Southland Royalty Co. v. Navajo Tribe of Indians, C-79-296

• Decision Date: 22 August 1983
• Docket Number: No. C-79-296,Nos. 80-2035,C-79-296,s. 80-2035
• Parties: SOUTHLAND ROYALTY COMPANY, Phillips Petroleum Company, Shell Oil Company, Chevron U.S.A., Inc., the Superior Oil Company, the Union Oil Company of California, Wilshire Oil Company of Texas, Anadarko Production Company, and Texaco, Inc., Plaintiffs, Appellants, Cross-Appellees, State of Utah, Lynn C. Baker, individually, and as Treasurer of the State of Utah, Utah State Tax Commission, David L. Duncan, Chairman, and Douglas Sonntag, Georgia B. Peterson and Robert D. Bowen, individually, and as members of the Utah State Tax Commission, Utah State Board of Oil, Gas and Mining, Charles Henderson, Chairman, and John L. Bell, Thadis W. Box, C. Ray Juvelin, Edward T. Beck, Constance K. Lundberg, and E. Steele McIntyre, individually, and as members of the Utah State Board of Oil, Gas and Mining, San Juan County, Utah, Edward S. Boyle, William G. Dunow and Calvin Black, individually, and as Commissioners of San Juan County, Utah, Marian Bayles, individually, and as San Juan County Treasurer, and Barbara Montella, individually, and as San Juan County Assessor, Plaintiffs in Intervention (in D.C.), Defendants-Appellees, v. NAVAJO TRIBE OF INDIANS, Defendant, Appellee, Cross-Appellant, Navajo Tribal Council, Peter MacDonald, individually, and as Chairman of the Navajo Tribal Council, Navajo Tax Commission, Glen C. George, Robert Shorty, Jr., David C. Cole, Delfred Wauneka, and William Morgan, Jr., individually, and as members of the Navajo Tax Commission, Defendants, Appellees, United States of America, James G. Watt, Secretary of the Interior, Martin E. Seneca, Jr., Acting Commissioner of the United States Bureau of Indian Affairs, Defendants, Appellees, Cross-Appellants. to 80-2038, 80-2067 and 80-2159.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 486

715 F.2d 486

SOUTHLAND ROYALTY COMPANY, Phillips Petroleum Company, Shell

Oil Company, Chevron U.S.A., Inc., the Superior Oil Company,

the Union Oil Company of California, Wilshire Oil Company of

Texas, Anadarko Production Company, and Texaco, Inc.,

Plaintiffs, Appellants, Cross-Appellees,

State of Utah, Lynn C. Baker, individually, and as Treasurer

of the State of Utah, Utah State Tax Commission, David L.

Duncan, Chairman, and Douglas Sonntag, Georgia B. Peterson

and Robert D. Bowen, individually, and as members of the

Utah State Tax Commission, Utah State Board of Oil, Gas and

Mining, Charles Henderson, Chairman, and John L. Bell,

Thadis W. Box, C. Ray Juvelin, Edward T. Beck, Constance K.

Lundberg, and E. Steele McIntyre, individually, and as

members of the Utah State Board of Oil, Gas and Mining, San

Juan County, Utah, Edward S. Boyle, William G. Dunow and

Calvin Black, individually, and as Commissioners of San Juan

County, Utah, Marian Bayles, individually, and as San Juan

County Treasurer, and Barbara Montella, individually, and as

San Juan County Assessor, Plaintiffs in Intervention (in

D.C. No. C-79-296), Defendants-Appellees, v. NAVAJO TRIBE OF INDIANS, Defendant, Appellee, Cross-Appellant,

Navajo Tribal Council, Peter MacDonald, individually, and as

Chairman of the Navajo Tribal Council, Navajo Tax

Commission, Glen C. George, Robert Shorty, Jr., David C.

Cole, Delfred Wauneka, and William Morgan, Jr.,

individually, and as members of the Navajo Tax Commission,

Defendants, Appellees,

United States of America, James G. Watt, Secretary of the

Interior, Martin E. Seneca, Jr., Acting

Commissioner of the United States Bureau

of Indian Affairs, Defendants,

Appellees, Cross-Appellants.

Nos. 80-2035 to 80-2038, 80-2067 and 80-2159.

United States Court of Appeals, Tenth Circuit.

Aug. 22, 1983.

Edward L. Barrett, Jr. of Nielsen & Senior, Salt Lake City, Utah (Arthur H. Nielsen, Clark R. Nielsen and John K. Mangum, Salt Lake City, Utah, with him on the brief), for plaintiffs, appellants, cross-appellees Southland Royalty Co., The Superior Oil Co., The Union Oil Co. of California, Wilshire Oil Co. of Texas and Anadarko Production Co.

Bruce D. Black of Campbell, Byrd & Black, P.A., Santa Fe, N.M., for plaintiff, appellant, cross-appellee Texaco, Inc.

Alan L. Sullivan of Van Cott, Bagley, Cornwall & McCarthy, Salt Lake City, Utah (Leonard J. Lewis and Gregory K. Orme, Salt Lake City, Utah, with him on the brief), for plaintiffs, appellants, cross-appellees Phillips Petroleum Co., Shell Oil Co., and Chevron U.S.A., Inc.

Michael M. Quealy, Asst. Atty. Gen., State of Utah, Salt Lake City, Utah (David L. Wilkinson, Atty. Gen., Richard L. Dewsnup, Dallin W. Jensen and Frank V. Nelson, Asst. Attys. Gen., Salt Lake City, Utah, with him on the brief), for plaintiffs in intervention, defendants-appellees State of Utah and state officials.

Katherine Ott and Gary Verberg of Vlassis & Ott, Phoenix, Ariz. (George P. Vlassis of Vlassis & Ott, Phoenix, Ariz., Harold G. Christensen and Max D. Wheeler of Snow, Christensen & Martineau, Salt Lake City, Utah, with Katherine Ott, Salt Lake City, Utah, on brief), for defendant, appellee, cross-appellant The Navajo Tribe of Indians, and Navajo defendants-appellees.

Kay L. Richman, Attorney, Dept. of Justice, Washington, D.C. (Carol E. Dinkins, Asst. Atty. Gen., James J. Clear and Dirk D. Snel, Attorneys, Dept. of Justice, Washington, D.C., with her on brief, David Etheridge, Attorney, Dept. of the Interior, Washington, D.C., of counsel), for defendants appellees, cross-appellants United States and federal officials.

Bruce K. Halliday, San Juan County Atty., Monticello, Utah, on brief for plaintiffs in intervention, defendants-appellees San Juan County and county officials.

Jeff Bingaman, Atty. Gen., State of N.M., Denise D. Fort, Asst. Atty. Gen., Nancy F. Jones and Allison Karslake, Sp. Asst. Attys. Gen., Taxation and Revenue Dept., Santa Fe, N.M., on brief for amicus curiae State of N.M.

Mark B. Thompson, III of Modrall, Sperling, Roehl, Harris & Sisk, P.A., Albuquerque, N.M., on brief for amicus curiae Amoco Production Co.

Before SETH, Chief Judge, and HOLLOWAY and DOYLE, Circuit Judges.

SETH, Chief Judge.

Since the 1950's the appellants have held oil and gas leases on lands in the Navajo Indian Reservation in Utah. The Navajo Tribe imposed taxes on the value of mineral interests and on gross receipts. The State of Utah and San Juan County have been collecting similar taxes for some years. The tribe has not collected taxes as yet under the resolutions imposing the taxes. This action is considered to be against the tribal officials.

Phillips Petroleum Company, Shell Oil Company and Chevron U.S.A., Inc. brought suit against the tribe and individual tribal officials individually to have the Navajo taxes declared invalid. A similar challenge was brought by Southland Royalty Company, The Superior Oil Company, The Union Oil Company of California, Wilshire Oil Company of Texas and Anadarko Production Company. These plaintiffs argued in the alternative that state and local taxes were invalid. Texaco, Inc. also brought suit against the tribe but did not challenge the state and local taxes. In the Texaco suit the state and county intervened in order to present their own arguments against the tribe's power to tax oil and gas leases and receipts. All of these cases were consolidated in the district court.

The district court dismissed the tribe and tribal entities but kept in the individual defendants. It found that the validity of the Navajo taxes was conditioned upon their approval by the Secretary of the Interior which had not been obtained, and that the state and county taxes were valid. These appeals and cross-appeals followed.

As the district court noted, the facts and issues in this case are very similar to those of Merrion v. Jicarilla Apache Tribe, 617 F.2d 537 (10th Cir.). Since the district court opinion in the cases before us the Supreme Court decided Merrion. Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 102 S.Ct. 894, 71 L.Ed.2d 21. These two cases govern the basic issues in this appeal.

It is apparent from Merrion that Indian taxation of oil and gas leases is a valid exercise of tribal authority. As the Court there said, 455 U.S. 130, at 137, 102 S.Ct. 894 at 901, the tribe has a power to tax which derives from

"the tribe's general authority, as sovereign, to control economic activity within its jurisdiction, and to defray the cost of providing governmental services by requiring contributions from persons or enterprises engaged in economic activities within that jurisdiction."

See also Washington v. Confederated Tribes, 447 U.S. 134, 100 S.Ct. 2069, 65 L.Ed.2d 10. Thus the Navajo Tribe had the power to tax and the burden on those who attack that power is to show that it has been modified, conditioned or divested by Congressional action.

The Supreme Court in Merrion rejected the argument that the Jicarilla Tribe's power to tax had been preempted by the extensive federal regulation of oil and gas leases promulgated pursuant to the Indian Mineral Leasing Act, 25 U.S.C. §§ 396a-396g. Despite that position of the Court the plaintiffs again advance a preemption argument, but they contend that there is a critical difference between the Jicarilla Tribe and the Navajo Tribe in that the Navajo Tribe has not chosen to organize and adopt a constitution under the Indian Reorganization Act of 1934, 25 U.S.C. §§ 461-479 (IRA). Thus taxes imposed by the organized Jicarilla Tribe would be reviewed by the Secretary of the Interior in accordance with the Jicarilla Constitution. Revised Constitution of the Jicarilla Apache Tribe, Art. XI § 1(e). This fact was noted by the Court in Merrion. 455 U.S. 130 at 150, 102 S.Ct. 894 at 905. In contrast, plaintiffs argue the taxes imposed by the Navajo Tribe which has no constitution would not be reviewed by any federal agency and might disrupt federal energy policies. Therefore, the plaintiffs argue the Navajo tax should be held to be preempted even though Merrion held that the similar Jicarilla tax was not.

We cannot agree with this argument. The secretarial approval required by the Jicarilla Constitution was not the only factor mentioned in Merrion on the point of federal regulation and preemption of the tribe's power to tax. State taxation might cause similar disruptions of federal policy, and the Court in Merrion, though not faced with the question, clearly indicated that state taxation of these leases was allowed under 25 U.S.C. § 398c. Merrion, 455 U.S. at 150-51, 102 S.Ct. at 908. See also Commonwealth Edison Co. v. Montana, 453 U.S. 609, 101 S.Ct. 2946, 69 L.Ed.2d 884.

Further, in Merrion the Court observed that Congress had recognized and allowed for the possibility of Indian taxation in the Natural Gas Policy Act of 1978, 15 U.S.C. § 3320(a), (c)(1) (1976 ed. Supp. III). The tribal taxation contemplated by this statute is not confined to taxes imposed by organized tribes. See 15 U.S.C. § 3316(b)(2)(C)(ii) (1976 ed.) where the meaning of the phrase "Indian tribe" for purposes of the Natural Gas Policy Act is stated. Thus federal energy law expressly allows for tribal taxes, and does so without any suggestion that the power to tax can only be exercised by tribes which have adopted a constitution under the IRA. We therefore hold that the Navajo Tribe's power to tax exists despite extensive federal regulation of the oil and gas activities on the reservation.

As the district court observed this state of the law may result in an advantage for tribes which have not adopted a constitution or charter under the IRA. The Navajo Tribe, for example, can impose taxes free from any requirement of approval by the Secretary of the Interior while organized tribes if their constitutions so provide must submit to secretarial review at some stage of the taxation process. The district court was concerned that to permit...