CHAPTER 13 Oil and Gas Lease Operation and Royalty Valuation On Indian Lands; What Is The Difference in Federal and Indian Leases?
| Jurisdiction | United States |
(Jan 1992)
Maynes, Bradford, Shipps & Sheftel *
Durango, Colorado
I. Introduction.
Those who have engaged in mineral exploration and production activities on Indian lands are generally aware that administration of those properties may differ from that of comparable federal properties. That variant administration may become evident in matters as significant as the methodology to be utilized in computing royalties or in incidents as seemingly insignificant as the arrival of a tribal wildlife officer at a well pad to ask a drilling crew some questions.
The potential for disparate treatment between federal and Indian leases arises in some instances from differences in the substantive provisions of the federal statutes authorizing mineral development.1 Additionally, the unique trust obligations that attach to all federal actions related to the development of Indian lands may dictate courses of conduct related to administration of Indian leases that would not have been required on federal lands.2 Finally, the emergence of tribal governments as both sophisticated proprietors and active regulatory bodies adds a significant
[Page 13-2]
factor to the administration of Indian leases.3 The purpose of this paper is to supply an analytical framework for understanding the potential differences in federal and Indian lease operation, as well as to identify the obvious and not-so-obvious areas of divergence that have arisen or may arise in the future.
As a key preliminary matter it should be clearly understood that Indian tribes are distinct organizations that vary widely in their histories, customs, resources and structures.4 Because of those differences, generalization about tribal mineral development necessarily bears some degree of inaccuracy. Federal policies reflected in treaties and statutes have an ever-changing quality, and the application of federal law to a particular tribe or group of tribes based upon geographical location or special historical focus has created inconsistencies in tribal land ownership patterns, reservation status and jurisdiction. For example, mineral ownership of lands occupied by the Five Tribes in the Indian Country of Oklahoma is a product of extensive allotment of lands under agreements and statutes made between 1897 and 1902.5 Mineral leasing of those lands is still governed by special laws and regulations.6 Identification of the differences in land ownership and leasing provisions that exist between individual tribes is beyond the scope of this paper. Rather, primary emphasis is directed
[Page 13-3]
to general Indian mineral leasing provisions that affect tribal mineral holdings and not to specific mineral leasing provisions that affect a particular tribe or individual allotments.
II. Authority for Mineral Leasing of Indian Lands.
Treatment of Indians and their lands is rooted in theories related to the European discovery of American and in principles of law employed by our nation's founding fathers. In recounting these historic underpinnings, Chief Justice John Marshall, in the classic case of Worcester v. Georgia,7 stated:
America, separated from Europe by a wide ocean, was inhabited by a distinct people, divided into separate nations, independent of each other and of the rest of the world, having institutions of their own, and governing themselves by their own laws. It is difficult to comprehend the proposition, that the inhabitants of either quarter of the globe could have rightful original claims of dominion over the inhabitants of the other, or over the lands they occupied; or that discovery of either by the other should give the discoverer rights in the country discovered, which annulled the pre-existing rights of its ancient possessors.
***
The great maritime powers of Europe discovered and visited different parts of this continent at nearly the same time. The object was too immense for any one of them to grasp the whole; and the claimants were too powerful to submit to the exclusive or unreasonable pretensions of any single potentate. To avoid bloody conflicts, which might terminate disastrously to all, it was necessary for the nations of Europe to establish some principle which all would acknowledge, and which should decide their respective rights as between themselves. This principle, suggested by the actual state of things, was, "that discovery gave title to the government by whose subjects or by whose authority it was made, against all other European governments,
[Page 13-4]
which title might be consummated by possession." 8 Wheat. 573.
***
Such was the policy of Great Britain towards the Indian nations inhabiting the territory from which she excluded all other Europeans; such her claims, and such her practical exposition of the charters she had granted: she considered them as nations capable of maintaining the relations of peace and war; of governing themselves, under her protection; and she made treaties with them, the obligation of which she acknowledged.
***
The king purchased their lands when they were willing to sell, at a price they were willing to take; but never coerced a surrender of them. He also purchased their alliance and dependence by subsidies; but never intruded into their interior affairs or interfered with their self-government, so far as respected themselves only.
***
The United States succeeded to all the claims of Great Britain, both territorial and political....
***
The whole intercourse between the United States and this Nation [the Cherokee Nation], is, by our Constitution and laws, vested in the government of the United States.8
In a decision written only a year earlier, Chief Justice Marshall had already distinguished between the quasi-independent status of tribes and the status of foreign nations for purposes of constitutional adjudication.9 In the case of Cherokee Nation v. Georgia, Chief Justice Marshall had
[Page 13-5]
characterized tribes in a way that retains contemporary recognition, when he stated:
Although the Indians are acknowledged to have an unquestionable, and, heretofore, unquestioned right to the lands they occupy, until that right shall be extinguished by a voluntary cession to our government; yet it may well be doubted whether those tribes which reside within the acknowledged boundaries of the United States can, with strict accuracy, be denominated foreign nations. They may, more correctly, perhaps, be denominated domestic dependent nations. They occupy a territory to which we assert a title independent of their will, which must take effect in point of possession when their right of possession ceases. Meanwhile they are in a state of pupilage. Their relation to the United States resembles that of a ward to his guardian.10
These historical passages contain the fundamental precepts that guided our nation's treatment of Indian tribes and their lands:
(1) Legal title to aboriginal Indian lands was vested in the United States subject to a tribal right of occupancy;
(2) The United States Constitution placed the power to control commerce with Indian tribes and the power to regulate the external relations of tribes in the national government of the United States;
(3) Tribes possessed the power to cede their interests in lands to the national government through contract or treaty;
(4) The United States Government had the duty to protect Indian nations from the incursion of foreign powers or the encroachment of state governments.
[Page 13-6]
While it would hardly be suggested by any student of history that our nation's dealings with Indians has always been honorable, the record, nonetheless, reflects many instances in which the federal duty of protection has served as the foundation for federal Indian policy. Commencing with the Act of July 22, 1790,11 Congress enacted a series of laws that regulated trade and intercourse with Indian tribes.12 Portions of that original Act, which remain valid today, are contained in the provisions of 25 USC § 177, which states:
No purchase, grant, lease, or other conveyance of lands, or of any title or claim thereto, from an Indian nation or tribe of Indians, shall be of any validity in law or equity, unless the same be made by treaty or convention entered into pursuant to the Constitution.
This provision has been consistently interpreted as requiring the authorization of the United States either by treaty or congressional enactment consenting to a conveyance of land occupied by or reserved for occupancy by Indian tribes in order for the conveyance to be valid.13 Failure to obtain that authorization renders the conveyance void.14
In providing requisite federal consent, Congress has enacted a variety of laws authorizing the leasing of Indian lands for metalliferous, non-metalliferous, and hydrocarbon mineral exploration and development.
[Page 13-7]
The first such enactment, the Act of February 28, 1891,15 permitted the leasing of lands "bought and paid for" by the Indians for mineral development for terms not to exceed ten years, provided that the lands were not otherwise needed for farming or agricultural purposes and were not desired for distribution as individual Indian allotments. Pursuant to the Act of March 3, 1909,16 all lands allotted to individual Indians, except those issued to members of the Five Civilized Tribes and Osage Indians in Oklahoma, were opened for mineral leasing under the supervision of the Secretary of the Interior. In the Act of May 29, 1924,17 Congress provided that unallotted lands within any Indian reservation, except for lands of the Five Civilized Tribes and the Osage Reservation, could be leased for oil and gas mining purposes at public auction held by the Secretary of the Interior. The term of a lease...
To continue reading
Request your trial