CHAPTER 7 REGULATING COMMERCE: FEDERAL OVERSIGHT OF THE DEVELOPMENT OF OIL, GAS, AND COAL RESOURCES ON INDIAN LANDS

• Jurisdiction: United States

Energy & Mineral Development in Indian Country
(Nov 2014)
CHAPTER 7
REGULATING COMMERCE: FEDERAL OVERSIGHT OF THE DEVELOPMENT OF OIL, GAS, AND COAL RESOURCES ON INDIAN LANDS
Scot W. Anderson
Partner
Hogan Lovells U.S. LLP
Denver, Colorado

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SCOT W. ANDERSON is a partner in the Denver office of Hogan Lovells U.S. LLP. His practice focuses on commercial transactions, regulatory advice, and project development involving the mining, oil and gas, and energy industries. Scot advises on the full sweep of issues affecting the coal, oil and gas, and hardrock mining industries. He has worked on complex transactions for natural resources clients, including the permitting and development of large resource projects, the formation of new joint ventures, the divestiture of natural resources projects, and the acquisition of leases and reserves for mining and oil and gas clients. He has represented clients in administrative proceedings and in federal and state courts. He has extensive experience addressing issues related to mineral development of federal public lands and Indian lands. Scot's practice includes international project development and transactions. He has worked on matters throughout North and South America, and in Europe, Australia, Africa, and Asia.

"[O]ur existing constitution ... confers on congress the powers of war and peace; of making treaties, and of regulating commerce with foreign nations, and among the several states, and with the Indian tribes. These powers comprehend all that is required for the regulation of our intercourse with Indians."

— Worcester v. Georgia, 31 U.S. 515, 559 (1832).

Introduction

The federal government of the United States of America has had an uneven relationship with its original inhabitants. The United States adopted widely-varied strategies since the adoption of the Constitution in 1789 including conquest, treaty-making, removal, assimilation, termination and reorganization.¹

At present, two fundamental concepts provide the underpinnings to United States Indian policy: self-determination and the trust duty. There is, of course, some tension between these concepts, and that tension drives the relationship between the federal government and the Indian nations on the development of tribal energy resources.²

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As the quote from Worcester v. Georgia at the beginning of this paper indicates, the relationship between the federal government and Indian tribes was based on martial, diplomatic and commercial relationships. Those powers were "all that is required for regulation of our intercourse with Indians."³ Even very early treaties, however, recognized that Indian tribes were under the protection of the United States.⁴ In 1831, Chief Justice Marshall described the relationship between the United States and Indian tribes as that of "a ward to his guardian," and characterized tribes as "domestic dependent nations."⁵ The trust relationship between the United States and tribes is similar to that of a trustee and beneficiary.⁶ The trust duty of the United States to Indians remains a key element of their relationship.⁷

While the status of Tribes as "domestic dependent nations" gives rise to a fiduciary obligation for the United States, the national character the Tribes presents an independent sovereignty for Tribes as well. In 1970, Richard Nixon issued a special message to Congress on Indian Affairs which recognized the principle of tribal self-determination.⁸ Nixon saw self-determination as a middle way between termination of Indian tribes and the paternalism inherent in the trust relationship: "Federal termination errs in one direction, federal paternalism errs in the other. Only by rejecting both of these extremes can we achieve a policy which truly serves the best interests of the Indian people. Self-determination among the Indian people can and must be encouraged without the threat of eventual termination."⁹ The policy of self-determination has created an increased recognition of tribal authority, to the exclusion of state jurisdiction over reservations.¹⁰ Self-determination includes the right of a tribal decision to open its lands for energy development, as well as a tribal decision concerning how it will develop its minerals. This decision should include regulation, the structure of agreements, and the manner of participation

While the United States moved toward promoting self-determination, that policy did not supersede or eliminate the trust relationship between the federal government and Native Americans. As a result, there is a fundamental tension inherent in every decision concerning the development of tribal minerals.¹¹ The. United States must promote and acknowledge tribal self-

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determination while at the same time fulfilling its trust obligation.¹² This tension creates practical limitations. The United States often finds itself in the same position as Buridan's ass, poised equidistant between two equally compelling principles, unable to move.¹³

Decisions concerning the development of Indian mineral resources typically involve both the Indian mineral owner and the Secretary of Interior, but fall within the following broad categories:

1. Tribal or Indian Mineral Owner Decisions with No Secretarial Involvement.

For example, the Ninth Circuit found that the Navajo Nation was authorized to impose a possessory interest tax on coal leases without Secretarial approval. ¹⁴ Also, as discussed below, a Tribe could also enter into a Tribal Energy Resource Agreement ("TERA") and once the TERA is approved by the Secretary, the Tribe can enter into energy development agreements and issue permits and rights-of-way without further Secretarial review.

2. Tribal Decisions Subject to Secretarial Approval.

For example, leases and mineral agreement entered into under the Indian Mineral Leasing Act or the Indian Mineral Development Agreement require approval of both the tribe and BIA. ¹⁵ Conceptually, the Indian mineral owner can negotiate the lease or mineral agreement, and then present it to the Secretary for approval. ¹⁶

3. Secretarial Decisions Requiring Tribal Consent.

The Indian Right-of-Way Act of 1948 requires tribal consent to issuance of a right-of-way across tribal lands: "No grant of a right-of-way over and across any lands belonging to a tribe . . . shall be made without the consent of the proper tribal officials." ¹⁷

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4. Secretarial Decisions Subject to Consultation with the Tribe or Indian Mineral Owner.

Some mineral development statutes and regulations expressly require tribal consultation. ¹⁸ In addition, because actions by the Secretary are federal actions, they are subject to review under the National Environmental Policy Act ("NEPA") ¹⁹ which includes tribal consultation. ²⁰ Also, actions on tribal lands routinely require consultation under the National Historic Preservation Act ²¹ and the Nature Graves Protection and Repatriation Act. ²² Consultations under these statues are limited to the substance of the statutes, and are not consultations concerning tribal investments or mineral development per se. ²³

5. Secretarial Decisions Made with No Tribal Involvement.

In theory, there should be no actions of the federal government affecting tribes that occur without some level of consultation. Executive Order No. 13175 requires that "[e]ach agency shall have an accountable process to ensure meaningful and timely input by tribal officials in the development of regulatory policies that have tribal implications." ²⁴ The Executive Order defines "policies that have tribal implications" as "regulations, legislative comments or proposed legislation, and other policy statements or actions that have substantial direct effects on one or more Indian tribes, on the relationship between the Federal Government and Indian tribes, or on the distribution of power and responsibilities between the Federal Government and Indian tribes." ²⁵ The Department of Interior has adopted a broad commitment to tribal consultation, which arguably creates opportunities for consultation beyond those required by statute or regulation. ²⁶

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As will be seen in the discussion that follows, the development of tribal and Indian minerals includes all these various manifestations of the Indian-federal relationship. The approach typically falls within the middle range of these categories, with some level of interaction between the Indian mineral owner and the Department of the Interior. The United States, acting through the Secretary of the Interior, retains the right to approve all leases of oil and gas and coal on Indian lands. The nature of that approval, and the process related to that approval, as evolved over time. Since the enactment of the Indian Mineral Development Act, and the increased emphasis on tribal self-determination, Indian tribes have taken on more responsibility for their own oil and gas development. Nonetheless, when the time comes to commit to a mineral lease or mineral development agreement, the Secretary will have her say.

Indian Mineral Leasing Act

The Indian Mineral Leasing Act ("IMLA"), passed in 1938, created a uniform approach to leasing tribal minerals, including coal and oil and gas. A mineral lease required the consent of both the tribe and the Secretary.²⁷ The process for leasing Indian minerals is found at 25 CFR Part 211.

The Indian mineral leasing regulations recognize the need to protect the interests of the Indian mineral owner: "These regulations are intended to ensure that Indian mineral owners desiring to have their resources developed are assured that they will be developed in a manner that maximizes their best economic interests and minimizes any adverse environmental impacts or cultural impacts resulting from such development.²⁸ The Secretary must approve any lease of Indian minerals, and must find that the lease is in the best interest of the Indian mineral...