The Alaska Statehood Act Does Not Guarantee Alaska Ninety Percent of the Revenue from Mineral Leases on Federal Lands in Alaska

• Jurisdiction: United States,Federal,Alaska
• Citation: Vol. 27 No. 03
• Publication year: 2004

SEATTLE UNIVERSITY LAW REVIEWVolume 27, No. 4SPRING 2004

COMMENTS

The Alaska Statehood Act Does Not Guarantee Alaska Ninety Percent of the Revenue from Mineral Leases on Federal Lands in Alaska

Ivan L. Ascott(fn*)

I. Introduction

Alaska is the largest state in the Union.(fn1) At over 365 million acres, it is one-fifth as large as the contiguous forty-eight states.(fn2) Alaska also has a proportionately large share of federal land within its borders.(fn3) The U.S. government owns 220.8 million acres in Alaska, which is over sixty percent of the land in the state.(fn4)

It is significant for Alaska that such a large amount of the state's land is under federal control because Alaska's economy depends on natural resource use. In particular, oil fuels the state's economic engine and contributes about eighty percent of the tax revenues for state government.(fn5) Alaskan oil is also important to the rest of the country because it accounts for about fifteen percent of domestic production.(fn6) The most likely, and perhaps last, site for development of a major new oilfield in Alaska is in the coastal plain of the Arctic National Wildlife Refuge ("ANWR").(fn7) Development in ANWR has been the subject of numerous recent congressional initiatives, which seek either to end the moratorium on exploration(fn8) or to extend the moratorium indefinitely.(fn9)

If ANWR is developed, and the development happens under the same terms that are currently applied to other public lands in Alaska, the State of Alaska will receive ninety percent of the proceeds that the leases and royalties generate.(fn10) Under this distribution formula, codified in the Mineral Leasing Act of 1920 ("MLA"), the federal government retains ten percent of the revenues for administrative purposes.(fn11) This arrangement has been in place since before Alaska achieved statehood in 1959 and is unique among the states.(fn12) However, a recurring provision in the bills to allow exploration in ANWR has been a call to change the MLA revenue distribution, as applied to ANWR, to a fifty-fifty revenue split between the federal government and the State of Alaska.(fn13)

Whether Congress has the authority to unilaterally alter the ninety-ten revenue distribution formula currently applied to public lands in Alaska has not been established.(fn14) Congress' authority to change the MLA might at first appear to be an obvious exercise of its legislative power, but that authority is clouded.(fn15) The Alaska Statehood Act ("the Act"),(fn16) which created the State of Alaska, incorporates the MLA through section 28(b) of the Act, which states:Section 35 of the [Mineral Leasing] Act entitled "An Act to promote the mining of coal, phosphate, oil, oil shale, gas, and sodium on the public domain" ... is hereby amended by inserting immediately before the colon preceding the first proviso thereof the following: ", and of those from Alaska 52 1/2 per centum thereof shall be paid to the State of Alaska for disposition by the legislature thereof."(fn17)

In the context of the full MLA, this amendment effectively gave the State of Alaska ninety percent of the lease and royalty revenues from mineral development on federal lands in the state.(fn18)

Alaska has argued that Congress purposefully incorporated the MLA into the Statehood Act through section 28(b), and in doing so, permanently granted the state ninety percent of the revenues from mineral development on federal lands.(fn19) Alaska asserts that the Alaska Statehood Act is a "compact" between the people of Alaska and the United States.(fn20) As such, the Act is akin to a contract and congressional legislation cannot unilaterally alter it.(fn21) Consequently, from Alaska's perspective, the passage of any legislation that alters the existing revenue-sharing formula in the MLA is invalid without Alaska's consent.(fn22) This includes ANWR drilling proposals that would alter the MLA to Alaska's detriment.(fn23)

This Comment argues that Alaska's position is legally incorrect. The text of the Act simply does not support the position that mineral-lease and royalty proceeds from federal lands are part of Alaska's "compact." In addition, the legislative history of the Act does not support Alaska's position, nor does case law that has addressed related issues. Following this Introduction, Part II of this Comment expands on Alaska's position and explains Alaska's "Statehood Compact" argument. Part III reviews the historical background of the Alaska Statehood Act as it pertains to the ninety percent-ten percent revenue-sharing formula under the MLA. Part IV discusses Alaska v. United States,(fn24) a case that addressed closely related issues and likely will figure prominently in any future argument concerning Alaska's rights under the Act. Part V, after analyzing the text and legislative history of the Act and judicial treatment of statehood agreements generally, concludes the Comment by arguing that Alaska's position will not have success with the courts.

II. Alaska's Statehood Compact Argument

Any discussion of Alaska's rights under its Statehood Act is ripe for disagreement and novel arguments partly because the U.S. Constitution has no mechanism that guides how new states will be admitted into the Union.(fn25) Consequently, after the original thirteen states joined the Union, all of the remainder entered under different circumstances and on unique terms.(fn26) Although parallels can be drawn between their respective admissions, the condition of each new state's entry into the United States contained elements unique to the political circumstances of the nation at that time. Therefore, the framework for resolving conflicts between the states and the federal government over the effect of statehood acts necessarily draws on historical sources and sometimes on unconventional ideas.

Alaska's position, for instance, distinguishes between "ordinary legislation," amendable at the will of Congress, and "compacts," which Alaska says are binding on both parties in the same way that a contract would be.(fn27) Alaska has argued that courts should interpret compacts as they would contracts-by considering the intent of both parties-rather than looking only at Congress's intent, as for routine legislation.(fn28) Presumably, if the Alaska Statehood Act was created by two equal parties negotiating something like a contract, Alaska can better argue a claim based on the expectations and understanding of Alaskans at the time of statehood.

It also brings contractual and equitable issues, such as reliance, into the discussion. For example, Alaska has argued that when Alaska voters accepted its statehood package, acceptance was partly due to their reliance on certain promises of members of Congress and others.(fn29)

To maintain its position, Alaska must establish three basic propositions: First, it must show that a "compact" has a legal status giving the state more rights than does ordinary federal legislation. Second, it must show either that the Alaska Statehood Act is such a compact, or alternatively, that section 28(b) is an element of a compact contained within the Act. Third, if it can establish the first two propositions, it must show that the compact contains a promise to pay Alaska ninety percent of the MLA proceeds in perpetuity.

A. Alaska Is Correct: A "Compact" Provides Rights Beyond Those of Ordinary Legislation

The word "compact" is used in the Alaska Statehood Act, but it is not defined.(fn30) Therefore, one must look to other sources to determine the meaning and legal status of the term. Black's Law Dictionary defines a "compact" as, "An agreement or covenant between two or more parties, especially] between governments or states."(fn31) The term "compact" appears in article I, section 10 of the U.S. Constitution: "No state shall, without the Consent of Congress . . . enter into any Agreement or Compact with another state . . . ."(fn32) The Framers apparently understood that a compact indicated some kind of an agreement between parties.

Case law also indicates that a compact is subject to different rules than ordinary legislation and is equally binding upon both parties. Two U.S. Supreme Court cases illustrate this concept.(fn33) First, Beecher v. Wetherby sets out the deference that the Court has sometimes given such compacts:The convention which subsequently assembled accepted the propositions, and ratified them by an article in the Constitution, embodying therein the provisions required by the act of Congress as a condition of the grants. With that Constitution the State was admitted into the Union in May, 1848. It was, therefore, an unalterable condition of the admission, obligatory upon the United States, that section sixteen (16) in every township of the public lands in the State, which had not been sold or otherwise disposed of, should be granted to the State for the use of schools. It matters not whether the words of the compact be considered as merely promissory on the part of the United States, and constituting only a pledge of a grant in future, or as operating to transfer the title to the State upon her acceptance of the propositions as soon as the sections could be afterwards identified by the public surveys.(fn34)

Second, in an earlier case, Cooper v. Roberts, the Court upheld a land grant after the federal government refused to allow the State of Michigan to choose...