(John Kemp is a Reuters market analyst. The views expressed are
By John Kemp
LONDON Feb 5 Native American communities are
often portrayed as victims of avaricious oil and gas drillers
and pipeline companies, who despoil the prairie with little
thought for sacred sites.
In fact, tribes are some of the largest petroleum developers
in the United States and are pressing the federal government for
more control over drilling on their own territory.
The tribes should be ideally placed to benefit from the
horizontal drilling and hydraulic fracturing techniques that
have revolutionised production across the United States.
Instead, much of the development has taken place around them
on privately owned and state property as drillers try to avoid
the cost, complexity and delays of trying to obtain permission
to drill from the federal overseers of Indian lands.
For almost a century, oil and gas has been produced on
reservations and other lands held in trust by the federal
government for Native Americans.
In northern New Mexico, almost 3,000 active and plugged oil
and gas wells are scattered across 377,000 acres of the
Jicarilla Apache Nation, covering about a third of the tribe's
reservation lands, which are crisscrossed by 2,000 miles of
gas-gathering pipelines and roads.
"We rely on oil and gas resources to provide governmental
services to our tribal members and to those non-tribal members
living on the reservation," Jicarilla President Levi Pesata told
the Senate Committee on Indian Affairs in February 2012 ("Energy
Development in Indian Country" Senate Hearing 112-628).
"We have been involved in the oil and gas industry for about
60 years. Throughout this time we have encouraged and fostered
development of our reservations while protecting our sovereignty
... the Nation has been diligent in designating and protecting
pristine areas as well as sacred sites and spiritual and
culturally sensitive areas from disturbance," Pesata told the
committee with obvious pride.
The tribe has its own oil and gas production company,
Jicarilla Apache Energy Company, JAECO.
Senators also heard from Utah's Ute tribe, which has seen
oil and gas production on its reservation since the 1940s.
"The tribe is a major oil and gas producer. We have about
7,000 wells that produce 45,000 barrels of oil a day. We also
produce about 900 million cubic feet of gas per day. And we have
plans for expansion. The tribe is currently in the process of
opening up an additional 150,000 acres to mineral leases," the
chairwoman of the Ute Tribal Business Committee told senators.
"The tribe relies on oil and gas development as the primary
source of funding for our tribal government and the services we
provide," according to the Ute.
But perhaps the most poignant statement at the hearing came
from Montana's Crow Nation: "Given our vast mineral resources,
the Crow Nation can, and should, be self-sufficient. We seek to
develop our mineral resources in an economically sound,
environmentally responsible and safe manner that is consistent
with Crow culture and beliefs. The Crow people are tired of
saying that we are resource-rich and cash-poor."
FRUSTRATION AND DELAYS
In a report released on Monday, Senator Lisa Murkowski, the
highest-ranking Republican on the Senate Energy and Natural
Resources Committee, said, "Claims that ... federal policies
have had a significant role in domestic oil production are ...
"About 96 percent of the increase in domestic oil production
is attributable to growth on state and private land. The overall
domestic increase is in spite of federal policies that stymie
production," Murkowski added. ("Energy 20/20: A Vision for
America's Energy Future" Feb 2012)
Federal agencies, including the Bureau of Land Management
(BLM), regulate both federal lands and those held in trust for
the tribes, which are often lumped together as "public lands".
BLM and other agencies outlined their vision in a 2011
report on the "New Energy Frontier: Balancing Energy Development
on Federal Lands". It is long on the potential for renewable
energy sources such as wind, solar, geothermal and hydro and
gives short shrift to coal, oil and gas.
The report explains that exploitation of resources on public
lands must be balanced against other considerations: wildlife,
scenic resources, groundwater quality, air quality, recreation,
cultural resources and rural life.
But what the federal government sees as careful stewardship,
the tribes see as burdensome and overly bureaucratic regulation.
"BLM apparently considers Indian lands to be 'public lands'
and plans to apply its fracking regulations to Indian lands,"
the Crow Nation told the committee. "Indian lands are not public
lands. Indian lands are for the exclusive use and benefit of
Indian tribes. The BLM's oversight of activities on our lands is
in fulfilment of BLM's trust responsibility to the tribe."
"The BLM should not apply its public interest standards to
our lands ... Congress (should) pass legislation that would
prevent Indian lands being swept into laws and policies for
public lands," the Crow demanded.
Ute representatives complained about BLM's 49-step process
to approve a single oil or gas well, including a site-specific
environmental assessment, an application for permission to drill
(APD) and an application for right of way (ROW) for associated
roads and pipelines.
It checks every well complies with the National
Environmental Policy Act (NEPA), as well as the Endangered
Species Act, the Clean Air Act, as well as various sets of
Indian leasing regulations.
If everything goes right, the steps can be completed in
about 90 days. But in practice the actual time it takes to
process a permit for the Ute is around 480 days, more than a
The result is a bureaucratic nightmare. Many companies
prefer to bypass Indian lands and drill on privately owned or
state-owned lands, where these requirements do not apply.
Drilling on Indian land is also expensive. BLM charges a fee
of $6,500 for every application for permission to drill to cover
its costs, with extra charges for right of way applications and
other work. In contrast, the state of Montana charges just $75
for a drilling application.
"We are aware of one company that has cancelled its plans to
develop two wells on the Fort Peck Reservation because (Bureau
of Indian Affairs) staff insisted on a ROW fee in excess of
$28,000, which is far more than would be paid off reservation,"
Sioux representatives told the hearing.
All the shuttling back and forth between different agencies
adds to confusion and delays. "Agency staff too often seem
uninterested in working with private companies in a fair, timely
and efficient manner," the Sioux complained.
The tribes voiced suspicion about new fracking regulations
BLM is developing for federal lands, which are likely to be
applied to Indian lands as well.
Finally the tribes want better tax treatment. In a landmark
Supreme Court case ("Merrion v Jicarilla" 1982), the tribes won
the right to impose a severance tax on oil and gas produced on
their land. Unfortunately in a subsequent case ("Cotton
Petroleum v New Mexico" 1989), the court found states retained
the right to impose their own taxes on non-Indian companies
operating on Indian lands.
The result is that much oil and gas production on Indian
lands is burdened by double taxation. The Jicarilla have
negotiated an agreement with New Mexico to eliminate double
taxation via a state tax credit, but only for wells drilled
after 1995. The tribes want Congress to recognise their
exclusive tax power over oil and gas produced on their lands to
strengthen their revenue base and eliminate the double taxation
Some progress has been made. In North Dakota, the Department
of Interior has established a "one stop shop" to speed up
drilling permits on the Fort Berthold Reservation, which lies at
the heart of the Bakken formation. Oil and gas permits are being
processed in just 60 days, the Ute told Congress.
There are now 28 rigs drilling on Fort Berthold lands, with
793 active wells, according to the North Dakota state
government, producing 135,000 barrels of oil per day in
Notwithstanding pressure from the tribes themselves, the
federal government seems unenthusiastic about drilling on Indian
lands, given the administration's strong preference for clean
Murkowski's report called on the Obama administration to
speed up permitting on Indian land. The Interior Department has
set up a handful of other one-stop shops, but the process is not
common, and new regulations governing fracking on "public lands"
threaten to make delays even worse.
(editing by Jane Baird)