Blackfeet Tribe of Indians v. State of Mont., CV-78-61-GF.

Citation507 F. Supp. 446
Decision Date06 January 1981
Docket NumberNo. CV-78-61-GF.,CV-78-61-GF.
PartiesThe BLACKFEET TRIBE OF INDIANS, Plaintiff, v. STATE OF MONTANA et al., Defendants.
CourtUnited States District Courts. 9th Circuit. United States District Court (Montana)

Dale L. McGarvey and John M. Schiltz, McGarvey, Lence & Heberling, Kalispell, Mont., Phil Roy, Browning, Mont., for plaintiff.

R. Bruce McGinnis, Chief Legal Counsel, Montana Dept. of Revenue, Helena, Mont., Allen B. Chronister, Asst. Atty. Gen. of Mont., Helena, Mont., Helena S. Maclay, Sp. Asst. Atty. Gen. of Mont., Missoula, Mont., Bruce McEvoy, Sp. Asst. Atty. Gen., Jurisdiction Project, Missoula, Mont., Selden Frisbee, Deputy County Atty., Cut Bank, Mont., Douglas Anderson, County Atty., Conrad, Mont., for defendant.

MEMORANDUM

HATFIELD, District Judge.

In this action the Blackfeet Tribe of Indians challenge five Montana taxation statutes. The Tribe seeks declaratory relief, with injunctive enforcement, from the state's statutes. These statutes authorize the state or county to levy and collect taxes from oil and gas production. The parties have filed cross motions for summary judgment, filed appropriate memoranda and the matter is ripe for disposition. Jurisdiction is invoked pursuant to 28 U.S.C. § 1362, 28 U.S.C. §§ 2201 and 2202. For the reasons stated below the taxes challenged herein are valid. There being no genuine issue as to any material fact, summary judgment shall be entered in favor of defendants.

FACTS

Plaintiff, the Blackfeet Indian Tribe (hereinafter the "Tribe"), is a tribe of American Indians duly organized pursuant to the Indian Reorganization Act, 25 U.S.C. § 461, et seq. The Tribe is the beneficial owner of oil and gas which lies beneath its reservation in Montana. Title to the oil and gas is held by the United States in trust for the Tribe. Certain oil and gas leases have been executed between the Tribe and various non-Indians allowing for the production of oil and gas on the Blackfeet Indian Reservation. Under the facts alleged here the lessor is the Tribe and the lessee is a non-Indian oil and gas producing entity.

The defendants in this action, the State of Montana and the counties of Glacier and Pondera, impose, levy and collect various taxes on the production of oil and gas within the State of Montana in a non-discriminatory manner pursuant to various Montana statutes.1

The Blackfeet Tribe has entered into many oil and gas production leases with non-Indian lessees. Since neither the Tribe nor any single member of the Tribe produces any of the oil and gas, they receive a royalty fee from the non-Indian lessee. It is agreed that any and all taxes collected by the state defendants from the production of oil and gas within the Blackfeet Indian Reservation have been paid to the state by non-Indian lessees engaged in the business of producing oil and gas. There have been no liens or encumbrances placed on any tribal property as a result of the taxation statutes. The Montana statutes also provide that in the absence of lease provisions to the contrary, the producer may reduce the royalty fee by a prorata share of the cost of the tax. See § 15-38-104, M.C.A. (Resource, Indemnity, Trust, Tax); § 15-36-101(4), M.C.A. (Oil and Gas Severance Tax); § 15-23-607(2), M.C.A. (Oil and Gas Net Proceeds Tax).

Without determining whether the legal incidence of these taxes fall upon the non-Indian lessee or the Tribe as lessor of the property, it is possible for the legal incidence of the tax sought to be imposed to fall on the Indians. However, that legal determination need not be made for the purposes of this summary judgment ruling. See Footnote 2, infra.

With the foregoing as a factual background, a review of the applicable federal law is in order.

FEDERAL STATUTES

By an act of Congress dated February 28, 1891, hereinafter the "1891 Act", found in 25 U.S.C. § 397, the federal government authorized mineral leases of Indian land under such terms and conditions as the Tribe might recommend, subject to the approval of the Secretary of Interior. By an act dated May 29, 1924 (now codified 25 U.S.C. § 398), hereinafter the "1924 Act", Congress authorized mineral leases for oil and gas and authorized states to tax the production of the same so long as no lien or charge of any kind or character could encumber the land of the Indian owner. The statute provides in full:

Unallotted land on Indian reservations other than lands of the Five Civilized Tribes and the Osage Reservation subject to lease for mining purposes for a period of ten years under § 3 of the Act of February 28, 1891 (25 U.S.C. § 397), may be leased at public auction by the Secretary of the Interior, with the consent of the Council speaking for such Indians for oil and gas mining purposes for a period of not to exceed ten years, and as much longer as oil or gas shall be found in paying quantities, and the terms of any existing oil or gas mining lease may in like manner be amended by extending the term thereof for as long as oil or gas shall be found in paying quantities: provided, that the production of oil and gas and other minerals on such lands may be taxed by the state in which said lands are located in all respects the same as production on unrestricted lands, and the Secretary of Interior is authorized and directed to cause to be paid the tax so assessed against the royalty interest on said lands: provided, however, that such tax shall not become a lien or charge of any kind or character against the land or the property of the Indian owner. (emphasis supplied)

Because of what in effect amounted to a patch-work state of the law governing mineral leases on tribal land, see, Handbook of Federal Indian Law, Felix S. Cohen, p. 328 (1942), Congress enacted comprehensive legislation governing the leasing of tribal lands for mining purposes. An act dated May 11, 1938, hereinafter the "1938 Act", now found in 25 U.S.C. §§ 396a thru 396f, was passed which imposed various procedural standards for leasing unallotted Indian lands for mining purposes. That mining act provided in pertinent part:

§ 396a ... Unallotted lands within any Indian reservation ... may, with the approval of the Secretary of Interior, be leased for mining purposes, by authority of the Tribal Council ..., for terms not to exceed ten years and as long thereafter as minerals are produced in paying quantities.

§ 396b provided in pertinent part

... Leases for oil—and/or gas mining purposes covering such unallotted lands shall be offered for sale to the highest responsible qualified bidder, at public auction or on sealed bids, after notice and advertisement, upon such terms and subject to such conditions as the Secretary of Interior may prescribe....

§ 396c provided

... Lessees of restricted Indian lands, tribal or allotted, for mining purposes, including oil and gas, shall furnish corporate surety bonds, in amounts satisfactory to the Secretary of Interior, guaranteeing compliance with the terms of their leases: ...

§ 396d provided

All operations under any oil, gas, or other mineral lease issued pursuant to the terms of any act affecting restricted Indian lands shall be subject to the rules and regulations promulgated by the Secretary of Interior....

§ 396e provided

The Secretary of Interior may, in his discretion, authorize superintendents or other officials in the Indian service to approve leases for oil, gas, or other mining purposes covering any restricted Indian land, tribal or allotted.

§ 396f dealt with exceptions concerning certain Indian reservations not of relevance here. The 1938 Act also included a general repealing clause that all acts or parts of the acts inconsistent herewith are hereby repealed. See, § 7 of the Act of May 11, 1938.

ANALYSIS

Plaintiff's argument essentially asserts that the Blackfeet Tribe has an inherent right to be free from taxation by the State of Montana and two of its counties. The United States Supreme Court has on occasion ruled that the state general taxing powers cannot be thrust upon the Indians, the Tribes or their property absent congressional authorization. See, Bryan v. Itasca County, 426 U.S. 373, 96 S.Ct. 2102, 48 L.Ed.2d 710 (1976); Confederated Salish and Kootenai Tribes v. Moe of the Flathead Reservation, 425 U.S. 463, 96 S.Ct. 1634, 48 L.Ed.2d 96 (1976); McClanahan v. Arizona State Tax Comm., 411 U.S. 164, 93 S.Ct. 1257, 36 L.Ed.2d 129 (1973); British-American Oil Producing Company v. Board of Equalization of Montana, 299 U.S. 159, 57 S.Ct. 132, 81 L.Ed. 95 (1936). Historically, Indians have been found to be exempt from taxes on Indian ownership and activity confined to the reservation. However, those same U. S. Supreme Court opinions have consistently recognized that Indian sovereignty in this regard is dependent upon congressional preservation. See also, U. S. v. Wheeler, 435 U.S. 313, 323, 98 S.Ct. 1079, 1086, 55 L.Ed.2d 303 (1978).

Congress may at anytime authorize the state to tax Indian property or activities so long as any state tax authorized by Congress is a non-discriminatory exercise of state sovereign authority. Thus absent discriminatory state action which is prohibited by the Indian commerce clause, the question is only one of congressional intent. Either Congress intended to allow the state to exert its taxing authority or it did not. With the traditional assumption of Indian sovereignty as a backdrop, a review of the relevant statutes is necessary to determine whether this historical immunity has been altered by Congress.

A plain reading of the 1924 Act clearly authorized state taxation of production of oil and gas and other minerals. The Act states in part:

... provided, that the production of oil and gas and other minerals on such lands may be taxed by the state in which said lands are located in all respects the same as production on unrestricted lands, and the Secretary of Interior is authorized and directed to be paid the tax so assessed against the royalty interests on said lands: ...
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