CHAPTER 7 TRIBAL ENERGY AND MINERAL RESOURCE DEVELOPMENT

• Jurisdiction: United States

Indian Law and Natural Resources: The Basics and Beyond (Sep 2017)
CHAPTER 7
TRIBAL ENERGY AND MINERAL RESOURCE DEVELOPMENT
Thomas H. Shipps
Partner
Maynes, Bradford, Shipps & Sheftel, LLP
Durango, CO
Lynn H. Slade
Shareholder
Modrall Sperling
Albuquerque, NM

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THOMAS H. SHIPPS is a partner in the Colorado law firm of Maynes, Bradford, Shipps and Sheftel, LLP. His practice involves a broad spectrum of matters including: oil and gas leasing, energy development, complex commercial and real estate transactions, Indian law and economic development, intergovernmental relations, and civil litigation. For several decades, the Maynes firm has served as general legal counsel for the Southern Ute Indian Tribe, and, during his 38 years of practice, Tom has represented the Tribe in numerous cases in federal, state, and tribal courts regarding a wide variety of matters. He has also served as the principal legal advisor to the Southern Ute Indian Tribe Growth Fund, a division of the Tribe established in 2000 as the vehicle for the Tribe's extensive commercial diversification activities. In those capacities, he has also helped negotiate and close numerous commercial transactions involving several billion dollars in cumulative value. In recognition of his advocacy on behalf of Indian tribes with respect to federal mineral leasing activities, several respective Secretaries of the Interior under the Clinton and both Bush administrations appointed him to serve as a member of the Royalty Management Advisory Committee and the Royalty Policy Committee. He has been an author and presenter of scholarly legal papers at programs sponsored by the Rocky Mountain Mineral Law Foundation (for which he also served as a trustee-at-large), the American Bar Association, and the Federal Bar Association. He also served for several years as a board member for the Indian Law Support Center in Boulder, Colorado. He has been recognized by numerous professional organizations as an outstanding lawyer in Indian law and natural resource matters and is listed as an AV Preeminent lawyer by Martindale Hubbell. Tom received his law degree from the University of Houston (J.D. 1979, President, Order of the Barons) and his undergraduate degree from Fort Lewis College (B. A. 1976, summa cum laude).

LYNN H. SLADE is a partner in the Albuquerque office of Modrall Sperling. For over thirty years, he has focused his practice on representing businesses addressing the challenges of economic development in Indian country in a manner consistent with the requirements of federal Indian law and applicable tribal law. In his Indian law practice, Lynn Slade represents energy developers, lenders, manufacturers, and asset managers in structuring transactions and resolving disputes arising from economic development in Indian country. His Indian country energy practice has involved "all of the above," including transactions and litigation concerning conventional (oil and gas, coal) and renewable (wind, solar, hydro) energy resources. Lynn is co-chair of Modrall Sperling's Native American Law Practice Group, a member of the American Law Institute, an advisor to ALI's proposed Restatement of the Law of the American Indian (3d), a Fellow of the American College of Environmental Lawyers, and a former Chair of the Committee on Native American Natural Resources of the ABA and of the Indian Law and Natural Resources Sections of the State Bar of New Mexico. Lynn has served as adjunct faculty (Federal public lands) at the University of New Mexico School of Law. He is a graduate of the University of New Mexico (B. A., Economics) and of the University of New Mexico School of Law, where he served as editor of the New Mexico Law Review.

TABLE OF CONTENTS

I. Introduction

II. Governmental Authorities and Roles

A. Congress and Relevant Statutes

1. Indian Mineral Leasing Act of 1938

2. Indian Mineral Development Act of 1982

3. Indian Long-Term Leasing Act

4. General Right-of-Way Act

5. Optional Elimination of Secretarial Approval

a. IRA § 16 (25 U.S.C. § 5123) and § 17 (25 U.S.C. § 5124)

b. Navajo Nation Trust Leasing Act of 2000

c. ITEDSA of 2005 (Tribal Energy Resource Agreements)

d. HEARTH Act of 2012

B. Department of Interior Agencies and Applicable Regulations

1. Bureau of Indian Affairs

a. 1938 Act Regulations (25 C.F.R. Part 211)

b. IMDA Regulations (25 C.F.R. Part 225)

c. Indian Long-Term Leasing Act Regulations (25 C.F.R. Part 162)

i. Subpart A - General Provisions

ii. Subpart D - Business Leases

iii. Subpart E - Wind and Solar Resource Leases

d. General Right-of-Way Act Regulations (25 C.F.R. Part 169)

e. TERA Regulations (25 C.F.R. Part 224)

2. Bureau of Land Management

a. Well Density and Spacing

b. Well Permitting - APDs

c. Well Abandonment and Reclamation

3. Office of Natural Resources Revenue

4. Office of Surface Mining Reclamation and Enforcement

5. U.S. Fish and Wildlife Service

C. Other Federal Agencies

D. State and Local Governments

1. Federal Preemption

2. Federal Common Law - the Montana doctrine

a. Oil and Gas Conservation Commissions

b. State Environmental or Health and Safety Regulation

c. State/County Land Use

d. Taxation - Merrion and Cotton Petroleum

E. Tribal Governments

1. Proprietary Interests

2. Regulatory Interests

3. Cultural Preservation

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III. Doing the Deal

A. Considerations Affecting the Structure of Optimal Agreements

B. Determining Proper Parties: Tribes and Tribal Entities

C. Structuring Development to Minimize Total Taxation

D. Structuring Agreement to Minimize Regulatory Burdens

IV. Options for Structuring Agreements

A. Private Developers Without a Tribal Partner

1. Leasing under the 1938 Act (IMLA)

2. Leasing under the IMDA

3. Long-Term Leasing Act: WSR Lease (or WEEL) for Wind or Solar Energy

B. Tribes and Third Parties - Joint Development

1. Partnering Agreements under the IMDA

2. Partnering Agreements under the LTLA

3. Essentials of Effectiveness of Partnering Arrangements

C. Tribes Without Developer Partners

V. Documenting the Deal

A. Effective Enforceability Provisions

B. Due Diligence

C. Financing

D. Recording

E. Regulatory Stability

VI. Conclusion

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I. INTRODUCTION

This paper acquaints developers and Native American tribal nations ("Tribes") with available structures to effectuate the increasing interests of Tribes to participate actively in the development of their energy and mineral resources. We approach this by reviewing the history of federally-authorized structures for energy and mineral development on tribal lands, tracing its evolution from narrowly tailored leasing regimes affording Tribes few options other than passive royalty ownership, to current authorizations for Tribes to share equity interests and management with nonmember developers, to full tribal ownership and management of a tribally owned development. Because energy development increasingly is in the "all of the above" range, we will review statutory vehicles authorizing both conventional sources, oil and gas, coal, uranium, and renewable resources, primarily wind and solar.

Decisions regarding project structure necessarily take into account regulatory compliance. We will review the alphabet soup of federal statutes and implementing agencies and regulations potentially governing operations, environmental compliance, cultural resource protection, and royalty compliance. We will analyze the roles of state and tribal governments in regulation of development. Because the paper focuses on tribal resource development, we will not address the specific issues that pertain to individual Indian "allotted" lands held in trust or subject to federal restrictions on alienation, unless such issues directly implicate tribal resource development.

II. GOVERNMENTAL AUTHORITIES AND ROLES

A. CONGRESS AND RELEVANT STATUTES

The Constitution vests in Congress the broad power "to regulate commerce . . . with the Indian Tribes."¹ While the earliest enactments of Congress under the Indian Commerce Clause restricted the activities of United States citizens in their dealings with Indian nations,² within a

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relatively short time the scope of congressional lawmaking grew to involve the inner workings of Tribes and the lives of their members.³ In 1834, Congress passed the Nonintercourse Act, the codified version of which, 25 U.S.C. § 177, remains practically unchanged from its original form.⁴ Under the Nonintercourse Act, any sale, lease or encumbrance of the lands of an Indian nation or Tribe is void "in law or equity" unless the same has been authorized by "treaty or convention entered into pursuant to the Constitution." The Nonintercourse Act effectively requires that Congress legislatively authorize the leasing or the granting of a right to use tribal lands, and, in the absence of such congressional authorization, a lease or claimed right to use tribal land is a nullity.⁵ Accordingly, Congress plays an indispensable role in determining the conditions under which tribal lands may be used for developmental purposes.

In exercise of its Indian Commerce Clause power, and answering the requirement for statutory authorization under the Nonintercourse Act, Congress has passed many laws allowing for the use and development of tribal lands. Following the end of the treaty-making period in 1871, those laws often related to particular reservations or areas, and some of those statutes called for tribal consent and some did not.⁶ Since passage of the Indian Reorganization Act of

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1934 ("IRA"),⁷ which brought an end to the allotment process, general statutes regarding the transfer of interests in tribal land have required tribal consent.⁸ The following outline identifies and describes the key features of federal statutes commonly used in developing tribal energy and mineral resources.

1. Indian Mineral Leasing Act of 1938

In order to...