Wyoming Gov. Matt Mead laid down the gauntlet Tuesday to a proposal by the U.S. Interior Department to withhold payment of mineral revenues to his state because of federal sequestration. Wyoming is faced with not receiving more than $53 million due this month through July.

The move is part of the Interior Department’s fiscal year 2013 response to sequestration budget cuts impacting 34 other states besides Wyoming, involving a total withholding from those states of $110.8 million. Wyoming faces the biggest hit, almost half of that total with New Mexico, which is ranked second at $26 million.

Interior’s Office of Natural Resources Revenue (ONRR) notified states and counties of the withholding earlier in March, attributing it to the Budget Control Act of 2011. “ONRR recognizes the hardships this may impose on states, but it is obligated to fulfill its mission in compliance with the law,” said ONRR spokesman Patrick Etchart.

For the past full fiscal year 2012, 36 states collectively received more than $2.1 billion in energy and mineral production revenues from federal lands, according to the ONRR.

Mead said he is consulting with Wyoming Attorney General Greg Phillips, the state’s congressional delegation and neighboring states about how to move forward.

“When the state reduced its budget by more than 6%, it did not achieve its reductions by withholding mineral revenue due under state leases,” Mead said. “That would be taking someone else’s property. Similarly, the Department of Interior should not be able to meet its budget reduction by taking mineral revenues that belong to states under the law.”

Under federal law, Wyoming is guaranteed 50% of the revenues from mineral leasing on federal lands within its boundaries.

Wyoming’s Treasurer Mark Gordon criticized Interior for pursuing actions that would “take a lot more of what states are properly owed.” He accused the federal government of finding the state mineral revenues “too tempting” a target in the face of across-the-board sequestration cuts.

“We are using every means necessary to make sure our state remains whole,” he said.

Mead said the Treasurer’s Office received a letter dated last Friday from Gregory Gould, Interior’s Director of the Office of Natural Resources Revenue, which indicated that the state’s mineral revenues would be withheld for March through July, with the withholding amounting to a little more than $10.6 million each month.

Mead said he was concerned about the timing of the letter, given that it was to be effective immediately. “This is no way to achieve adequate notice or give our state an opportunity to respond before the action in underway,” Mead said.

This level of communications gets a grade of “F-, or worse; it is not acceptable,” Mead said.

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