The Interior Department is exploring with Utah a new and controversial approach to state-federal land exchanges that could change how such trades are made in the West.

Secretary James G. Watt has "agreed in principle" to Utah's proposal, outlined in a Feb. 18 memo from Gov. Scott Matheson. Under it the state would offer up to 4 million scattered acres of now-useless land. Utah would receive large, useful parcels of federal land worth two to five times as much.

On the face of it, such an exchange would violate federal law, which requires a dollar-for-dollar swap. But Utah has proposed a creative redefinition of how these transactions are done.

According to state natural resources director James Butler, Utah's land would be assigned "non-traditional values" to make the exchange an equal one. Congress would have to determine whether the package is balanced. Such a decision would set precedents for future trades in other states with similar land management problems.

The "non-traditional values," Butler said in an interview, include gains Utah has not been able to realize from patches of land it owns but cannot use within large federal spreads such as parks, military reservations and wilderness study areas.

The state has lost money over decades of delay in settling land debts. Under this proposal the lost income would be collected from the feds in land.

Management headaches for both state and federal bureaucrats trying to use the patchwork quilt will end if the land is consolidated, which makes the swap a good idea from the federal point of view, Butler contended. No longer would the Bureau of Land Management have to include state officials in granting permits for development or grazing on large federal areas.

"The values would be balanced in the public interest but not the land values per se," Butler said. "We feel we have this [Watt's] commitment to work with us to do that.

The Wilderness Society immediately called the proposal "a ripoff of the nation's taxpayers."

Lands policy specialist Terry Sopher warned the idea was "a Sagebrush Rebellion measure in disguise" and would become a precedent for other massive transfers of federal land to state control. Matheson's memo outlining the proposal does say he hopes to make the deal "a model for other public lands states."

In an interview, Watt said he had endorsed the idea of an exchange during a telephone conversation with Matheson but would leave it to Congress to validate the "non-traditional values" concept. "I only support an equal value trade. That's what's in the law. If Congress wants to change that, they can," he said.

He added he had not read Matheson's memo outlining the difficulties.

In Utah, however, officials are more positive. "Our feeling is that Watt has agreed to help us put together a proposal that reflects that [non-traditional] value exchange," Butler said.

The Sagebrush Rebellion is the term that some western state critics of federal land management policies on grazing, water rights and other issues use to describe their efforts to win control of federal turf, including state ownership of federal lands.

Watt told his Senate confirmation hearings, "I am a Sagebrush Rebel," and added that his goal was "to defuse the Sagebrush Rebellion" by revamping lands management. But he also said he planned no major transfer of federal land to states.

Gail Prince of the Utah lands office said the proposed exchange would be a major one, involving at least 674,000 acres plus some portion of 3.5 million scattered acres restricted since statehood to school district use.

Interior Department officials are being "very helpful" in outlining federal lands from which Utah will choose parcels, Butler said.

Federal-state land swaps are a common way of resolving old land debts and outdated ownership patterns in the West. Traditionally, scattered state acreage that is of little value or awkwardly located is traded to the government for usable blocks of federal land.

The swap is required to involve equal dollar values for mineral rights or tree, water and topsoil resources under the Federal Land Policy Management Act of 1964 (FLPMA), and the deals are commonly preceded by delicate negotiation.

Nearly two-thirds of Utah is federally owned, including most of the oil shale areas of the Piceance Basin and great seams of coal that are certain targets for synthetic fuel and mining development.

In theory, all federal land outside military and park preserves is eligible for trade talks, and much of the mineral territory could be among the parcels traded to Utah, depending on the outcome of the discussion.

Utah's 674,000 acres include 169,760 in patches that are worthless to the state because they are in Indian and federal military reservations, parks, recreation areas and forests, and 229,720 acres the state cannot use because they are being studied for possible inclusion in federal wilderness areas, Prince said.

There are 235,000 acres owed Utah since statehood in 1896 but never ceded, and perhaps 35,000 acres promised but never delivered to various state institutions and tracts owed in trade for lands Utah earlier deeded to Interior.

Prince said some of the 3.5 million acres reserved since statehood for school districts would be included in the swap, but the amount had not been decided.

Utah Assistant Attorney General Richard L. Dewsnup was candid about the difficulties of the deal in his Feb. 18 memo to Matheson, which Matheson forwarded to Watt. He stressed it would require extensive public hearings and a heavy lobbying effort to win Congress over.

The value of the federal lands to be sought, Dewsnup wrote, "is not a vital federal interest in the same sense that a national park or a defense installation would be." He proposed offering Congress two or three alternatives, one to "allow the state of Utah to realize a 5-to-1 value benefit in its favor," and a second giving a 2-to-1 benefit.

"I would hesitate to propose an alternative where the values were equal or roughly equal, because it might be too tempting for Congress to opt for the latter alternative," he wrote.

In an interview, Dewsnup acknowledged "a good part of this would violate a whole bunch of things in FLPMA. This would be like wading across 1,000 miles of quicksand if we tried to do it under Flpma," he said.

"But there are enough wholesome things we want to accomplish that Congress will be relieved to know its benefits. It's in the federal interest and not a one-sided deal."

Matheson recommended that the planning and negotiation process "be entirely open" to environmental groups, mining, livestock and other interests before the first draft of the terms of trade is announced in August. iHe suggested public hearings be held in September.

"There is no need for intensive or detailed studies, inventories or appraisals" of the land, which is already familiar to the Bureau of Land Management, he wrote.

"The question of value is secondary. Our responsibility is to provide the Congress with a rationale for the final package, not an accounting of dollars or acres."