OPTIONS AND IMPACT OF THE
INDIAN MINERAL DEVELOPMENT ACT OF 1982
Karla Sexton
0006
In the upheaval that swept the nation when the demand for
energy resources reached "crisis" proportions, an unforeseen
force would rise out of the deserts of the Southwest with the
power to stand again as a proud nation and people in control
of their destiny. Many moons ago when the white settlers
pushed the American Indians to barren and sun-parched
lands
while reserving the fertile lands to themselves little did
they know that "hidden beneath the scrub lands that the
white settlers "gave away" are the natural resources craved
1
by this (now) energy-starved nation."
American Indian tribes are perhaps the largest private owner
2
of energy resources in the nation
with control of an estimated
3
15 percent of the nation's coal resources, about four percent
4
of the natural gas and oil reserves» roughly fourty percent of
all privately owned uranium, and quantities of oil shale,
5
hydroelectric and geothermal resources.
Mineral royalties in
6
1980 were upwards of $197 million.
"Energy has finally
given American Indians what they have
long lacked in their dealings with the United States govern7
ment: bargaining power."
But that power has yet to be effectively
utilized to deal with many of the problems facing Indian tribes
today, such as poverty, lack of education, and lack of effective
tribal organization-.
Restrictions upon their power have
retarded its potential. During the 2 00 year history of dealings
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under the protection and "trust" responsibility of the United
States government, control of their lands and resources has
been subject to numerous rules and limitations promulgated by
their trustee.
This discussion will focus on the development
of these limitations and the current trend of recent legislation
recognizing the new power in the hands of the Indian tribes
and developing a more flexible response to allow for development
by Indians of their mineral resources. Specifically, the
historical development of mineral development and leasing of
Indian lands will be breifly summarized as it relates to
an Act, now awaiting final signing and approval by the
executive, entitled "The Indian Mineral Development Act of
1982. H
The implications and provisions of this Act will be
detailed in exploring the new avenues which are open to
Indians in their efforts at self-determination and in the
utilization of their power through the development of their
natural resources. Also to be explored will be significant
developments in traditional tribal powers as they are
harnessed to aid in the development of these significant
resources.
Although not within the primary focus of this discussion,
yet an important aspect which underlies the trends of recent
development in the power of American Indians to chart their
own destiny is the decision of the Indian peoples to enter
this arena.
Resistance to change, even though perhaps change
for the better, is always a factor. As one member of the
Navajo tribe said, "Our mother earth is not for sale. We will
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not accept any type of energy development on the Navajo
8
Reservation."
Concern by many is on the adverse effects
that mineral development will have upon their society, tradition
and economy.
"Like many Third World countries, they
(the
Indian peoples) will have to choose a path of economic
development that will assure the people a measure of self9
sufficiency and a decent standard of living."
However,
the decision will not be without difficulty but the path
should be easier than that taken by many of their forefathers
into the wastelands those many moons ago.
STATUTORY PROHIBITIONS
An Indian tribe's ability to develop his land or to sell
an interst in minerals that it owns in trust has been severely
limited by a series of statutory
restrictions.
As early as 1790, The Non-Intercourse Act of the Indian
10
Trade and Intercourse Act
proscribed that tribes may not
alienate, sell or transfer, an interest in land except when
authorized by treaty or specific act of Congress. Unservered
minerals are deemed to be an interest in land, and therefore
subject to this proscription.
The initial purpose of this
act was seen to be the protection of the Indians from being
cheated out of their lands and of recognizing title to the
land in the sovereign United States as against all but
subject to the Indians right to occupancy or possession. Yet
it also constrained conveyance and mineral development.
The first legislative authorization for leasing of tribal
11
lands was seen in the Act of February 28, 1891.
That act
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authorized leasing of lands "bought and paid for" for a period
12
not to exceed ten years.
In about the next fifty-odd years,
piecemeal legislation was to so complicate the area as to
13
render the prohibitions incomphrehensible.
Briefly in 1909, the first general authorization of allotted
14
Indian land was found in the Indian Appropriation Act of 190 9.
Allotted Lands are those which under the General Allotment Act
15
of 1887
gave lands formerly part of reservations to individual
members in severalty. "The allotment system would not have
created any mineral leasing problems if full legal title to
their allotments
had been vested properly in the individual
„16
Indians."
However, title to these allotments are also held in
trust similar to tribal lands and therefore subject to similar
regulations.
Congress also first authorized leasing of lands within
executive order reservations for oil and gas purposes in
17
the Act of March 3, 1927
providing that the same rules
should apply.
In the decade of the 1930's the two most significant pieces
of legislation is this area of Indian mineral regulation were
18
passed. First the Indian Reorganization Act of 1934
put an end
to the allotment policy as the recognition that the assimilationist
goals of social and economic development wer not being fostered.
The Act authorized restoration of tribal ownership in the
19
remaining surplus lands of the Indian reservations.
Also
the Act allowed the tribes to elect whether to come under the
00972
provisions of the act where the land would be restored
permanently to tribal ownership and subsequently, after
receiving a charter of incorporation from the Secretary of
Interior, the tribe obtained powers to manage and control
disposition of its property, "wherein for a trial period all
leases would be subject to departmental approval and
20
thereafter free tribal leasing authority without approval."
Court interpretation of the legislative purpose held,
the "primary authority" is conferred "upon the Indians and
. . . the determination of the council should be conclusive
upon the government, at least in the absence of fraud or undue
21
influence."
A significant number of Indian tribes did not elect to
come under the 1934 Act, so Congress passed a broader mineral
leasing act to bring all the proscriptions into one body
22
of regulations. The General Leasing Act of 1938
intended
to make uniform the various laws. It applied to all tribal
23
lands except for certain exceptions.
Under the 1938 Act and its regulations, the statutory
lease term is ten years and for so long thereafter as minerals
are produced in paying quantities, leases are subject to
secretarial approval, and oil and gas leases are burdened
with regulations providing for sale by advertisement and
24
competitive bidding.
RECENT LEGISLATION
The need for additional legislation to provide better and
6
-6-
more avenues for the development of Indian mineral holdings,
was brought to attention because of the inadequacies of the
1938 act. The two concerns were, first of all, the fact that
the act limits development of oil, gas and other minerals to
"leases"; and second, oil and gas leases are further restricted
25
to a regulated advertisement/competitive bidding procedure.
Mindful of thses concerns, certain developments also influenced
and generated the legislation to be discussed.
The first factor or development was the Congressional
recognition of the ideal of "Self-Determination" for Indian
tribes.
As codified, Congress found,
"(1) the prolonged Federal domination of Indian service
programs has served to retard rather than enhance the progress
of Indian people and their communities by depriving
Indians of the full opportunity to develop leadership
skills crucial to the realization of self-government, and
has denied to the Indian people an effective voice in the
planning and implementation of programs for the benefit
of Indians which are responsive to the true needs of Indian
communities; and
(2) the Indian people will never surrender their desire
to control their relationships both among themselves
26
and with non-Indian governments, organizations and persons.
This philosophy was echoed recently by William S. Cohen, chairman
of the Senate Select Committee on Indian Affairs, when he stated
that many of the problems, i.e. poverty, of Indians will be
solved "when Indian tribes gain the capacity to make decisions
27
for themselves and to fashion their own destiny."
Another significant development was the formation in 1975
of the Council of Energy Resource Tribes
(CERT), 28
a non-profit
organization of about 34 American Indian Tribes.
Basically
CERT is to the energy-rich Indian tribes what OPEC is to the
29
Arab world.
00074
-7CERT offers assistance with mineral agreements, technical
assistance, educational programs and political lobbying and
the members also suggest negotiation should provide for
greater operational controls, greater profits, increased tribal
30
imput on issues involving the environment and enhanced oversight.
Thirdly as the percentage rate of royalties is usually
fixed for the term of the lease, which have ranged from 12^
percent to 16 2/3 percent, tribes have wanted to increase the
participation in the profits by paticipating directly in the
production, either by developing the resources or by entering
31
into joint venture partnerships, agreements with energy companies.
Since 1975 only six such agreements have been proposed, one for
the development of coal, one for uranium and four for the
32
development of oil and gas.
As the 1938 act is limited to
"leases" as mentioned briefly the authority of tribes to
enter into such agreements is questionable. As to these
agreements the approval authority was based on the authority
33
granted to approve contracts with Indian tribes,
which more
pertinently deals with personal service contracts and
historically has been used in connection with attorney contracts
34
with Indian tribes.
Senate Bill 1894
On November 30, 1981, Senator John Melcher of Montana
introduced Bill, S. 1894, authorizing Indian tribes to enter into
certain agreements, more specifically joint venture agreements,
operating agreements, production sharing agreements, service
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managerial agreements, and or other agreements approved by the
Secretary. The Bill, now entitled an Act, is currently awaiting
final executive approval. It was the subject of two senate
hearings, one in Billings, Montana on February 12, 1982 and one
in Washington D.C. on March 16, 1982. Testimony came from many
western tribes with energy resources as well as several energy
companies, representatives from the departments of Justice and
the Interior as well as representatives of tribal allottees.
The bill was amended on the Senate floor and passed as amended
on June 30, 1983 and then sent to the House Committee on interior
and Insular Affairs. The house hearing was held on July 27, 1982.
The Bill passed as amended on August 17, 1982.
The purpose of S. 1894 is specified "to provide Indian tribes
the flexibility for the development and sale of their mineral
35
resources."
"The objective is two-fold: first, to further
the policy of self-determination and second, to maximize,the
financial return tribes can expect for their valuable mineral
36
resources."
During the Senate hearing, response from most Indian tribes
which included the Northern Cheyenne, the Crow, the Navajo,
the Turtle Mountain Tribe, the Chippewa Cree, the Blackfeet, among
other, was favorable. Opposition was focussed mainly on the
retroactive application to existing agreements particularly in
whether passage of the act would a fortiori establish their
validity.
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Comments
One industry representative, Curt Burton, of Atlantic
Richfield summed up their reasons for supporting the Bill,
"No. 1, the bill is an important and positive step in advancing Indian self-determination;
No.2, it assures Indians and industry the use of greater
flexibility to tailor agreements relating to oil, gas,
and other minerals to address the specific needs of both
parties; and
No. 3, it removes any ambiguities that may exist in current
law with regard to exploration and development agreements
affecting Indian lands."37
Atlantic Richfield at the time had two active agreements with
the Jicarilla Apache Tribe and the Northern Cheyenne Tribe which
were of the type to be approved under the bill.
Burton also addressed the concerns of many that these agreements
would provide a vehicle to take advantage of tribal rights. He
stated
" . . . the time is long since past when Indians need
protection against unequal trading ability which might
be brought to bear by industry. Our recent expreience in
conducting business with representatives of Indian tribes
is that the tribes, represented by their elected authorities and by retained experts, bring to the negotiating
table a level of sophistication and trading skill that
rebuts any alleged need for a status resembling guardianship for the protection of tribal assets." 3 8
The Council of Energy Resource Tribes,
(CERT) through its
Executive Director, Ed Gabriel commented as follows:
"(w)e feel that the passage of this legislation would
basically give the tribes the intent that Congress and the
administration have always wanted for them and tat is to
39
enter into better terms of agreements for their own benfit."
Gabriel pointed out however that technical and financial resources
will be needed by the tribes to make the transition from simple
40
lease procedudres to coping with these new agreements.
0
-10-
In addition by resolution of the Navajo Tribal Council, the
tribe also evidenced its support of the measure,
". . . tribal energy resources are underutilized to the
detriment of both tribal and national economic and energy
goals. Only by allowing increased flexibility for both the
tribes and the private sector to negotiate the types of
modern, innovative agreements that are in their mutual
interest can production from tribal lands be maximized
41
with a minimum of social disruption to the tribes . . . "
One party in opposition was Paul Frye, attorney with DNA-Peoples
Legal Services state two reasons for opposing the legislation,
which hit on the main thrust of other disenters,
". . . 1 have found a general pattern of overreaching
and/or disparity in bargaining position with energy companies and a complete inability and general lack of desire
of the Department to fulfill its duty to guard against
improvident transactions . . . and further. Section 3,
S. 1894 would constitute . . . Congressional ratification
of unconscionalbe transactions."^
Specific Provisions
Basically the Act follows the normal organizationa
sequence.
Sec. 2 contains the basic definitions of "indian," "indian tribe,"
and Secretary," consistent with recognized definitions found in
enactments dealing with Indians. However, the definition of
"Indian" is significant in it inclusion of Indians with
holdings of allotted
lands.
Sec. 3 provides a list of the agreement forms now authorized.
A brief explanation of some of thses is now relevant. First, some
of the differences in these agreements and an ordinary lease form
can be best illustrated by listing the tribe's role under the
lease. Indian tribes retain the option, even with S. 1894, to
43
use the leasing provisions of the 1938 act.
Under the standard lease form, the tribe has no control or
00074
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management rights in the development of the resources, no right
to information, or participation in'the operation, no imput into
methods, programs for pollution control, conservation, reclamation
44
or restoration.
The lease procedure is however simple to
execute and administer.
The joint venture agreement allows for some degree of
control over operations and sharing of profits but the tribe
must bear it portion of the expenses, thus participating in
45
the losses as well as the profits.
Some of the more
significant drawbacks are the difficulties in accounting of profits
and special tax consequences, which are beyond the scope of
this discussion.
The production sharing agreement differs from the joint
venture in that production is shared, rather than profits and
the operator bears all of the exploration costs made up out of
46
production.
Under service contracts, the tribe, as owner would bear all
the expenses, put up all required capital and take all the
risks.
The tribe would then hire the operator to carry out
all of the technical arrangements. The advantage here is complete
47
control and retention of all profits.
In looking at the decision of which agreement to choice,
the tribe must weigh the benefit and consider the factors most
important in light of their circumstances, such as the particular mineral involved, the capital needed, the risks, the
00074
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tribe's managerial ability and development goals.
Sec. 4 provides the necessary time constraints upon
the Secretary in approving or disapproving the agreements
entered into in pursuance with this Act. Specific provision is
made for extended compliance in the event that an environmental
impact statement is required to be completed. Court decisions
have interpreted Secretarial approval of leases as a "major federal
action" thus requiring "a detailed statement on the enviornmental
49
impact of the proposed action
Also provided in this section is the procedure to be used
in the event the Secretary does not comply with the requirements. If the Secretary does not meet the time limits imposed,
any party must seek a writ of mandamus in order to compel the
Secretary to act as these agreements, unlike other agreements
such as the personal service contract for an attorney, are not
50
deemed to be approved at the expiration of the time limit.
Sec. 4 also provides the basic grant of authority to the
Secretary or his designee, the Assistant Secretary of the
Interior for Indian Affairs to approve or disapprove these
agreements. The Secretary does posses a modicum of descretionary
power in reviewing these agreements however, it is not unbridled.
He must act pursuant to the ascertainable and objective standards
set forth in Sec. 5.
Sec. 5 incorporates a "best interest" test and in assessing
these factors, the Senate Committee felt he should consider,
(1) recent, similar agreements - tribal, state, and private involving the same type of minerals,
(2) the probability that production will occur,
(3) the fair market value of the minerals that are the
subject of the agreement, and
(4) the social, environmental and economic impacts of
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development on the tribes.
Implicit in the concerns of the Committee was an understanding
of the traditional role of the Secretary in regulating
Indian
affairs tempered with the need for new conceptions of his
role in light of the policy of "self-determination for the
Indian tribes.
The role of the Secretary has been described in
various ways in his function of carrying out the trust
responsibility delegated to him by the United States government. He can be said to be the trustee of a life estate and
thus "function as a guardian for generations yet unborn so as
to guarantee that the cultural heritage and homeland will not
52
be diminished in size or value."
In the 19th Century, his
role was that of schoolmaster and thus his "function was to
53
prepare the Indians for life in the mainstream."
In the
sense that his role in regulating leases which has been limited
to a financial scruitiny, his function has been described
as trustee of a "spendthrift trust" as his function
was "to
54
protect the Indian from his own incompetence."
"The "incompetent
ward" justification for the approval power and for the underlying
trust responsibility presumes that the federal trusteeship
55
ceases when the trust beneficiary comes of age."
Yet it
would seem that in the context of the proposed act that a different
function is envisioned that of a counselor and advisor, supplying
information, technical assistance and encouragement in line
with the goals of self-government and autonomy. Except that
the Secretary would still retain his approval power as a
check to "assure that no one individual or faction of a tribe
0081
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should gain unfair advantge or be unjustly enriched at the
expense of the remaining members of the tribe." 5 6
Thus the "approval power may exist, then largely to safeguard the conditions regarded as essential to the continued
cohesiveness of the tribe and its culture - if not to its static
57
preservation. H
Other provisions of the Act are listed in the following
recital but were not mentioned with significant comment in
the Senate Report or in the hearings.
Comments as to the retroactivity and its effect wereexplained and construed not to give validity to the existing
agreements of concern to the tribes involved but went only
to establish the authority of the Secretary to approve them.
Significance then is the disclaimer of federal liability
found in Sec. 10 (b).
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INDIAN MINERAL DEVELOPMENT ACT OF 1982
S. 1894
Be it enacted by the Senate and House of Representatives
of the United States of America in Congress assembled, That this
Act may be cited as the "Indian Mineral Development Act of 1982".
Sec. 2. For the purposes of this Act, the term (1) "Indian" means any individual Indian or Alaska Native who
owns land or interests in land title to which is held in trust by
the United States or is subject to a restriction against
alienation
imposed by the United States;
(2) "Indian tribe" means any Indian tribe, band, nation, pueble,
community, rancheria, colony, or other group which owns land or interests in land title to which is held in trust by the United States
or is subject to a restriction against alienation imposed by the
United States; and
(3) "Secretary" means the Secretary of the Interior.
Sec. 3. (a) Any Indian tribe, subject to the approval of the
Secretary and any limitation or provision contained in its
constitution or charter, may enter into any joint venture, operating,
production sharing, service, managerial, lease or other agreement, or
any amendment, supplement or other modification of such agreement
(hereinafter referred to an "minerals Agreement") providing for the
exploration for, or extraction, processing, or other development of,
oil, gas, uranium, coal, geothermal, or other energy or nonenergy
C0071
-16mineral resources
(hereinafter referred to as "mineral resources")
in which such Indian tribe owns a trust or restricted interest,
or providing for the sale or other disposition of the production
or products of such mineral resources.
(b) Any Indian owning a trust or restricted interest in mineral
resources may include such resources in a tribal Minerals Agreement
subject to the concurrence of the parties and a finding by the Secretary that such participation is in the best interest of the
Indian.
Sec. 4, (a) The Secretary shall approve or disapprove any
Minerals Agreementsubmitted to him for approval within
(1) one
hundred and eighty days after submission or (2) sixty days after
compliance, if required, with section 102(2)(C) of the National
Enviornmental Policy Act of 1969
(42 U.S.C. 4332(2)(C) or any other
requirement of lav;, whichever is late. Any party to such an agreement may enforce the provisions of this subsection pursuant to section 1361 of title 28, United States Code.
(b) Not later than thirty days prior to formal approval or
disapproval of any Minerals Agreement, the Secretary shall provide
written findings forming the basis of his intent to approve or
disapprove such agreement to the affected Indian tribe. Notwithstanding any other law, such findings and all projections,
studies,
data or other information possessed by the Department of the Interior
regarding the terms and conditions of the Minerals Agrrement, the
financial return to the Indian parties thereto, or the extent,
nature, value, or dispositon of the Indian mineral resources, or the
00074
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production, products or proceeds thereof, shall be held by the
Department of the Interior as privileged proprietary
information
of the affected Indian or Indian tribe.
(c) The authority to disapprove agreements under this section
may only be delegated to the Assistant Secretary of the Interior
for Indian Affairs. The decision of the Secretary or, where
authority is delegated, of the Assistant Secretary of the Interior
for Indian Affairs to disapprove a Minerals Agreement shall be deemed a final agency action.
Sec. 5. In approving or dispproving a Minerals Agreement,
the Secretary shall determine if it is in the best interest of the
Indian tribe and,
in connection therewith, shall consider, among
other things (1) the economic return provided in the agreement in relation
to the economic potential of the mineral resource involved;
(2) the nature of the advice and technical assistance available
to the Indian tribe in the negotiation of the agreement;
(3) the potential environmental, socioeconomic, and cultural
effects of the implementation of the agreement on the tribe and its
members;
(4) any provisions in the agreement for tribal access to
management, financial, production and other operating
information;
(5) any provisions in the agreement relating to diligent
exploration and development or tribal monitoring, review, and
amendment; and
(6) any provisions in the agreement for resolving disputes
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which may arise between the parties over the terms or implementation
of the agreement:
Provided, That the Secretary shall not be required to prepare any
study regarding environmental, socioeconomic, or cultural effects of
the implementation of a Minerals Agreement apart from that which may
be required under section 102(2)(C) of the National Environmental
Policy Act of 1969
(42 U.S.C. 4332(2)(C).
Sec. 6. (a) Minerals Agreements which by their terms do not
purport to be leases, entered into by any Indian tribe and approved
by the Secretary after January 1, 1975, but prior to the enactment
of this Act, shall be processed as provided in this section.
(b) Where an Indian tribe has required ratification of the
Secretary's authority to approve an agreement covered under subsection
(a) of this section by notifying the Senate Select Committee
on Indian Affairs and the House Committee on Interior and Insular
Affairs after July 27, 1982, but prior to enactment of this Act or
by notifying the Secretary eithin thirty days after enactment of
this Act, such authority is hereby ratified: Provided, That such
ratification shall not constitute a congressional determination of
the validity or legality of any particular provision of such agreement.
(c) Where an affected Indian tribe does not provide notice as
provided in subsection
(b) of this section, the Secretary shall re-
view, within one hundred and twenty days after enactment of this
Act. any such prior agreement to determine if it complies with
the purposes of this Act and other appropriate provisions of law.
Where the Secretary fails to act within the alloted time, the previous
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approval of the Secretary shall be deemed ratified as provided
in subsection
(b) of this section.
Sec. 7. Nothing in this Act shall affect, nor shall any
Minerals Agreement approved pursuant to this Act be subject to or
limited by the Act of May 11, 1938
(52 Stat. 347; 25 U.S.C. 396a
et. seq.), as amended, or any other law authorizing the development or disposition of the mineral resources of an Indian or Indian
tribe.
Sec. 8. Any Indian tribe, subject to the approval of the
Secretary, may enter into an agreement to pledge or hypothecate its
interest in mineral resources which have been lawfully severed from
the land, or their production, products or proceeds, as security
for the repayment of funds provided to Indian tribes to finance the
cost of develpment of its mineral resources. The pledge or hypothecation agreement may be enforced only against the specified pledged
severed mineral resources or the pledged production, products or
proceeds, and only in accordance with the terms and conditions of
the agreement. The United States shall not be deemed a necessary
party in any action to enforce such agreement.
Sec. 9. In carrying out the obligations of the United States,
the Secretary shall ensure that upon the request of an Indian tribe
and to the extent of his available resources, such tribe shall have
advice, assistance, and information during the negotiation of a
Minerals Agreement. The Secretary may fulfill this reponsibility
either directly through the use of Federal officials and resources
or indirectly by providing financial assistance to the Indian tribe
C0071
to secure independent assistance.
Sec. 10. (a) Within one hundred and eighty days of the date of
enactment of this Act, the Secretary of the Interior shall promulgate rules and regulations to facilitate implementation of this Act.
The Secretary shall to the extent practicable, consult with national
and regional Indian organizations and tribes with expertise in mineraJ
development both in the initial formulation of rules and regulations
and any future revision or amendment of such rules and regulations.
Where there is pending before the Secretary for his approval a
Minerals Agreement of the type authorized by section 3 of this Act
which was submitted prior to the enactment of this Act, the Secretary
shall evaluate and approve or disapprove such agreement based upon
section 4(b) and section 5 of this Act, but shall not withhold or
delay such approval or disapproval on the grounds that the rules
and regulations implementing this Act have not been promulgated.
(b) Where the Secretary has approved a Minerals Agreement
in compliance with the provisions of this Act and any other
applicable provision of law, the United States shall not be liable
for any losses sustained by a tribe or individual Indian as a
result of changes in markets for any minerals subject to such
Minerals Agreement or as a result of decisions made by the parties
to the agreement in the course of doing businesspursuant to the terms
of such agreement; Provided, That the Secretary shall continue to
have a trust obligation to ensure that the legal rights of a tribe
or individual Indian are protected in the event of a violation of
•the terms of any Minerals Agreement by any other party to such
-21-
agreement.
( c )• Nothing contained in this Act shall absolve the United
States from any reponsibility to the Indians, including those which
derive from the trust relationship and from any treaties, Executive
Orders, or agreements between the United States and any Indian
tribe.
Sec. 11. Nothing in this Act shall impair any right of an
Indian tribe organized under section 16 or 17 of the Act of June,
18, 1934
(48 Stat. 987), as amended, tc develop their mineral resour-
cesas may be provided in any constitution or charter adopted by
such tribe pursuant to that Act. 5P
00074
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Other Recent Controls
A significant area for the exercise by the tribes of power
in the development of minerals is that of taxation. First of all
consideration of the tax consequences of alternative mineral
agreements.
The other area where significant
interpretation
by courts is the impact of tribal authority to tax, and
specifically by the use of a severance tax upon oil and gag.
What will be briefly explored here is the impact upon the tribe
of a tax imposed from within and more importantly the impact
of a tax imposed by the tribe as an alternative means of
reaping benefits withheld as a result of utilizing a standard
lease form rather than the avenue of S. 18 94.
Generally, although the tribe would not be liable for
a state imposed severance tax, "to the degree that an operator pays
taxes to a state, a tribe's possible revenues must be diminished."
59
And conversely, to the extent that the operator can
take advantage of tax credits and allowances, the tribe's
benefit would be increased..
The leading case in the area of tribally imposed severance
60
taxes in Merrion v. Jicarilla Apache Tribe .
In that case,
non-Indian lessees sought to prohibit enforcement of the
tribe's oil and gas severance tax measured by production of
oil and gas wells located on the reservation.
Three significant issues of relevance to the power of
Indians to develop or control the development of their minerals
and the impact of S. 1894 were raised in this case. First, was
00090
-2 3the inherent power of the tribe to tax; second, was the effect
of regulation in the area as pertaining to federal preemption, and
third, was the commerce clause violated.
The inherent power of the Jicarilla Apache Tribe is
first approached by its status as a tribe organized and
defined by its constitution under the authority of the Indian
Reorganization A c t ^ Specifically the constitution provided
that the council could enact ordinaces "to impose taxes and
fees on non-members of the tribe doing business on the
62
reservation."
The tax imposed was a severance tax on "any
oil and natural gas severed, saved and removed from Tribal
lands."
Findings of fact indicated that the
tax would
6 3 Thus
generate about two million dollars annually.
a tax of
this nature would impede the profitability and thus the
desireability of the lessee to develop the mineral resources.
Thus result would in turn seem to impact back upon the tribe
and in turn retard the development of these lands, a signficant
difference from the movement toward alternate agreements under
S. 1894 which would increase the benefits acrued to the
tribe without placing so much of the burden upon industry.
In
Merrion, the tribe first sought to defend the suit
upon the grounds that the trial court was v/ithout jurisdiction
to sue.
Here the Court held that the election to take advantage
of the provisions of the Indian Reorganization Act the tribe
64
had executed a valid waiver of sovereign immunity.
This
interpretation points to the reason many tribes did not take
00091
-24advantage of the provisions.
As the the power of the tribe to enact this tax, the Court
held that the "power of taxation, which is essential to the
very existence of self-government, is an attribute of sovereignty and extends generally to all that is within that govern65
ment's territorial jurisdiction."
Although tribes no longer
retain all of the attributes of full sovereignty, being now
domestic dependent nations in a trust relationship with the
United Staes government, the court employed the test of
whether the interest claimed or the power was as such
"inconsistent with the superior interst of the United States
66
as a soveriegn nation."
no way impinged.
Here the federal taxing power was in
As the tax fell upon non-members the nature of
the power is even more significant. Two different powers are
relied on here to hold the action valid - the power to tax
and the "power to exclude nonmembers from the reservation
and set the terms upon which such persons could enter and do
67
business therein"
In answering the issue of federal preemption, the significance of the grant to states of the right to tax the oil and
gas production of executive order reservations in 25 U.S.C § 398c
comes into play. The Court here relied upon a canon of construction that "statutes passed for the benefit of dependent
Indian tribes . . . are to be liberally construed, doubtful
68
expressions being resolved in favor of the Indians."
The last issue addressed by the Court was the effect
upon the commerce clause of the United States Constitution.
C0071
-25-
The standard applied by the court was "whether a tribe's tax
legislation infringes upon the national interest in maintaining
69
the free flow of interstate trade."
The Court then held that
"an occupation or privilege tax on mining or severing of natural
resources, although closely connected with interstate commerce,
is a local activity properly subject to local taxation."70
Conclusions
Indian lands, once seen as barren wastelands, have become
the focus of national attention in the search for new sources
of energy.
In the United States the desire for independence
from foreign sources of supply has triggered the parallel
movement for Indian independence in the development of their
natural resources now achievable because of the new power
which has shifted to these once displaced nations.
Two factors inhibited this development in the past,
the lack of Indian expertise and excessive governmental
restrictions, both of which have seen tremendous innroads
in recent times. Mineral development has been limited
to the leasing prescribed under the 1938 mineral leasing
provisions which "often provides the Indian with only
minimal compensation from, and no control over the means of
71
exploration and development of their resources."
1
Current developments, particularly the "Indian Mineral
Development Act of 1982,» point to a significant change
in policy from that of the 1938 act. in comment before the
House of
Representatives, Representative Udall of Arizona
said,
C0093
-26M
In recent years, some tribes have sought to abandon the
lease method of development, which does not have a great
potential for maximizing return. Instead, they have sought
to achieve a greater return by assuming a greater risk
under joint ventures or like arrangements." 72
Also, the Use of
the technique of improving profits to
the Indian tribes through utilization of severance taxes upheld
as part of the inherent authority of the tribe.
However the
effectiveness of this method in encouraging mineral development
and in gaining control over the management of their resources
is somewhat limited.
The goal of Indian tribes through management of their vast
energy resources is that of self-determination, the ability to
stand up for their rights and chart their destiny can only be
achieved by a willingness to "assume responsiJ,ility and take tlitj
risks associated with independence.
Once a vital economic base is developed through the
effective development of their mineral resources, Indian tribes
can truly shed the 'dependency' that has resulted from governmental
73
control.
Having tamed the barren wastelands, the Indian
tribes can once more be proud to stand on their own destiny.
00074
ENDNOTES
1. Sherman, The News, 6 American IndianJournal 3, 3 (1980)
(hereinafter cited a"s~News7 .
2. Id.
3. Richardson, Wha,t_ Happens After the Lease Is Signed?, 6 American
Indian^p.urnal 11, 11 (1980).
~
4. Comment, Indian Tribes; Self-Determination Through Effective
Management of Natural Resources, 17 Tulsa Law Journal 507,
528 (Spring 1982) (hereinafter cited as Serf-D^eYmihation) .
5. Id.
6. Id.
7. News at 3.
8i Barry, An Energy__Dichotomy for thejBO's, 6 American Indian
Journal 18, 19 (1980).
9. Id. at 20.
10. Act oX-July_22. 1790. ch.33, 1 Stat. 137.
11. 2 6~_Stat~^ 7 95, 25 u;S.C. 397 (1970).
12. Id
13. Self-Determination at 516.
14. 25 U.S.c7~in^6 (1964)
15. 25 U.S.C. § 331 et. seq. (1964).
16. Berger, Indian Lands-Minerals-Related Problems, 14 Rocky
-Mount aijg^HlTnera'l Law Institute 89, 95 (1968) (hereinafter Lands).
17. 44 Stat, 13-477~25™0»'S7U7 398a (1970) .
18. 48 Stat 984 (1934).
19. Lands at 98.
20. Td. at 99.
21. White Bear v. Barth 203 P. 517, 519 (1921).
22. 25 U.S.C. § 3 9 6 ( a ) - (g) (1976).
23. Exceptions include the Crow Tribe Reservation in Montana,
the ceded lands of the Shoshone Reservation in Wyoming,
the Osage Reservation in Oklahoma, and the coal and asphalt
lands of the Choctaw and Chickasaw Tribes in Oklahoma.
24. Indian Mineral Development, 1982: Hearings on S. 1894
Before the"5elect Committee on Indian Affairs, 97th Cong.,
2nd__S£jS5. 2 (1982) (statement of John Melcher, actingTcHrm.) .
Thereinafter Indian Affairs).
25. Id.
2
^• Indian Self-Determination and Education Assistance_Act,
Act~of~Jan. 4. 197?7~PTL~ 93^5 3 4 ,
§8 g t a t T ~ 2 2 0 ( 1 9 7 5 ) .
27.
Cong. Rec. S13176 (daily ed. October 1, 1982)
(stat erne n t~ 6 W i l l i a m S. Cohen, chrm Senate Select Committee
on Indian Affairs)
0 0 9 S 5
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41
42.
4 3.
44.
45.
46.
47.
48.
49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.
61.
62.
63.
64.
65.
66.
67.
68.
69.
70.
71.
72.
73.
Self-Determination at 521.
News at 3.
Self-Determination at 529.
Indian AfYairs~~at~ 3.
Id.iat 72.
Id.
Id. ,R. S. i 2103; Aug. 27, 1958, P. L. 85-770, 72 Stat 927.
Indian Affairs at 1.
Id.
~~
Id. at 8.
Id. at 9-10.
at 79.
Id. at 81.
Id. at 37.
Id. at 183.
13. at 4.
Lipton, The Pros and Cons of Petroleum Agreemejits, 6 American
Indian Journal 2, 6 (1980) (hereinafter cited as PetroTeumT".
IdV~ilTT.
Id. at 9.
Id. at 10.
Self-Determination at 526.
Davis v. Mort~6n~T69 F.2d 593 (1974).
STTTTep. "No. 97-472, 97th Cong., 2d Sess. 6 (1982) (hereinafter
cited as Report).
"
Id.
Chambers and Price, Regulating Sovereignty; Secretarial
Discretion and the Leasing of indian Lands, 2 6 Stanford Law
Rev^ 106 T, 1080 (1974)/hereinafter cited as Discretion).
Id.
Id. at 1078.
Id.
Report at 6.
Discretion at 1080.
Cong". Rec H 6044 (daily ed. August 17, 1982).
Petroleum at 3.
617 F. 2d 537 (19
617 F. 2d at 539.
Id.
Id.
617 F. 2d at 540.
617 F. 2d at 541.
Id.
617 F. 2d at 543.
617 F. 2d at 547.
617 F. 2d at 545.
Id.
Self-Determination at 521.
~
Cong. _RecT IJ 6046 (daily ed. August 17, 1982).
Self-Determinalfion at 529.
00086