By Laura Zuckerman

SALMON, Idaho (Reuters) - Wyoming will challenge a U.S. government ruling that more than one million acres of the western state's land still legally belongs to two Native American tribes, Governor Matt Mead said on Friday.

In a letter to the U.S. Environmental Protection Agency last week, Mead said he has directed the Wyoming attorney general to take aggressive action to overturn the agency's decision, which he said would adversely affect the state.

The land ruling was in response to an application from two sovereign native American tribes living on the Wind River Indian Reservation to the EPA seeking the same status afforded to U.S. states in order to implement provisions of the U.S. Clean Air Act.

A subsequent U.S. study found that the tribes should have access to the land, which includes the city of Riverton, that had been opened to non-tribal members under a 1905 act of Congress.

The governor told reporters on Friday that the Wyoming Supreme Court "has directly dealt with that issue and said clearly Riverton is not within the boundaries of the reservation."

The decision could have far-reaching legal and social implications for the roughly 10,000 Northern Arapaho and Eastern Shoshone, who now have access to grant money under the 1970s landmark environmental law.

The issue has heightened tensions in Wyoming over land management, sovereign rights and federal oversight.

State and Riverton officials described the determination about reservation boundaries as "an ill-advised federal agency action" equivalent to a land grab.

But Northern Arapaho and Eastern Shoshone representatives said the finding was long overdue for members who have been allowed little voice in decisions in Riverton on matters like air quality that impact tribal neighbors.

"We're willing to sit down with all the stakeholders in a spirit of cooperation and consultation to work through what the determination means on all these different issues," said Mark Howell, a Washington lobbyist for the Northern Arapaho.

Riverton residents have expressed worries about everything from property ownership to home values tied to the EPA decision, said City Administrator Steven Weaver.

"We're not very pleased about it and it's got a lot of people concerned," Weaver said. "We don't know if the ultimate goal of the tribes is to take over Riverton, but we will conduct business as usual until the matter is resolved in court."

Don Wharton, senior attorney at the Native American Rights Fund in Colorado and representative for the Eastern Shoshone, said alarmist statements by the governor and others are fueling unneeded fears.

"All the ownership of the land stays exactly as it was, not a single house or parcel of land changes ownership and nothing remotely like that is going to go on," said Wharton.

Legal experts said it was unlikely the case would have implications elsewhere in the nation because the matters at issue are specific to a reservation in Wyoming that stretches across millions of acres of sandstone cliffs and sagebrush flats.

"What the decision does show is a willingness on the EPA's part - and perhaps by the Obama administration more broadly - to take the side of the tribes in a dispute of this magnitude, knowing it would almost certainly be challenged," said William Wood, a visiting professor at Southwestern Law School and specialist in Indian law and policy.

(Reporting by Laura Zuckerman; editing by Gunna Dickson)