Ripping Off Indian Energy


As the demand for energy and national recreation areas accelerates the value of certain Indian-owned resources, such as coal, hydroelectric power heads, and undeveloped land, a century-old struggle for authority to dispose of tribal property is rapidly coming to a crisis. It is dangerously misleading to place most of the blame on the energy companies for the unfair treatment of Indians doing business with them. Were that the whole story, all resource owners would be equally exploited. The facts are nevertheless that tribal resource owners on the whole enjoy significantly lower returns than others. Unless it is being suggested that Indians are generally so inept and economically imprudent that they are more helpless than the rest of the population, what is the source of the overweening bargaining power of companies that deal with Indians?

The plain truth is that tribes are not at liberty to freely dispose of their resources. Under Federal law, they are only the beneficial, not the legal, owners of resources located within their territories. The U.S. government, the self-appointed trustee for their "protection and advancement," reserves the ultimate power to dispose of tribal property, with or without consent. In practice, this means that the government has the right to oversee leasing and development, the right to tax Indians on the proceeds of such leasing, and the right to ultimate ownership of reservations.

No tribal lease or development program can proceed without the approval of the Secretary of the Interior or, in specified cases, his subordinate. This makes it possible for the agency to ransom tribal development plans for concessions to the Federal government or to compel tribes to develop or not develop as the agency wishes. It also necessitates that companies negotiate contracts simultaneously and independently with the tribe and agency, at added expense, delay, and accommodation.

Coal development on the Crow reservation in Montana is a case in point. The Crows first learned of industry negotiations with the Bureau of Indian Affairs when the agency advised them to agree to lease their entire field at 11 cents per ton royalty. At that time, adjacent off-reservation tracts were leasing for two to three times that amount. Refusing the initial offer, the Crows negotiated prospective lessees up to 17½ cents and were still unsatisfied, but the Bureau in no uncertain terms recommended immediate acceptance. Further tribal pressure would merely "delay" or "jeopardize" development, said the Bureau, and the price was already as high as possible anyway. The Bureau also told the tribe that the coal would be subject to the same state taxes as adjacent non-Indian coal beds, although in fact state taxation of that coal was and is forbidden by Federal statute. Accordingly, the Crows accepted the leases, which included further terms and conditions inserted by the Bureau, such as perpetual, unilateral renewability by the lessees, immunity from tribal taxes, and inadequate performance and reclamation bonds. The Crows did not need an energy crisis to make renegotiation of these leases beneficial and lawful.

Essentially the same story was repeated in the leasing of the Northern Cheyenne coal reserve (also in Montana) and in substance at almost every other reservation, whether the sought-after resource was water, timber, or petroleum. The lesson business has learned has been unmistakable: it is cheaper to influence the Bureau of Indian Affairs into cajoling tribes to accept cheap terms than to offer tribes fair market value outright. This is not racism; simple economics turns the energy companies into ogres, so long as the Bureau functions.

This simple lesson is applicable with equal force to any property controlled by a bureaucracy having no direct interest in it. The bind in which the Indians find themselves has been compounded by the fact that the United States reserves a present and future pecuniary interest in tribal resources. The present interest is exemplified by the 10-percent gross-receipts tax that tribes must pay the U.S. Treasury on every lease of tribal property. This is a special tax on Indians, enacted in 1925 for the express purpose of reimbursing the United States for making tribes' business decisions for them. Since the tax is on gross receipts, it encourages the Bureau to maximize tribal receivables, not net gain. Moreover, the balance of tribal funds, after this deduction, is turned over and managed by the Treasury, which determines how it shall be invested and at what rates of return.

The United States is also the legal remainderman of tribal realty. When a tribe voluntarily cedes its territory or is terminated, the balance of its property becomes public domain, subject to patent, development, or cession to the states. ("Termination" is legal jargon for the summary extinction of a tribe's political existence. After termination, tribal members cease to be legally Indians, lose any special Federal benefits provided for Indians, lose the right to govern themselves as a group, and may vote and hold office in state, but not in tribal, government. The United States may dispose of the property of a terminated tribe, subject to the Fifth Amendment requirement that former tribal members be paid pro rata for it. Former members may form a state corporation to manage formerly tribal assets, if the United States approves, but they cannot by so doing preserve their original lawmaking powers or jurisdiction. All three branches of the Federal government agree that there is no constitutional bar against termination. Termination has been actively pursued only from 1953 to 1963. One reason is that the Bureau of Indian Affairs depends upon the continued existence of tribes to justify its own institutional survival. Thus while tribes have learned to resent the economic burdens of Bureau regulation of their affairs, they have also learned that the Bureau is their only ally in the continuing struggle to fend off a return to terminationism.) Congress can therefore rely on tribal property for pork-barreling, either by developing it now under conditions favorable to non-Indians or by holding it dormant until it can be delivered in its entirety to state governments.

The United States, along with the recreation industry lobbies, is party to tribal victimization in still another way. There has developed a large and often well-capitalized market for land in its pristine state, reflected in the recreation industry and lobby treasuries. Indeed, we have begun to view land as a public good—a good that the government ought to subsidize because its benefit is so diffuse demographically and diachronically that sufficient private capital cannot be attracted to it. The effect of the Due Process Clause ("just compensation") is to encourage the taking of the cheapest available real estate, which is usually to say the least-developed. By a happy coincidence, the cheapest undeveloped land is also of greatest recreational value. (If anything, this value has been enhanced by the popular press's exhorting non-Indians to emulate Indians and do "beautiful Indian things!") Whose land does the government take for this purpose? Tribal land.

A sad example of the subordination of Indian property rights to recreation interests is the Yellowtail Dam site in Montana. It had been purchased from the Crows under threat of uncompensated confiscation. Fifteen years ago, the National Park Service saw fit to expand the Yellowtail Dam site into a national recreation area. In return for an additional 40,000 acres of tribal mountain lands on indefinite lease, the service offered the Crows nothing more than an option to erect and maintain such recreational facilities on that acreage as the Secretary of the Interior should deem convenient—when, where, and if he should deem if convenient. The Bureau of Indian Affairs successfully urged the tribe to accede, although the consideration amounted to a diminution of the tribe's existing proprietary rights and a subsidy of recreation interests. The implication was that development funds would be available if and only if the tribe applied them to this purpose.

It has been more than a century since the Bureau of Indian Affairs was transferred out of the War Department to its present abode in Interior, where it shares quarters with the Bureau of Mines, Bureau of Reclamation, Bureau of Land Management, National Park Service, and other agencies committed to the national use and enjoyment of natural resources. It is hard to believe that the Interior Secretary can protect tribal rights when all but one of his subagencies are wholly averse to those rights.

The present system of Federally governed Indian reservations was dubbed the "Indian peace policy" by its reformist proponents of the 19th century. Today, tribes are confronted with a new breed of reformers, considerably more dangerous because they have succeeded in manipulating Indian's own consciences to advance their cause: the environmental and recreation lobbies.

Whatever their other, more praiseworthy, ambitions, they have palmed off a terrible conceit on tribes, no less than the rest of us—that Indians were the "first ecologists." Ergo, no "genuine" Indian ever develops natural resources. Genuine Indians tranquilly float through existence requiring no material sustenance other than wild hickory nuts. Accordingly Indians, already burdened with a system of public education and mass media representing them as either bloodthirsty barbarians or personified peyote dreams, have had to deal with the challenge that they are untrue to themselves when they choose to make use of the only capital they yet possess. On the Northern Cheyenne reservation an inundation of environmentalist literature touched off a bitter controversy between older and younger citizens over who were the better Indians. To a less dramatic extent this is repeated everywhere.

Not satisfied with political access to the Bureau and Congress, environmental lobbies have persuaded the Federal courts that the National Environmental Policy Act is applicable to tribal business by characterizing proposed development projects as mere Federal instrumentalities. Consequently every lease and industrial project, no matter how small, is contingent on the filing of an environmental impact statement, at great cost to already impoverished tribal economies. At the same time, the tribes' own constituent governments are deemed incapable of enacting their own protective environmental legislation as do the states, although many in fact have, notwithstanding NEPA. In the same way that the double process of negotiation and bureaucratic review under the Bureau of Indian Affairs increases the costs to business of contracting for tribal resources, the review procedure under NEPA causes delays and increases the costs to tribes of accepting contracts. Both lead inevitably to lower royalties, higher capital costs, and general aggravation of Indian poverty.

Many companies doing business with tribes privately argue that lower rents and royalties are attributable to arbitrary and dilatory tribal councils, the absence of supportive tribal institutions such as courts, geographical isolation, and lazy Indian employees—rather than discriminatory Federal interference and corporate ability to capture Bureau support. These arguments are of little merit. Primary industries are no strangers to physical isolation; nor are they ignorant of the need to play politics with state and Federal licensing, leasing, and regulatory agencies. Few resource developers have been affected by the competence of Indian labor one way or the other because of their practice of importing non-Indians already on the payroll for most positions.

The real issue underlying the problems of Indians who deal with companies is whether tribes will ever be the masters of their own property. Historically, Indians have always been forced into the position of caretakers of non-Indian interests. Whether their reservations have served to preserve natural resources for the Federal government or to preserve undisturbed habitats for private recreation, Indians have always been dealt with as if they were mere placeholders, tolerated on the land so long as they did not diminish its ultimate value to others. Development and nondevelopment have never been considered for their impact on tribal self-sufficiency, but for their impact on national welfare as determined by which lobbies have been most effective in gaining access to the Department of the Interior. As such, my answer to that inevitable diatribe over Indians' not paying taxes is that Indians bear a far greater tax than any of the rest of us. To be sure, reservation Indians are not required to pay state taxes. But not only do they pay the same national taxes on income as other citizens, but they are prevented from earning income so that others can obtain cheaper resources.

The continuing inability of tribes to effectively compete with industrial and anti-industrial lobbies before the Congress can be directly attributed to their lack of capital for employment in politics. As long as tribes remain poor, their limited funds controlled by the Treasury Department and the Bureau of Indian Affairs, they will never be able to ensure their political liberty. Indeed, those few, such as the Navajo, that have successfully developed their resources for their own benefit have found their influence in Congress augmented with their wealth. This realization has prompted them to provide greater attractions for business.

Many tribal leaders are heard to say that economic development is the surest path to termination of reservation status. Indeed, the Federal courts have made it plain that self-sufficiency is an indicator of "competency" and that once Indians are demonstrably "competent" to manage their own affairs there will no longer be any need for "protective" measures. This is an affirmation that exploitation is at the end of all Indian policy. If tribes demonstrate their competence to govern themselves without supervision, it would seem a strange reward to dissolve their constitutions and disperse their citizens! The only sensible inference to be drawn from competence is that supervision as such should be terminated and that tribal powers should thereafter be freely enjoyed in the same degree as the powers of all of our other sub-Federal governments. The Bureau, not the tribe, is the logical victim of the advent of tribal self-governance, and that is perhaps why the Bureau has acquiesced in the demands of other agencies for donations of tribal resources. The longer Indians remain impoverished, the longer the Bureau's reprieve.

There is, of course, a calculated risk in the move to economic self-sufficiency. As tribes develop and improve their territory, and consequently their power, they also become more attractive targets for confiscatory exploitation. It was no accident that the Cherokee Nation was removed from Georgia 140 years ago only after it had for 25 years been clearing the wilderness and building roads, canals, and bridges. It was also no accident that among the first tribes to be terminated pursuant to House Concurrent Resolution 108 (1953) were the Klamath and Menominee, developers of rich timber resources. To be sure, if tribes move toward the full political franchise that economic power entails, they must move deliberately and without hesitation, lest the value of their land ever outstrip the surplus finances available to them to defend it. The destructive alternative is a trusting inaction by which Indians will ever remain the caretakers of the land for eventual appropriation by the nation.

Russell L. Barsh is a lawyer and teaches at the University of Washington's Graduate School of Business. He has served as a consultant to the Crow Tribal Law and Order Committee. Reprinted with permission from MBA, June 1975. Copyright 1975 by MBA Communications.