CHAPTER 6 NEGOTIATING AND DRAFTING INDIAN MINERAL DEVELOPMENT ACT AGREEMENTS
| Jurisdiction | United States |
(May 1999)
NEGOTIATING AND DRAFTING INDIAN MINERAL DEVELOPMENT ACT AGREEMENTS
Crowley, Haughey, Hanson, Toole & Dietrich P.L.L.P.
Billings, Montana
TABLE OF CONTENTS
I. Introduction
II. Pre-1982 Statutory Authority for Development of Indian Lands
[1] Early Legislation
[2] Omnibus Indian Mineral Leasing Act of 1938
[3] Allotted Lands Leasing Act of 1909
III. Indian Mineral Development Act of 1982
IV. Negotiations
V. Areas of Special Attention
[1] Sovereign Immunity
[A] Tribal Sovereign Immunity
[B] Immunity of Other Tribal Entities
[2] Dual Taxation
[3] Tribal Employment Laws
[4] Dispute Resolution
[5] Choice of Law and Venue Provisions
[6] Application of State Laws
[A] Worker's Compensation Issues
[B] Spacing and Well Location Matters
7. Valuation and Sharing of Marketing Information
8. Secretarial Approval
9. Waiver of Inconsistent Regulations
VI. Conclusion
———————
[Page 6-1]
I. Introduction
The Indian Mineral Development Act of 19821 (IMDA) is now nearly 20 years old, yet very little has been written regarding the Act,2 and there have been few judicial decisions3 providing any discussion or analysis of the Act. At the time of its passage, the IMDA was envisioned as a powerful and much needed aid for Indian tribes as they sought to have more involvement in the development of the wealth of mineral resources found within a number of Indian reservations. Prior to passage of the IMDA, it was doubtful whether Indian tribes could utilize any non-lease business arrangements for the development of their mineral resources. The IMDA specifically allows an Indian tribe to negotiate and enter into any type of agreement for the development of its mineral resources, subject only to the requirement that any such agreement be approved by the Secretary after finding the agreement to be in the tribe's best interest. This opportunity for tribes to deal more flexibly and efficiently with their mineral resources has set the stage for tribes and developers negotiating and structuring a wide variety of innovative and flexible agreements that better address the unique needs of the negotiating tribe and the business demands of the mineral developer.
To properly place in perspective the opportunities and advantages presented to developers and tribes who choose to utilize the IMDA, it is useful to briefly review the statutory framework for developing Indian mineral resources as that framework existed prior to passage of the IMDA. This brief review is set forth in Part II of this paper. Part III of this paper discusses the IMDA and the regulations which have been promulgated by the Secretary to implement the Act. In Part IV, basic negotiating considerations are discussed. Finally, in Part V of this paper, there is discussion of a number of substantive negotiating concerns that should, at the very least, be considered, and in all likelihood addressed, in any IMDA agreement.
II. Pre-1982 Statutory Authority for Development of Indian Lands
Development of Indian mineral resources can occur only where the development is authorized or sanctioned by some legal authority. Primary authority for developing tribal minerals prior to passage of the IMDA was found in the Omnibus Indian Mineral Leasing Act of 1938.4 Primary authority for the development of mineral resources owned in trust by the United States for individual Indians is found in the Allotted Lands Leasing Act of 1909.5 Earlier legislation applicable to both tribal and allotted lands remains as additional statutory authority, although this earlier legislation is rarely, if ever, utilized for new development activities.
[Page 6-2]
[1] Early Legislation
The first statute which is generally recognized to have authorized tribal leasing for oil and gas was the Act of February 28, 1891.6 This Act applied only to lands "bought and paid for" by Indians and to those lands allotted to aged and disabled allottees. Under this Act, leases were absolutely limited to terms of 10 years. The 1891 statute was broadened in scope by the Act of May 29, 1924,7 which provided for the leasing of all unallotted lands on Indian reservations (other than lands of the Five Civilized Tribes and the Osage Reservation, which Congress had previously provided for by separate legislation) for periods up to 10 years and as long thereafter as oil or gas was found in paying quantities. The 1924 legislation established a public auction requirement and provided for state taxation of production from leased lands, including the tribe's royalty share, in a manner identical to taxation of production from non-Indian lands.8
In 1919, Congress enacted legislation which permitted the Secretary to lease unallotted lands in the western United States for metalliferous and non-metalliferous minerals for terms fixed by the Secretary.9
Following enactment of the 1924 Act, the applicability of that Act and other leasing legislation to reservations created by Executive Orders was uncertain. Congress clarified this when it passed the Act of March 3, 1927, which specifically made the leasing provisions of the 1924 Act10 applicable to these Executive Order reservations.11 Although the Mineral Leasing Act of 192012 has no application to Indian lands, the 1927 Act also authorized the Secretary of the Interior to recognize and confirm the validity of prospecting permits filed for Indian lands under the Mineral Leasing Act of 1920, provided the applications for those permits had been filed before May 27, 1924. Upon establishing full compliance with the terms of the prospecting permit, including discovery of oil and gas, the permittee was entitled to a lease on a portion of the permitted lands and a preference right to a lease on the balance.13
[Page 6-3]
Reservation lands reserved for agency or school purposes were subsequently made subject to lease by the Secretary at public auction by virtue of the Act of April 17, 1926.14 Similar legislation relating solely to the Fort Peck and Blackfeet reservations in Montana had previously been enacted,15 as had legislation pertaining solely to the Kaw reservation in Oklahoma.16
The various statutes referenced above created significant confusion and inconsistency in the development of Indian mineral resources. These various statutes, passed when the policy of the day was to terminate tribal relations and to assimilate tribal members into the mainstream of society, were in many ways inconsistent with the new federal Indian policy as reflected in, inter alia, the Indian Reorganization Act of 1934.17 This confusing and disjointed scheme for the development of tribal minerals was addressed by Congress in its passage of the Omnibus Indian Mineral Leasing Act of 1938.18
[2] Omnibus Indian Mineral Leasing Act of 193819
The Omnibus Indian Mineral Leasing Act of 1938 (1938 Act) was, for nearly 45 years, the main mechanism for developing tribal mineral resources. The 1938 Act was intended to accomplish three separate but related goals consistent with the new federal Indian policy which had been adopted by Congress through its passage of the Indian Reorganization Act. The three goals intended to be achieved through the 1938 Act were uniformity in the leasing and development of tribal mineral resources; an increase in the authority of tribes in the granting of leases; and increased protection and oversight by the United States in relation to the economic return enjoyed by tribes.20
The 1938 Act authorizes leasing lands "owned by any tribe, group or band of Indians under Federal jurisdiction", with any such lease being subject to approval of the Secretary.21
[Page 6-4]
Leases issued under the 1938 Act are statutorily limited to "terms not to exceed ten years and as long thereafter as minerals are produced in paying quantities."22 The Act requires that oil and gas leases be offered at a public sale following notice and advertisement.23 No similar statutory requirement exists for coal and other minerals. To hold a lease, the Act requires that a lessee furnish a bond or other acceptable collateral, in an amount deemed satisfactory to guarantee compliance with the lease terms.24 The Act authorizes the Secretary to promulgate rules and regulations to govern any operations under any 1938 Act Lease.25 These regulations are found at 25 C.F.R. Part 211.
Oil and gas leases to be issued under authority of the 1938 Act must be offered at public sale, with current regulations providing for at least 30 days notice of the sale.26 Sale notices need not identify the specific tracts offered, but specific descriptions of all tracts offered for sale must be available from the Superintendent and/or Area Director upon request.27 Rental and royalty rates are to be established and noted in the sale notice, and the rates identified in the notice are not to be subject to subsequent negotiation.28 Each notice must acknowledge the Secretary's right to reject bids and the notice is to indicate that acceptance of the lease bid by the tribe is required prior to approval of the lease by the Secretary.29 Strict compliance with these sale requirements is required.30
As noted, the 1938 Act does not require that there be public auctions or lease sales for minerals other than oil and gas. However, by regulation the Secretary has required that leases for minerals other than oil and gas also be advertised for bid in the same manner as leases for oil and
[Page 6-5]
gas, unless the Secretary grants the involved tribe written permission to privately negotiate for a lease.31
1938 Act leases for oil and gas and all other minerals except coal are, by regulation, required to be contained within one governmental survey section of land, not exceeding 640 acres. Leases under the 1938 Act for coal are ordinarily to cover no more than 2560 acres, although...
To continue reading
Request your trial