BMP of Oil and Gas Development

Indian Law

Tribal governments have begun to regulate oil and gas development through tribal codes, ordinances, and constitutions, and, in some cases, through specific BMPs. Our tribal law pages provide brief summaries of tribes’ BMPs and the environmental controls that provide guidance and requirements for oil and gas operations on American Indian reservation lands. The tribal constitutions and codes often provide general environmental controls where explicit BMPs are not in place. These controls frequently take the form in wildlife protection clauses, land-use restrictions, and prohibitions against water contamination. Some tribes have also implemented permitting processes, drilling plan requirements, and zoning restrictions. Most of these controls are implemented with the purpose of protecting tribal resources and utilizing the resources in the best interest of the tribe.

These summaries of BMPs and environmental controls relating to oil and gas operations of the American Indian tribes of Colorado, Utah, Wyoming, Montana, and New Mexico are not comprehensive due to the lack of publicly available codes and constitutions for many tribes and only considers the tribes that have made this information publicly available.

For law and policy of a particular tribe’s land, click on one of the following links:

Colorado: Southern Ute Tribe | Ute Mountain Ute Tribe

Montana: Fort Peck Assiniboine and Sioux Tribes | Blackfeet | Chippewa Cree | Confederated Salish Kootenai Tribes | Crow Nation

New Mexico: Jicarilla ApacheNavajo Nation | Mescalero Apache Tribe | Pueblo of Laguna

North Dakota: Three Affiliated Tribes (MHA)

Oklahoma: Osage Nation

Utah: Ute Indian Tribe of the Uintah and Ouray Reservation

Wyoming: Northern Arapaho and Eastern Shoshone Tribes of the Wind River Reservation

Mineral Resources on Tribal Lands

Indian tribes are collectively estimated to hold three percent of the known oil and gas reserves in the United States. In 2000, the Department of the Interior administered 3,772 mineral leases, licenses, permits and applications on more than two million acres of Indian lands.

Federal and Tribal Authorities
on Indian Trust Lands

The complex history between the federal government and American Indian tribes has created an equally complex division of authority between federal and tribal governments regarding oil and gas development on tribal lands.
The ownership of minerals and the affected surface lands is essential to determining which regulations apply during a gas and oil operation. In United States v. Shoshone Tribe, the United States Supreme Court held that when lands are reserved or otherwise set aside for the tribes in executive order, treaties or agreements approved by Congress, the tribes held the beneficial rights to the soil and the mineral interests under the lands. Therefore, on Indian trust lands the tribes retain ownership of the mineral resources, including gas and oil.

Lands that have been impacted by the General Allotment Act of 1887 require closer examination to determine who holds the mineral title to those lands. The Allotment Act worked to alienate the mineral rights from the tribes themselves by allotting tribal lands to individual members of the tribe and then allowing those tribal members to sell of lands in fee simple after a period of time. In these transactions the mineral estate was included in the fee simple title, resulting in the alienation of mineral rights from tribal and tribal member ownership as individuals sold off their parcels of land, generally to non-Indians. In 1934 Congress ended the General Allotment Act of 1887, and since then has been working with the tribes to reconsolidate former tribal trust lands. However, many of the lands that went through this process are still impacted by these policies.

To determine ownership of the mineral estate (subsurface estate) on allotted lands, it is important to look at the specific allotment act that impacted the tribe in question. Unless Congress has specifically provided otherwise for a particular allotment, the mineral estate followed the surface estate. This is generally the situation in most cases. However, occasionally Congress occasionally inserted specific provisions regarding the mineral estate. Some provisions reserved the minerals to the tribe for a specific period before they became property of a specific allottee at a future date, others recognized tribal ownership of minerals in perpetuity. Where the tribe retained the mineral estate, and the surface land was subsequently sold to a tribal member or a non-Indian, a “split-estate” is created where the tribe owns the subsurface minerals, but the purchaser of the land the surface estate.

When tribal lands were ceded to the US government or sold to homesteaders, the mineral rights were alienated from the tribes along with the land. In summary, tribe generally own the mineral rights to tribal lands while people who own the surface estate of lands that went through allotment (allotees) generally also own the mineral estate to those lands.  Anomalies do exist, however, creating split-estates with different ownership of the mineral and surface resource of the same piece of land.

Mineral Leasing

Early Mineral Leasing

The first law passed concerning mineral leasing on tribal lands was a 1891 Leasing and Grazing Act which affirmed congressional consent of non-Indian mineral leasing on tribal lands, and permitted 10-year leases with consent of the tribe. Several additional acts followed, providing for longer leases, preferred lease renewals, and in 1919 eliminating the requirement of tribal consent. The lease terms were continuously extended in subsequent legislation; states were authorized to tax production activities; and the Secretary was authorized to handle royalty and tax transactions with the lessees and states on behalf of the tribe. These early acts were haphazard, piecemeal legislation which left the law governing mineral leases on tribal lands in a state of confusion. To clarify mineral development law on tribal lands, Congress enacted the Indian Mineral Leasing Act of 1938.

The Indian Mineral Leasing Act of 1938

In 1938 the federal government enacted the Indian Mineral Leasing Act (“IMLA”), which overrode inconsistent earlier laws and clarified leasing regulations on Indian land. In addition, the Act was designed to promote Indian self-government by ensuring a fair return on tribal minerals. The IMLA created a single set of leasing procedures for all mineral development on all tribal lands. All leases would require Tribal consent and approval from the Secretary of the Interior. All leases were to be for a term of 10 years, and could only be extended if the minerals on the lease were being produced in paying quantities. Leases were to be granted on the basis of competitive bidding.

The IMLA did contain some gaps and exceptions. Certain tribes and tribal lands were excluded from its coverage. It also preserved the right of Indian Reorganization Act (“IRA”) tribes to lease lands for mining in accordance with their IRA charters and constitutions. This preserved right allowed for tribes to supersede Interior Department regulations for mining.  The act did not generally include leases of allotted lands nor did it repeal any of the allotment era leasing acts. Furthermore, a tribe does not have the authority to unilaterally cancel a lease for breach of the lease terms; this power rests with the Secretary of the Interior or the courts. The IMLA also failed to grant tribes any say in the mining process once the lease was authorized.

In 1977, the Interior Department Solicitor determined that the IMLA did not authorize states to tax Indian mineral leases. In the 1985 Supreme Court decision in Montana v. Blackfeet Tribe of Indians, the Court found that states may no tax Indian interests inside Indian country because Congress had not clearly consented to transaction. This rule was complicated by the Supreme Court ruling in Cotton Petroleum v. New Mexico. The Court ruled that the IMLA did not bar state taxation of non-Indian lessees on Indian land.   This is often detrimental to tribes as it makes Indian resources less profitable to non-Indian mining companies as these companies can be subject to a dual tax, one by the state and one by the tribe. 

While empowering tribes to negotiate leases, the IMLA also imposes responsibilities on the federal government, particularly the Secretary of Interior, to manage and regulate the mineral leasing so as to ensure maximum benefit to the Indians under a fiduciary relationship.
The IMLA provides that “unallotted lands within any Indian reservation” or otherwise under federal jurisdiction, “may, with the approval of the Secretary of Interior, be leased for mining purposes, by authority of the tribal council or other authorized spokesman for such Indians.”  Essentially, the Act empowered the Indians to negotiate leases themselves to control the use and disposition of the mineral resources on their lands and to negotiate mineral leases themselves.”

The IMLA has also been held to establish a fiduciary duty between the federal government and tribes when mineral leasing, which has widespread implications in United States v. Navajo Nation. The Secretary may only approve lease sales when they are “in the interest of the Indians.”
Additionally, the IMLA establishes federal jurisdiction over all claims involving mineral leasing operations, so long as the parties are involved in the mineral lease arrangements. However, the doctrine of tribal exhaustion, a rule created by the courts, still applies here and requires that federal courts defer to tribal courts whenever federal and tribal courts have concurrent jurisdiction over a claim.

Because tribes are domestic dependant nations, as sovereigns they are immune from many state and federal taxes. The IMLA has been held to preserve the tribal right to tax mineral extractions, maintain that tribes need not pay state taxes on royalties. However, the state can still collect state severance taxes on mineral leases.  A failure to comply with the Indian Mineral Leasing Act can cause the lease in question to be invalidated and entitle injured Indians to damages.

Bonding and Reclamation

Today, virtually all western states have statutes that govern the reclamation of oil, gas, and mining operations. In addition, the federal government in its role as the manager of the public lands has instituted reclamation requirements for oil, gas, and mining operations on such lands. Many of these regulatory programs require the project operator to post some form of financial surety to ensure completion of project reclamation. All of the issues raised in 1970 have not been finally resolved. However, several factors indicate that federal and state reclamation and bonding requirements are realities, rather than the subject of policy debates.

Indian Authority

The IMLA authorizes the Secretary of the Interior to approve the leasing of allotted and unallotted lands, subject to rules and regulations. The IMLA adopted an express requirement that a lessee provide surety bond to ensure compliance with the terms of the lease. Regulations have been promulgated that generally address the leasing of tribal lands and allotted lands. These regulations require the lessee to post a lease bond of at least $1,000, a statewide bond of at least $15,000, or a nationwide bond of at least $75,000.

In 1982 Congress enacted the Indian Mineral Development Act, authorizing Indian tribes to enter into forms of agreements for oil and gas development in addition to leases under the IMLA. An individual Indian who owns a beneficial or restricted interest in mineral resources may include such resources in tribal mineral agreement, if the parties to the agreement concur and the Secretary determines that such participation is in the individual’s best interest. Although regulations to implement this law have been proposed, final rules have not yet been adopted. The proposed rules include a provision requiring the permittee or operator to post a surety prior to beginning operations under a lease or any other form of development agreement.

Federal Authority

While the IMLA and tribal civil penalties create significant control over oil and gas developments, the developments are also subject to federal control. In particular, the Bureau of Indian Affairs (“BIA”) issued Mineral Development Leasing Regulations and Oil and Gas, Geothermal, and Solid Minerals Agreement governing Indian mineral agreements. BIA Mineral Development Leasing Regulations are regulations issued by the BIA regarding leases and permits for the development of Indian tribal oil and gas, geothermal, and solid mineral resources. Additionally, elements of Bureau of Land Management (“BLM”) regulations may be applicable to energy development activities if the agency is involved in the review and approval of the activities, and the Bureau of Land Management Oil and Gas Development Regulations may apply. The BLM supervises and approves most oil and gas operations on American Indian tribal lands although the BIA issues permits. As a result, some BLM-issued BMPs may be applicable to tribal lands.

Indian and Federal Authority – Air Quality

Regulation of oil and gas operations to protect air quality illustrates Indian Tribes’ implementation of a Federal environmental program. The Tribal Authority Rule (TAR) authorizes eligible Indian Tribes to implement EPA-approved programs under the Clean Air Act (CAA) in the same manner as states. This is accomplished when Indian Tribes develop Tribal Implementation Plans (TIPs), which are plans similar to State Implementation Plans (SIPs). If a Tribe develops a TIP to implement a CAA program, the TIP, once it is approved, will replace the Federal program as the requirement for that area of Indian country and the Tribe will become responsible for implementing that particular program. However, if Indian Tribes are unable or choose not to include a CAA program in a TIP, EPA will implement the program under its rules. The CAA provides EPA with broad authority to protect air resources throughout the Nation, including air resources in Indian country. The CAA also constitutes a statutory delegation of Federal authority to eligible Tribes over all sources of air pollution within the exterior boundaries of their reservations. Further, under the Act, Tribes may also apply to administer Tribal air quality programs for non-reservation areas over which they can show jurisdiction.

The Tribal Minor New Source Review (TMNSR) permitting program provides an example of one such program. The TMNSR falls under the NSR permitting program established in the 1977 Clean Air Act Amendments. Minor NSR permits are required to begin construction on stationary sources which create relatively small emissions, and thus do not require a Prevention of Significant Deterioration Permit or a Nonattainment NSR permit which are required for larger emission sources (see 40 C.F.R. pt. 50 for emissions required to qualify as a major stationary source). The permitting program prevents air quality from being significantly degraded from emissions by new and modified factories, power plants, and industrial boilers.

In July 2011, the EPA finalized a rule that, for the first time, created a minor NSR permitting program that applies in Indian Country. The minor new source review rule applies to new and modified minor sources and to minor modifications at major sources. This rule, codified at 40 C.F.R. pt. 49, affects owners and operators of emission sources in all industry groups in Indian country. This rule filled a regulatory gap because, previous to this rule, there was not a Federal permitting mechanism for minor sources in Indian Country. By setting specific regulations on a range of pollutants, the new rule will consider air quality while helping guide economic growth in Indian Country. Under the rule, tribes issue the permits according to the EPA’s requirements.

Because the oil and gas industry is expanding quickly in Indian country, the EPA is currently seeking to hasten the 2011 tribal minor NSR permitting process specifically for oil and gas production activities while still protecting air quality. In an EPA Fact Sheet, the agency describes its actions and proposal for considering three oil and natural gas emission permitting approaches: general permits, permits by rule, and a Federal Implementation Plan (FIP). The general permit would apply to similar types of equipment and facilities. The general permit would be a streamlined approach to the site-specific permit application. The permitting process would be even quicker under a permit by rule procedure, where the emission requirements are codified in a rule instead of a general permit document, because the permit seeker would only have to notify the permitting authority that his emission source met the eligibility criteria. Unlike the general permit, the permit seeker would not have to apply and be approved prior to starting construction of the source. The FIP would also not require the permit seeker to go through an application process prior to construction. Although the FIP will work similarly to a permit by rule, unlike the permits by rule, the FIP could address existing sources.

For more information, see EPA’s website: Managing Emissions from Oil and Natural Gas Production in Indian Country

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