CHAPTER 12 EPA'S INDIAN COUNTRY MINOR SOURCE RULE: HOW IS IT WORKING?

• Jurisdiction: United States

Air Quality Issues Affecting Oil, Gas, and Mining Development in the West
(Feb 2013)
CHAPTER 12
EPA'S INDIAN COUNTRY MINOR SOURCE RULE: HOW IS IT WORKING?
Colin G. Harris
Bryan Cave LLP
Denver and Boulder, CO
303-417-8543
colin.harris@bryancave.com

COLIN G. HARRIS is an Attorney at Bryan Cave in Boulder/Denver, Colorado. For over twenty years, he has served energy and natural resources industries in all aspects of federal and state environmental law, and public lands, pipeline safety, litigation, and OSHA matters. His clients operate exploration and production facilities, and engage in well servicing, midstream compression and processing, pipeline transmission, storage, crude oil refining, mining and coal-fired power. Colin has particular expertise and experience in Clean Air Act matters, including the highly specialized regulations that impact energy and oil and gas equipment, and the unique and rapidly evolving air issues that impact the resource-intensive Mountain West. His experience touches on every aspect of the Clean Air Act, from permitting to greenhouse gas regulation to enforcement defense. Colin regularly works with engineers, field personnel, senior management and counsel for operators, has inspected almost every type of oil, gas and energy facility, and regularly interacts with the regulators who oversee these operations. Colin leverages all of this experience to achieve successful results in a counseling role, in transactions, in rulemakings, in stakeholder processes, and in the courtroom. Colin also regularly handles NEPA and ESA matters, oil spill emergencies and enforcement, citizen suit defense, Office of Pipeline Safety and OSHA hearings, and natural resource damages claims, and he has a long history defending property and tort actions. He also has extensive experience representing companies confronting air quality matters in Indian Country. Colin recently authored a Guest Column about hydraulic fracturing in Forbes.com.

I. INTRODUCTION

A. Native American lands hold great potential for energy development. For example, the total value of oil, gas and coal extracted from such lands and sold in 2011 was $3.5 billion, up from $2.8 billion in FY 2010, according to the Government Accountability Office (GAO).¹ Some estimate that the Bakken oil and gas fields in North Dakota alone, which in large part underlie a reservation, will yield up to twenty-four billion barrels of oil when fully developed.²

B. The authority to regulate energy development in "Indian Country"³ is a complex issue. There are three overarching jurisdictional principles that apply to any question regarding activities on tribal land.⁴ First, tribes have inherent sovereignty that exists independent of legislation or treaty. While not dependent on any grant by the United States, tribal sovereignty is recognized in the Constitution, case law, legislation and treaty. Tribes generally enjoy broad self-government. They may have their own laws and court systems that function entirely separately from state and federal law. Second, tribal self-rule is not unlimited. The United States often retains significant authority over certain activities in Indian Country. The United States is obligated to balance its own authority with the sovereignty of tribes, and to act in the best interests of tribes pursuant to what is known as a "trust" or special relationship. Finally, states generally have limited authority to govern commerce and social affairs in Indian Country.

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C. There is vast federal and state case law and Congressional legislation involving jurisdictional issues impacting tribes and Indian Country, as well as numerous treaties, and state-tribal compacts and agreements. This reflects the constant jurisdictional tension between tribal sovereignty, the federal trust relationship, state jurisdiction, and non-tribal members who enter the reservation. The federal government often exercises considerable control over land and certain activities on reservations. States seek to retain some degree of authority over reservation land that (in many states) may comprise millions of acres. Non-tribal members engage in business activities on reservations. Numerous and multi-faceted issues have defined the tribal/federal/state relationship concerning reservation activities, ranging from criminal enforcement, to taxation, to civil jurisdiction, to the use of natural resources.

D. These three basic Indian law principles -- sovereignty, federal trust role, and limited state power -- are critical to the understanding and operation of the Clean Air Act in Indian Country. The tensions and problems that may arise when these principles collide are no less evident where air quality is concerned. Under the CAA, tribal sovereignty is limited; a tribe may implement the CAA only with permission of the federal Environmental Protection Agency (EPA), and only if the tribe demonstrates it is capable of acting like a state. In the absence of such a demonstration, EPA regulates air quality in Indian Country under the CAA. States generally do not have any CAA authority in Indian Country,⁵ even though reservation air quality may impact the ability of the state to govern outside the reservation, and even though this framework subjects operators in the state to two different permitting authorities and sets of regulations.

E. This paper addresses the efforts of EPA to ease the tension arising from the retention of federal CAA jurisdiction in Indian Country through the enactment of a new permitting framework in 2011, referred to here as the Tribal Minor Source Rule. Prior to this new program, there was a regulatory "gap" in Indian country because the EPA permitting framework was less flexible than state programs for certain facilities, and at the same time less restrictive for other sources of air emissions. This placed both tribes and operators at a potential economic disadvantage because of the disincentive to locate certain facilities in Indian Country and, for facilities that did operate on a reservation, there was an added permitting burden. At the same time, many smaller facilities were not regulated under EPA's framework, although they would have been under state law.

F. The structure of the CAA provides a critical backdrop for the Tribal Minor Source Rule. While other presentations during this Special Institute provide those basics, we briefly set forth below the CAA implementation and permit framework as particularly relevant to the Tribal Minor Source Rule. The genesis of the rule is then discussed. Finally, a review of the rule, and regulatory and legal developments, is provided.

II. WHO HAS AUTHORITY TO IMPLEMENT THE CAA IN INDIAN COUNTRY?

A. What is "Indian Country?"

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The Tribal Minor Source rule covers sources in "Indian Country." EPA adopted the definition of Indian Country in 18 U.S.C. § 1151,⁶ which encompasses:

1. all land within the limits of any Indian reservation under the jurisdiction of the United States Government, notwithstanding the issuance of any patent, and, including rights-of-way running through the reservation,

2. all dependent Indian communities within the borders of the United States whether within the original or subsequently acquired territory thereof, and whether within or without the limits of a state, and

3. all Indian allotments, the Indian titles to which have not been extinguished, including rights-of-way running through the same.

B. This definition reflects the protracted and complex history of tribal and non-tribal land ownership in reservation areas. For example, as a result of the Allotment Act of 1887,⁷ tribal members were "allotted" parcels of reservation land to be owned by the United States in trust, or owned by the Indian subject to restraints on alienation.⁸ The "surplus" reservation land was opened to settlers.⁹ This resulted in a "checkerboard" of lands owned by tribes, individual Indians, the federal government, and non-Indians. Establishing jurisdiction in such areas is often controversial.¹⁰ Similarly, determining whether land is a "dependent Indian community" is highly fact-specific and has been subject to lengthy litigation concerning EPA jurisdiction.¹¹

C. Controversies also arise where EPA has not even determined if lands are within Indian Country. In Michigan v. EPA, EPA proposed to promulgate and administer a Title V Federal Operating Permits Program (FOP) for lands for which the Indian country status was "in question," asserting that where the jurisdictional status of the land had not been determined, the EPA had general jurisdiction under the CAA.¹² The D.C. Circuit disagreed, stating that "[j]urisdiction as between states and tribes is binary, it must either lie with the state or with the tribe--one or the other--and EPA does not have a third option of not deciding."¹³ Thus, the

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court held that "[w]here a valid state program exists, EPA may implement a federal program only for Indian country itself, not for lands the status of which EPA deems 'in question.'"¹⁴ Further, the court stated the EPA must make jurisdictional determinations.¹⁵ Another frequently disputed issue is whether a reservation has been "disestablished."¹⁶

D. The meaning of "Indian Country" is beyond the scope of this paper. However, the issue is not an academic one. The Oklahoma Department of Environmental Quality has challenged the Tribal Minor Source Rule in court because of the implications of the Indian Country definition.¹⁷ Oklahoma, due to its history of tribal and non-tribal land ownership, asserts that the state would largely be "checkerboarded" for purposes of the Minor Source rule, resulting in an unduly burdensome system of dual regulation, and protracted disputes over what areas constitute "dependent Indian communities." Also, regardless of the outcome of that challenge, operators in assumed Indian Country should always address carefully any threshold...