CHAPTER 1 BASICS OF SUCCESSFUL NATURAL RESOURCE DEVELOPMENT PROJECTS IN INDIAN COUNTRY

• Jurisdiction: United States

Natural Resources Development in Indian Country
(Nov 2005)
CHAPTER 1
BASICS OF SUCCESSFUL NATURAL RESOURCE DEVELOPMENT PROJECTS IN INDIAN COUNTRY
Michael P. O'Connell ¹
Stoel Rives LLP
Seattle, Washington

I. INTRODUCTION

II. MINERAL DEVELOPMENT -- APPLICABLE LAWS AND REGULATIONS

A. Early Laws Generally No Longer Used for New Agreements

B. Indian Mineral Leasing Act of 1938

C. Allotted Lands

D. Indian Mineral Development Act of 1982

E. Energy Policy Act of 2005

III. SURFACE LEASES

IV. WATER RIGHTS

V. BASIC AGREEMENT FORM

A. Forms

B. Form and Substance of Agreement -- State Tax Considerations

VI. MINING EXPLORATION PERMITS AND MINING PLANS

A. Geological and Geophysical Permits

B. Exploration and Mining Plans

C. Start of Operations under IMDA Mineral Agreements

D. Surface Coal Mining, Including Exploration

VII. FEDERAL ENVIRONMENTAL REVIEW AND PERMITTING

A. Federal Environmental Laws

1. Substantive Environmental Laws

2. Procedural Environmental Laws

a. National Environmental Policy Act ("NEPA")

i. Leases and Minerals Agreements

ii. Other Federal Agency Actions Triggering NEPA

B. Endangered Species Act ("ESA")

C. National Historic Preservation Act ("NHPA")

D. Coastal Zone Management Act ("CZMA")

E. Native American Graves Protection and Repatriation Act ("NAGPRA) and Archaeological Resources Protection Act ("ARPA")

F. Consultations

VIII. LAND STATUS AND TITLE SEARCHES

A. Land Status

B. Title Searches

IX. ACCESS

A. Right-of-Ways

B. Right-of-Ways in the Form of Linear Leases

C. Right-of-Ways Consent Expressly Reserving Tribal Dominion and Control

D. Energy Policy Act of 2005

X. ENFORCEABILITY

A. Required Approvals

B. Sovereign Immunity Waivers

C. Arbitration

D. Forum Selection

E. Exhaustion of Tribal Remedies

XI. ROLE OF TRIBAL AND STATE GOVERNMENTS

A. Tribal Governments

B. State Governments

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I. INTRODUCTION

Laws and regulations governing development of natural resources on Indian lands ² and more broadly in "Indian country" ³ have deep roots in the use and occupancy of the Americas by native peoples long predating European contact, international law, colonial law, the Articles of Confederation, the Constitution of the United State, treaties, laws enacted by Congress, including the very First Congress, ⁴ executive orders, regulations, and executive policy statements, as well as an enormous body of decisions by federal administrative and judicial tribunals. Federal laws and regulations dominate development of natural resources on Indian lands for tribes, individual Indian landowners, and non-Indians alike. In addition, applicable tribal laws and regulations and, to a lesser extent, state laws and regulations, govern development of natural resources on Indian lands.

This paper provides a "basic" overview of successful natural resource development projects in Indian country in light of these laws and regulations. Participants in specific development projects should take a careful look at the particular laws and regulations that govern each transaction.

II. MINERAL DEVELOPMENT -- APPLICABLE LAWS AND REGULATIONS

A. Early Laws Generally No Longer Used for New Agreements

Mineral leases of tribal lands were first authorized in 1891 on lands "bought and paid for" by Indians. 25 U.S.C. § 397. These lands could be leased "by the authority of the council speaking for such Indians" for up to 10 years "upon such terms and conditions as the agent in charge of such reservation may recommend, subject to approval of the Secretary of the Interior." This remained the primary authority for leasing minerals on Indian reservations until 1919. However, application of this statute to executive order reservations was considered doubtful due to the unusual "bought and paid for" language.

In 1919, Congress authorized the Secretary of the Interior ("Secretary") to lease tribal lands in Arizona, California, Idaho, Montana, Nevada, New Mexico, Oregon, Washington and Wyoming for gold, silver, copper, and other valuable metalliferous minerals. 25 U.S.C. § 399. This statute was amended in 1924 to authorize leases of non-metalliferous minerals except oil and gas. No requirement existed for tribal consent to such leases. Initial leases under this statute could be for 20 years with a preferential right in the lessee to renew for successive 10 year periods on such reasonable terms and conditions as the Secretary might require.

In 1924, Congress enacted 25 U.S.C. § 398 authorizing leasing of "unallotted lands on Indian reservations" "with the consent of the council speaking for such Indians" for oil and gas mining for up to 10 years and as much longer as oil and gas shall be found in paying quantities. Section 398 did not authorize development of oil and gas resources on lands of the Five Civilized Tribes or Osage Reservation, which were separately authorized. A significant feature of section 398 is that it authorized state taxation of mineral resources produced from Indian lands, including a tribe's royalty share, in the same manner as taxation of minerals produced from non-Indian lands. By enacting 25 U.S.C. §§ 398a -398e in 1927, Congress provided that the leasing provisions of section 398 applied to executive order reservations.

B. Indian Mineral Leasing Act of 1938

Toward the goal of restoring tribal government control over reservation political affairs and economic development, Congress enacted a series of reforms in the 1930s, including the Indian Reorganization Act of 1934 ("IRA"), 25 U.S.C. §§ 461 -479. Consistent with the goals of the IRA, in 1938 Congress enacted the Indian Mineral Leasing Act ("IMLA"), 25 U.S.C. §§ 396a -396g, authorizing leasing for development of tribal minerals. "Minerals" as defined in IMLA regulations "includes" metalliferous and non-metalliferrous minerals, all hydrocarbons, coal and lignite of all ranks, geothermal resources, sand, gravel, pumice, cinders, granite, building stone, limestone, clay, silt, or "any other energy or non-energy mineral." 25 C.F.R. § 211.3. ⁵ IMLA regulations define the term "lease" to mean "any contract" approval by the Secretary under 25 U.S.C. §§ 396a -396g "that authorizes exploration for, extraction of, or removal of any minerals," 25 C.F.R. § 211.3, including leases for underground storage of oil or gas. 25 C.F.R. § 211.22. For many years, the IMLA was the primary means for development of tribal mineral resources. The IMLA remains available for leasing today, but, for reasons described below, no longer is the primary legal authority for development of tribal minerals. Nevertheless, many active leases issued under the IMLA remain in force.

In Montana v. Blackfeet Indian Tribe, 471 U.S. 759 (1985), the Supreme Court observed that the legislative history of the IMLA suggests Congress intended to replace the 1924 Act's leasing scheme with that of the IMLA. The Court said Congress had three major goals in adopting the IMLA: (a) to achieve "uniformity so far as practicable of the law relating to the leasing of tribal lands for mining purposes," (b) to "bring all mineral-leasing matters in harmony with the Indian Reorganization Act," and (c) and "to ensure that Indians receive 'the greatest return from their property."' 471 U.S. at 767 n.5. These purposes would be inconsistent, the Court noted, with interpreting the IMLA "to incorporate the taxation provision of the 1924 Act" authorizing state taxation of tribal mineral resources. Id. For this and other reasons, including IMLA section 7 repealing all acts or parts of acts "inconsistent herewith," set forth in the note to 25 U.S.C. § 396a), the Supreme Court held that the state taxation provision of the 1924 Act did not carry over to the IMLA. The issue not being raised, the Court did not decide whether the IMLA repealed authority for state taxation of leases issued under 25 U.S.C. § 398. 471 U.S. at 767 n.6.

Section 1 of the IMLA provided that "unallotted lands of any Indian reservation," except those specifically excepted by sections 396a to 396g, ⁶ could be leased "by the authority of the tribal council or other authorized spokesmen of said Indians, for terms not to exceed ten years, and as long thereafter as minerals are produced in paying quantities," subject to approval by the Secretary. 25 U.S.C. § 396a. See 25 C.F.R. § 211.27. ⁷

Section 2 of the IMLA directed leases for oil and gas on tribal lands to be offered for sale at public auction or on sealed bids after public notice and advertisement, upon terms and conditions as prescribed by the Secretary. 25 U.S.C. § 396b. Leases for minerals other than oil and gas also must be advertised for lease unless the Secretary has given written permission to the Indian mineral owner to negotiate for a lease. 25 C.F.R. § 211.20(a). SeeUnited States v. Navajo Nation, 537 U.S. 488, 494-495 (2003).

Section 3 provides that lessees of tribal or restricted tribal land "shall furnish corporate surety bonds, in amounts satisfactory to the Secretary of the Interior, guaranteeing compliance with the terms of their leases." 25 U.S.C. § 396c. See 25 C.F.R. § 211.24.

Section 4 authorized the Secretary to issue regulations governing mineral leases granted under the Act "and any other Act affecting restricted Indian lands." Regulations authorized by section 4 found at 25 C.F.R. Part 211 cross reference and incorporate mining regulations issued by certain other agencies, including the Bureau of Land Management ("BLM"), 25 C.F.R. § 211.4, Office of Surface Mining Reclamation and Enforcement ("OSM"), 25 C.F.R. Part 200 and 25 C.F.R. § 211.5, and Minerals Management Service ("MMS"), 30 C.F.R. chapter II, subchapters A and C, 25 C.F.R. § 211.6. Environmental review to comply with the National Environmental Policy Act and actions necessary to ensure compliance with the National Historic Preservation Act, other laws, and Executive Order 11593 (protection and enhancement of the cultural environment) are addressed in 25 C.F.R. §...