks of doing this? We probably would not be criticized for not doing hedging, but could be
criticized if the price goes above what we have hedged. Mr. Anderson stated there are many
different structures used for hedging that can be very complicated. The costless collar one is the
most simple. That is a response to the media - - we have created a port folio for different
approaches to our revenue. They would not recommend that we hedge all our gas.

Mr. Scales stated that, if we get into a position that we have a heavy commitment in the real
estate side, this could be a way to protect our cash flows. Mr. Gutting stated they don’t go into
any detail with a client until they have talked with the Chief Financial Officer, the Director, the
accounting people, etc. He would recommend that, if we consider doing this, we identify some
of our constituencies and explain to them what this would be doing.

Page No. 9
Page No. 10


Presentation of Upstream Oil and Gas Opportunities (cont’d)

       Update on Gas Marketing Strategies (cont’d)

Chairman Morris asked if we have the expertise in-house to hedge and do we leave money on the
table with hedging? He thinks the Board needs to know that this could happen. Mr. Andrews
stated we need to have the expertise in-house on an accounting basis. Our setup is like a
government entity, and we would have to have other setups to let us do this. We would need to
spend some focused time on the accounting aspects to make sure we could do this. Mr. Ron
Carlson stated he thinks the “box” we have constructed would accommodate this.

Ms. Garrison noted we will take all this information today and discuss it tomorrow. If the Board
wants to give the Staff direction, that would be great.

Chairman Morris thanked all these parties for their presentations and information to the Board.

Use of Sale Proceeds for Investment in Real Property

Mr. John Andrews discussed this with the Board through a power-point presentation.

*      Land Banking: the sale of less-productive land assets and redeployment of proceeds into
       more productive lands, instead of depositing sale proceeds with the State Treasurer for
       investment in financial assets.

*      Land banking allows acquisition of additional trust land without legislative appropriation
       for the purchase price.

*      Washington Land Banking Statute
       “The legislature finds that from time to time it may be desirable for the department to sell
       state lands which have low potential for natural resource management or low income-
       generating potential or which, because of geographic location or other factors, are
       inefficient for the department to manage. However, it is also important to acquire lands
       for long-term management to replace those sold so that the publicly owned land base will
       not be depleted . . . The purpose of this chapter is to provide a means to facilitate such
       sales and purchases so that the diversity of public uses on the trust lands will be

Page No. 10
Page No. 11


Use of Sale Proceeds for Investment in Real Property (cont’d)

Mr. Andrews stated that in Washington State the legislature thinks it is a good idea to replace
land with land. In Utah people will argue this both ways. Mr. Andrews gave the Board a land
banking report and referred to the numbers on it during his presentation.

*      Other State Land-Banking Programs

       *       Colorado - - “Deferred Land Exchange” program to acquire commercial
               properties. Mixed success with commercial.
       *       Montana - - Focus on acquiring agricultural properties with public-use amenities.
               Current proposal to acquire railroad checkerboard timberlands.
       *       Washington - - Focus on transferring trust properties to public ownership for
               cash, then buy commercial timber.
       *       Idaho - - New program.

Mr. Eardley asked that, if we did this, would we refer to our lands as “public” lands instead of
“trust” lands? Mr. Andrews stated that in the legislation we would make the distinction between
public lands and trust lands. In Washington, the state acquires certain lands for recreation, etc.,
from the Trust and then it becomes public land.

*      Land Banking Issues: Overview

       *       Policy issues: Redeployment of sales proceeds into other land would initially
               reduce permanent fund size and distributions to current school beneficiaries.
       *       Legal issues: Does creation of a land-banking program violate constitutional and
               statutory requirements that sales proceeds be deposited in Permanent Funds?
       *       Strategy/Implementation issues:
               *       Type of target lands; e.g, raw development land; investment
                       (office/commercial); agricultural or timber.
               *       Financial analysis; target rate of return
               *       Staff capacity and expertise

*      Policy Issue 1 - - Effect on Distribution

       *       Utah’s school trust is unique because Utah constitution requires that rental
               revenue be retained in Permanent School Fund (PSF) rather than distributed
               annually. This builds the PSF at the expense of current beneficiaries.

Page No. 11
Page No. 12


Use of Sale Proceeds for Investment in Real Property (cont’d)

       *       Other land-banking states distribute rentals for current year use by public schools,
               so redeployment of raw income land into more useable land is positive for current
       *       In Utah, for current school beneficiaries, distributions would be less as a result of
               land-banking for some period into the future, since: (1) returns would accrue only
               on invested annual rentals rather than value of sold lands; and (2) appreciation of
               acquired lands would occur outside PSF rather than as capital gains. This would
               reverse over time.

It was asked if any of the entities we have looked at invest into lands outside of their state.
Mr. Andrews stated he has not found any that do.

*      Policy Issue 2 - - Maintenance of Land Corpus

       *       Perpetual nature of trust - - should current generations deplete land corpus?
       *       Risk of loss or diversion of financial funds vs. stability of land - - it’s always
               there. Contra - - usurps investment role of state treasurer.
       *       Had this policy been followed in past years, land corpus would be huge.
       *       Contra: overall portfolio still heavily in land; sales of non-agricultural lands
               provide local property taxes for schools.

Chairman Morris noted that, if you start to treat the land as the corpus and not the permanent
fund, don’t you run into the issue that the more that time passes the more likely it is that the
public views that as public land unless you do something about it to mark it off as private? Mr.
Andrews stated that, if we were into public buildings, etc., the public would not think that.
Chairman Morris noted that, when we sell land, we are getting 140+ percent of appraised value.
There is an issue of trading lands at appraised value. Other states are trading at appraised value.

*      Legal Issues - - Can We Do It?

       *       Utah Enabling Act, Utah Constitution, and Trust Lands Management Act provide
               that “proceeds” of sales of school trust lands are to be deposited in the Permanent
               School Fund.
       *       Idaho amends Enabling Act and Constitution to allow use of sales proceeds to buy
               replacement land.

Page No. 12
Page No. 13


Use of Sale Proceeds for Investment in Real Property (cont’d)

       *      Colorado allows “deferred land exchanges” by statute, then ratifies with
              constitutional amendment.
       *      Montana and Washington: statutory program. Washington starts with
              appropriated funds.
       *      Colorado deferred exchange model, version l:
              *       Patent to sale lands put in escrow with purchase price;
              *       State identifies replacement lands and contracts with seller to close
                      through escrow.
              *       Final conveyance is simultaneous
              *       This works under existing Utah law as a three-way exchange, but requires
                      close matching of sales and may not be commercially feasible on a larger
       *      Colorado deferred exchange model, version 2:
              *       Sell sale lands, keep proceeds in escrow account.
              *       Identify replacement lands and buy them with escrowed funds.
       *      Legal question: Is this a sale or an exchange?
       *      Court decisions:
              *       Arizona Supreme Court: it’s a sale; can’t do it.
              *       Colorado Court of Appeals: if you don’t have a requirement that
                      replacement property be found soon, it’s a sale. Reversed on other
              *       U.S. District Court, D. Colo: This is like IRS § 1031 exchanges. If there
                      are similar limits on timing, etc., it is an exchange and doesn’t violate
                      Enabling Act.

*      Need for Statutory Amendment

       *      In Utah, deferred exchange would require statutory amendment because UCA
              53C-4-301 requires deed for exchange land to be obtained prior to state patent.
       *      Would need statutory authorization for land bank.
       *      Would help to obtain appropriation to start.

Mr. Andrews indicated he believes we could do land banking under the Enabling Act and
Constitution with statutory authorization. It is not without disputation.

Page No. 13
Page No. 14


Use of Sale Proceeds for Investment in Real Property (cont’d)

Mr. Lee asked if the beneficiaries would accept something like this. This question was not
answered at this point. Mr. Eardley asked what happens to our tax-exempt status if we trade for
an office building, etc? Mr. Andrews stated that, if we own the building outright, we would be
tax exempt. Mr. Eardley asked if Mr. Andrews thought it would create public outcry? Mr.
Andrews stated we have currently exchanged land into equity into a LLC, and it pays taxes.

*      Strategy and Implementation Issues

       *      Current Sale Strategy
              *       Surface Group sale of rural lands based on buyer demand
              *       Minimal recurring income drives sale-retain decision.
              *       No formal sale/retention strategy
       *      Current Acquisition Strategy
              *       Use land value to obtain ownership interest in improvements on existing
                      trust lands (e.g., Coral Canyon office building)
              *       Occasional purchase of adjoining lands using appropriated capital (e.g.,
                      Big Water motel site)
              *       Limited by existing pool of trust lands, availability of appropriated capital
       *      Possible Acquisition Types
              *       Investment grade (existing vertical)
              *       Urban land for development (build vertical)
              *       Development land (raw land near urban boundary)
              *       Agriculture/timber/speculative
              *       Complementary to existing trust lands (e.g., Big Water motel site)
       *      Required ROI on acquired lands
              *       Utah 9.45 percent threshold rate higher than other states
              *       Other states consider long-term sustainability; public values
       *      Discipline in sale selection process
              *       Acquisition of natural lands as safety valve, as Washington does?
       *      Ability of agency staff to manage acquired lands
              *       Transaction management
              *       Property management
              *       Support (legal, accounting)

Page No. 14
Page No. 15


Use of Sale Proceeds for Investment in Real Property (cont’d)

Mr. Andrews stated this presentation was meant to stimulate discussion.

Mr. Lee noted that the Supreme Court has stated that there are some lands that are unique. If we
are thinking about doing this kind of thing, maybe we should consider these lands; and we could
have a program where the legislature appropriates funds for the state to buy lands for us; i.e.,
Range Creek, Burr Trail, etc. He thinks we need to go further than we have been doing in this

Mr. Christy asked what constitutes “sensitive” lands. When we look at the layers of WSA’s,
etc., it leaves a very small port folio for us. Mr. Andrews stated that Colorado started with an
acreage figure. They constructed a public nomination process and forced the competing interest
groups to compete against each other to see why that interest group’s nomination should be the
ones dedicated to that program. Mr. Eardley stated we are “uniqued lands to death” in Utah. We
need to remember that we are 66 percent owned by the federal government. Every state is
different; and, therefore, we can’t necessarily apply what other states have done.

Chairman Morris stated another thing that is interesting is the question of “what is non-
producing land”? It is dynamic and changing and could be producing in years to come. Mr.
Andrews noted we are already selling lands. Do we need a process that says these are truly
“non-producers”? Do we reinvest the proceeds from the lands we sell? That could be an entire
separate decision.

Mr. Lee stated he thinks that, if the beneficiaries don’t like this concept, we might as well not do
it. Ms. Bird stated the beneficiaries were opposed initially to land banking. Since they have
seen it happening in other states, they don’t know whether the proof is there that it is working for
them. They were opposed since this was a brand new agency, and we didn’t know if we could
manage the lands we had. Their expectations have been far exceeded.

Chairman Morris stated he has heard from the beneficiaries over the years “why don’t we
reinvest those proceeds in a building”. Ms. Bird stated they do think that it would be smart to
buy a building and then lease it to the State Office of Education.

Director Carter stated that one of the things raised today is one of the things the Objective Sub-
Committee is dealing with; i.e., exploring ways to making sensitive lands available to those who
have a lot of passion in acquiring them. Maybe we just need to sell the idea to the State

Page No. 15
Page No. 16


Use of Sale Proceeds for Investment in Real Property (cont’d)

Treasurer because he could buy a building. The difference in rate of return would be from our
doing it or the Treasurer doing it. Mr. Andrews noted we would have to do it because the State
Treasurer doesn’t have expertise to manage it. Director Carter noted that the Utah State
Retirement System does do this and manages this type of property.

Long-term Water Issues Facing the State of Utah

Mr. Dennis Strong, Director of the Division of Water Resources made this presentation to the
Board. He stated their agency helps cities, etc., building water projects. He gave the Board a
power-point presentation, which is made a part of this record and recapped as follows:

*      What is water conservation?
       *      What are we planning on getting through water conservation? - - Save water today
              so that water can be used in the future for water demands. He is not talking about
              putting water back into streams. He is talking about putting it to a future use.

*      Population is what drives water use.
       *      In 1992 they made a projection into 2000 and determined that we would be
              800,000 acre-feet short.

*      Why conserve water?
       *     By conservation and by reducing our per-capita use by 25 percent, we will
             conserve one-half of the water we will need.

*      What have we done?
       *     The Governor’s Water Conservation Team adopted Water Resources/ 25 percent
             water conservation recommendation.
       *     Mission: Develop a long-term statewide conservation ethic with a goal to reduce
             M&I water use by at least 25 percent. This will develop over 400,000 a.f. of
       *     Steps to accomplish the goal:
             *       Coordinated M&I water conservation media campaign
             *       Develop water conservation recommendations and strategies that could be
                     implemented by state and local water agencies
             *       Help communities prepare Water Conservation Plans
             *       Track the impacts of the water conservation effort

Page No. 16
Page No. 17

Long-term Water Issues Facing the State of Utah (cont’d)

       *       Public connect drought and water conservation. We should not talk about them
               together. Drought is something that happens periodically. Water conservation is
               something we should do all the time.

*      How will we meet our future water needs?
       *    First - - Local water suppliers
            *        Groundwater
            *        Increase water treatment plant capacity
       *    Second - - conservation
            *        Where should we concentrate our water conservation efforts?
                     *      We overwater lawns by approximately 40 percent above the water
                            requirements for grass
                     *      We can have the same landscape and lifestyle until 2050, but
                            probably will have to change after that.
       *    Agricultural water conversion to M&I use
            *        Reduction in irrigated land
                     *      Total irrigated land - 1,380,000 acres
                     *      134,000 acres or 10 percent of the total farm land will be
                            urbanization by 2050 providing over 200,000 acre fee of water
       *    New large water development projects
            *        Bear River development - - 220,000 acre-feet
                     Lake Powell Pipeline
                     *      The Board of Water Resources is authorized to build the Bear River
                            Development Project and the Lake Powell Pipeline
                     *      State-sponsored project
                     *      Funds may be spent on preconstruction activities if the legislature
                            appropriates funds for that purpose
                     *      Legislature appropriated funding

Mr. Strong noted that on April 7, 2007, the seven Basin states signed a letter to the Secretary of
Interior stating they had signed an agreement stating how to operate the Glen Canyon Dam in
case we run out of water. The benefit to Utah is peace on the river for a time. If we were to be
sued right now by Colorado, California, and Nevada, they would be in a much better position to
get more of the allocation because we are not using all of our allocation. This agreement should
prevent that.

Page No. 17
Page No. 18

Long-term Water Issues Facing the State of Utah (cont’d)

Mr. Eardley stated that the need in Washington County for the Lake Powell pipeline is now - -
they don’t plan for that until 2020. In about five years they will be in serious trouble.

Mr. Strong explained that there is a great difference in water rights and allocation. The Division
of Water Rights has about one-half million acres in the allocation process. We probably only
have about 200,000 acre-feet to allocate. The big issues we are facing are water conservation,
management strategies, and water development. We are seeing water move to money as it always
has. What is happening with our water going to Nevada? The agreement with Nevada is good
for Utah. Water Rights is working hard to come to an agreement with Nevada.

Mr. Andrews asked about the 400,000 acre feet from Colorado to pump out of Flaming Gorge - -
what is our position on it? Mr. Strong stated we support Colorado being able to develop its
allotment. We will protect Utah water users. It’s now about 165,000 acre-feet. Mr. Andrews
asked if the allocation of Flaming Gorge water to Uintah County is all allotted and is some
reserved for oil shale development? Mr. Strong stated that Uintah County is asking this same
question of the Board of Water Resources. There will be a dialogue between the county and the
board. Oil shale is a legitimate use of that water. One hundred plus acre feet are allotted to the
Tribe. Oil shale is a way that maybe they could lease that water and still get the water back.

Mr. Strong thanked TLA for the money we give them. They are one our beneficiaries. Our
relationship is good with them, and the key to continue this is communication.


Washington Landscape

       Opportunities for Working With New Congress
             Land Exchanges
             County Land Bills
             ESA Mitigation Funding

Director Carter introduced Mr. Allen Freemyer and noted he is paid by us to be our agent in
Washington, D.C. on land exchange, endangered species money, etc. He was previously the chief
of staff to the Resources Committee when Congressman Hansen was the chairman and worked for
the congressman before that. He comes from Vernal.

Page No. 18
Page No. 19


Washington Landscape (cont’d)

Mr. Freemyer briefly discussed his 14-year history in doing exchanges. We need to recognize
that TLA is the most progressive and forward-thinking of any land-management agency in the
country. There is not another Western state that has attempted to do the things TLA has. TLA
has completed over 700,000 acres in congressional exchanges. Other states will not attempt to
address the land tenure issues like TLA does. In February, 1993, we were successful in passing
the P.L. 103 law that attempted to get us out of national parks, forests, etc. He was a staffer in
the minority then and had little to do with it. They did have Secretary Babbitt as Secretary of the
Interior and mostly a Republican Utah delegation except for Karen Shepherd. We did work with
her in accomplishing this. We ended up in litigation over that because of the appraisal issues, etc.
That did not get completed.

President Clinton then designated the Grand Staircase-Escalante National Monument. We then
contacted everyone about taking care of the school lands. We had a political promise from the
president to trade out of them. We had that, Secretary Babbitt, and a Republican delegation. We
set up this model that worked very well. We will treat this like a business transaction. We put
together a team from both sides, sat down, and negotiated on value. We did reach an agreement
between the Secretary and the Governor and took it to the Congress. This deviated from the
previous process of appraising every acre. This was a huge exchange.

We then did the West Desert Exchange. We had the same dynamic players. Then George Bush
got elected, and Secretary Norton was in the Interior Dept. We had the same team and same
rules, and the San Rafael Exchange did not pass. We learned a lot. The main thing we have
learned is that we have to take advantage of political opponents who have needs and bring them
together. The great achievement of our current exchange is that the team has done consensus
building on public land issues in this state. We took advantage of the failed exchange. No one
really liked us. Chairman Hansen retired. We came together and brought to Congress a smaller
exchange, but it had the support of the political opponents, the environmentalists, and recreational
communities. We introduced the bill in the 108th Congress with two weeks remaining. We spent
the entire 109th Congress negotiating. We spent hours and hours with committee staff, etc., and
rewrote the entire bill. We spend a lot of time building consensus. It was passed unanimously in
the House and sent to the Senate. Senator Coburn stated that any legislation that required money
to be spent would have to have an offset. Unfortunately, the committee participated in this. We
were in a package of 13 bills. Mr. Coburn held up that package the last day, and we didn’t get it

Page No. 19
Page No. 20


Washington Landscape (cont’d)

Now in the 110th Congress, the Democrats have taken over both houses. We are back to the
political opposition push, and it might be to our advantage right now. We have spent two years
educating the committee staff and negotiating issues that are very important. Part of this effort
has been to design a template that will work in the future.

Adding to this, the Inspector General’s activities have focused on Nevada and Utah’s land issues.
The Department of Interior is scared regarding land exchange issue. We have reassured the
committee that we are doing something that is right. We went to a hearing last week in the
Senate. Director Carter testified. We have assurances from the House that the bill will go
directly to the House floor in early May or late June. We have made good progress. Mr.
Matheson finds himself in the majority, and this is to our advantage. We also have taken
advantage of the conservation community. They have been active and aggressive. They have
been a great partner. He thinks our prospects are good for passing. Mr. Coburn is still there and
still up to the same tricks. It sounds like they have some different ways of dealing with him. If
we do it correctly, we can do it correctly again and again.

How can we be more successful? We have a great congressional delegation, and all are aware of
of TLA’s issues. They understand the need to do this type of exchange. He thinks the most
valuable thing we can do is to make sure land exchanges and land tenure are seen as high priority
from the Governor, the educational community, and others. They need to see this is how we can
solve problems that are going on over time. We are sort of picking the low fruit in this exchange.
There are still lands for oil and gas exploration that we would like. It is going to get more
challenging as we go along. We think this template will work well.

One of the issues we face is that we are exchanging primarily into unleased lands. We have
explored trading into producing lands. The problem with that is that the congressional budget
office “scores” bills that have any money issues. If you have a producing well and successfully
exchange for that, because there was revenue and you are taking that revenue out of the treasury,
that is direct spending and needs to be offset in the same piece of legislation and is subject to a
point of order. There is no threshold on that amount at this point. We will have to look at this
issue in the future on exchanges because we will be looking at producing assets. No one has
raised this issue in the current exchange.

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Washington Landscape (cont’d)

Ms. Bird stated that Don Peay went to the congressional delegation and created some problems
for us in the land exchange. She thinks certain members of the congressional delegation were
listening to the hunting issues, etc. She is concerned that could become a problem in future
exchanges. They did not have any of the education people call on this. She is wondering if they
should have 5,000 - 7,000 people call the congressional delegation after this bill and before
another one so that they understand the issues. She asked for Mr. Freemyer’s advice on this.

Mr. Freemyer asked them to please not unleash the calls on the congressional delegation. He has
experienced the backlash of these types of calls. The delegation slowed down to see what was
happening and learn more about it. It took staff a couple of weeks so to change this. Ms. Bird
asked how we are going to deal with this type of thing in the future. Mr. Freemyer asked that we
not do what they do - - don’t make enemies. Mr. Andrews stated Mr. Peay is not trying to get
something done, but trying to stop something from being done. We are trying to get something
done. When callers like this start calling, the damage is long-term. Ms. Bird stated that possibly
we need to take a delegation of education people to talk with the congressional delegation.
Chairman Morris noted that Ms. Bird’s concern about this is a good one, and we need to consider
this in the future.

Mr. Lee noted that we seem to be doing these exchanges piecemeal rather using Governor
Matheson’s approach to do Project BOLD. He asked if Mr. Freemyer ever thought we could get
a large one done? Mr. Freemyer stated we have used some of Governor Matheson’s ideas in past
exchanges. It’s getting harder and harder to get large ones done. Mr. Lee asked if the San Rafael
exchange could ever be revitalized? Mr. Freemyer stated that, where we have had success in the
past, the bill always lacks “wilderness”. Had we not had wilderness issues in San Rafael, it might
have been better. When crafting an exchange bill, he recommends that we do it outside a
wilderness discussion.

Director Carter stated that even a bigger philosophical question is whether or not we want to get
out of the scattered land ownership pattern. For mineral uses, it is better to have scattered
ownership. Chairman Morris asked if it would be fair to say that we have been proactive in the
last seven to eight years and maybe now we should wait to see what other interests are out there
for a few years? Director Carter stated we are looking at maybe doing it in association with a
county when they are doing a county land planning bill so that we don’t end up with land
holdings that would be in conflict with that.

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Page No. 22


Washington Landscape (cont’d)

Ms. Bird stated that she did an interesting research project when Project BOLD was being done to
see if we make more money on scattered land than on the blocked land. From the University of
Utah lands, they made more money on the scattered ones. It might be good to do a similar study

Mr. Ferry stated you have to remember Congress Matheson is not naive as to what Mr. Peay was
doing. He spent some political capital in doing that, and we need to be very careful we don’t get
into that. We have been the beneficiaries of the federal endangered species habitat. We have
been taking advantage of this for about five years, but not this year. We have been getting $6 - 8
million annually on the Red Cliffs Reserve. That fund has a current application in process and
has a level funding amount. The entire program is $80 million. The budget request from the
Administration is flat as well. In talking with the Appropriation Committee, they expect that that
program will be bumped up. It is popular with the Appropriation chairman. Hopefully, in 2008,
we see higher numbers on that fund. It is a 90 percent / 10 percent match with states. The benefit
to that on the HCP is that the state ends up owning the lands and not the feds. We get our value
out of the reserve, and the state maintains ownership. This is a unique program and has been
successful for us. We have been getting a large share of that money in the past years.

       County Land Bills

Mr. Freemyer noted that he helped write the Southern Nevada land management bill. The
Legislature basically drew a line around Las Vegas and said we were going to use the land for
exchanges. All the money was going to stay in the state, with 10 percent going to the water
authority. They thought at the time it was a 20-year plan. It lasted four years and then expanded
those boundaries. It was that second piece of legislation that became the model for the
Washington County bill. The Lincoln County, Nevada, bill ideas were combined with this also,
which had water issues in it.

In the 109th Congress, Senator Bennett went to Senator Reid and said they need to do this bill.
They were trying to do a bill in about three counties like this. The White Pine County bill was
passed, and the Washington county bill was not. We have not been too involved in this except
with the issues that deal with the Trust. Mr. Freemyer indicated he feels this is a good model on
how to deal with political issues. We believe Trust Lands can play a role in the county to bring
benefits back to the county. He hopes the county land bills continue to be successful. If Trust
Lands can play a role in the Washington County bill, we will be engaged in that process.

Page No. 22
Page No. 23


Washington Landscape (cont’d)

In Nevada, the commissioners have given away a lot of the acreage for wilderness, etc. They
have gotten huge benefits from that, and that is what has made that work. The environmental
committee has not gotten everything they wanted, but some. In private meetings the county was
getting great benefits for those areas. This has been a struggle for years in Utah. Mr. Eardley
noted there are different rules in Utah. Washington County has given more wilderness in the
plans than Nevada. They also don’t have to deal with SUWA. Mr. Freemyer noted that Nevada
also has Harry Reid, and that is powerful.

Mr. McKeachnie noted that his observation is that Harry Reid really led their process, and in our
state the local communities did that. He stated he had a conversation with Senator Bennett who
said that, when the state lets this be a federal issue instead of a state issue, we will have more
success. He asked what Mr. Freemyer’s reaction to that statement is. Mr. Freemyer stated that
Harry Reid came together with an opposite political person to do this. The committees don’t like
this process. Harry Reid has control of this process. Our senators just don’t have the seniority
that Mr. Reid has. He thinks there was a lot of pressure from both to do the deal. He thinks the
process of building consensus from the ground up is good, but somewhere in the process we have
to get a deal.

Mining Law Reform

Mr. Lee introduced Jim Butler. He is from the Cedar City area. He worked in Governor
Matheson’s office when Project BOLD was being done. He graduated first in his class at the
University of Utah. He has been with Parsons Behle & Latimer for 22 years. He works for
Barrick Gold Mining Company in Nevada. He tracks very closely the Federal mining legislation.

Mr. Butler gave the Board a power-point presentation on mining law reform. He noted that
tomorrow morning at 11:00 a.m., Congressman Rahall will unveil his mining bill reform.

*      Mining Law Reform
       *     Recent historical context
       *     Current political context
       *     Major legislative issues

*      Recent congressional activity:
       *      1994 - - Legislation passed both houses, but Conference Committee failed to
              reconcile the differences

Page No. 23
Page No. 24


Mining Law Reform (cont’d)

      *       1995 - - Mining law changes included in 1995 Budget Reform Act, but vetoed
      *       2005 - - Legislation passed the House, but dropped in Senate

*     Political context:
      *       House Natural Resources Committee
              *      Chairman Nick Rahall, West Virginia
              *      Ranking Minority Member Don Young, Alaska
      *       House Committee on Natural Resources
              *      Majority members include
                     *      George Miller, California
                     *      Edward Markey, Massachusetts
                     *      Maurice Hinchey, New York
                     *      Jay Inslee, Washington
                     *      Mark Udall, Colorado
                     *      Stephanie Herseth, South Dakota
              *      Minority members include
                     *      Chris Cannon, Utah
                     *      Rob Bishop, Utah
                     *      Dean Heller, Nevada
                     *      Jeff Flake, Arizona
                     *      Bill Sali, Idaho

*     Agenda for the House Committee
      *     The Bush Administration continues to ignore the archaic Mining law of 1872 - - a
            law signed by Ulysses S. Grant, and in dire need of reform. Under this law,
            valuable hard-rock minerals such as gold, silver, and copper are mined on public
            domain lands in the western states without payment of royalties. Further, these
            lands can be patented (fee simple title) by holders of mining claims for $2.50 or
            $5.00 per acre, depending on the type of claim (an annual appropriations bill
            provision has temporarily halted this practice). Reform of this law must take place
            to prohibit mining companies from gouging billions of dollars worth of minerals
            from public lands without any return to the public and at a great cost to taxpayers,
            communities, and the environment. The committee intends to revise the Mining
            Law to ensure that the American public receives a fair price for the hard-rock
            resources it owns, thus generating several hundred million dollars annually in
            much-needed Federal revenues.

Page No. 24
Page No. 25


Mining Law Reform (cont’d)

       *      Senate Energy and Natural Resources Committee
              *      Chairman Jeff Bingaman, New Mexico
              *      Ranking Minority Member Pete Domenici, New Mexico
              *      Majority members include
                     *      Tim Johnson, South Dakota
                     *      Byron Dorgan, North Dakota
                     *      Ken Salazar, Colorado
                     *      Mary Landreu, Louisiana
              *      Minority members include
                     *      Larry Craig, Idaho
                     *      Craig Thomas, Wyoming
                     *      Lisa Murkowski, Alaska

       *      Senate Environment and Public Works Committee
              *      Chairman Barbara Boxer, California
              *      Ranking Minority Member James Inhofe, Oklahoma
       *      Senate Majority Leader
              *      Senator Harry Reid, Nevada

*      Industry context
       *      Consolidation in the industry (late 1990s and early 2000s)
       *      Expansion and exploration (since 2004 or 2005)
       *      Continued globalization

The most influential person in the Senate on mining law is Senator Reid. He has the ability to
block a mining law bill and can also make it happen if he wants to do so.

*      Legislative issues
       *      Royalties
       *      Patents
       *      Unsuitability
              *       Right to say “no”
              *       “Protecting special places”
       *      Environmental Regulations
       *      Mining claim Use and Occupancy

Page No. 25
Page No. 26


Mining Law Reform (cont’d)

*      Royalties
       *      Net v. Gross
              *      Rate (Rahall’s “net” royalty is an 8 percent gross)
              *      Calculation of a “net”
       *      Who pays?
              *      All existing claims
              *      Grandfather some claims?
                     *       “valid” claims?
                     *       “properly located” claims?
       *      Where does the money go?
              *      Abandoned mine reclamation program
              *      State or federal?
       *      Royalty administration

Director Carter asked if there were any “takings” issues involved as they try to assert royalty on
previous claims? Mr. Butler stated he doesn’t think so. He thinks that just merely means a “tax”
here. They are not taking a piece of the property, just imposing a tax.

*      Patents
       *       Patent moratorium in place since 1994
       *       Is there an alternative to patenting?
               *       Pay fair-market value for the surface estate and royalty for the minerals?
               *       Reversion of lands to federal government post-mining?
               *       Make lands available for other uses?

*      Unsuitability
       *      Should federal land managers have a discretionary right to disapprove a mining
              plan of operations after permitting is completed?
              *       “The privilege of mining on public lands should be assessed in the context
                      of alternative uses, including recreation and conservation.” Michael
                      Kowalski, CEO of Tiffany & Co.
       *      Mining should be banned from “special places”
              *       Within 10 miles of a “national conservation” area
              *       “Sacred” areas
              *       Aquifers
              *       Habitat for endangered species - - if you can go through the process and get
                      a “no jeopardy” opinion, you can use habitat for endangered species.
Page No. 26
Page No. 27


Mining Law Reform (cont’d)

*     Environmental regulations
      *Current legal and regulator structure
      *      Significant changes since 1994
             *       New BLM regulations - - between 1995 and 2001, the BLM’s regulations
                     were substantially rewritten. In 2001 the Bush Administration revised the
                     *       New bonding requirements
                     *       Increased attention to water quality
                     *       Increased review of exploration and small production activities
             *       Evolving air and water standards
             *       Changes in §404 permitting

*     BLM and Forest Service Regulations
      *    Compliance with environmental standards
           *      air
           *      water
           *      wastes
      *    Reclamation
      *    Financial assurance (bonding)
      *    National Environmental Policy Act
           *      potential impacts must be studied and mitigated

*     Legislative Issues
      *      All public environmental regulation of mining on lands is “federalized” except:
             *       water quantity/water rights
             *       ground water quality
      *      Environmental enforcement (SMCRA model)
             *       permit blocks for other violations
             *       mandatory administrative citations and penalties
             *       citizen suits against agencies and operators

*     Mining Claim Use and Occupancy
      *     Clarify uncertainties regarding use of mining claims that remain from the John
            Leshy Solicitor’s Opinions
            *       Limitations on millsites
            *       Limitations on lode or placer claims for ancillary uses

Page No. 27
Page No. 28


Mining Law Reform (cont’d)

Mr. Lee noted that, in Nevada, Barrick had mining claims and wanted to patent them. Jim Butler
was involved in getting these patented.

Mr. Faddies noted he thinks there is already a mechanism for paying royalties on federal lands.
He asked if they need to “re-invent” this? Mr. Butler stated the royalty is not that controversial in
the industry, but they want to pay a “net royalty”. That makes a big difference. Director Carter
noted that trust lands agencies have always had mixed emotions about the mining industry
because of the federal regulations. We have had a good relationship with the mining industry.
Mr. Andrews stated that one of the benefits of Senator Rahalls’s dealing with mining regulations
is that, if we did an exchange that would include mining lands, this would help us. The question
was asked if there was a role for Trust Lands on a three-way deal? Mr. Butler stated that on site-
specific areas, there could be a role.

Finding Common Ground With Public Land Constituencies

       “How can we work with your organization to achieve both of our goals and needs?”

Dave Livermore -The Nature Conservancy

Mr. Livermore stated they have worked on some projects with Trust Lands. The idea to exchange
ideas today is a great one, and they have looked forward to it. They have purchased lands from
TLA and exchanged them also.

He gave the Board a brochure on The Nature Conservancy, which included a “hot spots” map of
sensitive lands. They are a national group who deals with conservation issues. He hopes TLA
will consider threatened and endangered species and other sensitive things when managing lands.

He noted that TLA maximizes profits, and that is good; but the true value in these lands is in
urban lands; and it might be more beneficial to TLA to be more in tune with environmental issues
because in the future it might be harder to develop some of these high-value lands without some
consideration of environmental issues.

Page No. 28
Page No. 29


Finding Common Ground With Public Land Constituencies (cont’d)

Chris Montague - - The Nature Conservancy

Mr. Montague noted this is one of the ways we can work together to improve our relationship.
On the blue maps, they have identified bio-diversity lands. TLA is constantly looking at its
statutes, etc., and it will always be their responsibility to make money from them. Their concern
is the bio-diversity of the lands. It is interesting that there are so many mandates with different
state agencies, and many agencies are always competing against each other. They suggest that we
might want to pick some criteria to choose the high priority, sensitive lands and then hold them
out from sale until something else could happen with them. On those that have a conservation
value, they could go through their regular bidding process and then let a conservation party match
that bid. They don’t like lands to come up for sale because of the uncertainty of the auction
process. They understand that it works perfectly for the money issues, but it doesn’t work for

They have a number of lease suggestions that would help bio-diversity if they could be put into
the lease. This would help preserve conservation issues. They would like to know more about
the process for how lands come up for auction.

The long-term planning process - - they are not really aware of a process in place that allows you
to compare relative values over time. Maybe there needs to be a statewide classification of
properties, and there could be a plan as to how to transfer them out of TLA’s ownership.

Mitigation banking - - He knows we are already doing this in part of the state. He thinks we need
to get a handle on this statewide, and not just as they come up.

Board - - rather than coming in once every so often, you might consider having a conservation
member on the Board because it is such an issue on all of the lands. Mr. Andrews stated we could
mirror the requirement in statute for the County Advisory Committee and have an environmental
advisory committee. Director Carter noted that they could also try to prevail on the Governor’s

Ms. Bird stated she thinks these ideas are to their advantage, and she wishes they had some that
would be for our advantage also. If we are going to set aside areas, would The Nature
Conservancy entertain the idea of paying for the right to meet the highest bid? Mr. Montague

Page No. 29
Page No. 30


Finding Common Ground With Public Land Constituencies (cont’d)

Chris Montague - - The Nature Conservancy (cont’d)

stated the right of first refusal is the price that would be generated. Ms. Bird stated this right
would chill the bidding. Mr. Montague thinks it might encourage the bidders to make it very
unpalatable for the conservation groups. Chairman Morris asked if they didn’t have that right
now, since they could pay a dollar higher than the highest bidder. Mr. Montague stated that, if
they knew a year in advance what we were going to sell, they could be a lot more prepared. In
some cases, they probably would be willing to pay for the lease to have land set aside during
certain times.

Director Carter noted that it sounds like the suggested changes want us to be the state version of
the BLM, and that is an ineffective land management model. It leads to a lot slower management.
Mr. Montague stated it might be somewhat slower if you have to pay attention to some of the
other uses. Mr. Livermore stated the changes would only apply to certain parcels.

Chairman Morris asked what is bio-diversity and what is meant by perfect compatibility. Mr.
Montague stated that, in a sustainable way, all the species and plants in Utah would be sustained
on a controlled basis. This is not everywhere, but only where the scientists are suggesting that we
work on this.

Scott Groene - - SUWA

Mr. Groene is the Executive Director of SUWA. He stated that their mission is the protection of
BLM wilderness in Utah, which is about nine million acres. They have about 20 staff in Utah.
They have an office in Salt Lake City and an office in Southern Utah. They have a different
mission that TLA, and that has caused us some conflict. He thinks, however, it has improved
over the years. He stated TLA has a really good staff who seem to be most knowledgeable and
motivated. With the different missions we have, it creates conflict; but also gives us an
opportunity to work together and trade lands out of wilderness areas and put them where they can
make more money somewhere else. The reason it is good to work together is because we have
really different constituencies.

He stated TLA has been very aggressive in Washington, D.C., and this has caused conflicts in the
past, but we have worked together on this last bill. We need to work together in the future so that
we can get trust lands out of wilderness so that we don’t have so many conflicts.

Page No. 30
Page No. 31


Finding Common Ground With Public Land Constituencies (cont’d)

Bill Hedden - - Grand Canyon Trust

Mr. Hedden is the Executive Director of the Grand Canyon Trust. He has been a county
commissioner in the past. He is on the board of SUWA and TNC. Grand Canyon Trust works to
restore and protect the Colorado Plateau. They probably have a greater diversity in approaches
than most of the groups. They have worked a lot in the forest, the parks, rivers, etc. They have
bought lands also. They have been referred to as the “Swiss army knife” of conservation groups.

They have worked with TLA on some lands in Southern Utah that were intensely valued by the
community. They, along with other groups, bought these lands. These types of group
conservation dollars are not going to pay to protect the scattered sections that may need it.

The opportunity here for all of us is to work together to get some of these lands protected if you
don’t want these lands developed. We have been able to do that so far because in the coal field in
Utah, the people are willing to have these lands blocked up for development. Eventually, we are
going to exhaust Carbon and Uintah Counties and need to figure out how these land exchanges
can be done. He thinks we should begin a process on a regional scale that will bring in parties
that will try to design a process that will make more sense for everyone involved. This would be
an asset for all involved if we could work together in these areas. There is a possibility to do
good things together. We need a planning process to figure out which TLA lands should not be
developed and what area they should be traded into. He has tried to focus on getting a process
developed where there is wide buy-in for that process, even though each land exchange is
different in some ways. He thinks some of the work that is being done in Washington County
points in that direction. It might be a better bill if some of the TLA lands had been traded into
the Vision Dixie area so that the lands that are sold would be trust lands.

Working in Arizona, which is their biggest office, trust lands is a very big issue also. There is a
real sense in the Phoenix area that protection of open space is a real problem. There are attempts
to resolve this in Arizona. An initiative has been denied that would have protected seven million
acres of trust lands. There were a number of other fixes. The initiative did lose very narrowly.
Polling shows that, if there had been more lands protected, it might have passed. There are some
trying to make a one-line amendment: “the purpose of the trust lands administration is expanded
to add conservation to the purposes of the trust.”

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Page No. 32


Finding Common Ground With Public Land Constituencies (cont’d)

Bill Hedden - - Grand Canyon Trust (cont’d)

Mr. McKeachnie stated he doesn’t agree with many of their goals, but what is the process?
Where does the process we have now break down? Mr. Hedden stated he would begin by having
Staff at TLA directly engage a county or some counties that form a unit and see if they would like
to do a planning process. He would invite some of the interests that need to be there at the table.
The result would not need to be “exact” sections, but a pretty good sense of where lands should
come out of TLA holdings and traded into other areas. In the meantime, we can’t do an
exploratory sale because that makes it harder for conservation groups to get money to buy the
land. Don’t build roads to the far end of the oil and gas exploration field - - give access to the
closest access point of the field. Rein in the activities in the far-out parts of the state until there is
a plan. If we know we are going to sell a sensitive piece of property, engage the environmental
community as to how it could be done.

Mr. Eardley stated that Mr. Hedden has said in reference to the Washington County bill that it
would be well if trust lands could be used to auction off - - it would benefit the schools also. Are
you aware of the formula of the sales and that a portion of that goes to public education and also
the lands go to the tax rolls? Mr. Eardley stated he doesn’t think Vision Dixie will be that
specific when it is finished. Will his organization accept what comes from Vision Dixie? Mr.
Hedden stated he is comfortable with the process and would have to see the end product to see if
he could support it.

Mr. Freemyer noted that Mr. Hedden has talked about a sequel approach to future exchanges
maybe county by county. We didn’t get a wilderness bill this way. Could we do this planning
process without tackling the wilderness problem? Could we deal with those regional issues
without dealing with wilderness? Every time land exchanges get coupled with wilderness, neither
one happens.

Mr. Hedden stated he sees these land exchanges as being a precursor to a wilderness bill. With
all these groups supporting the current land exchange, they don’t have a problem doing a land
exchange that doesn’t have wilderness in it; but it is clear it considers wilderness values and
concerns. Mr. Freemyer stated this is going to get more difficult over time.

Page No. 32
Page No. 33


Finding Common Ground With Public Land Constituencies (cont’d)

Bill Hedden - - Grand Canyon Trust (cont’d)

Mr. Livermore noted that TLA was part of an association that knew the Arizona issues were
happening and its model. Mr. Morris asked about the components of that model. Mr. Hedden
stated the mission to maximize revenue is hard. In Arizona they made projections of specific
acres; and, by having those lands protected, they would increase adjacent lands to offset the
“protected” lands. Their beneficiaries were o.k. with this. Ms. Bird stated the beneficiaries were
at the table initially; but, as it started to fall apart, the education community was opposed to both
bills because they felt it was a taking of land. Ms. Bird asked why Arizona didn’t look at doing
some congressional land exchanges to exchange some of the lands around Scottsdale, etc., so that
they get lands that can be developed? Mr. Hedden stated there has been a history of private
developers stating they are doing an exchange with the Trust and stating they want land in good
areas. They managed to sneak enough of those through that the words “land exchange” in
Arizona are poison.

Director Carter asked Mr. Groene that, if we went to a county (i.e., Beaver County) and there
was a much stronger conservation philosophy in the planning process and it appeared they were
heading towards a good portion of the Citizens proposal of wilderness and we worked out some
type of a land exchange, would SUWA support a county land exchange bill? Mr. Groene stated
they would support if it were a good bill. There are some problems due to county lands, etc.
Director Carter asked that, as we looked at working with them and talking about land exchanges,
it was clear that many counties preferred us to stay within their county. As we looked at targets,
it appeared there were two areas where the Red Rock boundary had been drawn that perhaps there
would be enough land for us to acquire - - how flexible are those boundaries? Mr. Groene stated
there is no firm rule about the boundaries. We would see what area qualifies to be in the
proposal. Is there a compelling public need or a compelling future need in that area? We need to
talk about it.

Director Carter noted to Mr. Montague that he had talked about the ability to match sales. He
stated he has always ascribed to the fact that this is chilling, but that might encourage people to
bid higher. He asked Mr. Montague if he was aware of any imperial data on either one of these
sides? Mr. Montague stated he is not aware of data on either one. He has been surprised at some
of our land auctions on what people would pay at the sales. Ms. Bird stated she has had
conversations with developers that said that, if there is an ability to match, they would not show
up. Chairman Morris asked, if they had a year to prepare for the sale of a piece of property, could

Page No. 33
Page No. 34


Finding Common Ground With Public Land Constituencies (cont’d)

Bill Hedden - - Grand Canyon Trust (cont’d)

they compete for that property? Mr. Montague stated they could compete better. They can’t
afford to buy at the scale they would like to protect as far as trust lands go. If they had a year,
that would be an adequate amount of time to decide whether they want to participate.

Director Carter noted that the rules allow us to do negotiated sales, and we have done them. Mr.
McKeachnie stated that these people might be interested in our track record of auction sales vs.
appraised value. Director Carter stated that our history is about 150 percent of value - - the same
thing with an exchange. Arguably, we lose money because it costs so much money to do an
exchange, and we wouldn’t get 150 percent of value. Mr. Andrews noted that the Director has a
map that overlays on our trust lands map showing habitat, wilderness, etc. There is very little
acreage that is not on someone’s list. How do we go about prioritizing between the different
constituencies that are out there? Mr. Groene stated he doesn’t think there are too many
differences on BLM lands, but maybe on Forest lands. Where do we go in the future? As the
state gets more crowded and people pay more attention to these issues, TLA will have to pay
more attention to these issues. The Green River parcel is a good example. There is a political
reality of dealing with some of these issues. Ms. Bird stated there is a counter to this also - - as
the population grows, there are going to be more homes needed.

Chairman Morris noted that we have had some transactions that we think they would categorize
as win-win - - why don’t they put those kinds of transactions in your literature? Why don’t we
see the positive coming from the media? Mr. Groene noted that in SUWA’s last two newsletters,
they have said good things about TLA. Sometimes they are not sure that is what we want.
Mr. Montague stated that, when they make a purchase, they try to give mutual credit to the parties
of the transaction. Chairman Morris asked Mr. Montague if they had considered people from
TLA to be on their board?

Mr. Eardley stated he thinks there has been a false premise here today. All have said that, if we
wanted to endear ourselves to the people, we should be on board with the conservation groups.
He doesn’t agree with that. He thinks the bulk of the population is not necessarily in harmony
with this position. It is viewed as counter-productive to their lifestyle. He thinks a lot of times
when we hear from groups, it does not represent the majority of the thinking in those areas. He
thinks we could do ourselves a lot of harm with the public viewing us as being very radical.

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Page No. 35


Finding Common Ground With Public Land Constituencies (cont’d)

Bill Hedden - - Grand Canyon Trust (cont’d)

Mr. Groene stated his point was not that TLA should be more conservation oriented - - it is
dealing with the controversy of certain people not wanting people to sell certain properties. Mr.
Eardley stated there always will be that, but he thinks SUWA would really want to have nine
million acres in wilderness. There is no genuine effort from them to come to the table and
negotiate on wilderness. Mr. Groene noted that TLA deals with a lot of constituencies. If people
continue to do this, there will be more need to negotiate on these issues. Mr. Eardley noted they
are dealing with different issues in Southern Utah - - transportation costs, homes, etc.
Mr. Livermore noted that the blue map is just to note that there is interest in these areas. He
thinks Staff has been very fair in considering these areas. Ms. Bird stated that, if these people
could know a year in advance about sales, it would be good, especially if everyone else knows

Mr. Montague stated that might be creating a problem TLA doesn’t think it has. They are
outsiders and see that people have more concern with environmental issues. Mr. Eardley stated
he thinks there is a segment in the media that spins that all the time.

Chairman Morris noted that there is an awareness with the Board and Staff that we have to deal
with conservation. We don’t ignore this. Mr. Scales noted that every person you ask about
“special” properties has a different answer. He is trying to sort out how we would determine what
really is a special piece of property. Mr. Ferry stated we have a mandate for our beneficiaries,
and this needs to come together and be balanced with the “special” needs and concerns. Mr.
Montague stated that possibly we need a mandate that is a little more flexible, as other states are
recognizing is needed. Director Carter stated he agrees that there is an increased need to evaluate
the long-term environmental consequences. He doesn’t think, however, that we are the only ones
who have bad press about them. We have done a lot in an effort to address this. We need to do
more. The model that we have done on the land exchange to engage all constituencies is good.
We won’t get land exchanges through Congress without environmental support. It doesn’t take
any skill to kill a land exchange.

Mr. Hedden noted that Staff from TLA is always knowledgeable. Of all the agencies they deal
with, TLA is the most knowledgeable and creative. They believe that possibly TLA will bring
forth some creative ideas to deal with this. They are tough about getting the best dollars, but
willing to negotiate also.

Page No. 35
Page No. 36


Finding Common Ground With Public Land Constituencies (cont’d)

Bill Hedden - - Grand Canyon Trust (cont’d)

Mr. Livermore noted these are all of our problems, and not just one of us. We need to all address
them. They are very grateful to be here today to talk about these issues. Mr. Montague stated
they appreciate their relationship and the transactions they have done with TLA. They will try to
work with whatever rules and policies TLA has. Today was a good chance to get some ideas
tossed out that can be worked through. Mr. Livermore stated they are all volunteering to work on
negotiating these issues.

Chairman Morris thanked these people very much for coming to the Retreat and having this
discussion. Mr. McKeachnie stated that we think these people need to know that this is not the
first time we have had this conversation. We have been trying to figure out if we are doing our
best and what we need to do differently. Director Carter stated we have enjoyed a good working
relationship with these organizations and will continue to work with them.

The first day of the Retreat adjourned at 4:45 p.m., and reconvened at 6:00 p.m., at the Joseph
Smith Building for a dinner with legislative leaders.


Lt. Governor Gary Herbert

Mr. Herbert stated he has a great appreciation for the legislature, what they do, and the balance
they are in government. He appreciates Director Carter and what TLA does. He appreciates our
goals and objectives. They are very important parts of what is happening in the State of Utah.

He noted he remembers that some time back TLA had an emphasis that they should be doing
more with its responsibility in developing the land in its jurisdiction. TLA now has a lot more in
the bank than then. He applauds that effort. You are getting together to work on ways to do it
better. The efforts have been significant and not unnoticed. There is a need to have better
understanding of our roles with the legislature, the Governor, public industry, environmentalists,
etc., without sacrificing our goals and objectives. He stated he thinks that most of our conflicts
are because of misunderstanding. He knows there are some groups out there that we just can’t
change because they have different goals and objectives. In working with those groups, however,
we can accomplish more and do it better.

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Page No. 37


Lt. Governor Gary Herbert (cont’d)

Governor Huntsman and he campaigned on “let’s grow the economy”, because that is how to pay
bills. We can pay bills without having to raise taxes. The biggest ones were education and
transportation. The good news is that we have been in a growth era. We had eight percent
growth in Governor Leavitt’s term. This past year we had about a 16 percent growth. We are the
fifth fastest growing state in the nation. Even in our poorest counties, we have 3.9 percent
unemployment, which is much lower than the national average. We will have more immigration.

One significant part of the development of the economy is in the natural resources field.
Construction is the fastest growing segment. Mining and natural resources is the second fastest.
Some of this has to do with TLA in the development of our resources. We have tremendous
opportunity to become more independent of oil, etc. Utah can help the nation in this area. TLA
can help if we take advantage of the trust lands.

Mr. Herbert stated he would suggest, unless TLA does something wrong, it probably won’t get in
the media much. Sometimes we wonder if our role is significant enough in the overall scheme
of things. He discussed roles we play. He knows something about being the “back up” and the
opportunities that come to him to help in the areas in which he knows. We have opportunities,
whatever our role is, to make sure “we win the game”. He stated what TLA does is significant
and impacts the outcome of the education of our young people. It is appreciated. He thanked
Staff and the Board for what they are doing on behalf of Governor Huntsman and himself.

Representative Barrus

Representative Barrus stated he appreciates Lt. Governor Herbert sharing his thoughts and echoed
what he said about the great work that we do and the benefit that is to the school and the
education system. He noted that we may or may not get some of the letters that he gets. He noted
TLA is doing the leg work, and he gets the thank you’s. He gets letters thanking Trust Lands for
the work we do. People recognize the benefit that is to the education system. He thanked Staff
and the Board. The work we do does provide much economic benefit.

One of the things he has done in working with natural resources is getting to know Director
Carter and Kim Christy. They have done a great job in educating him in what we do. He gave
some background on the areas he is focusing on. As chair of the Natural Resources Committee in
the House, he sees all those resources in which we are involved. There are three areas on which
he is focusing - - economic development, water development, and energy development.

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Page No. 38


Representative Barrus (cont’d)

*      Economic development - - this is very important. If we have jobs and good people, we
       will have revenue.

*      Water development - - we recognize we are in a dry state, and we have to be able to
       manage those resources and develop those resources.

*      Energy development - - if we don’t development the energy resources, we are missing a
       great opportunity.

In the last couple of years, one of the areas he tried to work on is the state energy policy. He
works with the Governor’s Office and with the State Energy Office, Laura Nelson. The energy
policy is a framework that creates the goals we are trying to accomplish and provides the ways we
are trying to do that. He wants to be able to work closely with Congressman Bishop and Senator
Hatch on this area. They tell him to talk to Gary Herbert. The policy has four areas: efficiency
and conservation, development of end resources, transportation and transmission of those
resources, and regulation of the energy resources. Last year they focused on efficiency and
conservation. This year we are focusing on development of those resources; i.e., fossil fuels, etc.
We have an opportunity, and he wants to see us get it done. They want to provide an
environment in which we can get it done. TLA plays a significant part. We have many oil shale
reserves in the state - - probably twice the equivalent barrels in oil shale than the known oil
reserves in the world. How do you develop that? Some of that oil shale is on TLA lands. If we
can decide to be more energy independent and develop the resources in our own state, whether
they are oil shale, wind, traditional oil and gas, etc., imagine the contribution we can make to our
state and country and the world. At the end of the day, education systems will benefit extremely
if we develop some of these resources which we haven’t been paying as much attention to.

Those are the areas he will focus on this year. He will look at energy development. He and
Senator Bell have met with the attorneys that drafted the legislation for the State of Wyoming.
They want to create an infrastructure here in Utah. TLA is playing a very important part because
it is trust resources that we are dealing with. He thanked TLA for all we do. It is trust resources
that will prove to be a great benefit to each of our schools.

Page No. 38
Page No. 39


Senator Stowell

Senator Stowell stated he appreciates the opportunity to be here. He represents District 28. He
took Tom Hatch’s place. He is serving as the co-chairman of the Appropriation Committee for
Natural Resources. They are the committee that sets TLA’s budget. He noted he appreciates
Director Carter, who is a Cedar City boy!

He stated he wanted to talk to us about our block in Bullfrog. He met with some county
commissioners last week. There is a mill and uranium mine there that operated in the 1980's.
This has been idle since then. There is no power line there, and they have three diesel generators.
The marina has a generator. There is a concession, and they have a generator. There are no
power lines. Last year it cost them 27 cents a kilowatt area to generate power. It will probably be
worse this year. You would have to build the power line through the park. There are two
wilderness areas involved. The Park Service is pushing to get this done. He thinks this is a real
opportunity to upgrade part of this and get a new line in. We may want to block up more land in
that area. He thinks we could have another city down there. The lots in Ticaboo are selling for
approximately $17,000. They are doing feasibility studies through the Six County Association of
Governments. The Park Service put in money. He noted that Director Carter had said TLA
would also put in money. Senator Stowell thinks we will see the area grow, and he encouraged us
to move in that direction. The feasibility study should be done in six months.

Senator Stowell stated he appreciates TLA and will do whatever they can to help us in the
Appropriation Committee. He is also co-chair with Fred Hunsaker on the Political Subdivisions
Interim Committee. If he can help us there, he will do so.

Director Carter expressed appreciation to our special guests for sharing this evening with TLA
Staff and Board members.

Page No. 39
Page No. 40

THURSDAY, MAY 10, 2007

Chairman Morris thanked Staff for putting this meeting and other meetings together. He
recognized Mr. Eardley as being honored as one of the great community leaders in the St. George


State Leaders and Associates - - “Critical Issues on the horizon and how the Trust Lands
Administration can be a Constructive partner to address those issues.”

Director Carter noted we have invited state leaders and a representative from the State Board of
Education to this session. We have invited them to give feedback on things the Board and
Administration can do to improve our interface with them and their agencies.

Mike Styler, Executive Director, Department of Natural Resources

Director Styler stated he appreciates being here today. The Department of Natural Resources
(DNR) has a lot of dealings with TLA. About 95 percent of the time they are amiable. We have
many issues that cross paths. DNR has seven divisions - - two water divisions, Water Rights and
Water Resources. He stated TLA probably would have more dealings with Water Rights because
TLA has water rights. It was noted that Director Strong, of the Division of Water Resources,
talked to the Board and Staff yesterday. Director Styler stated that the Division of Water Rights
works with us in protecting and taking care of our existing water rights. In some of the water
rights, we are partners; i.e., West Desert test wells. Most of them will be on trust lands. They are
appreciative TLA is willing to work with them on this.

Other divisions DNR has are:

State Parks - - TLA doesn’t have too many dealings with State Parks, but has done some
exchanges of properties.

Oil, Gas and Mining - - TLA has a lot of dealings with DOGM, as they are the permitting entity
for oil and gas and mining on trust lands and private lands. He noted we have a great relationship
in this area. They would even like us to work in their building! Critical issues on the horizon will
be discussed today. They are concerned about making sure the mineral and oil and gas resources
are taken good care of.

Page No. 40
Page No. 41


Mike Styler, Executive Director, Department of Natural Resources (cont’d)

Utah Geologic Survey - - They do a lot of work on water issues. They have hydrologists on staff.
If you are doing development, please check with them to make sure there won’t be land slides,
etc. on that property. UGS is very helpful and at your service. They work a lot with counties and
cities to prevent permitting in areas of slides, etc.

Forestry, Fire, and State Lands - - They have the responsibility to manage all the sovereign lands
in the state - - those lands under navigable waters - - Bear Lake, Utah Lake, Great Salt Lake, parts
of the Colorado River. They do permitting on those lands. They also do firefighting. They have
been talking with TLA to get a model state forest, and they still want to do that.

Wildlife Resources - - they probably have the most interaction with TLA. They make comments
on different proposals TLA has.

The issues that are very important for DNR are:

*      Health of the land - - one of the things that Commissioner Blackham and DNR have been
       working on is the watershed initiative. The legislature has appropriated money to protect
       this watershed. They want to prevent fires. The state is being overrun by cheat grass and
       other plants not native to the state. The fires re-burn the same areas every year, but they
       burn a little bit larger. Lots of that is on trust lands. We will improve the water quality
       and quantity. We will improve the grazing. One of the main benefits of the watershed is
       that we are improving the forage that comes off the lands. One of our main partners is
       TLA. Last year they spent $700,000 working on trust lands. DNR paid part of the bill,
       and TLA paid part of the bill. They want to help improve the land. This is one of the
       most critical issues we are doing now. They consider us to be important partners to make
       healthy landscape.

*      Energy - - Between DWR and DOGM, they will do everything they can to help facilitate
       resource development. Last year DOGM needed more biologists to help in their
       permitting. They went to the legislature and got money appropriated for four biologists to
       work in DOGM to help with permitting. In the past, there have been unreasonable
       expectations regarding wildlife and mineral development. He doesn’t think the two are

Page No. 41
Page No. 42


Mike Styler, Executive Director, Department of Natural Resources (cont’d)

*      Water - - water is becoming more scarce because there is more demand. We have had
       some drought cycles. They are worried about this year. There are scary projections on the
       Colorado River. Trust Lands needs to protect its water rights. Grazing is saving our
       water rights. They would have had to have been forfeited if you don’t use them. It is
       important that we have multiple use on our lands to maintain those water rights. In the
       State Engineer’s office, there are not any more water rights to appropriate. Therefore,
       they are trying to transfer and change the use. Transfers are becoming very complicated
       and difficult. We need to be aware of this in our dealings with our water rights. His
       advice is to get the best water attorney we can and protect ourselves.

*      Exchanges - - they are always doing exchanges between their divisions. Parks and DWR
       and FFSL all own land. They have two or three trades a year. They have prepared a list
       and given it to TLA of pieces of property they would like to have. They have also given
       TLA a list of some of their property that they no longer need for wildlife value. He thinks
       those exchanges will continue to be valuable for both agencies. He thinks we have had a
       good working relationship. We have had a running total of acres on exchanges, and Trust
       Lands owes DNR money or acres.

*      Political issues - - He was in the legislature when Mel Brown carried the bill to give TLA
       direction in its new statute. At that time, he thought it was pretty narrow. Mr. Brown
       stated it had been too far the other way for too many years. He had a copy of yesterday’s
       editorial regarding Utah’s “birthright”. He does agree with them on this, and he thinks
       there will be some political pressure to give us more latitude in our decisions. He gave an
       example of This is the Place State Park and the process they have gone through in trying
       to make it profitable. They are leasing some of the land to the University of Utah.
       However, the neighbors don’t like it. Perception becomes reality, and the neighbors
       thought it was “sacred” ground. Finally, the legislative leadership and the Governor asked
       them to do it some other way. He believes that many of the legislative leaders feel the
       same way about TLA’s mission. It is too narrow. He also believes that we are doing
       exactly what our mission is, but he thinks it is too narrow.

They are very pleased to work with TLA as a state agency. Director Carter and his staff are the
consummate professionals.

Page No. 42
Page No. 43


Mike Styler, Executive Director, Department of Natural Resources (cont’d)

Mr. Eardley stated that we know that water rights around the state affect trust lands. Many of the
aquifers are overpermitted. What is a solution to this? Director Styler stated the legislature put a
water-management plan into effect two years ago. It allows a local area to come with its own
solution. The statute allows for the local area to make changes and solve problems. In some of
the areas, the aquifers are dropping and pretty soon only the rich will be able to keep the
connection with the water. This is a very difficult situation.

Director Carter asked Director Styler if DWR is doing anything right now to pursue clearing the
5600 West property? Director Styler stated they are. Director Carter asked if they had a chance
to work with Director John Njord’s people to see how the highway will be aligned there?
Director Styler stated they have had a shooting range out there. Mountain View Corridor is going
right down 5800 West. There is much value there. This is the kind of thing we have talked about
making some large exchanges on so that we can get property that has future growth potential. It
was acquired with federal money, so they have to clear all the red tape before they can exchange
it. They are in the process of hiring a part-time person just to work on this.

Ms. Bird noted DWR is the Trust’s largest grazing permittee. What is being pursued in terms of
DWR to make sure they are using all the attached water rights? Director Styler stated he doesn’t
know, but he could find out the answer to that question. Ms. Bird noted it is very important to
protect the water rights. Does being used by wildlife protect the water rights the same as being
used by cows? It was the general feeling they could, but it was noted it was important to make
sure they are protected.

Chairman Morris stated the political issue is pretty much understood. We understand the
tensions. We are empathetic. With input from our beneficiaries, we will talk about the
opportunities to meet some of the needs of the constituents we talk about. This will evolve.

Tauni Pack-Downing, Governor’s Office

Mr. McKeachnie introduced Ms. Pack-Downing. She is very new in the position as the
Governor’s counsel. She was the Executive Director of Workforce Services and counsel for that
agency before that. Ms. Pack-Downing stated she is happy to be here. She has worked with Mr.
Christy before in the Legislative offices. She is happy to work with TLA.

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Page No. 44


John Njord, Executive Director of the Department of Transportation

Mr. Njord stated it was a pleasure to be here at this Retreat today. He recognized we are all his
customers and use their product. They are interested in improving that product and the quality of
life. When Governor Huntsman came into office, he made the statement that he was elected to
develop the economy. Our economy is very strong since he came into office. Growing the
economy presents opportunities to do other things within the state. There are economic
opportunities with transportation and our quality of life. It is three gears working together, and
anyone of those gears can stop the others. As he has talked with the Governor over the years,
they have tried hard to make sure that transportation is not the gear that stops the other two.
They have also seen an unprecedented amount of investment in our state in the last two years. It
is the feeling of the Governor and the Legislature that investing in transportation will engage
those other two gears.

This last year we have seen much investment in transportation. Record amounts of money were
invested this year. There was approval for a $1 billion bond for transportation. This will be paid
for through an appropriation from General Funds for about 11 years. In the transportation world,
that is a small amount. About three years ago, the legislature had a task force that identified the
resources - - the delta between then was $23.5 billion, including everything. Since 2004 real
estate prices have been high. Property values are going up. There has been tremendous inflation
in construction costs. They saw a 49 percent increase in those costs in the last two years. The
things that they build their roads out of are in short supply and extremely expensive today. That
is not to say that they are ungrateful for this bond. They are going to put it to good work. No one
should be fooled into thinking they are going to solve all the problems immediately.

In addition to the $1 billion bond which the Transportation Commission is considering as to
where it should be spent, they have received some one-time General Fund money of about $100
million that will be spent on corridor expansion, choke points, I-15 South, etc. They also have
resources that will enable them to purchase the rights of way for the Mountain View Corridor.
This will be about $450 million. The longer they wait to purchase, the more expensive it will be.
They have received authorization to bond up to $100 million for it. They would only be
authorized to purchase in Salt Lake County. They also received authorization to pay cash from
the $249 million Centennial Highway Fund. This was created in 1996 and was designed to
construct the I-15 project in Salt Lake County. They continue to pay on that bond. They gave
them cash this year to use on it.

Page No. 44
Page No. 45


John Njord, Executive Director of the Department of Transportation (cont’d)

They continue to look for partnerships in the way they deliver projects. He thinks it is good to
understand the future land values. Land is worth something only if you can get there. Having no
access decreases the value of property. They provide access. The land is greatly increased. They
have done a number of partnerships to provide access. In exchange for that access, they have
been able to improve their facilities.

They have done work with TLA on MP 2 in Washington County. They are proud of that
partnership with TLA to develop that property. They were going to build a beltway through trust
land. The partnership has enabled both of us to do our work less expensive. There has been a
tremendous amount of work by TLA to master plan that area to ensure that the highway will
maximize the value of the trust lands. They are glad to be able to work with us on this project.

There are opportunities to enhance our relationship in the future. They continue to be frustrated
with the paperwork for land of minimal value. Some times the cost is more than the value of the
land. They would like to be able to change that in the future. We have opportunities to work
together. TLA’s mission is defined by the legislature. It is a mission for our children and
education. He also has a mission to provide transportation for all the citizens of the state.
Finding ways to mirror those two missions will only help. They look forward to the opportunities
in the future.

Mr. McKeachnie asked about the difficulty in transferring lands between agencies and what can
be done about it. Mr. Njord stated he thinks our staffs can work on this. It should not be hard to
transfer land. We transfer land all the time. He has a full right-of-way section, and transferring
land with TLA is more difficult than transferring land with a private owner. Director Carter
stated he thinks the problem is that Mr. Njord has a way of doing things and we do too, and we
both think we are right. We need to work on how to do it better. Ms. Bird asked why we can’t sit
down and work with a mix of the two processes.

Chairman Morris asked Mr. Njord what it will be like five to 10 years from now in Eagle
Mountain, Grantsville ; i.e., arteries, how to get to urban vicinities, etc? Mr. Njord stated they
have plans to facilitate some of the cleanup of the problems in Utah County. Eagle Mountain and
Saratoga Springs should help. Lehi doesn’t want things to run through their town. They want it
to run around their town. It is very important that they find water for those areas. Chairman
Morris stated CUP has made an agreement to provide water there. Mr. Njord stated the entire

Page No. 45
Page No. 46


John Njord, Executive Director of the Department of Transportation (cont’d)

area is serviced by one road that is undersize. It is a tremendous traffic jam. Their plan to
address this is to build a new surface street south of SR 73 - - five to seven lanes that will run
from American Fork to the Junction of SR 78 and SR 63. That could be constructed by 2009.
There could be some impact to some residents and businesses along that corridor.
They also plan to build the Mountain View Corridor, a freeway that comes across Salt Lake
County and goes into Utah County and connects to I-15. Some of this is not permitable because it
is adjacent to Utah Lake. They have a fall-back position that would be 2100 North Main Street in
Lehi. He thinks that would likely be the location.

Director Carter asked if toll roads were in Utah’s future? Mr. Njord stated they are not
immediately in Utah’s future. Maybe in decades we might have some. The legislature has asked
us to look at this. There is no desire among legislators to toll roads.

Mr. Lee indicated there are environmental and litigation issues. He asked if they are presently
litigating in Salt Lake County? Mr. Njord stated they have litigation on almost every project on
which they are working. There is a lawsuit on two projects at 106 South area in Salt Lake
County. They are in Federal court. They anticipate an appeal on the case, which would delay it
further. There doesn’t seem to be any legal problems at MP 2.

Chairman Morris asked how the HOV land is going regarding people paying a fee to drive it?
Mr. Njord stated it is not overly subscribed. They are now selling 1400 passes. There are still
some available. They are happy with the opportunities that have occurred in that express lane.
The rate of travel grows six percent every year. In 20 years the traffic will double. We may
complain today about more traffic to other places. Twenty years from now it will be dramatically
different. They are going to do their best to keep up with it, but they can’t build roads that fast.
The express lane next phase will be to do electric tolls. They will have a transporter in your car.
You will be charged when you drive in that lane. When they have the congestion 20 years from
now, they will be able to generate a trip time in the express lane. They will only charge for
single-user use. It will be variably priced - - peak to off-peak.

Director Carter asked how things are going on the Legacy Highway? Mr. Njord stated Legacy is
coming along very well. There is a lot of activity near Lagoon and along the corridor. Two
weeks from today they will be paving the first part of Legacy towards the South end. We will be
driving on it October 8, 2008. He can’t predict interchanges on I-70. They have requests for

Page No. 46
Page No. 47


John Njord, Executive Director of the Department of Transportation (cont’d)

small interchanges. It is hard to justify an interchange for a small operation. They continue to
have many requests for interchanges on I-15. They have a list of those requests and have
prioritized them based on economic opportunity, traffic congestion, and traffic volume. If he
would predict where they would build the next one after MP 20, he thinks it would be in Layton.

Chairman Morris thanked Director Njord for coming today.

Commissioner Leonard Blackham, Department of Agriculture

Commissioner Blackham stated it was great to be here. One of the things we Utahn’s have is
conservation development - - we are part of this. We have basically all the state and federal
agencies that interact with public lands, and they are working together better now than for the last
20 years. In the last 20 years, we have discovered that the hands-off approach has not worked
very well. Federal agencies recognize this now. The partnership is an opportunity to work on
this, and the legislature gave Agriculture money to work on it. There is now money to do some
improvement projects to improve the land. This will reduce fire hazard and address
environmental issues. The partnership is strong. Director Carter participates and is always there
looking for ways TLA can participate. We have a great concern for the development on our land.
They were happy to see the legislature has recognized this and appreciated money to Agriculture
and DNR. The real manager of the land is the rancher - - he is the on-the-ground manager. Good
management can do more to improve the quality of the land than anything. They want to make
sure that happens. They now have the Grazing Improvement Program to interface and help
identify problems to bring them up through the department to work them out. The program is
flexible. If it impacts grazing, they can spend the money. One area that was stimulated is
invasive species. We belong to a weed-management process that stimulates the interest in getting
this done. The importance of getting control of these is essential. We trade worldwide now, and
we get weeds from all over the world; and we don’t have resistance to fight them. That role is
becoming more important. It is exciting to see the level of emphasis and commitment that is
being made now. We need to make sure that this partnership continues. It has been so beneficial.
We need to continue in a spirit of cooperation in this effort with federal and state agencies. The
bulk of federal resource costs are in legal services to defend themselves rather than do things.
The partnerships have not been challenged thus far. We have public cooperation, and we are
trying to do it with the knowledge of all the groups. We are excited about Trust Lands’

Page No. 47
Page No. 48


Commissioner Leonard Blackham, Department of Agriculture (cont’d)

Commissioner Blackham thinks the most threatened species in Utah is the Utah rancher. Many
of the ranchers in Utah are very old, and there is no one left to take over. An integral part of
keeping them in business is to make them profitable. Their program comes from the ranchers
point of view and what can they do to improve the livestock grazing. Utah range cannot exist
without the public lands. Probably about 80percent depend on it. If that is weakened any further,
ranchers will be gone. It has many benefits to the rural economy.

Commissioner Blackham stated he thinks nationally there will have to be a debate. Utah
agriculture is being impacted substantially with energy. Utah agriculture has had a 75 percent
increase in their costs. Utah agriculture is 80 percent livestock. Cattle is number one, then dairy,
hogs, turkeys, sheep, etc. They all use corn. Agriculture is being hit hard with the energy debate.
Also, houses being put on farm land are hurting agriculture. Trust Lands may need to be sensitive
to this. This is not the time to talk about raising grazing fees. The committee working with us
can probably help mitigate this impact. The director of that program is Bill Hopkins. He
basically is one of the main brains that turned around Deseret Land and Livestock. Our second
main person is Kathleen Clarke, Assistant Commissioner . They are very happy to have her
working on these issues.

Most of us here have a connection with farmers. Most of those legislators on the Hill don’t have
that connection. We will make it in Agriculture. They always meet the challenge. They are
pleased with their relationship with the Trust. They appreciate the attitudes of Director Carter
and Kim Christy.

Mr. Lee asked if they had done any study at all on the water impact on grazing? Commissioner
Blackham stated they have not. It is amazing what some small streams can do. Their main
problem is where the water is available. The best thing you can do is create new water-hole
opportunities. It is good for wildlife also. If you have more water holes, you can disperse the
cattle more evenly in the landscape. Development is not necessarily a dirty word. Sometimes
you have to do water development in areas to keep it healthy. If you make over $80,000, you
only spend four percent of your income on food. The average household spends seven to eight

Page No 48
Page No. 49


Commissioner Leonard Blackham, Department of Agriculture (cont’d)

Mr. McKeachnie told the group a story about being in Governor Bangerter’s office. He told them
to talk to the agencies’ people to work out the problems. These people today are representative of
the high quality of the cabinet people. They are the people who really run the state. The same
quality of people exist on this Board. These are dedicated citizens who try to help make the State
a better place.

Mr. McKeachnie noted that Ms. Tauni Pack-Downing was a very new employee in the
Governor’s Office. He asked her to talk about what she knows about trust lands. Ms. Pack-
Downing stated that TLA has the responsibility of trust lands - - a constitutional responsibility to
provide a heritage for the schoolchildren. The mission is to have the highest value on the land.
The parcels are spread all over the state. We often trade them for other areas that can increase the
value and put more money into the fund for the schoolchildren. Mr. McKeachnie stated that the
general public doesn’t know the answer to this.

Commissioner Blackham stated that one thing TLA should try to do in the future is to make
conservation easements a part of our total land package. It might be time that, when we sell land,
we should work with conservation people or ranchers in the area and transfer some of it to local
people. That way, it will keep it locally owned for the future. Sometimes they are appraised on
the back end at the time of retirement. It works great for the present owner. If we do it on the
front end and make it so young farmers and ranchers can afford the land, it might be more

Mr. Lee stated he understands that there is an issue that now they want money to maintain the
property when a conservation easement is given. Commissioner Blackham stated he thinks there
needs to be some responsibility. If it is open space, there is probably no obligations. If it is
agriculture, there should be some. Can we guarantee that they can still operate that ranch in the
future? This is always the question. He thinks the conservation easement will have to be
discussed in the next couple of years. The agricultural community wants to do this. If it is
needed as a subsidy to keep it there, what happens when the holder of the money leaves? Can the
new owners make it work properly. Probably not, so to do maintenance of the conservation
easement is very costly.

Chairman Morris states this is a theme we have heard and are trying to understand. We want to
address conservation to the extent our mandate allows. We are in this together. We all have
future schoolchildren and posterity. We take this very seriously and will talk about it. We will
ultimately adopt some policy and position that addresses it in the future.

Page No. 49
Page No. 50


Commissioner Leonard Blackham, Department of Agriculture (cont’d)

Director Carter stated the conservation issue and maintenance of it is something we are always
trying to work through. We have been working with DNR on some for prairie dogs. They now
need manpower to maintain the conservation easement. It is burdensome to have so many of
these across the state.

Janet Cannon, Vice-Chairman of the State Board of Education

Ms. Bird introduced Ms. Cannon and noted that she has been a real supporter of trust land for
many years. She was a great supporter of the new agency when it was organized. She has been
instrumental in helping the Board of Education understand trust land issues. She is also on the
Board of Regents and sits on the Nominating Committee for the TLA Board of Trustees.

Ms. Cannon stated that we and what we do mean a lot to her. She is a representative of one-half
million schoolchildren who are in need of help. In the next few years, it will be 700,000
schoolchildren. Over the past 20 - 30 years, Utah has been the most poorly funded in education.
Utah has the highest birth rate in the nation, so we have fewer taxpayers to support education.
We are looking to other funds to support his. TLA is key in that. She has done some research in
other states. Utah educates people in the fewest schools with the fewest teachers. We have
critical teacher shortages right now. We didn’t pay them enough, and they moved to other states.
We are also seeing a big change in demographics. One in 10 is Hispanic. With them, they bring
space needs and training. That means more money and more funding to fund those greater needs.
They look at those demographics and how TLA is growing the permanent fund.

TLA is having such a positive impact and is so appreciated. Last year the schools received $18.5
million. The average elementary school received $19,000, average junior high received $29,000,
and average high school received $39,000. A lot of that money goes to help fund personnel to
help students in reading, writing, and arithmetic. The money that is given is being used for
critical needs. We are charged with providing a help for the children now and in the future. Their
critical issue is to just say to TLA, “Please stay the course”. There have been 13 years of TLA
management. During that time, we have made up for 100 years of mismanagement of the
children’s assets. What if we had had that management 100 years ago? They could have been
there to help when we had those crises. Other states have been able to do this because their funds
were not raided.

Page No. 50
Page No. 51


Janet Cannon, Vice-Chairman of the State Board of Education (cont’d)

In 2004 Texas was able to give its schools $800 million in support. New Mexico gave $400
million to its schools. Neither of these states have veered away from their mission. She was very
concerned with the editorial in the Salt Lake Tribune recently. TLA has done an incredible job in
funding schools in the last 13 years. They hear from people serving on School Community
Councils stating their appreciation for the funding to help their needs. The Utah Supreme Court
stated that the duty of the state’s schools include not acting on behalf of third parties. It is critical
to stay the course and remember the children have huge needs.

She stated she has heard that TLA is not a good neighbor. We need to be good neighbors when
we can. However, if someone comes in and uses the land for their own personal benefit without
payment, we need not be a good neighbor. We have people interested in hunting and fishing and
do this on the backs of the schoolchildren - - our children, whose needs are critical. We have a
state who struggles to fund education. We have pretty well subsidized other agencies and
interests for 100 years where the assets were taken for the interest of others. She thinks we need
to compensate the children and stay the course and put the children in that priority position. Keep
doing the good work you have been doing. We are all stakeholders with our children and
grandchildren. They appreciate the TLA Staff and Board. You have done an incredible job in a
short period time, and they want so much to have this continue.

Mr. Lee noted that we see editorials refer to some wanting to change our mandate. What do we
do with unique properties; i.e., Little Home, Tabby Mountain, etc. If it is a unique property,
should we think about selling it, protecting it, getting it to DNR to manage? Where does the State
Board come down on this? Ms. Cannon stated we have to recognize that state or national
interests should not be put ahead of the beneficiaries’ interests. Whatever is done should be
something that needs to benefit both parties, but can’t let the children keep taking the hit. The
issue Mr. Lee is talking about is very critical, but the needs of the children have to supercede the
needs of the particular groups. Chairman Morris asked if they would be satisfied if an agency
were to pay appraised value assuming that the method to arrive at value was an agreed procedure?
We generally receive 140 percent of value at an auction. Would the beneficiaries be happy with
appraised value if it were 140 percent on these unique properties? Ms. Cannon deferred to Ms.
Bird to answer this question. Ms. Bird asked, if it were your children’s inheritance, would you be
happy getting $100 million when you know you could get $140 million? If the property is
unique and you want to own it, come to the auction and pay more than the highest bidder. Maybe
we need to give people time to come to the auction.

Page No. 51
Page No. 52


Janet Cannon, Vice-Chairman of the State Board of Education (cont’d)

Mr. Scales stated he would assume that not every dollar he would have would go to his children.
He still makes charitable contributions. However, if it is a unique property, is there a way that we
cannot take it to auction and sell it for our “average”? Is there a way other than an auction that
we can deal with these unique properties? Ms. Bird stated that maybe we can deal with them and
have them pay 140 percent of appraisal. She thinks we have to be careful, however, about
advantaging one group over another because private parties should have a chance. When we talk
about Tabby Mountain, she thinks it is low on the value curve now. This is why the Nominating
Committee interviews the people and tries to get the smartest people to do the smartest things. Is
it fair to ask the children to take a hit on something in order to give someone an advantage?
Chairman Morris asked if it is a hit to take 100 percent of a unique property? He is willing to
walk away from the last dollar to know that he might not have to see houses on Tabby Mountain
or other places if he gets 100 percent of appraised value. What if we are wrong in the value
calculation? He doesn’t like the methodology on the Tabby appraisal.

Mr. Ferry stated that, when the conservation groups came in yesterday to talk about value, it is
hard to determine what “value” we are calculating. We need to balance it out. Little Hole is
being sold tomorrow. The conservation groups said that, if they had enough time, they could bid.
DNR needs times also. We avoid the “sweetheart” deals by auction. If DNR is going to be a
player, they evidently have been gathering up funds. Staff noted that it was two years ago that the
lease application came in on Little Hole. It was over a year ago that the Director’s Finding was
issued. Mr. Ferry asked Mr. Styler if he was comfortable they could be a major player? Director
Styler stated they are comfortable they can meet the minimum bid. Mr. Scales asked why there is
a statutory limit that the state can only pay 110 percent? Director Styler stated they feel very
uncomfortable spending taxpayer money for over 110 percent of appraisal. Mr. Scales noted that
we have a list of the top five TLA properties that DNR wants. We are getting 140 percent of
appraised value. Is there a mechanism that can bring those two things together? Director Styler
stated they can go out and get partners - - a conservation group, investors, etc. There are also
trades that can be done at appraised value vs. appraised value. Director Carter stated that if it
were your children’s trust, what would be your decision - - would you be willing to take a 40
percent hair cut and depend on the big picture rather than this single transaction? He doesn’t
know if there is the political will or ability to amend the constitution in the state, but he thinks the
legislature could adjust the mandate that would still be within the constitution, but could impact
how we do business. It would cut the impact to the degree that it would affect our overall ability
to make money like we are now. Is what the market will bear right now worth that risk? It is

Page No. 52
Page No. 53


Janet Cannon, Vice-Chairman of the State Board of Education (cont’d)

unfortunate that Little Hole is an example because it is the exception. We have found countless
ways to convey property to DNR and other agencies without these political issues. This situation
originates from an application from a private party. We had a rule-based process that led to this
point. If they would have come in before we had an application, there would not be this issue.
There are some unfortunate circumstances at this time. It is the exception rather than the rule. As
he looks at the whole picture of trust land management, it is in our best interest to find a way to
resolve these exceptions so that it doesn’t takes away the way we do business, which is the real
threat. Mr. Scales stated he doesn’t see that changing the strategy on marketing Tabby
Mountain. Ms. Bird stated there are advantages to the people in this state that have not been
discussed. If Little Hole goes to DWR, it doesn’t necessarily generate income for the local people
and entities. Maybe there are pieces on Tabby where we could put some cabins, four-wheeling,
etc. The main tools we have for economic development are the trust lands. We have also
reserved more land for conservation purposes than Nature Conservancy in the entire nation for
that period of time. We have not gotten the credit for that.

Mr. McKeachnie noted that the more issues get public attention, the less flexibility we have. We
need to learn this lesson. If we will give things a little time and creativity and not all in the news
media, we can do things better. Director Styler stated that is exactly what they have found
working with BLM and the Forest Service. They have mostly win-win situations with TLA. He
thinks we will all be smiling tomorrow after the auction. They have constituencies that have
backed them into a corner on this, and they have not been able to negotiate as they would like.

Chairman Morris noted to Ms. Cannon that it is offensive to hear that TLA’s contribution to
education is less that a percent. He doesn’t think the general public understands this. There
should be a counter spin to this. He would like the public to be more aware of what the proceeds
are actually used for and the nature of the distributions of the funds. How do we change the
paradigm of ignorance of how the money is used? Ms. Cannon stated she feels the same offense
when she read the editorial. If we could have managed the land correctly for the past 100 years, it
would be more; and she thinks that is where we need to go on this. She thinks the thing that
saves us is that, if you look at the trust money that goes to each and every school that is used to
fill their greatest need, it would make a difference. They know how critical those funds are. She
thinks these people will not believe PR. They will see what they can do to get the word out on
how valuable those funds are to the schools.

Page No. 53
Page No. 54


Janet Cannon, Vice-Chairman of the State Board of Education (cont’d)

Ms. Karen Rupp stated that they have had people write articles to the Tribune, but they didn’t get
printed. This is part of the problem. Ms. Bird stated PTA wrote an article representing 135,000
schoolchildren. Mr. Ferry stated he spoke at his local school board and some good and bad
happened. Some had not seen our annual report. He took a list of each school so that the school
board could see what each school is getting. They were not totally connected with that. Ms.
Cannon stated they have a board member that sits on the School Board Association, and she will
see that this is mentioned. Ms. Bird stated that each school board sees that every year and
actually approves it. Mr. Ferry stated we need to make sure that they are seeing this often so that
they are aware of the impact. We need to counter what is being said.

Chairman Morris thanked Ms. Cannon and the other guests for coming to this Retreat.

 Local Government Partners and Associates - - “How can SITLA and local government work
together to achieve our common goals and needs?”

Chairman Morris noted that he appreciates all these people coming from all parts of the state.

Commissioner Michael McKee, Uintah County

There is a lot of oil and gas production in Uintah County. TLA has a lot of holdings in this area.
A few years ago, the Board identified this area as a place they wanted to be. The vastness of the
resources was attractive to them. Oil shale has not really been developed yet. In the Green River
formation, there is approximately three trillion barrels of oil in the oil shale. That is several times
more oil than in the Middle East. TLA also has some good holdings on tar sands. Much of what
is in Utah is in Uintah County. Maybe that development will happen faster than the oil shale.
The hot item is natural gas out there. The Uinta Basin has the highest percentage of gas left in
any basin in the United States. The oil and gas companies have identified the Rocky Mountain
Region as where they want to be. Lots of times wells only last about five years before they
deplete in other areas. In the Rocky Mountain’s the wells last 20-40 years. He mentions that
because of the holdings TLA has and our relationship in working together and the importance of
that relationship. Uintah County has enjoyed that relationship with TLA. All the different staff
members are very good. If there are issues, they have been willing to come and meet with them.
He thinks we have had a good relationship on many different issues. Roads are always a
discussion point. The land exchange issues have been worked out well. There are many common
interests with the county and TLA. Much of our economy is derived from the oil and gas

Page No. 54
Page No. 55


Commissioner Michael McKee, Uintah County (cont’d)

industry. There are some areas where he feels we could do some things that could be beneficial
to TLA and the county. The Kimball decision could be millions of dollars to the county. This
decision involved environmental groups who sued the BLM regarding wilderness areas not being
properly analyzed. The judge told them that BLM had not done the analysis. They would not
actually have to prohibit oil and gas in those areas, but they would need to do analysis. This has a
great effect on TLA lands. It could affect the mineral leasing, royalty payments, etc. He thinks
the State of Utah should have been involved as an intervener in protecting our interests as it
relates to this issue.

In the Uinta Basin there is a strong discussion going on regarding an EIS. They are in the middle
of a resource management plan to guide what happens as far as oil ans gas and other activities for
the next 20 years. It will address reasonable development, etc. The resource management plan is
to come out in about a year. They will have a Record of Decision by July 1. TLA has been
involved in this. It is extremely important that they be involved in the resource management plan.
With the air quality issues, it will say how many wells can be drilled, etc.

Mr. McKee stated he believes we are working very well together. He appreciates those
partnerships. He believes that the county and TLA have similar goals. He thinks it is very
valuable that TLA works very closely with the county. They are meeting with the larger players
of the oil industry, BLM, state and local officials, environmentalists, congressional people, etc.
He believes this correlation will be extremely valuable. There are many issues. DWR wants to
introduce bison out there. This will affect all the oil and gas deals. Their experience has been
that they say it will not have any effect; but, before long, there are all kind of protections,
regulations, etc. Examples are the introduction of the Black Footed Ferret and the Prairie Dog.
We have a very positive relationship with Trust Lands. We could have improvement by having
even more dialogue and interaction.

Mr. Andrews asked what Commissioner McKee’s colleagues in Grand County are doing about
the road extension? Commissioner McKee stated he believes Grand County politics makes this
difficult. He thinks that, if Uintah County will take the lead and make it happen, Grand County
would like it. Uintah County very much wants to see that road built. We can’t take it through the
WSA. There are other alternatives to doing that. Mr. McKeachnie asked if the BLM completed
the EIS on this 15 years ago. Commissioner McKee stated it was completed. We will have to do
another one because it is so dated. Over half of the oil and gas coming off federal land in the state
came out of Uintah County. Last year there were just over 900 APD’s. They have already

Page No. 55
Page No. 56


Commissioner Michael McKee, Uintah County (cont’d)

approved over 800 this year. These companies prefer to do business with TLA. Ms. Garrison
asked if they get negative comments from operators on working on TLA land. Commissioner
McKee stated they do not. The companies like working with TLA because there aren’t as many
regulations as on the federal lands.

Councilwoman Jean Arbuckle, Washington City

Ms. Arbuckle stated she has been in Washington City for 12 years and involved in politics for 11
years. She gave the Board members some M & M’s so that she can “sugar coat” things. She
stated they are delighted to work with Mr. Buchi. Their City Manager, Rodger Cutler, stated it
was a delight to work with him. They have felt like an attitude adjustment was needed, and this
might be a start.

All the cities and municipalities know that TLA doesn’t need their approval to develop land.
They don’t believe that the legislation meant for TLA to do anything it wanted without
considering the impact on cities. TLA should work very closely with the municipalities. They
provide the services that TLA needs. Sometimes TLA’s developments have to be upscaled in
order to meet their needs. Drafting a development agreement should not have to be a time-
consuming action. We just need to be up front with each other, realizing we both serve
customers. Sometimes it is viewed that they are not important. She stated TLA does a great job
with land, but not so good with development. She showed an aerial map of Sienna Hills - - this is
a large development. There is a Broadweave building. There has been a lot of time and money
on the city’s part. They are concerned with the development - - the pace and the costs. They
have put a lot of money into the development and are hoping that tax dollars will be coming. If
you compare the development with Coral Canyon - - what a great development that is. They
think that is a better idea. Developers are really good at what they do. It would be great for TLA
to understand that the elected officials have a responsibility to the citizens now and forever. They
have the opinion TLA is just interested in money some times, but they are concerned about the
citizens. They wish that TLA could work with the schools to provide immediate educational
needs. Funding an AP education class is nice, but it isn’t like funding a school. If the land could
be set aside for a school, it would be helpful. Paying top dollar for land is an interesting concept
to them. The need down there is now. They would like to see land set aside for the road. On the
road on I-15, TLA wants to develop just one side of it - - the green-space side. They don’t
understand why it isn’t developed on both sides as commercial.

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Page No. 57


Councilwoman Jean Arbuckle, Washington City (cont’d)

She noted that the arrangement with Broadweave at Sienna Hills has caused some problems.
Because of local ordinances and other things, there have been some problems. She noted we need
to be involved in each other’s master planning early on. When they started to update their general
plan, they asked TLA to give input. TLA wanted areas left as “future plans”, and they just went
ahead and made a designation. Now they have to amend their master plan. Does our goals and
needs have to be common in order for us to get along? She doesn’t think so as long as the goals
and needs are not controversial. She thinks we need to work together no matter what. She
appreciates being able to be here today.

Chairman Morris thanked Ms. Arbuckle for her candor. He asked if the pace at Sienna Hills is a
demand for houses, etc., and other issues in the marketplace right now? There has been a slow-
down - - or has it slowed because we are not doing what we needed it to do? Ms. Arbuckle
stated this has been going on for quite a while. Leasing the land instead of purchasing it is an
issue. They have sent people to work with TLA, and they have come away shaking their heads.
She thinks great opportunities were missed. She thinks the lost opportunities were partially due
to slow-down; some just felt like TLA was too hard to work with.

Mr. Buchi stated they are working with some people now to see if we can get something to
happen there, and we need to put things on the radar screen for future things to happen. We have
some outstanding sites that will mature in time as the market catches up. We need to get people
to know these opportunities are out there and to know that their patience can play into the
planning in making decisions. We have all seen some bad decisions made on the part of retailers.
He applauds the enthusiasm of Washington City to do this. He is excited that Rodger Cutler and
others are also going to a conference regarding shopping centers, etc.

Ms. Arbuckle stated they are excited to be working with Mr. Buchi. Had they known that this
would have been as slow as it was, they might have made different decisions. Everyone needs to
get involved in the master planning so that we know what is going to happen and the time frame.

Director Carter stated we don’t factor in the fact that there is turnover in the cities. We were 12
years and three developers in the SunCor development. We thought that the knowledge was
there. We are unhappy also that it is taking a long time. We are doing our best to move it along.
Chairman Morris stated that, it seems in terms of personality, this might be better. We will talk
about it down the road and see how satisfied they still are. He asked what the Broadweave issue
is with the city? Ms. Arbuckle stated TLA signed an agreement for Broadweave to have

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Page No. 58


Councilwoman Jean Arbuckle, Washington City (cont’d)

exclusive rights in the Sienna Hills development. According to city ordinance, there needs to be a
level playing field. Another group stated they were not notified and that they would have done
the infrastructure for nothing. Now it has become a hot issue. There are hard feelings and
problems with this. They have worked it out. If TLA would have come to them and said this is
what they wanted to do, they could have worked it out better.

Commissioner Mark Habbeshaw, Kane County

Commissioner Habbeshaw thanked the Board for this invitation to appear today. He has four
change suggestions. They are the ones he subscribes to in dealing with land planning issues.
They are:

*      Early cooperation avoids last-minute conflicts
*      All interested parties should be involved
*      Field trips are magical
*      Need for periodic updates

He has issues that are important to Kane County. He thanked the Board and Staff for giving them
funding for TLA lands that were traded out of the Grand Staircase-Escalante National Monument.
This will really help them. He also wishes he had to deal with Commissioner McKee’s problems
with oil and gas, but glad he doesn’t have to deal with all the growth issues of Washington
County. However, Kane County is going through some growth.

The issues he has regarding Kane County, keeping the four things in mind, are:

*      There is a quarter section by a county recreation area by Kanab. They have had an
       interest in leasing it and maybe purchasing it. He has talked with Lou Brown and others.
       He agrees with the purpose of making money and also the autonomy to do it. TLA should
       not have to cater to local government needs, but hopefully we can cooperate on this.
       They have a need and want to compensate TLA for it.

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Page No. 59


Commissioner Mark Habbeshaw, Kane County (cont’d)

*      Rights of way across trust lands - - when this program was first developed, it was
       controversial. All the counties are happy with the right-of-way program across trust lands.
       In relationship to this, we don’t qualify for the OHV money to use on trust lands. They
       are going to have an OHV ordinance, but first they are going to look at the road issue.
       Access is a mutual benefit.

*      He thanked TLA for allowing Director Carter to sit on the Public Lands Coordination
       Council. He is an effective member and gives good input. They appreciate Director
       Carter’s contribution to the council.

*      He attended a few meetings on the conflict TLA is having with UDOT on the highway.
       TLA went to the trouble of bringing a planner in and getting drawings, etc. He needs an
       update on this because he doesn’t know where it is.

*      Aman Resort being constructed - - the potential there is to shift the county’s demographics
       east. TLA is cooperating with the county there. He would like to be more involved there.
       He just took over the seat on the Glen Canyon Special Services District there. It has
       authority over water, fire, recreation, etc. He understands TLA is developing a septic
       system that will be combined with a future sewer system. He would like to develop a
       contact that he can call on this issue. It was noted Mr. Buchi will be the contact.

*      On the block, he doesn’t know what the current TLA intentions are. He had development
       in mind. Representative Noel stated to him that they haven’t given up getting coal out of
       that area. The pipeline there will benefit all of us in that area.

Commissioner Habbeshaw talked about the “base property holding practice” that they are in court
challenging now. These issues are complex, and the Trust utilizes the base properties for people
to hold grazing leases. (Ask Kim about this). When a rancher is bought out, the trust lands will
come with it; and they use that as their base property. (This issue is near Hanksville.) Maybe
there is something that can be done about this. Maybe TLA doesn’t care who acquires the permit.
Director Carter noted one thing we have done in our grazing program is to make one of the
requirements to hold a grazing permit is to maintain any water that might be associated with it.
An entity not running livestock puts that water right at risk. That has significantly shrunk the
pool of qualified grazing permittees. Environmental groups usually can’t qualify. We do care
who gets the permit if it puts our water rights at risk. This policy favors our livestock worker.

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Page No. 60


Commissioner Mark Habbeshaw, Kane County (cont’d)

Commissioner Habbeshaw stated he doesn’t have an issue with TLA. TLA is very high on his
list. He thinks we are doing a terrific job. He is on the advisory committee, but hasn’t come to
the meetings yet.

Director Carter stated that yesterday we talked about the Lake Powell pipeline. He recalls the
alignment of it comes out down by the dam and follows Highway 89 to Kanab. He is wondering
why they don’t choose to go cross-country to Church Wells and cut out miles of pipeline.
Mr. McKeachnie stated he heard it was because of easements that would be needed on trust lands.
Director Carter stated it would be many less miles. Even the easement fees would be cheaper
than more miles of pipeline. It might be the jump up to the ledge that would be the problem.

Gary Esplin, St. George City Manager

Mr. Esplin stated he appreciates the opportunity to be here. He has been the City Manager for 31
years and has seen many changes in that time. They have to deal with trust lands on many issues.
They have professional courtesies with the people he deals with. He knows they have conflicts
with some of the things the city is trying to do. There have been many issues on which we have
worked together. The Ft. Pierce Business Park has been very successful. TLA has been very
excellent in the planning on the South Block. We have spent much money in planning the area.
The city council last week approved the master plan for that area. It was a very good plan. He
sees some initial indication that they can receive cooperation on the airport.

Mr. Esplin stated he would like to talk about some problem areas that make dealings a little
harder. He understands the mandate that TLA has. Whoever made the selections for the Trust in
Washington County did a great job. You can’t go any direction in the city without running into
trust lands. Basically, trust lands control everything in St. George City for commercial
development. The real issue is timing there. TLA also controls all the land on the other
interchanges. This becomes difficult because the city receives no property taxes on those
holdings. The timing on what is great for St. George City may not be what is great for TLA. The
Atkinville Interchange has been especially difficult. The property tax is an issue that probably
can’t be resolved.

Page No. 60
Page No. 61


Gary Esplin, St. George City Manager (cont’d)

TLA also picked up the property that BLM had. Normally, the cities have an opportunity to do it
at no cost for parks, etc. There is nothing for the city to pick now. The city is paying many
millions of dollars to build the airport. Trust Lands is a major landowner, and the city will have
to purchase the property from the Trust. If BLM would still have owned it, they could have
gotten it for nothing. It is frustrating to the city.

Recognizing that TLA has so much property throughout all the state and dealing with the state are
very difficult. It feels like one size fits all because of the mandate. There are different needs, etc.,
in different areas.

One concern the city has had in the past is that TLA wants entitlements. He has difficulty with
that. The city negotiates deals with TLA; and four or five years later, they have to negotiate with
the developer; and things might have changed. It is easier for them to deal with the developer at
the time of development instead of dealing with four or five-year old entitlements. These create

It appears that some times the benefit is short-term. The long-term benefits that might be
increasing th value of the land long term are not happening. It doesn’t make them feel good when
TLA tells them their zoning laws don’t mean anything. We haven’t had to enforce any of that,
but he doesn’t want it to happen. Some of the property comes on line when the property is at the
highest point. Some companies don’t have commercial property because of this. The community
needs the property to be profitable.

Mr. Esplin gave some examples of making things developable. They made a nice development at
Sun River. They needed a fire station out there. TLA decided they had to buy the property.
They didn’t buy property from anyone else. It was appraised at its highest and best use. It was
appraised with an interchange and as commercial property. They paid $500,000. At Sun Brook,
they are giving them fire station property. He doesn’t think this is very fair.

Park issues - - with BLM, they require developers to give the city a park. If the city has to buy
the property on a trust lands development, it is costly.

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Page No. 62


Gary Esplin, St. George City Manager (cont’d)

The South Block is about 9,000 acres. It sticks in their craw that TLA is giving $4 million. They
got the funding for the entire interchange, and UDOT has not put any money in it. Trust Lands is
going to put $4 million in. That won’t even pay the cost of the bridge. Any other developer
would have had to pay for that interchange. They will have to come up with $7 million to provide
the access, etc. It doesn’t feel very good. They deal with John Andrews and have dealt with Ric
McBrier. He clashed with Mr. McBrier, but respected his position. It was not personal, but only
on issues. The city has to deal with TLA because it owns so much of the property. We just have
to do the best we can.

Chairman Morris stated we greatly appreciate Mr. Esplin sharing the things he shared with us.
When you are wholesalers, you can trade. What can the cities give TLA and what can we do as
far as trades in kind, in terms of parks, school sites - - what do you have to trade for assets?
Mr. Andrews stated we have traded impact fees in the past. It was noted we have traded fees,
grading, etc. Ms. Arbuckle stated developers give parks and land for fire stations. The
developers see a benefit. Mr. Esplin noted that, when they had to get a sewer to The Ledges, they
had to pay an easement fee; and TLA wanted some connections also. He thinks the Board did let
them have an easement. In a park, the developers think this is the anchor. The city builds the
park, and it is the draw. If you build a school, it is a draw to the residential area.

Mr. Scales noted that the developers get some type of a tax break by doing this. We don’t get any
break for doing it. Mr. Buchi asked how we handled the park that is being dedicated tonight in
Washington City? Ms. Arbuckle stated that TLA did give them more than they normally would
have, and they agreed to build the park up front. It would be very beneficial to the Sienna Hills
site long term. You have to have a draw like that.

Director Carter stated the reality is that we believe that we can commit property to parks and
other public services as long as, in committing it, there is a commensurate increase in the value of
the total development. Chairman Morris stated we need to look at the total development and not
just immediate value. Mr. Ferry asked if we ever get approached by our developers on these
issues. Director Carter stated we generally have an agreement with our developers that spells
everything like this out at the beginning. Mr. Andrews noted we generally ask for entitlements
before dealing with the developers. Affordable housing was looking as a quid pro quo in the
Fossil Hills area. That could provide a way to deal with some of these things.

Page No. 62
Page No. 63


Gary Esplin, St. George City Manager (cont’d)

Ms. Bird stated that, on the Sun River Project, about 90 percent of that was Sun River’s property.
It was unrealistic for us to donate land. Mr. Esplin stated the city did give them $200,000 on it.
He brought it up because TLA doesn’t participate in these types of things when we do a

Mr. McKeachnie stated he thinks history influences us as to how we react to this. In the first 100
years, trust lands were basically donated for sites. As a result, we don’t have very much in the
permanent fund. This is part of our heritage, and it sticks with us. Therefore, we are very
sensitive to “giving” anything away. Help us figure out a way to have a win-win. Ms. Arbuckle
stated that, if we can work together, the spirit of cooperation will be beneficial. Wipe the slate
clean and let’s be up front with each other and deal fairly. Mr. McKeachnie noted we should do
that. If a transaction shows up and it says that we gave away a park, it will be heavily criticized.
So we have to do it in a way that we can show a benefit. Maybe we have to call it something
different. Ms. Arbuckle stated she is not a believer in impact fee credits because it indicates that,
if they can do that, the fee is too high. There are some other ways we can work together,

Mr. Buchi stated he has not yet read through the development agreement with Washington City,
but he is hearing that neither side is honoring the agreement. He thinks better communication is
going to be the answer. Ms. Arbuckle stated they are a very transparent city to work with.

Chairman Morris thanked the participants for coming and commenting.

Legal Input From Agency Counsel Regarding Trust Obligations with Respect to Public Interest

Mr. Andrews discussed with the Board and Staff the trust doctrine and how it affects what we
have been talking about.

Utah Enabling Act - - one of the basic principles of state trust law is there are several layers of
legal authority that may govern trust management. The Enabling Act that created the state is the
core document that you have to start with as to whether there is a trust responsibility. It is an
interesting issue that for the most of the trust land states, other than Arizona and New Mexico,
there is no U. S. Supreme Court ruling as to whether or not there is a federal trust

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Legal Input - Agency Counsel Regarding Trust Obligations W/ Respect to Public Interest (cont’d)

responsibility law. There is a case that everyone is familiar with - - Lassen vs. Arizona - - stating
that there was a trust responsibility, in that case preventing the State of Arizona from giving away
rights of way to the State Highway Department even if so doing benefitted the surrounding land.
The trust responsibility required that the Arizona trust get full value. The Supreme Court
interpreted that the Arizona and New Mexico Enabling Acts focused on express trust language
that creates a duty. The Arizona and New Mexico Enabling Acts are the only enabling acts that
uses the word “trust”. If you go way back in history, you have many states that came into the
union before the Civil War that had grants of lands to beneficiaries. For those states, the Supreme
Court has said there is no federal law trust responsibility. Those grants were made with only an
honorary obligation imposed on the state, so those states are free to do whatever the legislature
chooses to do with its land. These states came in prior to the Civil War.

Then, we have about a 50-year period where there is no use of the express term “trust” as was
used in Arizona and New Mexico in 1912. In this middle group of states, the Supreme Court has
said they have never decided this issue. They have left it open. It is open to us today. If you
look at the Federal Courts of Appeal, they have looked at the issue. There is a 10th Circuit Court
of Appeal that looked at it in Colorado - - Branson vs. Romer. That court said the existence of an
Enabling Act depends on whether the Enabling Act requires the money to go into a permanent
fund, whether it sets a minimum price for lands, and whether there is a public auction
requirement for the disposition of lands. The 10th Circuit Court stated that the Colorado Enabling
Act had these characteristics and that the Colorado enabling Act therefore imposted a trust
responsibility. In contrast, the 10th Circuit, in a case that came out of our agency via the Attorney
General’s office dealing with Miners’ Hospital lands (an important distinction), found that there
was no federal trust for the Miners’ Hospital. They stated they looked at the Utah Enabling Act
and didn’t believe there is a trust responsibility in the Utah Enabling Act, although again, they
were dealing with Miners’ Hospital land. Of course, there was a trust based on the state
Constitution, as the Utah Supreme Court held in 1940 that there is trust and has so held since

So, you have two schools of thought regarding the issue of a federal trust. Therefore, there could
be a future instance where the U.S. Supreme Court could be asked to decide the existence of a
federal trust - - one of the reasons they take cases is where there is a dispute between states
supreme courts and federal appeal courts. In Utah it won’t come up unless the voter amend the
Utah Constitution. The Utah voters in 1992 specifically amended the Utah Constitution to

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Legal Input - Agency Counsel Regarding Trust Obligations W/ Respect to Public Interest (cont’d)

provide that the lands are held in trust for the named beneficiaries. As a matter of the State
Constitution, there is a trust responsibility. The voters could, of course, change the State
Constitution. In the State of Colorado, that was done in 1996. The voters in Colorado enacted an
amendment to their state constitution , Amendment 16. Colorado’s constitution, prior to the
amendment contained much more detail on how the trust lands were managed. Amendment 16
replaced the requirements that income must be maximized, with a statement that income must be
consistent over time. The amendment also stated that a principle of long-term stewardship must
be followed by the Land Board in the management of the lands. Therefore, the corpus also would
be managed for stewardship over time. Another thing the amendment did was to require the
creation of a stewardship reserve - - a pool of lands to be nominated by the public that would be
managed for the long-term stewardship rather than income generation. In a challenge by the
Colorado beneficiaries to Amendment 16 under the Enabling Act, the court found that the
Enabling Act in Colorado did impost a trust, but it upheld the change from income maximization
to constant income over time. They also reluctantly upheld a stewardship trust that put land out
of the income-generating portfolio.

This decision leaves some uncertainty whether, in fact, there is a federal trust in Utah for school
lands. The Miners’ Hospital case would say no, but it is distinguishable. The Branson case
would say yes, but it is potentially distinguishable since utah does not have an Enabling Act
auction requirement. Maybe it doesn’t matter. Utah’s Constitution imposes a trust and will be
difficult to amend. Of course, enabling acts can also be amended. The question then is what
happens to a pre-existing trust in an amendment situation.

The other thing to be drawn from the Colorado experience is that the court assumed there was a
trust, but determined that, under existing trust law, that constant income over time was an
acceptable standard for income for a perpetual trust. On other funds that we manage, there are
rules on how the entire trust is managed, but you have to look at how the individual parts are
managed. The direction you get from the Branson case is that there is lots of discretion in the
management decisions in dealing with the entire corpus. So you, therefore, did not have to apply
the income maximization on the entire corpus, but can put some into conservation status. If you
deal with the “what if” of the stewardship being the remaining part of the trust, you have to give
the interest of the beneficiaries primacy. The lesson we take from this is that in individual
transactions the board probably has less flexibility under trust principles; but, if you look at your
entire port folio, you would have more flexibility to say there are some areas where we don’t have
to obtain income maximization today or tomorrow. When you get down to individual
transactions, there are many more limitations on them.

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Legal Input - Agency Counsel Regarding Trust Obligations W/ Respect to Public Interest (cont’d)

Where do general state regulatory laws come into play to govern the trust? What are the
constraints that the legislature can place on the trust in light of this constitutional trust
responsibility? There really isn’t direct Utah authority except as to a footnote in a Supreme
Court decision. Other courts in Washington, Montana, and Colorado have said that,
notwithstanding the trust responsibility, the general laws that would apply to anyone dealing with
environmental protections are applicable to trust lands. The Utah Supreme Court has cited that
this is how other states have handled it, and we think it might apply here. It would appear that the
legislature can apply general applicable environmental laws to trust lands. Montana states that
trust lands have to meet state NEPA requirements. Individuals don’t have to do that, but trust
lands do. The court says that it will give the legislature broad designation in looking at all of the
policy issues regarding the management of these lands, and we will find that permissible. When
the court has explicitly gone the other direction, the court has been happy to invalidate outcomes
that seem to benefit private interests. You can draw from the cases in whole that the courts will
give the legislature a lot of discretion in the management of the lands as long as the legislature is
not seen as favoring the private individual over the beneficiaries.

In summary, there is case law from the 10th Circuit suggesting that the trust can be broadly
interpreted by both the legislature and the people of the state to take a very long-term view and to
look at a stewardship and reasonable income as opposed to the actual maximization of income,
and the legislature will be given discretion as long as they are not favoring private sector

Chairman Morris noted that Senator Valentine also stated that we are a public trust. He has heard
we are a private trust and why does it matter. Mr. Andrews stated it is uncertain that a private
trust cannot be modified. They are purely a matter between the settlor of the trust and the trustee.
That is not the situation here. There is another possibility - - a charitable trust. A charitable trust
is subject to being modified in a court order if they determine that it is appropriate to meet the
grantor’s intent. The other possibility is not so much as a public trust as a voluntary agreement
that is to be governed by trust principles. In the Kleppe case, it says this is not so much a private
trust as it is an agreement that is to be governed by trust principles. If the Congress amends the
enabling act and the voters amend the constitution, the trust is modified.

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Legal Input - Agency Counsel Regarding Trust Obligations W/ Respect to Public Interest (cont’d)

Director Carter asked if there is any flexibility in the interpretation in Utah - - in NPCA the court
cited Lassen. Does it indicate any type of a persuasion that there is an enabling act trust?
Mr. Andrews stated yes. The court in 1940 stated they believe the Enabling Act did impost a
trust responsibility. Director Carter asked if Mr. Andrews thought that the state’s position in the
Miners’ Hospital case was prudently argued before the 10th Circuit? Mr. Andrews stated no.
Ms. Rupp asked if there is anything to sure up the position of the beneficiaries and that it needs to
be managed prudently, profitably, etc? Should we add anything to the constitution to sure this
up? Mr. Andrews stated there clearly is a trust under the constitution, but there is flexibility in
what that trust requires. The trust must be managed as a trust, but specific responsibilities are not
absolutely clear - - what exactly do these mean: prudently and profitably? Mr. Lee stated that, if
you had added maximization of profits, you would not have as many people wiling to serve on the

Mr. McKeachnie stated it is interesting in the Miners’ Hospital case that the Attorney General’s
Office took the position that there was not a trust. They were being sued by miners who said
there was a trust. Therefore, the Attorney General’s Office took the position that there was not a
trust. Mr. Andrews stated the Attorney General’s Office argument on this case was flawed on so
many levels. Mr. McKeachnie asked, if we had a constitutional convention today, would we
adopt a Bill of Rights? If we presented the constitutional amendment today, would it pass? Mr.
Andrews stated he thinks it would because of its simplicity. They would not argue about the
assets of the trust, but what are the rules with regard to how it is managed. There is some room
for interpretation as to how it is managed. The constitution doesn’t say anything about
maximizing income. The Trust Lands Management Act states to maximize over time. Does that
mean don’t maximize it today at the risk of future generations? This is a broad mandate, and the
Board has discretion in policy decisions and management. If we treat them as individual
transactions, the discretion becomes circumscribed to the trust issues.

Board Review and Discussion of Issues

The Retreat session adjourned after lunch. The Board and Director Carter had some follow-up

Page No. 67

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