From the opening of the lawsuit: "The United States currently owns about 69 percent of the land in the State of Utah—roughly 37.4 million of Utah’s 54.3 million acres. Nearly half of that federal land--roughly 18.5 million acres--is 'unappropriated' land that the United States is simply holding, without formally reserving it for any designated purpose or using it to execute any of its enumerated powers."
Because the federal government has no power to hold onto a state's land without using it for some constitutionally-authorized purpose. So ultimately it's an argument based on state sovereignty. But aside from that "As the federal government itself recognizes, state and local governments suffer 'losses in property taxes due to the existence of nontaxable Federal lands within their boundaries,' owing to their 'inability … to collect property taxes on federally owned land.'”
