ACQUIRING MINERAL RIGHTS TO TRIBAL TRUST AND ALLOTTED LANDS

• Jurisdiction: United States

Land and Permitting
(Jan 1994)
CHAPTER 12A
ACQUIRING MINERAL RIGHTS TO TRIBAL TRUST AND ALLOTTED LANDS
M. Julia Hook
Ballard Spahr Andrews & Ingersoll
Denver, Colorado

This paper traces the evolution of the traditional federal statutory schemes governing development of minerals on Indian tribal trust lands;¹ discusses the problems with these traditional mineral development approaches that Congress was seeking to solve when it adopted the Indian Mineral Development Act of 1982; and addresses the types of title materials that are available for review prior to entering into a lease or other agreement for the development of minerals on tribal trust lands.

Types of Indian Land Ownership

The two most common types of Indian lands are tribal trust lands and allotted lands. Tribal trust lands are those held by the United States in trust for federally-recognized Indian tribes. This is a unique land ownership system in which each tribe is said to hold the equitable title to its lands for the benefit of all members of that tribe.² As a general rule, tribes acquired their tribal trust lands by virtue of one or more of the following: (1) the actions of governments predating the United States; (2) their aboriginal possession of the lands in question; (3) treaties with the United States confirming their aboriginal possession of certain lands or granting them other lands in exchange for aboriginal lands; (4) acts of Congress confirming their aboriginal lands or granting them other lands in exchange; (5) executive orders confirming their aboriginal lands or granting them other lands in exchange; or (6) the purchase of lands.³

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With the enactment of the General Allotment Act of 1887,⁴ a second category of Indian lands was created. Pursuant to the General Allotment Act, individual Indians were authorized to select for themselves parcels of "surplus" trust lands of their tribes.⁵ When the federal government approved the land selection, the allottee would receive a "trust patent" for the lands he had chosen. Under the original provisions of the General Allotment Act, the United States was to hold title to individual allotments for twenty-five years, and during this "trust" period, the individual Indian allottee could neither sell nor mortgage his property.⁶ At the end of the twenty-five year trust period, the allottee (or his heirs) would receive a fee patent to his allotment and the restrictions against alienation would be lifted. The obvious goal of the General Allotment Act was to enhance the assimilation of Indians into the general population, and to terminate tribal ownership of lands.⁷ The United States reversed its policy of granting allotments to individual Indians in the mid-1930s with the enactment of the Indian Reorganization Act (IRA).⁸ However, by the time the IRA was passed, many acres of "surplus" reservation land had received allotted status.⁹

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Legal History of Mineral Development on Indian Lands

The legal history of mineral development on Indian lands relates to two central questions: who owns the minerals underlying Indian lands, and who decides how those minerals should be developed?¹⁰ The Melcher Act is the federal government's most recent pronouncement on the second question.

The first question was answered by the United States Supreme Court in United States v. Shoshone Tribe,¹¹ a case involving the Wind River Reservation in Wyoming. The lands comprising the Reservation originally had been set aside by a treaty between the Shoshone Tribe and the United States for the "absolute and undisturbed use and occupation" of the Tribe. Despite the federal government's arguments to the contrary, the Supreme Court held that the minerals underlying the Reservation were "constituent elements of the land itself" and were owned by the Tribe.¹² The Court determined that where the United States had not expressly reserved an interest in minerals to itself in a treaty with an Indian tribe, there is a legal presumption that the minerals belong to the tribe in question. Further, any doubt as to the ownership of the minerals is to be resolved in favor of the Indians. The same presumption applies to Indian reservations created by executive order instead of by treaty.¹³

Leasing of Indian Lands

Prior to 1891, Indian reservations were closed to mineral leasing unless Congress specifically authorized mineral development on a particular reservation.¹⁴ Pursuant to the Act of February 28, 1891 (1891 Act),¹⁵ mineral leasing was authorized

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for terms not to exceed 10 years on lands "bought and paid for" by Indians. The phrase "bought and paid for" does not appear in other federal statutes pertaining to the leasing of Indian lands, and its meaning is unclear.¹⁶ In general, however, the phrase was interpreted to refer to treaty reservations, but not to executive order reservations.

Between 1891 and 1938, Congress adopted numerous mining statutes applicable to Indian lands. First, the Appropriations Act of June 30, 1919 (1919 Act),¹⁷ authorized the Secretary of the Interior to lease tribal lands in Arizona, California, Idaho, Montana, Nevada, New Mexico, Oregon, Washington and Wyoming for the mining of gold, silver, copper and other valuable metalliferous minerals. The 1919 Act later was amended to authorize the leasing of nonmetalliferous minerals, except for oil and gas, on Indian lands in those same states.

The 1891 Act was amended in 1924 to lengthen the 10-year term authorized for oil and gas leases on "unallotted lands on Indian reservations" available for mineral leasing under the 1891 Act (i.e., unallotted lands on treaty reservations).¹⁸ A 1927 statute authorized oil and gas leasing on executive order reservations (which were thought to be excluded under the 1891 Act).¹⁹ In addition, with adoption of the Allotted Lands Leasing Act of 1909 (1909 Act),²⁰ Congress authorized mineral leasing on allotted lands in which individual Indian "allottees" own the beneficial interest. Particular reservations were excepted from many of these statutes.

1938 Act Leasing Scheme

This statutory patchwork left the law governing mineral development on Indian reservations in a state of confusion. This was remedied in 1938 with the adoption of the Omnibus Indian

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Mineral Leasing Act of 1938 (1938 Act).²¹ The 1938 Act was intended to be the comprehensive statute governing the issuance and maintenance of mineral leases on tribal lands, and it repealed all prior inconsistent statutory provisions on Indian mineral leasing. However, the 1938 Act does not govern mineral leasing on allotted lands owned by individual Indians pursuant to the terms of the General Allotment Act of 1887; mineral leasing on such lands remains subject to the 1909 Act.

Under the 1938 Act, tribal trust lands within the boundaries of an Indian reservation (or lands outside a reservation's boundaries owned by any tribe or band of Indians under federal jurisdiction) can be leased, with the approval of the Secretary of the Interior, for mining purposes for terms not to exceed 10 years, and as long thereafter as minerals are produced in paying quantities. Tribes organized under the Indian Reorganization Act of 1934 (IRA),²² also are permitted to lease their lands in accordance with the provisions of any charter or constitution adopted pursuant to the IRA. A detailed set of regulations govern mineral leasing on tribal lands under the 1938 Act. These regulations, codified at 25 C.F.R. § 211 , set out durational requirements, minimum rental payments, royalty rates, acreage restrictions and environmental requirements.

Under the 1938 Act and its implementing regulations, oil and gas leases must be offered for sale by advertisement followed by competitive bidding. If all of the bids received are deemed unacceptable, or if no bids are received at all, the Secretary may readvertise the lease for sale or privately negotiate the lease (with the approval of tribal officials). Leases for minerals other than oil and gas must be advertised for bids in the same manner as that prescribed for oil and gas leases unless the tribe is granted written permission by the Commissioner of Indian Affairs to negotiate a lease. If the Secretary rejects a negotiated minerals agreement, the minerals may be advertised for bid. Congress' intent in enacting the 1938 Act was:

...to require competition, based upon the premise that companies would bid higher bonuses for tracts that showed promise. The bonus bids paid to Indians consequently would track market forces, whether or not [the

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Bureau of Indian Affairs] or the tribes knew what they had or what the market was doing. The advantages would be similar to those of an unsophisticated person buying into a mutual stock fund instead of buying individual stocks.²³

In addition to the bonus bid, the 1938 Act requires certain rents to be paid. Thus, "if no minerals were found, [the Indian owners] would at least get the bonus [bid payment] and rental money. If minerals were found, the tribe received a royalty, based upon how much was produced and at what price."²⁴ The 1938 Act thus was premised on the assumption that tribes are too unsophisticated to negotiate the terms of their own minerals agreements.

Problems Under the 1938 Act

While the 1938 Act was considered an improvement over the plethora of statutory provisions that preceded it, it became apparent over time that the Act had significant shortcomings. The range of contractual arrangements available to Indian tribes in developing their mineral resources was exceedingly narrow. The 1938 Act restricted tribes to the role of lessor, and required that oil and gas leases be offered for sale by advertisement followed by competitive bidding. For reasons including inadequate advertising of sales and failure to package tracts in a manner attractive to industry, the competitive bidding required by the 1938 Act for oil and gas...