Mining in Indian country is a matter of great significance both for the nation as a whole and for the tribes and Indian nations that contain mineral resources. Native nations constitute one of the largest owners of minerals in the country; only the federal government and the railroad companies have larger mineral holdings (Royster, 1994, 542–543). For many tribes, mining is the principal economic engine that brings revenues and employment to reservation communities (Royster, 1994, 544). Passed in 1938, the Indian Mineral Leasing Act (IMLA) has served as the principal piece of federal legislation that governs mineral leasing activities on Indian lands. The IMLA serves three primary purposes: (1) to obtain greater uniformity in the leasing of Indian lands for mining purposes, (2) to harmonize mineral leasing with the Indian Reorganization Act's policy of tribal self-determination by requiring tribal consent to mineral leasing on Indian lands, and (3) to foster greater tribal economic development by ensuring that Indians receive "the greatest return from their property" (Senate Report, 1937, 2–3; House Report, 1938, 1–3)
Prior to the IMLA's enactment, mineral leasing on Indian lands was governed by several other federal statutes, including the Acts of 1891, 1909, 1919, 1924 and 1927 (Royster, 1994, 556). The multiple statutes governing Indian mineral leasing created a patchwork that varied with respect to types of Native lands subject to the statute, the kind of leasing permitted (oil and gas or non-oil and gas mineral leasing), whether tribal consent was required, and whether state taxation of the mineral leasing was permitted (Royster, 1994, 556). The IMLA introduced a much more uniform mineral leasing regime by imposing one set of rules governing nearly all mineral leasing on tribal lands.
The IMLA authorizes the leasing of unallotted lands and other tribal lands for mining purposes if a tribe and the Secretary of Interior both consent to the lease (25 U.S.C. § 396a). The terms of mineral leases entered into under the Act may extend up to ten years "and as long thereafter as minerals are produced in paying quantities" (25 U.S.C. § 396a). The statute provides for the public auctioning of oil and gas leases, with the right to set the terms of such auctions and the right to reject bids delegated to the Secretary of Interior, and requires that mineral lessees post surety bonds in amounts set by the Secretary of Interior (25 U.S.C. §§ 396b and 396c). Finally, the Act delegates authority to the Secretary to promulgate rules and regulations governing mineral leases (25 U.S.C. § 396d).
Congress's second major goal in enacting the IMLA was promotion of tribal self-government through a requirement that all mineral leases be tribally approved, coupled with a requirement that the Secretary of the Interior also approve mineral leases on Indian lands (Senate Report 1937, 2–3; House Report 1938, 1–3). Although the tribal consent requirement provides assurance that tribes have a critical role in the initial approval of mineral leases on their lands, the consent requirement does little to promote tribal self-government once mineral leasing is underway, since the Act does not include provisions that allow tribes to control mining exploration and development activities once commenced (Royster, 1994, 561). In 1982, Congress responded to the demand for greater tribal control of mineral development activities by enacting the Indian Mineral Development Act.
Congress's third purpose for enacting the IMLA was to ensure that tribes received the "greatest return" possible for mineral leasing conducted on their lands (United States, 1937, 2–3; United States House of Representatives, 1938, 1–3). The Supreme Court has held that the reference to the "greatest return" in the Act's legislative history is not intended to guarantee tribes the maximum profit available, but instead to provide tribes with a "profitable source of revenue" (Cotton Petroleum v. New Mexico, 1989, 179). The IMLA is designed to accomplish this objective through the surety bonds that the statute requires and through the system of bonuses, rents, and royalties that the IMLA's regulations establish.
Mineral leasing conducted in accordance with the IMLA has given rise to several controversies that strike at the core issues of federal Indian law, including the federal government's trust relationship with Indian tribes and tribal and state taxing authority in Indian country.
In United States v. Navajo Nation, the Supreme Court addressed whether the IMLA imposes a fiduciary duty on the federal government that, if breached, could mandate compensation for damages. The case involved a coal lease between Peabody Coal Company and the Navajo Nation. When the original lease was ripe for amendment, the Secretary of the Interior, after an ex parte meeting with a Peabody Coal representative, directed the Deputy Assistant Secretary for Indian Affairs to encourage the parties to renegotiate new royalty rates for the lease, rather than wait to accept an impending decision from the Deputy Assistant Secretary that was expected to affirm a substantial increase in the royalty rate to 20 percent of gross proceeds. In accordance with the new instruction, the parties resumed negotiations and agreed to a smaller adjustment, raising the original royalty rate to only 12 percent of gross proceeds.
The Navajo Nation sued the United States for $600 million in damages, claiming that the secretary's approval of the coal lease amendments constituted a breach of trust. The Supreme Court rejected the tribe's claim, holding that the IMLA does not impose a duty on the federal government that is enforceable in a claim for money damages. The court found that the IMLA creates a lesser role for the secretary, one that is limited to approving mineral leases and promulgating rules and regulations governing mineral leasing. The court concluded that the IMLA was distinguishable from other statutes that served as the basis for money damages following a breach of fiduciary duty, as in the case of United States v. Mitchell (Mitchell II).
In Merrion v. Jicarilla Apache Indian Tribe, the Jicarilla Apaches assessed an oil and gas severance tax on the production activities of oil and gas lessees that operated on the tribe's reservation, pursuant to mineral leases entered into under the IMLA. The Supreme Court affirmed the tribe's power to tax the lessees, holding that "the power to tax is an essential attribute of Indian sovereignty because it is a necessary instrument of self-government and territorial management" that enables tribal governments to raise revenues for essential services (Merrion v. Jicarilla Apache Tribe, 1982, 137).
In Montana v. Blackfeet Tribe of Indians, the state of Montana assessed several taxes that were applied against the Blackfeet tribe's oil and gas royalty payments under several oil and gas leases with non-Indian lessees. The state argued that the taxes were authorized because it claimed that the IMLA had incorporated a provision in an earlier mineral leasing statute, the Act of 1924, which had authorized state taxation of Indian mineral leases. The Supreme Court rejected Montana's interpretation of the IMLA, holding that the court will find that the general rule of tribal exemption from state taxation is lifted only when Congress has made its intent "unmistakably clear" (Montana v. Blackfeet Tribe of Indians, 1985, 765).
In Cotton Petroleum v. New Mexico, the Supreme Court upheld various state oil and gas production taxes assessed against Cotton Petroleum Corporation, a non-Indian party to oil and gas leases entered into with the Jicarilla Apache tribe in New Mexico. The court considered whether the tax was preempted by federal law through either an express or an implied prohibition of the tax, and the court looked to the history of tribal sovereignty, including the broad policies furthered by the IMLA, as a backdrop to its analysis. The court concluded that, although the legislative history of the IMLA referred to tribes receiving the "greatest return" from their property, this did not mean that Congress intended "to remove all barriers to profit maximization," with the effect of precluding all state taxation of non-Indian mineral lessees (Cotton Petroleum v. New Mexico, 1989, 180). The court also determined that tribes did not have a history of independence from the imposition of state taxes in the area of mineral leasing, since the Act of 1927 specifically authorized such taxes in the past. Furthermore, the court noted that the state had an interest in taxing Cotton Petroleum's on-reservation oil and gas production because it provided services to both the company and tribal members on and off the reservation. The court also held that states generally have the authority to tax the activities of non-Indians on the reservation unless Congress prohibited the tax.
The Cotton Petroleum court refrained from reexamining its prior rejection of a state tax imposed by Montana on a non-Indian mineral lessee on Crow tribal lands. In that case, Montana v. Crow Tribe, the state of Montana assessed extraordinarily high state taxes on coal mining activities that amounted to an effective rate of 32.9 percent. The Ninth Circuit Court held that the taxes were unlawful, and the Supreme Court summarily affirmed its holding. This case stands in stark contrast to Cotton Petroleum.
Wenona T. Singel
Indian Mineral Leasing Act, 25 U.S.C. §§ 396a–396g (1988).; Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 137 (1982).; Montana v. Blackfeet Tribe of Indians, 471 U.S. 759 (1985).; Montana v. Crow Tribe, 484 U.S. 997 (1988).; United States v. Mitchell, 463 U.S. 206 (1983).; United States v. Navajo Nation, 537 U.S. 488 (2003).; Cotton Petroleum Corp. v. New Mexico, 490 U.S. 163 (1989).; Royster, Judith V. 1994. "Mineral Development in Indian Country: The Evolution of Tribal Control over Mineral Resources." Tulsa Law Journal 29: 552–580.; United States House of Representatives. Report No. 872, 75th Cong., 3d Sess. 1–3 (1938).; United States Senate. Report No. 985, 75th Cong., 1st Sess. 2–3 (1937).