(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, Feb 5 (Reuters) - 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.”
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 ... deeply misleading.
“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 year.
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 disadvantage.
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 November.
Notwithstanding pressure from the tribes themselves, the federal government seems unenthusiastic about drilling on Indian lands, given the administration’s strong preference for clean energy.
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)