Utah buys US Magnesium plant, plans to give more water to Great Salt Lake

The state of Utah has apparently won a bid for U.S. Magnesium's bankruptcy assets with plans to conduct environmental remediation and keeping more water in the Great Salt Lake.

A filing with U.S. Bankruptcy Court in Delaware, obtained by FOX 13 News, announced that Utah's Division of Forestry, Fire & State Lands had been selected as the winner of the "stalking horse bid" for U.S. Magnesium. LiMag, which is an affiliate of U.S. Magnesium's parent company, came in second.

A "stalking horse bid" is a pre-determined bid before an auction for bankruptcy assets takes place. A judge was expected to sign off on the bid during a hearing in Delaware on Tuesday while hearing any objections.

The move is significant for efforts to save the Great Salt Lake and a company that some have criticized for its environmental record.

"The most important asset in all of this, to me, is the water," House Majority Leader Casey Snider, R-Paradise, told FOX 13 News in an interview Tuesday. "And we’ve been able to make a very wise and prudent investment on behalf of the lake."

Records filed in the bankruptcy court and reviewed by FOX 13 News show that the state will spend roughly $30 million in taxpayer dollars for U.S. Magnesium's assets. The state is likely to dip into rainy day funds to authorize the purchase, with a vote expected on Wednesday in the House and Senate.

Governor Spencer Cox praised the move by his agency in a post on X late Tuesday.

Utah's Division of Forestry, Fire & State Lands has been waging a legal battle with U.S. Magnesium over control of its leases to operate on the Great Salt Lake.

The agency raised concerns of a waste pond and whether anyone was managing it, given U.S. Magnesium's bankruptcy, expressing fears that it could leak into the lake. The company declared bankruptcy last year. That delayed the state's plans to revoke U.S. Magnesium's assets.

Some of U.S. Magnesium's creditors said in a declaration filed in court that "the Debtor’s sale of assets to FFSL pursuant to the Successful Bid appears to be in the best interests of the Debtor and its estate."

"Significantly, the Successful Bid provides for the payment of $30 million for the purchase of certain unencumbered assets—assets that various other parties in this case claimed had no value," it said, referencing claims made in court that mineral rights on the site "have no value."

"The Successful Bid unquestionably represents both a higher and better offer than the Next-Highest Bid offered by LiMag Holdings, LLC," the declaration said. "Not only does the Successful Bid create more value for the estate, the Successful Bid also removes at least two major impediments existing in the LiMag offer: (a) the required assumption and assignment of the Mineral Lease over FFSL’s objection and (b) understandable concerns with the insider and related party attributes of any transaction with LiMag."

Wells Fargo Bank objected to the sale to the state of Utah, writing in a declaration: "FFSL has stated outright that its interest is in 'purchasing and eliminating' the Mineral Lease and Royalty Agreement that remains the cornerstone of the Debtor’s business, in order to protect and preserve the environment in and around the Great Salt Lake. The result of UFFSL’s proposed purchase, without question, would be the total liquidation of the Debtor’s assets, the complete shutdown of the Debtor’s magnesium and lithium carbonate businesses, and the irreversible elimination of current and future jobs."

Lynn de Freitas, the head of the environmental group Friends of Great Salt Lake, said she was supportive of the move.

"It was a great relief to hear it was going to be in the hands of the state," she told FOX 13 News, adding U.S. Magnesium's presence on the state sovereign lands of the lake have been "problematic."

She said there are contaminants that need to be dealt with and the water rights are important for the lake itself and it is a positive thing. De Freitas noted it is a Superfund site.

"There's a lot of work to be done. It will take time and it will take money," she said.

Senate President J. Stuart Adams, R-Layton, expressed support for the bid, telling FOX 13 News it demonstrated the legislature's commitment to saving the Great Salt Lake.

"I think it's really important, the state probably has an obligation to clean up what's there," he said.

Sen. Scott Sandall, R-Tremonton, who runs water legislation for the Republican supermajority, said it was important for the state to get water rights back to help the Great Salt Lake.

"I believe we have that obligation and we have the benefit when we can reacquire those water rights to be cognizant of the fact of what the lake levels are doing," he said.

Senate Minority Leader Luz Escamilla, D-Salt Lake City, said she was just learning about it.

"Excited for the possibility if we can work out that water going to the Great Salt Lake, that would be a really good thing," she said.

This article is published through the Great Salt Lake Collaborative, a solutions journalism initiative that partners news, education, and media organizations to help inform people about the plight of the Great Salt Lake — and what can be done to make a difference before it is too late. Read all of our stories at greatsaltlakenews.org.